-----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, RC4UpsGX20DxcBCScVtI6qggBMgxpxOnpeiUZGWqur6KZQH9b8nduwsTi/QbuMAJ 7QiK4ua2CZQGuiXmj3DztQ== 0000891092-02-000092.txt : 20020414 0000891092-02-000092.hdr.sgml : 20020414 ACCESSION NUMBER: 0000891092-02-000092 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020115 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Bankruptcy or receivership ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020128 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: 1934 Act SEC FILE NUMBER: 000-15205 FILM NUMBER: 02518615 BUSINESS ADDRESS: STREET 1: 6428 PARKLAND DR CITY: SARASOTA STATE: FL ZIP: 34243 BUSINESS PHONE: 9417580389 MAIL ADDRESS: STREET 1: 6428 PARKLAND DR CITY: SARASOTA STATE: FL ZIP: 34243 8-K 1 e129408k.txt FORM 8-K 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): January 15, 2002 ELCOTEL, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter). Delaware 000-15205 592518405 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 6428 Parkland Drive, Sarasota, Florida 34243 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (941) 758-0389 Item 2. Acquisition or Disposition of Assets See "Item 3. Bankruptcy or Receivership." Item 3. Bankruptcy or Receivership On January 15, 2002, the United States Bankruptcy Court, Middle District of Florida, Tampa Division (the "Bankruptcy Court") entered an Order Confirming the Second Amended Joint Plan of Elcotel, Inc. (the "Company") and its Affiliated Debtors (the "Debtors"). Pursuant to the Second Amended Joint Plan (the "Plan") confirmed by the Bankruptcy Court on January 15, 2002, the Debtors sold substantially all of their non-cash assets pursuant to the terms of an Asset Purchase Agreement dated December 14, 2001 (the "Agreement") between the Debtors and Applicon, Inc. and Elcotel Acquisition Corporation, affiliates of Gores Technology Group (the "Purchaser"), which was approved by the Bankruptcy Court pursuant to its Order confirming the Second Amended Joint Plan of the Debtors (the "Sale Transaction"). The Sale Transaction was effective as of December 31, 2001. On December 31, 2001, the Debtors' assets approximated $9.2 million (unaudited) including cash of approximately $4.1 million (unaudited), and the Debtors' liabilities approximated $15.2 million (unaudited) including liabilities subject to compromise of approximately $11.4 million (unaudited). The purchase price including certain assumed liabilities approximated $2.1 million. The Debtors received cash proceeds of $201,220 net of a cash holdback of $50,307, which will be distributed to the Debtors subject to the determination of purchase price adjustments, if any, under the terms of the Agreement. The consideration received was based upon negotiations between the Debtors, the Purchaser and the Debtors' senior secured lender, and was deemed to constitute reasonably equivalent and fair consideration under the Bankruptcy Code pursuant to the Order confirming the Plan. The orderly liquidation of substantially all of the Debtors' non-cash assets was implemented through the Sale Transaction as contemplated by the Plan. Further, the Company has commenced the winding up of its business in a manner and on terms acceptable to its senior secured lender. Pursuant to the Plan: (i) the Debtors' unsecured creditors will receive, after payments of costs associated with the prosecution of avoidance actions, any recoveries from the prosecution of such avoidance actions and $110,000; (ii) holders of the Company's common stock, of which there were 13,779,991 shares issued and outstanding as of January 15, 2002, will receive no value for their shares and such shares will be cancelled; and (iii) the Company's senior secured lender will receive the Company's cash and the net proceeds from the sale and disposition of the Company's assets after payment of liquidation costs and expenses, allowed administrative claims (including professional fees) and the payment to the Debtors' unsecured creditors. 2 Item 7. Financial Statements and Exhibits (a) Financial Statements of Business Acquired. Not Applicable (b) Pro Forma Financial Information. Not Applicable (c) Exhibits No. Description - -------------------------------------------------------------------------------- 2.1 Second Amended Joint Plan of Elcotel, Inc. and its Affiliated Debtors 2.2 Order Confirming the Second Amended Joint Plan of Elcotel, Inc. and its Affiliated Debtors dated January 15, 2002 2.3 Asset Purchase Agreement dated as of December 14, 2001 by and among Elcotel, Inc., Elcotel Direct, Inc., Technology Service Group, Inc. and International Service Technologies, Inc., Applicon, Inc. and Elcotel Acquisition Corporation - -------------------------------------------------------------------------------- 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ELCOTEL, INC. Date: January 24, 2002 By: /s/ William H. Thompson -------------------------- William H. Thompson Senior Vice President, Administration and Finance 4 EX-2.1 3 e12940ex21.txt PLAN OF REORGANIZATION Exhibit 2.1 UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION - ------------------------------------------------x In re Case Nos. 01-01077-8C1 01-01078-8C1 ELCOTEL, INC., ELCOTEL DIRECT, 01-01079-8C1 INC. and TECHNOLOGY SERVICE GROUP, INC., : Jointly Administered Under Case No. 01-01077-8C1 Debtors. - ------------------------------------------------x - -------------------------------------------------------------------------------- SECOND AMENDED JOINT PLAN OF REORGANIZATION OF ELCOTEL, INC. AND ITS AFFILIATED DEBTORS - -------------------------------------------------------------------------------- WHITE & CASE LLP First Union Financial Center Suite 4900 200 South Biscayne Boulevard Miami, Florida 33131 (305) 371-2700 Stichter, RiedeL, Blain & Prosser, P.A. 110 East Madison Street, Suite 200 Tampa, Florida 33602 (813) 229-0144 Dated: January 14, 2001 Counsel for the Debtors TABLE OF CONTENTS Page ---- ARTICLE I. DEFINITIONS AND INTERPRETATION................................................1 1.1. Definitions........................................................1 1.2. Interpretation.....................................................9 1.3. Application of Definitions and Rules of Construction Contained in the Bankruptcy Code.....................10 1.4. Other Terms.......................................................10 1.5. Appendices and Plan Documents.....................................10 ARTICLE II. PLAN ALTERNATIVES AND THE CONDUCT OF THE DEBTORS' BUSINESSES THROUGH THE CONFIRMATION DATE..............................................10 ARTICLE III. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS................................11 3.1. Claims and Equity Interests Classified............................11 3.2. Administrative Claims and Tax Claims..............................11 3.3. Claims and Equity Interests.......................................11 3.4. Substantive Consolidation for Voting and Distribution Purposes.............................................12 3.5. Separate Classification of Secured Claims.........................12 ARTICLE IV. IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS..................................................................12 4.1. Impaired Classes of Claims and Equity Interests...................12 4.2. Impairment Controversies..........................................12 ARTICLE V. PROVISIONS FOR TREATMENT OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN...................................................................12 5.1. Treatment of Claims and Equity Interests..........................12 ARTICLE VI. PROVISIONS FOR TREATMENT OF UNCLASSIFIED CLAIMS UNDER THE PLAN...............14 -i- 6.1. Treatment of Administrative Claims................................14 6.2. Treatment of Tax Claims...........................................15 ARTICLE VII. ACCEPTANCE OR REJECTION OF THE PLAN; EFFECT OF REJECTION BY ONE OR MORE CLASSES OF CLAIMS OR EQUITY INTERESTS......................................16 7.1. Classes Entitled to Vote..........................................16 7.2. Class Acceptance Requirement......................................16 ARTICLE VIII. MEANS FOR IMPLEMENTATION OF THE PLAN.........................................17 8.1. Continued Corporate Existence.....................................17 8.2. Vesting of Assets.................................................17 8.3. Management........................................................17 8.4. The Board of Directors............................................18 8.5. Officers..........................................................18 8.6. The New Charter and the New By-Laws...............................18 8.7. Cancellation of Instruments and Agreements........................19 8.8. Causes of Action..................................................19 8.9. Appointment of the Disbursing Agent...............................19 8.10. Asset Purchase Agreement..........................................19 8.11. Sources of Cash for Plan Distributions............................23 8.12. Investment of Funds Held by the Disbursing Agent; Tax Reporting by the Disbursing Agent.............................23 8.13. Distributions under the Plan......................................23 8.14. Timing of Distributions under the Plan............................24 8.15. Address for Delivery of Distributions under the Plan..............................................................24 8.16. Distributions under Twenty-Five Dollars...........................24 8.17. Time Bar to Cash Payments.........................................24 8.18. Manner of Payment under the Plan..................................24 8.19. Expenses Incurred on or after the Effective Date and Claims of the Disbursing Agent................................25 8.20. Fractional Distributions..........................................25 8.21. Severance and Benefit Programs....................................25 8.22. Employee Stock Option Plan........................................25 8.23. Corporate Action..................................................25 8.24. Effectuating Documents and Further Transactions...................26 -ii- ARTICLE IX. KEY EMPLOYEE MATTERS.........................................................26 ARTICLE X. PROCEDURES FOR RESOLVING AND TREATING CONTESTED CLAIMS........................27 10.1. Objection Deadline.............................................27 10.2. Prosecution of Contested Claims................................27 10.3. Claims Settlement Guidelines...................................27 10.4. No Distributions Pending Allowance.............................28 10.5. Distributions After Allowance..................................28 10.6. Estimation of Claims...........................................28 ARTICLE XI. CONDITIONS PRECEDENT TO CONFIRMATION OF THE PLAN AND THE OCCURRENCE OF THE EFFECTIVE DATE...........................................28 11.1. Conditions Precedent to Confirmation..............................28 11.2. Conditions Precedent to the Occurrence of the Effective Date....................................................29 11.3. Waiver of Conditions..............................................29 ARTICLE XII. THE DISBURSING AGENT..........................................................29 12.1. Powers and Duties.................................................29 12.2. Distributions.....................................................29 12.3. Exculpation.......................................................29 ARTICLE XIII. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES........................30 13.1. Assumption of Executory Contracts and Unexpired Leases............................................................30 13.2. Rejection of Executory Contracts and Unexpired Leases............................................................31 13.3. Claims Arising from Rejection or Termination......................31 ARTICLE XIV. RETENTION OF JURISDICTION....................................................31 -iii- ARTICLE XV. MISCELLANEOUS PROVISIONS.....................................................33 15.1. Payment of Statutory Fees........................................33 15.2. Discharge of the Debtors.........................................33 15.3. Third Party Agreements; Subordination............................34 15.4. Dissolution of Committee.........................................34 15.5. Exculpation......................................................34 15.6. Title to Assets; Discharge of Liabilities........................35 15.7. Surrender and Cancellation of Instruments........................35 15.8. Notices..........................................................35 15.9. Headings.........................................................36 15.10. Governing Law....................................................36 15.11. Expedited Determination..........................................36 15.12. Exemption from Transfer Taxes....................................37 15.13. Notice of Entry of Confirmation Order and Relevant Dates............................................................37 15.14. No Interest or Attorneys' Fees...................................37 15.15. Modification of the Plan.........................................37 15.16. Revocation of Plan...............................................37 15.17. Setoff Rights....................................................38 15.18. Subordination/Avoidance Rights Against the Debtors...............38 15.19. Compliance with Tax Requirements.................................38 15.20. Recognition of Guaranty Rights...................................38 15.21. Compliance with All Applicable Laws..............................39 15.22. Injunctions......................................................39 15.23. Binding Effect...................................................39 15.24. Severability.....................................................40 -iv- UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION - -------------------------------------------------x In re Case Nos. 01-01077-8C1 01-01078-8C1 ELCOTEL, INC., ELCOTEL DIRECT, 01-01079-8C1 INC. and TECHNOLOGY SERVICE GROUP, INC., : Jointly Administered Under Case No. 01-01077-8C1 Debtors. - -------------------------------------------------x - -------------------------------------------------------------------------------- SECOND AMENDED JOINT PLAN OF REORGANIZATION OF ELCOTEL, INC. AND ITS AFFILIATED DEBTORS - -------------------------------------------------------------------------------- Elcotel, Inc. ("Elcotel"), Elcotel Direct, Inc. ("Direct"), Technology Service Group, Inc. ("Technology," and collectively with Elcotel and Direct, the "Debtors"), hereby collectively and jointly propose the following joint plan of reorganization: ARTICLE I. DEFINITIONS AND INTERPRETATION 1.1. Definitions. The capitalized terms used herein shall have the respective meanings set forth below: (a) "Accepting Creditor" means any creditor who voted in favor of the First Amended Joint Plan of Reorganization of Elcotel, Inc and its Affiliated Debtors, as Corrected dated October 25, 2001. (b) "Administrative Claim" means a Claim incurred by a Debtor (or its Estate) on or after the Petition Date and before the Effective Date for a cost or expense of administration in the Chapter 11 Cases entitled to priority under sections 503(b) and 507(a)(1) of the Bankruptcy Code, including, without limitation, Fee Claims and the fees and costs of counsel to the Bank except that all fees owed as of the Effective Date to each member of the respective boards of directors of each of the Debtors are waived and therefore are not included in the definition of Administrative Claim. (c) "Affiliate" means, with respect to any Person, all Persons that would fall within the definition assigned to such term in section 101(2) of the Bankruptcy Code, if such Person was a debtor in a case under the Bankruptcy Code. (d) "Allowed," when used (i) with respect to any Claim, except for a Claim that is an Administrative Claim, means such Claim (A) to the extent it is listed in the Schedules as undisputed, liquidated and not contingent and is not a Contested Claim as of the Effective Date; (B) to the extent it is set forth pursuant to any stipulation or agreement that has been approved by Final Order of the Bankruptcy Court; (C) to the extent it is a Contested Claim as of the Effective Date, proof of which was filed timely with the Bankruptcy Court, and (I) as to which no objection was filed by the Objection Deadline, unless the Bankruptcy Court determines that such Claim is to be determined in a forum ------ other than the Bankruptcy Court, in which case such Claim shall not become Allowed until determined by Final Order of such other forum and allowed by Final Order of the Bankruptcy Court, or (II) as to which an objection was filed by the Objection Deadline, to the extent allowed by a Final Order; or (D) which otherwise becomes an Allowed Claim as provided in the Plan; and (ii) with respect to an Administrative Claim, means an Administrative Claim that has become "Allowed" pursuant to the procedures set forth in Section 6.1 of the Plan. (e) "Applicon" means Applicon, Inc., a Delaware corporation. (f) "Asset Purchase Agreement" means the Asset Purchase Agreement by and among Applicon, Inc., Elcotel Acquisition Corp. and Elcotel, Inc., Elcotel Direct, Inc., and Technology Service Group, Inc., dated as of December 17, 2001, which has been consent to by the Bank in writing. (g) "Assets" means all of the Debtors' right, title and interest of any nature in property, wherever located, as specified in section 541 of the Bankruptcy Code. (h) "Assumed Liabilities" means those liabilities of the Debtors which are being assumed by the Purchaser pursuant to the terms of the Asset Purchase Agreement. (i) "Avoidance Actions" means all claims, rights, and Causes of Action in favor of the Estates that arise under the Bankruptcy Code, including, but not limited to, all preference, fraudulent transfer, and other avoidance claims, rights, and Causes of Action arising under chapter 5 of the Bankruptcy Code. (j) "Bank" means Bank of America, N.A., f/k/a NationsBank, N.A. (k) "Bank Claims" means all Claims of the Bank, other than the fees and costs of counsel and any professional employed by the Bank, which are Allowed Claims in the principal amount of $8.4 million (less any Cash Collateral Payments) plus interest in the -2- amount of $1,345,821.93, which Allowed Claims are not subject to any setoff, claim or defense. (l) "Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended and codified at title 11 of the United States Code and as applicable to the Chapter 11 Cases. (m) "Bank Collateral" means substantially all of the Assets subject to Bank Prepetition Loan Agreements and the cash collateral orders entered by the Bankruptcy Court and subject to valid first priority lien, including but not limited to accounts, inventory, cash, equipment (except rolling stock), general intangibles including patents, trademarks, copyrights and applications for the same, and proceeds of the foregoing (which liens shall remain perfected and enforceable regardless of any change in Elcotel corporate structure under this Plan). (n) "Bank Payment" means a Cash payment equal to $5,000,000 less Cash Collateral Payments. (o) "Bank Prepetition Loan Agreements" means the various loan agreements and other related agreements between the Bank and the Debtors which form the basis for the Bank Claims, which agreements are reaffirmed by the Debtors. (p) "Bankruptcy Court" means the Bankruptcy Court unit of the United States District Court for the Middle District of Florida, or such other court having jurisdiction over the Chapter 11 Cases. (q) "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure, as prescribed by the United States Supreme Court pursuant to section 2075 of title 28 of the United States Code and as applicable to the Chapter 11 Cases. (r) "Bar Date Order" means the Order Establishing Deadline to file Proofs of Claim dated January 29, 2001. (s) "Business Day" means any day on which commercial banks are open for business in New York, New York. (t) "Cash" means legal tender of the United States of America or readily marketable direct obligations of, or obligations guaranteed by, the United States of America, commercial paper of domestic corporations carrying a Moody's Rating of "A" or better, or equivalent rating of any other nationally recognized rating service, or interest-bearing certificates of deposit or other similar obligations of domestic banks or other financial institutions having a shareholders' equity or equivalent capital of not less than Two Hundred Million Dollars ($200,000,000), having maturities of not more than one (1) year, at the then best generally available rates of interest for like amounts and like periods. (u) "Cash Collateral Payments" means the payments to the Bank made by the Debtors after October 12, 2001 through December 31, 2001, pursuant to orders of the -3- Bankruptcy Court permitting periodic adequate assurance payments under sections 363 and 361 of the Bankruptcy Code. (v) "Causes of Action" means all claims, rights, actions, causes of action, liabilities, obligations, suits, debts, remedies, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages or judgments, whether known or unknown and whether asserted or unasserted. (w) "Chapter 11 Cases" means the cases under chapter 11 of the Bankruptcy Code pending before the Bankruptcy Court with respect to each of the Debtors. (x) "Claim" means (i) any right to payment from a Debtor, whether or not such right is known or unknown, reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; (ii) any right to an equitable remedy for breach of performance if such breach gives rise to a right of payment from a Debtor, whether or not such right to an equitable remedy is known or unknown, reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured; or (iii) any right under section 502(h) of the Bankruptcy Code. (y) "Committee" means the Official Committee of Unsecured Creditors appointed in the Chapter 11 Cases by the Office of the United States Trustee in accordance with section 1102(a) of the Bankruptcy Code. (z) "Confirmation Date" means the date on which the Clerk of the Bankruptcy Court enters the Confirmation Order. (aa) "Confirmation Hearing" means the hearing held by the Bankruptcy Court, as it may be continued from time to time, on confirmation of the Plan. (bb) "Confirmation Order" means the order of the Bankruptcy Court confirming the Plan. (cc) "Contested Claim" means a Claim (A) to the extent it is listed in the Schedules as disputed, contingent, or unliquidated, in whole or in part; (B) that is listed in the Schedules as undisputed, liquidated, and not contingent and as to which a proof of claim has been filed with the Bankruptcy Court, to the extent the proof of claim amount exceeds the scheduled amount; (C) that is not listed in the Schedules, but as to which a proof of claim has been filed with the Bankruptcy Court; or (D) as to which an objection has been filed on or before the Effective Date; provided, that a Claim that is Allowed by Final Order or pursuant to the Plan on or before the Effective Date shall not be a Contested Claim. (dd) "Debtors" means collectively, Elcotel, Direct and Technology. -4- (ee) "Debtors in Possession" means the Debtors, each in its respective capacity as a debtor in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. (ff) "Direct" means Elcotel Direct, Inc., a Delaware corporation, as Debtor and Debtor In Possession in chapter 11 case no. 01-01078-8C1. (gg) "Disallowed" when used with respect to a Claim, means a Claim, or such portion of a Claim, that has been disallowed by a Final Order of the Bankruptcy Court. (hh) "Disbursing Agent" means Elcotel, in which capacity, it shall (i) make the Distributions contemplated under the Plan, the Confirmation Order, or any other relevant Final Order of the Bankruptcy Court, and (ii) perform any other act or task that is or may be delegated to the Disbursing Agent under the Plan. (ii) "Disclosure Statement" means the disclosure statement respecting the Plan, as approved by the Bankruptcy Court as containing adequate information in accordance with section 1125 of the Bankruptcy Code, all exhibits and annexes thereto and any amendments or modifications thereof. (jj) "Distribution" means the payment or distribution under the Plan of property or interests in property to the holders of Allowed Claims or Equity Interests. Unless otherwise agreed by the holder of an Allowed Claim any payment in Cash to be made by the Disbursing Agent shall be made, at the election of the Disbursing Agent, by check drawn on a domestic bank or by wire transfer from a domestic bank. (kk) "Distribution Date" means, with respect to any Claim, the Effective Date, if such Claim is then an Allowed Claim, or the First Business Day after such Claim becomes Allowed, if not Allowed on the Effective Date. (ll) "Effective Date" means the date on which all of the conditions specified in Section 11.2 of the Plan have been satisfied or waived which date shall be no later than December 31, 2001, unless the Bank agrees to a later date. (mm) "Elcotel" means Elcotel, Inc., a Delaware corporation, as Debtor and Debtor In Possession in chapter 11 case no. 01-01077-8C1. (nn) "Elcotel EBITDA" means the earnings before interest, amortization, depreciation, taxes, chapter 11 professional fees, retention and incentive bonuses, of Elcotel (as reorganized) as determined in accordance with generally accepted accounting principals in the United States in effect from time to time. (oo) "Elcotel Revolving Credit Facility" means a Revolving Credit Agreement which Credit Agreement shall (i) contain an asset-based revolving credit facility in the amount of up to $7,000,000 with an initial draw down of up to $4,000,000 and (ii) shall be substantially in the form contained in the Plan Documents. -5- (pp) "Elcotel Trustee" means the Person(s) to be selected by the Debtors in consultation with and consent of the Bank to serve as the trustee(s) of the Elcotel Trusts. (qq) "Elcotel Stock Options" means the stock options defined in Section 8.21. (rr) "Elcotel Trust" means the trust to be settled pursuant to the Plan for the benefit of the Bank in the event of a Liquidation Trigger Event. (ss) "Elcotel Unsecured Creditors Trust" means the trust to be settled pursuant to the Plan for the benefit of Unsecured Creditors in the event of a Liquidation Trigger Event. (tt) "Equity Interest" means any ownership or equity interest in any of the Debtors, including without limitation, Existing Elcotel Stock or warrants, options, or other rights to purchase any ownership or equity interest in any of the Debtors. (uu) "Estate" means the estate of any Debtor created by section 541 of the Bankruptcy Code upon the commencement of the Chapter 11 Cases. (vv) "Estimated Claims Order" means any order of the Bankruptcy Court estimating any Claim or the aggregate amount of all Claims in any class created under the Plan to aid in the confirmation of the Plan, or the calculation of distributions under the Plan. (ww) "Excluded Assets" means those Assets which are excluded from being sold to the Purchaser pursuant to the terms of the Asset Purchase Agreement. (xx) "Existing Elcotel Stock" means all issued and outstanding shares of common stock of Elcotel. (yy) "Fee Application" means an application of a Professional Person under section 330 or 503 of the Bankruptcy Code for final allowance of compensation and reimbursement of expenses incurred in the Chapter 11 Cases from the Petition Date to the Effective Date. (zz) "Fee Claim" means a Claim that is the subject of a Fee Application filed in the Chapter 11 Cases. (aaa) "Final Order" means (i) an order or judgment of the Bankruptcy Court or any other court or adjudicative body as to which the time to appeal, petition for certiorari, or move for reargument or rehearing has expired and as to which no appeal, petition for certiorari, or other proceedings for reargument or rehearing shall then be pending, or (ii) in the event that an appeal, writ of certiorari, reargument, or rehearing thereof has been sought, such order of the Bankruptcy Court or any other court or adjudicative body shall have been affirmed by the highest court to which such order was appealed, or certiorari has been denied, or from which reargument or rehearing was sought, and the time to take any further appeal, petition for certiorari or move for reargument or rehearing shall have expired; provided, that no order shall fail to be a Final Order solely because of the -6- possibility that a motion pursuant to Rule 60 of the Federal Rules of Civil Procedure or Bankruptcy Rule 9024 may be filed with respect to such order. (bbb) "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, and any applicable rulings, regulations (including temporary and proposed regulations) promulgated thereunder, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or the IRS. (ccc) "IRS" means the United States Internal Revenue Service. (ddd) "Key Employee Retention Plan" means the key employee retention and severance plan of the Debtors approved by Final Order of the Bankruptcy Court entered on or about June 29, 2001. (eee) "Liquidation Budget" means the costs and expenses associated with liquidating the Assets set forth on a budget for the period from January 1, 2002 through March 31, 2002 acceptable to the Bank, including employee salaries, benefits and severance obligations, which period may be extended by the Bank. The Liquidation Budget will be filed as a Plan Document. (fff) "Liquidation Process" means the process to be implemented by the Debtors subject to the review and written consent of the Bank for the purpose of liquidating the Assets if a Liquidation Trigger Event occurs, in accordance with the Liquidation Budget. The Liquidation Process will be documented by the Bank and the Debtors and filed as a Plan Document. (ggg) "Liquidation Trigger Event" means a triggering event set forth in Article II of the Plan. (hhh) "New By-Laws" means the by-laws of Elcotel, amended and restated in accordance with Section 8.6 hereof. The New By-Laws will be filed with the Bankruptcy Court as a Plan Document. (iii) "New Charter" means the certificate of incorporation of Elcotel, amended and restated in accordance with Section 8.6 of the Plan. The New Charter will be filed with the Bankruptcy Court as a Plan Document. (jjj) "New Elcotel Common Stock" means the authorized common stock of Elcotel as of the Effective Date. (kkk) "Ninth Cash Collateral Order" means the order entered by Bankruptcy Court on or about October 26, 2001 authorizing the Debtors' continued use of Cash Collateral. (lll) "Non-Bank Secured Claim" means (i) a Claim (other than a Bank Claim) secured by a Lien on any Assets, which Lien is valid, perfected, and enforceable under applicable law and is not subject to avoidance under the Bankruptcy Code or applicable non-bankruptcy law, and which is duly established in the Chapter 11 Cases, but only to -7- the extent of the value of the holder's interest in the collateral that secures payment of the Claim; (ii) a Claim against the Debtors that is subject to a valid right of recoupment or setoff under section 553 of the Bankruptcy Code, but only to the extent of the Allowed amount subject to recoupment or setoff as provided in section 506(a) of the Bankruptcy Code; and (iii) a Claim allowed under the Plan as a Non-Bank Secured Claim. (mmm) "Objection Deadline" means the deadline for filing objections to Claims as set forth in Section 10.1 of the Plan. (nnn) "Person" means an individual, corporation, partnership, joint venture, trust, estate, unincorporated association, unincorporated organization, governmental entity, or political subdivision thereof, or any other entity. (ooo) "Petition Date" means January 22, 2001. (ppp) "Plan" means this plan of reorganization, either in its present form or as it may be amended, supplemented, or otherwise modified from time to time, and the exhibits and schedules to the foregoing, as the same may be in effect at the time such reference becomes operative. (qqq) "Plan Documents" means the documents that aid in effectuating the Plan as specifically identified as such herein and filed with the Bankruptcy Court as specified in Section 1.5 of the Plan. (rrr) "Post-Confirmation Interest" means simple interest at the rate of 6.00% per annum or such other rate as the Bankruptcy Court may determine at the Confirmation Hearing is appropriate, such interest to accrue from the Effective Date, or, in the case of a Contested Claim, the date of entry of a Final Order allowing such Contested Claim. (sss) "Priority Claim" means any Claim to the extent such Claim is entitled to priority in right of payment under section 507(a) of the Bankruptcy Code, other than the Bank Claims, Non-Bank Secured Claims, Administrative Claims, and Tax Claims. (ttt) "Pro Rata Share" means the proportion that the amount an Allowed Claim bears to the aggregate amount of all Claims in a particular class, including Contested Claims, but not including Disallowed Claims, (i) as calculated by the Disbursing Agent on or before any Distribution Date; or (ii) as determined by the Bankruptcy Court in an Estimated Claims Order, if such an order is sought and obtained. (uuu) "Professional Person" means a Person retained or to be compensated for services rendered or costs incurred on or after the Petition Date and on or prior to the Effective Date pursuant to section 327, 328, 330, 503(b), or 1103 of the Bankruptcy Code in these Chapter 11 Cases. (vvv) "Purchaser" means Elcotel Acquisition Corp., a Delaware Corporation. (www) "Schedules" means the schedules of assets and liabilities and the statements of financial affairs filed by the Debtors with the Bankruptcy Court, as required -8- by section 521 of the Bankruptcy Code and the Official Bankruptcy Forms of the Bankruptcy Rules, as such schedules and statements may be amended by the Debtors in Possession from time to time in accordance with Bankruptcy Rule 1009. (xxx) "Subordinated Bank Note" means the subordinated note described in Section 5.1(a), which is substantially in the form contained in the Plan Documents. (yyy) "Tax Claims" means a Claim against any of the Debtors that is of a kind specified in Section 507(a)(8) of the Bankruptcy Code. (zzz) "Technology" means Technology Service Group, Inc., a Delaware corporation, as Debtor and Debtor In Possession in chapter 11 case no. 01-02079-861. (aaaa) "Unsecured Claim" means any Claim other than Bank Claims, Non-Bank Secured Claims (up to the Allowed amount subject to recoupment or setoff as provided in section 506(a) of the Bankruptcy Code), Administrative Claims, Priority Claims and Tax Claims. (bbbb) "Unsecured Creditor Account" means the account established by the Trustee funded by the Unsecured Creditor Payment. (cccc) "Unsecured Creditor Payment" means the $110,000 Cash payment by the Debtors to the Elcotel Unsecured Creditors Trust to fund the Unsecured Creditors Account for the benefit of the holders of Unsecured Claims. (dddd) "Unsecured Creditors Trustee" means the Person(s) to be selected by the Committee to serve as the trustee(s) of the Elcotel Unsecured Creditors Trust. Unless and until such Person(s) is selected, the Committee, through its counsel, shall have all the powers and rights granted to the Unsecured Creditors Trustee hereunder. (eeee) "Voting Procedures Order" means the Final Order of the Bankruptcy Court approving procedures relating to the solicitation and tabulation of votes with respect to the Plan. (ffff) "Year-End Budget" means the Debtors' operating budget attached as an Exhibit to the Ninth Cash Collateral Order. 