LUCENT TECHNOLOGIES INC, S-4, 1999-09-24

LUCENT TECHNOLOGIES INC
S-4, 1999-09-24
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

Previous: ENGINEERING ANIMATION INC, S-8, 1999-09-24

Next: WORKGROUP TECHNOLOGY CORP, DEF 14A, 1999-09-24

<PAGE> 1
================================================================================

As filed with the Securities and Exchange Commission on September 24, 1999

Registration No.

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

----------------------

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------------------

LUCENT TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 3661 22-3408857
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

----------------------

600 MOUNTAIN AVENUE
MURRAY HILL, NEW JERSEY 07974
(908) 582-8500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

PAMELA F. CRAVEN
VICE PRESIDENT - LAW AND SECRETARY
LUCENT TECHNOLOGIES INC.
600 MOUNTAIN AVENUE
MURRAY HILL, NEW JERSEY 07974
(908) 582-8500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

----------------------
Copies to:

MICHAEL J. HOLLIDAY PAUL P. BROUNTAS
LUCENT TECHNOLOGIES INC. JAMES R. BURKE
600 MOUNTAIN AVENUE HALE AND DORR LLP
MURRAY HILL, NEW JERSEY 07974 60 STATE STREET
(908) 582-8500 BOSTON, MA 02109
(617) 526-6000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Upon
consummation of the merger referred to herein.

If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. [ ]

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Proposed Maximum Proposed Maximum
Title of each class of securities Amount to be Offering Price Per Aggregate Offering Amount of
to be registered Registered(1) Share Price(2) Registration Fee
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value per 3,928,471 shares Not Applicable $767,765 $214.00
share, and related preferred
stock purchase rights (3)
===================================================================================================================================
</TABLE>
<PAGE> 2
(1) Based on the maximum number of shares to be issued in connection with the
merger, calculated as the product of (a) (i) the 4,607,356 shares of Xedia
common stock, par value $0.005 per share, outstanding on September 21, 1999
(other than shares owned by Xylophone Acquisition Inc., a wholly owned
subsidiary of the registrant, or the registrant or any of its
subsidiaries), (ii) 57,600 shares of Xedia Series A convertible preferred
stock, 165,000 shares of Series B convertible preferred stock, 240,000
shares of Series C convertible preferred stock, 2,127,867 shares of Series
D convertible preferred stock and 3,414,288 shares of Series E convertible
preferred stock, par value $0.01 per share, outstanding on September 21,
1999 (other than shares owned by Xylophone Acquisition Inc., or the
registrant or any of its subsidiaries), (iii) 4,634,452 shares of Xedia
common stock issuable pursuant to outstanding options and warrants prior to
the date the merger is expected to be consummated, and (iv) 51,432 shares
of Xedia Series E convertible preferred stock issuable pursuant to
outstanding warrants prior to the date the merger is expected to be
consummated, and (b) an exchange ratio of 0.216997 shares of the
registrant's common stock for each share of Xedia common stock, 0.433994
shares of the registrant's common stock for each share of Xedia Series A
convertible preferred stock, 0.433994 shares of the registrant's common
stock for each share of Xedia Series B convertible preferred stock,
0.647694 shares of the registrant's common stock for each share of Xedia
Series C convertible preferred stock, 0.433994 shares of the registrant's
common stock for each share of Xedia Series D convertible preferred stock,
and 0.216997 shares of the registrant's common stock for each share of
Xedia Series E convertible preferred stock, respectively.

(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act, and calculated pursuant to
Rule 457(f) under the Securities Act. Pursuant to Rule 457(f)(2) under the
Securities Act, the proposed maximum aggregate offering price of the
registrant's common stock was calculated in accordance with Rule 457(f)(2)
under the Securities Act as: $767,765, the book value of the shares of
Xedia stock computed as of the latest practicable date prior to the date of
filing this registration statement.

(3) No separate consideration will be received for the rights, which initially
will trade together with the common stock.

-----------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 3
XEDIA CORPORATION
50 NAGOG PARK
ACTON, MA 01720

OCTOBER , 1999

Dear Stockholder:

You are cordially invited to attend our special meeting of stockholders
on , 1999, at a.m., local time, at the offices of Hale and Dorr LLP, 60
State Street, Boston, Massachusetts.

At the special meeting, we will ask you to vote on:

- the merger of Xedia and Lucent Technologies Inc.

- an amendment to the certificate of incorporation of Xedia to
provide that a consolidation or merger of Xedia with or into
another corporation or entity in a transaction involving the
disposition of more than 50% of the voting power of Xedia, or a
sale of all or substantially all the assets of Xedia, shall not be
deemed to be a liquidation, dissolution or winding up of Xedia, and

- an amendment to Xedia's 1993 stock option plan.

In the merger, you will receive:

- 0.216997 of a share of Lucent common stock for each share of Xedia
common stock that you own

- 0.433994 of a share of Lucent common stock for each share of Xedia
Series A convertible preferred stock that you own

- 0.433994 of a share of Lucent common stock for each share of Xedia
Series B convertible preferred stock that you own

- 0.647694 of a share of Lucent common stock for each share of Xedia
Series C convertible preferred stock that you own

- 0.433994 of a share of Lucent common stock for each share of Xedia
Series D convertible preferred stock that you own, and

- 0.216997 of a share of Lucent common stock for each share of Xedia
Series E convertible preferred stock that you own.

Approximately 10% of the Lucent common stock that you would otherwise be
entitled to receive will be deposited in an escrow account and may be used to
compensate Lucent in the event that it is entitled to indemnification under the
merger agreement. To the extent that some or all of the escrowed shares are not
required to indemnify or potentially indemnify Lucent, the escrowed shares will
be distributed as soon as practicable following the first anniversary of the
consummation of the merger. Lucent common stock is listed on the New York Stock
Exchange under the trading symbol "LU" and on , 1999, Lucent common stock
closed at $ per share. You will receive cash for any fractional share of
Lucent common stock which you would otherwise receive in the merger.
<PAGE> 4
We cannot complete the merger unless:

- the merger agreement is approved by

(1) holders of a majority of the outstanding shares of Xedia
common stock and convertible preferred stock voting together
as a single class

(3) at least two of the following three holders of Series D
convertible preferred stock: Greylock Equity Limited
Partnership, J.P.M. International and D.R.L. Jones.

- the amendment to Xedia's certificate of incorporation is approved
by

(1) holders of a majority of the outstanding shares of Xedia
common stock and convertible preferred stock voting together
as a single class

(2) holders of a majority of the outstanding shares of Xedia
convertible preferred stock, voting together as a single
class, and

(3) holders of a majority of the outstanding shares of each of
the Series C convertible preferred stock, Series D
convertible preferred stock and Series E convertible
preferred stock, each voting as a separate class.

Holders of Xedia stock who properly preserve their rights are entitled to an
appraisal under Delaware law if the merger is completed.

On August 12, 1999, each of D.R.L. Jones, Greylock Equity Limited
Partnership, Greylock IX Limited Partnership, J.P.M. International, Robert
Polychron, Norwest Venture Partners VI, L.P. and Nortel Networks NA Inc.
entered into a voting agreement with Lucent, Xylophone Acquisition Inc. and
Xedia, pursuant to which they have agreed to vote the Xedia stock they own
"for" approval of the merger agreement. Each of these persons or entities has
also granted an irrevocable proxy and a power of attorney to Lucent
representatives to vote its shares of Xedia stock "for" approval of the merger
agreement and "for" approval of the amendment to the certificate of
incorporation. On the record date, these stockholders aggregately owned and
were entitled to vote (1) 75.1% of the outstanding shares of Xedia common stock
and convertible preferred stock, voting together as a single class and (2) 100
% of the Series C convertible preferred stock, 97.1% of the Series D
convertible preferred stock and 75.3% of the Series E convertible preferred
stock, each voting as a separate class.

You are also being asked to approve an amendment to Xedia's 1993 stock
option plan, increasing the number of shares of Xedia common stock authorized
for issuance under the plan from 4,700,000 to 5,950,000 shares. The amendment
requires the approval of the holders of a majority of the shares of Xedia
common stock and preferred stock, voting together as a single class, present or
represented by proxy at the special meeting and voting to approve the
amendment. No additional stock options will be issued in connection with the
amendment to Xedia's 1993 stock option plan, except for the grant of stock
options to acquire up to 100,000
<PAGE> 5
shares of Xedia common stock which may be granted to Xedia employees hired
after August 12, 1999 in accordance with the merger agreement. Approval of the
amendment to Xedia's 1993 stock option plan is not a condition to the merger.

Only stockholders who hold shares of Xedia stock at the close of business
on , 1999 will be entitled to vote at the special meeting.

YOU SHOULD CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS" COMMENCING
ON PAGE 17 OF THE ENCLOSED PROXY STATEMENT/PROSPECTUS BEFORE VOTING. PLEASE
REVIEW CAREFULLY THE ENTIRE PROXY STATEMENT/PROSPECTUS.

AFTER CAREFUL CONSIDERATION, XEDIA'S BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT, HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS
FAIR TO YOU AND IN YOUR BEST INTERESTS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR THE APPROVAL OF THE MERGER AGREEMENT. THE BOARD OF DIRECTORS ALSO
UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO APPROVE AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION OF XEDIA TO PROVIDE THAT A CONSOLIDATION OR MERGER OF XEDIA
WITH OR INTO ANOTHER CORPORATION OR ENTITY IN A TRANSACTION INVOLVING THE
DISPOSITION OF MORE THAN 50% OF THE VOTING POWER OF XEDIA, OR A SALE OF ALL OR
SUBSTANTIALLY ALL THE ASSETS OF XEDIA, SHALL NOT BE DEEMED TO BE A LIQUIDATION,
DISSOLUTION OR WINDING UP OF XEDIA. THE BOARD OF DIRECTORS ALSO UNANIMOUSLY
RECOMMENDS THAT YOU VOTE TO APPROVE AN AMENDMENT TO XEDIA'S 1993 STOCK OPTION
PLAN INCREASING THE NUMBER OF SHARES OF XEDIA COMMON STOCK AUTHORIZED FOR
ISSUANCE FROM 4,700,000 TO 5,950,000.

Thank you for your cooperation.

Sincerely,

-------------------------------------------
President

YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE MERGER DESCRIBED IN THE PROXY
STATEMENT/PROSPECTUS OR THE LUCENT COMMON STOCK TO BE ISSUED IN CONNECTION WITH
THE MERGER, OR DETERMINED IF THE PROXY STATEMENT/PROSPECTUS IS ACCURATE OR
ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE PROXY STATEMENT/PROSPECTUS IS DATED OCTOBER , 1999,
AND IS FIRST BEING MAILED TO STOCKHOLDERS ON OR ABOUT OCTOBER , 1999.
<PAGE> 6
REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates important business and financial
information about Lucent from documents that are not included in or delivered
with this proxy statement/prospectus. This information is available to you
without charge upon your written or oral request. You can obtain documents
incorporated by reference in this proxy statement/prospectus by requesting them
in writing or by telephone from Lucent at the following address and telephone
number:

Lucent Technologies Inc.
c/o The Bank of New York
Church Street Station
P.O. Box 1100
New York, New York 10286-1009
Telephone: 1-888-LUCENT6

If you would like to request documents, please do so by , 1999 in order
to receive them before the Xedia special meeting.

See "Where You Can Find More Information" (page 94).
<PAGE> 7
XEDIA CORPORATION

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1999

To the Stockholders of Xedia Corporation:

We will hold a special meeting of the stockholders of Xedia Corporation
on , 1999, at a.m., local time, at the offices of Hale and Dorr LLP, 60
State Street, Boston, Massachusetts.

(1) To consider and vote upon a proposal to approve the merger agreement
among Lucent Technologies Inc., Xylophone Acquisition Inc., a wholly-owned
subsidiary of Lucent, and Xedia. Under the merger agreement, each outstanding
share of Xedia stock will be converted into the right to receive (1) in the
case of each share of common stock, 0.216997, (2) in the case of each share of
Series A convertible preferred stock, 0.433994, (3) in the case of each share
of Series B convertible preferred stock, 0.433994, (4) in the case of each
share of Series C convertible preferred stock, 0.647694, (5) in the case of
each share of Series D convertible preferred stock, 0.433994, and (6) in the
case of each share of Series E convertible preferred stock, 0.216997, of a
share of Lucent common stock.

(2) To consider and vote upon a proposal to approve an amendment to the
certificate of incorporation of Xedia to provide that a consolidation or merger
of Xedia with or into another corporation or entity in a transaction involving
the disposition of more than 50% of the voting power of Xedia, or a sale of all
or substantially all the assets of Xedia, shall not be deemed to be a
liquidation, dissolution or winding up of Xedia.

(3) To consider and vote upon a proposal to approve an amendment to Xedia's
1993 stock option plan increasing the number of shares of Xedia common stock
authorized for issuance from 4,700,000 to 5,950,000.

We will transact no other business at the special meeting.

Only holders of record of shares of Xedia stock at the close of business
on , 1999, the record date for the special meeting, are entitled to notice
of, and to vote at, the special meeting and any adjournment or postponement of
it.

We cannot complete the merger unless:

- the merger agreement is approved by

(1) holders of a majority of the outstanding shares of Xedia
common stock and convertible preferred stock voting together
as a single class

(2) holders of a majority of the outstanding shares of each of
the Series C convertible preferred stock, Series D
convertible preferred stock and Series E convertible
preferred stock, each voting as a separate class, and
<PAGE> 8
(3) at least two of the following three holders of Series D
convertible preferred stock: Greylock Equity Limited
Partnership, J.P.M. International and D.R.L. Jones

- the amendment to Xedia's certificate of incorporation is approved
by

(1) holders of a majority of the outstanding shares of Xedia
common stock and convertible preferred stock voting together
as a single class

(2) holders of a majority of the outstanding shares of Xedia
convertible preferred stock, voting together as a single
class, and

Holders of Xedia stock who properly preserve their rights to an appraisal are
entitled to an appraisal of their shares under Delaware law.

You are also being asked to approve an amendment to Xedia's 1993 stock
option plan, increasing the number of shares of Xedia common stock authorized
for issuance under the plan from 4,700,000 to 5,950,000 shares. The amendment
requires the approval of the holders of a majority of the shares of Xedia
common stock and preferred stock, voting together as a single class, present or
represented by proxy at the special meeting and voting to approve the
amendment. No additional stock options will be issued in connection with the
amendment to Xedia's 1993 stock option plan, except for the grant of stock
options to acquire up to 100,000 shares of Xedia common stock which may be
granted to Xedia employees hired after August 12, 1999 in accordance with the
merger agreement. Approval of the amendment to Xedia's 1993 stock option plan
is not a condition to the merger.

FOR MORE INFORMATION ABOUT THE MERGER AND THE AMENDMENT TO XEDIA'S
CERTIFICATE OF INCORPORATION AND THE AMENDMENT TO XEDIA'S 1993 STOCK OPTION
PLAN, PLEASE REVIEW THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS, THE MERGER
AGREEMENT ATTACHED AS ANNEX A AND THE PROPOSED AMENDMENT TO XEDIA'S CERTIFICATE
OF INCORPORATION ATTACHED AS ANNEX B.

Whether or not you plan to attend the special meeting, please complete,
sign and date the enclosed proxy and return it promptly in the enclosed
postage-paid envelope. You may vote in person at the special meeting, even if
you have returned a proxy. If you do not vote by proxy or in person at the
special meeting, it will count as a vote against the merger agreement.

Please do not send any stock certificates at this time.

By Order of the Board of Directors,

-----------------------------------
Chairman
- -------------------------------

ACTON, MASSACHUSETTS
, 1999
<PAGE> 9

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Selected Historical Financial Data -- Lucent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Selected Historical Financial Data -- Xedia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Risk Factors Relating to the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Risk Factors Relating To Xedia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

THE COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Xedia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Lucent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Material Contracts between Lucent and Xedia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Date, Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Purpose of Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Record Date; Stock Entitled to Vote; Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Votes Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Voting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Voting of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Revocability of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Dissenters' Rights to Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Background to the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Reasons for the Merger and Board of Directors Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Opinion of Morgan Stanley & Co. Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Interests of Xedia Directors and Management in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Form of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Conversion of Shares and Warrants; Procedures for Exchange of Certificates and
Warrants; Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
<PAGE> 10
<TABLE>
<S> <C>
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Stock Exchange Listing of Lucent Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
United States Federal Income Tax Consequences of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Rights of Stockholders to Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Appraisal Rights Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Effect on Awards Outstanding Under Xedia Stock Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Resale of Lucent Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Conditions to the Completion of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
No Other Negotiations Involving Xedia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Amendment; Extension and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Amendments to Xedia's Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Amendments to the Xedia By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Working Capital Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Indemnification and Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

AMENDMENT TO XEDIA'S CERTIFICATE OF INCORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Proposed Amendment to Xedia's Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Purpose and Effect of the Proposed Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

AMENDMENT TO XEDIA'S 1993 STOCK OPTION PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Summary of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

STOCK PRICES AND DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

DESCRIPTION OF LUCENT CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS
OF LUCENT AND STOCKHOLDERS OF XEDIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Number, Election, Vacancy and Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Amendments to Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Amendments to By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Stockholder Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Notice of Certain Stockholder Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
<PAGE> 11
<TABLE>
<S> <C>
Special Stockholder Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Limitation of Personal Liability of Directors and Indemnification . . . . . . . . . . . . . . . . . . . . . . . 76
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Appraisal or Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

CERTAIN INFORMATION CONCERNING XEDIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Security Ownership of Directors, Executive Officers and
Principal Stockholders of Xedia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

WHERE YOU CAN FIND MORE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

INDEX TO XEDIA CORPORATION FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>

Annexes

Annex A Agreement and Plan of Merger

Annex B Proposed Amendment to the Certificate of Incorporation
of Xedia

Annex C Section 262 of the Delaware General Corporation Law

Annex D Opinion of Morgan Stanley & Co. Incorporated

Annex E Form of Voting Agreement
<PAGE> 12
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

Q: WHY IS XEDIA MERGING?

A: This is a unique opportunity for Xedia to join and become part of Lucent,
one of the world's leading designers, developers and manufacturers of
communications systems, software and products, and for Xedia stockholders
to become Lucent stockholders.

Q: WHY IS XEDIA'S CERTIFICATE OF INCORPORATION BEING AMENDED?

A: It is a condition to the merger that the certificate of incorporation of
Xedia be amended to provide that a consolidation or merger of Xedia with
or into another corporation or entity in a transaction involving the
disposition of more than 50% of the voting power of Xedia, or a sale of
all or substantially all the assets of Xedia, shall not be deemed to be a
liquidation, dissolution or winding up of Xedia.

Q: WHY IS XEDIA'S 1993 STOCK OPTION PLAN BEING AMENDED?

A. The plan is being amended to increase the number of shares of Xedia
common stock authorized for issuance under the plan from 4,700,000 to
5,950,000. The Xedia board of directors approved the amendment to the
plan subject to stockholder approval and subsequently authorized stock
option grants for the purchase in excess of the previously reserved
4,700,000 shares under the plan. Xedia's board of directors adopted the
plan amendment to provide additional equity to satisfy Xedia's incentive
compensation needs, as it believes that grants of stock options have been
an important element in attracting and retaining key employees who are
expected to contribute to Xedia's growth and success.

No additional stock options will be issued in connection with the
amendment to Xedia's 1993 stock option plan, except for the grant of
stock options to acquire up to 100,000 shares of Xedia common stock which
may be granted to Xedia employees hired after August 12, 1999 in
accordance with the merger agreement.

Q: WHAT WILL I RECEIVE IN THE MERGER?

A: If the merger is completed, you will receive:

- 0.216997 of a share of Lucent common stock for each share of Xedia
common stock that you own

- 0.433994 of a share of Lucent common stock for each share of Xedia
Series A convertible preferred stock that you own

- 0.433994 of a share of Lucent common stock for each share of Xedia
Series B convertible preferred stock that you own

- 0.647694 of a share of Lucent common stock for each share of Xedia
Series C convertible preferred stock that you own

i
<PAGE> 13
- 0.433994 of a share of Lucent common stock for each share of Xedia
Series D convertible preferred stock that you own, and

- 0.216997 of a share of Lucent common stock for each share of Xedia
Series E convertible preferred stock that you own.

Approximately 10% of the shares of Lucent common stock that you would
otherwise be entitled to receive will be deposited in an escrow account
and may be used to compensate Lucent in the event that it is entitled to
indemnification under the merger agreement.

Q: WHAT IS THE ESCROW FUND AND HOW DOES IT WORK?

A: If the merger is completed, Lucent will deposit 291,620 shares of Lucent
common stock into an escrow account. The escrowed shares will be
available to compensate Lucent in the event that it is entitled to
indemnification from the Xedia stockholders under the merger agreement.
To the extent that some or all the escrowed shares are not required to
indemnify or potentially indemnify Lucent, the escrowed shares will be
distributed to Xedia stockholders as soon as practicable following the
first anniversary of the consummation of the merger.

Q: WHY IS THE BOARD OF DIRECTORS RECOMMENDING THAT I VOTE FOR THE MERGER
AGREEMENT AND THE AMENDMENT TO XEDIA'S CERTIFICATE OF INCORPORATION?

A: After considering the support for the merger from its independent
directors and the other reasons set forth on pages 31-41, including the
opinion of its financial advisor, Morgan Stanley & Co. Incorporated, your
board of directors unanimously believes that the terms of the merger
agreement are fair to and in the best interests of Xedia and its
stockholders. Your board of directors also unanimously recommends that
you vote to approve the amendment to Xedia's certificate of incorporation
so that the merger can be consummated.

Q: WHAT IF THE MERGER IS NOT COMPLETED?

A: It is possible the merger will not be completed. That might happen if,
for example, Xedia stockholders do not approve the merger agreement.
Should that occur, none of Lucent, Xedia or any third party is under any
obligation to make or consider any alternative proposals regarding the
purchase of your shares of Xedia common stock.

Q: WHAT DO I NEED TO DO NOW?

A: After carefully reading and considering the information contained in this
proxy statement/prospectus, please complete and sign your proxy and
return it in the enclosed return envelope as soon as possible so that
your shares may be represented at the special meeting. If you sign and
send in your proxy and do not indicate how you want to vote, we will
count your proxy as a vote in favor of approval of the merger agreement,
in favor of the amendment to Xedia's certificate of incorporation and in
favor of the amendment to Xedia's 1993 stock option plan. IF YOU ABSTAIN
FROM VOTING OR DO NOT VOTE ON APPROVAL

ii
<PAGE> 14
OF THE MERGER AGREEMENT OR THE AMENDMENT TO XEDIA'S CERTIFICATE OF
INCORPORATION, YOUR ABSTENTION OR FAILURE TO VOTE WILL HAVE THE SAME
EFFECT AS A VOTE AGAINST THE APPLICABLE PROPOSAL. IF YOU ABSTAIN FROM
VOTING OR DO NOT VOTE ON THE AMENDMENT TO XEDIA'S 1993 STOCK OPTION PLAN,
IT WILL HAVE NO EFFECT ON THE VOTE.

The special meeting will take place on , , 1999. You may attend the
special meeting and vote your shares in person, rather than signing and
mailing your proxy.

Q: WHO MAY VOTE AT THE SPECIAL MEETING?

A: All stockholders of record as of the close of business on , 1999 may
vote. You are entitled to one vote per share of Xedia common stock that
you own on the record date, and the number of votes equal to the number
of whole shares of Xedia common stock into which each share of preferred
stock that you own is convertible on the record date. On the record date,
each share of Xedia Series A, Series B, Series C, Series D and Series E
convertible preferred stock was convertible into 2.0000, 2.0000, 2.9848,
2.0000 and 1.0000 shares of Xedia common stock, respectively.

Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?

A: Yes. If you hold your shares in your own name, you can do this in one of
three ways. First, you can send a written notice stating that you would
like to revoke your proxy. Second, you can complete and submit a new
proxy. If you choose either of these two methods, you must submit your
notice of revocation or your new proxy to the Secretary of Xedia at the
address set forth in the answer to the last question below. Third, you
can attend the special meeting and vote in person.

Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?

A: No. After the merger is completed, you will receive written instructions
for exchanging your stock certificates. Please do not send in your stock
certificates with your proxy.

Q: WHEN AND WHERE IS THE SPECIAL MEETING?

A: The special meeting will be held at a.m., local time, on 1999 at
the offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts.

Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?

A: We are working to complete the merger as quickly as possible. We expect
to complete the merger during the fourth calendar quarter of 1999.

iii
<PAGE> 15
Q: WHAT ELSE WILL HAPPEN AT THE MEETING?

A: We know of no other matters which are expected to come before the special
meeting.

Q: WHAT RIGHTS DO I HAVE IF I OPPOSE THE MERGER?

A: You may dissent from the merger and seek appraisal of the fair value of
your shares by complying with all the Delaware law procedures explained
on pages 27 to 28 and in Annex C.

Q: WHO CAN HELP ANSWER MY QUESTIONS?

A: If you have any questions about the merger or if you need additional
copies of this proxy statement/prospectus or the enclosed proxy, you
should contact:

Xedia Corporation
Attention: President
50 Nagog Park
Acton, Massachusetts 01720
Telephone: (978) 263-0060

iv
<PAGE> 16
A: If you have any questions about the merger or if you need additional
copies of this proxy statement/prospectus or the enclosed proxy, you
should contact:

Xedia Corporation
Attention: President
50 Nagog Park
Acton, Massachusetts 01720
Telephone: (978) 263-0060

v
<PAGE> 17
SUMMARY

This summary highlights selected information from this proxy
statement/prospectus and does not contain all the information that is important
to you. For a more complete understanding of the merger, you should carefully
read this entire proxy statement/prospectus and the other documents to which we
refer you. In particular, you should read the documents attached to this proxy
statement/prospectus, including the merger agreement which is attached as Annex
A, the proposed amendment to Xedia's certificate of incorporation, which is
attached as Annex B, your appraisal rights under Delaware law, which are
attached as Annex C and the opinion of Morgan Stanley & Co. Incorporated which
is attached as Annex D. Also, see "Where You Can Find More Information" on
page 94. We have included page references parenthetically to direct you to a
more complete description of the topics presented in this summary.

GENERAL

WHAT YOU WILL RECEIVE IN THE MERGER (PAGE 44)

In the merger, you will receive:

- 0.216997 of a share of Lucent common stock for each share of Xedia
common stock that you own

- 0.433994 of a share of Lucent common stock for each share of Xedia
Series A convertible preferred stock that you own

- 0.433994 of a share of Lucent common stock for each share of Xedia
Series B convertible preferred stock that you own

- 0.647694 of a share of Lucent common stock for each share of Xedia
Series C convertible preferred stock that you own

- 0.433994 of a share of Lucent common stock for each share of Xedia
Series D convertible preferred stock that you own, and

- 0.216997 of a share of Lucent common stock for each share of Xedia
Series E convertible preferred stock that you own.

Approximately 10% of the shares of Lucent common stock you would otherwise
be entitled to receive will be deposited in an escrow account and may be used to
compensate Lucent in the event that it is entitled to indemnification under the
merger agreement. To the extent that some or all of the escrowed shares are not
required to indemnify or potentially indemnify Lucent, the escrowed shares will
be distributed as soon as practicable following the first anniversary of the
consummation of the merger.

OWNERSHIP OF LUCENT FOLLOWING THE MERGER

Based on the number of currently outstanding shares of Xedia stock,
outstanding warrants to purchase Xedia common stock and Series E convertible
preferred stock, we anticipate that Xedia stockholders will receive
approximately 2,924,669 shares of Lucent common stock in the merger. Based on
that number

1
<PAGE> 18
and on the number of currently outstanding shares of Lucent common stock,
following the merger former Xedia stockholders will own less than 1% of the
outstanding shares of Lucent common stock.

CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
(PAGE 46)

The merger is intended to qualify as a reorganization within the meaning
of the Internal Revenue Code of 1986. It is a condition to the completion of
the merger that Xedia receive an opinion from its counsel, Hale and Dorr LLP,
stating that the merger will qualify for United States federal income tax
purposes as a reorganization within the meaning of the Internal Revenue Code.
If the merger qualifies as a reorganization within the meaning of the Internal
Revenue Code, unless you are subject to special tax treatment under the
Internal Revenue Code, you will not recognize gain or loss for United States
federal income tax purposes as a result of the exchange of your Xedia stock for
Lucent common stock in the merger, except for any cash received in lieu of a
fractional share of Lucent common stock.

TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER
TO YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR
OWN TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER
TO YOU.

RECOMMENDATIONS OF THE XEDIA BOARD OF DIRECTORS TO STOCKHOLDERS (PAGE 34)

The Xedia board of directors believes that the terms of the merger and
the merger agreement are fair to and in the best interests of Xedia and its
stockholders and unanimously recommends that stockholders vote "for" approval
of the merger agreement. The board of directors also unanimously recommends
that stockholders vote "for" approval of an amendment to Xedia's certificate of
incorporation to provide that a consolidation or merger of Xedia with or into
another corporation or entity in a transaction involving the disposition of
more than 50% of the voting power of Xedia, or a sale of all or substantially
all the assets of Xedia, shall not be deemed to be a liquidation, dissolution
or winding up of Xedia. The board of directors also unanimously recommends
that you vote to approve an amendment to Xedia's 1993 stock option plan
increasing the number of shares of Xedia common stock authorized for issuance
from 4,700,000 to 5,950,000.

To review the background and reasons for the merger in greater detail, as
well as certain risks related to the merger, see pages 29-36 and 17-22.

FAIRNESS OPINION OF FINANCIAL ADVISOR (PAGE 36)

In deciding to approve the merger agreement, the Xedia board of directors
considered the opinion dated August 12, 1999 of its financial advisor, Morgan
Stanley & Co. Incorporated, as to the fairness to Xedia stockholders from a
financial point of view of the consideration to be received in the aggregate by
the Xedia stockholders pursuant to the merger agreement, based upon and subject
to the various considerations in its opinion. This opinion is attached as
Annex D

2
<PAGE> 19
to this proxy statement/prospectus. WE ENCOURAGE XEDIA STOCKHOLDERS TO READ
THIS OPINION CAREFULLY.

INTERESTS OF XEDIA DIRECTORS AND MANAGEMENT IN THE MERGER (PAGE 41)

Xedia stockholders should note that a number of directors and officers of
Xedia have interests in the merger as directors or officers that are different
from, or in addition to, those of a stockholder. If we complete the merger,
certain indemnification arrangements for current directors and officers of
Xedia will be continued and three current executive officers of Xedia will be
retained as employees of Lucent. One of Xedia's executive officers is entitled
to a severance payment if his employment by Xedia is terminated by Xedia
without cause. In addition, directors and employees with stock options to
acquire Xedia common stock will have these options converted to stock options
to acquire Lucent common stock on the same terms and conditions as the stock
options for Xedia common stock, including the terms of stock options held by
certain officers, directors and employees of Xedia that provide for accelerated
vesting after a change in control of Xedia.

DISSENTERS' RIGHTS TO APPRAISAL (PAGE 27)

If you do not wish to accept Lucent common stock in the merger, you have
the right under Delaware law to have the fair value of your shares determined
by the Delaware chancery court. This right to appraisal is subject to a number
of restrictions and technical requirements. Generally, in order to exercise
your appraisal rights:

- you must send a written demand to Xedia for appraisal in compliance
with Delaware law before the vote on the merger

- you must not vote in favor of the merger

- you must continuously hold your Xedia stock, from the date you make
the demand for appraisal through the closing of the merger

Merely voting against the merger will not protect your rights to an appraisal.
Annex C to this proxy statement/prospectus contains a copy of the Delaware
statute governing appraisal rights. Failure to follow all the steps required by
Delaware law will result in the loss of your rights to appraisal. The Delaware
law requirements for exercising appraisal rights are described in further
detail on pages 27 to 28.

3
<PAGE> 20
THE COMPANIES (PAGE 23)

XEDIA CORPORATION
50 Nagog Park
Acton, MA 01720
(978) 263-0060

Xedia designs, manufactures and markets integrated hardware and software
high-speed network routers for broadband access to the Internet. Xedia's
family of Access Point products are typically employed at the interface between
enterprise networks (local area networks) and Internet service providers (wide
area networks) to function as a router for accessing the Internet. In
addition, its products assist in providing service quality and security by
applying quality-of-service (QoS) and encryption techniques to the information
flowing between networks.

Xedia sells its products primarily to Internet service providers which
typically bundle them with other services and resell them to their customers.
The service providers generally are either independent operators or providers
affiliated with large, traditional data communications companies. As of
September 1, 1999, Xedia's customers included leading Internet service
providers such as MCI Worldcom's UUNET, Concentric, PSINet, Verio and Digex.

Xedia has approximately 90 full-time and 5 part-time employees, most of
whom are located at Xedia's headquarters in Acton, Massachusetts. Xedia was
organized as Other Company, Inc. under the laws of Delaware on October 5, 1992
and its executive offices are located at 50 Nagog Park, Acton, Massachusetts.

LUCENT TECHNOLOGIES INC.
600 Mountain Avenue
Murray Hill, NJ 07974
(908) 582-8500

Lucent designs, builds and delivers a wide range of public and private
networks, communications systems and software, data networking systems,
business telephone systems and microelectronic components. Lucent is a global
leader in the sale of public communications systems, and is a supplier of
systems or software to most of the world's largest network operators. Lucent is
also a global leader in the sale of business communications systems and in the
sale of microelectronic components for communications applications to
manufacturers of communications systems and computers. Lucent conducts its
research and development activities through Bell Laboratories, one of the
world's foremost industrial research and development organizations.

MARKET PRICE AND DIVIDEND INFORMATION (PAGE 70)

Shares of Lucent common stock are listed on the New York Stock Exchange.
On August 12, 1999, the last full trading day prior to the public announcement
of the proposed merger, the last reported sale price of one share of Lucent
common stock, as reported on the New York

4
<PAGE> 21
Stock Exchange Composite Transactions Tape was $63 3/4. On , 1999, the last
day for which information was available prior to the date of this proxy
statement/prospectus, the last reported sale price of one share of Lucent common
stock, as reported on the New York Stock Exchange Composite Transactions Tape
was . Because there is no established trading market for shares of Xedia
stock, information with respect to the market prices of the Xedia stock and the
equivalent per share market prices of Lucent common stock have been omitted.

