Applied Innovation to be Acquired by KEG Holdings, Inc.


DUBLIN, Ohio and HILLSBORO, Oregon, Feb. 23 / -- Applied Innovation Inc. (NASDAQ:AINN), a leading provider of network management solutions for the communications industry, today announced that it has signed a definitive agreement with KEG Holdings, Inc. (KEG), the parent company of Kentrox, LLC (Kentrox), a supplier of high-speed network access equipment. Pursuant to the agreement, KEG will acquire all of the outstanding shares of Applied Innovation for $3.45 per share in cash. Upon completion of this transaction, Investcorp Technology Partners, a current investor in KEG, will own a controlling interest in the combined company.

The Boards of Directors of both Applied Innovation and KEG have approved the proposed transaction. In addition, Gerard B. Moersdorf, the founder and a director of Applied Innovation, who beneficially has voting rights for approximately 37% of Applied Innovation's outstanding shares of common stock, has signed a voting agreement in favor of the proposed transaction.

As described in the acquisition agreement to be filed by Applied Innovation with the Securities and Exchange Commission (SEC), the final purchase price is subject to a downward or upward closing adjustment based on Applied Innovation's net working capital at closing. The transaction also is subject to the approval of Applied Innovation's stockholders and other customary closing conditions. It currently is anticipated that the transaction will close on or before the end of Applied Innovation's second quarter.

"In today's business environment, and especially in our industry, scale is becoming more critical in order to continue to bring technologically competitive and cost-competitive products to the marketplace," said William H. Largent, President and Chief Executive Officer of Applied Innovation. "By bringing together the technical and service capabilities of Applied Innovation and Kentrox, our telecommunications customers will have expanded access to more advanced products."

"We are excited about the combination of Applied Innovation and Kentrox, which will clearly help us achieve our strategic vision faster, while greatly expanding our offering to our valued customers," said Jeff Estuesta, KEG's President and Chief Executive Officer. "We also look forward to welcoming Applied Innovation's employees to the Kentrox family."

"We believe our continued investment in KEG Holdings will allow the combination of Kentrox and Applied Innovation to continue to innovate, create new products and achieve their growth plans," said Anand Radhakrishnan of Investcorp Technology Partners.

Raymond James & Associates, Inc. has acted as financial advisor to Applied Innovation in connection with the transaction, and has rendered a fairness opinion to its Board of Directors.

About Applied Innovation

Applied Innovation provides hardware and software applications that drive operational efficiency and improve quality in wireless, wireline and converging networks. Applied Innovation's industry-leading solutions include sophisticated remote site management, 3G network data quality monitoring and logical security of critical networks. Applied Innovation is a certified TL 9000 registered company with solutions currently installed in more than 34,000 sites worldwide.

Headquartered in Dublin, Ohio, Applied is traded on NASDAQ under the symbol AINN. For more information, please visit the Company's Web site at www.appliedinnovation.com/.

About Kentrox

Kentrox is a leading supplier of high-speed network access equipment, including the recently-introduced and award-winning QoS appliance, Q-Series QoS access routers, DSU/CSUs, ATM access concentrators and wireless base station products. Its extensive customer base includes enterprises and small- to-medium offices, carriers, wireless service providers and government entities worldwide. Kentrox is based in Hillsboro, Oregon. Contact the company at 800-733-5511 or via the Web at www.kentrox.com.

About Investcorp Technology Partners

Investcorp Technology Partners is a leading growth and buyout investor in small and medium-sized technology businesses in North America and Europe. The team focuses on growth capital, buyout, corporate carveout and take-private transactions, generally investing between $15 million and $40 million of equity. Investcorp Technology Partners is part of Investcorp, a leading provider and manager of alternative investment products with over $10 billion in invested assets under management. Further information is available at www.investcorp.com.

Source: Applied Innovation Inc.

CONTACT:
Julia A. Fratianne, Vice President and Chief Financial Officer of Applied Innovation Inc., +1-614-798-2000,
or Gregory Iverson of Kentrox, +1-503-350-6305, or Greg_Iverson@kentrox.com,
or Todd Fogarty of Kekst and Company, +1-212-521-4800, or todd-fogarty@kekst.com, for Investcorp Technology Partners

Web site:
http://www.appliedinnovation.com/
http://www.kentrox.com/ www.investcorp.com/

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