1.2. Interpretation. Unless otherwise specified, all section, article, and exhibit references in the Plan are to the respective section in, article of, or exhibit to, the Plan, as the same may be amended, waived, or modified from time to time. The headings in the Plan are for convenience of reference only and shall not limit or otherwise affect the provisions of the Plan. Words denoting the singular number shall include the plural number and vice versa, and words denoting one gender shall include the other gender. The Disclosure Statement may be referred to for purposes of interpretation to the extent any term or provision of the Plan is determined by the Bankruptcy Court to be ambiguous. -9- 1.3. Application of Definitions and Rules of Construction Contained in the Bankruptcy Code. Words and terms defined in section 101 of the Bankruptcy Code shall have the same meaning when used in the Plan, unless a different definition is given in the Plan. The rules of construction contained in section 102 of the Bankruptcy Code shall apply to the construction of the Plan. 1.4. Other Terms. The words "herein," "hereof," "hereto," "hereunder," and others of similar import refer to the Plan as a whole and not to any particular section, subsection, or clause contained in the Plan. A term used herein that is not defined herein shall have the meaning ascribed to that term, if any, in the Bankruptcy Code. 1.5. Appendices and Plan Documents. All appendices to the Plan and the Plan Documents are incorporated into the Plan by this reference and are a part of the Plan as if set forth in full herein. All Plan Documents shall be filed with the Clerk of the Bankruptcy Court not less than five (5) days prior to the commencement of the Confirmation Hearing. Holders of Claims and Equity Interests may obtain a copy of the Plan Documents, once filed, by a written request sent to the following address: Mark Fuhr White & Case LLP 200 South Biscayne Boulevard, Suite 4900 Miami, Florida 33131 ARTICLE II. PLAN ALTERNATIVES AND THE CONDUCT OF THE DEBTORS' BUSINESSES THROUGH THE CONFIRMATION DATE The Plan contemplates a reorganization of the Debtors or, alternatively, if a Liquidation Trigger Event occurs, an orderly liquidation of the Debtors and their respective Assets pursuant to the Liquidation Process agreed to by the Bank and the Debtors. In the event of an orderly liquidation, the Plan provides for alternate treatment for Classes 1, 2 and 4, and Tax Claims. A Liquidation Trigger Event occurs if (a) the Debtors, with the approval of the Bank, have determined to sell substantially all the Assets prior to the Confirmation Hearing, pursuant to an agreement acceptable to the Bank or (b) the Debtors fail to distribute by the Effective Date to the Bank the Bank Payment. During the Plan confirmation process, the Debtors shall conduct their operations in accordance with the Year-End Budget and terms of the Ninth Cash Collateral Order. The Liquidation Process contemplates a winding up of the Debtors' operations as overseen by Elcotel's management in consultation with the Bank, including the marketing and -10- sale of the component businesses, the packaging and selling of inventory, the completion of pending purchase orders, and the sale of furniture, fixture and equipment in a manner and on terms acceptable to the Bank. The Liquidation Process is intended to be completed no later than March 31, 2002, unless such period is extended by the Bank, but the Bank has no obligation to extend. At such time, Elcotel shall be dissolved, any of the remaining Bank Collateral and other Assets will be deemed to be abandoned and voluntarily surrendered to the Bank, and the Bank may take any action in respect of the Bank Collateral in accordance with Bank Pre-Petition Loan agreements and state law, including, but not limited to exercising its foreclosure rights on such collateral. The entry of a final order or decree closing the Chapter 11 Cases will occur at such time the Committee completes prosecution of or settles the Avoidance Actions and objections to Claims. ARTICLE III. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS 3.1. Claims and Equity Interests Classified. For purposes of organization, voting and all confirmation matters, except as otherwise provided herein, all Claims (except for Administrative Claims and Tax Claims) and all Equity Interests shall be classified as set forth in this Article III of the Plan. 3.2. Administrative Claims and Tax Claims. As provided in section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Tax Claims shall not be classified for purposes of voting or receiving distributions under the Plan. Rather, all such Claims shall be treated separately as unclassified Claims on the terms set forth in Article VI of the Plan. 3.3. Claims and Equity Interests. The Plan classifies the Claims against and Equity Interests in each of the Debtors as follows: (a) Class 1: Bank Claims (b) Class 2: Priority Claims (c) Class 3: Non-Bank Secured Claims (d) Class 4: Unsecured Claims (e) Class 5: 5-A - Equity Interests in Elcotel 5-B - Equity Interests in Direct 5-C - Equity Interests in Technology -11- 3.4. Substantive Consolidation for Voting and Distribution Purposes. All Assets of the Debtors and Claims against the Debtors shall be substantively consolidated for voting and distribution purposes. 3.5. Separate Classification of Secured Claims. Although Non-Bank Secured Claims against each Debtor have been placed in one class for purposes of convenience, each Non-Bank Secured Claim shall be treated as though in a separate class for purposes of voting and receiving distributions under the Plan. ARTICLE IV. IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS 4.1. Impaired Classes of Claims and Equity Interests. All classes of Claims against and Equity Interests in the Debtors are impaired under the Plan. 4.2. Impairment Controversies. If a controversy arises as to whether any Claim or Equity Interest, or any class of Claims or Equity Interests, is impaired under the Plan, the Bankruptcy Court shall, after notice and a hearing, determine such controversy. ARTICLE V. PROVISIONS FOR TREATMENT OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN 5.1. Treatment of Claims and Equity Interests. The classes of Claims against and Equity Interests in the Debtors shall be treated under the Plan as follows: (a) Class 1 - Bank Claims. (1) Reorganization Treatment. Each holder of an Allowed Bank Claim shall receive on the Effective Date (i) such holder's Pro Rata Share of a single Cash payment in an amount equal to the Bank Payment payable from available Cash and the proceeds of the Elcotel Revolving Credit Facility or some other financing arrangement and (ii) such holder's Pro Rata Share of the aggregate principal amount of the Subordinated Bank Note(s) in the principal amount of $3,400,000. The Subordinated Bank Note shall accrue interest at the rate of twelve percent (12%) per annum and mature on the sixth anniversary of the Effective Date. Interest -12- payments shall be made only when the ratio of Elcotel EBITDA to the senior interest expense under the Elcotel Revolving Credit Facility meets or exceeds 5.0 times. Principal payments shall be made periodically in accordance with the terms of the Subordinated Bank Note. The holders of Bank Claims agree to waive any Claim in excess of $8.4 million if the Bank Payment is paid by the Effective Date. (2) Liquidation Treatment. If a Liquidation Trigger Event occurs, the Debtors shall commence dissolution of their corporate status and liquidate their assets and wind up their affairs as provided in the Plan and required by applicable state law. Beginning on the Effective Date, holders of Bank Claims shall be paid the net Cash proceeds from the sale and disposition of the Bank Collateral, after the payment of the actual costs and expenses pursuant to the Liquidation Budget, Allowed Administrative Claims (as agreed to by the Bank), and the Unsecured Creditor Payment, equal up to the Bank Payment (the "Net Cash Proceeds"). In the event holders of Bank Claims have been paid the Bank Payment, each holder shall then be entitled to be paid (i) its Pro Rata Share of $250,000 of the remaining Net Cash Proceeds, if any, which shall be shared equally with holders of Allowed Unsecured Claims, and (ii) thereafter the balance of any remaining Net Cash Proceeds. (b) Class 2 - Priority Claims. (1) Reorganization Treatment. Pursuant to section 1124 of the Bankruptcy Code, all of the legal, equitable and contractual rights of each holder of an Allowed Priority Claim in respect of such Claim shall be fully reinstated and retained as though the Chapter 11 Cases had not been filed, except as provided in section 1124(2)(A)-(C) of the Bankruptcy Code, and the holders of such Allowed Priority Claims shall be paid in full. (2) Liquidation Treatment. If a Liquidation Trigger Event occurs, each holder of an Allowed Priority Claim in full satisfaction of its Allowed Priority Claim shall be paid on the Distribution Date a lesser amount in one Cash payment as may be agreed upon in writing by such holder or such other treatment as may be agreed upon in writing by such holder (as agreed to by the Bank). (c) Class 3 - Non-Bank Secured Claims. Reorganization and Liquidation Treatment. Each holder of an Allowed Non-Bank Secured Claim shall receive one of the following distributions: (a) the payment of such holder's Allowed Secured Claim in full, in Cash; (b) the sale or disposition proceeds of the property securing any Allowed Secured Claim to the extent of the value of their respective interests in such property; (c) the surrender to the Holder or holders of any Allowed Secured Claim of the property securing such Claim; or (d) such other -13- distributions as shall be necessary to satisfy the requirements of chapter 11 of the Bankruptcy Code. The manner and treatment of each Allowed Secured Claim shall be determined by the Debtors, in their discretion, on or before the Confirmation Date, and upon notice to each Secured Creditor. With respect to any Allowed Non-Bank Secured Claim that is based on a right of recoupment or setoff, such treatment shall be implemented by giving effect to such right of recoupment or setoff. (d) Class 4 - Unsecured Claims. (1) Reorganization Treatment. On the Effective Date, if a Liquidation Trigger Event has not occurred, each holder of an Allowed Unsecured Claim shall receive shares equal to its Pro Rata Share of 33.3% of the New Elcotel Common Stock. (2) Liquidation Treatment. If a Liquidation Trigger Event occurs, each holder of an Allowed Unsecured Claim shall receive its Pro Rata Share of Cash from any judgment or settlements obtained from the Avoidance Actions after payment of attorney's fees and expenses in respect of such Avoidance Actions. On the Effective Date, the Unsecured Creditor Account shall be funded with the Unsecured Creditors Payment. The Unsecured Creditors Trustee may elect to use the proceeds of the Unsecured Creditors Account to pay attorneys fees and expenses to prosecute the Avoidance Actions and any objections to Claims. Each holder of an Allowed Unsecured Claim shall be paid its Pro Rata Share of the balance of any Cash proceeds remaining in the Unsecured Creditors Account after the payment of any attorneys' fees and expenses incurred in the prosecution of the Avoidance Actions or objections to Claims. After holders of Bank Claims have been paid the Bank Payment, each holder of Allowed Unsecured Claims shall be paid its Pro Rata Share of the next $250,000 of Net Cash Proceeds to be shared equally with the holders of the Bank Claims. (e) Class 5 - Equity Interests. On the Effective Date, Equity Interests in Classes 5-A, 5-B and 5-C shall be cancelled. ARTICLE VI. PROVISIONS FOR TREATMENT OF UNCLASSIFIED CLAIMS UNDER THE PLAN 6.1. Treatment of Administrative Claims. All Administrative Claims shall be treated as follows: -14- (a) Time for Filing Administrative Claims. The administrative claims bar date was fixed by the Bankruptcy Court's Order Scheduling Hearing on Disclosure Statement, Establishing Disclosure Hearing Procedures, Setting Times for Filing Fee Applications and Establishing Administrative Claims Bar Date entered July 27, 2001 [Document No. 223]. (b) Time for Filing Fee Claims. Each Professional Person shall be required to file with the Bankruptcy Court, and serve on all parties required to receive notice, a Fee Application in accordance with the Bankruptcy Court's Case Management Order dated January 24, 2001 [Document No. 31], as may be further modified. (c) Allowance of Administrative Claims. An Administrative Claim with respect to which notice has been properly filed and served pursuant to Section 6.1(a) of the Plan shall become an Allowed Administrative Claim. If an objection is filed, the Administrative Claim shall become an Allowed Administrative Claim only to the extent allowed by Final Order after a hearing to be held on the date of the Confirmation Hearing. An Administrative Claim with respect to which a Fee Application has been properly filed pursuant to Section 6.1(b) of the Plan shall become an Allowed Administrative Claim only to the extent allowed by Final Order at a hearing established by the Bankruptcy Court. (d) Payment of Allowed Administrative Claims. On the Distribution Date, each holder of an Allowed Administrative Claim other than Fee Claims shall receive (i) the amount of such holder's Allowed Claim in one Cash payment, or (ii) such other treatment as may be agreed upon in writing by the Bank, the Debtors and such holder; provided, that an Administrative Claim representing a liability incurred in the ordinary course of business of the Debtors may be paid with the consent of the Bank, at the Debtors' election in the ordinary course of business in accordance with the Year-End Budget. All Allowed Administrative Claims shall be paid by, and shall be the sole responsibility of, the Debtors and the Disbursing Agent. Absent an extension by the Bank in writing, prior to October 31, 2001 at 12:00 P.M., each holder of an Allowed Fee Claim shall have reached an agreement with the Bank and the Debtors regarding the amount of such Claims and the timing of payment in full satisfaction and discharge of such Claims. Such agreement is a condition precedent to the confirmation of the Plan. 6.2. Treatment of Tax Claims. (a) Reorganization Treatment. At the election of the Debtors, each holder of an Allowed Tax Claim shall receive in full satisfaction of such holder's Allowed Tax Claim, (a) the amount of such holder's Allowed Tax Claim, with Post-Confirmation Interest thereon, in equal annual Cash payments on each anniversary of the Effective Date, until the sixth anniversary of the date of assessment of such Tax Claim (provided that the Disbursing Agent may prepay the balance of any such Allowed Tax Claim at any time without penalty); (b) a lesser amount in one Cash payment as may be agreed upon in writing by such holder; or (c) such other treatment as may be agreed upon in writing by such holder. -15- (b) Liquidation Treatment. If a Liquidation Trigger Event occurs, each holder of an Allowed Tax Claim in full satisfaction of such holder's Allowed Tax Claim shall receive on the Distribution Date a lesser amount in one Cash payment as may be agreed upon in writing by such holder or such other treatment as may be agreed upon in writing by such holder (as agreed to by the Bank). (c) The Confirmation Order shall constitute and provide for an injunction by the Bankruptcy Court as of the Effective Date against any holder of a Tax Claim from commencing or continuing any action or proceeding against any responsible person or officer or director of the Debtors that otherwise would be liable to such holder for payment of a Tax Claim so long as no default has occurred with respect to such Tax Claim under this Section 6.2 of the Plan. ARTICLE VII. ACCEPTANCE OR REJECTION OF THE PLAN; EFFECT OF REJECTION BY ONE OR MORE CLASSES OF CLAIMS OR EQUITY INTERESTS 7.1. Classes Entitled to Vote. The holders of Bank Claims in Class 1 of the Plan, Priority Claims in Class 2 of the Plan, Non-Bank Secured Claims in Class 3 of the Plan, Unsecured Claims in Class 4 of the Plan and shall be entitled to vote to accept or reject the Plan. Each holder of an Equity Interest in Classes 5-A, 5-B and 5-C of the Plan will neither receive nor retain any property under the Plan and such holders are therefore deemed to have rejected the Plan without actually voting on it. 7.2. Class Acceptance Requirement. Only holders of Claims that are of record and as to which an objection is not pending as set forth in the Voting Procedures Order shall be entitled to accept or reject the Plan. A class of Claims shall have accepted the Plan if it is accepted by at least two-thirds (2/3) in amount and more than one-half (1/2) in number of the Allowed Claims in such class that have voted on the Plan. -16- ARTICLE VIII. MEANS FOR IMPLEMENTATION OF THE PLAN 8.1. Continued Corporate Existence. (a) Reorganization Treatment. Elcotel shall continue to exist after the Effective Date as a separate corporate entity, with all corporate powers, in accordance with the laws of the State of Delaware and pursuant to the New Charter and the New By-Laws, which shall become effective upon the occurrence of the Effective Date. All of the Debtors' respective Assets shall be transferred and conveyed to Elcotel, on the Effective Date. (b) Liquidation Treatment. In the event a Liquidation Trigger Event occurs, Elcotel shall continue to exist after the Effective Date as a separate corporate entity consistent with Section 8.1(a) with all of the Debtors' respective Assets transferred and conveyed to Elcotel on the Effective Date (subject to the liens of the Bank), but solely for the purpose of conducting an orderly liquidation of the Assets. Elcotel shall be dissolved and shall cease to exist as soon as practical after March 31, 2002. In either case, the other Debtors (Direct and Technology) shall be dissolved and shall cease to exist as soon as practical after the Effective Date. 8.2. Vesting of Assets. (a) Reorganization Treatment. Upon the occurrence of the Effective Date, title to all of the Assets of the Debtors and non-Debtor affiliates shall vest in Elcotel, free and clear of all liens, claims, and interests, except as expressly provided in the Plan. Elcotel may operate its business and may use, acquire and dispose of the Assets free of any restrictions of the Bankruptcy Code on and after the occurrence of the Effective Date. (b) Liquidation Treatment. If a Liquidation Trigger Event occurs, upon the occurrence of the Effective Date, title to all of the Assets of the Debtors and non-Debtor affiliates shall vest in Elcotel, free and clear of all liens, claims, and interests, except those of the Bank and as expressly provided in the Plan. In consultation with and consent of the Bank, Elcotel may operate the Debtors' businesses and may use, acquire and dispose of the Assets free of any restrictions of the Bankruptcy Code on and after the occurrence of the Effective Date. 8.3. Management. (a) Reorganization Treatment. Upon the occurrence of the Effective Date, the management, control, and operations of Elcotel shall become the general responsibility of Elcotel's boards of directors. (b) Liquidation Treatment. If a Liquidation Trigger Event occurs, the Debtors, in consultation with and consent of the Bank, shall appoint management to conduct the -17- orderly liquidation. William Thompson has been selected by the Debtors and is acceptable to the Bank to oversee the orderly liquidation through March 31, 2002. Entry of the Confirmation Order shall ratify and approve all actions taken by Elcotel's boards from the Petition Date through and until the Effective Date. 8.4. The Board of Directors. The initial board of directors of Elcotel shall be composed of the same individuals identified at or prior to the conclusion of the Confirmation Hearing. From and after the Effective Date, the members of Elcotel's Board of Directors shall be selected and determined in accordance with the provisions of the New Charter and the New By-Laws for Elcotel as provided in Section 8.6(a) and 8.6(b), as applicable. 8.5. Officers. (a) Reorganization Treatment. The Persons identified prior to the conclusion of the Confirmation Hearing shall serve as the initial officers of Elcotel on the Effective Date in accordance with their respective employment agreements, if any, with Elcotel and applicable nonbankruptcy law. Subject to any applicable employment agreements and applicable nonbankruptcy law, from and after the Effective Date, the officers of Elcotel shall be selected and appointed by the board of directors of Elcotel, in accordance with, and pursuant to, the provisions of the New Charter and the New By-Laws for Elcotel. (b) Liquidation Treatment. If a Liquidation Trigger Event occurs prior to the conclusion of the Confirmation Hearing, Debtors, in consultation with the Bank, shall designate a Person(s) to serve as the initial officer(s) of Elcotel. 8.6. The New Charter and the New By-Laws. (a) Reorganization Treatment. Upon the occurrence of the Effective Date, the charter and bylaws of Elcotel shall be amended and restated in substantially the form of the New Charter and the New By-Laws, to, among other things, (a) prohibit the issuance of nonvoting equity securities as required by section 1123(a)(6) of the Bankruptcy Code, subject to further amendment of such New Charters as permitted by applicable law, (b) authorize the cancellation of all existing Equity Interests in Elcotel and the issuance of three million (3,000,000) shares of New Elcotel Common Stock, and (c) otherwise effectuate the provisions of the Plan. (b) Liquidation Treatment. Upon the occurrence of the Effective Date, the charter and bylaws of Elcotel shall be amended and restated in substantially the form of the New Charter and the New By-Laws, to, among other things, (a) prohibit the issuance of nonvoting equity securities as required by section 1123(a)(6) of the Bankruptcy Code, subject to further amendment of such New Charters as permitted by applicable law, -18- (b) authorize the cancellation of all existing Equity Interests in Elcotel and the issuance of one thousand (1,000) shares of New Elcotel Common Stock to the Elcotel Trust, and (c) otherwise effectuate the provisions of the Plan. 8.7. Cancellation of Instruments and Agreements. Upon the occurrence of the Effective Date, except as otherwise provided herein, all promissory notes, instruments, indentures, or agreements evidencing, giving rise to, or governing any Claim shall be deemed canceled and annulled without further act or action under any applicable agreement, law, regulation, order, or rule, and the obligations of the Debtors under such promissory notes, instruments, indentures, or agreements shall be discharged. If a Liquidation Trigger occurs, the Bank Prepetition Loan Documents shall remain in full force and effect until such time the Bank Claims are satisfied. 8.8. Causes of Action. (a) Reorganization Treatment. Except as otherwise provided in the Plan, all Causes of Action assertable by the Debtors and any non-Debtor affiliates, including, but not limited to, Avoidance Actions, shall be retained by the Debtors and shall be vested in the Debtors upon the occurrence of the Effective Date. Any net recovery realized by a Debtor on account of such Causes of Action shall be property of the respective Debtors. (b) Liquidation Treatment. If a Liquidation Trigger Event does occur, all Causes of Action described in Section 8.8(a) shall be assertable by the Unsecured Creditors Trustee on behalf of Unsecured Creditors. Any net recovery realized by the Unsecured Creditors Trustee on account of such Causes of Action shall be distributed pursuant to Section 5.1(d)(2) of the Plan. 8.9. Appointment of the Disbursing Agent. Unless, prior to the conclusion of the Confirmation Hearing, the Debtors specifically identify a Person acceptable to the Bank to serve as the Disbursing Agent under the Plan, Elcotel shall serve as the Disbursing Agent. 8.10. Asset Purchase Agreement. Upon the occurrence of a Liquidation Trigger Event, pursuant to the terms of the Asset Purchase Agreement, attached hereto as Exhibit "B," on the Effective Date, the Purchaser shall among other things acquire substantially all of the Debtors' Assets and certain of the Debtors' Assumed Liabilities for the Purchase Price. The Confirmation Order shall to the fullest extent allowed by the Bankruptcy Court provide that (a) the Asset Purchase Agreement is approved by the Bankruptcy Court, (b) pursuant to section 363(f) of the Bankruptcy Code, the Assets transferred pursuant to the Asset Purchase Agreement (excluding the Excluded Assets) shall be sold and transferred to the Purchaser free and clear of all liens, Claims, claims (as that term is defined under section 101(5) of the Bankruptcy Code), security interests, and all other encumbrances to the extent permissible by the Bankruptcy Court, (c) the Purchaser shall be deemed a good faith purchaser under section 363(m) and (n) of the Bankruptcy Code; (d) the Purchaser shall not be deemed a successor to any of the Debtors for any lien, claim, interest or -19- encumbrance and the transfer of certain Assets to the Purchaser shall not subject the Purchaser to any liability with respect to the operation of the Debtors' business prior to the Closing Date; (e) the transfer of certain of the Assets pursuant to the Asset Purchase Agreement qualifies as a transfer under section 1146(c) of the Bankruptcy Code; and (f) the Debtors are authorized to take all actions as may be reasonably necessary to implement the Asset Purchase Agreement. The Debtors, Bank, and the Purchaser believe that the Plan will be substantially consummated upon the payment and distribution of the sales proceeds from the Asset Purchase Agreement in accordance with the Plan. The following is a summary of the salient terms of the Asset Purchase Agreement: SUMMARY OF ASSET PURCHASE AGREEMENT Agreement and Parties: Asset Purchase Agreement, dated as of December 14, 2001 (the "Agreement"), among Elcotel, Inc., Elcotel Direct, Inc., Technology Service Group, Inc. and International Service Technology, Inc. (collectively, the "Sellers") and Applicon, Inc. , Elcotel Acquisition Corp. (the "Purchaser"). Acquired Assets: The Sellers are selling to the Purchaser all of the Sellers' right, title and interest in all of the assets, rights and claims of the Sellers (the "Acquired Assets"), other than the certain assets and properties of the Sellers set forth in the Agreement, including, without limitation, the following: inventor account receivables, furniture, fixtures, equipment, governmental permits, books and records, prepaid expenses, rents and credits, and all guaranties, warranties and indemnities with respect to the foregoing assets. Additionally, the Sellers will assign and the Purchaser will accept all of the Sellers' rights under and title and interest in certain executory contracts and unexpired leases (the "Assumed Rights") and certain intellectual property rights. Except as set forth in the Agreement, this sale will be free and clear of all liens, claims and interests of anyone who receives notice of the plan of reorganization. Sarasota Property: The Sellers will permit the Purchaser to occupy the real property located at 6428 Parkland Drive, Sarasota, Florida 34243 for up to ninety days following the Closing in consideration of the Sellers' pre-paid rent with respect to such properties and at no additional rental cost to the Purchaser without assumption of the lease. -20- Assumed Liabilities: The Purchaser will assume from the Sellers certain liabilities and obligations including liabilities and obligations arising under the executory contracts and unexpired leases, the governmental permits, and any accrued liabilities with respect to any employees of the Sellers' which accept employment with the Purchaser. The Purchaser will pay all costs ordered by the Bankruptcy Court with respect to the Assumed Rights at the closing or at such later date as approved by the Bankruptcy Court. Purchase Price: In consideration for the Acquired Assets, the Purchaser will pay on behalf of the Sellers at closing cash in an amount of $1,400,000, as adjusted (the "Purchase Price"), less the lower of (i) 20% of the Purchase Price and (ii) $280,000 (the "Adjustment Hold-Back") to the Sellers' professionals, an escrow established for the unsecured creditors and to the Bank. Accordingly, the Purchaser shall wire directly to the professionals, the unsecured creditors and the Bank funds in the approximate amount of $325,000, $110,000 and $685,000. respectively. The Debtors and Purchaser will file a schedule with specific amounts no later than three days prior to the Confirmation Hearing. The Purchase Price will be adjusted as follows: (i) the Purchase Price will be reduced by the amount of all customer prepayments or other amounts received by the Sellers with respect to which goods have not been delivered or services have not been performed or with respect to which the liabilities associated therewith have not been satisfied; and reduced by the amount by which the book value of any of accounts payable, certain employee liabilities, international commissions, and capital lease payables exceed certain thresholds; (ii) the Purchase Price will be reduced by one half of the amount by which (A)(1) receivables which arose in the ordinary course of business and which are less than 90 days past due (the "Ordinary Course Receivables") minus (2) one half of the book value of all liabilities relating to warranties and reserves therefore ("Warranties") are less then (B) $638,277; (iii) the Purchase Price will be increased by one half of the amount by which (X)(1) Ordinary Course Receivables minus (2) one half of the Warranties are (Y) -21- greater than $638,277; (iv) the Purchase Price will be reduced by one half of the amount by which the book value of the inventory is less than $3,945,252; and (v) the Purchase Price will be increased by one half of the amount by which the book value of the inventory is greater than $3,945,252. If the final Purchase Price reflects a greater reduction to the Purchase Price than the amount originally calculated, the Purchaser will deliver to the Sellers an amount equal to the Adjustment Hold-Back minus the final Purchase Price adjustment. If the final Purchase Price reflects a lower reduction to the Purchase Price than the amount originally calculated, the Purchaser will deliver to the Sellers an amount equal to the Adjustment Hold-Back plus the final Purchase Price adjustment. The plan of reorganization will be substantially consummated at the Closing. Conditions Precedent: The Agreement contains conditions precedent to closing which are customary for transactions of this nature, including, without limitation, the following: 1. All necessary governmental and Bankruptcy Court approvals obtained and in full force and effect, including, without limitation, a final Confirmation Order. 2. No re-solicitation of votes with respect to the plan of reorganization. 3. Incumbency and signature certificates with respect to the officers of each Credit Party, together with constituent documents and board resolutions referred to therein. 4. All material consents and approvals of third parties necessary to assign and transfer the Acquired Assets obtained and delivered. Termination: The Agreement may be terminated upon certain events, including but not limited to, failure of the closing to occur on or before January 14, 2002, (ii) failure of the Confirmation Order to have been entered on or before January 14, 2002, (iii) by the Purchaser on or prior to December 27, 2001 as a result of the Purchaser's dissatisfaction with the Schedules to the Agreement. -22- Copies of the Asset Purchase Agreement may be obtained by request in writing to: Mark Fuhr White & Case, LLP 200 South Biscayne Blvd., Suite 4900 Miami, Florida 33131 Facsimile: (305) 358-5744 8.11. Sources of Cash for Plan Distributions. (a) Reorganization Treatment. All Cash necessary for the Disbursing Agent to make payments and Distributions pursuant to the Plan shall be provided by Cash, the Elcotel Revolving Credit Facility or some other financing arrangement, and the post-Effective Date operations of the Debtors. (b) Liquidation Treatment. All Cash necessary for the Disbursing Agent to make payments and Distributions pursuant to the Plan shall be provided by existing Cash and Cash generated under the Liquidation Process. All Cash shall be deposited into bank accounts at the Bank in which the Bank shall have a priority security interest and right of setoff subject to the terms of this Plan. 8.12. Investment of Funds Held by the Disbursing Agent; Tax Reporting by the Disbursing Agent. Subject to the consent of the Bank, the Disbursing Agent may, but shall not be required to, invest any funds held by the Disbursing Agent pending the distribution of such funds pursuant to the Plan in investments that are exempt from federal, state, and local taxes. Subject to definitive guidance from the IRS or a court of competent jurisdiction to the contrary (including the receipt by the Disbursing Agent of a private letter ruling if the Disbursing Agent so requests one, or the receipt of an adverse determination by the IRS upon audit if not contested by the Disbursing Agent), the Disbursing Agent shall (a) treat the funds and other property held by it as held in a single trust for federal income tax purposes, of which the holders of all Allowed Claims are the sole beneficiaries, in accordance with the trust provisions of the Internal Revenue Code (Sections 641 et seq.), and (b) to the extent permitted by applicable law, report consistently with the foregoing for state and local income tax purposes. 