Lucent has historically paid to its stockholders a regular quarterly
dividend, currently $0.02 per share. The payment of dividends by Lucent in the
future will depend on business conditions, its financial position, earnings and
other factors. Xedia has never paid dividends to its stockholders.

THE SPECIAL MEETING (PAGE 24)

The special meeting of Xedia stockholders will be held at the offices of
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts, at a.m., local
time, on , , 1999. At the special meeting, all stockholders will be asked
to approve the merger agreement, the amendment to Xedia's certificate of
incorporation and the amendment to Xedia's 1993 stock option plan.

RECORD DATE; VOTING POWER

Xedia stockholders are entitled to vote at the special meeting if they
owned shares as of the close of business on , 1999, the record date.

On the record date, there were shares of Xedia common stock,
57,600 shares of Xedia Series A convertible preferred stock, 165,000 shares of
Xedia Series B convertible preferred stock, 240,000 shares of Xedia Series C
convertible preferred stock, 2,127,867 shares of Xedia Series D convertible
preferred stock, and 3,414,288 shares of Xedia Series E convertible preferred
stock entitled to vote at the special meeting. Stockholders will have one vote
at the special meeting for each share of Xedia common stock that they owned on
the record date, and will have the number of votes equal to the number of whole
shares of Xedia common stock into which each share of preferred stock that they
owned on the record date was convertible, whether voting together with the
common stock or as a separate vote of each series entitled to vote. On the
record date, each share of Xedia Series A, Series B, Series C, Series D and
Series E convertible preferred stock was convertible into 2.0000, 2.0000,
2.9848, 2.0000 and 1.0000 whole shares of Xedia common stock, respectively.

VOTE REQUIRED

The affirmative vote of each of the following is required to approve the
merger agreement:

- a majority of the outstanding shares of Xedia common stock and
convertible preferred stock on the record date voting together as a
single class

5
<PAGE> 22
- a majority of the outstanding shares of each of the Series C
convertible preferred stock, Series D convertible preferred stock
and Series E convertible preferred stock on the record date, each
voting as a separate class, and

- at least two of the following three holders of Series D convertible
preferred stock: Greylock Equity Limited Partnership, J.P.M.
International and D.R.L. Jones.

The affirmative vote of each of the following is required to approve the
amendment to Xedia's certificate of incorporation:

- a majority of the outstanding shares of Xedia common stock and
convertible preferred stock on the record date voting together as a
single class

- a majority of the outstanding shares of Xedia convertible preferred
stock on the record date voting together as a single class, and

- a majority of the outstanding shares of each of the Series C
convertible preferred stock Series D convertible preferred and
Series E convertible preferred stock, each voting as a separate
class.

The affirmative vote of the holders of a majority of the outstanding
shares of Xedia common stock and preferred stock on the record date, voting
together as single class, present or represented by proxy at the special
meeting and voting on the matter is required to approve the amendment to
Xedia's 1993 stock option plan.

WE CANNOT COMPLETE THE MERGER UNLESS BOTH THE MERGER AGREEMENT AND THE
AMENDMENT TO XEDIA'S CERTIFICATE OF INCORPORATION ARE APPROVED BY THE REQUISITE
VOTES.

WE CAN COMPLETE THE MERGER WITHOUT APPROVAL OF THE AMENDMENT TO XEDIA'S
1993 STOCK OPTION PLAN.

VOTING AGREEMENTS

On the record date, these stockholders owned and were entitled to vote
(1) 75.1% of the outstanding shares of Xedia common stock and convertible
preferred stock, voting together as a single class and (2) 100% of the Series C
convertible preferred stock, 97.1% of the Series D convertible preferred stock
and 75.3% of the Series E convertible preferred stock.

6
<PAGE> 23
THE MERGER (PAGE 29)

The merger agreement is attached as Annex A to this proxy
statement/prospectus. We encourage you to read the merger agreement. It is the
principal document governing the merger.

CONDITIONS TO THE MERGER (PAGE 53)

Lucent and Xedia will complete the merger only if they satisfy or, in some
cases, waive several conditions, including the following:

- each of the following must vote to approve the merger agreement:
(1) holders of a majority of the outstanding shares of Xedia common
stock and convertible preferred stock voting together as a single
class, (2) holders of a majority of the outstanding shares of each
of the Series C convertible preferred stock, Series D convertible
preferred stock and Series E convertible preferred stock, each
voting as a separate class, and (3) at least two of the following
three holders of Series D convertible preferred stock: Greylock
Equity Limited Partnership, J.P.M. International and D.R.L. Jones

- each of the following must vote to approve the amendment to Xedia's
certificate of incorporation : (1) holders of a majority of the
outstanding shares of Xedia common stock and convertible preferred
stock voting together as a single class, (2) holders of a majority
of the outstanding shares of Xedia convertible preferred stock
voting together as a single class, and (3) holders of a majority of
the outstanding shares of each of the Series C convertible
preferred stock, Series D convertible preferred stock and Series E
convertible preferred stock, each voting as a separate class

- the amendment to Xedia's certificate of incorporation must be in
full force and effect

- no judgment, order, statute, law or regulation entered, enacted,
enforced or issued by any court or other governmental entity of
competent jurisdiction or other legal restraint or prohibition may
be in effect that (1) would prevent or materially delay the merger
or (2) otherwise would materially impair the ability of Lucent or
Xedia to perform its obligations under the merger agreement

- no action or proceeding has been commenced seeking a temporary
restraining order, preliminary or permanent injunction or other
order from any court of competent jurisdiction or seeking any other
legal restraint or prohibition preventing or materially delaying
the merger or which would materially impair the ability of Lucent
or Xedia to perform its obligations under the merger agreement
other than an action or proceeding that has been dismissed with
prejudice, and Lucent and Xedia will use their reasonable best
efforts to prevent the entry of any temporary

7
<PAGE> 24
restraining order, preliminary or permanent injunction or other
order and will appeal promptly any order that may have been entered

- the registration statement on Form S-4, of which this proxy
statement/prospectus forms a part, must have become effective under
the Securities Act and must not be the subject of any stop order or
proceedings seeking a stop order

- Lucent common stock to be issued to Xedia stockholders in the
merger and issuable upon exercise of the assumed options must be
authorized for listing on the New York Stock Exchange, subject to
official notice of issuance

- Lucent must receive a letter satisfactory to it in form and
substance dated as of the date on which the merger is to be
completed from Arthur Andersen LLP, Xedia's independent public
accountants, regarding that firm's concurrence with the conclusion
of Xedia's management that no condition exists that would preclude
Xedia from being a party to a transaction that would be accounted
for as a pooling of interests under Accounting Principles Board
Opinion No. 16 and applicable SEC rules and regulations if the
merger is completed in accordance with the merger agreement

- Xedia must receive a letter satisfactory to it in form and
substance dated as of the date on which the merger is to be
completed from PricewaterhouseCoopers LLP, Lucent's independent
public accountants, regarding that firm's concurrence with the
conclusion of Lucent's management that no condition exists at
Lucent that would preclude accounting for the merger as a pooling
of interests under Accounting Principles Board Opinion No. 16 and
applicable SEC rules and regulations if the merger is completed in
accordance with the merger agreement

- Xedia and Lucent must comply with their respective agreements and
conditions in all material respects

- the respective representations and warranties of Xedia and Lucent
contained in the merger agreement must be true and correct, or true
and correct in all material respects, in accordance with the
applicable standards set forth in the merger agreement

- no material adverse change in the assets, business, financial
condition or operations of either party may occur and no event or
events may occur that could reasonably be expected to have a
material adverse effect on the other party other than as a result
of (1) general economic conditions, (2) business and economic
conditions generally affecting the data networking industry, (3)
liabilities incurred in connection with the merger agreement or the
transactions contemplated by it, or (4) resulting from the
announcement of the transactions contemplated by the merger
agreement

8
<PAGE> 25
- Xedia must receive all necessary consents to the merger and waivers
required by the schedules to the merger agreement

- Lucent and Xylophone Acquisition must receive the favorable written
opinions dated the closing date of special counsel to Xedia, in
form satisfactory to Lucent and Xylophone Acquisition

- Xedia must receive the favorable written opinions dated the closing
date of special counsel to Lucent and Xylophone Acquisition, and
internal counsel to Lucent and Xylophone Acquisition, each in form
satisfactory to Xedia, and Xedia must receive a written opinion
dated the closing date of special counsel to Xedia, that the merger
should be treated, for federal income tax purposes, as a
reorganization within the meaning of the Internal Revenue Code

- Lucent must deliver to each of Ashley Stephenson, Robert A.
Steinkrauss and Jeremy Greene letters relating to their employment
with Lucent following the merger

NO OTHER NEGOTIATIONS INVOLVING XEDIA (PAGE 56)

The merger agreement provides that Xedia will not, and will not authorize
or permit any of its affiliates over which it exercises control or any officer,
director, employee, investment banker, attorney or other advisor,
representative of it or any of its affiliates to solicit, initiate or encourage
any acquisition proposal, participate in any discussion or negotiation
regarding any acquisition proposal or furnish information to any person to
facilitate an acquisition proposal. Without limiting this restriction, any
violation of the restriction of which Xedia or any of its affiliates had
knowledge at the time of the violation, by any officer, director, employee,
investment banker, attorney, employee or other advisor or representative of
Xedia or any of its affiliates, whether or not such person is purporting to act
on behalf of Xedia or any of its affiliates or otherwise, will be deemed to be
a breach of the merger agreement by Xedia and it affiliates. Xedia will
promptly advise Lucent of any acquisition proposal and inquiries with respect
to any acquisition proposal.

INDEMNIFICATION AND ESCROW AGREEMENT (PAGE 63)

The merger agreement provides that 291,620 shares of Lucent common stock
will be deposited in escrow with an escrow agent as soon as practicable after
the closing date of the merger. The number of shares of Lucent common stock to
be received by each Xedia stockholder will be reduced by approximately 10% of
the shares of Lucent common stock stockholders would otherwise be entitled to
receive. The escrow account will be the only source available to compensate
Lucent for the indemnification obligations of each holder of Xedia stock under
the merger agreement, other than for any claim of fraud. The escrow will
terminate one year after the date of the merger at which time all shares of
Lucent stock that are in the escrow account and are not the subject of any
claim by Lucent will be released to Robert Steinkrauss as the Xedia
stockholders' representative for distribution to the Xedia stockholders
entitled to receive those

9
<PAGE> 26
shares. Any shares of Lucent stock that are the subject of a claim will be
retained in escrow account pending resolution of the claim and thereafter any
shares not used to satisfy Lucent's claims for indemnification will be released
to the Xedia stockholders' representative for distribution to the Xedia
stockholders entitled to receive those shares.

TERMINATION OF THE MERGER AGREEMENT (PAGE 57)

TERMINATION. The merger agreement may be terminated at any time prior to
the merger, whether before or after approval of the merger agreement by the
stockholders of Xedia:

- by mutual agreement of Lucent, Xylophone Acquisition and Xedia

- by Lucent, Xylophone Acquisition or Xedia, if the merger has not
been completed by December 31, 1999

- by Lucent, Xylophone Acquisition or Xedia, if any court of
competent jurisdiction in the United States or other United States
governmental authority issues an order, decree, ruling or takes any
other action restraining, enjoining or otherwise prohibiting the
merger and that order, decree, ruling or other action has become
final and nonappealable

- by Lucent or Xedia, if the other party has materially breached its
obligations under the merger agreement, unless the breach is cured
within 15 calendar days after notice to the other party

ACCOUNTING TREATMENT (PAGE 44)

Lucent and Xedia expect the merger to qualify as a pooling of interests,
which means that the merger of Lucent and Xedia will be accounted for as if
Lucent and Xedia had always been combined for accounting purposes. As a
result, the basis of assets and liabilities of Xedia will be reflected in the
consolidated financial statements of Lucent at Xedia's historical book values.

EXPENSES (PAGE 60)

Lucent and Xedia will each pay its own expenses incidental to the
preparation of the merger agreement, the carrying out of the provisions of the
merger agreement and the consummation of the merger whether or not the merger
is consummated.

10
<PAGE> 27
COMPARATIVE PER SHARE INFORMATION

We have summarized below the per common share information for Lucent on a
historical basis, for Xedia on a historical basis and for Lucent and Xedia on a
pro forma combined basis and pro forma equivalent basis. Lucent's historical
results were restated to include the results of Kenan Systems Corporation, which
merged with Lucent on February 26, 1999, and Ascend Communications Inc., which
merged with Lucent on June 24, 1999. The Kenan merger and the Ascend merger
were each accounted for as a pooling of interests. All per share data has been
restated to account for Lucent's two-for-one stock splits effective on April 1,
1999 and April 1, 1998. Lucent's fiscal year ends on September 30 and Xedia's
fiscal year ends on December 31.

The unaudited "pro forma combined" and the unaudited "pro forma
equivalent--Xedia" information assumes that the merger of Xedia and Lucent is
accounted for as a pooling of interests and occurred at the beginning of the
earliest period presented. The unaudited "pro forma combined" information
combines the financial information of Lucent for the six months ended March 31,
1999 and 1998, for each of the two years in the period ended September 30, 1998
and for the nine-month period ended September 30, 1996, with the financial
information of Xedia for the six months ended June 30, 1999 and 1998 and for
each of the three years in the period ended December 31, 1998. Beginning
September 30, 1996, Lucent changed its fiscal year end from December 31 to
September 30 and Lucent reported results for the nine-month transition period
ended September 30, 1996. Lucent's results for the nine-month period ended
June 30, 1999 and the six-month period ended March 31, 1999 and Xedia's results
for the six-month period ended June 30, 1999 may not be indicative results for
the full year.

The unaudited "pro forma equivalent--Xedia" information was calculated by
multiplying the corresponding pro forma combined data by the common stock
exchange ratio of 0.216997. This information shows how each share of Xedia
common stock would have participated in net earnings, cash dividends and book
value of Lucent if the merger had been completed at the beginning of the
earliest period presented. However, these amounts do not necessarily reflect
future per share levels of net earnings, cash dividends or book value of
Lucent. The following unaudited comparative and unaudited pro forma per share
data is calculated from the historical financial statements of Lucent and
Xedia.

STOCKHOLDERS SHOULD READ THE INFORMATION IN THIS SECTION ALONG WITH
LUCENT'S AND XEDIA'S HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND
ACCOMPANYING NOTES INCLUDED ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS OR IN
THE DOCUMENTS DESCRIBED UNDER "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 94,
"CERTAIN INFORMATION CONCERNING XEDIA --MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" ON PAGE 82, AND "XEDIA'S
FINANCIAL STATEMENTS" ON PAGES F-1 to F-20.

<TABLE>
<CAPTION>
AT OR FOR THE NINE AT OR FOR THE SIX AT OR FOR THE TWELVE AT OR FOR THE
MONTHS ENDED MONTHS ENDED MONTHS ENDED NINE MONTHS ENDED
JUNE 30, MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
------------------- --------------------- ------------------------- ------------------

1999 1998 1999 1998 1998 1997 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
LUCENT -- HISTORICAL
Basic earnings per share $1.26 $0.28 $1.01 $0.33 $0.35 $0.16 $0.14
Diluted earnings per share 1.22 0.27 0.98 0.32 0.34 0.15 0.14
Cash dividends declared per share 0.06 0.06 0.04 0.38 0.078 0.056 0.038
Book value per share 4.07 2.37 3.76 2.40 2.55 1.51 1.20
</TABLE>

11
<PAGE> 28

<TABLE>
<CAPTION>
AT OR FOR THE SIX AT OR FOR THE TWELVE
MONTHS ENDED MONTHS ENDED
JUNE 30, DECEMBER 31,
-------------------- ------------------------

1999 1998 1998 1997 1996
---- ---- ---- ------ ----
<S> <C> <C> <C> <C> <C>
XEDIA -- HISTORICAL
Basic and diluted loss per share(1) $(0.65) $(1.04) $(1.89) $(1.38) $(0.41)
Cash dividends declared per share N/A N/A N/A N/A N/A
Book value per share (4.55) (3.36) (4.16) (2.40) (1.13)
</TABLE>

<TABLE>
<CAPTION>
AT OR FOR THE SIX AT OR FOR THE TWELVE AT OR FOR THE NINE
MONTHS ENDED MONTHS ENDED MONTHS ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
----------------------- ------------------------ ---------------------

1999 1998 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PRO FORMA COMBINED
Basic earnings per share $1.01 $0.33 $0.35 $0.15 $0.14
Diluted earnings per share 0.98 0.32 0.34 0.15 0.14
Cash dividends declared per share 0.04 0.038 0.078 0.056 0.038
Book value per share 3.72 2.36 2.54 1.50 1.20
</TABLE>

1999 1998 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PRO FORMA EQUIVALENT -- XEDIA
Basic earnings per share $0.22 $0.07 $0.08 $0.03 $0.03
Diluted earnings per share 0.21 0.07 0.07 0.03 0.03
Cash dividends declared per share 0.01 0.01 0.02 0.01 0.01
Book value per share 0.81 0.51 0.55 0.33 0.26
</TABLE>

N/A -- not applicable

(1) Does not include Xedia's convertible preferred shares

12
<PAGE> 29

SELECTED HISTORICAL FINANCIAL DATA -- LUCENT

Lucent was spun off from AT&T Corp. in 1996. On February 1, 1996, AT&T
began transferring to Lucent the assets and liabilities relating to Lucent's
operations. Lucent's historical financial data for periods prior to that date
reflect the results of operations and the financial position of the business
that was transferred to Lucent from AT&T in the separation as if Lucent had
been a stand-alone entity and have been prepared using the historical basis in
the assets and liabilities and historical results of operations related to the
Lucent business. Lucent's historical financial data for periods prior to that
date also include an allocation of certain AT&T corporate headquarters assets,
liabilities and expenses related to the Lucent business. The calculation of
earnings (loss) per common share on a historical basis includes the retroactive
recognition to January 1, 1995 of the 524,624,894 shares on a pre-split basis,
or 2,098,499,576 shares on a post-split basis, owned by AT&T on April 10, 1996.

Beginning September 30, 1996, Lucent changed its fiscal year end from
December 31 to September 30 and reported results for the nine-month transition
period ended September 30, 1996. All per share data has been restated to
account for Lucent's two-for-one stock splits effective on April 1, 1999 and on
April 1, 1998. Lucent's results were restated to include the results of Kenan
Systems Corporation, which merged with Lucent on February 26, 1999, and Ascend
Communications Inc., which merged with Lucent on June 24, 1999. The Kenan
merger and the Ascend merger were each accounted for as a pooling of interests.

Effective October 1, 1998, Lucent changed its method of accounting for
pension and post-retirement benefits. As a result, Lucent recorded a one-time,
after-tax gain from the cumulative effect of the accounting change of $1,308
million (net of tax of $842 million), or $0.42 per diluted share, for the first
fiscal quarter of 1999. Included in net income as a result of the accounting
change is $195 million, or $0.06 per diluted share for the nine months ended
June 30, 1999 and $130 million, or $0.04 per diluted share for the six months
ended March 31, 1999.

The following selected historical financial data of Lucent at September
30, 1998 and 1997, for each of the two years in the period ended September 30,
1998 and for the nine-month period ended September 30, 1996 is derived from
audited historical financial statements incorporated by reference in this proxy
statement/prospectus. The selected historical financial data of Lucent at
September 30, 1996, December 31, 1995 and 1994, and for each of the two years
in the period ended December 31, 1995, is derived from unaudited financial
statements not incorporated by reference in this proxy statement/prospectus,
and in the opinion of Lucent's management, includes all necessary adjustments
for a fair presentation of that data in conformity with generally accepted
accounting principles.

The selected historical financial data of Lucent at and for the nine
months ended June 30, 1999 and 1998, at and for the six months ended March 31,
1999 and 1998, and for the twelve months ended September 30, 1996, is derived
from unaudited condensed financial statements incorporated by reference in this
proxy statement/prospectus and, in the opinion of Lucent's management, includes
all necessary adjustments for a fair presentation of that data in conformity
with generally accepted accounting principles. Results for the nine-month
period ended June 30, 1999 and for the six-month period ended March 31, 1999,
may not be indicative of the results for the full year.

THE INFORMATION IN THIS SECTION SHOULD BE READ ALONG WITH LUCENT'S
HISTORICAL FINANCIAL STATEMENTS AND ACCOMPANYING NOTES INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS. SEE "WHERE YOU CAN FIND MORE
INFORMATION" ON PAGE 94.

13
<PAGE> 30
SELECTED HISTORICAL FINANCIAL DATA -- LUCENT
(CONTINUED)

<TABLE>
<CAPTION>
INCOME AT OR FOR THE AT OR FOR THE AT OR FOR THE TWELVE AT OR FOR THE
STATEMENT NINE MONTHS SIX MONTHS MONTHS ENDED NINE MONTHS ENDED
DATA: ENDED JUNE 30, ENDED MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
--------------------- ----------------------- ------------------------------------ -------------

1999 1998 1999 1998 1998 1997 1996 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $27,728 $23,232 $18,413 $15,590 $31,806 $27,611 $24,215 $16,639

Operating 4,177 1,960 2,900 1,748 2,638 1,599 (656) 734
income (loss)

Income (loss) 2,510 815 1,760 465 1,035 449 (604) 382
before
cumulative
effect of
accounting
change

Net income 3,818 815 3,068 965 1,035 449 (604) 382
(loss)

Base earnings 1.26 0.28 1.01 0.33 0.35 0.16 (0.23) 0.14
per share

Diluted 1.22 0.27 0.98 0.32 0.34 0.15 (0.23) 0.14
earnings
Per Share

Dividends 0.06 0.06 0.04 0.038 0.078 0.056 0.038 0.038
declared per
common share
stock

BALANCE SHEET DATA:

Total assets $37,156 $26,919 $35,560 $26,124 $29,363 $25,006 $23,572 $23,572

Total debt 6,792 4,322 6,901 3,816 4,640 4,203 3,997 3,997

Shareowners' 12,403 6,296 11,328 6,276 7,709 4,379 3,462 3,462
equity

<CAPTION>
INCOME AT OR FOR THE TWELVE
STATEMENT MONTHS ENDED
DATA: DECEMBER 31,
---------------------

1995 1994
---- ----
<S> <C> <C>
Revenues $21,718 $19,867

Operating (921) 985
income (loss)

Income (loss) (813) 497
before
cumulative
effect of
accounting
change

Net income (813) 497
(loss)

Base earnings 0.34) N/A
per share

Diluted (0.34) N/A
earnings
Per Share

Dividends -- N/A
declared per
common share
stock

BALANCE SHEET DATA:

Total assets $20,217 $17,475

Total debt 4,018 3,164

Shareowners' 1,917 2,583
equity
</TABLE>

N/A--Not applicable
Dollars in millions, except for per share amounts

14
<PAGE> 31
SELECTED HISTORICAL FINANCIAL DATA -- XEDIA

The following selected historical consolidated financial information of
Xedia has been derived from their respective historical consolidated financial
statements and include their notes, and should be read in conjunction with these
consolidated financial statements and the notes. The historical consolidated
financial statements of Xedia for the years ended December 31, 1994, 1995, 1996,
1997 and 1998 can be found in this proxy statement/prospectus in the section
entitled "Xedia Corporation Financial Statements" on pages F-1 to F-20, and with
the sections of this proxy statement/prospectus entitled "Certain Information
Concerning Xedia -- Management's Discussion and Analysis of Financial Condition
and Results of Operations." These financial statements should be read in
conjunction with these consolidated financial statements and the notes. The
Xedia and Lucent historical financial information as of and for the interim
periods presented below has been prepared on the same basis as that derived from
historical financial statements prepared on an annual basis and, in the opinion
of management of the respective companies, includes all adjustments, consisting
of normally recurring adjustments, necessary for a fair presentation of the
financial position and results of operations of the respective companies as of
the dates and for these periods. The results of the interim periods presented
are not necessarily indicative of the results to be expected for future periods.

INCOME STATEMENT DATA:

<TABLE>
<CAPTION>
AT OR FOR THE SIX MONTHS AT OR FOR THE TWELVE MONTHS
ENDED JUNE 30, ENDED DECEMBER 31,
------------------------- ----------------------------------------------------------

1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $6.9 $1.5 $5.5 $0.6 $4.4 $3.6 $0.5

Operating loss (2.9) (4.6) (8.3) (5.7) (1.5) (1.5) (1.7)

Net loss (2.9) (4.4) (8.0) (5.7) (1.5) (1.5) (1.7)

Net loss per common (0.65) (1.04) (1.89) (1.38) (0.41) (0.45) (0.74)
share-basic and diluted

Dividends declared per N/A N/A N/A N/A N/A N/A N/A
common share

BALANCE SHEET DATA:

Total assets $7.9 $10.5 $8.5 $14.3 $1.0 $3.0 $0.6

Total debt 1.3 0.5 0.4 0.6 0.5 0.4 0.4

Total redeemable 20.7 20.7 20.7 20.7 2.4 2.0 --
convertible preferred
stock

Stockholder's (18.7) (12.4) (16.0) (8.1) (2.4) (1.3) (0.3)
deficit
</TABLE>

N/A--Not applicable
Dollars in millions, except per share amounts

15
<PAGE> 32
RISK FACTORS

In addition to the other information included and incorporated by
reference in this proxy statement/prospectus, Xedia stockholders should
consider carefully the matters described below in determining whether to
approve the merger agreement.

RISK FACTORS RELATING TO THE MERGER

- THE EXCHANGE RATIOS FOR LUCENT COMMON STOCK TO BE RECEIVED IN THE
MERGER ARE FIXED AND WILL NOT BE ADJUSTED IN THE EVENT OF ANY
CHANGE IN STOCK PRICE. Under the merger agreement, each share of
Xedia stock will be converted into the right to receive (1) in the
case of each share of common stock, 0.216997, (2) in the case of
each share of Series A convertible preferred stock, 0.433994, (3)
in the case of each share of Series B convertible preferred stock,
0.433994, (4) in the case of each share of Series C convertible
preferred stock, 0.647694, (5) in the case of each share of Series
D convertible preferred stock, 0.433994, and (6) in the case of
each share of Series E convertible preferred stock, 0.216997, of a
share of Lucent common stock. These exchange ratios are fixed
numbers and will not be adjusted in the event of any increase or
decrease in the price of Lucent common stock. The price of Lucent
common stock at the closing of the merger may vary from its price
on the date of this proxy statement/prospectus and on the date of
the special meeting. The price may vary because of changes in the
business, operations or prospects of Lucent, the timing of the
completion of the merger, the prospects of post-merger operations,
general market and economic conditions and other factors. Because
the date that the merger is completed may be later than the date of
the special meeting, the price of Lucent common stock on the date
of the special meeting may not be indicative of its price on the
date the merger is completed. We urge Xedia stockholders to obtain
current market quotations for Lucent common stock.

- THE PRICE OF LUCENT COMMON STOCK MAY BE AFFECTED BY FACTORS
DIFFERENT FROM THOSE AFFECTING THE VALUE OF XEDIA STOCK. Upon
completion of the merger, holders of Xedia stock will become
holders of Lucent common stock. Lucent's business differs from that
of Xedia, and Lucent's results of operations, as well as the price
of Lucent common stock, may be affected by factors different from
those affecting Xedia's results of operations and the value of
Xedia stock. For a discussion of Lucent's business and certain
factors to consider in connection with this business, see Lucent's
Annual Report on Form 10-K for the fiscal year ended September 30,
1998, as amended, which is incorporated by reference in this proxy
statement/prospectus.

- A PORTION OF THE LUCENT COMMON STOCK TO BE RECEIVED BY XEDIA
STOCKHOLDERS WILL BE PLACED IN ESCROW TO SATISFY INDEMNITY CLAIMS
MADE BY LUCENT UNDER THE MERGER AGREEMENT. The merger agreement
provides that Xedia stockholders will remain liable and will
indemnify Lucent and certain other persons after the merger for any
inaccuracy in a representation or warranty and for any breach or
default by Xedia of any covenants or agreements made by Xedia in the
merger agreement.

16
<PAGE> 33
After the date of the merger, Lucent will cause 291,620 shares of
Lucent common stock issued in connection with the merger to be
deposited into an escrow account, which will be available to it to
satisfy the indemnification obligations of the Xedia stockholders.
There can be no assurance that the Xedia stockholders will receive
any of the shares in the escrow account should they be required to
indemnify Lucent under the terms of the merger agreement. See "The
Merger Agreement -- Indemnification and Escrow Arrangement" on page
63 and "The Merger -- Merger Consideration" on page 53.

RISK FACTORS RELATING TO XEDIA

As a stand-alone company, Xedia's business is subject to numerous risks
and uncertainties, including those described below. Xedia stockholders should
understand that these and other risks will continue to apply to Xedia's
business if the merger is not consummated.

- XEDIA HAS A HISTORY OF LOSSES AND EXPECTS TO INCUR FUTURE LOSSES.
Since its inception, Xedia has not achieved profitability.
Although its revenue has grown in 1998 and 1999, Xedia cannot
assure you that its revenue will continue to grow or that it will
realize sufficient revenue to achieve profitability. Xedia has
incurred cumulative net losses of $6.7 million from inception
through December 31, 1996, and losses of approximately $5.7 million
for fiscal year 1997, $8.0 million for fiscal year 1998 and $2.9
million for the six months ended June 30, 1999. As of December 31,
1998, Xedia had an accumulated deficit of $20.4 million.

If the merger with Lucent is not consummated, Xedia would expect to
increase its operating expenses to expand its sales and marketing
activities, develop new distribution channels, fund increased
levels of research and development and build its operational
infrastructure. If Xedia's future revenue does not increase
substantially, these increased expenditures would have a materially
adverse effect on Xedia's future business, results of operations
and financial condition.

- XEDIA WILL NEED ADDITIONAL FINANCING. If the merger with Lucent is
not consummated and Xedia continues as a stand-alone company, Xedia
would not have sufficient capital to continue its business
operations as they are now being conducted. The merger agreement
provides that Lucent will loan Xedia, at its request, up to
$5,000,000 for working capital during the period prior to the
closing on commercially reasonable terms and conditions. If the
merger is not consummated, Xedia will be obligated to repay the
Lucent loan, which will require Xedia to obtain significant
additional debt and/or equity funds both to repay the Lucent loan
and to provide working capital for Xedia's continuing operations as
a stand-alone company. While Xedia believes that it will be able to
raise the funds required to finance its operations as a stand-alone
company, it cannot assure you that the required funds will be
available when needed or that they can be obtained on terms
favorable to Xedia. If the required funds cannot be

17
<PAGE> 34
obtained, Xedia could be forced to revise its business plans,
including possible curtailment of its future business operations,
reduction of its planned future growth or a combination with
another company on terms less favorable than the terms governing
the merger with Lucent.

- XEDIA ENCOUNTERS INTENSE COMPETITION FOR IP ACCESS ROUTING AND VPN
PRODUCTS. The market for Internet protocol (commonly referred to
as IP) access routers is intensely competitive. This market is
dominated by Cisco Systems. Several other major companies have
entered or are expected to enter this market, including Nortel
Networks, Nokia, Alcatel, FORE Systems, Siemens and Lucent. Many
of Xedia's current and potential competitors have substantially
greater financial, technical, sales, marketing and other resources
than Xedia, as well as greater name recognition and larger
installed customer bases. As a result, these competitors are able
to devote greater resources to the development, promotion, sale and
support of their products than Xedia can as a stand-alone company.
In addition, Cisco Systems' position as a leader in providing
networking solutions to businesses could adversely affect Xedia's
efforts to sell its new virtual private network, or VPN, solutions
to businesses and Internet service providers.

- A SMALL NUMBER OF XEDIA'S CUSTOMERS ARE LIKELY TO ACCOUNT FOR A
SUBSTANTIAL PERCENTAGE OF ITS REVENUE. During the fiscal year
ended December 31, 1998, Xedia had two customers, PSINet and UUNET,
that accounted for approximately 61% and 13%, respectively, of
Xedia's total revenue for the period. Xedia expects that a small
number of customers, including resellers and original equipment
manufacturers, with large orders will continue to account for a
majority of its quarterly revenue. If Xedia's large customers
alter their purchasing habits, choose to buy competitors' products
or reevaluate their needs for its products, Xedia's business,
results of operations and financial condition would be materially
adversely affected. Although its largest customers may vary from
period to period, Xedia anticipates that its operating results for
any given period will continue to depend to a significant extent on
large orders from a small number of customers, particularly in
light of the high sales price per unit of its products and the
length of its sales cycles.

Nortel Networks accounted for approximately $1.4 million of Xedia's
revenue during the first half of 1999, or approximately 21% of
Xedia's revenue during that period. Because Nortel Networks and
certain other Xedia customers are competitors of Lucent, they are
likely to be disinclined to buy Xedia's products after its merger
with Lucent. Xedia previously expected that Nortel would
contribute approximately 20% of Xedia's revenue for the second half
of 1999. Therefore, the loss of Nortel's business and the business
of certain other existing customers of Xedia could have a
significant adverse impact on Xedia's expected future revenue as a
stand-alone company.

18
<PAGE> 35
- XEDIA MUST DEVELOP AND EXPAND ITS DISTRIBUTION CHANNELS. Xedia
relies on its 20-person field sales organization, as well as
resellers and original equipment manufacturers, for the
distribution of its products. To expand its sales and support
fulfillment of its orders, Xedia must expand its distribution
channels, primarily by adding large resellers and original
equipment manufacturers or strategic partners. If Xedia fails to
develop relationships with significant resellers or strategic
partners, or if these resellers and partners are not successful in
their sales efforts, sales of Xedia's products, particularly
outside the United States, may decrease and its operating results
would be materially adversely affected.

- XEDIA IS DEPENDENT ON SALES OF ITS XEDIA ACCESS POINT PRODUCT
FAMILY. Xedia currently derives almost all of its revenue from
sales of its Xedia Access Point product family and expects that
revenue from Access Point will continue to account for a
substantial portion of its revenue for the foreseeable future.
Accordingly, continued market acceptance of this product family is
critical to Xedia's future success. Factors that may negatively
impact the market acceptance of Xedia's products include the
performance, price and total cost of ownership of Xedia's Access
Point products and the availability and price of competing products
and technologies. Many of these factors are beyond Xedia's
control. Xedia's future performance will also depend on the
successful development, introduction and market acceptance of new
and enhanced products that address customer requirements in a
cost-effective manner. Failure of Xedia's existing or future
products to maintain and achieve widespread levels of market
acceptance would significantly impair Xedia's revenue growth.