8.13. Distributions under the Plan. The Disbursing Agent shall make all Distributions required under the Plan after receiving written approval from the Bank. Whenever any Distribution to be made under this Plan shall be due on a day other than a Business Day, such Distribution shall instead be made, without interest, on the immediately succeeding Business Day, but shall be deemed to have been made on the date due. For federal income tax purposes, a Distribution will be allocated to the principal amount of a Claim first and then, to the extent the Distribution exceeds the principal amount of the Claim, to the portion of the Claim representing accrued but unpaid interest. -23- 8.14. Timing of Distributions under the Plan. Except for Distributions to holders of Allowed Bank Claims on the Effective Date pursuant to Section 5.1(a) of the Plan, any Distribution to be made pursuant to the Plan shall be deemed to have been timely made if made within ten (10) days after the time therefor specified in the Plan. 8.15. Address for Delivery of Distributions under the Plan. Subject to Bankruptcy Rule 9010, any Distribution or delivery to a holder of an Allowed Claim or Equity Interest shall be made at the address of such holder as set forth on the proof of Claim filed by such holder (or at the last known address of such holder if no proof of claim is filed or if the Disbursing Agent or the Debtors, as the case may be, have been notified of a change of address). If any holder's Distribution or payment is returned to the Disbursing Agent as undeliverable, no further Distributions or payments to such holder shall be made unless and until the Disbursing Agent is notified of such holder's then current address within three months after such Distribution or payment was returned, at which time any missed Distribution or payment shall be made to such holder without interest. 8.16. Distributions under Twenty-Five Dollars. No Distribution of less than twenty-five dollars ($25.00) shall be made by the Disbursing Agent to the holder of any Claim unless a request therefor is made in writing to the Disbursing Agent. If no request is made as provided in the preceding sentence, all such Distributions shall revert to the respective Debtor on whose behalf the Claim would have been paid if a request had been made. 8.17. Time Bar to Cash Payments. Checks issued in respect of Allowed Claims shall be null and void if not negotiated within ninety (90) days after the date of issuance thereof. Requests for reissuance of any check shall be made directly to the Disbursing Agent by the holder of the Allowed Claim with respect to which such check originally was issued. Any claim in respect of such a voided check shall be made on or before the later of (a) the first anniversary of the date on which such Distribution or payment was made and (b) ninety (90) days after the date of the issuance of such check. If no Claim is made as provided in the preceding sentence, all Claims in respect of void checks shall be discharged and forever barred and such unclaimed Distributions or payments shall revert to the respective Debtor on whose behalf the check was issued. 8.18. Manner of Payment under the Plan. Unless the Person receiving a Distribution agrees otherwise, any Distribution to be made in Cash under the Plan shall be made, at the election of the Disbursing Agent, by check drawn on a domestic bank or by wire transfer from a domestic bank. -24- 8.19. Expenses Incurred on or after the Effective Date and Claims of the Disbursing Agent. Except as otherwise ordered by the Bankruptcy Court or as provided herein, the amount of any reasonable expenses incurred by the Disbursing Agent and approved by the Bank on or after the Effective Date (including, but not limited to, taxes) to be paid to or by the Disbursing Agent may be withheld from the amounts to be distributed by the Disbursing Agent until such compensation and expenses are satisfied in full. Consequently, amounts actually received by holders of Allowed Claims may be less than the gross distributions provided for under the Plan by the amount of distributions to the Disbursing Agent, or its agents, for the payment of reimbursement claims of the Disbursing Agent. Professional fees and expenses incurred by the Disbursing Agent from and after the Effective Date in connection with the effectuation of the Plan shall be paid in the ordinary course of business subject to approval of the Bank. Any dispute regarding compensation shall be resolved by agreement of the parties or if the parties are unable to agree, as determined by the Bankruptcy Court. 8.20. Fractional Distributions. Notwithstanding anything to the contrary contained herein, no cash payments of fractions of cents will be made. Fractional cents shall be rounded to the nearest whole cent (with any amount of .5 cent or less to be rounded down). 8.21. Severance and Benefit Programs. The Debtors' existing severance and benefit programs shall remain in effect on their terms subsequent to the Effective Date except as modified herein. All benefits payable in accordance with the terms of such programs shall be paid by the Disbursing Agent as Allowed Administrative Claims and without the necessity of filing a notice of Administrative Claim under Section 6.1(a) hereof. 8.22. Employee Stock Option Plan. On or after the Effective Date if a Liquidation Triggering Event has not occurred, certain of Elcotel's employees pursuant to a Stock Option Plan will receive options to purchase New Elcotel Common Stock having the principal terms set forth in the Plan Documents. Any New Elcotel Common Stock is expressly subordinate to the rights of the Bank under the Plan. 8.23. Corporate Action. If a Liquidation Triggering event has not occurred: on the Effective Date, the adoption of the New Charter, the filing of the New Charter and the adoption of the New By-Laws, as contemplated by Section 8.6 hereof shall be authorized and approved in all respects without further action under applicable law, regulation, order, or rule, including, without express or implied limitation, any action by the stockholders or directors of Elcotel. On the Effective Date or as soon thereafter as is practicable, Elcotel shall file with the Secretary of State of the State of Delaware its New Charter, if applicable. On the Effective Date, the cancellation of the Existing Elcotel Stock, the issuance of the New Elcotel Common Stock, and other matters provided under the Plan involving the corporate structure of the Debtors or corporate action by -25- the Debtors shall be deemed to have occurred, be authorized, and shall be in effect from and after the Effective Date without requiring further action under applicable law, regulation, order, or rule, including, without express or implied limitation, any action by the stockholders or directors of the Debtors. 8.24. Effectuating Documents and Further Transactions. Each of the officers of the Debtors is authorized, in accordance with his or her authority under the resolutions of the boards of directors, to execute, deliver, file, or record such contracts, instruments, releases, indentures, and other agreements or documents and take such actions as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan and any notes or securities issued pursuant to the Plan. ARTICLE IX. KEY EMPLOYEE MATTERS The Key Employee Retention Plan shall be modified as follows. In the event a Liquidation Trigger Event has not occurred, the Plan is confirmed, the Bank Payment is made on the Effective Date, and Elcotel is operating as a going concern, (a) the remaining key employees (the "Key Employees") participating in the Key Employee Retention Plan shall contribute their entitlement to the Emergence Bonus (as defined in the Key Employee Retention) and (b) on the Effective Date, Michael Boyle, Elcotel's President and Chief Executive, shall contribute $250,000 in Cash to Elcotel, in exchange for 66.7% of the New Elcotel Common Stock which shall be issued will shall be issued on the Effective Date to the Key Employees and Mr. Boyle in an amount equal to their Pro Rata Share of their respective contributions on the Effective Date. In the event a Liquidation Trigger Event occurs and the Liquidation Process is being conducted, the Emergence Bonus will not be paid. Severance Benefits will be paid in accordance with the terms of the Key Employee Retention Plan, except that, subject to the terms of the Liquidation Process (which control), including Michael Boyle and William Thompson using their commercially reasonable efforts to implement same, Mr. Boyle, who will manage the Debtors' orderly liquidation through December 31, 2001, will be paid $125,000 on December 31, 2001; William Thompson, Elcotel's Vice President and Chief Financial Officer, who will manage the Debtors' orderly liquidation through March 31, 2002, will be paid $68,750 on March 31, 2002; and Donald Fragan ("Mr. Fragan"), Vice President, who shall be terminated prior to Confirmation, shall have received $50,000 within 30 days of his termination, which payments shall be in full satisfaction of any claims against the Debtors or their Estates, except for sums due as prescribed in the Liquidation Budget. Employees covered by the Key Employee Retention Plan who are offered employment by the Purchaser with substantially equivalent compensation and benefits as currently being provided by the Debtors (with the exception of those benefits provided under the Key Employee Retention Plan to such employees) but who refuse such offer of employment by the Purchasers will not receive any benefits under the Key Employee Retention Plan, including but not limited to Severance and Retention Bonus (accrued or not). Employees not offered employment with the Purchaser (other than Mr. Fragan) will be paid Retention Bonuses and Severance Bonuses under the Key Employee Retention Plan. -26- ARTICLE X. PROCEDURES FOR RESOLVING AND TREATING CONTESTED CLAIMS 10.1. Objection Deadline. As soon as practicable, but in no event later than ninety (90) days after the Effective Date (subject to being extended by the Bankruptcy Court upon motion of the Disbursing Agent without notice or a hearing), objections to Claims shall be filed with the Bankruptcy Court and served upon the holders of each of the Claims to which objections are made. 10.2. Prosecution of Contested Claims. The Disbursing Agent and Bank (or the Committee if a Liquidation Trigger Event occurs) may object to the allowance of Claims filed with the Bankruptcy Court with respect to which liability is disputed in whole or in part. All objections that are filed and prosecuted as provided herein shall be litigated to Final Order or compromised and settled in accordance with Section 10.3 of the Plan. The Bank and the Committee shall have standing to appear and be heard on all objections to Claims. 10.3. Claims Settlement Guidelines. Notwithstanding any requirements that may be imposed pursuant to Bankruptcy Rule 9019, from and after the Effective Date all Claims and all claims that any of the Debtors have asserted against other parties may be compromised and settled according to the following procedures with the consent of the Bank: (a) Subject to subsection 10.3(b) hereof, the following settlements or compromises do not require the review or approval of the Bankruptcy Court or any other party in interest: (i) The settlement or compromise of a Claim pursuant to which such Claim is Allowed in an amount of $20,000 or less; and (ii) The settlement or compromise of a Claim where the difference between the amount of the Claim listed on the Schedules and the amount of the Claim proposed to be Allowed under the settlement is $20,000 or less; and (b) The following settlements or compromises shall be submitted to the Bankruptcy Court for approval: (i) Any settlement or compromise not described in subsection 10.3(a) hereof; and (ii) Any settlement or compromise of a Claim or a claim asserted by one or more of the Debtors that involves an "insider," as defined in section 101(31) of the Bankruptcy Code; and -27- (c) The Bank and the Committee shall be given notice of any proposed settlement or compromise pursuant to subsection 10.3(b) hereof. 10.4. No Distributions Pending Allowance. Notwithstanding any other provision of the Plan, no payment or Distribution shall be made with respect to any Claim to the extent it is a Contested Claim unless and until such Contested Claim becomes an Allowed Claim, subject to the Debtors' setoff rights as provided in Section 15.17 of the Plan. 10.5. Distributions After Allowance. Payments and Distributions to each holder of a Contested Claim, to the extent that such Claim ultimately becomes Allowed, shall be made in accordance with the provision of the Plan governing the class of Claims to which the respective holder belongs. 10.6. Estimation of Claims. The Disbursing Agent with the consent of the Bank may, at any time, request that the Bankruptcy Court estimate any Contested Claim pursuant to section 502(c) of the Bankruptcy Code regardless of whether the Disbursing Agent has previously objected to such Claim or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court will retain jurisdiction to estimate any Claim at any time during litigation concerning any objection to any Claim, including during the pendency of any appeal relating to any such objection. In the event that the Bankruptcy Court estimates any Contested Claim, that estimated amount will constitute either the allowed amount of such Claim or a maximum limitation on such Claim, as determined by the Bankruptcy Court. If the estimated amount constitutes a maximum limitation on such Claim, the Disbursing Agent with the consent of the Bank (or the Unsecured Creditors Trustee, if a Liquidation Trigger Event occurs) may elect to pursue any supplemental proceedings to object to any ultimate payment on such Claim. All of the objection, estimation, settlement, and resolution procedures set forth in the Plan are cumulative and not necessarily exclusive of one another. Claims may be estimated and subsequently compromised, settled, withdrawn or resolved by any mechanism approved by the Bankruptcy Court. ARTICLE XI. CONDITIONS PRECEDENT TO CONFIRMATION OF THE PLAN AND THE OCCURRENCE OF THE EFFECTIVE DATE 11.1. Conditions Precedent to Confirmation. The following are conditions precedent to confirmation of the Plan: (a) The Clerk of the Bankruptcy Court shall have entered an order or orders, which may be the Confirmation Order, approving the Plan Documents, authorizing the Debtors to execute, enter into, and deliver the Plan Documents and to execute, implement, and to take all actions otherwise necessary or appropriate to give effect to, the transactions contemplated by the Plan and the Plan Documents. -28- 11.2. Conditions Precedent to the Occurrence of the Effective Date. The following are conditions precedent to the occurrence of the Effective Date: (a) The Confirmation Order shall have been entered by the Clerk of the Bankruptcy Court, be in full force and effect and not be subject to any stay or injunction. (b) All necessary consents, authorizations and approvals shall have been given for the transfers of property and the payments provided for or contemplated by the Plan, including, without limitation, satisfaction or waiver of all conditions to the obligations of the Debtors under the Asset Purchase Agreement. 11.3. Waiver of Conditions. Subject to the written consent of the Bank, the Debtors may waive any of the conditions set forth in Sections 11.1 and 11.2 of the Plan. ARTICLE XII. THE DISBURSING AGENT 12.1. Powers and Duties. Pursuant to the terms and provisions of the Plan, the Disbursing Agent shall with the consent of the Bank be empowered and directed to (a) take all steps and execute all instruments and documents necessary to make Distributions to holders of Allowed Claims; (b) make distributions contemplated by the Plan; (c) comply with the Plan and the obligations thereunder; (d) employ, retain, or replace professionals to represent it with respect to its responsibilities; (e) object to Claims as specified in Article VIII hereof, and prosecute such objections; (f) compromise and settle any issue or dispute regarding the amount, validity, priority, treatment, or Allowance of any Claim as provided in Article VIII hereof; (g) make annual and other periodic reports regarding the status of distributions under the Plan to the holders of Allowed Claims that are outstanding against the Debtors at such time, such reports to be made available upon request to the holders of any Contested Claim; and (h) exercise such other powers as may be vested in the Disbursing Agent pursuant to the Disbursement Agreement, order of the Bankruptcy Court, or the Plan. 12.2. Distributions. Pursuant to the terms and provisions of the Plan, the Disbursing Agent shall on the Distribution Date, make the required Distributions specified under the Plan. To the extent all or a portion of a Contested Claim becomes an Allowed Claim subsequent to the Effective Date, the Disbursing Agent shall distribute to the holder of such Contested Claim the applicable initial distribution within thirty (30) days of such Contested Claim becoming an Allowed Claim. 12.3. Exculpation. Except as otherwise provided in this Section 12.3, the Disbursing Agent, together with its officers, directors, employees, agents, professionals and representatives, are -29- hereby exculpated by all Accepting Creditors from any and all Causes of Action, and other assertions of liability (including breach of fiduciary duty) arising out of the discharge of the powers and duties conferred upon the Disbursing Agent by the Plan, any Final Order of the Bankruptcy Court entered pursuant to or in the furtherance of the Plan, or applicable law, except solely for actions or omissions arising out of the Disbursing Agent's willful misconduct or gross negligence. No Accepting Creditor, or representative thereof, shall have or pursue any claim or cause of action (a) against the Disbursing Agent or its officers, directors, employees, agents, and representatives for making payments or Distributions in accordance with the Plan, or for liquidating the Remaining Estate Assets to make Distributions under the Plan, or (b) against any holder of a Claim for receiving or retaining payments or transfers of assets as provided for by the Plan. Nothing contained in this Section 12.3 shall preclude or impair any Accepting Creditor from bringing an action in the Bankruptcy Court against the Debtors to compel the making of Distributions contemplated by the Plan on account of such Claim. Additionally, as to Mr. Boyle or Mr. Thompson, Section 12.3 only applies to the extent that they are acting in the capacity of Disbursing Agent. ARTICLE XIII. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES 13.1. Assumption of Executory Contracts and Unexpired Leases. Pursuant to section 365 of the Bankruptcy Code, Exhibit "A" to the Plan sets forth a list of executory contracts and unexpired leases, together with the amount, if any, required to cure any defaults, to be assumed under the Plan. Any executory contracts or unexpired leases listed on an exhibit filed as a Plan document, as such may be amended through the Effective Date, shall be deemed to have been assumed by the Debtors on the Effective Date. The Plan shall constitute a motion to assume and assign certain of the executory contracts and unexpired leases assumed pursuant to Exhibit "A" to the Purchaser pursuant to the terms of the Asset Purchase Agreement as indicated on Exhibit "A". Subject to the occurrence of the Effective Date, entry of the Confirmation Order by the Clerk of the Bankruptcy Court shall constitute approval of such assumptions and assignments pursuant to section 365 of the Bankruptcy Code and findings by the Bankruptcy Court that the amounts listed on such exhibit Plan are sufficient to cure any defaults that may exist, that each assumption is in the best interest of the Debtors, their estates, and all parties in interest in the Chapter 11 Cases and that the requirements for assumption and assignment of any executory contract or unexpired lease to be assumed under section 365 of the Bankruptcy Code have been satisfied. Except as otherwise provided in the following sentence, all cure payments which may be required by section 365(b)(1) of the Bankruptcy Code under any executory contract or unexpired lease which is assumed under the Plan shall be made by the Debtors or the Purchaser pursuant to the Asset Purchase Agreement on the Effective Date or as soon as practicable thereafter. In the event of a dispute, cure payments required by section 365(b)(1) of the Bankruptcy Code shall be paid from the Available Proceeds upon entry of a Final Order resolving such dispute. -30- 13.2. Rejection of Executory Contracts and Unexpired Leases. Any executory contracts or unexpired leases of any of the Debtors that (a) are not listed on the exhibit filed as a Plan document, (b) have not been approved by the Bankruptcy Court prior to the Confirmation Date for assumption and assignment by any of the Debtors, and (c) are not the subject of pending motions to assume on the Confirmation Date, shall be deemed to have been rejected by the Debtors. The Plan shall constitute a motion to reject such executory contracts and unexpired leases, and the Debtors shall have no liability thereunder except as is specifically provided in the Plan. Entry of the Confirmation Order by the Clerk of the Bankruptcy Court shall constitute approval of such rejections pursuant to section 365(a) of the Bankruptcy Code and a finding by the Bankruptcy Court that each such rejected executory contract or unexpired lease is burdensome, and that the rejection thereof is in the best interest of the Debtors, their estates, and all parties in interest in the Chapter 11 Cases. 13.3. Claims Arising from Rejection or Termination. Claims created by the rejection of executory contracts or unexpired leases or the expiration or termination of any executory contract or unexpired lease prior to the Confirmation Date must be filed with the Bankruptcy Court and served on the Debtors (a) in the case of an executory contract or unexpired lease rejected by the Debtors prior to the Confirmation Date, in accordance with the Bar Date Order, or (b) in the case of an executory contract or unexpired lease that (i) was terminated or expired by its terms prior to the Confirmation Date, or (ii) is deemed rejected pursuant to Section 13.2 of the Plan, no later than thirty (30) days after the Confirmation Date, or (c) in the case of an executory contract or unexpired lease that is rejected by the Debtors after the Confirmation Date, within thirty (30) days after the entry of an order of the Bankruptcy Court authorizing and approving such rejection. Any Claims for which a proof of claim is not filed and served within such time will be forever barred from assertion and shall not be enforceable against the Debtors, their estates, assets, properties, or interests in property. Unless otherwise ordered by the Bankruptcy Court, all such Claims that are timely filed as provided herein shall be treated as Unsecured Claims under the Plan subject to objection by the Debtors. ARTICLE XIV. RETENTION OF JURISDICTION 14.1. Pursuant to sections 105(a) and 1142 of the Bankruptcy Code, the Bankruptcy Court shall retain and shall have exclusive jurisdiction over any matter (a) arising under the Bankruptcy Code, (b) arising in or related to the Chapter 11 Cases or the Plan, or (c) that relates to the following: (i) To hear and determine any and all motions or applications pending on the Confirmation Date or thereafter brought in accordance with Article XIII hereof for the assumption and/or assignment or rejection of executory contracts or unexpired leases to which any of the Debtors is a party, or with respect to which any of the Debtors may be liable, and to hear and determine any and all Claims resulting therefrom or from the expiration or termination of any executory contract or unexpired lease; -31- (ii) To determine any and all adversary proceedings, applications, motions, and contested or litigated matters that may be pending on the Effective Date or that, pursuant to the Plan, may be instituted by the Disbursing Agent, or the Debtors or the Committee after the Effective Date, including, without express or implied limitation, any application to the Bankruptcy Court relating to any claims to avoid any preferences, fraudulent transfers, or other voidable transfers, or otherwise to recover assets for the benefit of each of the Debtors; (iii) To hear and determine any objections to the allowance of Claims, whether filed, asserted, or made before or after the Effective Date, including, without express or implied limitation, to hear and determine any objections to the classification of any Claim and to allow, disallow or estimate any Contested Claim in whole or in part; (iv) To issue such orders in aid of execution of the Plan to the extent authorized or contemplated by section 1142 of the Bankruptcy Code; (v) To consider any modifications of the Plan, remedy any defect or omission, or reconcile any inconsistency in any order of the Bankruptcy Court, including, without limitation, the Confirmation Order; (vi) To hear and determine all applications for allowances of compensation and reimbursement of expenses of professionals under sections 330 and 331 of the Bankruptcy Code and any other fees and expenses authorized to be paid or reimbursed under the Plan or the Bankruptcy Code; (vii) To hear and determine all controversies, suits, and disputes that may relate to, impact upon, or arise in connection with the Plan (and all documents, instruments, agreements, schedules, and exhibits thereto) or their interpretation, implementation, enforcement, or consummation; (viii) To hear and determine all controversies, suits, and disputes that may relate to, impact upon, or arise in connection with the Confirmation Order (and all exhibits to the Plan) or its interpretation, implementation, enforcement, or consummation; (ix) To the extent that Bankruptcy Court approval is required to consider and act on the compromise and settlement of any Claim or cause of action by or against the Debtors' Estates; (x) To determine such other matters that may be set forth in the Plan, or the Confirmation Order, or that may arise in connection with the Plan, or the Confirmation Order; (xi) To hear and determine matters concerning state, local, and federal taxes, fines, penalties, or additions to taxes for which the Debtors, the Debtors in Possession, or the Disbursing Agent may be liable, directly or indirectly, in accordance with sections 346, 505, and 1146 of the Bankruptcy Code; -32- (xii) To hear and determine all controversies, suits, and disputes that may relate to, impact upon, or arise in connection with any setoff and/or recoupment rights of the Debtors or any Person; (xiii) To hear and determine all controversies, suits, and disputes that may relate to, impact upon, or arise in connection with Causes of Action of the Debtors (including Avoidance Actions) commenced by the Debtors before or the Debtors or the Committee, as the case may be, after the Effective Date; (xiv) To enter an order or final decree closing the Chapter 11 Cases; (xv) To determine such other matters and for such other purposes as may be provided in the Confirmation Order; (xvi) To issue injunctions, enter and implement other orders or take such other actions as may be necessary or appropriate to restrain interference by any Person with consummation, implementation or enforcement of the Plan or the Confirmation Order; and (xvii) To hear and determine any other matters related hereto and not inconsistent with chapter 11 of the Bankruptcy Code; provided, however, any of the retained jurisdiction under this provision shall not affect the rights of the Bank to enforce its remedies in non-bankruptcy forums after March 31, 2002. ARTICLE XV. MISCELLANEOUS PROVISIONS 15.1. Payment of Statutory Fees. All fees payable pursuant to section 1930 of title 28 of the United States Code, as determined by the Bankruptcy Court at the hearing on confirmation of the Plan, shall be paid by the Debtors on or before the Effective Date. Any such fees accrued after the Effective Date will constitute an Allowed Administrative Claim and be treated in accordance with Section 6.1 of the Plan. 15.2. Discharge of the Debtors. The rights afforded in the Plan and the treatment of all Claims and Equity Interests herein shall be in exchange for, and in complete satisfaction, discharge, and release of all Claims and Equity Interests of any nature whatsoever, including any interest accrued thereon from and after the Petition Date, against the Debtors and the Debtors in Possession, or any of their Estates, Assets, properties, or interests in property. Except as otherwise provided herein, on the Effective Date, all Claims against and Equity Interests in the Debtors and the Debtors in Possession shall be satisfied, discharged, and released in full. The Debtors shall not be responsible for any obligations of the Debtors or the Debtors in Possession except those expressly assumed by any of the Debtors in the Plan. Except as otherwise provided herein, all Persons shall be precluded and forever barred from asserting against the Debtors, their respective -33- successors or assigns, or their Assets, properties, or interests in property any other or further Claims based upon any act or omission, transaction, or other activity of any kind or nature that occurred prior to the Effective Date, whether or not the facts of or legal bases therefor were known or existed prior to the Effective Date. 15.3. Third Party Agreements; Subordination. The Distributions to the various classes of Claims hereunder shall not affect the right of any Person to levy, garnish, attach, or employ any other legal process with respect to such Distributions by reason of any claimed subordination rights or otherwise. All of such rights and any agreements relating thereto shall remain in full force and effect. Distributions under the Plan shall be subject to, and modified by, any Final Order directing distributions other than as provided in the Plan. In accordance with section 510(b) of the Bankruptcy Code, a Claim arising from rescission of a purchase or sale of a security of the Debtors or of an Affiliate of the Debtors, for damages arising from the purchase or sale of such a security, or for reimbursement or contribution allowed under section 502 of the Bankruptcy Code on account of such Claim, shall be subordinated to all Claims that are senior to, or equal the Claim or Equity Interest represented by such security, except that if such security is common stock in Classes 5-A, 5-B and 5-C, such Claim has the same priority and treatment as Class 5-A, 5-B and 5-C and the holders of such Claims will neither receive or retain any property under the Plan. 15.4. Dissolution of Committee. Ninety (90) days after the occurrence of the Effective Date, the Committee shall thereupon be released and discharged of and from all further authority, duties, responsibilities, and obligations relating to and arising from and in connection with the Chapter 11 Cases, and the Committee shall be deemed dissolved, unless prior thereto the Bankruptcy Court shall have entered an order extending the existence of the Committee. 15.5. Exculpation. The Debtors shall not have or incur any liability to any Person for any act or omission in connection with or arising out of the pursuit of confirmation of the Plan, the consummation of the Plan, or the administration of the Plan or the property to be distributed under the Plan, except for gross negligence or willful misconduct as determined by Final Order of the Bankruptcy Court, and in all respects shall be entitled to rely upon the advice of counsel and all information provided by other exculpated persons herein without any duty to investigate the veracity or accuracy of such information with respect to their duties and responsibilities under the Plan. None of the Disbursing Agent, the Bank, the Committee, Elcotel Trustee, the Unsecured Creditors Trustee, any of their respective officers, directors, employees, advisors, members, professionals or agents or any of the Debtors' respective officers, directors, employees, advisors, members, professionals or agents shall have or incur any liability to any Accepting Creditor for any act or omission in connection with or arising out of the pursuit of confirmation of the Plan, the consummation of the Plan, or the administration of the Plan or the property to be distributed under the Plan, except for gross negligence or willful misconduct -34- as determined by Final Order of the Bankruptcy Court, and in all respects shall be entitled to rely upon the advice of counsel and all information provided by other exculpated persons herein without any duty to investigate the veracity or accuracy of such information with respect to their duties and responsibilities under the Plan. 15.6. Title to Assets; Discharge of Liabilities. Except as otherwise provided in the Plan, including Section 8.2(a) of the Plan, on the Effective Date, title to all Assets shall vest in Elcotel free and clear of all Claims, Equity Interests, liens, security interests, encumbrances, and other interests, and the Confirmation Order shall be a judicial determination of discharge of the liabilities of the Debtors, except as provided in the Plan. Except as otherwise provided in the Plan, all holders of Claims and Equity Interests shall be precluded from asserting against the Debtors, the Assets, or any property dealt with under the Plan, any or other further Claim based upon any act or omission, transaction, or other activity of any kind or nature that occurred prior to the Confirmation Date. 15.7. Surrender and Cancellation of Instruments. On the Effective Date, except as provided below, all promissory notes, instruments, securities and agreements evidencing a Claim or Equity Interest shall be cancelled. At the option of the Disbursing Agent, no Distribution hereunder shall be made to or on behalf of any holder of any such Claim unless and until such promissory note, instrument, security or agreement is surrendered or the unavailability thereof is reasonably established to the satisfaction of the Disbursing Agent and such holder of a Claim executes and delivers any documents necessary to release all encumbrances arising under any applicable security agreement or nonbankruptcy law and such other documents as the Disbursing Agent may reasonably request. In accordance with section 1143 of the Bankruptcy Code, any such holder of a Claim that fails to surrender or cause to be surrendered such promissory note, instrument, security or agreement or to execute and deliver an affidavit of loss and indemnity reasonably satisfactory to the Disbursing Agent, and, in the event that the Disbursing Agent requests, furnish a bond in form and substance reasonably satisfactory to the Disbursing Agent (including, without limitation, amount), shall be deemed to have forfeited all rights, claims, and interests and shall not participate in any Distribution hereunder (to the extent otherwise entitled). If a Liquidation Trigger Event occurs, the Bank Prepetition Loan Agreements will not be cancelled until the Bank Claim has been satisfied. 