- XEDIA'S MARKET IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE. The data
networking market is characterized by rapid technological change,
frequent new product introductions, changes in customer
requirements and evolving industry standards. To remain
competitive, Xedia must regularly enhance the functionality of its
existing products and introduce new products while simultaneously
reducing its production costs. Even if Xedia is successful at
introducing new product functionality and reducing costs,
alternative technologies may develop which, if they achieve
widespread market acceptance, could supplant Xedia's technology and
make Xedia's products obsolete. Xedia's failure to respond to any
of these market pressures would adversely affect its business,
results of operations and financial condition.

- XEDIA IS DEPENDENT ON THE WIDESPREAD ADOPTION OF INTERNET VPN
SERVICES. Sales of Xedia's products depend on the increased use
and widespread adoption of VPN services and the ability of Xedia's
customers to market and sell VPN services. Xedia's business,
results of operations and financial condition would be materially
adversely affected if the use of VPN services does not increase as
anticipated or if its customers' VPN services are not received well
by the marketplace. Critical issues concerning the use of VPN
services remain unresolved and could affect the use of VPNs. These
issues include:

19
<PAGE> 36
- reliability

- bandwidth

- cost

- ease of access

- quality of service

Even if these issues are resolved, the market for products that provide
VPNs over the Internet and to corporate networks may fail to develop, or
develop at a slower pace than anticipated, and Xedia's business, results
of operations and financial condition would be materially adversely
affected.

- XEDIA MAY BE UNABLE TO PROTECT ITS PROPRIETARY TECHNOLOGY. Xedia
relies on a combination of copyright, trademark, patent and trade
secret laws and restrictions on disclosure to protect its
intellectual property rights. Although Xedia attempts to protect
its intellectual property rights, it may be unable to prevent the
misappropriation of its intellectual property, particularly in
foreign countries where the laws may not protect Xedia's
proprietary rights as fully as in the United States.

Others may allege that Xedia's products infringe upon their
proprietary rights. Any parties asserting that Xedia's products
infringe upon their proprietary rights would force Xedia to defend
itself or its customers, manufacturers or suppliers against alleged
infringement of intellectual property rights. Xedia could incur
substantial costs to prosecute or defend this litigation. In the
event of a successful claim of infringement against Xedia and
Xedia's failure or inability to develop non-infringing technology
or license the infringed technology on acceptable terms and on a
timely basis, Xedia could be forced to cease selling, incorporating
or using products or services that incorporate the infringed
technology and its business, results of operations and financial
condition would be materially adversely affected. Xedia may be
subject to such claims in the future.

- XEDIA PURCHASES SEVERAL KEY PRODUCT COMPONENTS FROM SINGLE OR
LIMITED SOURCES OF SUPPLY. Xedia currently purchases several key
components used in the manufacture of its products from single or
limited sources of supply. Sole source components include
processors, system controller chips, network interface chips and
selected passive components such as inductors and connectors, while
limited source components include flash memories, random access
memory components and printed circuit boards. Xedia has no
guaranteed supply arrangement with the suppliers of these
components, and Xedia or its manufacturers may fail to obtain these
components in a timely manner in the future. Financial or other
difficulties faced by these suppliers or significant changes in
demand for these components could limit the availability to Xedia
of these components. Any interruption or delay in the supply of
any of these components, or the inability to obtain these
components from alternate sources at acceptable prices and within a
reasonable amount of time, would adversely affect Xedia's ability
to meet scheduled product

20
<PAGE> 37
deliveries to its customers and would materially adversely affect
Xedia's business, results of operations and financial condition.

- XEDIA'S PLANNED EXPANSION TO INTERNATIONAL MARKETS WILL INVOLVE NEW
RISKS. In 1998, Xedia derived approximately 97% of its revenues
from sales to customers in the United States. Xedia's ability to
increase its revenue will depend in large part on its ability to
expand its international sales, which in turn depends on its
development of country-specific features and on meeting foreign
regulatory requirements. In its international sales expansion
efforts, Xedia may be subject to a number of risks, including:

- expenses associated with customizing products for foreign countries

- United States export regulations which may impede Xedia's ability
to compete in foreign markets

- difficulty and expense of visiting foreign customers to build
long-term relationships

- dependence on local agents or representatives

- foreign currency exchange rate fluctuations

- political and economic instability

21
<PAGE> 38
THE COMPANIES

XEDIA

LUCENT

Lucent was incorporated in Delaware in November 1995. Lucent was a wholly
owned subsidiary of AT&T prior to its initial public offering of common stock
on April 10, 1996, and became completely separate from AT&T when the remaining
shares of Lucent common stock held by AT&T were distributed to AT&T's
stockholders on September 30, 1996. Additional information regarding Lucent is
contained in Lucent's filings with the Securities and Exchange Commission. See
"Where You Can Find More Information" on page 94.

MATERIAL CONTRACTS BETWEEN LUCENT AND XEDIA

Lucent and Xedia are parties to a non-exclusive reseller agreement dated
as of July 1, 1999, under which Lucent may purchase and resell certain of
Xedia's products at a standard

22
<PAGE> 39
discount with customary payment terms. Lucent and Xedia also entered into a
non-disclosure agreement dated as of July 23, 1998 and a confidentiality
agreement dated as of January 21, 1999 containing customary terms and
conditions regarding the confidential treatment of information exchanged
between the parties.

At Xedia's request, Lucent has agreed to provide prior to the merger up
to $5 million in working capital financing to Xedia for a term of one year on
commercially reasonable terms and conditions consistent with past practice and
reasonably acceptable to Lucent and Xedia.

THE SPECIAL MEETING

We are furnishing this proxy statement/prospectus to stockholders of
Xedia as part of the solicitation of proxies by the Xedia board of directors
for use at the special meeting.

DATE, TIME AND PLACE

We will hold the special meeting at the offices of Hale and Dorr LLP, 60
State Street, Boston, Massachusetts at , at a.m., local time, on , 1999.

PURPOSE OF SPECIAL MEETING

At the special meeting, we are asking holders of Xedia stock to approve
(1) the merger agreement, (2) the amendment to Xedia's certificate of
incorporation to provide that a consolidation or merger of Xedia with or into
another corporation or entity in a transaction involving the disposition of
more than 50% of the voting power of Xedia, or a sale of all or substantially
all the assets of Xedia, shall not be deemed to be a liquidation, dissolution
or winding up of Xedia and (3) the amendment to Xedia's 1993 stock option plan
increasing the number of shares of Xedia common stock authorized for issuance
from 4,700,000 to 5,950,000. The Xedia board of directors has determined that
the merger is fair to, and in the best interests of, Xedia stockholders, has
unanimously approved the merger agreement and the merger, and unanimously
recommends that Xedia stockholders vote "for" approval of the merger agreement,
"for" the amendment to Xedia's certificate of incorporation and "for" the
amendment to Xedia's 1993 stock option plan.

RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM

Only holders of record of Xedia stock at the close of business on ,
1999, the record date, are entitled to notice of and to vote at the special
meeting. On the record date, (1) shares of Xedia common stock were
issued and outstanding and held by approximately 41 holders of record, (2)
57,600 shares of Series A convertible preferred stock were issued and
outstanding and held by five holders of record, (3) 165,000 shares of Series B
convertible preferred stock were issued and outstanding and held by seven
holders of record, (4) 240,000 shares of Series C convertible preferred stock
were issued and outstanding and held by one holder of record, (5)

23
<PAGE> 40
2,127,867 shares of Series D convertible preferred stock were issued and
outstanding and held by eight holders of record, and (6) 3,414,288 shares of
Series E convertible preferred stock were issued and outstanding and held by 11
holders of record.

A quorum is present at the special meeting if a majority of the shares of
(1) Xedia stock, and (2) Xedia stock of each class or series entitled to vote
separately where a separate vote is required, in each case are issued and
outstanding and entitled to vote on the record date are represented in person
or by proxy. In the event that a quorum is not present at the special meeting,
it is expected that the meeting will be adjourned or postponed to solicit
additional proxies. Holders of record of Xedia common stock on the record date
are entitled to one vote per share of common stock at the special meeting on
the proposals to approve the merger agreement, amend the certificate of
incorporation and amend the 1993 stock option plan. Holders of record of Xedia
preferred stock on the record date are entitled to the number of votes per
share of preferred stock equal to the number of whole shares of Xedia common
stock into which each share of preferred stock is convertible at the special
meeting on the proposals to approve the merger agreement, amend the certificate
of incorporation and amend the 1993 stock option plan, whether voting together
with the common stock or in a separate vote of each class or series entitled to
vote. As of the record date, each share of Xedia Series A, Series B, Series C,
Series D and Series E convertible preferred stock was convertible into 2.0000,
2.0000, 2.9848, 2.0000 and 1.0000 shares of Xedia common stock, respectively.

VOTES REQUIRED

The affirmative vote of each of the following is required to approve the
merger agreement: (1) a majority of the outstanding shares of Xedia common stock
and convertible preferred stock on the record date voting together as a single
class, (2) a majority of the outstanding shares of each of the Series C
convertible preferred stock, Series D convertible preferred stock and Series E
convertible preferred stock on the record date, each voting as a separate class,
and (3) at least two of the following three holders of Series D convertible
preferred stock: Greylock Equity Limited Partnership, J.P.M. International and
D.R.L. Jones. IF YOU ABSTAIN FROM VOTING OR DO NOT VOTE ON THE MERGER PROPOSAL,
EITHER IN PERSON OR BY PROXY, IT WILL HAVE THE EFFECT OF A VOTE AGAINST APPROVAL
OF THE MERGER AGREEMENT.

The affirmative vote of each of the following is required to approve the
amendment of the certificate of incorporation: (1) a majority of the
outstanding shares of Xedia common stock and convertible preferred stock on the
record date voting together as a single class, (2) holders of a majority of the
outstanding shares of Xedia convertible preferred stock voting together as a
single class, and (3) a majority of the outstanding shares of each of the Series
C convertible preferred stock Series D convertible preferred and Series E
convertible preferred stock, each voting as a separate class. IF YOU ABSTAIN
FROM VOTING OR DO NOT VOTE ON THE PROPOSED AMENDMENT TO XEDIA'S CERTIFICATE OF
INCORPORATION, EITHER IN PERSON OR BY PROXY, IT WILL HAVE THE EFFECT OF A VOTE
AGAINST APPROVAL OF THE AMENDMENT.

The affirmative vote of a majority of the outstanding shares of Xedia
common stock and preferred stock on the record date, voting together as single
class, present or represented by

24
<PAGE> 41
proxy at the special meeting and voting on the matter is required to
approve the amendment to Xedia's 1993 stock option plan. IF YOU ABSTAIN FROM
VOTING OR DO NOT VOTE ON THE PROPOSAL TO AMEND XEDIA'S 1993 STOCK OPTION PLAN,
IT WILL HAVE NO EFFECT ON THE VOTE.

WE CANNOT COMPLETE THE MERGER UNLESS BOTH THE MERGER AGREEMENT AND THE
AMENDMENT TO XEDIA'S CERTIFICATE OF INCORPORATION ARE APPROVED BY THE REQUISITE
VOTES.

WE CAN COMPLETE THE MERGER WITHOUT APPROVAL OF THE AMENDMENT TO XEDIA'S
1993 STOCK OPTION PLAN.

VOTING AGREEMENTS

VOTING OF PROXIES

All shares represented by properly executed proxies received in time for
the special meeting will be voted at the special meeting in the manner
specified by the holders. PROPERLY EXECUTED PROXIES THAT DO NOT CONTAIN VOTING
INSTRUCTIONS WITH RESPECT TO APPROVAL OF THE MERGER AGREEMENT WILL BE VOTED
"FOR" APPROVAL OF THE MERGER AGREEMENT. PROPERLY EXECUTED PROXIES THAT DO NOT
CONTAIN VOTING INSTRUCTIONS WITH RESPECT TO APPROVAL OF THE AMENDMENT OF THE
CERTIFICATE OF INCORPORATION OF XEDIA WILL BE VOTED "FOR" APPROVAL OF THE
AMENDMENT OF THE CERTIFICATE OF INCORPORATION. PROPERLY EXECUTED PROXIES THAT
DO NOT CONTAIN VOTING INSTRUCTIONS WITH RESPECT TO APPROVAL OF THE AMENDMENT TO
XEDIA'S 1993 STOCK OPTION PLAN WILL BE VOTED "FOR" APPROVAL OF THE AMENDMENT TO
XEDIA'S 1993 STOCK OPTION PLAN.

Shares of Xedia stock represented at the special meeting but not voting,
including shares of Xedia stock for which proxies have been received but for
which holders of shares have abstained, will be treated as present at the
special meeting for purposes of determining the presence or absence of a quorum
for the transaction of all business.

25
<PAGE> 42
Only shares affirmatively voted for approval of the merger agreement,
including properly executed proxies that do not contain voting instructions,
will be counted as favorable votes for the merger proposal. Only shares
affirmatively voted for the amendment to the amended restated certificate of
incorporation, including properly executed proxies that do not contain voting
instructions, will be counted as favorable votes for the amendment proposal.
Only shares affirmatively voted for the amendment to Xedia's 1993 stock option
plan, including properly executed proxies that do not contain voting
instructions, will be counted as favorable votes for the amendment proposal. If
a Xedia stockholder abstains from voting or does not vote, either in person or
by proxy, it will have the effect of a vote against the merger agreement and
the amendment of the certificate of incorporation and will have no effect on
the proposed amendment of the stock option plan.

The persons named as proxies by a stockholder may propose and vote for one
or more adjournments of the special meeting, including adjournments to permit
further solicitations of proxies. No proxy voted against the proposal to
approve the merger agreement or the amendment to the certificate of
incorporation of Xedia, as the case may be, will be voted in favor of any
adjournment or postponement.

REVOCABILITY OF PROXIES

The grant of a proxy on the enclosed form of proxy does not preclude a
stockholder from voting in person at the special meeting. A stockholder may
revoke a proxy at any time prior to its exercise by filing with the Secretary
of Xedia a duly executed revocation of proxy, by submitting a duly executed
proxy to the Secretary of Xedia bearing a later date or by appearing at the
special meeting and voting in person. Attendance at the special meeting will
not itself constitute revocation of a proxy.

SOLICITATION OF PROXIES

Xedia will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of Xedia and its subsidiaries may solicit proxies from stockholders
by telephone or other electronic means or in person.

PLEASE DO NOT SEND STOCK CERTIFICATES WITH YOUR PROXY. A transmittal form
with instructions for the surrender of Xedia stock certificates will be mailed
to you as soon as practicable after completion of the merger.

DISSENTERS' RIGHTS TO APPRAISAL

- you must send a written demand to Xedia for appraisal in compliance
with Delaware law before the vote on the merger

- you must not vote in favor of the merger

- you must continuously hold your Xedia stock, from the date you make
the demand for appraisal through the closing of the merger

See "The Merger--Right of Stockholders to Appraisals" and "The
Merger--Appraisal Rights Procedures" on pages 48 and 49, respectively and
"Comparison of Rights of Common Stockholders of Lucent and Stockholders of
Xedia--Appraisal or Dissenters' Rights" on page 79.

<PAGE> 43
THE MERGER

The following discussion summarizes the material terms of the merger and
the merger agreement. We urge stockholders to read carefully the merger
agreement and the fairness opinion of Morgan Stanley & Co. Incorporated which
are attached as Annexes A and E to this proxy statement/prospectus.

BACKGROUND TO THE MERGER

Xedia's sales and distribution strategy has historically relied on indirect
marketing channels provided by established resellers and original equipment
manufacturers, commonly referred to as OEMs, including network equipment vendors
such as Lucent, for the distribution of its products. In connection with
establishing business relationships with resellers and OEMs, Xedia was contacted
by Kevin Oye, Vice President, Strategy and Business Development of Lucent's Data
Networking Systems business group, and Mark Lovington, Director, Strategy and
Business Development of Lucent's Data Networking Systems business group, which
led to a meeting on May 6, 1998 during which Xedia provided information on its
background and product line.

On May 14, 1998, several other product management and engineering
representatives of Lucent visited Xedia and received more extensive
presentations on the Xedia product line and a discussion of potential reseller
and OEM opportunities ensued.

On June 19 and August 21, 1998, Xedia's representatives met with Mr. Oye to
discuss potential business relationships with Lucent. On July 23, 1998, Xedia
and Lucent entered into a non-disclosure agreement containing customary terms
and conditions regarding the confidential treatment of information furnished by
the parties.

On September 7, 1998, Ashley Stephenson, Chairman of Xedia, and Robert
Steinkrauss, President of Xedia, met with Karyn Mashima, Vice President of
Lucent's Data Networking Systems business group, to discuss expanding the
potential business opportunities between Lucent and Xedia from a reseller/OEM
arrangement to a strategic relationship.

Over the course of the second half of 1998 and the first half of 1999,
Xedia also engaged in strategic discussions regarding general business and
reseller opportunities with several other equipment vendors, including Ascend
(which was subsequently acquired by Lucent).

On September 28, 1998, Xedia retained Morgan Stanley & Co. Incorporated to
advise Xedia on strategic alternatives. Xedia did not authorize Morgan Stanley
to solicit interest in Xedia from any other parties at that time.

On November 24, 1998, Xedia met with Dick Slezak, Ascend's Director of
Business Development, to discuss the potential for future cooperative sales and
marketing opportunities and to review Xedia's business and product strategy,
including an update on the interoperability tests conducted by Xedia and
Ascend.

On December 29, 1998, Ms. Mashima further discussed with Xedia Lucent's
interest in a potential strategic relationship. On January 13, 1999, Lucent and
Ascend announced that they had entered into a merger agreement.

On January 21, 1999, Lucent and Xedia entered into a confidentiality
agreement containing customary terms and conditions regarding the confidential
treatment of information furnished by the parties.

On March 5, 1999, representatives from Lucent met with Xedia
representatives for extensive product and business discussions, and additional
Xedia product testing was scheduled to follow.

On April 26, 1999, Michael Bond, Director, Corporate Strategy and
Development of Lucent, called Mr. Steinkrauss to discuss a possible acquisition
of Xedia by Lucent and to discuss the need for conducting due diligence and
entering into a more appropriate non-disclosure agreement.

In May 1999, Xedia received a follow-up call from Mr. Bond, and
representatives of Xedia, Lucent and Ascend met to discuss Xedia's recent
product announcements and ongoing reseller opportunities. The representatives
also held preliminary discussions regarding the possible acquisition of Xedia
by Lucent. On June 14, 1999, representatives from Xedia met with Menachem
Abraham, President, Enterprise Systems of Lucent's Data Networking Systems
business group, and Roger Boyce, Vice President, Enterprise Access at Ascend,
to discuss general business progress and employee retention opportunities
should an acquisition occur.

<PAGE> 44

During the first part of 1999, Xedia held discussions with other parties
regarding strategic opportunities and also received expressions of interest
from several parties who wished to discuss strategic opportunities. In late
June, Xedia scheduled meetings with several interested parties.

On July 1, 1999, Mr. Oye and Mr. Bond contacted Mr. Steinkrauss to discuss
Lucent's interest in acquiring Xedia in exchange for $200 million of Lucent
common stock. On July 2, 1999, Mr. Stephenson convened a special telephonic
meeting of the board of directors of Xedia to discuss the Lucent proposal.
During the course of the meeting, the directors assessed the Lucent proposal
and the status of strategic discussions with other parties held to date. The
Xedia directors then instructed Morgan Stanley to commence discussions with
Lucent regarding the value placed on Xedia by Lucent and to evaluate other
alternatives, including an initial public offering of Xedia's common stock and
potential strategic and acquisition opportunities with other interested
parties.

Based on Xedia's board directive, between July 3 and July 14, 1999 Morgan
Stanley began contacting several parties which had expressed strategic interest
in Xedia as well as other potentially interested parties. Morgan Stanley
informed potentially interested parties that any acquisition inquiries should be
of a timely nature.

On July 7, 1999, Morgan Stanley called Lucent to discuss Lucent's offer.
Morgan Stanley advised Lucent that its offer needed to be increased, and Lucent
advised Xedia that it was unwilling to discuss an increased offer without some
guidance from Xedia's board of directors as to an acceptable price.

On July 7, 1999, the directors of Xedia met to review the Lucent offer and
to hear the report of Morgan Stanley on the status of its discussions with
Lucent and other parties. Xedia's directors instructed Morgan Stanley to advise
Lucent that a Lucent offer in the $275 million range would be viewed favorably
by Xedia's directors.

Between July 7 and July 14, 1999, Xedia met with several interested
parties to conduct due diligence and discuss strategic opportunities.

On July 12, 1999, Lucent called Morgan Stanley and asked if Xedia's board
had provided Morgan Stanley with any guidance, and Morgan Stanley communicated
the $275 million range.

On July 14, 1999, Lucent advised Morgan Stanley that it might be willing
to increase its offer between 4-5%, provided that the terms of the merger were
negotiated quickly and a definitive agreement was executed in a timely manner.
On July 15, 1999, Lucent indicated that it would be willing to formally
increase its offer to $225 million, provided that it receive a prompt favorable
response from Xedia's board of directors.

At a meeting of the Xedia board of directors held on July 15, 1999, Morgan
Stanley reported on its latest discussions with Lucent and other potential
acquirors. The board reviewed the strategic merits, relative status of due
diligence, certainty of consummating a transaction and potential value
proposals from each of the other potential buyers and compared them to Lucent's

<PAGE> 45

proposal. In addition, the Board reviewed transaction models, including cash
versus equity consideration, pooling of interest issues and other related
acquisition issues.

On July 20, 1999, Morgan Stanley presented Lucent with a $245 million
counter offer, and on July 21, 1999, Lucent responded that it would increase
its offer to $230 million if Xedia entered into an exclusivity agreement with
Lucent.

From July 20 to July 27, 1999, in anticipation of Lucent's request for an
exclusivity agreement, Morgan Stanley with the assistance of Xedia's executives
engaged in discussions with three potentially interested parties.

On July 21, 1999, during a telephone board meeting, the Lucent board of
directors considered the merger and, after deliberation, approved the
transactions and authorized the execution and delivery of the merger agreement
and the related documents.

On July 22, 1999, Lucent presented a draft of an exclusivity agreement to
Xedia. On July 23, Morgan Stanley and Lucent discussed the terms of the
proposed acquisition by Lucent and the exclusivity agreement. On July 26, 1999,
counsel for Xedia and Lucent negotiated a mutually acceptable exclusivity
agreement.

By July 27, 1999, two of the parties had withdrawn from the discussions
and a third party (Company A) indicated that it would not be able to engage in
discussions with Xedia for at least two weeks. Based on Lucent's demand for a
prompt favorable response and the lack of any alternative proposal, the board
decided to move towards a potential transaction with Lucent, which included
further due diligence activities and the negotiation of a mutually acceptable
merger agreement.

On July 28, 1999, Xedia and Lucent entered into an exclusivity agreement,
pursuant to which Xedia agreed that it would not solicit or encourage any
offers or otherwise engage in any discussions with any parties other than
Lucent regarding the possible acquisition of Xedia until the close of business
on August 18, 1999.

During the period from July 29, 1999 through August 8, 1999,
representatives of Lucent and Xedia conducted mutual due diligence concerning
their respective businesses and operations, while the attorneys for Lucent and
Xedia were engaged in negotiating the terms of a draft merger agreement
prepared by Lucent.

On August 9, 1999, Xedia received an unsolicited letter from Company A
indicating Company A's interest in pursuing negotiations to acquire Xedia.
Company A's proposal stated that it was not intended to be a legally binding
agreement, but was intended to advance Company A's negotiations and due
diligence regarding a proposed acquisition of Xedia. The letter proffered a
preliminary valuation of Xedia of $450 million in Company A common stock. It
also provided that in the event Xedia did not deliver a signed copy of Company
A's letter by 3:00 p.m. (Pacific Standard Time) on August 11, 1999, Company A's
letter would be deemed to be withdrawn and of no further force and effect.
Xedia promptly advised Lucent, pursuant to the terms of its

<PAGE> 46

exclusivity agreement with Lucent, that it had received an unsolicited letter
from a potential third party acquiror.

On August 10, 1999, Xedia convened a special telephonic meeting of its
board of directors, which also was attended by representatives of Morgan
Stanley and Xedia's special counsel, Hale and Dorr LLP. The purpose of the
meeting was to discuss the Company A proposal and to review the status of the
Lucent discussions. The board reviewed the principal provisions of the Company
A proposal, including the provision that would result in the payment of $450
million, or $220 million more in Company A common stock than would be obtained
from Lucent if a transaction with Company A were consummated. The board also
reviewed the limited amount of discussions to date between Company A and Xedia
and the more complicated strategic implications of a transaction with a small,
relatively young company such as Company A compared to a transaction with a
large established company such as Lucent. Counsel noted that the Company A
letter imposed a 48-hour deadline which required a favorable response by 3:00
p.m. Pacific Standard Time on August 11, 1999. Counsel also noted that the
exclusivity agreement with Lucent prohibited Xedia from carrying on any
discussions prior to August 18, 1999, the expiration date of the exclusivity
agreement. In addition, counsel reviewed the non-binding nature of Company A's
letter which, in substance, was an expression of interest on the part of
Company A to carry on negotiations rather than a firm offer to acquire Xedia on
specified terms. Counsel also discussed the need for the directors to assess
the probability of a successful transaction with Company A if Xedia delayed
responding to the latest Lucent offer and the risk that Xedia could be left
without either the Lucent or the Company A opportunity because of the duration
of the exclusivity period and the Company A deadline for Xedia's response.

Representatives of Morgan Stanley then reviewed the Company A proposal,
including (i) the absence from Company A's letter of any binding commitment,
(ii) the need to conduct due diligence and to prepare and negotiate definitive
merger agreement with Company A, and (iii) the 48-hour response deadline
imposed by Company A. Morgan Stanley also reviewed Company A's financial
position and the recent trading activity of stock. Morgan Stanley also advised
the Xedia directors that Lucent stated that it was prepared to sign a
definitive merger agreement within the next 24 hours and discussed the serious
risks of any further delay in dealing with Lucent. After comparison by the
Xedia directors of the uncertainties and lack of an unconditional offer from
Company A with the certainty of a transaction with Lucent and the value of
Lucent stock, coupled with the uncertainty that a merger transaction could be
successfully negotiated or consummated with Company A, the Xedia directors
concluded that the Lucent transaction was preferable and that any delay to
allow for the expiration of the exclusivity period could result in the loss of
the Lucent transaction without any assurance that a more favorable transaction
could be consummated with Company A. Accordingly, the board of directors
instructed Morgan Stanley to revisit its price discussions with Lucent with the
objective of negotiating an increase in the merger consideration. The Xedia
directors also instructed Morgan Stanley to prepare additional information on
Company A for consideration by the directors at the Xedia board meeting called
for August 11, 1999.

On August 11, 1999, the Xedia directors met together with representatives
of Morgan Stanley and Hale and Dorr. Representatives of Morgan Stanley
presented a financial analysis of

<PAGE> 47

the Lucent merger offer as well as other potential alternatives. They reported
that Morgan Stanley, acting on instructions from the board of directors, sought
to negotiate a higher valuation from Lucent. They reported that their
negotiations resulted in Lucent's agreement to increase the merger
consideration by 5%, from $230 million to $241.5 million, and after further
negotiations, to raise it to $243 million. Lucent advised Morgan Stanley that
$243 million was its best and final offer and was subject to withdrawal if
Xedia did not enter into a definitive merger agreement in the next two days. In
addition, Morgan Stanley reviewed the valuation methodologies which it employed
for purposes of its fairness opinion, discussed the merger exchange ratios,
reviewed the risks of a transaction with Company A based on the Company A
letter, compared the Lucent firm offer with the Company A expression of
interest in terms of strategic rationale, timing, value, certainty and currency
and delivered the oral opinion of Morgan Stanley, later confirmed in writing,
to the effect that, as of August 12, 1999, the exchange ratio offered by Lucent
was fair to Xedia's stockholders from a financial point of view. Mr. Stephenson
also compared the two alternatives from the perspective of strategic fit and
ability to grow and advance the Xedia product and organization.

Next, representatives of Hale and Dorr described the fiduciary duties
applicable to directors considering a strategic business combination and
reviewed the principal terms of the merger agreement and related documents, the
current drafts of which were provided to each director. Counsel also summarized
the status of the negotiations and the terms of the voting agreements required
by Lucent as a condition to its execution of the merger agreement, and reviewed
the pooling of interest accounting issues, the indemnification provisions and
the escrow agreement. In addition, counsel reviewed regulatory issues, the
timing of a S-4 registration statement to be filed with the SEC in connection
with the issuance of Lucent's shares in the merger, and recommendations for
resolving remaining open merger agreement issues. Prior to the Chairman's call
for a vote on the merger transaction, Roger L. Evans, a director of Xedia,
reported to the directors on his substantial holdings of Lucent stock received
principally in connection with Lucent's acquisition of Ascend. After
discussion, Mr. Evans stated he felt conflicted in voting on the Lucent
transaction because of his substantial Lucent stock position and therefore
tendered his resignation as a director of Xedia effective immediately. The
directors of Xedia then engaged in further discussions regarding the proposed
Lucent merger agreement and the proposed merger transactions, after which they
unanimously approved the Lucent merger agreement and authorized its execution
and delivery. The parties signed the merger agreement on the night of August
12, 1999.

Prior to the commencement of trading on the New York Stock Exchange on
August 13, 1999, Lucent and Xedia issued a joint press release announcing the
execution of the merger agreement.

REASONS FOR THE MERGER AND BOARD OF DIRECTORS RECOMMENDATION

REASONS FOR THE MERGER. In reaching its decision to approve the merger
agreement and the merger and to recommend approval of the merger agreement by
Xedia stockholders, the Xedia board of directors consulted with its management
team and advisors and independently considered the proposed merger agreement
and the transactions contemplated by the merger

<PAGE> 48

agreement. The following discussion of the factors considered by the Xedia
board of directors in making its decision is not intended to be exhaustive but
includes all material factors considered by the Xedia board of directors.

The Xedia board of directors considered the following factors as reasons
that the merger will be beneficial to Xedia and its stockholders:

- The access afforded to Xedia's products through Lucent's
established relationships with large business organizations and
enterprises and with major customers, sales and marketing resources
and distribution channels

- The belief that the merger would permit Xedia to leverage hardware
and software technologies developed for other products in the
Lucent portfolio, including the access and aggregation switching
systems to which Xedia products are often connected in Xedia's
customers' networks

- The belief that, through a tax-free reorganization, the opportunity
to own Lucent common stock would provide Xedia stockholders with
greater future liquidity in the security of an attractive company
that could capitalize on the business prospect of Xedia and provide
a better return of stockholder investment

- The strategic fit and complementary nature of Lucent's and Xedia's
router and VPN product lines which could result in significant
solution and channel synergy, allowing Xedia to offer a more
complete solution to potential Xedia customers

In the course of its deliberations, the Xedia board of directors reviewed
with Xedia management a number of other factors relevant to the merger. In
particular, the Xedia board of directors considered, among other things:

- Information relating to the business, assets, management,
competitive position and operating performance of Xedia,
including the prospects of Xedia if it were to continue as an
independent company

- The strategic importance of securing a large partner for Xedia in
order to maximize the potential of the market and take advantage
of Xedia's leadership position in access routing and Internet
VPNs

- The financial presentation of Morgan Stanley, including its opinion
described under "The Merger -- Opinion of Morgan Stanley & Co.
Incorporated" on page 36, to the effect that, as of the date of
such opinion, the consideration to be received in the aggregate by
the stockholders of Xedia was fair, from a financial point of view,
to the stockholders of Xedia

- The market price and anticipated stability of Lucent stock

<PAGE> 49

- The likelihood that the merger would be completed

- The expected qualification of the merger as a reorganization under
Section 368(a) of the Internal Revenue Code

The Xedia board of directors also identified and considered a number of
potentially negative factors in its deliberations concerning the merger,
including:

- The risk that the operations of Lucent and Xedia might not be
successfully integrated

- The risk that, despite the efforts of Xedia and Lucent after the
merger, key personnel might leave Xedia

- The risk that the potential benefits of the merger might not be
fully realized

The Xedia board of directors believed that certain of these risks were
unlikely to occur, that Xedia could avoid or mitigate others, and that,
overall, these risks were outweighed by the potential benefits of the merger.

In view of the variety of factors considered in connection with its
evaluation of the merger agreement and the merger, the Xedia board of directors
did not find it practicable to and did not quantify or otherwise assign
relative weight to the specific factors considered in reaching its
determination. In addition, individual members of the Xedia board of directors
may have given different weight to different factors.

RECOMMENDATION OF THE XEDIA BOARD OF DIRECTORS. After careful
consideration, the Xedia board of directors unanimously determined that the
terms of the merger agreement and the merger are fair to, and in the best
interests of, Xedia and its stockholders and has unanimously approved the
merger agreement and the merger. The Xedia board of directors unanimously
recommends that the stockholders of Xedia vote "for" the approval of the merger
agreement.

OPINION OF MORGAN STANLEY & CO. INCORPORATED

Pursuant to a letter dated as of September 28, 1998, Morgan Stanley & Co.
Incorporated was engaged to provide financial advisory services and a financial
fairness opinion in connection with the merger. Morgan Stanley was selected by
Xedia's board of directors to act as Xedia's financial advisor based on Morgan
Stanley's qualifications, expertise and reputation and its knowledge of the
business and affairs of Xedia and the industry in general.

At the August 11, 1999 meeting of the Xedia board, Morgan Stanley rendered
its oral opinion that, as of such date and based upon and subject to the
various considerations set forth in its opinion, the consideration to be
received in the aggregate by the Xedia stockholders pursuant to the merger
agreement is fair from a financial point of view to Xedia stockholders. Morgan

<PAGE> 50

Stanley delivered to the Xedia board a written opinion dated August 12, 1999
confirming its oral opinion.

The full text of Morgan Stanley's written opinion dated August 12, 1999,
which sets forth, among other things, assumptions made, procedures followed,
matters considered and the limits of the review undertaken, is attached as
Annex D to this proxy statement/prospectus and is incorporated herein by
reference. Holders of Xedia stock are urged to, and should, read the opinion
carefully and in its entirety. The Morgan Stanley opinion is addressed to the
Xedia board and addresses the fairness of the consideration to be received in
the aggregate by the holders of shares of the equity pursuant to the merger
agreement from a financial point of view to the holders of Xedia stock and it
does not address any other aspect of the merger, nor does it constitute a
recommendation to any stockholder of Xedia as to how Xedia's stockholders
should vote at the special meeting. The summary of the opinion of Morgan
Stanley set forth in this proxy statement/prospectus is qualified in its
entirety by reference to the full text of its opinion.