15.8. Notices. Any notices, requests, and demands required or permitted to be provided under the Plan, in order to be effective, shall be in writing (including, without express or implied limitation, by facsimile transmission), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when actually delivered or, in the case of notice by facsimile transmission, when received and telephonically confirmed, addressed as follows: -35- Elcotel, Inc. Attention: Mike J. Boyle, President/CEO 6428 Parkland Drive Sarasota, Florida 34243 Telecopier: (941) 758-4716 Telephone: (941) 751-0389 and White & Case LLP Attention: Thomas E Lauria, Esq. 200 South Biscayne Boulevard Miami, Florida 33131 Telecopier: (305) 358-5744 Telephone: (305) 371-2700 and Stichter, Riedel, Blain & Prosser, P.A. Attention: Don M. Stichter, Esq. 110 East Madison Street, Suite 200 Tampa, Florida 33602 Telecopier: (813) 229-1811 Telephone: (813) 229-0144 15.9. Headings. The headings used in the Plan are inserted for convenience only, and neither constitute a portion of the Plan nor in any manner affect the construction of the provisions of the Plan. 15.10. Governing Law. Unless a rule of law or procedure is supplied by federal law (including the Bankruptcy Code and the Bankruptcy Rules), the laws of the State of Florida, without giving effect to the conflicts of laws principles thereof, shall govern the construction of the Plan and any agreements, documents, and instruments executed in connection with the Plan, except as otherwise expressly provided in such instruments, agreements or documents. 15.11. Expedited Determination. The Disbursing Agent, with respect to property held by the Disbursing Agent pending the Final Distribution Date is hereby authorized to file a request for expedited determination under section 502(b) of the Bankruptcy Code for all tax returns filed with respect thereto. -36- 15.12. Exemption from Transfer Taxes. Pursuant to section 1146(c) of the Bankruptcy Code, the issuance, transfer, or exchange of notes or equity securities under the Plan, the creation of any mortgage, deed of trust, or other security interest, the making or assignment of any lease or sublease, or the making or delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with the Plan, shall not be subject to any stamp, real estate transfer, mortgage recording, or other similar tax. 15.13. Notice of Entry of Confirmation Order and Relevant Dates. Promptly upon entry of the Confirmation Order, the Debtors serve on all known parties in interest and holders of Claims, notice of the entry of the Confirmation Order and all relevant deadlines and dates under the Plan, including, but not limited to, the deadline for filing notice of Administrative Claims (Section 6.1 hereof), and the deadline for filing rejection damage claims (Section 13.3 hereof). 15.14. No Interest or Attorneys' Fees. Except as expressly stated in the Plan, or as allowed by the Bankruptcy Court, no interest, penalty or late charge arising after the Petition Date, and no award or reimbursement of attorneys fees or related expenses or disbursements, shall be allowed on, or in connection with, any Claim. 15.15. Modification of the Plan. As provided in section 1127 of the Bankruptcy Code, modification of the Plan may be proposed in writing by the Debtors at any time before confirmation as long as the Bank has consented to such modification in writing, provided that the Plan, as modified, meets the requirements of sections 1122 and 1123 of the Bankruptcy Code, and the Debtors shall have complied with section 1125 of the Bankruptcy Code. The Debtors may modify the Plan at any time after confirmation and before substantial consummation, provided that the Plan, as modified, meets the requirements of sections 1122 and 1123 of the Bankruptcy Code and the Bankruptcy Court, after notice and a hearing, confirms the Plan as modified under section 1129 of the Bankruptcy Code, and the circumstances warrant such modifications. A holder of a Claim that has accepted or rejected the Plan shall be deemed to have accepted or rejected, as the case may be, such Plan as modified, unless, within the time fixed by the Bankruptcy Court, such holder changes its previous acceptance or rejection. 15.16. Revocation of Plan. Subject to the written consent of the Bank, the Debtors reserve the right to revoke and withdraw the Plan as to any Debtor prior to the occurrence of the Effective Date. If the Debtors revoke or withdraw the Plan as to any Debtor, or if the Effective Date does not occur as to any Debtor, then, as to such Debtor, the Plan and all settlements set forth in the Plan shall be deemed null and void and nothing contained herein shall be deemed to constitute a waiver or release of any Claims against or equity interests in such Debtor or to prejudice in any manner the rights of the Debtors or any Person in any other further proceedings involving such Debtor. -37- 15.17. Setoff Rights. In the event that the Debtors have a claim of any nature whatsoever against the holder of a Claim, the Debtors may, but are not required to, setoff against the Claim (and any payments or other Distributions to be made in respect of such Claim hereunder) the Debtors' claim against the holder, unless any such Claim is or will be released under the Plan, subject to the provisions of section 553 of the Bankruptcy Code. Neither the failure to setoff nor the allowance of any Claim under the Plan shall constitute a waiver or release of any claims that the Debtors have against the holder of a Claim. 15.18. Subordination/Avoidance Rights Against the Debtors. All Claims against the Debtors, based upon any claimed subordination rights against the Debtors or rights to avoid payments or transfers of property by the Debtors pursuant to any provision of the Bankruptcy Code or other applicable law, shall be deemed satisfied as to the Debtors by the distributions under the Plan to holders of Allowed Claims having such subordination rights and any rights to avoid payments or transfers of property. 15.19. Compliance with Tax Requirements. In connection with the Plan, the Debtors and the Disbursing Agent, as applicable, shall comply with all withholding and reporting requirements imposed by federal, state, local, and foreign taxing authorities and all Distributions hereunder shall be subject to such withholding and reporting requirements. Notwithstanding the above, each holder of an Allowed Claim that is to receive a Distribution under the Plan shall have the sole and exclusive responsibility for the satisfaction and payment of any tax obligations imposed by any government unit, including income, withholding and other tax obligations, on account of such Distribution and reorganization. The Disbursing Agent has the right, but not the obligation, to not make a Distribution until such holder has made arrangements satisfactory to the Disbursing Agent for payment of any such tax obligations. Pursuant to section 1146(c) of the Bankruptcy Code, the issuance, transfer, or exchange of promissory notes, equity securities, or other instruments under the Plan, the creation of any mortgage, deed of trust, or other security interest, the making or assignment of any lease or sublease or the making or delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with the Plan, including, without limitation, any merger agreements or agreements of consolidation, deeds, bills of sale, or assignments executed in connection with any of the transactions contemplated under the Plan shall not be subject to any stamp, real estate transfer, mortgage recording, or other similar tax. 15.20. Recognition of Guaranty Rights. The classification and manner of satisfying all Claims under the Plan take into consideration (a) the existence of guaranties by the Debtors of obligations of other Persons, and (b) the fact that the Debtors may be joint obligors with other Persons with respect to an obligation. Except for any guaranties under Bank Pre-Petition Loan Agreements, all Claims against the Debtors based upon any such guaranties or joint obligations shall be discharged in the -38- manner provided in the Plan; provided, that no creditor shall be entitled to receive more than one recovery with respect to any of its Allowed Claims. 15.21. Compliance with All Applicable Laws. If notified by any governmental authority that it is in violation of any applicable law, rule, regulation, or order of such governmental authority relating to its businesses, the Debtors shall take whatever action as may be required to comply with such law, rule, regulation, or order; provided, that nothing contained herein shall require such compliance if the legality or applicability of any such requirement is being contested in good faith, and, if appropriate, an adequate reserve for such requirement has been set aside. 15.22. Injunctions. On the Effective Date, (a) all Persons who have been, are, or may be holders of Claims against or Equity Interests in the Debtors shall, except as otherwise permitted under this Plan, be enjoined from taking any of the following actions against or affecting the Debtors, their Estates, their Assets, or Elcotel and (b) all Accepting Creditors, shall, except as otherwise permitted under this Plan, be enjoined from taking any of the following actions against or affecting the Elcotel Unsecured Creditors Trust, the Bank or the Committee, any of their respective officers, directors, employees, agents, representatives, or professionals or the Debtors' respective officers, directors, employees, advisors, members, professionals or agents or their respective assets and property with respect to any Claims such Accepting Creditors may have (other than actions brought to enforce any rights or obligations under the Plan, including the treatment and allowance of Allowed Non-Bank Secured Claims pursuant to the Plan, and appeals, if any, from the Confirmation Order): (a) commencing, conducting or continuing in any manner, directly or indirectly, any suit, action or other proceeding of any kind (including, without limitation, all suits, actions, and proceedings that are pending as of the Effective Date, which must be withdrawn or dismissed with prejudice); (b) enforcing, levying, attaching, collecting or otherwise recovering by any manner or means whether directly or indirectly any judgment, award, decree or order; (c) creating, perfecting or otherwise enforcing in any manner, directly or indirectly, any encumbrance; and (d) except with respect to the treatment and allowance of Allowed Non-Bank Secured Claims by the Bankruptcy Court as provided in the Plan including under Section 5.1(c) hereof, asserting any setoff, right of subrogation or recoupment of any kind; provided, that any defenses, offsets or counterclaims which the Debtors or Elcotel (as reorganized) may have or assert in respect of the above referenced claims are fully preserved in accordance with Section 15.17 of the Plan. 15.23. Binding Effect. -39- The Plan shall be binding upon and inure to the benefit of the Debtors, the holders of all Claims and Equity Interests, and their respective successors and assigns. To the extent any provision of the Disclosure Statement may be inconsistent with the terms of the Plan, the terms of the Plan shall be binding and conclusive. 15.24. Severability. SHOULD THE BANKRUPTCY COURT DETERMINE THAT ANY PROVISION OF THE PLAN IS UNENFORCEABLE EITHER ON ITS FACE OR AS APPLIED TO ANY CLAIM OR EQUITY INTEREST OR TRANSACTION, THE DEBTORS MAY WITH WRITTEN CONSENT OF THE BANK, MODIFY THE PLAN IN ACCORDANCE WITH SECTION 15.5 OF THE PLAN SO THAT SUCH PROVISION SHALL NOT BE APPLICABLE TO THE HOLDER OF ANY CLAIM OR EQUITY INTEREST. SUCH A DETERMINATION OF UNENFORCEABILITY SHALL NOT (A) LIMIT OR AFFECT THE ENFORCEABILITY AND OPERATIVE EFFECT OF ANY OTHER PROVISION OF THE PLAN OR (B) REQUIRE THE RESOLICITATION OF ANY ACCEPTANCE OR REJECTION OF THE PLAN. Dated: January 14, 2001. Respectfully submitted, Elcotel, Inc. By: /s/ William H. Thompson ------------------------ Title: Senior Vice-President --------------------- Elcotel Direct, Inc. By: /s William H. Thompson ------------------------ Title: Vice-President ------------------------ Technology Service Group, Inc. By: /s William H. Thompson ------------------------ Title: Vice-President ------------------------ -40- EX-2.2 4 e12940ex22.txt SECOND AMENDED JOINT PLAN UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION - ------------------------------------------------x In re Case Nos. 01-01077-8C1 01-01078-8C1 ELCOTEL, INC., ELCOTEL DIRECT, 01-01079-8C1 INC., and TECHNOLOGY SERVICE GROUP, INC., : Jointly Administered Under Case No. 01-01077-8C1 Debtors. - ------------------------------------------------x ORDER CONFIRMING THE SECOND AMENDED JOINT PLAN OF ELCOTEL INC. AND ITS AFFILIATED DEBTORS - -------------------------------------------------------------------------------- THIS CASE came for hearing on December 13, 2001, at 9:30 a.m., and January 11, 2002, at 9:30 a.m. (jointly, the "Confirmation Hearing"), to consider confirmation of the First Amended Joint Plan of Reorganization of Elcotel, Inc. and its Affiliated Debtors1 as Corrected dated October 25, 2001 (Document No. 306), Modification of the First Amended Joint Plan of Reorganization of Elcotel, Inc. and its Affiliated Debtors, as Corrected (Document No. 374), and Notice of Filing Revised Exhibit "A" to the Modified First Amended Joint Plan of Elcotel, Inc. and its Affiliated Debtors, as Corrected dated October 25, 2001 (Document No. 396), which were filed by Elcotel, Inc. ("Elcotel"), Elcotel Direct, Inc. ("Direct") and Technology Services Group ("Technology," collectively with Elcotel and Direct, the "Debtors"). At the hearing, the court determined that additional modifications to the proposed plan were required to satisfy the requirements of Section 1129(a) of the Bankruptcy Code. - ---------- (1) Unless otherwise defined, capitalized terms used herein shall have the meanings ascribed to them in the Plan or the Purchase Agreement, as the case may be. The court also directed the Debtors to restate and incorporate the proposed plan and all amendments and modifications in a single document to be entitled Second Amended Joint Plan of Reorganization of Elcotel, Inc. and its Affiliated Debtors. On January 15, 2002, the Debtors filed that amended plan (Document No. 404). At the Confirmation Hearing, the Court dictated certain findings of fact and conclusions of law into the record. For the reasons stated orally and recorded in open Court that shall constitute the Court's findings of fact and conclusions of law, it is hereby ORDERED as follows: 1. The Second Amended Joint Plan of Reorganization of Elcotel, Inc. and its Affiliated Debtors filed on January 15, 2002 (Document No. 404), is hereby confirmed in all respects. Approval of Purchase Agreement 2. The Plan includes as a material term the approval and consumation of the Purchase Agreement dated as of December 17, 2001 between Elcotel, Direct, Technology and International Service Technology, Inc. (collectively, the "Seller") and Applicon, Inc. and Elcotel Acquisition Corporation (the "Purchaser") together with all schedules, exhibits and appendices attached thereto or filed with the Court as approved by the Debtors, Bank and Purchaser (the "Purchase Agreement"). Pursuant to the Plan the Debtors and the Purchaser sought entry of an order under sections 105(a), 363, 365, and 1146(c) of the Bankruptcy Code and Fed. R. Bankr. P. 2002, 6004, 6006, and 9014 (a) authorizing (i) the Debtors' proposed sale (the "Asset Sale") of substantially all of the Debtors' assets as defined in the Purchase Agreement (the "Acquired Assets"), free and clear of all liens, claims, interests, and encumbrances (except those expressly assumed by the Purchaser or otherwise expressly stated as obligations or liabilities of the 2 Purchaser (collectively, the "Assumed Liabilities")), pursuant to and as described in the Purchase Agreement, (ii) the Seller's assumption and assignment to the Purchaser of certain executory contracts and unexpired leases (the "Assumed Contracts"), pursuant to and as described in the Purchase Agreement, free and clear of liens, claims, interests, and encumbrances (except the Assumed Liabilities), and (iii) the assumption by the Purchaser of certain liabilities of the Seller (the collectively, "Assumed Liabilities"), pursuant to and as described in the Purchase Agreement. 3. The Liquidation Trigger Event has occurred and an orderly liquidation of the Debtors' assets shall be substantially implemented through the consummation of the transactions contemplated by the Purchase Agreement. 4. The Purchase Agreement, and all of the terms and conditions thereof, is hereby approved. 5. Pursuant to sections 363(b) of the Bankruptcy Code, the Seller is authorized and directed to consummate the Asset Sale, pursuant to and in accordance with the terms and conditions of the Purchase Agreement. 6. The Seller is authorized and directed to execute and deliver, and empowered to perform under, consummate and implement, the Purchase Agreement, together with all additional instruments and documents that may be reasonably necessary or desirable to implement the Purchase Agreement, and to take all further actions as may be reasonably requested by the Purchaser and required under the Purchase Agreement for the purpose of assigning, transferring, granting, conveying and conferring the Acquired Assets to the Purchaser. 3 Transfer of Acquired Assets 7. Pursuant to sections 105(a) and 363(f) of the Bankruptcy Code, the Acquired Assets shall be transferred to the Purchaser, and upon consummation of the Purchase Agreement (the "Closing") shall be, free and clear of all: (i) mortgages, security interests, conditional sale or other title retention agreements, pledges, liens, claims, judgments, demands easements, charges, encumbrances, defects, security interests, options, rights of first refusal, and restrictions of all kind of record (collectively, "Interests"), and (ii) all debts arising under or out of, in connection with, or in any way relating to, any acts of the Debtor, claims (as that term is defined in section 101(5) of the Bankruptcy Code), rights or causes of action (whether in law or in equity, including, but not limited to, any rights or causes of action based on theories of transferee or successor liability under any law, statute, rule or regulation of the United States, any state, territory, or possession thereof, or the District of Columbia), obligations, demands, guaranties, rights, contractual commitments, restrictions, interests and matters of any kind or nature whatsoever, whether arising prior to or subsequent to the commencement of these cases, and whether imposed by agreement, understanding, law, equity, or otherwise (including, without limitation, claims and encumbrances of record (A) that purport to give to any party a right or option to effect any forfeiture, modification, right of first refusal, or termination of the Seller's or the Purchaser's interest in the Acquired Assets, or any similar rights, (B) relating to taxes arising under or out of, in connection with, or in any way relating to the operation of the Debtors' Business prior to the Closing Date, and (C) arising under or out of, in connection with, or in any way relating to, claims asserted by the Debtors' former or current employees (collectively, "Claims"), with all such Claims and Interests of any kind or nature whatsoever to attach to the net proceeds of the Asset Sale in the order of their priority, with the same validity, force and 4 effect which they now have as against the Acquired Assets except with respect to the Bank whose validity, force and effect are not subject to challenge as agreed to under the Plan, subject to any claims and defenses the Debtors may possess with respect thereto. For purposes of this Order, the phrase "of record" shall refer to those persons and/or entities that received notice of the Confirmation Hearing. 8. Except as expressly permitted or otherwise specifically provided by the Purchase Agreement or this Order, all persons and entities of record, including, but not limited to, all debt security holders, equity security holders, governmental, tax, and regulatory authorities, lenders, current or former employees, trade and other creditors, holding Claims and Interests of any kind or nature whatsoever against or in the Debtors or the Acquired Assets (whether legal or equitable, secured or unsecured, matured or unmatured, contingent or non-contingent, senior or subordinated), arising under or out of, in connection with, or in any way relating to, the Debtors, the Acquired Assets, the operation of the Debtors' Business prior to the Closing Date, or the transfer of the Acquired Assets to the Purchaser, hereby are forever barred, estopped, and permanently enjoined from asserting against the Purchaser, its successors or assigns, its property, or the Acquired Assets, such persons' or entities' Claims and Interests, however nothing in this order shall be construed to prevent the Debtors and/or its successors for taking any action against the Purchaser for breach of the Purchase Agreement. 9. The transfer of the Acquired Assets to the Purchaser pursuant to the Purchase Agreement constitutes a legal, valid, and effective transfer of the Acquired Assets, and shall vest the Purchaser with all right, title, and interest of the Seller in and to the Acquired Assets free and clear of all Claims and Interests of record of any kind or nature whatsoever, other than the Assumed Liabilities. 5 Assumption and Assignment to Purchaser of Assumed Contracts and Assumed Liabilities 10. Pursuant to sections 105(a) and 365 of the Bankruptcy Code, and subject to and conditioned upon the Closing of the Asset Sale, the Seller's assumption and assignment to the Purchaser, and the Purchaser's assumption on the terms set forth in the Purchase Agreement, of the Assumed Contracts (other than those particular executory contracts and unexpired leases which, pursuant to the Purchase Agreement, are not being assumed and assigned to the Purchaser) and Assumed Liabilities is hereby approved, and the requirements of sections 365(b)(1) of the Bankruptcy Code with respect thereto and hereby deemed satisfied. 11. The Seller is hereby authorized and directed in accordance with sections 105(a) and 365 of the Bankruptcy Code to (a) assume and assign to the Purchaser, effective upon the Closing of the Asset Sale, the Assumed Contracts and Assumed Liabilities free and clear of all Claims and Interests of record of any kind or nature whatsoever, other than the Assumed Liabilities, and (b) execute and deliver to the Purchaser such documents or other instruments as may be necessary to assign and transfer the Assumed Contracts and Assumed Liabilities to the Purchaser. 12. The Assumed Contracts and Assumed Liabilities shall be transferred to, and remain in full force and effect for the benefit of, the Purchaser in accordance with their respective terms, notwithstanding any provision in any such Contract or Assumed Liability (including those of the type described in sections 365(b)(2) and (f) of the Bankruptcy Code) that prohibits, restricts, or conditions such assignment or transfer (including any prohibition, restriction or condition on transfer relating to a change in control of the Seller), and, pursuant to section 365(k) of the Bankruptcy Code, the Debtors shall be relieved from any further liability 6 with respect to the Assumed Contracts and Assumed Liabilities after such assignment to and assumption by the Purchaser. 13. All defaults or other obligations to the extent specified on Schedule 1.03 to the Purchase Agreement (the "Cure Costs") of the Seller under the Assumed Contracts and Assumed Liabilities arising or accruing prior to the date of this Order (without giving effect to any acceleration clauses or any default provisions of the kind specified in section 365(b)(2) of the Bankruptcy Code) shall be cured by the Purchaser at the Closing of the Asset Sale or as soon thereafter as practicable. 14. Each non-Debtor party of record to Assumed Contract or Assumed Liability hereby is forever barred, estopped, and permanently enjoined from asserting against the Purchaser, or the property of either of them, any default existing as of the date hereof. 15. The failure of the Seller or the Purchaser to enforce at any time one or more terms or conditions of any Assumed Contract shall not be a waiver of such terms or conditions, or of the Seller's and Purchaser's rights to enforce every term and condition of the Assumed Contracts. Additional Provisions 16. The consideration provided by the Purchaser for the Acquired Assets under the Purchase Agreement shall be deemed to constitute reasonably equivalent value and fair consideration under the Bankruptcy Code and under the laws of the United States, any state, territory, possession, or the District of Columbia. 17. The consideration provided by the Purchaser of the Acquired Assets under the Purchase Agreement is fair and reasonable and may not be avoided under section 363 (k) or (n) of the Bankruptcy Code. 7 18. On the date of the Closing of the Sale (the "Closing Date"), each of the Seller's creditors is authorized to execute such documents and take all other actions as may be necessary to release its Claims against or Interests in the Acquired Assets, if any, as such Claims or Interests may have been recorded or may otherwise exist. 19. This Order (a) shall be effective as a determination that, on the Closing Date, all Claims and Interests of record of any kind or nature whatsoever existing as to the Debtors or the Acquired Assets prior to the Closing have been unconditionally released, discharged and terminated (other than the Assumed Liabilities), and that the conveyance described in decretal paragraph 6 hereof has been effected, and (b) shall be binding upon and shall govern the acts of all entities including without limitation, all filing agents, filing officers, title agents, title companies, recorders of mortgages, recorders of deeds, registrars of deeds, administrative agencies, governmental departments, secretaries of state, federal, state, and local officials, and all other persons and entities who may be required by operation of law, the duties of their office, or contract, to accept, file, register or otherwise record or release any documents or instruments, or who may be required to report or insure any title or state of title in or to any of the Acquired Assets. 20. Each and every federal, state, and local governmental agency or department is hereby directed to accept any and all documents and instruments necessary and appropriate to consummate the transactions contemplated by the Purchase Agreement. 21. If any person or entity that has filed financing statements, mortgages, mechanic's liens, lis pendens, or other documents or agreements evidencing Claims against or Interests in the Debtors or the Acquired Assets shall not have delivered to the Seller prior to the Closing Date, in proper form for filing and executed by the appropriate parties, termination 8 statements, instruments of satisfaction, releases of all Claims or Interests which the person or entity has with respect to the Debtors or the Acquired Assets or otherwise, then the Purchaser is hereby authorized to file, register, or otherwise record a certified copy of this Order, which, once filed, registered, or otherwise recorded, shall constitute conclusive evidence of the release of all Claims against or Interests in the Acquired Assets of any kind or nature whatsoever. 22. All entities who are presently, or on the Closing Date may be, in possession of some or all of the Acquired Assets are hereby directed to surrender possession of the Acquired Assets to the Purchaser on the Closing Date. 23. The Purchaser shall have no liability or responsibility for any liability or other obligation of the Seller arising under or related to the Acquired Assets other than for (a) the Purchase Price, (b) the Assumed Liabilities (c) the Assumed Contracts and (d) the Cure Costs. Without limiting the generality of the foregoing, and except as otherwise specifically provided herein and in the Purchase Agreement, the Purchaser shall not be liable for any Claims against the Debtors or any of their predecessors or affiliates, and the Purchaser shall have no successor or vicarious liabilities of any kind or character whether known or unknown as of the Closing Date, now existing or hereafter arising, whether fixed or contingent, with respect to the Debtors or any obligations of the Debtors arising prior to the Closing Date, including, but not limited to liabilities on account of any taxes arising, accruing, or payable under, out of, in connection with, or in any way relating to the operation of the Debtors' Business prior to the Closing Date. 24. The Purchaser shall not be deemed a successor of or to the Debtors for any Claim or Interest against or in the Acquired Assets of any kind or nature whatsoever. The sale, transfer, assignment and delivery of the Acquired Assets shall not be subject to any Claims and Interests, and all Claims and Interests of any kind or nature whatsoever shall remain with, and 9 continue to be obligations of, the Debtors (other than the Assumed Liabilities). Except for holders of Assumed Liabilities, parties to Assumed Contracts and parties to whom Cure Costs are owed, all persons holding Claims or Interests against or in the Debtors or the Acquired Assets of any kind or nature whatsoever shall be, and hereby are, forever barred, estopped, and permanently enjoined from asserting, prosecuting, or otherwise pursuing such Claims or Interests against the Purchaser, its property, its successors and assigns, or the Acquired Assets with respect to any Claim or Interest of any kind or nature whatsoever such person or entity had, has, or may have against or in the Debtor, its estate, officers, directors, shareholders, or the Acquired Assets. Following the Closing Date, no holder of a Claim against or Interest in the Debtors shall interfere with the Purchaser's title to or use and enjoyment of the Acquired Assets based on or related to such Claim or Interest, or any actions that the Debtors may take in their Chapter 11 cases, with the exception that parties to whom Cure Costs are owed may seek payment of such Cure Costs from the Purchaser to the extent set forth in Schedule 1.03 to the Purchase Agreement. 25. This Court retains jurisdiction to enforce and implement the terms and provisions of the Purchase Agreement, all amendments thereto, any waivers and consents thereunder, and each of the agreements executed in connection therewith in all respects, including, but not limited to, retaining jurisdiction to (a) compel delivery of the Acquired Assets to the Purchaser, (b) resolve any disputes arising under or related to the Purchase Agreement, except to the extent otherwise provided therein, (c) interpret, implement, and enforce the provisions of this Order, and (d) protect the Purchaser against (i) any of the Excluded Liabilities or (ii) any Claims against or Interests in the Debtors or the Acquired Assets, of any kind or nature whosoever, attaching to the proceeds of the Asset Sale. 10 26. Nothing contained in any plan of reorganization (or liquidation) confirmed in this case or any order of this Court confirming such plan shall conflict with or derogate from the provisions of the Purchase Agreement or the terms of this Order, provided that the Purchaser shall comply with those obligations imposed on it under the Purchase Agreement in respect of any subsequent plan. 27. The transfer of the Acquired Assets pursuant to the Asset Sale shall not subject the Purchaser to any liability with respect to the operation of the Debtors' Business prior to the Closing Date or by reason of such transfer under the laws of the United States, any state, territory, or possession thereof, or the District of Columbia, based, in whole or in part, directly or indirectly, on any theory of law or equity, including, without limitation, any theory of equitable subordination or successor or transferee liability. 28. The transactions contemplated by the Purchase Agreement are undertaken by the Purchaser in good faith, as that term is used in section 363(m) of the Bankruptcy Code, and accordingly, the reversal or modification on appeal of the authorization provided therein to consummate the Asset Sale shall not affect the validity of the Asset Sale to the Purchaser, unless such authorization is duly stayed pending such appeal. The Purchaser is a Purchaser in good faith of the Acquired Assets, and is entitled to all of the protections afforded by section 363(m) of the Bankruptcy Code. 29. The terms and provisions of the Purchase Agreement and this Order shall be binding in all respects upon, and shall inure to the benefit of, the Debtors, their estates, and their creditors, the Purchaser, and its respective affiliates, successors and assigns, and any affected third parties including, but not limited to, all persons of record asserting a Claim against or Interest in the Acquired Assets to be sold to the Purchaser pursuant to the Purchase 11 Agreement, notwithstanding any subsequent appointment of any trustee, responsible person, estate administrator, representative or similar person (a "Responsible Person") for or in connection with any of the Debtors' Estates or affairs in this case or in any subsequent case under the Bankruptcy Code involving the Debtors, as to which Responsible Person such terms and provisions likewise shall be binding in all respects. 30. The failure specifically to include any particular provisions of the Purchase Agreement in this Order shall not diminish or impair the effectiveness of such provision, it being the intent of the Court that the Purchase Agreement be authorized and approved in its entirety. 31. The Purchase Agreement and any related agreements, documents or other instruments may be modified, amended or supplemented by the parties thereto, in a writing signed by both parties, and in accordance with the terms thereof, without further order of the Court, provided that any such modification, amendment or supplement does not have a material adverse effect on the Debtors' estate. 32. The transfer of the Acquired Assets pursuant to the Asset Sale is a transfer pursuant to section 1146(c) of the Bankruptcy Code, and accordingly shall not be taxed under any law imposing a stamp tax or a sale, transfer, or any other similar tax. 33. Notwithstanding F.R.B.P. 7062 and the stay provisions of F.R.B.P. 6004(g) and F.R.B.P. 6006(d) to the contrary, this Order shall be effective and enforceable immediately upon entry. 34. The Purchaser is authorized (as agreed by the Debtors and the Landlord under the lease of such property) to occupy the property located at 6428 Parkland Drive and 2007 Whitfield Park Drive, Sarasota, Florida 34243 for a period of ninety days after the closing 12 with no payment of additional rent, however the Purchaser shall be liable for current payment of telephone and utilities. 35. With the exception of the objection of the Office of the United States Trustee (the "Trustee"), all objections to the Plan or the relief requested therein that have not been withdrawn, waived, or settled, and all reservations of rights included therein, hereby are overruled on the merits. The Objection of the Trustee is sustained in part. The exculpations and injunctions contained in paragraphs 36, 37 and 38 of this Order are specifically approved as more fully set forth in the Plan. 36. The exculpations contained in Article 15.5 of the Plan are hereby approved in all respects. The Debtors shall not have or incur any liability to any Person for any act or omission in connection with or arising out of the pursuit of confirmation of the Plan, the consummation of the Plan, or the administration of the Plan or the property to be distributed under the Plan, except for gross negligence or willful misconduct as determined by Final Order of the Bankruptcy Court, and in all respects shall be entitled to rely upon the advice of counsel and all information provided by other exculpated persons herein without any duty to investigate the veracity or accuracy of such information with respect to their duties and responsibilities under the Plan. Further, none of the Disbursing Agent, the Bank, the Committee, Elcotel Trustee, the Unsecured Creditors Trustee, any of their respective officers, directors, employees, advisors, members, professionals or agents or any of the Debtors' respective officers, directors, employees, advisors, members, professionals or agents shall have or incur any liability to any any creditor who voted in favor of the Plan (the "Accepting Creditors") for any act or omission in connection with or arising out of the pursuit of confirmation of the Plan, the consummation of the Plan, or the administration of the Plan or the property to be distributed under the Plan, except 13 for gross negligence or willful misconduct as determined by Final Order of the Bankruptcy Court, and in all respects shall be entitled to rely upon the advice of counsel and all information provided by other exculpated persons herein without any duty to investigate the veracity or accuracy of such information with respect to their duties and responsibilities under the Plan. 37. The injunctions contained in Article 15.22 of the Plan are hereby approved in all respects. On the Effective Date, (a) all Persons who have been, are, or may be holders of Claims against or Equity Interests in the Debtors shall, except as otherwise permitted under this Plan, be enjoined from taking any of the following actions against or affecting the Debtors, their Estates, their Assets, or Elcotel and (b) all Accepting Creditors, shall, except as otherwise permitted under this Plan, be enjoined from taking any of the following actions against or affecting the Elcotel Unsecured Creditors Trust, the Bank or the Committee, any of their respective officers, directors, employees, agents, representatives, or professionals or the Debtors' respective officers, directors, employees, advisors, members, professionals or agents or their respective assets and property with respect to any Claims such Accepting Creditors may have (other than actions brought to enforce any rights or obligations under the Plan, including the treatment and allowance of Allowed Non-Bank Secured Claims pursuant to the Plan, and appeals, if any, from the Confirmation Order): a. commencing, conducting or continuing in any manner, directly or indirectly, any suit, action or other proceeding of any kind (including, without limitation, all suits, actions, and proceedings that are pending as of the Effective Date, which must be withdrawn or dismissed with prejudice); 14 b. enforcing, levying, attaching, collecting or otherwise recovering by any manner or means whether directly or indirectly any judgment, award, decree or order; c. creating, perfecting or otherwise enforcing in any manner, directly or indirectly, any encumbrance; and d. except with respect to the treatment and allowance of Allowed Non-Bank Secured Claims by the Bankruptcy Court as provided in the Plan including under Section 5.1(c) hereof, asserting any setoff, right of subrogation or recoupment of any kind; provided, that any defenses, offsets or counterclaims which the Debtors or Elcotel (as reorganized) may have or assert in respect of the above referenced claims are fully preserved in accordance with Section 15.17 of the Plan. 38. The exculpations contained in Article 12.3 of the Plan are hereby approved in all respects. The Disbursing Agent, together with its officers, directors, employees, agents, professionals and representatives, are hereby exculpated by all Accepting Creditors from any and all Causes of Action, and other assertions of liability (including breach of fiduciary duty) arising out of the discharge of the powers and duties conferred upon the Disbursing Agent by the Plan, any Final Order of the Bankruptcy Court entered pursuant to or in the furtherance of the Plan, or applicable law, except solely for actions or omissions arising out of the Disbursing Agent's willful misconduct or gross negligence. No Accepting Creditors, or representative thereof, shall have or pursue any claim or cause of action (a) against the Disbursing Agent or its officers, directors, employees, agents, and representatives for making payments or Distributions in accordance with the Plan, or for liquidating the Remaining Estate Assets to make Distributions 15 under the Plan, or (b) against any holder of a Claim for receiving or retaining payments or transfers of assets as provided for by the Plan. 39. The agreement between the Bank and the Debtors with respect to the payment of professional fees as set forth in Exhibit "A" attached hereto (the "Professional Fee Agreement") is hereby approved in all respects. 40. Upon entry of this Order, the Purchaser is directed to pay the Purchase Price as provided in Exhibit D to the Purchase Agreement to (a) White & Case, LLP to hold in escrow on behalf of the Debtors' Professionals to be distributed pro rata in accordance with this Court's prior orders allowing the fees and expenses of the Debtors' Professionals and the Professional Fee Agreement, (b) the escrow established on behalf of the Unsecured Creditors, and (c) the Bank. 41. The Court shall retain jurisdiction over these cases as set forth in Article 14.1 of the Plan. 42. Any holder of Administrative Claim which accrued between September 5, 2001 (the Administrative Claims Bar Date established by the Court's order dated July 27, 2001 establishing among other things an Administrative Claims Bar date) and the Effective Date shall have until 45 days after the entry of this Order to file an application for an allowance of an Administrative Claim. 43. Claims created by the rejection of executory contracts or unexpired leases or the expiration or termination of any executory contract or unexpired lease prior to the Confirmation Date must be filed with the Bankruptcy Court and served on the Debtors (a) in the case of an executory contract or unexpired lease rejected by the Debtors prior to the Confirmation Date, in accordance with the Order allowing rejection of such executory contract 16 or unexpired lease, or (b) in the case of an executory contract or unexpired lease that (i) was terminated or expired by its terms prior to the Confirmation Date, or (ii) is deemed rejected pursuant to Section 13.2 of the Plan, no later than thirty (30) days after the Confirmation Date, or (c) in the case of an executory contract or unexpired lease that is rejected by the Debtors after the Confirmation Date, within thirty (30) days after the entry of an order of the Bankruptcy Court authorizing and approving such rejection. 44. Counsel for the Debtors shall immediately serve a copy of this Order on the L.B.R. 1007-2 Parties in Interest List using a current mailing matrix obtained from the Clerk. Counsel shall promptly thereafter file proof of such service. 45. Counsel for the Debtors shall immediately serve a copy of the Notice of Confirmation in the form attached hereto as Exhibit "B" upon all creditors and parties in interest in these cases. Counsel shall promptly thereafter file proof of such service. 46. The provisions of this Order are nonseverable and mutually dependent. DONE AND ORDERED at Tampa, Florida on January ___, 2002. ______________________________ C. TIMOTHY CORCORAN, III United States Bankruptcy Judge 17 CERTIFICATE OF SERVICE Elcotel, Inc., Debtor, 6428 Parkland Drive, Sarasota, Florida 34243 Elcotel Direct, Inc., Debtor, 6428 Parkland Drive, Sarasota, Florida 34243 Technology Service Group, Inc., Debtor, 6428 Parkland Drive, Sarasota, Florida 34243 Thomas E Lauria, Esquire, Attorney for Debtors, 200 S. Biscayne Boulevard, Suite 4900, Miami, Florida 33131-2352 Mark J. Wolfson, Esquire, Attorney for Bank of America, Post Office Box 3391, Tampa, Florida 33691-3391 T. Boatner, Esq. United States Trustee, Timberlake Annex, Suite 1200, 501 E. Polk Street, Tampa, Florida 33602 Donald M. Schutz, Attorneys for the Unsecured Creditors' Committee, 535 Central Avenue, St. Petersburg, Florida 33701-3703 Robert Klyman, Esq., Latham & Watkins, 633 West 5th Street, Suite 4000, Los Angeles, California 90071 Dated: _____________ By: _________________________________ Deputy Clerk 18 Exhibit "B" UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION - ---------------------------------------------x In re Case Nos. 01-01077-8C1 01-01078-8C1 ELCOTEL, INC., ELCOTEL DIRECT, 01-01079-8C1 INC., and TECHNOLOGY SERVICE GROUP, INC., Jointly Administered Under Case No. 01-01077-8C1 Debtors. - ---------------------------------------------x NOTICE OF CONFIRMATION NOTICE IS HEREBY GIVEN that on January __, 2002, this Court entered an order confirming a chapter 11 plan heretofore submitted by the above-named debtor(s) and accepted by the requisite number and amount of creditors in each class affected by the plan. NOTICE IS FURTHER GIVEN that by virtue of section 1141(b) of the Bankruptcy Code, the Order of Confirmation vests all the property of the estate in the debtor(s), except as otherwise provided in the plan or the Order confirming the plan. YOU ARE FURTHER NOTIFIED that, except as otherwise provided in section 1141(d)(1), (2), and (3), the Order of Confirmation operates as a discharge from any debt which arose before the date of confirmation and any debt specified in section 502(g), (h) and (i), whether or not proof of claim was filed or allowed or the holder of such claim accepted the plan. YOU ARE FURTHER NOTIFIED that any holder of an Administrative Claim which accrued between September 5, 2001 and the Effective Date shall have until 45 days after the entry of this Order to file an application for an allowance of an Administrative Claim. YOU ARE FURTHER NOTIFIED that Claims created by the rejection of executory contracts or unexpired leases or the expiration or termination of any executory contract or unexpired lease prior to the Confirmation Date must be filed with the Bankruptcy Court and served on the Debtors (a) in the case of an executory contract or unexpired lease rejected by the Debtors prior to the Confirmation Date, in accordance with the Order allowing rejection of such executory contract or unexpired lease, or (b) in the case of an executory contract or unexpired lease that (i) was terminated or expired by its terms prior to the Confirmation Date, or (ii) is deemed rejected pursuant to Section 13.2 of the Plan, no later than thirty (30) days after the Confirmation Date, or (c) in the case of an executory contract or unexpired lease that is rejected by the Debtors after the Confirmation Date, within thirty (30) days after the entry of an order of the Bankruptcy Court authorizing and approving such rejection. YOU ARE FURTHER NOTIFIED that the Order of Confirmation is on file with the Bankruptcy Court [Docket No. ____] and White & Case, LLP, 200 South Biscayne Boulevard, Suite 4900, Miami, Florida 33131, Attn: Mark Fuhr, Telephone: 305-375-2700. PLEASE GOVERN YOURSELF ACCORDINGLY. DATED at Miami, Florida on January __, 2002. WHITE & CASE LLP 200 South Biscayne Blvd., Suite 4900 Miami, Florida 33131 Telephone: (305) 371-2700 Facsimile: (305) 358-5744 Thomas E Lauria (Florida Bar No. 044083 Linda M. Leali (Florida Bar No. 186686) -and- STICHTER, RIEDEL, BLAIN & PROSSER, P.A. 110 East Madison Street, Suite 200 Tampa, Florida 33602 Telephone: (813) 229-0144 Facsimile: (813) 229-1811 Don M. Stichter (Florida Bar No. 078280) ATTORNEYS FOR THE DEBTORS EX-2.3 5 e12940ex23.txt ASSET PURCHASE AGREEMENT ================================================================================ ASSET PURCHASE AGREEMENT by and among APPLICON, INC. ELCOTEL ACQUISITION CORPORATION. and ELCOTEL, INC. ELCOTEL DIRECT, INC. TECHNOLOGY SERVICE GROUP, INC. INTERNATIONAL SERVICE TECHNOLOGIES, INC. Dated as of December 14, 2001 ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE 1. PURCHASE AND SALE OF ASSETS....................................... 2 SECTION 1.01 Acquired Assets......................................... 2 SECTION 1.02 Excluded Assets......................................... 3 SECTION 1.03 Cure and Reinstatement.................................. 3 SECTION 1.04 Assumed Liabilities..................................... 3 SECTION 1.05 Excluded Liabilities.................................... 4 SECTION 1.06 Purchase Price.......................................... 5 ARTICLE 2. THE CLOSING....................................................... 5 SECTION 2.01 Closing................................................. 5 SECTION 2.02 Deliveries at Closing................................... 6 SECTION 2.03 Purchase Price Adjustments.............................. 7 SECTION 2.04 Further Assurances...................................... 9 ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS..................... 9 SECTION 3.01 Organization, Qualification, Etc........................ 9 SECTION 3.02 Authorization, Etc...................................... 9 SECTION 3.03 No Violation............................................ 10 SECTION 3.04 Title to Properties..................................... 10 SECTION 3.05 Brokers................................................. 11 SECTION 3.06 Material Contracts...................................... 11 SECTION 3.07 Intellectual Property................................... 12 SECTION 3.08 Consents and Approvals of Governmental Authorities...... 12 SECTION 3.09 Third Party Consents.................................... 13 SECTION 3.10 Absence of Certain Changes.............................. 13 SECTION 3.11 Litigation and Proceedings.............................. 14 SECTION 3.12 Compliance with Laws and Court Orders................... 14 SECTION 3.13 Inventory............................................... 14 SECTION 3.14 Receivables............................................. 14 SECTION 3.15 Environmental Compliance................................ 14 SECTION 3.16 Conduct of Activities................................... 15 SECTION 3.17 Customers and Suppliers................................. 15 SECTION 3.18 Personnel............................................... 15 SECTION 3.19 Condition and Sufficiency of the Equipment.............. 15 SECTION 3.20 Financial Statements.................................... 15 SECTION 3.21 Labor Relations......................................... 16 SECTION 3.22 Tax Matters............................................. 16 SECTION 3.23 Disclosure Statement.................................... 18 SECTION 3.24 Periodic Reports........................................ 18 ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER................... 18 SECTION 4.01 Organization............................................ 18 SECTION 4.02 Authority Relative to this Agreement.................... 18 SECTION 4.03 Consents and Approvals.................................. 18 i SECTION 4.04 No Violation............................................ 19 SECTION 4.05 Brokers................................................. 19 ARTICLE 5. COVENANTS......................................................... 19 SECTION 5.01 Access and Information.................................. 19 SECTION 5.02 Confidentiality......................................... 19 SECTION 5.03 Additional Matters...................................... 20 SECTION 5.04 [Intentionally Omitted]................................. 20 SECTION 5.05 Employees and Benefit Programs.......................... 20 SECTION 5.06 Public Announcements.................................... 24 SECTION 5.07 Conduct of the Business................................. 24 SECTION 5.08 Notices of Certain Events............................... 25 SECTION 5.09 Bankruptcy Court Entry of Confirmation Order........... 26 SECTION 5.10 Name Changes............................................ 26 SECTION 5.11 Permits................................................. 26 SECTION 5.12 Consents; Assignments................................... 26 SECTION 5.13 Accounts Receivables.................................... 27 SECTION 5.14 No-shop clause.......................................... 27 SECTION 5.15 Disclosure Supplements.................................. 27 SECTION 5.16 Tax Clearance........................................... 28 SECTION 5.17 Post-Petition Retention Bonuses and Severance........... 28 SECTION 5.18 Transition Period....................................... 28 SECTION 5.19 Sarasota Property....................................... 30 ARTICLE 6. CONDITIONS PRECEDENT.............................................. 30 SECTION 6.01 Conditions Precedent to Obligation of the Sellers and the Purchaser..................................... 30 SECTION 6.02 Conditions Precedent to Obligation of the Sellers....... 31 SECTION 6.03 Conditions Precedent to Obligation of the Purchaser..... 31 ARTICLE 7. TERMINATION, AMENDMENT AND WAIVER................................. 33 SECTION 7.01 Termination............................................. 33 SECTION 7.02 Effect of Termination................................... 33 ARTICLE 8. GENERAL PROVISIONS................................................ 34 SECTION 8.01 Survival of Representations, Warranties................. 34 SECTION 8.02 Transfer Taxes.......................................... 34 SECTION 8.03 Notices................................................. 34 SECTION 8.04 Descriptive Headings; Certain Terms..................... 36 SECTION 8.05 Entire Agreement, Assignment............................ 36 SECTION 8.06 Governing Laws.......................................... 36 SECTION 8.07 Expenses................................................ 37 SECTION 8.08 Amendment............................................... 37 SECTION 8.09 Waiver.................................................. 37 SECTION 8.10 Counterparts; Effectiveness............................. 37 SECTION 8.11 Severability; Validity; Parties of Interest............. 37 ARTICLE 9. DEFINITIONS....................................................... 37 SECTION 9.01 Defined Terms........................................... 37 ii ARTICLE 10. TAX MATTERS...................................................... 43 SECTION 10.01 Transfer Taxes.......................................... 43 SECTION 10.02 Allocation of Taxes Among Acquired Assets............... 43 SECTION 10.03 Withholding Exemption................................... 44 EXHIBITS Exhibit A - Bill of Sale Exhibit B - Consent of Bank of America, N.A. Exhibit C - Transition Budget iii ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT, dated as of December 14, 2001 (the "Agreement"), is made by and among Elcotel, Inc., a Delaware corporation, Elcotel Direct, Inc., a Delaware corporation, Technology Service Group, Inc., a Delaware corporation and International Service Technologies, Inc., a Delaware corporation (collectively the "Sellers"), Applicon, Inc., a Delaware corporation ("Applicon") and Elcotel Acquisition Corporation, a Delaware corporation (the "Purchaser"). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in Article 9 of this Agreement. WHEREAS, on January 22, 2001 (the "Petition Date"), Elcotel, Inc., Elcotel Direct, Inc. and Technology Service Group, Inc. (the "Debtors") sought relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") by filing cases entitled In re Elcotel, Inc., Elcotel Direct, Inc. and Technology Service Group, Inc., case nos. 01-01077-8C1, 01-01078-8C1 and 01-01079-8C1 (collectively, the "Chapter 11 Case") in the United States Bankruptcy Court for the Middle District of Florida (the "Bankruptcy Court"); WHEREAS, the Debtors have proposed a First Amended Joint Plan of Reorganization of Elcotel, Inc. and its affiliated debtors, as corrected (the "Plan"), and, in accordance with Sections 1126 and 1129 of the Bankruptcy Code, have solicited from the holders of certain claims of the Sellers the approval of the Plan; WHEREAS, Article II of the Plan provides for the orderly liquidation of the assets of the Sellers upon the occurrence of a Liquidation Trigger Event (as defined therein); WHEREAS, the Debtors have advised Applicon and the Purchaser that a Liquidation Trigger Event, as defined in the Plan, has occurred; WHEREAS, the Purchaser desires to purchase substantially all of the assets of the Sellers and assume certain liabilities from the Sellers, and the Sellers desire to sell, convey, assign and transfer to the Purchaser, substantially all of its assets and properties together with certain obligations and liabilities related thereto, all in the manner and subject to the terms and conditions set forth herein; WHEREAS, Sellers intend that the transactions contemplated by this Agreement shall occur pursuant to the Plan, and consummation of the transactions contemplated by this Agreement shall be subject to the entry by the Bankruptcy Court of a final order, in form and substance acceptable to the Purchaser, confirming the Plan; and WHEREAS, to induce the Purchaser to enter into this Agreement, the Bank has consented to the transactions contemplated by this Agreement in the form attached hereto as Exhibit B. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows: ARTICLE 1. PURCHASE AND SALE OF ASSETS SECTION 1.01 Acquired Assets. (a) Assigned Assets. On the terms and subject to the conditions precedent set forth in this Agreement, the Sellers shall sell, assign, transfer, convey, and deliver (or cause to be sold, assigned, transferred, conveyed and delivered) to the Purchaser, and the Purchaser shall, and Applicon shall cause the Purchaser to, purchase and accept from the Sellers, at the Closing all of the Sellers' rights, title, and interests in, to and under all of the assets, property, rights and claims of the Sellers, other than assets, property, rights and claims set forth in Schedule 1.01(a) under the heading "Excluded Assets" (as amended pursuant to the terms of this Agreement from time to time prior to 12:00pm Los Angeles Time on December 27, 2001 (the "Schedule Approval Time"); provided that if the Sellers delay delivery of the -------- Disclosure Schedules beyond December 19, 2001 the Schedule Approval Time shall be delayed by the same amount), wherever located, real, personal or mixed, whether tangible or intangible (collectively, the "Assigned Assets"), including, without limitation, the following: (i) all Inventory existing as of 11:59, p.m. New York Time, on the date immediately preceding the Closing Date (the "Effective Time"); (ii) all accounts and notes receivable of the Sellers existing as of the Effective Time ("Receivables"); (iii) all furniture, fixtures and equipment and other fixed assets owned by the Sellers; (iv) to the extent permitted by applicable law to be transferred to the Purchaser, all Permits applicable primarily to the business of the Sellers (the "Business") and listed in Schedule 1.01(a)(iv); (v) originals or copies of all relevant books, records and other data and information of the Sellers, as such relates to its customers (including, without limitation, the Principal Clients), including, without limitation, books, records, materials, manuals, financial and accounting statements, sales and promotional materials and records, customer lists, supplier lists, mailing lists, distribution lists, business plans, demographic information, credit information, costs and pricing information, reference catalogs and other data and information relating to or used in connection with the conduct of the Business; (vi) all prepaid expenses, rents and credits and all security deposits paid by the Sellers with respect to the Acquired Assets (collectively, the "Prepaids"); (vii) all monies contained in the Transition Account; and 2 (viii) all guarantees, warranties and indemnities and similar rights in favor of the Sellers with respect to any of the Acquired Assets; provided that the Assigned Assets shall not include (i) any executory contracts or unexpired leases, which are dealt with exclusively in Section 1.01(b), or (ii) Excluded Assets as provided in Section 1.02. (b) Assumed Rights. At the Closing the Sellers shall assume and assign (or cause to be assigned) to the Purchaser, and the Purchaser shall, and Applicon shall cause the Purchaser to, accept from the Sellers, all of the Sellers' rights under and title and interest in all of Sellers' executory contracts and unexpired leases listed on Schedule 1.01(b) (as amended by Purchaser at any time prior to the Schedule Approval Time and, with respect to executory contracts entered into by the Sellers after the Schedule Approval Time, as amended by the Purchaser to add any or all of such executory contracts at any time prior to the Closing) (collectively, the "Assumed Rights"). Any other executory contracts or leases not included as Assumed Rights are referred to herein as the "Excluded Contracts." (c) Intellectual Property Rights. The Sellers shall assign (or cause to be assigned) to the Purchaser, and the Purchaser shall, and Applicon shall cause the Purchaser to, accept and assume from the Sellers, all of Sellers' rights, title and interest in, to and under all Intellectual Property other than the Intellectual Property listed in Schedule 1.01(c) (such assigned and assumed Intellectual Property being the "Acquired Intellectual Property"). SECTION 1.02 Excluded Assets. Notwithstanding the foregoing, the Purchaser expressly understands and agrees that (a) the assets and properties of the Sellers listed on Schedule 1.01(a) under the heading "Excluded Assets" (as amended from time to time by Purchaser prior to Closing) and (b) the Excluded Contracts (collectively, the "Excluded Assets") shall be excluded from the Acquired Assets. SECTION 1.03 Cure and Reinstatement. The Purchaser shall take all commercially reasonable steps, including paying all costs ordered by the Bankruptcy court with respect to the Assumed Rights (the "Cure Costs") at the Closing or at such later date as approved by the Bankruptcy Court. Attached as Schedule 1.03 is the Sellers good faith estimate of the Cure Costs as of the Closing Date. In the event the Cure Costs ordered by the Bankruptcy Court with respect to any executory contract or unexpired lease included in the Assumed Rights exceeds the amount set forth with respect to such executory contract or unexpired lease on Schedule 1.03, the Purchaser in its sole discretion may choose to reject such executory contract or unexpired lease, in which case such executory contract or unexpired lease shall not be included in the Assumed Rights for all purposes hereunder. SECTION 1.04 Assumed Liabilities. On the terms and subject to the conditions set forth in this Agreement, at the Closing, the Purchaser shall, and Applicon shall cause the Purchaser to, assume from the Sellers and thereafter pay, perform or discharge when due (or cause to be paid, performed or discharged when due) in accordance with their terms all of Sellers' liabilities and obligations arising or otherwise relating to any period on or after the 3 Closing Date under the executory contracts and unexpired leases included in the Assumed Rights, the Permits included in the Assigned Assets, the accrued liabilities with respect to the Transferred Employees and the other liabilities expressly set forth on Schedule 1.04 under the heading "Assumed Liabilities." The liabilities set forth on Schedule 1.04 under the heading "Assumed Liabilities" shall be assumed by the Purchaser only as to the specific categories of liabilities expressly set forth on Schedule 1.04. The liabilities to be assumed pursuant to this Section 1.04 and the Cure Costs shall be referred to herein as the "Assumed Liabilities." SECTION 1.05 Excluded Liabilities. Notwithstanding any provision in this Agreement or any other writing or commitment (written or oral) to the contrary, the Purchaser is assuming only the Assumed Liabilities and is not assuming any other liability or obligation of the Sellers (or any predecessors of the Sellers or any prior owners of all or part of their businesses and assets) of whatever nature, whether presently in existence or arising hereafter. All such other liabilities and obligations shall be retained by and remain obligations and liabilities of the Sellers (all such liabilities and obligations not being assumed being herein referred to as the "Excluded Liabilities"). Notwithstanding anything to the contrary in Section 1.04, none of the following shall be Assumed Liabilities for the purposes of this Agreement: (a) any liability or obligation under any Environmental Laws arising or accruing prior to the Closing Date; (b) any liability or obligation arising or accruing prior to the Closing related to employees of Sellers, including, without limitation, (i) any COBRA obligations with respect to any employees of Sellers who are not Transferred Employees, and (ii) retention bonuses for any of Sellers' employees other than the Transferred Employees (the "Retention Bonuses") and vacation and severance obligations for any of Sellers' employees other than the Transferred Employees; (c) any liability or obligation for Designated Chapter 11 Costs and any contracts related thereto; (d) any liability or obligation for indebtedness for borrowed money or evidenced by bonds or notes (including accrued interest and fees with respect thereto); (e) other than tangible personal property taxes owed with respect to the Acquired Assets in the amount set forth on Schedule 1.04 under the heading "Personal Property Tax Liens", any Taxes for which the Sellers are liable pursuant to Section 8.02 and Article 10, Taxes for which the Sellers are liable pursuant to any other provision of this Agreement and Taxes for which the Sellers are otherwise liable and which have not been explicitly assumed by the Purchaser pursuant to this Agreement; (f) any liability or obligation relating to an Excluded Asset; and (g) any liability or obligation under any Employee Plan or Benefit Arrangement. 4 The foregoing list of Excluded Liabilities is illustrative only and in no way shall be deemed to limit the scope of the first two sentences of this Section 1.05. SECTION 1.06 Purchase Price. (a) In consideration for the Acquired Assets, in addition to the assumption or payment by the Purchaser of the Assumed Liabilities, the Purchaser shall pay in cash at Closing by wire transfer in an amount equal to $1,400,000, as adjusted by Section 2.03 hereof (the "Purchase Price"), less the lower of (i) 20% of the Purchase Price (as adjusted pursuant to Section 2.03(b) and (ii) $280,000, which the Purchaser shall deliver to Carlton Fields, its special Florida counsel, to be held in escrow pending determination of the Final Purchase Price Adjustment (the "Adjustment Hold-Back"), which amount shall be paid by the Purchaser on behalf of the Sellers to the Debtors' professionals, an escrow established for the benefit of the unsecured creditors and the Bank in accordance with Exhibit D attached hereto. (b) The Purchase Price (plus Assumed Liabilities to the extent properly taken into account under the Code and the Treasury Regulations promulgated thereunder), shall be allocated among the Acquired Assets in accordance with Schedule 1.06(b) (the "Allocation"), which will be delivered by the Purchaser no later than 2 business days prior to the Measurement Date and will be subject to Sellers' reasonable approval. If there is a Final Purchase Price Adjustment, the Allocation will be revised and the Purchaser will deliver a revised Schedule 1.06(b) within 2 business days after the determination of the Final Purchase Price Adjustment which will be subject to Sellers' reasonable approval. Sellers and Purchaser agree to (i) be bound by the Allocation, (ii) act in accordance with the Allocation in the preparation of financial statements and filing of all Tax Returns (including, without limitation, filing Form 8594 and supplemental Form 8579 as may be required with their United States federal income Tax Return for the taxable year that includes the date of the Closing) and in the course of any Tax audit, Tax review or Tax litigation relating thereto and (iii) take no position and cause their Affiliates to take no position inconsistent with the Allocation for income Tax purposes, including United States federal and state income Tax and foreign income Tax. Not later than 30 days prior to the filing of their respective Forms 8594 relating to this transaction, each party shall deliver to the other party a copy of its Form 8594. ARTICLE 2. THE CLOSING SECTION 2.01 Closing. The consummation of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Foley & Lardner, 100 North Tampa Street, Suite 2700, Tampa, Florida 33602 at 10:00 a.m. (Florida time) (a) within one Business Day after the conditions set forth in Article 6 shall have been satisfied or waived (other than conditions with respect to actions the parties will take at the Closing itself) or (b) at such other time, date and place as shall be fixed by agreement among the parties (the date of the Closing being herein referred to as the "Closing Date"), but in no event will the Closing occur later than 5:00 p.m. (Florida Time) on January 12, 2002 without the written consent of the Bank. 5 SECTION 2.02 Deliveries at Closing. (a) At the Closing, the Sellers shall deliver to the Purchaser: (i) such deeds, bills of sale, assignments of leases and contracts, and any other instruments of conveyance (collectively, the "Conveyance Documents") that, in the reasonable judgment of Purchaser, are reasonable and necessary to effectively vest in Purchaser good, valid and marketable title to the Acquired Assets intended to be granted hereby; (ii) a duly executed bill of sale, assignment and assumption with respect to the Acquired Assets and the Assumed Liabilities (the "Bill of Sale"), substantially in the form attached hereto as Exhibit A, transferring the Acquired Assets to the Purchaser free and clear of any and all Liens (other than Permitted Exceptions); (iii) duly executed copies of the consents referred to in Sections 3.08 and 3.09; (iv) such other duly executed instruments as are deemed necessary or appropriate by the Purchaser to effectuate the assignment of the Acquired Assets by the Sellers; and (v) such other customary (for transactions of this kind) closing documents, instruments or certificates required to be delivered as a condition precedent to the Purchaser's obligations under this Agreement. (b) At the Closing, the Purchaser shall, and Applicon shall cause the Purchaser to, deliver to the Sellers: (i) the Bill of Sale, duly executed by the Purchaser; (ii) such other duly executed instruments as are deemed necessary or appropriate by the Sellers to effectuate the assumption of the Assumed Liabilities by the Purchaser; and (iii) such other customary closing documents, instruments or certificates required to be delivered as a condition precedent to the Sellers' obligations under this Agreement. 