In rendering its opinion, Morgan Stanley, among other things:

- reviewed certain internal financial statements and other financial
and operating data concerning Xedia prepared by the management of
Xedia;

- reviewed certain financial projections prepared by the management
of Xedia;

- discussed the past and current operations and financial condition
and the prospects of Xedia, including information relating to
certain strategic, financial and operational benefits anticipated
from the merger, with senior executives of Xedia;

- compared the financial performance of Xedia with that of certain
comparable publicly-traded companies and their securities;

- reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;

- reviewed certain publicly available financial statements and other
information of Lucent;

- discussed the past and current operations and financial condition
and the prospects of Lucent with representatives of Lucent;

- analyzed the pro forma impact of the merger on Lucent's earnings
per share and other financial ratios;

- reviewed the reported prices and trading activity for Lucent common
stock;

- discussed with representatives of Lucent certain publicly available
research analyst projections for Lucent;

<PAGE> 51

- compared the financial performance and prices and trading activity
of Lucent common stock with that of certain other comparable
publicly traded companies and their securities;

- participated in discussions and negotiations among representatives
of Xedia and Lucent and their financial and legal advisors;

- reviewed the merger agreement and certain related documents; and

- performed such other analyses and considered such other factors as
it deemed appropriate.

In arriving at its opinion, Morgan Stanley assumed and relied upon,
without independent verification, the accuracy and completeness of the
information reviewed by it for the purposes of this opinion. With respect to
the financial projections, including information relating to certain strategic,
financial and operational benefits anticipated from the merger, Morgan Stanley
assumed that they were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial performance
of Xedia. Morgan Stanley also relied upon the assessment by the management of
Xedia and Lucent of their ability to retain key employees of Xedia. Morgan
Stanley also relied upon, without independent verification, the assessment by
the management of Xedia of Xedia's technologies and products, the timing and
risks associated with the integration of Xedia with Lucent and the validity of,
and risks associated with, Xedia's existing and future products and
technologies. As the board was aware, Lucent did not make available its
forecasts of future financial performance. Instead, for purposes of its
analysis, Morgan Stanley has relied upon, with the board's consent, the
estimates of certain research analysts for Lucent. In addition, Morgan Stanley
has assumed that the merger will be consummated in accordance with the terms
set forth in the merger agreement, including, among other things, that the
merger will be accounted for as a "pooling-of-interests" business combination
in accordance with U.S. generally accepted accounting principles and the merger
will be treated as a tax-free reorganization and/or exchange, each pursuant to
the Internal Revenue Code of 1986. Morgan Stanley has not made any independent
valuation or appraisal of the assets or liabilities of Xedia, nor has it been
furnished with any such appraisals. Morgan Stanley noted that the capital
structure of Xedia consists of the common stock and the Series A, Series B,
Series C, Series D, and Series E convertible preferred stock, and Morgan
Stanley expressed no opinion as to the fairness of the consideration to be
received among the various classes or series of stock. The Morgan Stanley
opinion is necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to Morgan
Stanley as of, the date of the Morgan Stanley opinion.

The following is a brief summary of certain analyses performed by Morgan
Stanley in connection with its oral and written opinions. The summary of one
financial analysis includes information presented in tabular format. In order
to fully understand this financial analysis used by Morgan Stanley, the tables
must be read together with the text of the summary. The tables alone do not
constitute a complete description of the financial analysis.

<PAGE> 52

DISCOUNTED EQUITY ANALYSIS. Morgan Stanley performed an analysis of the
present value of Xedia's future value based on the following assumption ranges:
net earnings estimates for the years 2001 and 2002 (utilizing sensitivity cases
in addition to base case estimates); revenue estimates (utilizing sensitivity
cases in addition to base case estimates) for the calendar years 2000 and 2001;
illustrative forward multiples of earnings, ranging from 30.0x to 50.0x;
illustrative forward multiples of revenues, ranging from 6.0x to 8.0x;
illustrative discount rates, ranging from 20% to 35%. Based on these
assumptions, Morgan Stanley calculated the present value of Xedia's future
theoretical equity values, ranging from approximately $175 million to $250
million.

ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS. Using publicly available
information, Morgan Stanley reviewed the terms of certain announced, pending or
completed early-stage networking industry acquisition transactions and compared
the aggregate value of these transactions to the latest implied post-money
venture capital financing valuation. Based on the overall range of early-stage
networking transactions, Morgan Stanley applied a range of multiples of
aggregate value to implied post-money venture capital financing valuation of
3.0x to 5.0x.

As part of its analysis, Morgan Stanley also reviewed the publicly
available terms of certain announced, pending or completed networking industry
acquisition transactions and compared the aggregate value of these transactions
to the trailing twelve months revenue. Based on the overall range of these
late-stage networking transactions, Morgan Stanley applied a range of multiples
of aggregate value to trailing twelve months revenues of approximately 4.0x to
8.0x to Xedia's calendar year 2000 revenues to determine a theoretical future
value, and calculated the present value of such result at discount rates of
20-35%.

No transaction utilized as a comparison in the precedent transactions
analysis is identical to the merger. In evaluating the precedent transactions,
Morgan Stanley made judgments and assumptions regarding industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of Xedia, such as the impact of
competition on Xedia and the industry generally, industry growth and the
absence of any material adverse change in the financial condition and prospects
of Xedia or the industry or in the financial markets in general. Mathematical
analysis (such as determining the average or median) is not in itself a
meaningful method of using comparable transaction data.

HISTORICAL COMMON STOCK PERFORMANCE. Morgan Stanley's analysis of Lucent's
common stock performance consisted of a historical analysis of closing prices
and trading volumes over the period from August 9, 1998 to August 9, 1999.
During that period, based on closing prices on the New York Stock Exchange,
shares of Lucent common stock achieved a high closing price of $78.44 on July
16, 1999 and a low closing price of $28.50 on October 7, 1998. Additionally,
Morgan Stanley noted that shares of Lucent common stock closed at a price of
$63.63 on August 9, 1999.

COMPARATIVE STOCK PRICE PERFORMANCE. Morgan Stanley performed a historical
analysis of closing prices from August 6, 1998 to August 6, 1999 of: Lucent
common stock; the NASDAQ Composite; the S&P 500; and an index of comparable
voice and data networking companies, consisting of Cisco Systems, Inc., Nortel
Networks Corporation, Tellabs, Inc.,

<PAGE> 53

Ericsson (LM), Alcatel, Cabletron Systems, Inc., Newbridge Networks Corporation
and 3Com Corporation. Morgan Stanley compared the performance of such companies
and indices to the performance of Lucent's common stock during such period.
Morgan Stanley observed that over the period from August 6, 1998 to August 6,
1999, Lucent common stock increased 38%, the NASDAQ Composite increased 39%,
the S&P 500 increased 19% and the voice and data networking companies increased
41%.

PEER GROUP COMPARISON. Morgan Stanley compared certain publicly available
financial information of Lucent with publicly available information of the
voice and data networking companies. The following table presents, as of August
9, 1999, the median for the voice and data networking companies of share price
to projected calendar year 1999 and 2000 earnings multiples; calendar year 2000
earnings multiples divided by long-term growth rates; and aggregate value
(defined as market capitalization plus total debt less cash and cash
equivalents) to calendar year 1999 revenue, compared to the values indicated
for Lucent. All earnings and growth estimates are based on median estimates
from securities research analysts.

SHARE PRICE TO PROJECTED AGGREGATE
CALENDAR YEAR 2000 VALUE TO
SHARE PRICE TO PROJECTED EARNINGS DIVIDED BY CALENDAR
CALENDAR YEAR EARNINGS LONG TERM GROWTH RATE 1999 REVENUE
---------------------------- ---------------------- --------------

1999 2000
------------- --------------
<S> <C> <C> <C> <C>
Lucent 49.7x 39.8x 199% 4.9x

Voice and Data Networking 39.7 27.0 140% 2.6
Companies
</TABLE>

No company utilized in the peer group comparison analysis as a comparison
is identical to Lucent. In evaluating the peer groups, Morgan Stanley made
judgments and assumptions with regard to industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of Lucent, such as the impact of competition on
the business of Lucent and the industry generally, industry growth and the
absence of any material adverse change in the financial condition and prospects
of Lucent or Xedia or the industry or in the financial markets in general.
Mathematical analysis (such as determining the average or median) is not in
itself a meaningful method of using peer group data.

PRO FORMA ANALYSIS OF THE MERGER. Morgan Stanley analyzed the pro forma
impact of the merger on earnings per share for Lucent for fiscal year 2000. The
pro forma results were calculated as if the merger had closed at the end of
Lucent's fiscal 1999, and were based on projected earnings derived from median
First Call estimates for Lucent and management estimates for Xedia. The pro
forma analysis also assumed the pooling accounting treatment of the merger.
Morgan Stanley noted that, without including synergies, on a U.S. GAAP basis,
the merger would be neutral to Lucent's earnings per share in fiscal year 2000.

The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley

<PAGE> 54

considered the results of all of its analyses as a whole and did not attribute
any particular weight to any particular analysis or factor considered by it.
Furthermore, Morgan Stanley believes that selecting any portion of Morgan
Stanley's analyses, without considering all analyses, would create an
incomplete view of the process underlying the opinion. In addition, Morgan
Stanley may have deemed various assumptions more or less probable than other
assumptions, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be Morgan Stanley's view of the
actual value of Xedia or Lucent.

In performing its analysis, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Lucent or Xedia. The
analyses performed by Morgan Stanley are not necessarily indicative of actual
values, which may be significantly more or less favorable than suggested by
such analyses. Such analyses were prepared solely as a part of Morgan Stanley's
analysis of the fairness from a financial point of view of the consideration to
be received in the aggregate by the Xedia stockholders pursuant to the merger
agreement and were provided to the Xedia board of directors in connection with
the delivery of the Morgan Stanley opinion. The analyses do not purport to be
appraisals of value or to reflect the prices at which Lucent or Xedia might
actually be sold. In addition, as described above, the Morgan Stanley opinion
was one of the many factors taken into consideration by the Xedia board of
directors in making its determination to approve the merger. The purchase price
pursuant to the merger agreement was determined through arm's-length
negotiations between Lucent and Xedia and was approved by the Xedia board of
directors. Consequently, the Morgan Stanley analyses as described above should
not be viewed as determinative of the opinion of the Xedia board of directors
with respect to the value of Xedia or of whether the Xedia board of directors
would have been willing to agree to different consideration.

Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking business, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate, estate and other purposes. Morgan
Stanley may continue to provide investment banking services to the combined
entity in the future. In the ordinary course of its trading, brokerage and
financing activities, Morgan Stanley and its affiliates may, at any time, have
a long or short position in, and buy and sell the debt or equity securities and
senior loans of Lucent for its account or the account of its customers. Morgan
Stanley and its affiliates have, in the past, provided financial advisory
services to Lucent and Xedia and have received customary fees for the rendering
of such services.

Pursuant to an engagement letter dated September 28, 1998, Morgan Stanley
provided financial advisory services and a financial fairness opinion in
connection with the merger, and Xedia agreed to pay Morgan Stanley a customary
fee in connection with the merger if the merger is completed. Xedia also agreed
to reimburse Morgan Stanley for expenses incurred by Morgan Stanley in
performing its services. In addition, Xedia has also agreed to indemnify Morgan
Stanley and its affiliates, their respective directors, officers, agents and
employees and each person, if any, controlling Morgan Stanley or any of its
affiliates against certain liabilities and

<PAGE> 55

expenses, including liabilities under the federal securities laws, related to
or arising out of Morgan Stanley's engagement and any related transactions. In
the past, Morgan Stanley and its affiliates have provided financing services
for Lucent and have received customary fees for the rendering of these
services.

INTERESTS OF XEDIA DIRECTORS AND MANAGEMENT IN THE MERGER

In considering the recommendation of the Xedia board of directors in favor
of the merger, stockholders of Xedia should be aware that certain directors and
executive officers of Xedia have interests in the merger as specified in the
merger agreement that are different from, or in addition to, the interests of
stockholders of Xedia. These interests relate to or arise from, among other
things:

- the continued indemnification of current directors and officers of
Xedia

- the retention of certain current officers of Xedia as employees of
Lucent

- stock options to acquire Xedia common stock held by employees,
directors and consultants will be converted into stock options to
acquire Lucent common stock on the same terms and conditions as the
stock options for Xedia common stock, including the terms of stock
options held by certain officers, directors and employees of Xedia
that provide for accelerated vesting after a change in control of
Xedia

- one executive officer is entitled to a severance payment if his
employment by Xedia is terminated by Xedia without cause

These interests are described below, to the extent material, and except as
described below those persons have, to the knowledge of Lucent and Xedia, no
material interest in the merger apart from those of stockholders generally. The
Xedia board of directors was aware of, and considered the interests of, their
directors and executive officers in approving the merger agreement and the
merger.

INDEMNIFICATION AND INSURANCE. The merger agreement provides that Lucent
will, or will cause the surviving corporation to, fulfill and honor in all
respects the obligations of Xedia to indemnify each person who is or was a
director or officer of Xedia or any of its subsidiaries pursuant to any
indemnification provision of the certificate of incorporation or by-laws or
equivalent constituent documents of Xedia or any of its subsidiaries as each
was in effect on the date of the merger agreement. Lucent will maintain for six
years after the merger directors' and officers' liability insurance under
customary terms and conditions for acts or omissions of each person who is or
was a director or officer of Xedia or any of its subsidiaries which occur prior
to the merger.

XEDIA EXECUTIVE OFFICERS. After the merger, Robert Steinkrauss will be
employed by Lucent's InterNetworking Systems business group as Vice President,
General Manager Service

<PAGE> 56

Provider CPE; Ashley Stephenson will be employed by Lucent's InterNetworking
Systems business group as Vice President, Chief Technology Officer in the
Enterprise WAN group; and Jeremy Greene will be employed by Lucent's
InterNetworking System business group as Vice President, Engineering in the
Enterprise WAN group. In accordance with the terms of Mr. Stephenson's existing
employment agreement with Xedia, Mr. Stephenson will be entitled to the payment
of one year's salary if his employment is terminated by Xedia without cause.

WORKING CAPITAL FINANCING. At Xedia's request, Lucent has agreed to
provide prior to the merger up to $5 million in working capital financing to
Xedia for a term of one year on commercially reasonable terms and conditions
consistent with past practice and reasonably acceptable to Lucent and Xedia.

EMPLOYEE BENEFITS. Lucent has agreed to provide employee benefit plans,
programs and arrangements to those individuals who will continue to be
employees of Xedia after the merger that are the same as those made generally
available to similarly situated employees of Lucent's InterNetworking Systems
Group hired by Lucent after July 1, 1999. These plans, programs and
arrangements will be made available as soon as practicable after the merger.
Until these plans, programs and arrangements are made available, Lucent has
agreed that it will provide the same benefit plans, programs and arrangements
of Xedia that were provided to employees of Xedia as were in effect as of
August 12, 1999. See "Merger Agreement--Additional Agreements" on page 62.

STOCK OPTIONS

Under the merger agreement, at the effective time of the merger, Lucent
will assume the stock option plan of Xedia and all stock options granted under
the plan to acquire shares of Xedia common stock. Each stock option under the
plan will be converted into a stock option to acquire Lucent common stock on
the same terms and conditions, including the terms of options held by certain
officers, directors and employees that provide for accelerated vesting after a
change in control of Xedia. The number of shares of Lucent common stock to be
subject to any option will be equal to the number of shares of Xedia common
stock subject to that Xedia option multiplied by the 0.216997 exchange ratio
and rounded down to the nearest whole share. The exercise price per share of
Lucent common stock under any option will be equal to the exercise price per
share of Xedia common stock subject to that Xedia option divided by the
0.216997 exchange ratio. No later than 30 days after the effective time of the
merger, Lucent will prepare and file with the Securities and Exchange
Commission an appropriate registration statement registering the shares of
Lucent common stock subject to the assumed Xedia stock options. That
registration statement will be kept effective (and the current status of the
prospectus required by the Securities and Exchange Commission shall be
maintained in accordance with the requirements of the Securities Act of 1933
and the Securities Exchange Act of 1934) for so long as any assumed Xedia
options remain outstanding. See "--Effect of Awards Outstanding Under Xedia
Stock Plan" on page 51.

<PAGE> 57

WARRANTS

Under the merger agreement, prior to the effective time of the merger,
Xedia will take all actions to receive from each holder of an outstanding
warrant to purchase shares of Xedia common stock or Series E convertible
preferred stock, as applicable, an agreement that, as of the effective time,
such warrant shall be converted into a right of such holder to receive from the
exchange agent the consideration set forth in the next sentence at the same
time that each such holder of Xedia stock is entitled to receive shares of
Lucent common stock from the surviving corporation in connection with the
Merger. Each holder of a warrant will be entitled to receive from the exchange
agent, in respect of the shares of Xedia common stock or Series E convertible
preferred stock, as applicable, to be issued upon the exercise of such warrant,
the number of shares of Lucent common stock (rounded down to the nearest whole
share) equal to the number of shares of Xedia stock subject to such warrant
immediately prior to the effective time of the merger multiplied by 0.137605,
in the case of warrants for purchase of Xedia common stock, and 0.161423, in
the case of warrants for the purchase of Xedia Series E convertible preferred
stock. Lucent will pay cash (without interest) to holders of warrants in lieu
of issuing fractional shares of Lucent common stock in an amount, rounded to
the nearest whole cent, computed in accordance with the formula set forth for
fractional shares in the merger agreement.

ACCOUNTING TREATMENT

Completion of the merger is conditioned upon its being accounted for on a
pooling of interests accounting basis and the receipt by Lucent and Xedia of
letters from PricewaterhouseCoopers LLP and Arthur Andersen LLP, respectively,
regarding those firms' concurrence with Lucent management's and Xedia
management's conclusions, respectively, that no condition exists that would
prevent accounting of the merger as a pooling of interests under Accounting
Principles Board Opinion No. 16 if completed in accordance with the merger
agreement. Under this accounting treatment, as of the effective time of the
merger, the assets and liabilities of Xedia would be added to those of Lucent at
their recorded book values.

FORM OF THE MERGER

Subject to the terms and conditions of the merger agreement and in
accordance with Delaware law, at the effective time of the merger, Xylophone
Acquisition Inc., a wholly owned subsidiary of Lucent, will merge with and into
Xedia. Xedia will be the surviving corporation of the merger and a wholly owned
subsidiary of Lucent, and will continue under the name "Xedia Corporation."

<PAGE> 58

MERGER CONSIDERATION

At the effective time of the merger, each outstanding share of Xedia stock
(other than shares as to which dissenters' rights to appraisal have been
perfected) will be converted into the right to receive (1) in the case of each
share of common stock, 0.216997, (2) in the case of each share of Series A
convertible preferred stock, 0.433994, (3) in the case of each share of Series
B convertible preferred stock, 0.433994, (4) in the case of each share of
Series C convertible preferred stock, 0.647694, (5) in the case of each share
of Series D convertible preferred stock, 0.433994, (6) in the case of each
share of Series E convertible preferred stock, 0.216997, of a share of Lucent
common stock, except that treasury stock and stock held by Xylophone
Acquisition or Lucent its subsidiaries will be canceled. Stockholders will
receive cash for any fractional shares which they would otherwise receive in
the merger. As of the effective time of the merger, all shares of Xedia stock
will no longer be outstanding, will automatically be canceled and will cease to
exist. At that time, each holder of a certificate representing shares of Xedia
stock (other than shares as to which dissenters' rights to appraisal have been
perfected) will cease to have any rights as a stockholder except the right to
receive Lucent common stock, the right to any dividends or other distributions
in accordance with the merger agreement and the right to receive cash for any
fractional share of Lucent common stock. The exchange ratios were determined
through arm's-length negotiations between Lucent and Xedia.

CONVERSION OF SHARES AND WARRANTS; PROCEDURES FOR EXCHANGE OF CERTIFICATES AND
WARRANTS; FRACTIONAL SHARES

The conversion of Xedia stock and warrants into the right to receive
Lucent common stock will occur automatically at the effective time of the
merger. As of the effective time of the merger, Lucent will deposit with the
Bank of New York (or another institution selected by Lucent), the exchange
agent, for the benefit of the holders of Xedia stock and warrants, certificates
representing the shares of the Lucent common stock to be issued pursuant to the
merger agreement, less the number of shares of Lucent common stock to be
deposited in an escrow account pursuant to the merger agreement. As soon as
practicable after the merger, the exchange agent will send a transmittal letter
to each former Xedia stockholder and warrantholder. The transmittal letter will
contain instructions for obtaining shares of Lucent common stock in exchange
for shares of Xedia stock and warrants. PLEASE DO NOT SEND STOCK CERTIFICATES
OR WARRANTS WITH THE ENCLOSED PROXY.

After the merger, each certificate that previously represented shares of
Xedia stock and each warrant for the purchase of Xedia common stock and Series
E convertible preferred stock will represent only the right to receive the
Lucent common stock into which those shares and warrants were converted in the
merger and the right to receive cash for any fractional share of Lucent common
stock as described below.

Until holders of certificates previously representing Xedia stock or
warrants for the purchase of such stock have surrendered those certificates or
warrants, as applicable, to the exchange agent for exchange, holders will not
receive dividends or distributions on the Lucent common stock into which those
shares have been converted with a record date after the merger,

<PAGE> 59

and will not receive cash for any fractional shares of Lucent common stock.
When holders surrender those certificates or warrants, as applicable, they will
receive any unpaid dividends and any cash for fractional shares of Lucent
common stock without interest.

Upon surrender of certificates previously representing Xedia stock or
warrants for the purchase of Xedia stock, as applicable, for cancellation,
together with the letter of transmittal described above duly executed and such
other documents as the exchange agent may reasonably require, the holder will
be entitled to receive in exchange for the certificates or warrants (1) a
certificate representing the number of whole shares of Lucent common stock into
which the Xedia stock or warrant, represented by the surrendered certificate or
warrant, will have been converted at the effective time, less, in the case of
the surrender of certificates previously representing stock, the holder's pro
rata portion on a fully converted basis of the number of shares of Lucent
common stock to be deposited in the escrow account on the holder's behalf
pursuant to the merger agreement, (2) cash in lieu of any fractional share of
Lucent common stock in accordance with the merger agreement, and (3) certain
dividends and distributions in accordance with the merger agreement. The
surrendered certificates or warrants, as applicable, will then be canceled.

In the event of a transfer of ownership of Xedia stock or warrants which
are not registered in the records of Xedia's transfer agent, a certificate
representing the proper number of shares of Lucent common stock may be issued
to a person other than the person in whose name the certificate or warrant so
surrendered is registered if:

- that certificate or warrant is properly endorsed and otherwise is
in proper form for transfer

- the person requesting that issuance (1) pays to the exchange agent
any transfer or other taxes resulting from the issuance of shares
of Lucent common stock and delivery of cash for any fractional
share, or (2) establishes to the satisfaction of the exchange agent
that tax has been paid or is not applicable.

All shares of Lucent common stock issued upon conversion of shares of
Xedia stock, including any cash paid for any fractional share of Lucent common
stock, will be issued in full satisfaction of all rights relating to those
shares of Xedia stock.

No fractional share of Lucent common stock will be issued to any Xedia
stockholder or warrantholder upon surrender for exchange of certificates
previously representing Xedia stock or warrants. In lieu of any fractional
share, the stockholder will receive cash equal to the product obtained by
multiplying (1) the closing price for a share of Lucent common stock on the New
York Stock Exchange Composite Transactions Tape on the date immediately
preceding the date on which the merger is completed by (2) the fractional share
to which the stockholder or warrantholder would otherwise be entitled.

<PAGE> 60

EFFECTIVE TIME OF THE MERGER

The merger will become effective upon the filing of a certificate of
merger with the Secretary of State of the State of Delaware, or at such later
time as stated in the certificate of merger or agreed upon by Lucent and Xedia.
The filing of a certificate of merger will occur as soon as practicable, but no
later than the second business day after satisfaction or waiver of the
conditions to the completion of the merger described in the merger agreement
unless another date is agreed to by Lucent and Xedia.

STOCK EXCHANGE LISTING OF LUCENT COMMON STOCK

It is a condition to the completion of the merger that Lucent common stock
issued to Xedia stockholders and warrantholders in the merger and issuable in
connection with the Xedia stock options assumed by Lucent be authorized for
listing on the New York Stock Exchange, subject to official notice of issuance.

CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

The following discussion summarizes the material federal income tax
considerations relevant to the merger that are applicable to the stockholders
and warrantholders of Xedia. This discussion is based on existing provisions of
the Internal Revenue Code, existing Treasury Regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
Any such change, which may or may not be retroactive, could alter the tax
consequences to Lucent, Xedia, Xedia's stockholders or Xedia's warrantholders
as described herein.

This discussion does not deal with all federal income tax considerations
that may be relevant to particular Xedia stockholders and warrantholders in
light of their particular circumstances, such as stockholders or warrantholders
who are dealers in securities, who are subject to the alternative minimum tax
provisions of the Code, who are insurance companies or financial institutions,
who are foreign persons or entities, who do not hold their Xedia stock or
warrants as capital assets, who acquired their shares in connection with stock
option or stock purchase plans or in other compensatory transactions, or who
have previously entered into a transaction deemed to result in a constructive
sale of Xedia stock under the Code. In addition, the following discussion does
not address the tax consequences of the merger under foreign, state or local
tax laws, the tax consequences of transactions effectuated prior or subsequent
to, or concurrently with, the merger (whether or not any such transactions are
undertaken in connection with the merger), or the tax consequences of the
assumption by Lucent of outstanding options. ACCORDINGLY, XEDIA STOCKHOLDERS
AND WARRANTHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABLE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE MERGER.

Xedia has received an opinion from Hale and Dorr LLP, which has been filed
as an exhibit to the registration statement of which this proxy
statement/prospectus is a part, to the effect that

<PAGE> 61

the merger will be treated as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code. The opinion is subject to certain
assumptions, limitations and qualifications, and is based upon certain factual
representations of Lucent, its subsidiary formed to undertake the merger and
Xedia. In addition, the consummation of the merger is conditioned upon Hale and
Dorr LLP delivering an opinion to Xedia at the closing similar to the opinion
filed as an exhibit to the registration statement but which will be based upon
facts and factual representations of Lucent, its acquisition subsidiary and
Xedia as of the date of the closing. Assuming the merger is a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, then,
subject to the assumptions, limitations and qualifications referred to herein
and in the opinion, the merger should result in the following federal income
tax consequences:

(a) No gain or loss will be recognized by the stockholders and
warrantholders of Xedia stock who exchange their Xedia stock or warrants in the
merger solely for Lucent common stock (except to the extent of cash received in
lieu of a fractional share of Lucent common stock).

(b) The aggregate tax basis of the Lucent common stock received by a Xedia
stockholder or warrantholder in the merger (including any fractional share of
Lucent common stock not actually received) will be the same as the aggregate
tax basis of the Xedia stock or warrants surrendered therefor.

(c) The holding period of the Lucent common stock received by each Xedia
stockholder and each warrantholder in the merger will include the periods for
which the Xedia stock or warrants surrendered in exchange therefor were
considered to be held, provided that the Xedia stock or warrants so surrendered
were held as capital assets at the time of the merger.

(d) Cash payments received by holders of Xedia stock and warrants in lieu
of a fractional share will be treated as if such fractional share of Lucent
common stock had been issued in the merger and then redeemed by the combined
company. A Xedia stockholder or warrant holder receiving such cash will
recognize gain or loss, upon such payment, measured by the difference (if any)
between the amount of cash received and the basis in such fractional share.

(e) Each of Lucent, its subsidiary formed to participate in the merger and
Xedia will be a party to the reorganization, and as such will not recognize
gain or loss directly as a result of the merger.

The parties will not request a ruling from the Internal Revenue Service in
connection with the merger. Xedia stockholders and warrantholders should be
aware that neither the tax opinion contained as an exhibit to the registration
statement nor the tax opinion that is to be delivered at the closing of the
merger will bind the Internal Revenue Service, and the Internal Revenue Service
is therefore not precluded from successfully asserting a contrary opinion. In
addition, the tax opinion contained as an exhibit to the registration statement
and the tax opinion that is to be delivered at the closing of the merger are
subject to certain assumptions, limitations and qualifications, including but
not limited to the truth and accuracy of certain representations made by Lucent
and Xedia.

<PAGE> 62

A successful Internal Revenue Service challenge to the reorganization
status of the merger would result in Xedia stockholders and warrantholders
recognizing taxable gain or loss with respect to each share of Xedia stock and
each Xedia warrant surrendered equal to the difference between the holder's
basis in such share or warrant and the fair market value, as of the effective
time of the merger, of the Lucent common stock received in exchange therefor.
In such event, a stockholder's or warrantholder's aggregate basis in the Lucent
common stock so received would equal its fair market value as of the effective
time of the merger, and the holder's holding period for such stock would begin
the day after the merger.

RIGHTS OF STOCKHOLDERS TO APPRAISALS

The Delaware General Corporation Law grants appraisal rights in the merger
to the holders of Xedia common and preferred stock. Under the Delaware General
Corporation Law, Xedia stockholders may object to the merger, and demand in
writing that Xedia pay the fair value of their shares. Fair value takes into
account all relevant factors but excludes any appreciation or depreciation in
anticipation of the applicable merger. Stockholders who elect to exercise
appraisal rights must comply with all of the procedures to preserve those
rights. We have attached a copy of Section 262 of the Delaware General
Corporation Law (which sets forth the appraisal rights) as Annex C to the proxy
statement/prospectus.

Section 262 sets forth the required procedure a stockholder requesting
appraisal must follow. Making sure that you actually perfect your appraisal
rights can be complicated. The procedural rules are specific and must be
followed completely. Failure to comply with the procedure may cause a
termination of your appraisal rights. We are providing you only a summary of
your rights and the procedure. The following information is qualified in its
entirety by the provisions of Section 262. Please review Section 262 for the
complete procedure. Xedia will not give you any notice other than as described
in this proxy statement/prospectus and as required by the Delaware General
Corporation Law.

APPRAISAL RIGHTS PROCEDURES

If you are a Xedia stockholder and you wish to exercise your appraisal
rights, you must satisfy the provisions of Section 262 of the Delaware General
Corporation Law. Section 262 requires the following:

YOU MUST MAKE A WRITTEN DEMAND FOR APPRAISAL: You must deliver a
written demand for appraisal to Xedia before the vote on the merger
agreement is taken at the special meeting. This written demand for
appraisal must be separate from your proxy. In other words, a vote
against the Xedia merger agreement will not alone constitute demand
for appraisal.

YOU MUST REFRAIN FROM VOTING FOR APPROVAL OF THE MERGER: You must not
vote for approval of the merger agreement. If you vote, by proxy or in
person, in favor of the merger agreement, this will terminate your
right to appraisal. You can also terminate your right to appraisal if
you return a signed proxy and (i) fail to vote

<PAGE> 63

against approval of the merger or (ii) fail to note that you are
abstaining from voting. Your appraisal rights will be terminated even
if you previously filed a written demand for appraisal.

YOU MUST CONTINUOUSLY HOLD YOUR XEDIA SHARES: You must continuously
hold your shares of Xedia stock, from the date you make the demand for
appraisal through the closing of the merger. If you are the record
holder of Xedia stock on the date the written demand for appraisal is
made but thereafter transfer the shares prior to the merger, you will
lose any right to appraisal in respect of those shares. You should
read the paragraphs below for more details on making a demand for
appraisal.

A written demand for appraisal of Xedia stock is only effective if it is
signed by, or for, the stockholder of record who owns such shares at the time
the demand is made. The demand must be signed as the stockholder's name appears
on their stock certificate(s). If you are the beneficial owner of Xedia stock,
but not the stockholder of record, you must have the stockholder of record sign
a demand for appraisal.

If you own Xedia stock in a fiduciary capacity, such as a trustee,
guardian or custodian, you must disclose the fact that you are signing the
demand for appraisal in that capacity.

If you own Xedia stock with more than one person, such as in a joint
tenancy or tenancy in common, all of the owners must sign, or have signed for
them, the demand for appraisal. An authorized agent, which could include one or
more of the joint owners, may sign the demand for appraisal for a stockholder
of record; however, the agent must expressly disclose who the stockholder of
record is and that the agent is signing the demand as that stockholder's agent.

If you are a record owner, such as a broker, who holds Xedia stock as a
nominee for others, you may exercise a right of appraisal with respect to the
shares held for one or more beneficial owners, while not exercising such right
for other beneficial owners. In such a case, you should specify in the written
demand the number of shares as to which you wish to demand appraisal. If you do
not expressly specify the number of shares, we will assume that your written
demand covers all the shares of Xedia common stock that are in your name.

If you are a Xedia stockholder who elects to exercise approval rights, you
should mail or deliver a written demand to:

Xedia Corporation
50 Nagog Park
Acton, Massachusetts 01720
Attention: President

It is important that Xedia receive all written demands before the vote
concerning the merger agreement is taken at the special meeting. As explained
above, this written demand should be signed by, or on behalf of, the
stockholder of record. The written demand for appraisal should

<PAGE> 64

specify the stockholder's name and mailing address, the number of shares of
stock owned, and that the stockholder is thereby demanding appraisal of that
stockholder's shares.

If you fail to comply with any of these conditions and the merger becomes
effective, you will only be entitled to receive the merger consideration
provided in the merger agreement.

WRITTEN NOTICE: Within ten days after the closing of the merger, Xedia
must give written notice that the merger has become effective to each
stockholder who has fully complied with the conditions of Section 262.

PETITION WITH THE CHANCERY COURT: Within 120 days after the merger, either
the surviving corporation or any stockholder who has complied with the
conditions of Section 262, may file a petition in the Delaware Court of
Chancery. This petition should request that the chancery court determine the
value of the shares of stock held by all of the stockholders who are entitled
to appraisal rights. If you intend to exercise your rights of appraisal, you
should file such a petition in the chancery court. Xedia has no intention at
this time to file such a petition. Because Xedia has no obligation to file such
a petition, if you do not file such a petition within 120 days after the
closing, you will lose your rights of appraisal.