6 (c) At the Closing, the Purchaser shall, and Applicon shall cause the Purchaser to, deliver on behalf of the Sellers the Purchase Price in accordance with Exhibit D, less the Adjustment Hold-Back (which shall be delivered to Carlton Fields at the Closing). SECTION 2.03 Purchase Price Adjustments. (a) Five (5) business days prior to the Measurement Date (the "Closing Payment Statement Date"), the Sellers will deliver to the Purchaser a statement (the "Closing Payment Statement"), certified by an appropriate senior executive officer of the Sellers, setting forth Sellers' good faith estimate, as of the Measurement Date of (i) the components, aging and value of, and a brief description of, all Receivables which arose in the ordinary course of the Sellers' business and which are less than ninety days past due ("Ordinary Course Receivables"), (ii) a substantially complete list of and the book value of all Inventory, (iii) the book value of all liabilities relating to warranties and reserves therefore ("Warranties"), (iv) the amount of all customer refunds and advances, customer prepayments or other amounts received by the Sellers with respect to which goods have not been delivered or services have not been performed or with respect to which the liabilities associated therewith have not otherwise been satisfied ("Deferred Revenues"), (v) a substantially complete list of and the book value of all furniture, fixtures and equipment of the Sellers (the "Fixed Assets"), and (vi) an updated list of the book value of the categories of Assumed Liabilities set forth on Schedule 1.04. The Sellers will prepare the Closing Payment Statement in accordance with this Agreement and in accordance with and following GAAP. "Excess Liabilities" shall mean the amount by which the book value of the amounts of any of accounts payable, employee liabilities related to the Transferred Employees (including, without limitation, wages, bonuses, retention bonuses, accrued vacation and employee advances), international commissions, and capital lease payables, each set forth in the Closing Payment Statement exceeds the corresponding amounts for such categories set forth on Schedule 1.04. (b) The Purchase Price will be adjusted as follows, using the amounts set forth on the Closing Payment Statement: (i) the Purchase Price shall be reduced by the amount of the Deferred Revenues; reduced by the amount of Excess Liabilities; reduced by one half of the amount by which (A) (1) Ordinary Course Receivables minus (2) one half of the Warranties are less than (B) $638,277 as of the Measurement Date; and increased by one half of the amount by which (X) (1) Ordinary Course Receivables minus (2) one half of the Warranties are (Y) greater than $638,277 as of the Measurement Date; provided that the Purchase Price shall be reduced by the full amount of any -------- reduction in Ordinary Course Receivables from Bell Atlantic Network Services, Inc. that does not result in an equal reduction in the accounts payable to Bell Atlantic Network Services, Inc.; and (ii) the Purchase Price shall be reduced by one half of the amount by which the book value of the Inventory is less than $3,945,252 as of the 7 Measurement Date and increased by one half of the amount by which the book value of the Inventory is greater than $3,945,252 as of the Measurement Date. (c) Purchaser shall have the right to review the books and records of the Business for a period of thirty (30) days after Closing (or such reasonable extension thereof as approved by Sellers and the Bank, such approval not to be unreasonably withheld) to verify and confirm the accuracy thereof, and the Purchaser shall provide to the Sellers and the Bank reasonable access to such books and records (during normal business hours of the Purchaser) during such thirty (30) day period or approved extension thereof to verify and confirm the accuracy thereof and to otherwise wind up the debtors' affairs. If, after such review, Purchaser agrees with the Closing Payment Statement, Purchaser shall promptly (and in any event within thirty (30) days after Closing or approved extension thereof) notify Sellers of its agreement. If, after such review, Purchaser objects in good faith to the Closing Payment Statement on commercially reasonable grounds, Purchaser shall promptly (and in any event within thirty (30) days after Closing or approved extension thereof) provide Sellers with a statement indicating the basis for its objections, and Purchaser and Sellers shall meet and confer in an effort to resolve such disagreement in good faith. If the Purchaser fails to provide the Sellers, within such thirty (30) day period (or such other extended period), with such statement of objection, then the Purchaser shall be deemed to have agreed with the Closing Payment Statement, in which event the Purchase Price, as adjusted in accordance with Section 2.03 hereof, shall be final and binding on the parties hereto. (d) In the event Purchaser and Sellers are unable to resolve a disagreement with respect to the Closing Payment Statement within thirty (30) days following the date of Purchaser's objection to the Closing Payment Statement (or such longer period as Purchaser, the Sellers and the Bank may agree), the Ordinary Course Receivables, Warranties, Deferred Revenues, Excess Liabilities and Inventory as of the Measurement Date as of the Closing Date shall be determined by an independent firm of certified public accountants mutually agreeable to Purchaser and Sellers (the "Accountants"). If issues in dispute are submitted to the Accountants for resolution, (i) each party shall furnish to the Accountants such work papers and other documents and information relating to the disputed issues as the Accountants may request and are available to that party, and shall be afforded the opportunity to present to the Accountants any materials relating to the determination and to discuss the determination with the Accountants; (ii) the determination by the Accountants of the Ordinary Course Receivables, Warranties, Deferred Revenue, Excess Liabilities and Inventory as of the Measurement Date as of the Closing Date as set forth in a notice delivered to both parties by the Accountants, will be binding and conclusive on the parties; and (iii) the fees and expenses of the Accountants for such determination shall be split equally by the parties. Other than the expense of retaining the Accountants, the expense of preparing the Closing Payment Statement shall be borne by Seller. (e) Upon the determination of the Ordinary Course Receivables, Warranties, Deferred Revenue, Excess Liabilities and Inventory as of the Measurement Date as of the Closing Date pursuant to either the agreement of the parties or the determination of the 8 Accountants, the parties shall recompute the Purchase Price in accordance with the provisions of Section 2.03 (the "Final Purchase Price Adjustment"). (f) Within three (3) business days of determining the Final Purchase Price Adjustment, the Purchaser will deliver to the Sellers (i) if the Final Purchase Price Adjustment reflects a greater reduction to the Purchase Price than the amount originally calculated pursuant to Section 2.03, an amount equal to the Adjustment Hold-Back minus the Final Purchase Price Adjustment, and (ii) if the Final Purchase Price Adjustment reflects a lower reduction in the Purchase Price than the amount originally calculated pursuant to Section 2.03, an amount equal to the Adjustment Hold-Back plus the Final Purchase Price Adjustment. SECTION 2.04 Further Assurances. After the Closing each party hereto will from time to time, at the reasonable request of any other party hereto, execute and deliver such other instruments of conveyance and transfer and such other instruments, documents and agreements and take such other actions as such other party may reasonably request, in order to more effectively consummate the transactions contemplated hereby and to vest in the Purchaser the right, title and interest in, to and under the Acquired Assets and to provide for the assumption of the Assumed Liabilities; provided, that the requesting party will prepare such additional documents and instruments and will handle any submittal, applications, processing, recording and registrations, and all costs and expenses incurred in connection with such request shall be paid by the requesting party. The Purchaser and the Sellers hereby irrevocably consent to the personal and subject-matter jurisdiction of the Bankruptcy Court for all purposes necessary to effectuate this Section 2.04. ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS As of the date hereof and as of the Measurement Date, each of the Sellers hereby jointly and severally represents and warrants to the Purchaser and Applicon as follows: SECTION 3.01 Organization, Qualification, Etc. Each of the Sellers is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation. The Sellers have full corporate power and authority to carry on the Business and to own or lease the Acquired Assets. The Sellers are duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required, except where any failures to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. The copies of the Certificate of Incorporation and By-laws of each of the Sellers heretofore delivered to the Purchaser are complete and correct copies of such instruments as in effect as of the date of this Agreement and as of the Closing Date. The Sellers are not in violation of any provisions of their respective Certificate of Incorporation and By-laws. Attached as Schedule 3.01 is a list of all subsidiaries of each of the Sellers. SECTION 3.02 Authorization, Etc. Subject to the approval of the Bankruptcy Court, the Sellers have full corporate capacity, power and authority to enter into this Agreement to perform their obligations hereunder and to consummate the transactions contemplated hereby 9 in accordance with the terms of this Agreement. Upon entry of the Confirmation Order, each of the Sellers will have taken all action required by law, the Certificate of Incorporation and By-laws of the Sellers to authorize the execution and delivery of this Agreement by the Sellers and the consummation by the Sellers of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Sellers. Assuming due authorization, execution and delivery by the Purchaser, this Agreement will constitute a valid and binding obligation of the Sellers upon the entry of the Confirmation Order. SECTION 3.03 No Violation. Except as set forth on Schedule 3.03, the execution and delivery of this Agreement by the Sellers and the consummation by the Sellers of the transactions contemplated hereby will not, upon entry of the Confirmation Order: (a) violate any provision of the Certificate of Incorporation or By-laws of any of the Sellers; or (b) violate any statute, law, judgment, decree, order, regulation or rule of any court or governmental authority applicable to the Sellers or the Business; or (c) violate, or be in conflict with, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or cause the acceleration of the maturity of any debt or obligation pursuant to, any agreement or commitment to which the Sellers or by which any Seller is bound. SECTION 3.04 Title to Properties. (a) Except as disclosed in Schedule 3.04(a): (i) the Sellers have good, valid and marketable title to the Acquired Assets; and (ii) upon entry of the Confirmation Order, none of the Acquired Assets will be subject to any Liens, other than the Assumed Liabilities. As used in this Agreement, the term "Liens" means: any mortgage, pledge, hypothecation, interest, right of others, claim (as defined in Bankruptcy Code Section 101(5)), security interest, encumbrance, lease, sublease, license, occupancy agreement, adverse claim or interest, easement, covenant, encroachment, burden, title defect, title retention agreement, voting trust agreement, interest, equity, option, lien, right of first refusal, charge or other restrictions or limitations of any nature whatsoever on the assets and properties of the Sellers or any of its subsidiaries, including, but not limited to, such as may arise under any Material Contracts (as hereinafter defined) or the Acquired Assets. (b) Schedule 3.04(b) contains an accurate list of the real property used by the Sellers in the conduct of the Business (collectively, the "Real Properties"). (c) As of the Closing Date the leases relating to the Real Properties leased by Sellers or any of their Affiliates as tenant (the "Leased Properties") will be in full force and effect, and constitute the legal, valid and binding obligations of the Sellers, and all other parties thereto, and there will exist no event of default, event, occurrence, condition or act which, with the giving of notice, the lapse of time or the happening of any further event or condition could reasonably be expected to constitute a default by the Sellers or by any other party under any of such leases. (d) Except for the Excluded Assets and except as otherwise described in Schedule 3.04(d), the Acquired Assets constitute all of the property and assets used or 10 held for use in the Business and are adequate for the continued conduct of the Business after the Measurement Date by the Purchaser in substantially the same manner as currently conducted. (e) The book value of the Fixed Assets as of September 30, 2001 is not less than $1,281,000, and as of will be as of the Measurement Date not less than $1,281,000 (less depreciation in the ordinary course of business), determined in accordance with GAAP. SECTION 3.05 Brokers. Except for Jesup & Lamont Capital Markets, Inc. whose fees and expenses are the sole responsibility of the Sellers, no Person is entitled to any brokerage, financial advisory or finder's fee or similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Sellers or any of its Affiliates. SECTION 3.06 Material Contracts. (a) Schedule 3.06(a) sets forth a list of all of the executory contracts and unexpired leases of the Sellers and their Affiliates relating to the Business and currently in effect (collectively, the "Material Contracts"). (b) The Sellers have heretofore furnished or made available to the Purchaser complete and correct copies of the Material Contracts, each as amended or modified to the date hereof (including any waivers with respect thereto). As of the Closing, each of the Assumed Rights will be in full force and effect and enforceable in accordance with its terms. Neither the Sellers nor any of their Affiliates have received any written notice nor do the Sellers have any knowledge of any cancellation or termination of, or any expression or indication of an intention or desire to cancel or terminate, any of the Assumed Rights. None of the Assumed Rights is the subject of, or has been threatened to be made the subject of, any arbitration, suit or other legal proceeding (other than the bankruptcy proceedings related to the Chapter 11 Case). With respect to any of the Assumed Rights which by their terms will terminate as of a certain date unless renewed or unless an option to extend such Assumed Right is exercised, neither the Sellers nor any of their subsidiaries have received any written notice nor do the Sellers have any knowledge that any such Assumed Right will not be, or is not likely to be, so renewed or that any such extension option will not be exercised. As of the Closing, there will be no event of default or occurrence, condition or act on the part of the Sellers or any of its Affiliates or on the part of the other parties to the Assumed Rights, which constitutes or would constitute (with notice or lapse of time or both) a breach of or default under any of the Assumed Rights, other than a breach or default based on the filing of the Chapter 11 Case. (c) Except as set forth on Schedule 3.06(c), there are no contracts for which deferred revenue is reflected or is required by GAAP to be reflected any Sellers' books and records. 11 SECTION 3.07 Intellectual Property. (a) Schedule 3.07(a) sets forth the Intellectual Property owned by Sellers. (b) Schedule 3.07(b) sets forth for the Intellectual Property owned by the Sellers or used by the Sellers in connection with the Business a complete and accurate list of all license agreements (whether as licensor or licensee), including but not limited to, all agreements relating to technology, know-how or processes included in the Acquired Assets (the "IP License Agreements"). (c) Except as set forth in Schedule 3.07(c) or except where the failure of any of the following to be true and correct would not, individually or in the aggregate, result in a Lien on the Acquired Assets or result in any material liability to the Purchaser following the Closing Date or have a Material Adverse Effect: (i) the Sellers own or have the valid right to use the Acquired Intellectual Property; (ii) all Acquired Intellectual Property owned or used by the Sellers are valid and subsisting in full force and effect and has not been cancelled, expired or abandoned; (iii) no claims have been asserted against the Sellers or any of their Affiliates by any Person challenging the ownership or right to use any of the Acquired Intellectual Property or challenging or questioning the validity or effectiveness of any such IP License Agreement; and (iv) the use by the Sellers of the Acquired Intellectual Property does not infringe on the rights of any third party. (d) Except as set forth on Schedule 3.07(d), the IP License Agreements are valid and binding obligations of the Sellers and, to the Sellers' knowledge, all other parties thereto, enforceable in accordance with their terms, and there exists no condition or third party consent which, if not met or obtained, will result in a violation or breach of, or constitute a default by the Sellers, or to the Sellers' knowledge, any other party under any such IP License Agreement as a result of the consummation of the transaction contemplated hereby. (e) Except as set forth on Schedule 3.07(e) and for any fees required by the U.S. Trademark and Patent Office, there shall be no fees, costs or assessments required to assign or sell the Acquired Intellectual Property to Purchaser. (f) Except as set forth on Schedule 3.07(f), the Sellers are not aware of any defenses which a party may have to the assignment or sale of the Acquired Intellectual Property to Purchaser. SECTION 3.08 Consents and Approvals of Governmental Authorities. Except (i) for necessary approvals of the Bankruptcy Court, including, without limitation, the Confirmation 12 Order, (ii) as otherwise set forth in Schedule 3.08, and (iii) for consents, approvals, certificates, licenses, permits, waivers, authorizations of, or declarations, filings or registration with, any governmental or regulatory authority or agency (whether U.S. federal, state, local or foreign) (each, a "Governmental Entity"), which, if not obtained, would not be reasonably likely to have, individually or in the aggregate, a Material Adverse Effect, no consent, approval, certificate, license, permit, waiver, authorization of, or declaration, filing or registration with, any Governmental Entity is required to be obtained by the Sellers in connection with the execution, delivery and performance of this Agreement by the Sellers, the purchase and sale of the Acquired Assets or the consummation by the Sellers of the transactions contemplated hereby. SECTION 3.09 Third Party Consents. Except as set forth in Schedule 3.09 and for consents or waivers of any Person (other than a Governmental Entity) which, if not obtained, would not be reasonably likely to have, individually or in the aggregate, a Material Adverse Effect, no consent or waiver of any such Person (other than a Governmental Entity) is required in connection with the execution, delivery and performance of this Agreement by the Sellers, the purchase and sale of the Acquired Assets, the assumption and assignment of the Assumed Rights or the consummation by the Sellers of the transactions contemplated hereby. SECTION 3.10 Absence of Certain Changes. Except as disclosed in Schedule 3.10, since September 30, 2001, the Business has been conducted in the ordinary course, and there has not been: (a) any damage, destruction or other casualty loss (whether or not covered by insurance) affecting the Business or any Acquired Asset which, individually or in the aggregate, has had or could reasonably be expected to have individually or in the aggregate a Material Adverse Effect; (b) any change in any method of accounting or accounting practice by the Sellers except for any such change after the date hereof required by reason of a change in GAAP, and the financial statements of the Sellers as of September 30, 2001 did not reflect any change in any method of accounting or accounting practice by the Sellers from the quarterly period immediately prior to the quarter ended September 30, 2001; (c) any labor dispute, other than routine individual grievances, or any activity or proceeding by a labor union or representative thereof to organize any employees of the Sellers, which employees were not subject to a collective bargaining agreement at the Petition Date, or any lockouts, strikes, slowdowns, work stoppages or threats thereof by or with respect to employees of the Sellers; (d) any sale or other disposition of any material assets other than sales of products in the ordinary course of business; (e) to the extent applicable to the Acquired Assets or the Business, any cancellation or modification of any existing insurance policies; (f) any election or change to any election in respect to Taxes, adoption or change of any material accounting method in respect to Taxes, entrance into any Tax allocation agreement, Tax sharing agreement, Tax indemnity agreement or closing 13 agreement, settlement or compromise on any claim, notice, audit report or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes. SECTION 3.11 Litigation and Proceedings. Schedule 3.11 contains an accurate list of all material legal actions, suits and proceedings pending as of the date hereof against any of the Sellers in connection with the Business or any of the Acquired Assets, whether or not stayed pursuant to Section 362 of the Bankruptcy Code. Except as described in Schedule 3.11, there is no material action, suit, investigation or proceeding pending against or, to Sellers' knowledge, threatened against or affecting the Business or any Acquired Asset before any court or arbitrator or any government body, agency or official. SECTION 3.12 Compliance with Laws and Court Orders. Except as set forth on Schedule 3.12, the Business has been and is being conducted in material compliance with all laws, statutes, rules, regulations, judgments, injunctions, orders or decrees applicable to the Acquired Assets or the conduct of the Business and the Sellers have not received any written communication from a Government Entity that alleges that the Business has not been conducted in compliance with any laws, statutes, rules, regulations, judgments, injunctions, orders or decrees. SECTION 3.13 Inventory. Set forth on Schedule 3.13 is a true, correct and substantially complete list of all Inventory held by Sellers as of October 31, 2001, together with a usage schedule for the last twelve months and the addresses at which the Inventory is located. The Inventory set forth on Schedule 3.13 (a) was acquired and has been maintained in the ordinary course of business, (b) is substantially of good and merchantable quality, (c) consists of items substantially of a quality, quantity and condition useable, leasable or saleable in the ordinary course of business, (c) is valued at the lower of cost or market value and (d) is not subject to any material write-down or write-off; with the exception that any Inventory that is obsolete, unusable, slow-moving, damaged, opened, used or unsalable in the ordinary course of business has been adequately reserved against in accordance with GAAP. SECTION 3.14 Receivables. Set forth on Schedule 3.14 is a true, correct and complete list of all Receivables as of October 31, 2001, including Receivables from and advances to employees and Affiliates of the Sellers, showing amounts due in 30-day aging categories (the "A/R Aging Report"). Except as otherwise reflected on Schedule 3.14, the accounts, notes and other receivables shown on Schedule 3.14 were created in the ordinary course of the Business, are valid, bona fide claims for sales or other charges, and are not subject to any defenses, set-offs or counterclaims. Sellers have fully performed all obligations with respect to such Receivables that it was obligated to perform to the date hereof and there are no facts or circumstances that would result in any material increase in the uncollectability of the Receivables after Closing. SECTION 3.15 Environmental Compliance. Except as set forth in Schedule 3.15, Sellers are in material compliance with all applicable Environmental Laws and there are no material liabilities arising in connection with or relating to any of the Sellers, the Real Property, Business or Acquired Assets of any kind whatsoever, whether accrued, contingent, absolute, determinable or otherwise, arising under or relating to any Environmental Laws. The Sellers 14 have not received any written notices of violations or demand from any other Person arising under such Environmental Laws and there are no governmental investigations pending or, to the Sellers' knowledge, threatened regarding the Sellers' compliance with or liability under any Environmental Laws. The Sellers have all Environmental Permits required under Environmental Laws and, there are no Hazardous Substances on the Real Property which require any remediation or cleanup under applicable Environmental Laws. SECTION 3.16 Conduct of Activities. Each of the Debtors is a debtor in its Chapter 11 Case. All of the operations of the Business is operated by the Debtors, except as disclosed in Schedule 3.16. SECTION 3.17 Customers and Suppliers. Schedule 3.17 contains a list of all current clients of the Business "Clients" and all current Suppliers under the heading "Suppliers." Except as described in Schedule 3.17, since September 30, 2001 there has not been any change in the business relationship of the Sellers with any Principal Client or with any Supplier that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 3.17, since the Petition Date, no Principal Client or distributor has terminated or materially altered, or informed the Sellers that such Principal Client or distributor intends to terminate or materially alter, its business relationship with the Sellers. "Supplier" means any supplier from whom the Sellers purchased more than five percent (5%) of the goods or services (on a consolidated basis) which it purchased during the period between January 1, 1999 and March 31, 2001. "Principal Clients" means the top twenty-five percent (25%) of the clients of the Business by revenue for each of the last two fiscal quarters of the Sellers. Schedule 3.17 contains a list of all accounts payable with respect to each of the Sellers vendors as of October 31, 2001. SECTION 3.18 Personnel. The Sellers have previously provided to the Purchaser a true, correct and complete list of: (i) the names, job classifications and current salaries or wage rates of all officers and employees of the Sellers engaged in the conduct of the Business (the "Employee Schedule"). The Employee Schedule is attached hereto as Schedule 3.18. SECTION 3.19 Condition and Sufficiency of the Equipment. The equipment that constitutes any part of the Acquired Assets is in good operating condition and repair (except for normal wear and tear), and such equipment is adequate for the uses to which it is being put, and none of such Acquired Assets are in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. SECTION 3.20 Financial Statements. Schedule 3.20 contains audited financial statements of the Sellers for the fiscal years ended March 31, 1999, and March 31, 2000 and March 31, 2001 (the "Operating Reports") and the unaudited financial statements for the three months and six months ended September 30, 2001 (the "Monthly Reports"). The Operating Reports and Monthly Reports are in accordance with the books, records and accounts of Sellers maintained with respect to the Business, were prepared pursuant to the related work papers, are complete and correct, have been prepared in accordance with GAAP consistently applied and present fairly the financial condition of the Business as of the respective dates thereof and the results of operations and cash flows of the Business for the respective periods covered thereby, except in the case of Monthly Reports that such statements do not include footnotes. The 15 statements of operations included in the Operating Reports and Monthly Reports do not contain any material items of special or non-recurring income or other income not earned in the ordinary course of the Business except as expressly specified therein. SECTION 3.21 Labor Relations. (a) Except as set forth in Schedule 3.21(a), (i) there are no written personnel policies applicable to employees of the Sellers; (ii) the Sellers are not a party to any labor agreement with any labor organization, group or association with respect to employees of the Sellers; (iii) there is no labor strike, dispute, slowdown or work stoppage or lockout actually pending or threatened by the employees of the Sellers against or affecting the Business; (iv) no union organizational campaign is in progress with respect to the Sellers' employees; (v) the Business is in substantial compliance with all applicable material laws relating to employment and employment practices, terms and conditions of employment, wages, hours of work, and occupational safety and health, and is not engaged in any unfair labor practices; (vi) there is no pending unfair labor practice, charge or complaint against the Sellers before the National Labor Relations Board; (vii) there is no pending labor grievance by the Sellers' employees that could reasonably be expected to have a material adverse effect on the Business nor any pending arbitration proceeding by the Sellers' employees arising out of or under any collective bargaining agreements relating to the Business which could reasonably be expected to have a material adverse effect on the Business; (viii) no charges with respect to or relating to the Sellers are pending before the Equal Employment Opportunity Commission or any comparable state, local or foreign agency responsible for the prevention of unlawful employment practices; and (ix) neither the Sellers nor any of their Affiliates have received notice of the intent of any federal or state agency responsible for the enforcement of labor or employment laws to conduct an investigation with respect to the Business that could reasonably be expected to have a material adverse effect on the Business. (b) Except to the extent set forth on Schedule 3.21(b), since the enactment of the Worker Adjustment and Retraining Notification Act ("WARN Act"), the Sellers have not effectuated (i) a "plant closing" (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Sellers; or (ii) a "mass layoff" (as defined in the WARN Act) affecting any site of employment or facility of the Sellers; nor have the Sellers been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state or local law. SECTION 3.22 Tax Matters. (a) Filing of Tax Returns. Except as set forth on Schedule 3.22(a), the Sellers have duly and timely filed with the appropriate taxing authorities all Tax Returns required to be filed through the date hereof. Except as set forth on Schedule 3.22(a), all such Tax Returns filed are complete and accurate in all material respects. All Taxes owed by the Sellers (whether or not shown on any Tax Return) have been paid except where failure to pay such Taxes would not have a material adverse effect on the financial condition of the Sellers. Except as set forth on Schedule 3.22(a), the Sellers are not 16 currently the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where the Sellers do not file Tax Returns that they are or may be subject to taxation by that jurisdiction, other than claims with which Sellers have subsequently complied. (b) Audits, Investigations, Disputes or Claims. No material deficiencies for Taxes have been claimed, proposed or assessed by any taxing or other governmental authority against the Sellers. Except as disclosed on Schedule 3.22(b), there are no pending or threatened audits, investigations, disputes or claims or other Actions for or relating to any Liability for Taxes with respect to the Sellers, and there are no matters under discussion with any governmental authorities, or known to the Sellers, with respect to Taxes that are likely to result in a material additional Liability for Taxes with respect to the Sellers. Audits of federal, state and local Tax Returns by the relevant taxing authorities have been completed for the periods set forth on Schedule 3.22(b) and, except as set forth in such Schedule, neither the Sellers nor any predecessor has been notified that any taxing authority intends to audit a Tax Return for any other period. To the Sellers' knowledge, the Sellers have delivered to Purchaser complete and accurate copies of all examination reports and statements of deficiencies assessed against or agreed to by the Sellers since December 31, 1996. Except as set forth on Schedule 3.22(b), the Sellers have not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. (c) Lien. Other than liens to secure payment of tangible personal property taxes in the amount set forth on Schedule 1.04 under the heading "Personal Property Tax Liens," there are no Liens for Taxes (other than for current Taxes not yet due and payable) on any of the Acquired Assets. None of the Acquired Assets is property that is required to be treated for Tax purposes as being owned by any other Person. (d) Prior Affiliated Groups. Except as set forth on Schedule 3.22(d) and except with respect to any group of which any Seller are the common parent for tax purposes, the Sellers have no