WITHDRAWAL OF DEMAND: If you change your mind and decide you no longer
want appraisal rights, you may withdraw your demand for appraisal rights at any
time within 60 days after the closing of the merger. You may also withdraw your
demand for appraisal rights after 60 days after the closing of your merger, but
only with the written consent of Xedia. If you effectively withdraw your demand
for appraisal rights, you will receive the merger consideration provided in
your merger agreement.

REQUEST FOR APPRAISAL RIGHTS STATEMENT: If you have complied with the
conditions of Section 262, you are entitled to receive a statement from Xedia.
This statement will set forth the number of shares that have demanded appraisal
rights, and the number of stockholders who own those shares. In order to
receive this statement, you must send a written request to Xedia within 120
days after the merger. After the merger, Xedia has ten days after receiving a
request to mail you the statement.

CHANCERY COURT PROCEDURES: If you properly file a petition for appraisal
in the chancery court and deliver a copy to Xedia, Xedia will then have 20 days
to provide the chancery court with a list of the names and addresses of all
stockholders who have demanded appraisal rights and have not reached an
agreement with Xedia as to the value of their shares. The chancery court will
then send notice to all of the stockholders who have demanded appraisal rights.
If the chancery court thinks it is appropriate, it has the power to conduct a
hearing to determine whether the stockholders have fully complied with Section
262 of the Delaware General Corporation Law and whether they are entitled to
appraisal rights under that section. The chancery court may also require you to
submit your stock certificates to the Registry in Chancery so that it can note
on the certificates that an appraisal proceeding is pending. If you do not
follow the chancery court's directions, you may be dismissed from the
proceeding.

<PAGE> 65

APPRAISAL OF SHARES: After the chancery court determines which
stockholders are entitled to appraisal rights, the chancery court will appraise
the shares of stock. To determine the fair value of the shares, the chancery
court will consider all relevant factors except for any appreciation or
depreciation due to the anticipation or accomplishment of the merger. After the
chancery court determines the fair value of the shares, it will direct Xedia to
pay that value to the stockholders who are entitled to appraisal rights. The
chancery court can also direct Xedia to pay interest, simple or compound, on
that value if the chancery court determines that interest is appropriate. In
order to receive your fair value for your shares, you must then surrender your
stock certificates to Xedia.

The chancery court could determine that the fair value of shares of stock
is more than, the same as, or less than the merger consideration. In other
words, if you demand appraisal rights, you could receive less consideration
than you would under the merger agreement. You should also be aware that an
opinion of an investment banking firm that the merger is fair is not an opinion
that the merger consideration is the same as the fair value under Section 262.

COSTS AND EXPENSES OF APPRAISAL PROCEEDING: The costs and expenses of the
appraisal proceeding may be assessed against Xedia and the stockholders
participating in the appraisal proceeding, as the chancery court deems
equitable under the circumstances. You can request that the chancery court
determine the amount of interest, if any, Xedia should pay on the value of
stock owned by stockholders entitled to the payment of interest. You may also
request that the chancery court allocate the expenses of the appraisal action
incurred by any stockholder pro rata against the value of all of the shares
entitled to appraisal.

LOSS OF STOCKHOLDER'S RIGHTS: If you demand appraisal rights, after the
closing of the merger you will not be entitled to:

- vote your shares of stock, for any purpose, for which you have
demanded appraisal rights;

- receive payment of dividends or any other distribution with respect
to such shares, except for dividends or distributions, if any, that
are payable to holders of record as of a record date prior to the
effective time of the merger; or

- receive the payment of the consideration provided for in the merger
agreement (unless you properly withdraw your demand for appraisal).

If no petition for an appraisal is filed within 120 days after the closing
of the merger, your right to an appraisal will cease. You may withdraw your
demand for appraisal and accept the merger consideration by delivering to Xedia
a written withdrawal of your demand, except that (1) any attempt to withdraw
made more than 60 days after the closing of the merger will require the written
approval of Xedia, and (2) an appraisal proceeding in the chancery court cannot
be dismissed unless the chancery court approves.

<PAGE> 66

If you fail to comply strictly with the procedures described above you
will lose your appraisal rights. Consequently, if you wish to exercise your
appraisal rights, we strongly urge you to consult a legal advisor before
attempting to exercise your appraisal rights.

EFFECT ON AWARDS OUTSTANDING UNDER XEDIA STOCK PLAN

At the effective time of the merger, Lucent will assume Xedia's 1993 stock
option plan. Each stock option to acquire shares of Xedia common stock under
the plan will be amended and converted into a stock option to acquire shares of
Lucent common stock on the same terms and conditions. The number of shares of
Lucent common stock to be subject to each Xedia option assumed by Lucent will
be equal to the number of shares of Xedia common stock subject to the Xedia
option multiplied by the 0.216997 exchange ratio and rounded down to the
nearest whole share. The exercise price per share of Lucent common stock under
each Xedia option assumed by Lucent will be equal to the exercise price per
share of Xedia common stock subject to the Xedia option divided by the 0.216997
exchange ratio, rounded to the nearest one hundredth of a cent. As of August
12, 1999, the number of shares of Xedia common stock reserved for issuance
pursuant to outstanding stock options under the plan was 5,950,000.

Prior to the merger, Lucent will take all necessary actions to assume
Xedia's 1993 stock option plan. No later than 30 days following the merger,
Lucent will prepare and file with the Securities and Exchange Commission an
appropriate registration statement registering the shares of Lucent common
stock subject to the assumed Xedia stock options. That registration statement
will be kept effective (and the current status of the prospectus required by
that registration statement will be maintained in accordance with the relevant
requirements of the Securities Act and the Exchange Act) for so long as any
assumed Xedia options remain outstanding.

RESALE OF LUCENT COMMON STOCK

Lucent common stock issued in the merger will not be subject to any
restrictions on transfer arising under the Securities Act of 1933, except for
shares issued to any Xedia stockholder who may be deemed to be an "affiliate"
of Xedia or Lucent for purposes of Rule 145 under the Securities Act or for
purposes of qualifying the merger for pooling of interests accounting
treatment. An affiliate of Xedia or Lucent is any individual or entity that (1)
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, Xedia or Lucent, respectively,
or (2) owns more than 7.5% of the capital stock or equity interest in Xedia or
Lucent, respectively. It is expected that each affiliate will agree not to
transfer any Lucent common stock received in the merger except in compliance
with the resale provisions of Rule 144 or 145 under the Securities Act or as
otherwise permitted under the Securities Act and will make no disposition of
any Lucent common stock received in connection with the merger unless, in the
opinion of counsel to Lucent, the transaction will not have any adverse
consequences for Lucent with respect to the treatment of the merger for tax
purposes. In addition, it is expected that each affiliate will agree not to
make any disposition beginning 30 days prior to the merger until after the date
on which financial results covering at least 30 days of combined operations of
Lucent and Xedia after the merger have been published. The merger agreement
requires Xedia to use its reasonable best efforts to cause its affiliates to
enter into these

<PAGE> 67

agreements, and Lucent has agreed to use its reasonable best efforts to cause
its affiliates to comply with the transfer restrictions referred to in the
preceding sentence. This proxy statement/prospectus does not cover resales of
Lucent common stock received by any person upon completion of the merger, and
no person is authorized to make any use of this proxy statement/prospectus in
connection with any resale.

THE MERGER AGREEMENT

The following description summarizes the material provisions of the merger
agreement. We urge stockholders to read carefully the merger agreement, which
is attached as Annex A of this proxy statement/prospectus.

CONDITIONS TO THE COMPLETION OF THE MERGER

Each party's obligation to effect the merger is subject to the
satisfaction or waiver of various conditions which include, in addition to
other customary closing conditions, the following:

- each of the following must vote to approve the merger agreement:
(1) holders of a majority of the outstanding shares of Xedia common
stock and convertible preferred stock voting together as a single
class, (2) holders of a majority of the outstanding shares of each
of the Series C convertible preferred stock, the Series D
convertible preferred stock and the Series E convertible preferred
stock, each voting as a separate class, and (3) at least two of the
following three holders of Series D convertible preferred stock:
Greylock Equity Limited Partnership, J.P.M. International and
D.R.L. Jones

- each of the following must vote to approve the amendment to the
certificate of incorporation of Xedia: (1) holders of a majority of
the outstanding shares of Xedia common stock and convertible
preferred stock voting together as a single class, (2) holders of a
majority of the outstanding shares of Xedia convertible preferred
stock voting together as a single class, and (3) holders of a
majority of the outstanding shares of each of the Series C
convertible preferred stock, Series D convertible preferred stock
and Series E convertible preferred stock, each voting as a separate
class

- the amendment to Xedia's certificate of incorporation of must be in
full force and effect

<PAGE> 68

- Xedia and Lucent must comply with their respective agreements and
conditions in all material respects

- no material adverse change in the assets, business, financial
condition or operations of either party may occur and no event or
events may occur that could reasonably

<PAGE> 69

be expected to have a material adverse effect on the other party
other than as a result of (1) general economic conditions, (2)
business and economic conditions generally affecting the data
networking industry, (3) liabilities incurred in connection with
the merger agreement or the transactions contemplated by it, or (4)
resulting from the announcement of the transactions contemplated by
the merger agreement

- Xedia must receive all necessary consents to the merger and waivers
required by the schedules to the merger agreement

- Lucent and Xylophone Acquisition must receive the favorable written
opinions dated the closing date of special counsel to Xedia, in
form satisfactory to Lucent and Xylophone Acquisition

- Lucent must deliver to each of Ashley Stephenson, Robert A.
Steinkrauss and Jeremy Greene letters relating to their employment
with Lucent following the merger

In addition, the parties' obligation to effect the merger is further
subject to the satisfaction or waiver of various additional conditions
including the following:

- all authorizations, consents, orders, declarations or approvals of,
or filings with, or terminations or expirations of waiting periods
imposed by, any governmental or regulatory authority must be
obtained, made or occur unless the failure to obtain, make or occur
(1) would not have the effect of making the merger or any of the
transactions contemplated in the merger agreement illegal, assuming
the merger had occurred, or (2) would not have a material adverse
effect on Lucent or Xedia, assuming the merger had occurred

- Lucent and the exchange agent must enter into an exchange agent
agreement

- Lucent and Xedia each must sign and deliver letters relating to
certain tax matters

- Xedia, Lucent and their affiliates each must execute and deliver a
letter relating to pooling of interests substantially in the forms
specified in the merger agreement and each such letter must be true
and correct in all respects and in full force and effect

<PAGE> 70

- Lucent, Xedia, the escrow agent and Xedia's stockholder
representative must enter into an escrow agreement

- Lucent, as the sole stockholder of Xylophone Acquisition, must
approve the merger agreement

- Lucent must receive a certificate at the closing from Xedia
certifying that each of Xedia and its subsidiaries has never been
and is not a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Internal Revenue Code

- in the case of Lucent only, each director and officer of Xedia must
cease to act in such capacity

- in the case of Lucent only, certain individuals of Xedia must enter
into non-competition agreements with Xedia, and those agreements
must be in full force and effect

The merger agreement defines a "material adverse effect" when used in
connection with Lucent or Xedia as any condition or event that may:

- have a material adverse effect on the assets, business, financial
condition or operations of Lucent or Xedia as applicable, in each
case, taken as a whole with its subsidiaries, if any

- materially impair the ability of Lucent or Xedia to perform its
obligations under the merger agreement

- prevent or delay the consummation of the transactions contemplated
under the merger agreement

NO OTHER NEGOTIATIONS INVOLVING XEDIA

<PAGE> 71

The merger agreement also provides that Xedia will promptly advise Lucent
of any acquisition proposal and inquiries with respect to any acquisition
proposal. An acquisition proposal is any proposal for a merger or other
business combination involving Xedia or any of its affiliates or any proposal
or offer to acquire in any manner, directly or indirectly, an equity interest
in Xedia or any of its affiliates, any voting securities of Xedia or any of its
affiliates or a substantial portion of Xedia's assets (other than sales of
Xedia's products in the ordinary course of business consistent with past
practice).

TERMINATION

The merger agreement may be terminated at any time prior to the merger,
whether before or after approval of the merger agreement by the stockholders of
Xedia:

- by mutual agreement of Lucent, Xylophone Acquisition and Xedia

- by Lucent, Xylophone Acquisition or Xedia, if the merger has not
been completed by December 31, 1999

- by Lucent or Xedia, if the other party has materially breached its
obligations under the merger agreement, unless the breach is cured
within 15 calendar days after notice to the other party

CONDUCT OF BUSINESS PENDING THE MERGER

Pursuant to the merger agreement, Xedia has agreed that, prior to the
merger, it will and will cause each of its subsidiaries to:

- maintain its existence in good standing

- maintain the general character of its business and properties and
conduct its business in the ordinary and usual manner consistent
with past practices, except as expressly permitted by the merger
agreement

- maintain business and accounting records consistent with past
practices

- use its reasonable best efforts to preserve its business intact, to
keep available the services of its present officers and employees,
and to preserve the goodwill of its suppliers, customers and others
having business relations with Xedia or any of its subsidiaries

<PAGE> 72

In addition, Xedia has agreed that, subject to certain exceptions provided
in the merger agreement or approved by Lucent in writing, it will not and will
not permit any of its subsidiaries to:

- amend or otherwise change its certificate of incorporation or
by-laws

- issue, sell or authorize for issuance or sale, or grant any options
or make any other agreements with respect to, any shares of its
capital stock or other securities except for (1) the grant of stock
options to purchase up to an aggregate of 100,000 shares of Xedia
common stock granted to Xedia employees hired after August 12, 1999
consistent with past practice and with an exercise price reflecting
Xedia common stock's fair market value and which are granted in the
ordinary course of business and (2) those provisions of the merger
agreement with the exchange agent which provisions are in
furtherance of the merger agreement

- declare, set aside, make or pay any dividend or other distribution
payable in cash, stock, property or otherwise with respect to any
of its capital stock

- reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock

- acquire any corporation, partnership, other business organization
or any division thereof or any material amount of assets (or enter
into or amend any contract, agreement, commitment or arrangement
with respect to the same)

- incur any indebtedness for borrowed money (other than up to
$5 million in working capital financing from Lucent or as disclosed
on schedules to the merger agreement) or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person, or make any
loans or advances, except for certain interest and fees on
indebtedness set forth in the merger agreement incurred in the
ordinary course of business and consistent with past practice

- enter into or amend any contract or agreement, or a series of
related contracts, in excess of $100,000 other than in the ordinary
course of business and consistent with past practice (or enter into
or amend any commitment or arrangement with respect to the same)

- authorize any capital commitment which is in excess of $25,000 or
capital expenditures which are, in the aggregate, in excess of
$100,000 (or enter into or amend any contract, agreement,
commitment or arrangement with respect to the same)

- mortgage, pledge or subject to lien, any of its assets or
properties or agree to do so except for certain permitted liens
under the merger agreement

<PAGE> 73

- assume, guarantee or otherwise become responsible for the
obligations of any other person or agree to so do

- enter into or agree to enter into or terminate prior to the
expiration date any employment agreement or increase the number of
Xedia employees above 108

- (1) increase the compensation or benefits payable or to become
payable to its officers or employees, except for increases to
employees of Xedia or any of its subsidiaries who are not officers
in the ordinary course of business and in accordance with past
practices in salaries or wages of employees of Xedia or such
subsidiary who are not officers of Xedia or such subsidiary, (2)
grant any severance or termination pay to, or enter into any
severance agreement with any director, officer or other employee of
Xedia or any of its subsidiaries, or (3) establish, adopt, enter
into or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any such director, officer or
employee

- take any action, other than in the ordinary course of business and
consistent with past practice, with respect to accounting policies
or procedures

- make any material tax election or settle or compromise any material
federal, state, local or foreign income tax liability

- settle or compromise any pending or threatened suit, action or
claim which is material or which relates to any of the transactions
contemplated by the merger agreement

- pay, discharge or satisfy any claim, liability or obligation, other
than (1) the payment, discharge or satisfaction, in the ordinary
course of business and consistent with past practice, of
liabilities reflected or reserved against in the audited balance
sheets of Xedia and its subsidiaries as of December 31, 1998 or
subsequently incurred in the ordinary course of business and
consistent with past practice and (2) other claims, liabilities or
obligations that do not exceed $25,000 in the aggregate and as to
which Xedia's or any of its subsidiaries' failure to so pay,
discharge or satisfy could not reasonably be expected to have a
material adverse effect

- except in connection with the sale or licensing of Xedia's products
in the ordinary course of business and consistent with past
practice, sell, assign, transfer, license, sublicense, pledge or
otherwise encumber any of Xedia's intellectual property rights

- announce an intention to do any of the foregoing

<PAGE> 74

AMENDMENT; EXTENSION AND WAIVER

Subject to applicable law:

- except as provided in Section 251(d) of the Delaware General
Corporation Law, the merger agreement may be amended, modified or
supplemented by the parties in writing at any time prior to the
effective time of the merger notwithstanding approval of such
amendment, modification or supplementation by the stockholders of
Xedia or Xylophone Acquisition as applicable

- waiver of a compliance or consent with respect to the merger
agreement must be in a writing signed by Lucent, Xylophone
Acquisition and Xedia.

EXPENSES

Lucent and Xedia will each pay its own expenses incidental to the merger
and the preparation of the merger agreement, whether or not the merger is
consummated.

REPRESENTATIONS AND WARRANTIES

The merger agreement contains customary representations and warranties
relating to, among other things:

- corporate organization and similar corporate matters of Lucent,
Xylophone Acquisition and Xedia

- subsidiaries of Xedia

- the capital structure of Lucent and Xedia

- authorization, execution, delivery, performance and enforceability
of, and required consents, approvals, orders and authorizations of
governmental authorities relating to, the merger agreement and
related matters of Lucent, Xylophone Acquisition and Xedia

- documents filed by Lucent with the Securities and Exchange
Commission, the accuracy of information contained in those
documents and the absence of undisclosed liabilities of Lucent

- financial statements provided by Xedia to Lucent, the fairness of
those financial statements and the absence of undisclosed
liabilities of Xedia

- the accuracy of information supplied by each of Lucent and Xedia in
connection with this proxy statement/prospectus and the
registration statement of which it is a part

<PAGE> 75

- absence of material changes or events concerning Lucent and Xedia

- compliance with applicable laws by Xedia

- matters relating to the benefit plans of Xedia

- matters relating to the Employee Retirement Income Security Act for
Xedia

- filing of tax returns and payment of taxes by Xedia

- required stockholder vote of Xedia

- absence of actions by Lucent or Xedia that would prevent accounting
for the merger as a pooling of interests

- absence of actions by Lucent or Xedia that would prevent the merger
from qualifying as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code

- engagement and payment of fees of brokers, investment bankers and
financial advisors by each of Lucent and Xedia

- intellectual property and year 2000 matters of Xedia

- outstanding and pending material litigation of each of Lucent and
Xedia

- good and valid title to property of Xedia

- customers and suppliers of Xedia

- certain leases and contracts entered into by Xedia and absence of
default by Xedia under those leases and contracts

- accounts receivable and inventory of Xedia

- bank accounts, letters of credit and power of attorneys of Xedia

- affiliate transactions of Xedia

- insurance matters

- certain employment matters regarding Xedia

- the assets and properties of Xedia and their condition

<PAGE> 76

- liability of Xedia under environmental laws

- interim operations of Xylophone Acquisition

- compliance with export control laws and regulations

- financial projections of Xedia

ADDITIONAL AGREEMENTS

The merger agreement contains certain other agreements, relating to, among
other things:

- actions to be taken by Xedia and Lucent relating to the assumption
of Xedia's 1993 stock option plan by Lucent

- employee benefits plans, programs and arrangements to be provided
by Lucent

- indemnification by Lucent of directors and officers of Xedia and
its subsidiaries and maintenance by Lucent of directors' and
officers' liability insurance as described below under the caption
"--Indemnification and Insurance."

- indemnification of Lucent pursuant to an escrow agreement described
below under the caption "--Indemnification and Escrow Agreement."

INDEMNIFICATION AND INSURANCE

The merger agreement provides that Lucent will, or will cause the
surviving corporation to fulfill and honor in all respects the obligations of
Xedia to indemnify each person who is or was a director or officer of Xedia or
any of its subsidiaries pursuant to any indemnification provision of the
certificate of incorporation or by-laws or equivalent constituent documents of
Xedia or any of its subsidiaries as each was in effect on the date of the
merger agreement. Lucent will maintain for six years after the merger
directors' and officers' liability insurance under customary terms and
conditions for acts or omissions of each person who is or was a director or
officer of Xedia or any of its subsidiaries which occur prior to the merger.

AMENDMENTS TO XEDIA'S CERTIFICATE OF INCORPORATION

As of the effective time of the merger, the certificate of incorporation
of Xylophone Acquisition, as in effect immediately prior to the merger, will be
the certificate of incorporation of the surviving corporation except that it
will be amended to provide that the name of the surviving corporation is Xedia
Corporation. For a summary of certain provisions of the current Xedia
certificate of incorporation and the associated rights of Xedia stockholders,
see "Comparison of Rights of Common Stockholders of Lucent and Stockholders of
Xedia" on page 71.

<PAGE> 77

AMENDMENTS TO THE XEDIA BY-LAWS

The merger agreement provides that the by-laws of Xylophone Acquisition,
as in effect immediately prior to the merger, will be the by-laws of the
surviving corporation following the merger until changed or amended. For a
summary of certain provisions of the current Xedia by-laws and the associated
rights of Xedia stockholders, see "Comparison of Rights of Common Stockholders
of Lucent and Stockholders of Xedia" on page 71.

WORKING CAPITAL FINANCING

The merger agreement provides that Lucent is to provide up to $5 million
in working capital financing to Xedia at Xedia's request for a term of one-year
on commercially reasonable terms and conditions consistent with past practice
and reasonably acceptable to Lucent and Xedia.

INDEMNIFICATION AND ESCROW AGREEMENT

The merger agreement provides that 291,620 shares of Lucent common stock
will be deposited in escrow with an escrow agent as soon as practicable after
the closing date of the merger. The number of shares of Lucent common stock to
be received by each Xedia stockholder will be reduced by approximately 10% of
the shares of Lucent common stock the stockholders would otherwise be entitled
to receive. The escrow account is the only source available to compensate
Lucent for the indemnification obligations of each holder of Xedia stock under
the merger agreement, except that Lucent may elect not to have recourse to the
escrow account for any claim of fraud.

The Xedia stockholders have agreed to indemnify Lucent and its officers,
directors, employees, agents and advisors, from and against any and all damages
and liabilities (including reasonable legal fees) arising out of (1) any
inaccuracy in any representation or warranty made by Xedia in the merger
agreement, and (2) any breach or default by Xedia of any of the covenants or
agreements given or made by any of them in the merger agreement.

With respect to claims for indemnification arising out of any inaccuracy
in any representation or warranty made by Xedia in the merger agreement or in
exhibits or schedules to the merger agreement, Lucent may not seek
indemnification until the aggregate amount of all damages for which Lucent is
seeking indemnification is at least $750,000, in which case Lucent may seek
indemnification for damages in excess of that amount.

The escrow fund will terminate on the first anniversary of the closing
date of the merger. On the first anniversary, all shares of Lucent common stock
remaining in the escrow fund will be released except for shares as to which
Lucent has made a claim before the first anniversary and which claim is
unresolved. The shares that are subject to a claim by Lucent will be held in
the escrow fund pending resolution of the claim. Escrowed shares that are
released from the escrow fund will be promptly delivered by the escrow agent to
the Xedia stockholders' representative and

<PAGE> 78

will be distributed to Xedia's stockholders in accordance with each
stockholder's percentage of the escrow fund.

The merger agreement provides that Robert A. Steinkrauss is appointed as
representative for and on behalf of Xedia stockholders to take all actions
necessary or appropriate in his judgment for the accomplishment of the terms of
the merger agreement. The holders of a majority in interest of the shares of
Lucent common stock held in the escrow fund may replace the stockholders'
representative upon not less than 10 days' prior written notice to Lucent. The
stockholders' representative will not be required to provide a bond and will
not receive any compensation for his services. Notices of communications to or
from the stockholders' representative will constitute notice to or from each of
the Xedia stockholders. If the stockholders' representative dies or is
otherwise no longer able or willing to serve as the stockholders'
representative, a new stockholders' representative shall be chosen by Xedia
stockholders holding a majority of the shares of Lucent common stock issued in
connection with the merger.

The stockholders' representative will not be liable for any act done or
omitted in such capacity while acting in good faith and in the exercise of
reasonable judgment, and any act done or omitted pursuant to the advice of
counsel will be conclusive evidence of such good faith. Xedia stockholders will
severally indemnify the stockholders' representative and hold him harmless
against any loss, liability or expense (including any expenses of legal counsel
retained by the stockholders' representative) incurred without gross negligence
or bad faith on his part and arising out of or in connection with the
acceptance or administration of his duties.

Any decision, act, consent or instruction of the stockholders'
representative will constitute a decision of all Xedia stockholders and will be
final, binding and conclusive upon every Xedia stockholder, and the escrow
agent and Lucent may rely upon any decision, act, consent or instruction of
each and every Xedia stockholder. The escrow agent and Lucent are relieved from
any liability to any person for acts done by them in accordance with such
decision, act, consent or instruction of the stockholders' representative.

<PAGE> 79
AMENDMENT TO XEDIA'S
CERTIFICATE OF INCORPORATION

Xedia's certificate of incorporation currently provides that with respect
to the liquidation preferences set forth in the certificate, a consolidation or
merger of Xedia with or into another corporation or entity in a transaction
involving the disposition of more than 50% of the voting power of Xedia, or a
sale of all or substantially all of the assets of Xedia, collectively referred
to as a consolidation, shall be regarded as a liquidation, dissolution or
winding up of Xedia. On August 11, 1999, the board of directors of Xedia
adopted resolutions, subject to stockholder approval, proposing that Xedia's
certificate of incorporation be amended to provide that with respect to the
liquidation preferences set forth in the certificate such a consolidation,
merger or sale shall not be deemed to be a liquidation, dissolution or winding
up of Xedia.

PROPOSED AMENDMENT TO XEDIA'S CERTIFICATE OF INCORPORATION

Xedia's board of directors has adopted resolutions setting forth the
proposed amendment to Section 2(c) of Part B of Article FOURTH of Xedia's
certificate of incorporation, the advisability of the amendment, and a call for
submission of the amendment for approval by Xedia's stockholders at the special
meeting. The following is the text of Section 2(c) of Part B of Article FOURTH
of the certificate of incorporation, as proposed to be amended:

"(c) For purposes of this Section 2, a consolidation or merger of the
Corporation with or into another corporation or entity in a transaction
involving the disposition of more than 50% of the voting power of the
Corporation, or a sale of all or substantially all of the assets of the
Corporation, shall not be deemed to be a liquidation, dissolution or winding up
of the Corporation."

PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT

Xedia's board of directors believes that it is in Xedia's best interest to
approve the certificate of incorporation amendment. Under the current provision
in the certificate of incorporation, in the case of a consolidation, merger or
sale, including in the case of the merger contemplated by this proxy
statement/prospectus, holders of Xedia preferred stock would only be entitled
to receive liquidation rights, as determined in accordance with the certificate
of incorporation, unless the holders exercise their rights to convert their
Xedia preferred stock into Xedia common stock. To exercise their conversion
rights, the holders of Xedia preferred stock must surrender to Xedia the
certificate(s) representing their shares of Xedia preferred stock, along with
written notice of their election to convert their shares. Xedia must, as soon
as practicable after receipt of the certificates and notice, issue and deliver
to the stockholder certificates for the number of shares of Xedia common stock
to which the stockholder is entitled, along with cash in lieu of any fractional
shares of Xedia common stock to which the stockholder would otherwise be
entitled.

In the case of the proposed merger, the value of the liquidation rights
payable to holders of Xedia preferred stock is significantly lower than the
value of the consideration which the holders would receive if they converted
their Xedia preferred stock into Xedia common stock prior to the merger.
Therefore, Xedia's board of directors expects that, as Section 2(c) of Part B
of Article FOURTH of Xedia's certificate of incorporation is currently written,
all holders of Xedia preferred stock would exercise their conversion rights
prior to the merger, resulting in the need to administer the conversion and the
issuance of new Xedia common stock certificates, which will be eliminated if
the amendment is approved.

If the amendment is approved, holders of Xedia preferred stock would not
need to exercise their conversion rights in order to receive the merger
consideration to which they are entitled by the merger agreement. In addition,
the amendment to Xedia's certificate of incorporation eliminates the risk that
a holder of Xedia preferred stock might fail to exercise its conversion rights
in a timely manner and consequently receive the lower consideration payable if
the merger transaction is treated as a liquidation.

XEDIA'S BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF THE AMENDMENT TO
THE CERTIFICATE OF INCORPORATION IS IN THE BEST INTERESTS OF XEDIA AND ITS
STOCKHOLDERS AND RECOMMENDS A VOTE IN FAVOR OF AMENDMENT.

<PAGE> 80
AMENDMENT TO XEDIA'S 1993 STOCK OPTION PLAN

On March 12, 1999, the board of directors of Xedia adopted a resolution,
subject to stockholder approval, authorizing an amendment to Xedia's 1993 stock
option plan to increase the number of shares of Xedia common stock authorized
for issuance under the plan from 4,700,000 to 5,950,000 shares and subsequently
authorized stock option grants for the purchase of an aggregate of 392,353 in
excess of the previously reserved 4,700,000 shares under the plan. Therefore,
stockholder approval is required for those shares as well as any future option
grants prior to the consummation of the merger.

Xedia's board of directors adopted the plan amendment to provide additional
equity to satisfy Xedia's incentive compensation needs. Xedia's board of
directors believes that grants of stock options have been an important element
in attracting and retaining key employees who are expected to contribute to
Xedia's growth and success. The board of directors of Xedia believes that the
ability to grant stock options will remain an important element in attracting
and retaining key employees, either in the event that the merger is not
consummated, or, if the stockholders approve the merger, until the closing of
the merger.

No additional stock options will be issued in connection with the amendment
to Xedia's 1993 stock option plan, except for the grant of stock options to
acquire up to 100,000 shares of Xedia common stock which may be granted to Xedia
employees hired after August 12, 1999 in accordance with the merger agreement.

XEDIA'S BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF THE PLAN AMENDMENT
IS IN THE BEST INTERESTS OF XEDIA AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE IN
FAVOR OF AMENDMENT. APPROVAL OF THE AMENDMENT TO XEDIA'S 1993 STOCK OPTION PLAN
IS NOT A CONDITION TO THE MERGER.

SUMMARY OF THE PLAN

The plan was adopted by Xedia's board of directors and approved by Xedia's
stockholders in June 1993. The purpose of the plan is to secure for Xedia and
its stockholders the benefits arising from stock ownership by employees,
officers and directors of, and consultants or advisors to, Xedia, its
subsidiaries and any parent corporation, who are expected to contribute to
Xedia's future growth and success.

The plan provides for the grant of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986 or non-statutory
options which are not intended to qualify as incentive stock options. Generally,
options granted under the plan are not assignable or transferable except by will
or the laws of descent and distribution and, in the case of non-statutory
options, pursuant to a qualified domestic relations order.

<PAGE> 81

Participants receive the right to purchase a specified number of shares of
Xedia common stock at a specified option price and subject to such other terms
and conditions as are specified in connection with the option grant. Subject to
the limitations described below, options may be granted at an exercise price
which may be less than, equal to or greater than the fair market value of the
Xedia common stock on the date of grant. Under present law, however, incentive
stock options may not be granted at an exercise price less than the fair market
value of the Xedia common stock on the date of grant (or less than 110% of the
fair market value in the case of incentive stock options granted to participants
holding more than 10% of the total combined voting power of Xedia and any parent
and subsidiary corporations). Incentive stock options may not be granted for a
term in excess of ten years (or, in the case of incentive stock options granted
to participants holding more than 10% of the total combined voting power of
Xedia and any parent and subsidiary corporations, options may not be granted for
a term in excess of five years). Options granted under the plan may provide for
the payment of the exercise price by delivery of cash, a check payable to the
order of Xedia, or, to the extent provided in the applicable option agreement,
by surrender to Xedia of shares of Xedia common stock, by delivery to Xedia of a
promissory note, by any other lawful means or any combination of these methods.

The plan is administered by Xedia's board of directors. The board selects
the persons to whom options are granted and determines the terms of each option,
including (1) the number of shares of Xedia common stock covered by each option
and the dates upon which the option becomes exercisable, (2) the exercise price
of options and (3) the duration of options.

Xedia's board of directors may, in its sole discretion, include additional
provisions in any option granted under the plan, including without limitation
restrictions on transfer, repurchase rights, commitments to pay cash bonuses, to
make, arrange for or guarantee loans or to transfer other property to
participants upon exercise of options, or such other provisions as shall be
determined by the board of directors, so long as not inconsistent with the plan
or applicable law. Xedia's board of directors may also, in its sole discretion,
accelerate or extend the date or dates on which all options or any particular
option granted under the plan may be exercised.

Xedia's board of directors may make appropriate adjustments to the plan and
any outstanding options to reflect stock dividends, stock splits and certain
other events. In the event of a merger, liquidation or certain other events,
Xedia's board of directors is authorized to provide for outstanding options to
be assumed or substituted for, to provide that all unexercised options will
terminate immediately unless exercised by the participant within a specified
period following written notice to the participant, to accelerate the awards to
make them fully exercisable prior to consummation of the event, or to provide
for a cash out of the value of any outstanding options. If any option expires or
is terminated, the unused shares of Xedia common stock covered by such award
will again be available for grant under the plan.

The plan will remain in effect until June 14, 2003 (except that options
outstanding on that date will continue to have effect in accordance with the
applicable option agreements). Xedia's board of directors may at any time modify
or amend the plan in any respect, provided that no amendment shall be made
without stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement.

<PAGE> 82

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the United States federal income tax
consequences that generally will arise with respect to options granted under the
plan and with respect to the sale of common stock acquired under the plan.

INCENTIVE STOCK OPTIONS. In general, a participant will not recognize
taxable income upon the grant or exercise of an incentive stock option. Instead,
a participant will recognize taxable income with respect to an incentive stock
option only upon the sale of common stock acquired through the exercise of the
option, which is referred to as ISO stock. The exercise of an incentive stock
option, however, may subject the participant to the alternative minimum tax.