Liability for the Taxes of any Person (other than the Sellers) (i) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise. (e) Tax Sharing Agreements. There are no Tax-sharing agreements or similar arrangements (including indemnity arrangements) with respect to or involving the Sellers, the Acquired Assets or the Business and, after the Closing Date, none of the Sellers, the Acquired Assets or the Business shall be bound by any such Tax-sharing agreements or similar arrangements or have any Liability thereunder for amounts due in respect of periods prior to the Closing Date. (f) No Withholding. None of the transactions contemplated hereby are subject to withholding under Section 1445 of the Code. The Sellers have withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party. The transactions contemplated herein are not subject to the tax withholding 17 provisions of Section 3406 of the Code, or of Subchapter A of Chapter 3 of the Code or of any other provision of law. SECTION 3.23 Disclosure Statement. The Debtors have prepared and filed with the Bankruptcy Court a Second Amended Disclosure Statement of the Debtors Pursuant to Section 1125 of the Bankruptcy Code with respect to the Joint Plan of Reorganization of Elcotel, Inc. and its Affiliated Debtors, as corrected, dated October 25, 2001 (the "Disclosure Statement"). SECTION 3.24 Periodic Reports. The Annual Report on Form 10-K for the fiscal year ended March 31, 2001 of the Sellers, the Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 and the Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, each as filed with the United States Securities and Exchange Commission (the "Commission"), and all Current Reports on Form 8-K of the Sellers filed with the Commission after March 31, 2001, did not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser represents and warrants to the Sellers as follows: SECTION 4.01 Organization. Each of Applicon and the Purchaser is a corporation validly existing and in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted. Each of Applicon and the Purchaser is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities make such qualification appropriate, except where the failure to be so qualified would not individually or in the aggregate have a material adverse effect on Applicon's or the Purchaser's (as applicable) ability to complete the transactions contemplated by this Agreement. SECTION 4.02 Authority Relative to this Agreement. The Purchaser has the corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution, delivery, and performance of this Agreement by Applicon and the Purchaser and the consummation by Applicon and the Purchaser of the transactions contemplated hereby have been duly authorized by all requisite corporate action. This Agreement has been duly and validly executed and delivered by Applicon and the Purchaser and (assuming this Agreement constitutes a valid and binding obligation of the Sellers) constitutes a valid and binding agreement of Applicon and the Purchaser, enforceable against Applicon and the Purchaser in accordance with its terms. SECTION 4.03 Consents and Approvals. Except approvals or authorizations which may be required under the Bankruptcy Code and as otherwise set forth in Schedule 4.03, no consent, approval, certificate, license, permit, waiver, authorization of, or declaration, filing 18 or registration with, any third party or any Governmental Entity is required to be obtained or made by Applicon or the Purchaser in connection with the execution, delivery and performance by Applicon and the Purchaser of this Agreement or the consummation by Applicon and the Purchaser of the transactions contemplated hereby. SECTION 4.04 No Violation. Neither the execution or delivery of this Agreement nor the consummation of the transactions contemplated hereby will, upon entry of the Confirmation Order: (a) violate any provision of the Articles of Incorporation or By-laws of Applicon or the Certificate of Incorporation or Bylaws of the Purchaser; or (b) violate any statute, law, judgment, decree, order, regulation or rule of any court or governmental authority applicable to Applicon or the Purchaser; or (c) violate, or be in conflict with, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or cause the acceleration of the maturity of any debt or obligation pursuant to, any agreement or commitment to which Applicon or the Purchaser or by which Applicon or the Purchaser is bound. SECTION 4.05 Brokers. No Person is entitled to any brokerage, financial advisory, finder's or similar fee or commission payable by Applicon or the Purchaser in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Applicon or the Purchaser. ARTICLE 5. COVENANTS SECTION 5.01 Access and Information. The Sellers shall afford to the Purchaser and to the Purchaser's financial advisors, legal counsel, accountants, consultants, financing sources and other authorized representatives reasonable access during normal business hours throughout the period prior to the Closing Date to the books, records, properties and personnel of the Sellers, and, during such period, shall furnish as promptly as practicable to the Purchaser any and all such information as the Purchaser reasonably may request with respect thereto, including all pleadings and other documents or schedules filed with the Bankruptcy Court or the Office of the United States Trustee. In addition, prior to the Closing Date, Purchaser shall have the right to consult with Sellers regarding the management and operation of the Business. Any disclosure whatsoever during such investigation by the Purchaser shall not constitute an enlargement of or additional representations or warranties of the Seller beyond those specifically set forth in this Agreement. SECTION 5.02 Confidentiality. (a) The Sellers covenant that, after the Closing, they will not, nor will they permit any of their subsidiaries to, without the prior written consent of the Purchaser, disclose to any Person confidential information relating to or concerning the Acquired Assets or the Business (the "Confidential Information"), except to its subsidiaries and their respective officers, directors, employees, advisors and representatives who need to know such information for purposes of taxes, accounting, legal and other matters necessary by reason of Sellers' ownership, prior to the Effective Time, of the Acquired Assets, and to the Bank. In the event that the Sellers or any of their Affiliates are requested or required by subpoena, civil investigative 19 demand, interrogatories, requests for information, or other similar process to disclose any Confidential Information, the Sellers will provide the Purchaser with prompt notice of such request or demand or other similar process so that the Purchaser may, at its cost, seek an appropriate protective order or, if such request, demand or other similar process is not mandatory, waive the Sellers' or their Affiliates' compliance with the provisions of this Section 5.02, as appropriate. (b) The restrictions and prohibitions set forth in subsection (a) above will not apply to Confidential Information that (i) is known by the receiving party at the time of its receipt, other than through a disclosure by the Sellers or their subsidiaries not otherwise permitted under this Section 5.02, (ii) at the time of disclosure is already available in the public domain other than as a result of a breach of this Section 5.02, (iii) is disclosed by either of the Sellers or any of their subsidiaries in order to perform their obligations or enforce their rights under this Agreement (provided that such disclosure entails only the minimum information required to be disclosed in order to perform their obligations or enforce their rights under this Agreement), or (iv) is required to be disclosed by applicable law or judicial order (provided that such disclosure entails only the minimum information required to be disclosed in order to comply with the law or order). (c) This Section 5.02 will survive for a period of two years after the Closing. SECTION 5.03 Additional Matters. Subject to the terms and conditions herein, except as provided by the Bankruptcy Code, the Bankruptcy Rules or any other orders entered or approvals or authorizations granted by the Bankruptcy Court in the Chapter 11 Case, including any order contemplated by Section 7.01(ii) hereof, each of the parties hereto agrees to use all commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable, including under applicable laws and regulations, to consummate and make effective the transactions contemplated by this Agreement, including using all commercially reasonable efforts to obtain all necessary waivers, consents and approvals required under this Agreement. SECTION 5.04 [Intentionally Omitted] SECTION 5.05 Employees and Benefit Programs. (a) Employee Benefits Definitions. The following terms, as used in this Agreement, having the following meanings: "Benefit Arrangements" has the meaning set forth in Section 5.05(b)(i). "COBRA" means Part 6 of Title I of ERISA or any similar state law. "Employee Plans" has the meaning set forth in Section 5.05(b)(i). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 20 "ERISA Affiliate" of any entity means any other entity which, together with such entity, would be treated as a single employer under Section 414 of the Code. "Multiemployer Plan" means each Employee Plan that is a multiemployer plan, as defined in Section 3(37) of ERISA. "Retained Employees" means the employees engaged in the Business that are identified by the Sellers on or prior to December 19, 2001. "Sellers' Employee Liabilities" means all liabilities, obligations and commitments arising out of or related to the employment (or termination of employment) by the Sellers of their employees and former employees, including, but not limited to, any obligation or liability for (a) accrued but unpaid wages, salary, incentive or bonus compensation, vacation benefits and pay, unpaid contributions to any Employee Plans or other compensation, (b) all claims for severance or other termination benefits, (c) all workers compensation claims, short term disability claims, long term disability claims and leaves of absence, (d) employee tort claims or claims under federal and state employee discrimination or harassment laws including claims under Title VII of the Civil Rights Act of 1964, and (e) any actions, suits or proceedings brought by employees or former employees which are set forth on Schedule 3.11. "Transferred Employees" has the meaning set forth in Section 5.05(c). (b) ERISA Representations. The Sellers hereby represent and warrant to the Purchaser that: (i) Schedule 5.05(b)(i) lists (A) each material "employee benefit plan," as such term is defined in Section 3(3) of ERISA, which is maintained, administered or contributed to by the Sellers or any of their ERISA Affiliates which covers employees of Sellers or any of their ERISA Affiliates or in which such employees participate (hereinafter referred to collectively as the "Employee Plans") and (B) each material employment, severance or other similar contract and material policy, plan or arrangement providing for insurance coverage (including any self-insured arrangements), workers' compensation, disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits, deferred compensation, profit-sharing, bonuses, stock options, stock appreciation or other forms of incentive compensation or post-retirement insurance, compensation or benefits which is not an Employee Plan. Such contracts, policies, plans and arrangements described in clause (B) above are hereinafter referred to collectively as the "Benefit Arrangements." (ii) No Employee Plan is a Multiemployer Plan or is subject to Title IV of ERISA or Section 412 of the Code. Neither the Sellers nor any of the Sellers' ERISA Affiliates has incurred any liability under Title IV of ERISA arising in connection with the termination of any plan covered or previously covered by Title IV of ERISA, or has maintained a plan subject to Section 412 of ERISA, for which any liability remains outstanding. 21 (iii) Each Employee Plan, which is intended to be qualified under Section 401(a) of the Code, is so qualified or, if such Employee Plan fails to be so qualified, can become qualified on a retroactive basis, or if a Seller becomes aware that any such Employer Plan fails to be so qualified prior to the rollover of any participant's accounts from such plan to any plan of the Purchaser will notify Purchaser of such failure. (iv) The Acquired Assets are not now nor will they after the passage of time be subject to any Lien imposed under Code Section 412(n) by reason of the failure of the Sellers or their ERISA Affiliates to make timely installments or other payments required by Code Section 412 with respect to any plan maintained by Sellers or their ERISA Affiliates prior to the Closing. (v) No Employee Plan or Benefit Arrangement provides post-retirement health or life benefits to any employees of Sellers, except as required by COBRA or similar state law. 22 (c) Employees and Offers of Employment. Purchaser will offer employment to those of Sellers' active employees set forth on the Employee Schedule selected by the Purchaser in its sole discretion at substantially the same salary and bonus levels for such employees as were in effect prior to the Closing; provided, that the Purchaser may terminate at any time after the Closing Date the employment of any employee who accepts such offer. No later than the Schedule Approval Time, Purchaser shall provide Sellers with a list of those employees of Sellers other than the Retained Employees to whom Purchaser does not intend to offer employment following the Closing Date (the "Non-Retained Employees"). Sellers shall be solely responsible for any WARN Act notification and any liability under the WARN Act, relating to any termination of any of Sellers' employees occurring on or after the date of this Agreement; provided, however, Sellers shall have no liability for any WARN Act notification and any liability under the WARN Act relating to any termination of Sellers' employees which are employed at the Orange, Virginia plant. For purposes of this Section 5.05, an employee shall be an "active" employee of Sellers if on the day immediately prior to the Closing Date, such Person is actively employed by the Sellers or is on short-term disability leave, authorized leave of absence or military service as of the day immediately prior to the Closing Date (such inactive employees may be offered employment by the Purchaser as of the date they would otherwise return to active employment), but shall exclude any other inactive or former employee including any Person who has been on lay-off, long-term disability leave or unauthorized leave of absence or who has terminated his or her employment, retired or died on or before the day immediately prior to the Closing Date. Any such offer of employment shall be at such benefit levels, and on such other terms and conditions as the Purchaser shall in its sole discretion deem appropriate; provided that this provision shall not be read to reduce the level of Assumed Liabilities with respect to the Transferred Employees. The employees engaged in the Business who accept and commence employment with the Purchaser are hereinafter collectively referred to as the "Transferred Employees." The Sellers will not take, and will cause each of their subsidiaries not to take, any action which would impede, hinder, interfere or otherwise compete with the Purchaser's efforts to hire any Transferred Employees. (d) Purchaser Benefit Plans. The Purchaser or one of its Affiliates will recognize all years of service of the Transferred Employees with the Sellers (or their predecessors) or any of its Affiliates, only for purposes of eligibility to participate in and to vest under those employee benefit plans (but not for benefit accrual or any other purpose), within the meaning of Section 3(3) of ERISA, in which the Transferred Employees are enrolled by the Purchaser or one of its Affiliates immediately after the Closing Date. The Purchaser shall cause all pre-existing condition exclusions under any medical and dental plans ("Purchaser's Health Plans") made available by the Purchaser to Transferred Employees to be waived in respect of such employees and dependents, but only to the extent Sellers' medical and dental plans recognize such Transferred Employees and their dependents as having satisfied any pre-existing conditions exclusion under Sellers' medical and dental plans. Sellers shall treat the Transferred Employees as terminated by Sellers as of the Closing Date for purposes of such Transferred Employees' participation in any 401(k) plan of Sellers. 23 (e) No Third Party Beneficiaries. No provision of this Article shall create any third party beneficiary or other rights in any employee or former employee (including any beneficiary or dependent thereof) of the Sellers or of any of their subsidiaries in respect of continued employment (or resumed employment) with either the Business, the Purchaser any of its Affiliates and no provision of this Section 5.05 shall create any such rights in any such Persons in respect of any benefits that may be provided, directly or indirectly, under any Employee Plan or Benefit Arrangement or any plan or arrangement which may be established by the Purchaser or any of its Affiliates. No provision of this Agreement shall constitute a limitation on rights to amend, modify or terminate after the Closing Date any such plans or arrangements of the Purchaser or any of its Affiliates. SECTION 5.06 Public Announcements. The Purchaser and the Sellers shall consult with each other before issuing any press release or making any public statement or other public communication with respect to the Agreement or the transactions contemplated hereby. The Purchaser and the Sellers shall not issue any such press release or make any such public statement or public communication without the prior consent of the other party, which shall not be unreasonably withheld; provided, however, that a party may, without the prior consent of the other party, issue such press release or make such public statement as may, upon the advice of counsel, be required by law. SECTION 5.07 Conduct of the Business. Except as otherwise provided herein or authorized by the Bankruptcy Court prior to the date hereof, from the date hereof until the Measurement Date, the Sellers shall conduct the Business in the ordinary course and shall use commercially reasonable efforts to preserve intact the business or organizations and relationships with third parties and to keep available the services of the present employees of the Business. In addition, without the prior written consent of Purchaser which consent shall not be unreasonably withheld or delayed, from the date hereof through the Measurement Date the Sellers shall not: (a) take or agree to commit to take any action that could reasonably be expected to (i) make any representations or warranties of the Sellers that is qualified as to materiality untrue; (ii) make any representations or warranties of the Sellers that is not so qualified untrue in any material respect, or (iii) cause any of the conditions set forth in Article 6 of this Agreement not to be satisfied; (b) terminate or amend any of the Material Contracts included in the Assumed Rights; (c) fail to take any reasonable action necessary to preserve the benefits of any of the Assumed Rights; (d) accelerate Receivables prior to their due date or provide discounts or other inducements with respect to the payment of Receivables; (e) to the extent applicable to the Acquired Assets or the Business, (i) make any loans, advances or capital contributions to, or investments in, any Person or declare or pay dividends, or make advances, to any Person, other than short-term investments of cash on hand in the ordinary course consistent with past practices, or (ii) except in the 24 ordinary course of business consistent with past practice, mortgage or pledge any Acquired Assets or create or allow any Lien, other than Liens described on Schedule 3.04(a), to exist on any Acquired Assets; (f) to the extent applicable to the Acquired Assets or the Business, cancel or modify any existing insurance policies; (g) to the extent such action could be reasonably expected to have a Material Adverse Effect on the Acquired Assets or the Business, make or change any election in respect to Taxes, adopt or change any material accounting method in respect to Taxes, enter into any Tax allocation agreement, Tax sharing agreement, Tax indemnity agreement or closing agreement, settle or compromise on any claim, notice, audit report or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes; (h) except as disclosed in Schedule 5.07(h), to the extent applicable to the Acquired Assets or the Business, pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in the Sellers' Operating Reports and Monthly Reports (or the notes thereto) or incurred in the ordinary course of business consistent with past practice; (i) acquire, sell, lease, license or otherwise dispose of any Acquired Assets other than the disposition of inventory in the ordinary course of business and at prevailing rates; (j) make or agree to make any new capital expenditure or expenditures that, in the aggregate, are in excess of $25,000; (k) to the extent applicable to Sellers, the Business or the Acquired Assets, acquire or agree to acquire (i) by merger, consolidation, acquisition of stock or assets, or any other manner) any business, corporation, partnership, limited liability company, joint venture, association or other business organization or division thereof, or (ii) any assets that are material, individually or in the aggregate, to the Business; or (l) authorize or enter into any agreement, arrangement, commitment or obligation to take any action prohibited by this Section 5.07. SECTION 5.08 Notices of Certain Events. The Sellers shall promptly notify the Purchaser of damage or destruction by fire or other casualty of any material Acquired Asset or in the event that any material Acquired Asset becomes the subject of any proceeding or, to the knowledge of the Sellers, threatened proceeding for the taking thereof or any part thereof or of any right relating thereto by condemnation, eminent domain or other similar governmental action. 25 SECTION 5.09 Bankruptcy Court Entry of Confirmation Order. (a) As promptly as practicable after the date hereof, the Sellers shall seek authority of the Bankruptcy Court for a confirmation order with respect to the Plan (the "Confirmation Order") authorizing the Sellers to sell the Acquired Assets to the Purchaser pursuant to this Agreement and the Plan free and clear of all Liens in or on the Acquired Assets (including any and all "claims and interests" in the Assets within the meaning of Section 363(f) of the Bankruptcy Code), other than Liens related to the Assumed Liabilities and Permitted Exceptions and otherwise free and clear of claims and liabilities of all parties who receive notice, such that the Purchaser shall not, among other things, incur any liability as a successor to the Business and authorizing, among other things, the Sellers, to assume and to assign to the Purchaser the Assumed Rights. In furtherance of the foregoing, if required by the Bankruptcy Court, the Sellers shall provide notice to all holders of Liens with respect to any of the Acquired Assets (including all federal, state and local taxing authorities) of the pending Confirmation Order and any hearing with respect thereto in a form and manner satisfactory to the Bankruptcy Court and shall take any and all other actions required by the Bankruptcy Court in connection with the Confirmation Order. (b) In the event an appeal is taken, or a stay pending appeal is requested or reconsideration is sought from the Confirmation Order the Sellers shall immediately notify the Purchaser of such appeal or stay request and shall provide to the Purchaser within one business day a copy of the related notice of appeal or order of stay or application for reconsideration. The Sellers shall also provide the Purchaser with written notice, (and copies of) any other or further notice of appeal, motion or application filed in connection with any appeal from or application for reconsideration of, either of such orders and any related briefs. SECTION 5.10 Name Changes. Within 60 days after the Closing, the Sellers agree (a) to change their names to some other name not using the word "Elcotel" or the words "Technology Service Group" and (b) after the Closing, until papers are duly filed with the applicable Secretaries of State to effect such name changes, not to use its name in any way for the purpose of selling or marketing any product or service or otherwise in any manner which does or might compete with the Purchaser or, in any other way which, in the Purchaser's reasonable judgment, would, could or might be detrimental to the Purchaser's enjoyment of the rights and goodwill it sought when it paid for and acquired the Acquired Assets. SECTION 5.11 Permits. Prior to the Closing Date, the Sellers (1) shall use commercially reasonable efforts to identify all material Permits (including Environmental Permits) necessary to operate the Business from and after the Closing Date, and (2) shall use commercially reasonable efforts to obtain consents to the transfer of such material Permits which are transferable to Purchaser at or prior to Closing and which are not otherwise covered by the Confirmation Order. Prior to and after the Closing, the Sellers shall cooperate with Purchaser with respect to the transfer of all material Permits. SECTION 5.12 Consents; Assignments. The Sellers and the Purchaser shall use commercially reasonable efforts to obtain any consent, approval or amendment required to 26 novate and/or assign all agreements, leases, licenses, and other rights of any nature whatsoever included in the Acquired Assets; provided, however, that except for filing and other administrative charges, the Purchaser shall not be obligated to pay any consideration therefor to the third party from whom such consents, approvals, and amendments are requested. In the event and to the extent that the Sellers and the Purchaser are unable to obtain any such required consent, approval or amendment, or if any attempted assignment would be ineffective or would adversely affect the rights of the Sellers with respect to the Acquired Assets so that the Purchaser would not in fact receive all the rights with respect to the Acquired Assets, the Sellers and the Purchaser will cooperate (to the extent permitted by law or the terms of any applicable agreement) in a mutually agreeable arrangement under which the Purchaser obtain the benefits and assume the obligations with respect to such Acquired Asset in accordance with this Agreement, including sub-contracting, sub-licensing, or sub-leasing to the Purchaser, or under which the Sellers would enforce for the benefit of the Purchaser, with the Purchaser assuming the Sellers' obligations, any and all rights of the Sellers against a third party thereto. The Sellers shall, without further consideration therefor, pay and remit to the Purchaser promptly all monies, rights, and other considerations received in respect of the Purchaser's performance of such obligations. Following the Closing, the Sellers shall use commercially reasonable efforts to obtain required consents with respect to any Acquired Assets which are not assigned to the Purchaser pursuant to the Confirmation Order. If and when any such consent shall be obtained or such agreement, lease, license, or other right shall otherwise become assignable or able to be novated, the Sellers shall promptly assign and novate all their rights and obligations thereunder to the Purchaser without the payment of any further consideration therefor. The foregoing shall not limit the right of the Purchaser to require the Sellers to assign any contract included in the Acquired Assets to it or constitute a waiver to any condition precedent to Closing. SECTION 5.13 Accounts Receivables. Immediately following the Closing, Sellers shall notify (in writing) the account debtors for all Receivables sold under this Agreement that such Receivables have been sold to the Purchaser; provided that the Purchaser shall pay the postage and printing costs of mailing such notice to the account debtors. SECTION 5.14 No-shop clause. From the date of this Agreement until termination of this Agreement, the Sellers will not, and will not permit any Person acting for or on behalf of the Sellers to, without the prior written consent of the Purchaser, solicit offers to buy the Business or the Acquired Assets (other than sales of Inventory in the ordinary course of business). SECTION 5.15 Disclosure Supplements. On or before December 19, 2001, Sellers will deliver, and from time to time prior to the Closing Sellers shall promptly supplement or amend, the Schedules referred to in Article 3 (the "Disclosure Schedules") with respect to any matter arising after the date hereof which, if existing or occurring at or prior to the date hereof, would have been required to be set forth or described in the Disclosure Schedules or which is necessary to complete or correct any information in the Disclosure Schedules or in any representation or warranty of Sellers which has been rendered inaccurate thereby. No such supplement or amendment of the Disclosure Schedules will be deemed to cure any breach of any representation or warranty made in this Agreement or to affect the conditions to the obligations of the parties under this Agreement. 27 SECTION 5.16 Tax Clearance. Sellers shall promptly apply for and use all commercially reasonable efforts to obtain, prior to Closing, all clearance certificate(s) or similar document(s) that may be required by any state taxing authority in order to relieve Purchaser of any obligation to withhold any portion of the Purchase Price. SECTION 5.17 Post-Petition Retention Bonuses and Severance. Sellers shall promptly seek the authority of the Bankruptcy Court to amend the Plan to provide that the post-petition retention bonuses of, and severance liabilities with respect to, the Sellers' employees shall not be paid by the estates of the Sellers to any employee who is offered employment pursuant to Section 5.05(c) with the Purchaser and who does not accept such offer. SECTION 5.18 Transition Period. (a) From the Measurement Date to the Closing Date (the "Transition Period") and unless otherwise directed by the Representative, the Sellers shall conduct the Business in the ordinary course and shall use commercially reasonable efforts to preserve intact the business and relationships with third parties and to keep available the services of the Transferred Employees. (b) In addition, during the Transition Period the Sellers shall: (i) expend funds and operate the Business in accordance with the budget attached hereto as Exhibit C (the "Transition Budget"); (ii) deposit all monies received by the Sellers as payment of any accounts and notes receivable or otherwise into a bank account separate from all other accounts of the Sellers established at a bank other than the Bank (the "Transition Account"); (iii) permit a representative appointed by the Purchaser (the "Representative") and a reasonable number of additional representatives access to the Sellers facilities and properties to observe fully the conduct of the Business and shall provide the Representative with all information and materials necessary to enable the Representative to make reasonably informed decisions with respect to the Business; and (iv) otherwise comply with the reasonable requests of the Representative so long as such requests do not cause the Sellers to expend funds in excess of the amounts provided in the Transition Budget. (c) In addition, from the Measurement Date to the Closing Date the Sellers shall not: (i) fail to deposit and hold all monies received by the Sellers on or after the Measurement Date into the Transition Account, or fail to preserve the funds contained in the Transition Account for the benefit of the Purchaser after the Closing; 28 (ii) take or agree to commit to take any action that could reasonably be expected to cause any of the conditions set forth in Section 6.03(b) of this Agreement not to be satisfied; (iii) without the consent of the Representative, terminate or amend any of the Material Contracts included in the Assumed Rights, or enter into any contract after the date of the Confirmation Order which does not expressly provide that the benefits of the Sellers pursuant to such contract may be assigned, and the duties of the Sellers pursuant to such contract may be delegated, to the Purchaser on the Closing Date; (iv) without the consent of the Representative, accelerate Receivables prior to their due date or provide discounts or other inducements with respect to the payment of Receivables; (v) to the extent such action could be reasonably expected to have a Material Adverse Effect on the Acquired Assets or the Business, make or change any election in respect to Taxes, adopt or change any material accounting method in respect to Taxes, enter into any Tax allocation agreement, Tax sharing agreement, Tax indemnity agreement or closing agreement, settle or compromise on any claim, notice, audit report or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes; (vi) without the consent of the Representative, pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) on behalf of the Purchaser; (vii) without the consent of the Representative, acquire, sell, lease, license or otherwise dispose of any Acquired Assets other than the disposition of inventory in the ordinary course of business and at prevailing rates; (viii) acquire or agree to acquire (i) by merger, consolidation, acquisition of stock or assets, or any other manner) any business, corporation, partnership, limited liability company, joint venture, association or other business organization or division thereof, or (ii) any assets that are material, individually or in the aggregate, to the Business; or (ix) authorize or enter into any agreement, arrangement, commitment or obligation to take any action prohibited by this Section 5.18. (d) Within ten (10) Business Days following the Closing Date, the Purchaser shall pay the Sellers an amount equal to the actual cash expenditures of the Sellers (other than amounts paid from the Transition Account) during the Transition Period for the items relating to or arising from the continuing operation of the Business beyond the Measurement Date (including without limitation utility and telephone costs and payroll and related benefits of the Transferred Employees and for amounts, if any, then due for the purchase prior to the Measurement Date of inventory that is not received by the 29 Sellers until after the Measurement Date) (the "Transition Operation Expenses") but not for items