Generally, the tax consequences of selling ISO stock will vary with the
length of time that the participant has owned the ISO stock at the time it is
sold. If the participant sells ISO stock after having owned it for at least two
years from the date the option was granted and one year from the date the option
was exercised, then the participant will recognize long-term capital gain in an
amount equal to the excess of the sale price of the ISO stock over the exercise
price.

If the participant sells ISO stock for more than the exercise price prior
to having owned it for at least two years from the grant date and one year from
the exercise date, which is referred to as a disqualifying disposition, then all
or a portion of the gain recognized by the participant will be ordinary
compensation income and the remaining gain, if any, will be a capital gain. This
capital gain will be long-term capital gain if the participant has held the ISO
stock for more than one year prior to the date of sale.

If a participant sells ISO stock for less than the exercise price, then the
participant will recognize capital loss in an amount equal to the excess of the
exercise price over the sale price of the ISO stock. This capital loss will be
long-term capital loss if the participant has held the ISO stock for more than
one year prior to the date of sale.

NON-STATUTORY STOCK OPTIONS. As in the case of an incentive stock option, a
participant will not recognize taxable income upon the grant of a non-statutory
stock option. Unlike the case of an incentive stock option, however, a
participant who exercises a non-statutory stock option generally will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the common stock acquired through the exercise of the option, which is
referred to as NSO stock, on the exercise date over the exercise price.

With respect to any NSO stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the NSO
stock and the participant's tax basis in the NSO stock. This capital gain or
loss will be long-term capital gain or loss if the participant has held the NSO
stock for more than one year prior to the date of the sale.

TAX CONSEQUENCES TO XEDIA. The grant of an option under the plan will have
no tax consequences to Xedia. Moreover, in general, neither the exercise of an
incentive stock option nor the sale of any common stock acquired under the plan
will have any tax consequences to Xedia. Xedia generally will be entitled to a
business-expense deduction, however, with respect to any ordinary compensation
income recognized by a participant under the plan, including as a result of the
exercise of a non-statutory stock option or a disqualifying disposition.

<PAGE> 83

STOCK PRICES AND DIVIDENDS

Lucent common stock is listed for trading on the New York Stock Exchange
under the trading symbol "LU". The following table sets forth, for the periods
indicated, dividends and the high and low sales prices per share of Lucent
common stock on the New York Stock Exchange Composite Transactions Tape.
Lucent's per share data has been restated to account for Lucent's two-for-one
stock splits effective on April 1, 1999 and on April 1, 1998. For current price
information, stockholders are urged to consult publicly available sources.
Because there is no established trading market for shares of Xedia stock,
information with respect to the market prices of Xedia stock has been omitted.

<TABLE>
<CAPTION>
LUCENT
COMMON STOCK
-------------
DIVIDENDS
CALENDAR PERIOD HIGH LOW DECLARED
- --------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
1996
Second Quarter $9 13/16 $ 7 7/16 $0.019
Third Quarter 11 15/32 7 21/32 0.019
Fourth Quarter 13 9/32 10 17/32 0.019

1997
First Quarter $15 5/32 $11 3/16 $0.000
Second Quarter 18 35/64 12 15/32 0.019
Third Quarter 22 11/16 18 3/64 0.019
Fourth Quarter 22 35/64 18 3/32 0.038

1998
First Quarter $32 1/16 $18 23/64 $0.000
Second Quarter 41 27/32 32 0.020
Third Quarter 54 1/4 34 3/16 0.020
Fourth Quarter 56 15/16 26 23/32 0.040

1999
First Quarter $60 $47 $0.000
Second Quarter 68 11/16 51 7/8 0.020
Third Quarter 0.020
(through 1999)
</TABLE>

The following table sets forth the high and low sales prices per share of
Lucent common stock on the New York Stock Exchange Composite Transactions Tape
on August 12, 1999, the last trading day before the public announcement of the
merger agreement, and on , 1999, the

<PAGE> 84

last trading day before the date of this proxy statement/prospectus. Because
there is no established trading market for shares of Xedia stock, information
with respect to the market prices of Xedia stock has been omitted.

<TABLE>
<CAPTION>
LUCENT
COMMON STOCK
------------------
HIGH LOW
---- ---
<S> <C> <C>
August 12, 1999 $64 1/4 $62 7/8
, 1999
</TABLE>

DESCRIPTION OF LUCENT CAPITAL STOCK

The following summary of the capital stock of Lucent is subject in all
respects to applicable Delaware law, Lucent's certificate of incorporation and
by-laws and Lucent's rights agreement. See "Comparison of Rights of Common
Stockholders of Lucent and Stockholders of Xedia" on page 71.

The total authorized shares of capital stock of Lucent consist of (1) 6
billion shares of common stock, $.01 par value per share, and (2) 250 million
shares of preferred stock, $1.00 par value per share. At the close of business
on August 31, 1999 approximately 3.1 billion shares of Lucent common stock were
issued and outstanding and no shares of Lucent preferred stock were issued and
outstanding.

The Lucent board of directors is authorized to provide for the issuance
from time to time of Lucent preferred stock in series and, as to each series, to
fix the designation, the dividend rate and the preferences, if any, which
dividends on each series will have compared to any other class or series of
capital stock of Lucent, the voting rights, if any, the voluntary and
involuntary liquidation prices, the conversion or exchange privileges, if any,
applicable to each series and the redemption price or prices and the other terms
of redemption, if any, applicable to each series. Cumulative dividends, dividend
preferences and conversion, exchange and redemption provisions, to the extent
that some or all of these features may be present when shares of Lucent
preferred stock are issued, could have an adverse effect on the availability of
earnings for distribution to the holders of Lucent common stock or for other
corporate purposes.

For a description of the rights to acquire Lucent junior preferred stock
that are attached to shares of Lucent common stock, see "Comparison of Rights of
Common Stockholders of Lucent and Stockholders of Xedia --Rights Plan" on page
71.

COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS
OF LUCENT AND STOCKHOLDERS OF XEDIA

The rights of Lucent and Xedia stockholders are currently governed by the
Delaware General Corporation Law, and the respective certificates of
incorporation and by-laws of Lucent

<PAGE> 85

and Xedia. Upon completion of the merger, the rights of Xedia stockholders who
become stockholders of Lucent in the merger will be governed by the Delaware
General Corporation Law, Lucent's certificate of incorporation and Lucent's
by-laws.

The following description summarizes the material differences that may
affect the rights of stockholders of Lucent and stockholders of Xedia but does
not purport to be a complete statement of all those differences, or a complete
description of the specific provisions referred to in this summary. The
identification of specific differences is not intended to indicate that other
equally or more significant differences do not exist. Stockholders should read
carefully the relevant provisions of the Delaware General Corporation Law,
Lucent's certificate of incorporation, Lucent's by-laws, Xedia's certificate of
incorporation and Xedia's by-laws.

CAPITALIZATION

LUCENT. Lucent's authorized capital stock is described above under
"Description of Lucent Capital Stock."

XEDIA. The total authorized shares of capital stock of Xedia consist of (1)
19,000,000 shares of common stock, $.005 par value per share, and (2) 6,090,467
shares of preferred stock, $.01 par value per share. At the close of business on
August 12, 1999, there were approximately 4,607,356 shares of Xedia common stock
outstanding and 8,831,575 shares had been reserved for the conversion of the
preferred stock and 60,003 shares had been reserved for issuance upon exercise
of warrants. As of the same date, (i) 57,600 shares of preferred stock had been
designated as Series A convertible preferred stock, of which 57,600 shares were
issued and outstanding, (ii) 165,000 shares of preferred stock had been
designated as Series B convertible preferred stock, of which 165,000 shares were
issued and outstanding, (iii) 240,000 shares of preferred stock had been
designated as Series C convertible preferred stock, of which 240,000 shares were
issued and outstanding, (iv) 2,127,867 shares of preferred stock had been
designated as Series D convertible preferred stock, of which 2,127,867 shares
were issued and outstanding, and (v) 3,500,000 shares of preferred stock had
been designated as Series E convertible preferred stock, of which 3,414,288
shares were issued and outstanding and 8,571 shares had been reserved for the
conversion of warrants.

Xedia's certificate of incorporation provides that the number of authorized
shares of common stock may be increased or decreased (but not below the number
then outstanding) by the affirmative vote of a majority of the stock entitled to
vote, irrespective of the provisions of Section 242(b)(2) of the Delaware
General Corporation Law.

VOTING RIGHTS

LUCENT. Each holder of Lucent common stock is entitled to one vote for each
share held of record and may not cumulate votes for the election of directors.

XEDIA. Each holder of Xedia common stock is entitled to one vote for each
share held at all meetings of stockholders and written actions in lieu of
meetings and may not cumulate votes.

<PAGE> 86

Each holder of Xedia preferred stock is entitled to the number of votes equal to
the number of whole shares of common stock into which the shares of preferred
stock held are then convertible. Except as provided by law, and in certain
situations set forth in Xedia's certificate of incorporation, holders of
preferred stock vote together with the holders of common stock as a single
class.

NUMBER, ELECTION, VACANCY AND REMOVAL OF DIRECTORS

LUCENT. Lucent's board of directors has nine members. Lucent's certificate
of incorporation provides that the Lucent board of directors will consist of at
least three directors and that the number of directors may be changed from time
to time by a resolution adopted by a majority of the total number of directors
which Lucent would have if there were no vacancies. As permitted under the
Delaware General Corporation Law, Lucent's certificate of incorporation also
provides that the Lucent board of directors consists of three classes of
directors. The directors in each class serve on the Lucent board of directors
for approximately three years each.

Lucent's certificate of incorporation and by-laws provide that if there is
a vacancy on the Lucent board of directors or if the number of directors is
increased, those vacancies will be filled by the affirmative vote of a majority
of the remaining directors then in office, even though less than a quorum, and
not by the stockholders. A director elected to fill a vacancy or newly created
directorship will serve for the remainder of the full term of the class of
directors in which the vacancy occurred or the new directorship was created and
until that director's successor will have been duly elected and qualified. No
decrease in the number of directors will shorten the term of any incumbent
director.

Under Lucent's certificate of incorporation, any director may be removed
from office only for cause by the affirmative vote of the holders of at least a
majority of the voting power of all shares of Lucent common stock entitled to
vote generally in the election of directors then outstanding, voting together as
a single class.

XEDIA. Xedia's board of directors has five members. Xedia's by-laws provide
that the number of directors be determined by resolution of the stockholders or
the board of directors, but that it may not be less than one. The number of
directors may be decreased at any time and from time to time either by the
stockholders or by a majority of the directors then in office, but only to
eliminate vacancies existing by reason of the death, resignation, removal or
expiration of the term of one or more directors. The directors are elected at
the annual meeting of stockholders by such stockholders as have the right to
vote on such election. The number of directors may be increased at any time and
from time to time by the stockholders or by a majority of the directors then in
office. Each director holds office until the next annual meeting and until his
successor is elected and qualified, or until his earlier death, resignation or
removal.

Except as set forth below, Xedia's by-laws provide that unless and until
filled by the stockholders, any vacancy in the board of directors, including a
vacancy resulting from an enlargement of the board, may be filled by vote of a
majority or the directors then in office, although less than a quorum, or by a
sole remaining director. A director elected to fill a vacancy

<PAGE> 87

is elected for the unexpired term of his predecessor in office, and a director
chosen to fill a position resulting from an increase in the number of directors
will hold office until the next annual meeting of stockholders and until his
successor is elected and qualified, or until his earlier death, resignation or
removal. Any director may resign by delivering his written resignation to Xedia
at its principal office or to Xedia's president or secretary. Such resignation
shall be effective upon receipt unless it is specified to be effective at some
other time or upon the happening of some other event.

Xedia's by-laws provide that except as otherwise provided by the Delaware
General Corporation Law, any one or more or all of the directors may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors, except that the directors elected by the
holders of a particular class or series of stock may be removed without cause
only by vote of the holders of a majority of the outstanding shares of such
class or series.

Xedia's certificate of incorporation provides that the holders of Series D
convertible preferred stock, voting as a separate series, are entitled to elect
one director and the holders of Series E convertible preferred stock, voting as
a separate series, are entitled to elect one director. A vacancy in any
directorship elected by the holders of the Series D convertible preferred stock
or the Series E convertible preferred stock may be filled only by vote or
written consent of the holders of the Series D convertible preferred stock or
the Series E convertible preferred stock, as the case may be.

AMENDMENTS TO CERTIFICATE OF INCORPORATION

LUCENT. Lucent's certificate of incorporation provides that the affirmative
vote of the holders of at least 80% of the voting stock then outstanding, voting
together as a single class, will be required to alter, amend, adopt any
provision inconsistent with or repeal Articles V, VII and VIII of Lucent's
certificate of incorporation, which relate to stockholder action, the Lucent
board of directors and Lucent's by-laws, respectively.

XEDIA. Xedia's certificate of incorporation provides that Xedia reserves
the right to amend or repeal any provision of the certificate of incorporation
as prescribed by present or future law and that all rights conferred upon Xedia
stockholders by the certificate of incorporation are granted subject to such
reservation. The certificate of incorporation further provides that Xedia may
not amend the certificate of incorporation in a manner that is materially
adverse to the holders of the Series C convertible preferred stock, Series D
convertible preferred stock or Series E convertible preferred stock without
first obtaining the approval of a majority of each of the Series C, Series D and
Series E convertible preferred stock, each voting as a separate class, except
that no such approval is required of such series when there are outstanding less
than 100,000 shares of such series.

<PAGE> 88

AMENDMENTS TO BY-LAWS

LUCENT. Lucent's certificate of incorporation and by-laws provide that
Lucent's by-laws may be altered or repealed and new by-laws may be adopted:

- at any annual or special meeting of stockholders, by the affirmative
vote of the holders of a majority of the voting power of the stock
issued and outstanding and entitled to vote at that meeting, provided
that, any proposed alteration or repeal of, or the adoption of, any
by-law inconsistent with Section 2.2, 2.7 or 2.10 of Article II of
Lucent's by-laws, which relate to special meetings of stockholders,
notice of stockholder business and nominations and actions by written
consent of stockholders, respectively, or with Section 3.2, 3.9 or
3.11 of Article III of Lucent's by-laws, which relate to the number
and tenure of the directors, vacancies on the Lucent board of
directors and removal of directors, respectively, by the stockholders
requires the affirmative vote of the holders of at least 80% of the
voting stock then outstanding, voting together as a single class

- by a majority of the total number of directors Lucent would have if
there were no vacancies.

XEDIA. Xedia's certificate of incorporation authorizes the board of
directors to adopt, amend or repeal Xedia's by-laws. It further provides that
Xedia may not amend the by-laws in a manner which is materially adverse to the
holders of the Series C convertible preferred stock, Series D convertible
preferred stock or Series E convertible preferred stock without first obtaining
the approval of the holders of a majority of each of the Series C, Series D and
Series E convertible preferred stock, each voting as a separate class, except
that no such approval is required when there are outstanding less than 100,000
shares of such series. Xedia's by-laws provide that they may be altered, amended
or repealed or new by-laws adopted by the directors at any meeting of the
directors at which a quorum is present. They may also be altered, amended or
repealed or new by-laws adopted by the affirmative vote of the holders of a
majority of the shares of the stock issued and outstanding and entitled to vote
at any meeting of stockholders, provided that in the case of a special meeting,
notice of such alteration, amendment, repeal or adoption of new by-laws is
stated in the notice of such special meeting.

STOCKHOLDER ACTION

LUCENT. Lucent's certificate of incorporation provides that any action
required or permitted to be taken by the Lucent stockholders must be effected at
a duly called annual or special meeting and may not be effected by written
consent.

XEDIA. Xedia's by-laws provide that any action which may be taken at a
meeting of stockholders may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken, is
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.

<PAGE> 89

NOTICE OF CERTAIN STOCKHOLDER ACTIONS

LUCENT. Lucent's certificate of incorporation provides that a stockholder
must give advance written notice of nominations for election of directors and to
properly bring business before an annual meeting of stockholders. Under Lucent's
by-laws, a stockholder's written notice must generally be delivered to the
Secretary of Lucent not later than 45 days nor earlier than the 75 days prior to
the first anniversary of the record date for determining stockholders entitled
to vote at the preceding year's annual meeting.

In the event that Lucent calls a special meeting of stockholders for the
purpose of electing one or more directors to the Lucent board of directors, any
stockholder may nominate a director or directors, provided that written notice
must be delivered not earlier than 120 days prior to the special meeting and not
later than (1) 90 days prior to that special meeting or (2) 10 days following
the day on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Lucent board of directors to be
elected at that meeting.

XEDIA. Xedia does not have any comparable notice unique to stockholder
actions.

SPECIAL STOCKHOLDER MEETINGS

LUCENT. Lucent's certificate of incorporation and by-laws provide that a
special meeting of Lucent's stockholders may be called only by the Lucent board
of directors by a resolution stating the purposes of the special meeting and
approved by a majority of the total number of directors Lucent would have if
there were no vacancies or by the chairman of the Lucent board of directors. Any
power of the stockholders to call a special meeting is specifically denied in
Lucent's certificate of incorporation.

XEDIA. Xedia's by-laws provide that special meetings of the stockholders
may be called at any time by the board of directors or by Xedia's president.

LIMITATION OF PERSONAL LIABILITY OF DIRECTORS AND INDEMNIFICATION

LUCENT. Lucent's certificate of incorporation provides that a director will
not be personally liable to the corporation or to its stockholders for monetary
damages for breach of fiduciary duty as a director, except, if required by law,
for liability:

- for any breach of the director's duty of loyalty to the corporation or
its stockholders

- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law

- under Section 174 of the Delaware General Corporation Law regarding
unlawful payment of dividends or unlawful stock purchases or
redemptions

<PAGE> 90

- for any transaction from which the director derived an improper
personal benefit

Lucent's certificate of incorporation provides a right to indemnification
to directors and officers of Lucent subject to the limitations under Delaware
General Corporation Law.

In addition, Lucent must indemnify any present or former director or
officer of a corporation who has been successful on the merits or otherwise in
the defense of any claim or proceeding for expenses (including attorneys' fees)
actually and reasonably incurred.

XEDIA. Xedia's certificate of incorporation provides that except to the
extent that the Delaware General Corporation Law prohibits the elimination or
limitation of liability of directors for breaches of fiduciary duty, no director
will be personally liable to Xedia or its stockholders for monetary damages for
any breach of fiduciary duty as a director, notwithstanding any provision of law
imposing such liability. The certificate of incorporation further provides that
no amendment to or repeal of such limitation of liability will apply to or have
any effect on the liability or alleged liability of any director for or with
respect to any acts or omissions of such director occurring prior to such
amendment.

Xedia's certificate of incorporation provides that Xedia will, to the
fullest extent permitted by Section 145 of the Delaware General Corporation Law,
as amended from time to time, indemnify each person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was, or has agreed to become, a director or
officer of Xedia, or is or was serving, or has agreed to serve, at the request
of Xedia, as a director, officer or trustee of, or in a similar capacity with,
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action alleged to have been taken or omitted in such capacity,
against all expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom.

The certificate of incorporation further provides that indemnification may
include payment by Xedia of expenses in defending an action or proceeding in
advance of the final disposition of such action or proceeding upon receipt of an
undertaking by the person indemnified to repay such payment if it is ultimately
determined that such person is not entitled to indemnification under Article
EIGHTH of the certificate of incorporation, which undertaking may be accepted
without reference to the financial ability of such person to make such
repayment. Xedia will not indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person unless
the initiation thereof was approved by Xedia's board of directors.

The indemnification rights provided in Article EIGHTH of Xedia's
certificate of incorporation (1) are not exclusive of any other rights to which
those indemnified may be entitled under any law, agreement or vote of
stockholders or disinterested directors or otherwise, and (2) inure to the
benefit of the heirs, executors and administrators of such persons. Xedia may,
to the extent authorized from time to time by its board of directors, grant
indemnification rights to other employees or agents of Xedia or other persons
serving the corporation and such rights may be

<PAGE> 91

equivalent to, or greater or less than, those set forth in Article EIGHTH of the
certificate of incorporation.

DIVIDENDS

LUCENT. Lucent's by-laws provide that the Lucent board of directors may
from time to time declare, and Lucent may pay, dividends on its outstanding
shares in the manner and upon the terms and conditions provided by law and in
Lucent's certificate of incorporation.

XEDIA. Xedia's certificate of incorporation provides that dividends may be
declared and paid on the common stock from funds lawfully available therefor as
and when determined by the board of directors and subject to any preferential
dividend rights of any then outstanding preferred stock. The holders of the
preferred stock are entitled, when, as and if declared by the board of directors
of Xedia, to dividends out of the corporation's assets legally available
therefor at the rate of $0.24 per share per annum. Dividends may be declared and
paid upon the common stock in any fiscal year only if dividends have been paid
to or declared and set apart for payment to all shares of preferred stock at
such annual rate for such fiscal year. After the holders of preferred stock have
received their dividend preference as set forth above, the holders of preferred
stock and common stock are entitled, when, as and if declared by the board of
directors, to dividends out of Xedia's assets legally available therefor;
provided, that no such dividends may be declared or paid on any shares of common
stock or preferred stock unless at the same time an equivalent dividend is
declared and paid on all outstanding shares of common stock and preferred stock;
and provided further that the dividend on each series of preferred stock is
payable at the same rate per share as would be payable on the shares of common
stock or other securities into which such series of preferred stock is
convertible immediately prior to the record date for such dividend. The right to
dividends on shares of the common stock or preferred stock are not cumulative,
and no right accrues to holders of common stock or preferred stock by reason of
the fact that dividends on said shares are not declared in any prior period.

Xedia may not declare or pay any dividends or other distributions on shares
of common stock unless the holders of the preferred stock then outstanding
simultaneously receives an equivalent dividend on each outstanding share of
preferred stock in an amount at least equal to the product of (i) the per share
amount, if any, of the dividends or other distributions to be declared, paid or
set aside for the common stock, multiplied by (ii) the number of whole shares of
common stock into which such share of preferred stock is then convertible.

LIQUIDATION

LUCENT. Holders of Lucent common stock have no preferential rights with
respect to liquidation.

XEDIA. Xedia's certificate of incorporation provides that in the event of
any voluntary or involuntary liquidation, dissolution or winding up of Xedia,
the holders of shares of Xedia preferred stock then outstanding are entitled to
be paid out of Xedia's assets available for distribution to its stockholders
before any payment may be made to the holders of Xedia common

<PAGE> 92

stock by reason of their ownership thereof, (1) an amount equal to $6.25 for
each share of Series A convertible preferred stock then held by them, (2) an
amount equal to $10.00 for each share of Series B convertible preferred stock
then held by them, (3) an amount equal to $10.00 for each share of Series C
convertible preferred stock then held by them, (4) an amount equal to $3.00 for
each share of Series D convertible preferred stock then held by them, and (5) an
amount equal to $3.50 for each share of Series E convertible preferred stock
then held by them, in each case subject to appropriate adjustment in the event
of any stock dividend, stock split, combination or other similar
recapitalization affecting such preferred shares, plus any dividends declared or
accrued but unpaid on such preferred shares. If upon any liquidation,
dissolution or winding up of Xedia the remaining assets of Xedia available for
distribution to its stockholders are insufficient to pay the holders of shares
of Xedia preferred stock the full amount to which they are entitled, the holders
of shares of Xedia preferred stock will share ratably in any distribution of the
remaining assets and funds of Xedia in proportion to the respective amounts
which would otherwise be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to such shares were paid
in full.

Xedia's certificate of incorporation further provides that, after the
payment of all preferential amounts required to be paid to the holders of Xedia
preferred stock upon the dissolution, liquidation or winding up of Xedia, the
remaining assets and funds of Xedia available for distribution to its
stockholders will be distributed among the holders of shares of Xedia common
stock, pro rata based on the number of shares of Xedia common stock held by
each.

Xedia's certificate of incorporation currently provides that in connection
with the preceding two paragraphs of this prospectus/proxy statement, a
consolidation or merger of Xedia with or into another corporation or entity in a
transaction involving the disposition of more than 50% of the voting power of
Xedia, or a sale of all or substantially all of the assets of Xedia, will be
regarded as a liquidation, dissolution or winding up of Xedia. You are being
asked to vote on an amendment to Xedia's certificate of incorporation which
would amend this provision to provide that such a consolidation or merger will
not be regarded as a liquidation, dissolution or winding up of Xedia for the
purposes of the preceding two paragraphs. See "Amendment to Xedia's Certificate
of Incorporation" on page 64.

CONVERSION

LUCENT. Holders of Lucent common stock have no rights to convert their
shares into any other securities.

XEDIA. Holders of Xedia common stock have no rights to convert their shares
into any other securities. Subject to certain terms, conditions, limitations and
adjustments set forth in the certificate of incorporation, holders of each
series of Xedia preferred stock have the right at their option to convert any
such shares, without the payment of additional consideration, into the number of
fully paid and nonassessable shares of Xedia common stock as is determined by
the formulae set forth in the certificate of incorporation. Based on the
formulae, each share of Xedia Series A convertible preferred stock is currently
convertible into two shares of Xedia common stock, each share of Xedia Series B
convertible preferred stock is

<PAGE> 93

currently convertible into two shares of Xedia common stock, each share of Xedia
Series C convertible preferred stock is currently convertible into approximately
2.9848 shares of Xedia common stock, each share of Xedia Series D convertible
preferred stock is currently convertible into two shares of Xedia common stock
and each share of Xedia Series E convertible preferred stock is currently
convertible into one share of Xedia common stock.

No fractional shares of common stock may be issued upon conversion of
Series preferred stock. In lieu of any fractional shares to which the holder
would otherwise be entitled, Xedia will pay cash equal to such fraction
multiplied by the then effective applicable conversion price.

APPRAISAL OR DISSENTERS' RIGHTS

LUCENT. Lucent is a Delaware corporation. Under the Delaware
General Corporation Law, dissenters' rights of appraisal are available to a
stockholder of a corporation only in connection with certain mergers or
consolidations involving that corporation. Appraisal rights are not available
under the Delaware General Corporation Law if the corporations's stock is
either:

- listed on a national securities exchange, as the Lucent common stock
is, or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. (the "NASD") or

- held of record by more than 2,000 stockholders;

provided that appraisal rights will be available if the merger or consolidation
requires stockholders to exchange their stock for anything other than:

- shares of the surviving corporation,

- shares of another corporation that will be listed on a national
securities exchange, designated as a national market system security
on an interdealer quotation system by the NASD or held of record by
more than 2,000 stockholders or

- cash in lieu of fractional shares.

Additionally, no appraisal rights are available if the corporation is the
surviving corporation, and no vote of its stockholders is required for the
merger.

XEDIA. Dissenters' rights of appraisal are available for shares of Xedia
common and preferred stock.

RIGHTS PLAN

LUCENT. Lucent has a rights agreement with The Bank of New York as rights
agent. The following description of the rights agreement is qualified in its
entirety by reference to the terms and conditions of the rights agreement.
Stockholders should read carefully the rights agreement. See "Where You Can Find
More Information" on page 94.

Under the rights agreement, rights attach to each share of Lucent common
stock outstanding and, when exercisable, entitle the registered holder to
purchase from Lucent one four-hundredth of a share of junior preferred stock,
par value $1.00 per share, at a purchase price of $22.50 per one four-hundredth
of a share, subject to customary anti-dilution adjustments.

The rights will not be exercisable until the earlier of:

- 10 days following a public announcement that a person or group has
acquired beneficial ownership of 10% or more of the outstanding shares
of Lucent common stock or

- 10 business days, or that later date as may be determined by the
Lucent board of directors, following the commencement of, or
announcement of an intention to make, a tender offer or exchange
offer, the consummation of which would result in a person or group
acquiring beneficial ownership of 10% or more of the outstanding
shares of Lucent common stock.

The rights will expire on March 31, 2006, unless that date is extended or unless
the rights are earlier redeemed or exchanged by Lucent, in each case as
summarized below.

In the event that a person or group acquires beneficial ownership of 10% or
more of the outstanding shares of Lucent common stock, each holder of a right,
other than rights beneficially

<PAGE> 94

owned by that person or group, which become void, will have the right to receive
upon exercise that number of shares of Lucent common stock having a market value
of two times the purchase price provided for in the right. In the event that
Lucent is acquired in a merger or other business combination transaction or 50%
or more of its consolidated assets or earning power are sold after a person or
group acquires beneficial ownership of 10% or more of the outstanding shares of
Lucent common stock, each holder of a right will have the right to receive upon
exercise that number of shares of common stock of the acquiring company which at
the time of that transaction will have a market value of two times the purchase
price provided for in the right.

At any time after a person or group acquires beneficial ownership of 10% or
more of the outstanding shares of Lucent common stock and prior to the
acquisition by that person or group of 50% or more of the then outstanding
shares of Lucent common stock, the Lucent board of directors may exchange the
rights, other than rights owned by that person or group which have become void,
in whole or in part, for Lucent common stock or junior preferred stock.

At any time prior to a person or group acquiring beneficial ownership of
10% or more of the outstanding shares of Lucent common stock, the Lucent board
of directors may redeem the rights in whole, but not in part, at a redemption
price of $0.0025 per right, subject to customary anti-dilution provisions, or
may amend the terms of the rights, in each case, without the consent of the
holders of the rights, at the time, on the basis and upon the conditions that
the Lucent board of directors may establish.

Junior preferred shares purchasable upon exercise of the rights will not be
redeemable. The junior preferred shares have dividend, voting and liquidation
rights that are intended to result in the value of the one four-hundredth
interest in a junior preferred share purchasable upon exercise of each right
approximating the value of one share of Lucent common stock.

The rights may have antitakeover effects. The rights will cause substantial
dilution to a person or group of persons that attempts to acquire Lucent on
terms not approved by the Lucent board of directors. The rights should not
interfere with any merger or other business combination approved by the Lucent
board of directors prior to the time that a person or group has acquired such
10% beneficial ownership since the rights may be redeemed or amended by Lucent
until such time.

XEDIA. Xedia does not have a rights plan.

<PAGE> 95
CERTAIN INFORMATION CONCERNING XEDIA

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

OVERVIEW

Xedia designs, manufactures and markets integrated hardware and software
high-speed network routers for broadband access to the Internet. Xedia's family
of Access Point products are typically employed at the interface between
enterprise networks (local area networks) and Internet service providers (wide
area networks) to function as a router for accessing the Internet. In addition,
its products assist in providing service quality and security by applying
quality-of-service (QoS) and encryption techniques to the information flowing
between networks.

Xedia sells its products primarily to Internet service providers which
typically bundle them with other services and resell them to their customers.
The service providers generally are either independent operators or providers
affiliated with large, traditional data communications companies. As of
September 1, 1999, Xedia's customers included leading Internet service providers
such as MCI Worldcom's UUNET, Concentric, PSINet, Verio and Digex.

RESULTS OF OPERATIONS

Six months ended June 30, 1998 compared to the six months ended June 30, 1999

Total Revenues

Xedia derives its revenues from product sales and the sale of maintenance
contracts for the support of the products sold to its customers. Maintenance
contracts are sold on an up-front annual basis and the revenue is amortized over
a fifteen-month period including the 90-day software warranty period.
Maintenance contract revenue is a small component of total revenues,
representing only 0.5% and 4.5% of total revenue respectively for the six months
ended June 30, 1998 and the six months ended June 30, 1999, respectively. Total
revenues increased from $1.54 million for the six months ended June 30, 1998 to
$6.90 million for the six months ended June 30, 1999. The increase in total
revenues primarily reflected an increased number of new customers, as well as
increased sales of Xedia product to its existing customer base.

Cost of Revenues

Cost of revenues includes the cost of purchasing subassembly and component
materials from Xedia's independent suppliers, production related expenses,
warranty and quality assurance for those products, as well as costs of personnel
associated with supporting Xedia's customers. Cost of revenues also includes
software costs of the media in which it is delivered and royalty

<PAGE> 96

costs for embedded third-party software components of the product. Cost of
revenues increased from $0.72 million for the six months ended June 30, 1998 to
$2.63 million for the six months ended June 30, 1999. The increase was primarily
due to an increase in direct product costs associated with the increase in
product revenues as well as an increase in manufacturing and support personnel
and other related overhead costs to support Xedia's customers. The gross margin
increased from 53% of total revenue for the six months ended June 30, 1998 to
62% of total revenue for the six months ended June 30, 1999. The increase in
gross margin reflected lower product cost as a result of Xedia meeting volume
purchase commitments and the absorption of fixed costs over higher revenues.

Research and Development

Research and development expenses consist primarily of salaries and related
costs of employees engaged in research, design and development activities.
Research and development expenses increased from $1.92 million for the six
months ended June 30, 1998 to $3.11 million for the six months ended June 30,
1999. The increase was due to an increase in personnel and related costs as well
as to an increase in depreciation expense, expensed prototype materials, outside
services and non-recurring engineering (NRE) costs and other generally allocated
expenses.

Selling and Marketing Expenses

Selling and marketing expenses consist primarily of employee-related
expenses, commissions to sales representatives, product marketing and
promotional expenses. Selling and marketing expenses increased from $2.68
million for the six months ended June 30, 1998 to $3.04 million for the six
months ended June 30, 1999. The increase was primarily attributed to the
increase in personnel to support Xedia's sales and product marketing activities
for its Access Point(TM) product line.

General and Administrative Expenses

General and administrative expenses consist principally of expenses to
support the business, including corporate, accounting, legal, information
technology systems and human resources expenses. General and administrative
expenses increased from $0.79 million for the six months ended June 30, 1998 to
$0.96 million for the six months ended June 30, 1999. The increase was primarily
attributed to increased personnel and related costs incurred in expanding
the management and accounting functions to support the overall increase in
business activity.

Interest Income

Interest income declined from $0.25 million for the six months ended June
30, 1998 to $0.07 million for the six months ended June 30, 1999. The decrease
was primarily due to Xedia's use of its cash received from its 1997 financing to
fund its operations throughout 1998 and 1999.

<PAGE> 97

Interest Expense

Interest expense increased from $0.03 million for the six months ended June
30, 1998 to $0.04 million for the six months ended June 30, 1999. The increase
was primarily attributed to the increased borrowing under Xedia's equipment and
working capital line of credit to finance the purchase of capital equipment and
general working capital requirements.

Years Ended December 31, 1996, 1997 and 1998

Total Revenues

Total revenues decreased from $4.42 million in 1996 to $0.59 million in
1997 and then increased to $5.50 million in 1998. The decrease in revenues from
1996 to 1997 reflected management's decision to discontinue its workgroup
ethernet switching business and restart the business with the development of its
current Access Point(TM) product line. This decision made in 1996 resulted in
the termination of an OEM agreement between Xedia and Bay Networks, Xedia's
largest workgroup ethernet switch customer. Total revenues for 1997 were
primarily attributable to the Access Point(TM) product sales which began in
the fourth quarter of 1997. 1998 represented Xedia's first full year of sales
of the Access Point(TM) product lines.

Cost of Revenues

Cost of revenues decreased from $3.56 million in 1996 to $0.71 million in
1997 and then increased to $2.22 million in 1998. The decrease in cost of
revenues from 1996 to 1997 was directly attributable to the decrease in total
product revenues. The increase in cost of revenues in 1998 was due to an
increase in direct product costs associated with the increase in product
revenues and the increase in manufacturing and support personnel and other
related overhead costs to support Xedia's customers. The gross margin decreased
from 19% in 1996 to a loss of 20% in 1997 and then increased to 60% in 1998. The
decrease in gross margin in 1997 reflected the decrease in total revenues and
the increased utilization of production personnel for new product development
efforts in 1997. The increase in gross margin for 1998 reflected the product
cost structure for the Access Point(TM) product line and the absorption of fixed
costs, such as production related expenses and personnel costs associated with
supporting Xedia's customers, over higher revenues and sales volumes.

Research and Development

Research and development expenses increased from $1.05 million in 1996 to
$2.52 million in 1997 to $4.37 million in 1998. The increase in 1997 was due
primarily to an increase in personnel and related costs, depreciation expense,
expensed prototype materials, outside services and non-recurring engineering
(NRE) costs and other generally allocated expenses. The increase in 1998 was
primarily due primarily to an increase in personnel and related costs as well as
an increase in depreciation expense of capital equipment used in the various
research and development activities and other generally allocated expenses.

<PAGE> 98

Selling and Marketing Expenses

Selling and marketing expenses increased from $0.56 million in 1996 to
$2.09 million in 1997 to $5.65 million in 1998. The increases were primarily due
to additional personnel, including senior level management, increased product
marketing costs associated with new products, increased commissions as a result
of higher sales in 1998 and costs associated with the establishment of regional
sales offices. The increases in 1997 and 1998, respectively, were due to
increases in salaries, commissions and related expenses. The increase in 1997
was due to increases in salaries, commissions and related expenses, as well as
marketing programs, trade show and advertising expenses related to the
introduction of the Access Point(TM) product. The remainder of the increase in
1998 was primarily due to increased public relation costs, marketing program
spending and costs associated with the addition of domestic sales offices.

General and Administrative Expenses

General and administrative expenses increased from $0.77 million in 1996 to
$0.98 million in 1997 to $1.59 million in 1998. The increases in 1997 and 1998
were primarily due to the hiring of additional personnel, including senior level
management, costs associated with supporting the business, which included
increases in legal and professional fees, management and director travel
expenses, information systems infrastructure growth and human resource
activities.

Interest Income

Interest income increased from $6,000 in 1996 to $89,000 in 1997 to
$376,000 in 1998. The increases reflected interest earned on higher balances of
cash and cash equivalents resulting from sales of preferred stock in February
1997, August 1997 and December 1997.

Interest Expense

Interest expense was $21,000, $43,000 and $45,000 in 1996, 1997 and 1998,
respectively. The increases were primarily due to the increased borrowing under
Xedia's equipment and working capital line of credit to finance the purchase of
capital equipment and general working capital requirements.

INCOME TAXES. Xedia has generated taxable losses from operations since
inception and, accordingly, has not had taxable income available to offset net
operating losses. Xedia accounts for income taxes under SFAS No. 109, Accounting
for Income Taxes, by providing for income taxes under the liability method.
Deferred taxes are determined based on the difference between the financial
statement and tax bases of assets and liabilities, as measured by the enacted
tax rates.

LIQUIDITY AND CAPITAL RESOURCES. Since its inception in 1993, Xedia has
financed its operations and capital requirements from the net sale of $25.2
million of preferred and common stock, borrowings under two equipment lines of
credit of $0.25 million and $0.50 million, respectively, and a general working
capital line of $4 million, along with cash from operations. Xedia currently has
a line of credit with a bank that provided for borrowings up to $500,000 to be
used for the acquisition of equipment and borrowings were made available for
purchases until May 15, 1998. Substantially all of this line has been used. The
line is payable in 36 equal monthly payments starting June 15, 1998. The line
bears interest at prime (7.75% at December 31, 1998) plus 0.25% and is secured
by substantially all assets of Xedia. Xedia has an additional revolving line of
credit with a bank, which provides for borrowings up to $4.0 million. Borrowings
bear interest at prime (7.75% at December 31, 1998) plus 0.25% and are secured
by all assets of Xedia. There

<PAGE> 99

were no borrowings outstanding under this line of credit as of December 31,
1996, 1997 or 1998. As of June 30, 1999, there was $1.0 million in borrowings
outstanding under this line of credit.

Net cash used in operating activities for the years ended December 31,
1996, 1997 and 1998 was $0.98 million, $5.87 million and $6.85 million,
respectively. Cash used in operating activities consisted primarily of cash
utilized to fund operating losses and for working capital. For the six months
ended June 30, 1999, net cash used in operating activities was $2.94 million.

Net cash used in investing activities for the years ended December 31,
1996, 1997 and 1998 was $0.09 million, $0.61 million and $1.18 million,
respectively. Capital expenditures included computers and equipment for research
and development, sales, marketing and general administration to support Xedia's
growth. Net cash used in investing activities for the six months ended June 30,
1999 was $0.59 million.

Xedia had a cash and cash equivalents balance at December 31, 1996, 1997
and 1998 of $0.45 million, $12.4 million and $4.23 million, respectively.
Xedia's cash and cash equivalents balance at June 30, 1999 was $1.78 million.

Xedia expects to incur significant cash outlays for the balance of fiscal
1999 related to the continued funding of operating losses, the build-up of
inventory and other working capital requirements and additional capital
equipment investments. Management believes its cash and cash equivalents and
available borrowings will be sufficient to satisfy Xedia's funding needs for at
least the next twelve months.

If the merger with Lucent is not consummated and Xedia continues as
stand-alone company, Xedia would not have sufficient capital to continue its
business operations as they are now being conducted. The merger agreement
provides that Lucent will loan Xedia, at its request, up to $5 million for
working capital during the period prior to the closing on commercially
reasonable terms and conditions. If the merger is not consummated, Xedia will be
obligated to repay any Lucent loan, which will require Xedia to obtain
significant additional debt and/or equity funds both to repay the Lucent loan
and to provide working capital for Xedia's continuing operations as a
stand-alone company. While Xedia believes that it will be able to raise the
funds required to finance its operations as a stand-alone company, it cannot
assure you that the required funds will be available when needed or that they
can be obtained on terms favorable to Xedia. If the required funds cannot be
obtained, Xedia could be forced to revise its business plans, including possible
curtailment of its future business operations, reductions of its planned future
growth or a combination with another company on terms less favorable than the
terms governing the merger with Lucent.

<PAGE> 100

At December 31, 1998, Xedia had available net operating loss carryforwards
of approximately $18.5 million, expiring at various dates through 2018. At
December 31, 1998, Xedia also had available federal tax credits of approximately
$0.45 million expiring at various dates through 2018. As of December 31, 1998,
Xedia had a net deferred tax asset, principally from the NOLs and tax credit
carryforwards of approximately $8.16 million, and has recorded a full valuation
allowance against this asset due to uncertainties regarding its realization.

The Internal Revenue Code contains provisions that may limit Xedia's net
operating loss carryforwards available to be used in any given year upon the
occurrence of certain events, including changes in the ownership interests of
significant stockholders.

YEAR 2000. Many currently installed computer systems and software products
are dependent upon internal calendars coded to accept only two digit entries in
the date code field. These date code fields will need to accept four digit
entries to distinguish 21st century dates from 20th century dates. Computer
systems and software used by many companies may need to be upgraded to comply
with such "Year 2000" requirements. Xedia has completed a review of its computer
systems to assess what steps, if any, are required to achieve full Year 2000
compliance. Based on this review, Xedia believes that its systems are currently
Year 2000 compliant. Xedia does not anticipate that it will incur material
expenses or meaningful delays in connection with Year 2000 compliance.

All of Xedia's products use internal calendars that accept four digit date
codes and as such are year 2000 compliant. Moreover, based on assessments made
to date, we do not anticipate material disruptions to our operations or products
as a result of Year 2000 issues.

Xedia has not yet begun to assess the Year 2000 readiness of its material
supply and service vendors or its material customers. However, Xedia intends to
continue through 1999 to assess its exposure to Year 2000 noncompliance on the
part of any of its material vendors and customers and there can be no assurance
that their systems will be Year 2000 compliant. Xedia believes that Year 2000
issues will not pose significant operational problems for its business.
Therefore, Xedia does not have, and does not intend to create, a contingency
plan in the event Year 2000 compliance cannot be achieved in a timely manner.

MARKET RISKS. Xedia does not use derivative financial instruments. Xedia
generally places its marketable security investments in high credit quality
instruments, primarily U.S. Government and Federal Agency obligations and
corporate obligations with contractual maturities of one year or less. Xedia
does not expect any material loss from its marketable security investments and
therefore believes that its potential interest rate exposure is not material.
Xedia to date has not made any strategic equity investments and therefore has no
exposure to the market risks that can be created by such investments.

Xedia invoices customers only in U.S. dollars. Xedia is only exposed to
foreign exchange rate fluctuations from expenses paid out of its U.K. subsidiary
which are not deemed to be material. Xedia does not enter into foreign currency
hedge transactions. Through June 30, 1999, foreign currency fluctuations have
not had a material impact on Xedia's financial position or

<PAGE> 101

results of operations, and therefore Xedia believes that its potential foreign
currency exchange rate exposure is not material.

The foregoing risk management discussion and the effects thereof are
forward-looking statements. Actual results in the future may differ materially
from these projected results due to actual developments in global financial
markets. The analytical methods used by Xedia to asses and mitigate risk
discussed above should not be considered projections of future events or losses.

SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS
OF XEDIA

The following table sets forth, as of September 1, 1999, the security
ownership of Xedia's directors, executive officers and holders of more than 5%
of any class or series of stock. The number of shares of Xedia stock listed in
the table represents outstanding shares of Xedia common stock as of September 1,
1999, not the number of shares of Xedia common stock issuable upon conversion of
the Xedia preferred stock. Unless otherwise indicated, each person's address is
in care of Xedia Corporation, 50 Nagog Park, Acton, Massachusetts 01720. To the
knowledge of Xedia, the persons named in the table have sole voting and
investment power with respect to all shares of Xedia stock shown as beneficially
owned by them, subject to the information contained in the footnotes to the
table. Beneficial ownership is determined according to the rules of the SEC.
Shares of Xedia common stock subject to options currently exercisable or
exercisable within sixty days from the date of this table are deemed outstanding
when determining the number of shares and percentage ownership by the person
holding these options.

85
<PAGE> 102

<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
AMOUNT AND NATURE PERCENT OF SERIES A SERIES B
OF BENEFICIAL COMMON STOCK PREFERRED STOCK PREFERRED STOCK
NAME OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP (1) (2) (3)
------------------------ -------------- --------- --- --- ---
<S> <C> <C> <C> <C> <C>
Greylock Management Corporation (8) Common Stock 40,000 0.9%
755 Page Mill Road, Suite A100 Series D Preferred 1,366,667
Palo Alto, CA 94304 Series E Preferred 857,143

Jens Montanana (9) Common Stock 1,883,068 39.7%
54 Llanvoir Drive Series B Preferred 5,000 3.0%
South Ascot, Berkshire Series D Preferred 433,334
England SL59LN Series E Preferred 285,715

Norwest Venture Partners VI Series E Preferred 1,428,572
c/o Norwest Venture Capital
40 William Street, Suite 305
Wellesley, MA 02181

Ernest Parizeau (10) Series E Preferred 1,428,572
c/o Norwest Venture Capital
40 William Street, Suite 305
Wellesley, MA 02181

Robert P. Polychron (11) Common Stock 833,400 17.3%
c/o Xedia Corporation Series A Preferred 17,600 30.6%
50 Nagog Park Series D Preferred 166,667
Acton, MA 01720

Nortel Networks NA Inc. Series C Preferred 240,000
4401 Great America Parkway
SC2-05
Santa Clara, CA 95052

AT&T Ventures (12) Series E Preferred 714,286
295 North Maple Avenue
Room 3361C1
Basking Ridge, NJ 07920
Ian R. Davison Common Stock 442,000 9.6%
7 Powers Road Series B Preferred 5,000 3.0%
Andover, MA 01810

PERCENT OF PERCENT OF PERCENT OF PERCENTAGE
SERIES C SERIES D SERIES E AGGREGATE
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK VOTING
NAME OF BENEFICIAL OWNER (4) (5) (6) POWER (7)
- ------------------------ --- --- --- ---------
<S> <C> <C> <C> <C>
Greylock Management Corporation (8) 27.0%
755 Page Mill Road, Suite A100 64.2%
Palo Alto, CA 94304 25.1%

Jens Montanana (9) 22.4%
54 Llanvoir Drive
South Ascot, Berkshire 20.4%
England SL59LN 8.4%

Norwest Venture Partners VI 41.8% 10.6%
c/o Norwest Venture Capital
40 William Street, Suite 305
Wellesley, MA 02181

Ernest Parizeau (10) 41.8% 10.6%
c/o Norwest Venture Capital
40 William Street, Suite 305
Wellesley, MA 02181

Robert P. Polychron (11) 8.8%
c/o Xedia Corporation
50 Nagog Park 7.8%
Acton, MA 01720

Nortel Networks NA Inc. 100.0% 5.3%
4401 Great America Parkway
SC2-05
Santa Clara, CA 95052

AT&T Ventures (12) 20.9% 5.3%
295 North Maple Avenue
Room 3361C1
Basking Ridge, NJ 07920
Ian R. Davison 3.4%
7 Powers Road
Andover, MA 01810
</TABLE>

NOTE: Series A and B are convertible preferred stock.
Series C, D and E are redeemable convertible preferred stock.

<PAGE> 103

<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
AMOUNT AND NATURE PERCENT OF SERIES A SERIES B
OF BENEFICIAL COMMON STOCK PREFERRED STOCK PREFERRED STOCK
NAME OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP (1) (2) (3)
------------------------ -------------- --------- --- --- ---
<S> <C> <C> <C> <C> <C>
D.R.L. Jones (13) Common Stock 190,000 4.1%
Garsdon Mill Series A Preferred 8,000 13.9%
Garsdon Series B Preferred 25,000 15.2%
Malmesbury, Wiltshire Series D Preferred 99,999
England SN169NR

Savest Management Limited (14) Common Stock 366,000 7.9%
c/o General Pacific Capital Ltd. Series B Preferred 15,000 9.1%
Corporate Data Services
9 Av d'Ostende
Monte Carlo, Monaco MC98000

John McCartney Common Stock 264,016 5.7%
40 Bd. De Courcelles Series B Preferred 10,000 6.1%
75017 Paris, France

JT Soft Service Co., Ltd. Series B Preferred 100,000 60.6%
c/o President
JT-Ebisu-Minami Building, 3rd Floor
15-1 Ebisu-Minami
1-Chome Shibuya-KU
Tokyo 150-0022, Japan

Integran, Inc. Series A Preferred 16,000 27.8%
c/o Van Chu
7 Buehler Road
Bedford, MA 01730

General Pacific Capital Ltd. Series A Preferred 8,000 13.9%
Corporate Data Services
9 Av d'Ostende
Monte Carlo, Monaco MC98000

Andrew J. Bendheim Series A Preferred 8,000 13.9%
32 Arcadia Road

<CAPTION>
PERCENT OF PERCENT OF PERCENT OF PERCENTAGE
SERIES C SERIES D SERIES E AGGREGATE
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK VOTING
NAME OF BENEFICIAL OWNER (4) (5) (6) POWER (7)
- ------------------------ --- --- --- ---------
<S> <C> <C> <C> <C>
D.R.L. Jones (13) 3.4%
Garsdon Mill
Garsdon
Malmesbury, Wiltshire 4.7%
England SN169NR

Savest Management Limited (14) 2.9%
c/o General Pacific Capital Ltd.
Corporate Data Services
9 Av d'Ostende
Monte Carlo, Monaco MC98000

John McCartney 2.1%
40 Bd. De Courcelles
75017 Paris, France

JT Soft Service Co., Ltd. 1.5%
c/o President
JT-Ebisu-Minami Building, 3rd Floor
15-1 Ebisu-Minami
1-Chome Shibuya-KU
Tokyo 150-0022, Japan

Integran, Inc. 0.2%
c/o Van Chu
7 Buehler Road
Bedford, MA 01730

General Pacific Capital Ltd. 0.1%
Corporate Data Services
9 Av d'Ostende
Monte Carlo, Monaco MC98000

Andrew J. Bendheim 0.1%
32 Arcadia Road
</TABLE>

NOTE: Series A and B are convertible preferred stock.
Series C, D and E are redeemable convertible preferred stock.

<PAGE> 104

Atlantic Management Associates, Inc. Series B Preferred 5,000 3.0%
c/o David Steadman
P.O. Box 10670
Bedford, NH 03110

Ashley Stephenson (15) Common Stock 620,000 11.9%

Robert Steinkrauss (16) Common Stock 250,000 5.4%

Martin Meyer (17) Common Stock 161,400 3.4%

Jeremy Greene (18) Common Stock 143,240 3.0%

R. Stephen Cheheyl (19) Common Stock 75,000 1.6%
Series D Preferred 20,000

All executives and directors Common Stock 3,132,708 54.2%
as a group (7 persons) Series A Preferred 17,600 30.6%
Series B Preferred 5,000 3.0%
Series D Preferred 620,001
Series E Preferred 1,714,287

Atlantic Management Associates, Inc. 0.1%
c/o David Steadman
P.O. Box 10670
Bedford, NH 03110

Ashley Stephenson (15) 4.4%

Robert Steinkrauss (16) 1.9%

Martin Meyer (17) 1.2%

Jeremy Greene (18) 1.1%

R. Stephen Cheheyl (19) 0.9%
0.9%

All executives and directors 42.0%
as a group (7 persons)

14.6%
50.2%
</TABLE>

NOTE: Series A and B are convertible preferred stock.
Series C, D and E are redeemable convertible preferred stock.

88
<PAGE> 105

(1) Based on 4,607,356 shares outstanding as of September 1, 1999.

(2) Based on 57,600 shares outstanding as of September 1, 1999.

(3) Based on 165,000 shares outstanding as of September 1, 1999.

(4) Based on 240,000 shares outstanding as of September 1, 1999.

(5) Based on 2,127,867 shares outstanding as of September 1, 1999.

(6) Based on 3,414,288 shares outstanding as of September 1, 1999.

(7) Each share of common stock is entitled to one vote, each share of Series A
convertible preferred stock is entitled to two votes, each share of Series
B convertible preferred stock is entitled to two votes, each share of
Series C convertible preferred stock is entitled to approximately 2.9848
votes, each share of Series D convertible preferred stock is entitled to
two votes, and each share of Series E convertible preferred stock is
entitled to one vote.

(8) Includes shares held by Greylock Equity Limited Partnership and Greylock IX
Limited Partnership.

(9) Includes shares held in the name of J.P.M. International, JPM International
(BVI) Limited, JPM International, Limited, and JPM International, Ltd.,
over which Mr. Montanana has sole voting and investment power. Also
includes 140,000 shares of Common Stock as to which J.P.M. International
has the right to acquire beneficial ownership within 60 days after
September 1, 1999 through the exercise of stock options. Mr. Montanana is a
director of Xedia.

(10) Mr. Parizeau, a general partner of ITASCA VC Partners VI, LLP, the general
partner of Norwest Venture Partners VI, LP, is a director of Xedia. Mr.
Parizeau shares voting and investment power with respect to the shares
listed. Mr. Parizeau does not own any shares of Xedia in his individual
capacity and disclaims beneficial ownership of the shares listed except to
the extent of his pecuniary interest therein. Mr. Parizeau is a director of
Xedia.

(11) Includes 211,400 shares of Common Stock as to which Mr. Polychron has the
right to acquire beneficial ownership within 60 days after September 1,
1999 through the exercise of stock options.

(12) Includes shares held by Venture Fund I, L.P., AT&T Venture Fund II L.P.,
Special Partners Fund, L.P. and Special Partners Fund International, L.P.

<TABLE>
<CAPTION>
<S> <C>
Note: Series A and B are convertible preferred stock. Series C, D and E are redeemable convertible preferred stock.
</TABLE>

<PAGE> 106

(13) Includes 40,000 shares of Common Stock as to which Mr. Jones has the right
to acquire beneficial ownership within 60 days after September 1, 1999
through the exercise of stock options. Mr. Jones is a former director of
Xedia.

(14) To the knowledge of Xedia, General Pacific Capital does not have voting or
investment power over these shares.

(15) Includes 620,000 shares of Common Stock as to which Mr. Stephenson has the
right to acquire beneficial ownership within 60 days after September 1,
1999 through the exercise of stock options. Mr. Stephenson is a director
and an executive officer of Xedia.

(16) Includes 37,500 shares of Common Stock as to which Mr. Steinkrauss has the
right to acquire beneficial ownership within 60 days after September 1,
1999 through the exercise of stock options. Also includes 212,500 shares of
Common Stock held by four irrevocable trusts of which Mr. Steinkrauss' wife
is the trustee and his children are the beneficiaries; Mr. Steinkrauss
disclaims beneficial ownership of the shares held by these trusts. Mr.
Steinkrauss is a director and an executive officer of Xedia.

(17) Includes 161,400 shares of Common Stock as to which Mr. Meyer has the right
to acquire beneficial ownership within 60 days after September 1, 1999
through the exercise of stock options. Mr. Meyer is an executive officer of
Xedia.

(18) Includes 143,240 shares of Common Stock as to which Mr. Greene has the
right to acquire beneficial ownership within 60 days after September 1,
1999 through the exercise of stock options. Mr. Greene is an executive
officer of Xedia.

(19) Includes 75,000 shares of Common Stock as to which Mr. Cheheyl has the
right to acquire beneficial ownership within 60 days after September 1,
1999 through the exercise of stock options, including shares which become
fully vested and exercisable upon the completion of the merger. Mr. Cheheyl
is a director of Xedia.

LEGAL MATTERS

The legality of Lucent common stock offered by this proxy
statement/prospectus will be passed upon for Lucent by Pamela F. Craven, Vice
President--Law and Secretary, of Lucent. As of September 7, 1999, Pamela F.
Craven owned 1,096 shares of Lucent common stock and options and stock units for
282,400 shares of Lucent common stock.

Certain United States federal income tax consequences of the merger will be
passed upon for Xedia's special counsel Hale and Dorr LLP, Boston,
Massachusetts.

<PAGE> 107

EXPERTS

The financial statements incorporated in this proxy statement/prospectus by
reference in Exhibit 99.1 to the Lucent Current Report on Form 8-K dated August
2, 1999, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

The consolidated audited financial statements of Xedia Corporation as of
December 31, 1997 and 1998 and for each of the three years in the period ended
December 31, 1998 included in this joint proxy statement/prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.

OTHER MATTERS

As of the date of this proxy statement/prospectus, the Xedia board of
directors knows of no matters that will be presented for consideration at the
special meeting of stockholders other than as described in this proxy
statement/prospectus.

WHERE YOU CAN FIND MORE INFORMATION

Lucent files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements or other information that Lucent files with the
Securities and Exchange Commission at the Securities and Exchange Commission's
public reference rooms at the following locations:

<TABLE>
<CAPTION>
<S> <C> <C>
Public Reference New York Regional Office Chicago Regional Office
Room 7 World Trade Center Citicorp Center
450 Fifth Street, Suite 1300 500 West Madison Street
N.W. New York, NY 10048 Suite 1400
Room 1024 Chicago, IL 60661-2511
Washington, D.C.
20549
</TABLE>

Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. These Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the Internet world wide web site maintained by the
Securities and Exchange Commission at "http://www.sec.gov." Reports, proxy
statements and other information concerning Lucent may also be inspected at the
offices of the New York Stock Exchange at 20 Broad Street, New York, New York
10005.

<PAGE> 108

Lucent filed a registration statement on Form S-4 on , 1999 to register
with the Securities and Exchange Commission the Lucent common stock to be issued
to Xedia stockholders in the merger. This proxy statement/prospectus is a part
of that registration statement. As allowed by Securities and Exchange Commission
rules, this proxy statement/prospectus does not contain all the information you
can find in Lucent's registration statement or the exhibits to the registration
statement.

The Securities and Exchange Commission allows Lucent to "incorporate by
reference" information into this proxy statement/prospectus, which means that
the companies can disclose important information to you by referring you to
other documents filed separately with the Securities and Exchange Commission.
The information incorporated by reference is considered part of this proxy
statement/prospectus, except for any information superseded by information
contained directly in this proxy statement/prospectus or in later filed
documents incorporated by reference in this proxy statement/prospectus.

This proxy statement/prospectus incorporates by reference the documents set
forth below that Lucent previously filed with the Securities and Exchange
Commission. These documents contain important business and financial information
about Lucent that is not included in or delivered with this proxy
statement/prospectus.

<TABLE>
<CAPTION>
LUCENT FILINGS
(FILE NO. 001-11639) PERIOD
- -------------------- ------
<S> <C>
Annual Report on Form 10-K Fiscal Year ended September 30, 1998
as amended by Amendment No. 1 thereto
filed on Form 10-K/A on May 17, 1999

Quarterly Reports on Form 10-Q Quarters ended December 31, 1998,
March 31, 1999 and June 30, 1999

Current Reports on Form 8-K Filed November 19, 1998, January 8,
1999, January 15, 1999, March 5, 1999
(as amended by Amendment No. 1 thereto
filed on Form 8-K/A on May 18, 1999),
June 28, 1999 and August 2, 1999

Proxy Statement Filed December 22, 1998

The description of Lucent Filed under Section 12 of the Exchange
common stock and Lucent Act on February 26, 1996, as amended
rights to acquire junior by Amendment No. 1 thereto filed on
preferred stock set forth Form 10/A on March 12, 1996, Amendment
in the Lucent Registration No. 2 thereto filed on Form 10/A on
Statement on Form 10 March 22, 1996 and Amendment No. 3
thereto filed on Form 10/A on April
1, 1996, including any amendments or
reports filed for the purpose of
updating such descriptions
</TABLE>

<PAGE> 109

Lucent also incorporates by reference additional documents that may be
filed with the Securities and Exchange Commission under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act between the date of this proxy
statement/prospectus and the date of the special meeting. These include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as well as proxy statements.

Lucent has supplied all information contained or incorporated by reference
in this proxy statement/prospectus relating to Lucent and Xedia has supplied all
such information relating to Xedia.

Xedia stockholders should not send in their Xedia certificates or warrants
until they receive the transmittal materials from the exchange agent. Xedia
stockholders of record who have further questions about their share certificates
or the exchange of their Xedia stock for Lucent common stock should call the
exchange agent.

You can obtain any of the documents incorporated by reference through
Lucent, the Securities and Exchange Commission or the Securities and Exchange
Commission's Internet web site as described above. Documents incorporated by
reference are available from Lucent without charge, excluding all exhibits,
except that if Lucent has specifically incorporated by reference an exhibit in
this proxy statement/prospectus, the exhibit will also be provided without
charge. Stockholders may obtain documents incorporated by reference in this
proxy statement/prospectus by requesting them in writing or by telephone from
the Lucent at the following address:

Lucent Technologies Inc.
c/o The Bank of New York
Church Street Station
P.O. Box 11009
New York, New York 10286-1009
Telephone: 1-888-LUCENT6

You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. We have not authorized anyone to
provide you with information that is different from what is contained in this
proxy statement/prospectus. This proxy statement/prospectus is dated , 1999.
You should not assume that the information contained in this proxy
statement/prospectus is accurate as of any date other than that date. Neither
the mailing of this proxy statement/prospectus to stockholders nor the issuance
of Lucent common stock in the merger creates any implication to the contrary.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to the financial condition, results of operations, business strategies,
operating efficiencies or synergies,

<PAGE> 110

competitive positions, growth opportunities for existing products, plans and
objectives of management, markets for stock of Lucent and Xedia and other
matters. Statements in this proxy statement/prospectus that are not historical
facts are hereby identified as "forward-looking statements" for the purpose of
the safe harbor provided by Section 21E of the Exchange Act and Section 27A of
the Securities Act. These forward-looking statements, including, without
limitation, those relating to the future business prospects, revenues and
income, in each case relating to Lucent and Xedia , wherever they occur in this
proxy statement/prospectus, are necessarily estimates reflecting the best
judgment of the senior management of Lucent and Xedia and involve a number of
risks and uncertainties that could cause actual results to differ materially
from those suggested by the forward-looking statements. These forward-looking
statements should, therefore, be considered in light of various important
factors, including those set forth in this proxy statement/prospectus. Important
factors that could cause actual results to differ materially from estimates or
projections contained in the forward-looking statements include without
limitation:

- the ability to integrate the operations of Lucent and Xedia, including
their respective product lines

- the effects of vigorous competition in the markets in which Lucent and
Xedia operate

Words such as "estimate," "project," "plan," "intend," "expect," "believe"
and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are found at various places throughout this
proxy statement/prospectus and the other documents incorporated by reference,
including, but not limited to, the Annual Report on Form 10-K for the year ended
September 30, 1998 of Lucent, including any amendments. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date of this proxy statement/prospectus. Neither Lucent nor Xedia
undertakes any obligation to publicly update or release any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this proxy statement/prospectus or to reflect the occurrence of unanticipated
events.

<PAGE> 111

INDEX TO XEDIA CORPORATION FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Public Accountants........................................................F-2

Consolidated Balance Sheets as of December 31, 1997 and 1998
and June 30, 1999 (Unaudited)...................................................................F-3

Consolidated Statements of Operations for the Years Ended December 31, 1996,
1997 and 1998 and for the Six-Month Periods
Ended June 30, 1998 and 1999 (Unaudited)........................................................F-4

Consolidated Statements of Stockholders' Deficit for the Years Ended December
31, 1996, 1997 and 1998 and for the Six-Month Period
Ended June 30, 1999 (Unaudited).................................................................F-5

Consolidated Statements of Cash Flows for the Years Ended December 31, 1996,
1997 and 1998 and for the Six-Month Periods
Ended June 30, 1998 and 1999 (Unaudited)........................................................F-6

Notes to Consolidated Financial Statements......................................................F-7-21
</TABLE>

F-1

<PAGE> 112

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Xedia Corporation:

We have audited the accompanying consolidated balance sheets of Xedia
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1997
and 1998, and the related consolidated statements of operations, stockholders'
deficit and cash flows for each of the three years in the period ended December
31, 1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Xedia Corporation
and subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.