relating to or arising from the winding up of the affairs of the Sellers (including without limitation payroll and related benefits and bonuses of employees other than the Transferred Employees) or for items relating to or arising from the operation of the Business prior to the Measurement Date; provided that such expenditures do not exceed the amounts set forth in the Transition Budget; and, provided further, that the Sellers may use the funds set forth in the Transition Account to pay Transition Operation Expenses during the Transition Period. (e) During the Transition Period and from time to time following the Closing Date, the Sellers in good faith shall credit or debit the Transition Account for items that may have been mistakenly credited to the incorrect account to further the intent of this Section 5.18. SECTION 5.19 Sarasota Property. The Sellers shall entitle the Purchaser to unfettered access to and to occupy the real property currently occupied by the Sellers located at 6428 Parkland Drive, Sarasota, Florida 34243 (the "Sarasota Property") for a period of ninety (90) days following the Closing in consideration of the Sellers' pre-paid rent with respect to such properties and at no additional cost to the Purchaser (other than payments for utility costs associated with the operation of the facilities located on such properties and actually incurred by the Purchaser in connection with such property after the Closing) without assumption of any other liabilities or the real property lease with respect thereto. In addition, during the Transition Period, the Sellers shall allow the Purchaser access to the real property located at 2007 Whitfield Park Drive, Sarasota, Florida 34243 and shall attempt in good faith to arrange for the Purchaser to have access to such property for a period of three (3) business days following the Closing Date. ARTICLE 6. CONDITIONS PRECEDENT SECTION 6.01 Conditions Precedent to Obligation of the Sellers and the Purchaser. The respective obligations of each party to effect the transactions contemplated by this Agreement shall be subject to the satisfaction of the following conditions: (a) prior to the Measurement Date, all other authorizations, consents, orders and approvals of Governmental Entities and prior to the Closing of the Bankruptcy Court necessary for the consummation of the transactions contemplated by this Agreement shall have been obtained, including a final Confirmation Order which shall be in form and substance reasonably satisfactory to the Purchaser and which shall, among other things, (i) contain findings of fact and rulings that Purchaser is a good faith purchaser and entitled to all applicable protections of the Bankruptcy Code; (ii) terminate and release all of the Liens, claims and interests in and to the Acquired Assets except to the extent securing any of the Assumed Liabilities (it being understood that such order or an abstract thereof shall be in form suitable for filing in applicable lien records and shall direct the execution of appropriate title transfers and lien releases by creditors with respect to the transferred or released property and limitations on the Assumed Liabilities as set forth in this Agreement and enjoin any holder of a claim or interest in any of the 30 Sellers from asserting any such claim or interest against the Purchaser other than claims directly related to the Assumed Liabilities); and (iii) include a finding of fact and law that re-solicitation of votes with respect to the plan is not required; (b) the Bankruptcy Court shall not have required the re-solicitation of votes with respect to the Plan (other than the votes already cast with respect to the plan and other than the Bank) as a result of this Agreement; and (c) there shall not be any statute, rule or regulation, enjoining or prohibiting the consummation of the Closing and no court of competent jurisdiction shall have issued, and there shall not have been commenced and be continuing any action by any Governmental Entity seeking, any order, decree or ruling enjoining or prohibiting the consummation of the Closing. SECTION 6.02 Conditions Precedent to Obligation of the Sellers. The obligation of the Sellers to effect the transactions contemplated by this Agreement shall be subject to the satisfaction or waiver at or prior to the Closing Date of the following additional conditions: (a) the Purchaser shall have performed in all material respects its obligations under this Agreement required to be performed by the Purchaser at or prior to the Closing Date; (b) the representations and warranties of the Purchaser contained in this Agreement shall be true and correct in all respects (in the case of any representation or warranty qualified as to materiality) or all material respects (in the case of any representation or warranty not so qualified) as of the Closing Date as if made at and as of such date except as otherwise contemplated by this Agreement; and (c) the Purchaser shall have furnished the Sellers with a certificate of an executive officer or member, as the case may be, of the Sellers to the effect that the conditions set forth in Sections 6.02 hereof have been satisfied; SECTION 6.03 Conditions Precedent to Obligation of the Purchaser. The obligation of the Purchaser to effect the transactions contemplated by this Agreement shall be subject to the satisfaction or waiver of the following additional conditions: (a) Prior to the Measurement Date: (i) the representations and warranties of the Sellers contained in this Agreement which are qualified as to materiality or a "Material Adverse Effect" shall be true in all respects as of the date hereof and as of the Measurement Date, and all other representations and warranties of the Sellers shall be true and correct as of the date hereof and on and as of the Measurement Date except as would not be reasonably likely to have, individually or in the aggregate, a Material Adverse Effect; (ii) since September 30, 2001, there shall not have been a change that has had or could reasonably be expected to have a Material Adverse Effect; 31 (iii) the book value of the Assumed Liabilities as of the Measurement Date (determine in accordance with GAAP) shall not exceed the amounts set forth on Schedule 1.03 and Schedule 1.04; (iv) the Sellers shall have furnished the Purchaser with a certificate of an executive officer or member, as the case may be, of the Sellers to the effect that the conditions set forth in Sections 6.03(a) hereof have been satisfied; (v) the Purchaser shall be satisfied that it is entitled to unfettered access to and to occupy the Sarasota Property for a period of ninety (90) days following the Closing in consideration of the Sellers' pre-paid rent with respect to such properties and at no additional cost to the Purchaser (other than payments for utility costs associated with the operation of the facilities located on such property and actually incurred by the Purchaser in connection with such property after the Closing) without assumption of any other liabilities or the real property lease with respect thereto; (vi) all other material consents and approvals of third parties necessary to assign and transfer the Acquired Assets or to assign the Assumed Rights to the Purchaser shall have been received by the Sellers and delivered to the Purchaser at or prior to the Measurement Date; (vii) sellers shall have applied for all clearance certificate or similar document(s) that may be required by any state taxing authority in order to relieve Purchaser of any obligation to withhold any portion of the Purchase Price; (viii) the Sellers shall have performed in all material respects their obligations under this Agreement required to be performed by the Sellers at or prior to the Measurement Date; and (b) prior to the Closing Date: (i) the Sellers shall have performed in all material respects their obligations under Section 1.01, Section 2.01, Section 2.02(a) (other than Section 2.02(a)(iii) and provided that the deliveries required by Sections 2.02(a)(iv) and 2.02(a)(v) shall be reasonable), Section 5.01 (to the extent it materially impairs the rights of the Purchaser under the Agreement), Section 5.18 and Section 5.19 required to be performed by the Sellers at or prior to the Closing Date; (ii) from the Measurement Date, there shall not have occurred any change that would have a Material Adverse Effect; (iii) upon consummation of the transactions contemplated hereby, the Purchaser will have acquired good title in and to, or a valid leasehold interest in, as applicable, each of the Acquired Assets, free and clear of all Liens (as contemplated by the Confirmation Order) other than Liens related to the Assumed Liabilities and Permitted Exceptions; and 32 (iv) the Confirmation Order, in a form reasonably acceptable to the Purchaser, shall have been entered by the Bankruptcy Court and shall have become a final order, and such order shall not have been stayed, modified, reversed or amended in any manner adverse to the Purchaser, and the Sellers shall have received from the Bankruptcy Court all other orders, approvals and consents required to transfer the Acquired Assets and to consummate the transactions contemplated by this Agreement, and the Purchaser shall have received evidence thereof reasonably satisfactory to the Purchaser and its counsel (it being understood that the Confirmation Order will be "reasonably acceptable" to the Purchaser if the Confirmation Order contains the provisions described by the Bankruptcy Court at the hearing with respect to the Chapter 11 Cases on December 13, 2001). ARTICLE 7. TERMINATION, AMENDMENT AND WAIVER SECTION 7.01 Termination. This Agreement may be terminated: (i) by mutual written agreement of the Sellers and the Purchaser prior to the Measurement Date; (ii) at any time before the Closing, by the Purchaser if any of the conditions set forth in Section 6.01 or Section 6.03 shall have become incapable of fulfillment or cure and shall not have been waived by the Purchaser, provided that the Purchaser is not then in breach of this Agreement; (iii) at any time before the Closing, by the Sellers if any of the conditions set forth in Section 6.01 or Section 6.02 shall have become incapable of fulfillment or cure and shall not have been waived by the Sellers, provided that the Sellers are not then in breach of this Agreement; (iv) at any time after January 14, 2002, by the Purchaser if the Closing fails to occur on or before such date, unless such failure is due to the action or inaction of the Purchaser; (v) at any time after January 14, 2002, by the Purchaser if by such date the Confirmation Order has not been entered; (vi) prior to the Measurement Date, by the Purchaser in the event of a material breach of the covenants contained in Section 5.15; and (vii) at any time prior to the Schedule Approval Time by the Purchaser as a result of the Purchaser's dissatisfaction, in its sole discretion, with the Disclosure Schedules to be delivered by the Sellers pursuant to this Agreement. SECTION 7.02 Effect of Termination(a) . If this Agreement is terminated under Section 7.01, written notice thereof will forthwith be given to the other party and this Agreement will thereafter become void and have no further force and effect and, except for those provisions 33 that expressly survive the termination of this Agreement, all further obligations of the Sellers and the Purchaser to each other under this Agreement will terminate without further obligation or liability of the Sellers or the Purchaser to the others, except that each party will return all documents, workpapers and other material of any other party relating to the transactions contemplated by this Agreement, whether so obtained before or after the execution of this Agreement, to the party furnishing the same, and all confidential information received by any party to this Agreement with respect to the business of any other party will be treated in accordance with the confidentiality agreement between Gores Technology Group and Sellers. ARTICLE 8. GENERAL PROVISIONS SECTION 8.01 Survival of Representations, Warranties. No representations or warranties in this Agreement shall survive beyond the Closing Date. SECTION 8.02 Transfer Taxes. The Sellers shall seek an order approving this Agreement which provides that (a) in accordance with section 1146(c) of the Bankruptcy Code, the making or delivery of any instrument of transfer under a plan confirmed under section 1129 of the Bankruptcy Code shall not be taxed under any law imposing a stamp tax or similar tax, and (b) the instruments transferring the Acquired Assets to the Purchaser shall contain the following endorsement (if permitted by applicable law): "Because this [instrument] has been authorized pursuant to Order of the United States Bankruptcy Court for the District of _____________ relating to a plan of reorganization of the Grantor, it is exempt from transfer taxes, stamp taxes or similar taxes pursuant to 11 U.S.C. ss. 1146(c)." In the event transfer Taxes are required to be paid in order to consummate the transactions hereunder, or in the event any such Taxes are assessed at any time thereafter, such transfer Taxes (including any interest, penalties or other additions thereon) incurred as a result of the transactions contemplated hereby shall be paid by the Sellers. In the event sales, use or other similar Taxes are assessed at Closing or at any time thereafter on the transfer of any of the Acquired Assets, such Taxes (including any interest, penalties or other additions thereon) incurred as a result of the transactions contemplated hereby shall be paid by the Sellers. The Purchaser and the Sellers shall cooperate in providing each other with any appropriate resale exemption certifications and other similar documentation. SECTION 8.03 Notices. All notices, claims, demands and other communications hereunder shall be in writing and shall be deemed given upon (a) confirmation of receipt of a facsimile transmission, (b) confirmed delivery by a standard overnight carrier or when delivered by hand, or (c) the expiration of three (3) business days after the day when mailed by registered or certified mail (postage prepaid, return receipt requested), addressed to the respective parties at the following addresses (or such other address for a party as shall be specified by like notice): 34 (a) If to the Purchaser or to Applicon, to Elcotel Acquisition Corporation 10877 Wilshire Blvd., Suite 1805 Los Angeles, California 90024 Telecopy: 310-209-3310 Attention: General Counsel and Applicon, Inc. 6260 Lookout Road Boulder, Colorado 80301 Telecopy: 303-531-3200 Attention: Chief Financial Officer with the copy (which shall not constitute notice) to: Latham & Watkins 633 West Fifth Street, Suite 4000 Los Angeles, California 90071-2007 Telecopy: 213-891-8763 Attention: Robert A. Klyman, Esq. (b) If to the Sellers, to: Elcotel Inc. 6428 Parkland Drive Sarasota, Florida 34243 Telecopy: (941) 751-4716 Attention: William H. Thompson with the copy (which shall not constitute notice) to: White & Case LLP 200 South Biscayne Blvd., Suite 4900 Miami, Florida 33131 Telecopy: (305) 358-5744 Attention: Frank L. Eaton, Esq. and 35 (c) If to the Bank, to: Bank of America, N.A. 100 North Tampa Street, Suite 1700 Tampa, Florida 33602 Telecopy: Attention: Joseph Martens with the copy (which shall not constitute notice) to: Foley & Lardner 100 North Tampa Street, Suite 2700 Tampa, Florida 33131 Telecopy: (813) 221-4210 Attention: Mark J. Wolfson, Esq. SECTION 8.04 Descriptive Headings; Certain Terms. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All references to "$" or dollars shall be to United States dollars and all references to "days" shall be to calendar days unless otherwise specified. SECTION 8.05 Entire Agreement, Assignment. This Agreement (including the Exhibits, and the other documents and instruments referred to herein) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, among the parties or any of them (including that certain letter of intent dated as of November 9, 2001 between Gores Technology Group and Elcotel, Inc., with respect to the subject matter hereof). The Sellers and the Purchaser acknowledge that in deciding to enter into this Agreement and to consummate the transactions contemplated hereby, they have not relied upon any statements, promises or representations, written or oral, express or implied, other than those explicitly set forth in this Agreement. In furtherance and not in limitation of the foregoing, the Purchaser acknowledges that the Sellers have not made any representations or warranties, of any kind, either express or implied, except as expressly set forth in this Agreement. THE PURCHASER AGREES THAT THE REPRESENTATIONS AND WARRANTIES GIVEN HEREIN BY THE SELLERS ARE IN LIEU OF, AND THE PURCHASER HEREBY EXPRESSLY WAIVES ALL RIGHTS TO, ANY IMPLIED WARRANTIES WHICH MAY OTHERWISE BE APPLICABLE BECAUSE OF THE PROVISIONS OF THE UNIFORM COMMERCIAL CODE OR ANY OTHER STATUTE, INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. This Agreement shall not be assigned by operation of law or otherwise; provided, however that Purchaser may assign all or part of its rights or obligations under this Agreement to one of its wholly-owned subsidiaries so long as Purchaser remains liable for its obligations hereunder. SECTION 8.06 Governing Laws. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the rules of conflict of laws of the State of Delaware or any other jurisdiction. The Purchaser and Sellers irrevocably and unconditionally consent to submit to the jurisdiction of the Bankruptcy Court for 36 all matters arising out of or relating to this Agreement and the transactions contemplated thereby (and agree not to commence any litigation relating thereto except in the Bankruptcy Court). SECTION 8.07 Expenses. Except as set forth in this Agreement, whether or not the transactions contemplated by this Agreement are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses. The foregoing shall not affect the legal right, if any, that any party hereto may have to recover expenses from any other party that breaches its obligations hereunder. SECTION 8.08 Amendment. This Agreement and the Exhibits and Schedules hereto may not be amended except by an instrument in writing signed on behalf of all the parties hereto. SECTION 8.09 Waiver. At any time prior to the Measurement Date, the parties hereto may (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. SECTION 8.10 Counterparts; Effectiveness. This Agreement may be executed by facsimile signature and in two or more counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement. This Agreement shall become effective when each party hereto shall have received counterparts thereof signed by all the other parties hereto. SECTION 8.11 Severability; Validity; Parties of Interest. If any provision of this Agreement or the application thereof to any Person or circumstance is held invalid or unenforceable, the remainder of this Agreement, and the application of such provision to other Persons or circumstances, shall not be affected thereby, and to such end, the provisions of this Agreement are agreed to be severable. Nothing in this Agreement, express or implied, is intended to confer upon any Person not a party to this Agreement any rights or remedies of any nature whatsoever under or by reason of this Agreement. ARTICLE 9. DEFINITIONS SECTION 9.01 Defined Terms. As used herein (including the Schedules hereto), the terms below shall have the following meanings. "Accountants" has the meaning set forth in Section 2.03(d). "Acquired Assets" means the Assigned Assets, the Assumed Rights and the Intellectual Property. "Acquired Intellectual Property" has the meaning set forth in Section 1.01(c). 37 "Adjustment Hold-Back" has the meaning set forth in Section 1.06(a). "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such other Person. "Agreement" has the meaning set forth in the Preamble. "Allocation" has the meaning set forth in Section 1.06(b). "Applicon" has the meaning set forth in the Preamble. "A/R Aging Report" has the meaning set forth in Section 3.14. "Assigned Assets" has the meaning set forth in Section 1.01(a). "Assumed Liabilities" has the meaning set forth in Section 1.04. "Assumed Rights" has the meaning set forth in Section 1.01(b). "Bank" has the meaning set forth in Section 6.01(b). "Bankruptcy Code" has the meaning set forth in the Recitals. "Bankruptcy Court" has the meaning set forth in the Recitals. "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedures, as amended. "Benefit Arrangements" has the meaning set forth in Section 5.05(b)(i). "Bill of Sale" has the meaning set forth in Section 2.02(a)(ii). "book value" means the book value, net of appropriate valuation reserves, determined in accordance with GAAP. "Business" has the meaning set forth in Section 1.01(a)(iv). "Business Day" means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in New York, New York. "Chapter 11 Case" has the meaning set forth in the Recitals. "Closing" has the meaning set forth in Section 2.01. "Closing Date" has the meaning set forth in Section 2.01. "Closing Payment Statement" has the meaning set forth in Section 2.03(a). "Closing Payment Statement Date" has the meaning set forth in Section 2.03(a). 38 "Code" means the Internal Revenue Code of 1986, as amended. "Confidential Information" has the meaning set forth in Section 5.03(a). "Confirmation Order" has the meaning set forth in Section 5.9(b)(ii). "Conveyance Documents" has the meaning set forth in Section 2.02(a)(i). "Cure Costs" has the meaning set forth in Section 1.03. "Debtors" has the meaning set forth in the Preamble. "Deferred Revenues" has the meaning set forth in Section 2.03(a). "Designated Chapter 11 Costs" means all out of pocket fees and expenses incurred or owed in connection with the administration of the Chapter 11 Case including the U.S. Trustee fees, the fees and expenses of attorneys, accountants, financial advisors, consultants and other professionals retained by the Sellers, the Creditors' Committee, or the prepetition lenders incurred or owed in connection with the administration of the Chapter 11 Case (but specifically excluding ordinary course professionals as authorized by the Bankruptcy Court), and all out of pocket expenses of the Sellers in connection with the transactions contemplated under this Agreement. "Disclosure Schedules" has the meaning set forth in Section 5.17. "Disclosure Statement" has the meaning set forth in Section 3.23. "Effective Time" has the meaning set forth in Section 1.01(a)(i). "Employee Plans" has the meaning set forth in Section 5.05(b)(i). "Employee Schedule" has the meaning set forth in Section 3.18. "Environmental Laws" means any federal, state, local or foreign law (including, without limitation, common law), treaty, judicial decision, regulation, rule, judgment, order, decree, injunction, permit or governmental restriction or any agreement with any governmental authority or other third party, relating to the environment, human health and safety or to pollutants, contaminants, wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substances, wastes or materials. "Environmental Permits" means all permits, licenses, franchises, certificates, approvals and other similar authorizations of governmental authorities relating to or required by Environmental Laws and affecting, or relating in any way to, the Business. "Excess Liabilities" has the meaning set forth in Section 2.03(a). "Excluded Assets" has the meaning set forth in Section 1.02. "Excluded Contracts" has the meaning set forth Section 1.01(b). 39 "Excluded Liabilities" has the meaning set forth in Section 1.05. "Excluded Liability Total" has the meaning set forth in Section 2.03(a). "Final Purchase Price Adjustment" has the meaning set forth in Section 2.03(e). "Fixed Assets" has the meaning set forth in Section 2.03(a). "GAAP" means United States generally accepted accounting principles. "Governmental Entity" has the meaning set forth in Section 3.08. "Hazardous Substances" means any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable corrosive, reactive or otherwise hazardous substance, waste or material or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics including petroleum, its derivatives, by-products and other hydrocarbons, and any substance, waste or material regulated under any Environmental Law. "including" shall always be read as "including without limitation." "Intellectual Property" means all trademarks, service marks, trade names, logos, domain names, computer software, mask work, invention, patent, trade secret, copyright, Internet, technology, processes, inventions, proprietary data, formulae, research and development data, computer software programs, know-how (including any registrations or applications for registration of any of the foregoing) or any other similar type of proprietary intellectual property right, in each case, that are used in the conduct of the Business. "Inventory" means all of Sellers' inventory held for resale and all of Sellers' raw materials, work in process, finished products, wrapping, supply and packaging items and similar items with respect to the Business, in each case wherever the same may be located. "IP License Agreements" has the meaning set forth in Section 3.07(b). "knowledge" or known means, with respect to Sellers, the actual knowledge, after reasonable investigation of any executive officers. "Leased Properties" has the meaning set forth in Section 3.04(d). "Leases" means the Sellers' material real property leases to which the Sellers are a party related to the operation of the Business. "Lien" has the meaning set forth in Section 3.04(a). "mass layoff" has the meaning set forth in Section 3.21(b). 40 "Material Adverse Effect" means any event, condition or matter in respect of the operation of the Business, the Acquired Assets and the Assumed Liabilities that in the aggregate will result in or have a material adverse effect on the Acquired Assets, the Assumed Liabilities, or the ability of Purchaser to operate the Business after the Closing. "Material Contracts" has the meaning set forth in Section 3.06(a). "Measurement Date" means December 31, 2001. "Monthly Reports" has the meaning set forth in Section 3.20. "Non-Retained Employees" has the meaning set forth in Section 5.05(c). "Operating Reports" has the meaning set forth in Section 3.20. "Ordinary Course Receivables" has the meaning set forth in Section 2.03(a). "Permits" means any permit, license or authorization issued, granted or given or otherwise made available by any Governmental Entity. "Permitted Exceptions" means imperfections of title, restrictions or encumbrances, if any, that (a) cannot be released or cured under the Bankruptcy Code pursuant to a sale of assets under Sections 363 or 365 of the Bankruptcy Code and that either (i) would not involve material costs to correct or remove or (ii) do not materially impair the use and operation of such asset in the Business as currently conducted or (b) are caused solely by Purchaser. "Person" means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Petition Date" has the meaning set forth in the Recitals. "Plan" has the meaning set forth in the Recitals. "plant closing" has the meaning set forth in Section 3.21(b). "Post-Closing Tax Period" means any tax period beginning after the Measurement Date and that portion of a Straddle Period beginning after the Measurement Date. "Pre-Closing Tax Period" means any tax period ending on or before the Measurement Date and the portion of any Straddle Period ending on the Measurement Date. "Prepaids" has the meaning set forth in Section 1.01(a)(vi). "Principal Clients" has the meaning set forth in Section 3.17. 41 "Purchase Price" has the meaning set forth in Section 1.06(a). "Purchaser" has the meaning set forth in the Preamble. "Purchaser's Health Plans" has the meaning set forth in Section 5.05(e). "Real Property" has the meaning set forth in Section 3.04(b). "Receivables" has the meaning set forth in Section 1.01(a)(ii). "Representative" has the meaning set forth in Section 5.18(b)(iii) "Retention Bonuses" has the meaning set forth in Section 1.05(b). "Sarasota Property" has the meaning set forth in Section 5.19. "Schedule Approval Time" has the meaning set forth in Section 1.01(a). "SEC" has the meaning set forth in Section 1.05(f). "Sellers" has the meaning set forth in the Preamble. "Straddle Period" means any taxable period beginning before and ending after the Measurement Date. "Supplier" has the meaning set forth in Section 3.17. "Tax" or "Taxes" means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "Transferred Employees" has the meaning set forth in Section 5.05(c)(ii). "Transition Account" has the meaning set forth in Section 5.18(b)(ii). "Transition Budget" has the meaning set forth in Section 5.18(b)(i). "Transition Period" has the meaning set forth in Section 5.18(a). "Transition Operation Expenses" has the meaning set forth in Section 5.18(d). 42 "WARN Act" means the Worker Adjustment and Retraining Notification Act of 1988. "Warranties" has the meaning set forth in Section 2.03(a). ARTICLE 10. TAX MATTERS SECTION 10.01 Transfer Taxes. The responsibility for paying all transfer, documentary, sales, use, registration, value-added and other similar Taxes (including all applicable real estate transfer Taxes) and related fees (including any penalties, interest and additions to Taxes) (collectively, "Transfer Taxes") incurred in connection with this Agreement and the transactions contemplated hereby will be borne by the Sellers. SECTION 10.02 Allocation of Taxes Among Acquired Assets. (a) The Purchaser and the Sellers agree to furnish or cause to be furnished to the other, upon request, as promptly as practicable, such information and assistance relating to the Acquired Assets, including, without limitation, access to books and records, as is reasonably necessary for the filing of all Tax Returns by the Purchaser or the Sellers, the making of any election relating to Taxes, the preparation for any audit by any taxing authority, and the prosecution or defense of any claim, suit or proceeding relating to any Tax. Each of the Purchaser and the Sellers shall retain all books and records with respect to Taxes pertaining to the Acquired Assets for a period of at least six years following the Closing Date. At the end of such period, each party shall provide the other with at least 10 days prior written notice before transferring, destroying or discarding any such books and records, during which period the party receiving such notice can elect to take possession, at its own expense, of such books and records. The Purchaser and the Sellers shall cooperate fully with each other in the conduct of any audit, litigation or other proceeding relating to Taxes involving the Acquired Assets. The Purchaser and the Sellers further agree, upon request, to use their best efforts to obtain any certificate or other document from any governmental authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not limited to, with respect to the transactions contemplated hereby). (b) To the extent not allocated in this Agreement, the Sellers shall be responsible for and shall promptly pay when due all Taxes levied with respect to the Acquired Assets attributable to the Pre-Closing Period. All such Taxes levied with respect to the Acquired Assets for the Straddle Period (collectively, the "Apportioned Obligations") shall be apportioned between the Purchaser and the Sellers based on the number of days of such taxable period included in the Pre-Closing Period and the number of days of such taxable period included in the Post-Closing Tax Period. The Sellers shall be liable for the proportionate amount of such Taxes attributable to the Acquired Assets that is attributable to the Pre-Closing Tax Period, and the Purchaser shall be liable for the proportionate amount of such Taxes that is attributable to the Post-Closing Tax Period. Upon receipt of any bill for such Taxes relating to the Acquired Assets, the Purchaser and the Sellers shall present a statement to the other setting forth the amount of 43 reimbursement to which each is entitled under this Section 10.02 together with such supporting evidence as is reasonably necessary to calculate the proration amount. The proration amount shall be paid by the party owing it to the other within fifteen (15) days after delivery of such statement. In the event that the Purchaser or the Sellers shall make any payment for which it is entitled to reimbursement under this Section 10.02, the applicable party shall make such reimbursement promptly but in no event later than fifteen (15) days after the presentation of a statement setting forth the amount of reimbursement to which the presenting party is entitled along with such supporting evidence as is reasonably necessary to calculate the amount of reimbursement. Notwithstanding the foregoing, the Purchaser shall not be liable for (i) any Taxes of the Sellers levied with respect to the Acquired Assets attributable to periods (or portions of periods) ending on or before the Measurement Date, or (ii) any other Taxes of the Sellers for any periods. SECTION 10.03 Withholding Exemption. The Sellers shall deliver to the Purchaser at the Closing all necessary forms and certificates complying with applicable law, duly executed and acknowledged, certifying that the transactions contemplated hereby are exempt from withholding under Section 1445 of the Code. [Remainder of page intentionally blank; next page is signature page] 44 IN WITNESS WHEREOF, the Sellers, Applicon and the Purchaser have caused this Agreement to be executed on their behalf by their officers thereunto duly authorized, as of the date first above written. ELCOTEL ACQUISITION CORPORATION, a Delaware corporation By: ________________________________________ Name: ______________________________________ Title: _____________________________________ APPLICON, INC., a Delaware corporation By: ________________________________________ Name: ______________________________________ Title: _____________________________________ ELCOTEL, INC., a Delaware corporation By: ________________________________________ Name: ______________________________________ Title: _____________________________________ ELCOTEL DIRECT, INC., a Delaware corporation By: ________________________________________ Name: ______________________________________ Title: _____________________________________ TECHNOLOGY SERVICE GROUP, INC., a Delaware corporation By: ________________________________________ Name: ______________________________________ Title: _____________________________________ INTERNATIONAL SERVICE TECHNOLOGIES, INC., a Delaware corporation By: ________________________________________ Name: ______________________________________ Title: _____________________________________ S-1 EXHIBIT A BILL OF SALE EXHIBIT B CONSENT OF BANK OF AMERICA, N.A. -----END PRIVACY-ENHANCED MESSAGE-----