/s/ Arthur Andersen LLP

Boston, Massachusetts
March 11, 1999

F-2

<PAGE> 113

XEDIA CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998 1999
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 12,369,063 $ 4,227,067 $ 1,777,683
Accounts receivable, less reserves of $50,000,
$103,409 and $91,416 at December 31, 1997 and
1998 and June 30, 1999, respectively 352,510 1,866,932 3,273,685
Inventories 631,922 766,254 856,399
Prepaid expenses and other current assets 207,273 278,424 470,823
---------------- --------------- --------------
Total current assets 13,560,768 7,138,677 6,378,590
---------------- --------------- --------------

Property and Equipment, at cost:
Equipment 650,548 1,210,341 1,534,733
Computer equipment and software 556,857 1,093,211 1,322,041
Furniture and fixtures 46,037 128,986 135,345
Leasehold improvements 24,735 69,358 -
---------------- --------------- --------------
1,278,177 2,501,896 2,992,119
Less--Accumulated depreciation and amortization 568,076 1,166,950 1,543,274
---------------- --------------- --------------
710,101 1,334,946 1,448,845
---------------- --------------- --------------
Other Assets 69,857 24,932 119,377
---------------- --------------- --------------
$ 14,340,726 $ 8,498,555 $ 7,946,812
================ =============== ==============

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
Line of credit $ - $ - $ 1,000,000
Current portion of long-term debt 151,216 168,029 166,596
Accounts payable 397,318 917,730 1,309,470
Accrued expenses 680,263 1,684,453 2,163,139
Deferred revenue 15,296 737,274 1,103,996
---------------- --------------- --------------
Total current liabilities 1,244,093 3,507,486 5,743,201
---------------- --------------- --------------

Long-Term Debt, net of current portion 430,804 236,011 152,713
---------------- --------------- --------------

Commitments (Notes 3 and 6)

Redeemable Convertible Preferred Stock, $.01 par
value:
Authorized--5,867,867 shares
Issued and outstanding--5,782,155 shares
(preference in
liquidation of $20,733,609) 20,733,609 20,733,609 20,733,609
--------------- --------------- --------------
Stockholders' Deficit:

Convertible preferred stock, $.01 par value
Authorized--222,600 shares
Issued and outstanding--222,600 shares
(preference in
liquidation of $2,010,000) 2,226 2,226 2,226
Common stock, $.005 par value
Authorized--19,000,000 shares
Issued and outstanding--4,194,556, 20,972 21,624 22,729
4,324,956 and 4,546,056
shares at December 31, 1997 and 1998 and
June 30, 1999,
respectively
Additional paid-in capital 4,249,411 4,349,058 4,512,778
Accumulated deficit (12,340,389) (20,351,459) (23,220,444)
--------------- --------------- --------------
Total stockholders' deficit (8,067,780) (15,978,551) (18,682,711)
--------------- --------------- --------------

$ 14,340,726 $ 8,498,555 $ 7,946,812
=============== ================ ==============
</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

F-3

<PAGE> 114

XEDIA CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

YEARS ENDED DECEMBER 31, SIX-MONTH PERIODS ENDED
JUNE 30,
1996 1997 1998 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue $ 4,423,725 $ 594,893 $ 5,499,766 $ 1,535,445 $ 6,903,672

Cost of Revenue 3,564,974 714,141 2,215,796 719,430 2,631,747
--------------- -------------- -------------- -------------- -------------

Gross profit (loss) 858,751 (119,248) 3,283,970 816,015 4,271,925

Operating Expenses:
Research and development 1,052,015 2,515,205 4,374,173 1,920,509 3,122,388
Sales and marketing 555,096 2,092,648 5,649,427 2,679,356 3,044,740
General and administrative 771,223 981,725 1,594,977 792,382 964,601
--------------- -------------- -------------- -------------- -------------

Loss from operations (1,519,583) (5,708,826) (8,334,607) (4,576,232) (2,859,804)

Interest income 5,848 89,469 376,372 244,856 65,387
Interest expense (20,922) (43,434) (45,423) (25,201) (44,017)
Other expense, net - (8,053) (7,412) (2,912) (30,551)
--------------- ------------- ------------- ------------- ------------

Net loss $ (1,534,657) $ (5,670,844) $ (8,011,070) $ (4,359,489) $ (2,868,985)
============== ============= ============= ============= ============

Net Loss per Share (Note 2(j)):
Basic and diluted net loss per common
share $ (0.41) $ (1.38) $ (1.89) $ (1.04) $ (0.65)
============== ============= ============= ============= ============
Basic and diluted weighted average
common shares outstanding 3,753,767 4,123,203 4,249,733 4,199,230 4,438,211
=============== ============== ============== ============== =============

Pro Forma Net Loss per Share (Note 2(j)):
Pro forma basic and diluted net loss
per share $ (0.61) $ (0.22)
============= =============
Pro forma basic and diluted weighted
average common shares
outstanding 13,081,355 13,269,833
============== =============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4

<PAGE> 115

XEDIA CORPORATION AND SUBSIDIARIES

Consolidated Statements of Stockholders' Deficit

<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED
STOCK COMMON STOCK ADDITIONAL TOTAL
NUMBER OF $.01 PAR NUMBER OF .005 PAR PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES VALUE SHARES VALUE CAPITAL DEFICIT DEFICIT
<S> <C> <C> <C> <C> <C> <C> <C>

Balance, December 31, 1995 222,600 $2,226 3,665,272 $18,326 $3,796,079 (5,134,888) $(1,318,257)
Sale of common stock - - 12,200 61 7,039 - 7,100
Conversion of notes payable into
common stock - - 267,084 1,335 399,291 - 400,626
Net loss - - - - - (1,534,657) (1,534,657)
------- ------ --------- ------- ---------- ---------- -----------

Balance, December 31, 1996 222,600 2,226 3,944,556 19,722 4,202,409 (6,669,545) (2,445,188)

Issuance costs in connection with
issuance of Series C and
Series D redeemable convertible
preferred stock - - - - (76,748) - (76,748
Sale of common stock - - 158,000 790 78,210 - 79,000
Exercise of stock options - - 84,000 420 41,580 - 42,000
Issuance of common stock for
services rendered - - 8,000 40 3,960 - 4,000
Net loss - - - - - (5,670,844) (5,670,844)
------- ------ --------- ------- ---------- ----------- ----------
Balance, December 31, 1997 222,600 2,226 4,194,556 20,972 4,249,411 (12,340,389) (8,067,780)
Exercise of stock options - - 130,400 652 69,047 - 69,699

</TABLE>

F-5

<PAGE> 116

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock options to
nonemployees - - - - 20,600 - 20,600
Value ascribed to common stock
warrants - - - - 10,000 - 10,000
Net loss - - - - - (8,011,070) (8,011,070)
------- ------- --------- -------- --------- ----------- ------------

Balance, December 31, 1998 222,600 2,226 4,324,956 21,624 4,349,058 (20,351,459) (15,978,551)
Exercise of stock options (unaudited) - - 221,100 1,105 163,720 - 164,825
Net loss (unaudited) - - - - - (2,868,985) (2,868,985)
------- ------ --------- ------- ---------- ------------ ------------
Balance, June 30, 1999 (unaudited) 222,600 $2,226 4,546,056 $22,729 $4,512,778 $(23,220,444) $(18,682,711)
======= ====== ========= ======= ========== ============ ============

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5

<PAGE> 117
XEDIA CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
SIX-MONTH PERIODS
ENDED JUNE 30,
YEARS ENDED DECEMBER 31, (UNAUDITED)
1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $(1,534,657) $(5,670,844) $(8,011,070) $(4,359,489) $(2,868,985)

Adjustments to reconcile net loss to
net cash used in operating activities-
Depreciation and amortization 98,148 254,636 598,874 257,643 376,324
Issuance of common stock for
services - 4,000 - - -
Value ascribed to common stock
warrants - - 10,000 - -
Compensation charge for the
issuance of stock options to
nonemployees - - 20,600 - -
Changes in current assets and
liabilities-
Accounts receivable 305,356 (352,510) (1,514,422) (747,499) (1,406,753)
Inventories 1,510,974 (573,787) (134,332) (178,268) (90,145)
Prepaid expenses and other current
assets (11,235) (144,763) (71,151) (42,174) (192,399)
Accounts payable (1,461,472) 279,147 520,412 77,863 391,740
Accrued expenses 119,752 314,270 1,004,190 442,332 478,686
Deferred revenue - 15,296 721,978 34,964 366,722
---------- --------- --------- --------- ----------

Net cash used in operating activities (973,134) (5,874,555) (6,854,921) (4,514,628) (2,944,810)
---------- --------- --------- --------- ----------

Cash Flows from Investing Activitie:
Purchases of property and equipment (73,099) (559,706) (1,223,719) (872,603) (490,223)
(Increase) decrease in other assets (21,290) (48,567) 44,925 42,384 (94,445)
---------- --------- --------- --------- ----------

Net cash used in investing activities (94,389) (608,273) (1,178,794) (830,219) (584,668)
---------- --------- --------- --------- ----------

Cash Flows from Financing Activities:
Borrowings under line of credit - - - - 1,000,000

Borrowings (payments) on notes
payable to stockholders 300,000 (50,000) - 166,596 -
Proceeds from long-term debt - 499,788 - 319,309 -

</TABLE>

F-6

<PAGE> 118

<TABLE>
<S> <C> <C> <C> <C> <C>
Payments on long-term debt (25,592) (97,213) (177,980) (555,303) (84,731)
Proceeds from sale of redeemable
convertible preferred stock,
net of issuance costs 400,000 17,933,261 - - -
Sale of common stock 7,100 79,000 - - -
Proceeds from exercise of stock options - 42,000 69,699 52,700 164,825
----------- ------------ ------------- ------------ -------------

Net cash provided by (used in)
financing activities 681,508 18,406,836 (108,281) (16,698) 1,080,094
----------- ------------ ------------- ------------ -------------

Net (Decrease) Increase in Cash and
Cash Equivalents (386,015) 11,924,008 (8,141,996) (5,361,545) (2,449,384)

Cash and Cash Equivalents, beginning of
period 831,070 445,055 12,369,063 12,369,063 4,227,067
----------- ------------ ------------- ------------ -------------

Cash and Cash Equivalents, end of
period $ 445,055 $ 12,369,063 $ 4,227,067 $ 7,007,518 $ 1,777,683
=========== ============ ============= ============ =============

Supplemental Disclosure of Cash Flow
Information:
Cash paid for interest $ 5,452 $ 50,762 $ 45,423 $ 25,201 $ 44,017
=========== ============ ============= ============ =============
Cash paid for income taxes $ - $ - $ 7,412 $ 1,612 $ 4,156
=========== ============ ============= ============ =============

Supplemental Disclosure of Noncash
Investing Activity:
Equipment acquired under
capital leases $ 179,617 $ 21,020 $ - $ - $ -
=========== ============ ============= ============ =============
Supplemental Disclosure of Noncash
Financing Activities:
Conversion of notes payable to $ 400,626 $ - $ - $ - $ -
stockholders plus accrued interest =========== ============ ============= ============ =============
into 267,084 shares of common
stock
Conversion of notes payable and $ - $ 323,600 $ - $ $ -
accrued interest into 107,867 =========== ============ ============= ============ =============
shares of Series D redeemable
convertible preferred stock

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6

<PAGE> 119

XEDIA CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
(including data applicable to unaudited periods)

(1) Operations

Xedia Corporation (the Company) develops, manufactures and sells a new
generation of integrated, scaleable, managed broadband access products for
connection to service provider networks.

The Company is subject to a number of risks common to companies in similar
stages of development, including dependence on key individuals, competition
from substitute products and larger companies, the need for adequate
financing to fund future operations and for the successful development and
marketing of the Company's products.

(2) Significant Accounting Policies

The accompanying consolidated financial statements reflect the application
of certain significant accounting policies, as described in this note and
elsewhere in these notes to consolidated financial statements.

(a) Principles of Consolidation

The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All
material intercompany accounts and transactions have been eliminated
in consolidation.

(b) Interim Unaudited Financial Statements

The accompanying consolidated balance sheet as of June 30, 1999, the
consolidated statements of operations and cash flows for the six-month
periods ended June 30, 1998 and 1999 and the consolidated statements
of stockholders' deficit for the six-month period ended June 30, 1999
are unaudited, but in the opinion of management, include all
adjustments, consisting of normal recurring adjustments, necessary for
a fair presentation of results for these interim periods. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted, although management believes that the
disclosures included are adequate to make the information presented
not misleading. The results of operations for the six-month period
ended June 30, 1999 are not necessarily indicative of the results to
be expected for any other interim period or the entire fiscal year.

F-7

<PAGE> 120
(c) Management Estimates

The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

(d) Revenue Recognition

The Company generally recognizes product revenue upon shipment,
provided that there are no significant obligations or customer
acceptance criteria to be met. A provision is made at that time for
estimated warranty costs to be incurred. The Company recognizes
revenue from its maintenance contracts ratably over the term of the
contract, which is typically one year.

(e) Significant Customers and Concentration of Credit Risk

Statement of Financial Accounting Standards (SFAS) No. 105, Disclosure
of Information About Financial Instruments with Off-Balance-Sheet Risk
and Financial Instruments with Concentrations of Credit Risk, requires
disclosure of any significant off-balance-sheet and credit risk
concentrations. Financial instruments that subject the Company to
credit risk consist primarily of cash equivalents and trade accounts
receivable. The Company has not experienced any significant losses
related to its accounts receivable.

The Company had a total of four customers whose accounts receivable
balances individually represented a significant percentage of total
accounts receivable in certain or all years or periods, as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER FOR THE SIX MONTHS ENDED
31, JUNE 30,
1996 1997 1998 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Nortel (A Related Party) -% -% -% 3% 42%
Customer B - - 2 - 11
Customer C - 94 1 10 24
Customer D - - 74 55 2
</TABLE>

F-8

<PAGE> 121

The Company had a total of five customers whose revenues individually
represented a significant percentage of total revenue in certain or
all years or periods, as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, FOR THE SIX-MONTH
PERIODS ENDED JUNE 30,
1996 1997 1998 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Customer A 91% 4% -% -% 7%
Customer B - 13 2 6 1
Customer C - 64 13 21 22
Customer D - - 61 36 22
Nortel (A Related Party) - - 1 2 21
</TABLE>

(f) Cash and Cash Equivalents

The Company considers highly liquid investments purchased with an
original maturity of 90 days or less at the time of acquisition to be
cash equivalents. Cash equivalents consist of money market investments
and T-bills carried at cost, which approximates their fair market
value.

(g) Inventories

Inventories, which include material and contracted assembly, are
stated at the lower of cost (first-in, first-out) or market and
consisted of the following at December 31, 1997, 1998 and June 30,
1999:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998 1999
(UNAUDITED)
<S> <C> <C> <C>
Raw materials and work-in-process $582,515 $583,422 $707,863
Finished goods 49,407 182,832 148,536
------ ------- -------
$631,922 $766,254 $856,399
======== ======== ========
</TABLE>

F-9

<PAGE> 122

(h) Depreciation and Amortization

The Company provides for depreciation and amortization by charges to
operations in amounts estimated to allocate the cost of property and
equipment over its estimated useful lives, on the straight-line basis,
as follows:

<TABLE>
<CAPTION>
ASSET CLASSIFICATION ESTIMATED
USEFUL LIFE
<S> <C>
Equipment 3 years
Computer equipment and software 3 years
Furniture and fixtures 3 years
Leasehold improvements 3 years
</TABLE>

(i) Research and Development and Software Development Costs

Research and development costs are charged to operations as incurred.
SFAS No. 86, Accounting for the Costs of Computer Software To Be Sold,
Leased or Otherwise Marketed, requires the capitalization of certain
computer software development costs incurred after technological
feasibility is established and prior to shipment of the product. The
costs incurred after technological feasibility and prior to product
shipment have not been material; therefore, no software development
costs were capitalized during the years ended December 31, 1996, 1997
and 1998 or the six-month periods ended June 30, 1998 and 1999.

(j) Net Loss Per Common Share

Basic and diluted net loss per common share were determined by
dividing net loss by the weighted average common shares outstanding
during the period. Basic and diluted net loss per share are the same
for all periods presented as outstanding common stock options,
warrants, redeemable convertible and convertible preferred stock are
antidilutive. Redeemable convertible and convertible preferred stock,
options and warrants to purchase a weighted total of 2,625,838,
7,337,321, 13,101,940, 12,828,524 and 13,312,985 common shares have
been excluded from the computation of diluted weighted average shares
outstanding for the years ended December 31, 1996, 1997 and 1998 and
the six-month periods ended June 30, 1998 and 1999, respectively.

The calculation of pro forma net loss per common share assumes that
all Series A and B convertible preferred stock and Series C, D and E
redeemable convertible preferred stock had been converted to common
stock as of the issuance date.

F-10

<PAGE> 123

(k) Comprehensive Loss

In June 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 130, Reporting Comprehensive Income. The Company did not have
any components of comprehensive loss in addition to its reported net
loss.

(l) Accrued Expenses

Accrued expenses at December 31, 1997 and 1998 consisted of the
following:

<TABLE>
<CAPTION>
DECEMBER 31,
1997 1998

<S> <C> <C>
Payroll and related costs $ 438,155 $ 1,055,201
Warranty 95,516 103,481
Other 146,592 525,771
--------------------- ---------------------

$ 680,263 $ 1,684,453
===================== =====================
</TABLE>

(3) Debt

At December 31, 1997 and 1998 and June 30, 1999, long-term debt consisted
of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998 1999
(UNAUDITED)
<S> <C> <C> <C>
Equipment lines of credit $499,787 $402,607 $319,309
Capital lease obligations 82,233 1,433 -
------ ----- -------
Total long-term debt 582,020 404,040 319,309
Less--Current portion 151,216 168,029 166,596
------- ------- -------
$430,804 $236,011 $152,713
======== ======== ========
</TABLE>

F-11

<PAGE> 124

The following represents the future minimum payments on long-term debt at
December 31, 1998:

<TABLE>
<S> <C>
1999 $ 185,205
2000 183,722
2001 76,571
---------------------

445,498

Less--Amounts representing interest (41,458)
---------------------

$ 404,040
=====================
</TABLE>

(a) Equipment Lines of Credit

The Company has a line of credit with a bank that provides for
borrowings up to $500,000 to be used for the acquisition of equipment.
Borrowings were made available for purchases until May 15, 1998.
Borrowings are payable in 36 equal monthly payments commencing on June
15, 1998 and they bear interest at prime (7.75% at December 31, 1998)
plus .25% and are secured by substantially all assets of the Company.

The Company has an additional line of credit agreement with a lease
financing limited partnership (the limited partnership) that provides
for borrowings up to $500,000 to be used for the acquisition of
equipment. Borrowings were made available for purchases until October
31, 1998. This line is collateralized by all equipment acquired under
the agreement. During 1997, the limited partnership purchased 10,000
shares of the Company's common stock for net proceeds of $5,000 in
connection with this agreement.

(b) Revolving Line of Credit

The Company has a revolving line of credit agreement with a bank,
which provides for borrowings of up to $4,000,000. Borrowings bear
interest at prime (7.75% at December 31, 1998) plus .25% and are
secured by substantially all assets of the Company. There were no
borrowings outstanding under this revolving line of credit at December
31, 1997 and 1998 and $1,000,000 was outstanding under this revolving
line of credit at June 30, 1999. On January 13, 1999, the Company
amended its agreement with the bank to change certain financial
covenants, as well as to extend the expiration date of the line of
credit to January 27, 2000. On August 2, 1999, the Company again
amended its agreement with the bank to remove all existing financial
covenants.

F-12

<PAGE> 125

(4) Redeemable Convertible Preferred Stock

Redeemable convertible preferred stock consisted of the following at
December 31, 1997 and 1998 and June 30, 1999:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998 1999
(UNAUDITED)
<S> <C> <C> <C>
Redeemable convertible preferred stock, $.01 par value:
Series C (at redemption value)-
Authorized--240,000 shares
Issued and outstanding--240,000 shares
(preference in liquidation of $2,400,000) $ 2,400,000 $ 2,400,000 $ 2,400,000
Series D (at redemption value)-
Authorized--2,127,867 shares
Issued and outstanding--2,127,867 shares
(preference in liquidation of $6,383,601) 6,383,601 6,383,601 6,383,601
Series E (at redemption value)-
Authorized--3,500,000 shares
Issued and outstanding--3,414,288 shares
(preference in liquidation of $11,950,008) 11,950,008 11,950,008 11,950,008
--------------- ------------- --------------

$ 20,733,609 $ 20,733,609 $ 20,733,609
=============== ============= ==============
</TABLE>

The rights, preferences and privileges of the Series C, D and E redeemable
convertible preferred stock (the Redeemable Convertible Preferred Stock)
are listed below:

CONVERSION

Each share of Series D Redeemable Convertible Preferred Stock is
convertible into two shares of common stock, adjustable for certain
dilutive events, as defined. Each share of Series C Redeemable Convertible
Preferred Stock is convertible into 2.9848 shares of common stock,
adjustable for certain dilutive events, as defined. Each share of Series E
Redeemable Convertible Preferred Stock is convertible into one share of
common stock, adjustable for certain dilutive events, as defined.
Conversion is at the option of the preferred stockholder, but it is
mandatory upon the closing of an initial public offering of the Company's
common stock at a per share price of at least $14.00 and with gross
proceeds to the Company of at least $10,000,000.

VOTING RIGHTS

The holders of the Redeemable Convertible Preferred Stock are entitled to
vote on all matters and are entitled to the number of votes equal to the
number of shares of common stock into which the Redeemable Convertible
Preferred Stock is then convertible.

F-13

<PAGE> 126

Together, the holders of the Series D and Series E Redeemable Convertible
Preferred Stock are each entitled to elect one director to the Company's
Board of Directors.

DIVIDENDS

The holders of the Redeemable Convertible Preferred Stock shall be entitled
to receive, prior to any dividends on common stock, dividends of $0.24 per
share each year, when and if declared by the Board of Directors. The
dividends are not cumulative. Any dividends in excess of the preference
amount would be paid to all stockholders as if all Redeemable Convertible
Preferred Stock had converted into common stock.

LIQUIDATION PREFERENCE

The holders of the Redeemable Convertible Preferred Stock have preference
over the common stockholders in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company. The holders of the
Series C, D and E Redeemable Convertible Preferred Stock are entitled to a
preference of $10.00, $3.00 and $3.50, respectively, per share, plus any
accrued but unpaid dividends.

REDEMPTION

The Series C, D and E Redeemable Convertible Preferred Stock are redeemable
at the option of the holder beginning on February 11, 2002 in three equal
annual installments. The maximum amount to be redeemed in any one year is
limited to 50% of the Company's cash flows for the previous fiscal year.

F-14

<PAGE> 127

(5) Stockholders' Equity

(a) Convertible Preferred Stock

Convertible preferred stock consisted of the following at December 31,
1997 and 1998 and June 30, 1999:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998 1999
(UNAUDITED)
<S> <C> <C> <C>
Convertible preferred stock, $.01 par value:
Series A-
Authorized--57,600 shares
Issued and outstanding--57,600 shares
(preference in liquidation of $360,000) $576 $576 $576
Series B-
Authorized--165,000 shares
Issued and outstanding--165,000 shares
(preference in liquidation of $1,650,000) 1,650 1,650 1,650
----- ----- -----

$2,226 $2,226 $2,226
====== ====== ======
</TABLE>

The rights, preferences and privileges of the Series A and B convertible
preferred stock (the Convertible Preferred Stock) are listed below:

CONVERSION

Each share of Series A and B Convertible Preferred Stock is convertible
into two shares of common stock, adjustable for certain dilutive events, as
defined. Conversion is at the option of the preferred stockholder, but it
is mandatory upon the closing of an initial public offering of the
Company's common stock at a per share price of at least $14.00 and with
gross proceeds to the Company of at least $10,000,000.

VOTING RIGHTS

The holders of Convertible Preferred Stock are entitled to vote on all
matters and are entitled to the number of votes equal to the number of
shares of common stock into which the Convertible Preferred Stock is then
convertible.

F-15

<PAGE> 128

DIVIDENDS

The holders of the Convertible Preferred Stock shall be entitled to
receive, prior to any dividends on common stock, dividends of $0.24 per
share each year, when and if declared by the Board of Directors. The
dividends are not cumulative. Any dividends in excess of the preference
amount would be paid to all stockholders as if all Series A and B
Convertible Preferred Stock had converted into common stock.

LIQUIDATION PREFERENCE

The holders of the Convertible Preferred Stock have preference over the
common stockholders in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company. The holders of the
Series A and B Convertible Preferred Stock are entitled to a preference of
$6.25 and $10.00 respectively, per share, plus any accrued but unpaid
dividends.

(b) Common Stock

As of June 30, 1999, the Company has reserved shares of common stock
as follows:

<TABLE>
<S> <C>
Series A Convertible Preferred Stock 115,200
Series B Convertible Preferred Stock 330,000
Series C Redeemable Convertible Preferred
Stock 716,352
Series D Redeemable Convertible Preferred
Stock 4,255,734
Series E Redeemable Convertible Preferred
Stock 3,414,288
Options 4,550,966
Warrants 60,003
----------

13,442,543
==========
</TABLE>

The Company's 1993 Stock Option Plan (the Plan) provides for the grant
of incentive stock options (ISOs) and nonqualified options to purchase
up to 5,950,000 shares of common stock to key employees, directors and
consultants. Under the terms of the Plan, the exercise price of
options granted shall be determined by the Board of Directors, and for
ISOs, shall not be less than the fair market value of the common stock
on the date of grant. The vesting term of each stock option shall be
determined by the Board, but shall not exceed 10 years from the date
of grant. At June 30, 1999, there are 964,134 options available for
grant under this plan.

F-16

<PAGE> 129

The following is all activity under the Plan for the years ended December
31, 1996, 1997 and 1998 and the six-month period ended June 30, 1999:

<TABLE>
<CAPTION>
NUMBER WEIGHTED
OF OPTIONS AVERAGE
OPTION
EXERCISE PRICE
<S> <C> <C>
Outstanding, December 31, 1995 1,413,300 $ .63
Granted 1,310,900 .67
Canceled (389,500) .74
-------------------- ------------------------
Outstanding, December 31, 1996 2,334,700 .58
Granted 1,231,416 .50
Exercised (84,000) .50
Canceled (215,750) .52
-------------------- ------------------------

Outstanding, December 31, 1997 3,266,366 .56
Granted 1,562,100 .75
Exercised (130,400) .57
Canceled (94,600) .70
-------------------- ------------------------

Outstanding, December 31, 1998 4,603,466 .62
Granted (unaudited) 214,000 .97
Exercised (unaudited) (221,000) .75
Canceled (unaudited) (45,500) .75
-------------------- ------------------------

Outstanding, June 30, 1999 4,550,966 $ .63
(unaudited) ===================== ========================

Exercisable, December 31, 1996 1,389,100 $ .61
===================== ========================
Exercisable, December 31, 1997 1,736,183 $ .52
===================== ========================

Exercisable, December 31, 1998 2,186,386 $ .55
===================== ========================

Exercisable, June 30, 1999 2,440,364 $ .57
(unaudited) ===================== ========================

</TABLE>
The range of exercise prices for options outstanding and options
exercisable at June 30, 1999 (unaudited) is as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
<S> <C> <C> <C> <C> <C>
$ .50-.75 4,236,366 7.68 $ .57 2,319,564 $ .52
.90-1.20 178,500 9.84 1.04 - -
1.50 136,000 6.69 1.50 120,800 1.50
-------------- ----------- --------------------- --------------------- ---------------------
4,550,866 7.73 $ .63 2,440,364 $ .57
============== =========== ===================== ===================== =====================
</TABLE>

F-17

<PAGE> 130

In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation, which requires the
measurement of the fair value of stock-based compensation to be included in
the statement of operations or disclosed in the notes to the financial
statements. The Company has determined that it will continue to account for
its stock-based compensation for employees under Accounting Principles
Board Opinion No. 25 and elect the disclosure-only alternative under SFAS
No. 123. Using the Black-Scholes option pricing model prescribed by SFAS
No. 123, the assumptions and weighted average information are as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX-MONTH
DECEMBER 31, PERIODS ENDED JUNE 30,
1996 1997 1998 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Risk-free interest rates 6.18% 5.77%-6.76% 4.18%-5.42% 5.42%-5.63% 4.60%-5.81%
Expected dividend yield - - - - -
Expected lives 5 years 5 years 5 years 5 years 5 years
Expected volatility - - - - -
Weighted average fair
value per share of
options granted $0.18 $0.14 $0.17 $0.18 $0.23
Weighted average
remaining contractual
life of options 7.71 years 8.68 years 8.16 years 8.42 years 7.73 years
</TABLE>

Had compensation cost for the Company's stock option plan been recorded,
the Company's pro forma net loss would have been increased, as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX-MONTH
DECEMBER 31, PERIODS ENDED JUNE 30,
1996 1997 1998 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss-
As reported $ (1,534,657) $(5,670,844) $(8,011,070) $ (4,359,489) $ (2,868,985)

Pro forma (1,560,933) (5,745,175) (8,044,320) (4,380,595) (2,918,137)

Basic and
diluted net
loss per
share-
As reported (0.41) (1.38) (1.89) (1.04) (0.65)
Pro forma (0.42) (1.39) (1.89) (1.04) (0.66)
</TABLE>

Because the method prescribed by SFAS No. 123 has not been applied to
options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in
future years.

F-18

<PAGE> 131

<PAGE> 132

(d) Warrants

The following summarizes all warrant activity for the years ended
December 31, 1996, 1997 and 1998 and the six-month period ended June
30, 1999:

<TABLE>
<CAPTION>
SERIES C REDEEMABLE SERIES E REDEEMABLE COMMON STOCK
PREFERRED STOCK PREFERRED STOCK
NUMBER EXERCISE NUMBER EXERCISE NUMBER EXERCISE
OF PRICE PER OF PRICE PER OF PRICE PER
WARRANTS SHARE WARRANTS SHARE WARRANTS SHARE
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
December 31, 1995 399,209 $ 10.00-14.50 - - 290,468 $ 1.50
Exercised (40,000) 10.00 - - (238,468) 1.50
Expired (359,209) 10.00-14.50 - - (46,668) 1.50
--------------- -------------- ---------- ---------- -------- ----------
Outstanding,
December 31, 1996 - $ - - $ - 5,332 $ 1.50
Granted - - 8,571 3.50 - -
Expired - - - - (5,332) (1.50)
---------------- -------------- ---------- ---------- -------- ---------
Outstanding,
December 31, 1997 - $ - 8,571 $ 3.50 - $ -
Granted - - - - 51,432 5.00
---------------- -------------- ---------- ---------- --------- ----------
Outstanding,
December 31, 1998 and
June 30, 1999 (unaudited) - $ - 8,571 $ 3.50 51,432 $ 5.00
================ ============== ========== ========== ========= ==========
</TABLE>

On June 30, 1998, the Company issued warrants to a nonemployee to purchase
51,432 shares of common stock at $5.00 per share which vested upon
issuance. These warrants expire in five years. As a result of this issuance
of warrants, the Company valued these warrants using the Black-Scholes
option pricing model and incurred a $10,000 expense during 1998.

(6) Commitments

The Company leases its facilities and certain equipment under operating
leases that expire through June 2004.

The annual minimum payments under these noncancelable leases as of December
31, 1998 are as follows:

<TABLE>
<CAPTION>
AMOUNT
<S> <C>
Year Ending December 31,
1999 $644,863
2000 868,515
2001 880,725
2002 864,243
Thereafter 1,289,226
----------
$4,547,572
==========
</TABLE>

F-19

<PAGE> 133

Total rent expense was approximately $170,000, $159,000, $402,000, $185,848
and $222,572 for the years ended December 31, 1996, 1997 and 1998 and the
six-month periods ended June 30, 1998 and 1999, respectively.

(7) Income Taxes

The Company accounts for income taxes under SFAS No. 109, Accounting for
Income Taxes, by providing for income taxes under the liability method.
Deferred taxes are determined based on the difference between the financial
statement and tax bases of assets and liabilities, as measured by the
enacted tax rates.

At December 31, 1997 and 1998, the Company had available net operating loss
carryforwards (NOLs) of approximately $10,727,000 and $18,502,000,
respectively, expiring at various dates through 2018. The Company also had
available federal tax credits of approximately $390,000 and $453,000 also
expiring at various dates through 2018. At December 31, 1997 and 1998, the
Company had a net deferred tax asset, principally from the NOLs and tax
credit carryforwards of approximately $5,019,000 and $8,163,000,
respectively, and it had recorded a full valuation allowance against this
asset due to the significant uncertainties regarding its realization.

The Internal Revenue Code contains provisions that may limit the Company's
net operating loss carryforwards available to be used in any given year
upon the occurrence of certain events, including changes in the ownership
interests of significant stockholders, as defined.

(8) Disclosures about Segments of an Enterprise

The Company has adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, in the fiscal year ended December 31,
1998. SFAS No. 131 establishes standards for reporting information
regarding operating segments in annual financial statements and requires
selected information for those segments to be presented in interim
financial reports issued to stockholders. SFAS No. 131 also establishes
standards for related disclosures about products and services and
geographic areas.

Operating segments are identified as components of an enterprise about
which separate discrete financial information is available for evaluation
by the chief operating decision maker, or decision making group, in making
decisions how to allocate resources and assess performance. The Company's
chief operating decision-makers, as defined under SFAS No. 131, are the
Chief Executive Officer, the Chief Financial Officer and the Chairman of
the Board. To date, the Company has viewed its operations and manages its
business as principally one operating segment, broadband access products.
The Company evaluates these products based upon gross margins. As a result,
the financial information disclosed herein represents all of the material
financial information related to the Company's principal operating segment.

F-20

<PAGE> 134
(9) Geographic Sales Information

The Company's geographic sales information as a percentage of total revenue
is as follows:

<TABLE>
<CAPTION>
FOR THE SIX-MONTH
FOR THE YEARS ENDED DECEMBER 31, PERIODS ENDED JUNE 30,
1996 1997 1998 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
United States 97% 98% 97% 97% 91%
Europe 3 2 2 1 8
Other - - 1 2 1
- - - - -
100% 100% 100% 100% 100%
=== === === === ===
</TABLE>

F-21

<PAGE> 135

(10) Valuation and Qualifying Accounts

A summary of the valuation and qualifying accounts of the Company related
to doubtful accounts for the three years ended December 31, 1998 is as
follows:

<TABLE>
<S> <C>
Reserve balance at December 31, 1995 $ 19,352
Addition to reserves -
Reduction in reserves (17,030)
---------
Reserve balance at December 31, 1996 2,322
Addition to reserves 47,678
Reduction in reserves -

Reserve balance at December 31, 1997 50,000
Addition to reserves 84,000
Reduction in reserves (30,591)
--------

Reserve balance at December 31, 1998 $ 103,409
==========
</TABLE>

(11) Related Party Transaction

At June 30, 1999, Nortel Networks NA Inc. owned 100% of the Company's
Series C convertible preferred stock outstanding. Nortel Networks purchased
from the Company data communication equipment representing $28,867, $27,992 and
$1,416,916 of revenue for the periods ending December 31, 1998 and June 30,
1998 and 1999, respectively, and represented $1,410,218 of the Company's
accounts receivable at June 30, 1999.

(12) Subsequent Event

On August 12, 1999, the Company entered into a definitive merger agreement
(the Merger Agreement) with Xylophone Acquisition Inc. (Xylophone), a
wholly owned subsidiary of Lucent Technologies, Inc. (Lucent). Pursuant to
the Merger Agreement, Xylophone will merge with and into the Company, which
will become a wholly owned subsidiary of Lucent. At the effective time of
the merger, each outstanding share of the Company's common stock and
Convertible Preferred Stock will be converted into shares of Lucent common
stock. The respective obligations of the Company, Xylophone and Lucent to
effect the merger are subject to the satisfaction of certain conditions.

F-22
<PAGE> 136

ANNEX A

-----------------------------------------------------------------

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

LUCENT TECHNOLOGIES INC.,

XYLOPHONE ACQUISITION INC.

AND

XEDIA CORPORATION

-------------------------------------------

Dated as of August 12, 1999

-------------------------------------------

<PAGE> 137

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
AGREEMENT AND PLAN OF MERGER................................................... -1-

BACKGROUND..................................................................... -1-
1. The Merger........................................................... -2-
1.1 General......................................................... -2-
1.2 Certificate of Incorporation.................................... -2-
1.3 By-Laws......................................................... -3-
1.4 Directors and Officers.......................................... -3-
1.5 Conversion of Securities........................................ -3-
1.6 Adjustment of the Exchange Ratios............................... -4-
1.7 Dissenting Shares............................................... -4-
1.8 No Fractional Shares............................................ -4-
1.9 Exchange Procedures; Distributions with Respect to
Unexchanged Shares; Stock Transfer Books........................ -5-
1.10 Return of Exchange Fund......................................... -7-
1.11 No Further Ownership Rights in Company Capital
Stock........................................................... -7-
1.12 Further Assurances.............................................. -7-

2. Approval by Stockholders............................................. -8-
2.1 Approval by Stockholders........................................ -8-

3. Representations and Warranties of the
Company.............................................................. -8-
3.1 Organization.................................................... -8-
3.2 Capitalization, Options and Other Rights........................ -8-
3.3 Authority; Stockholder Vote..................................... -9-
3.4 Charter Documents............................................... -11-
3.5 Financial Statements............................................ -11-
3.6 Absence of Undisclosed Liabilities; Indebtedness................ -12-
3.7 Operations and Obligations...................................... -12-
3.8 Properties...................................................... -14-
3.9 Customers and Suppliers......................................... -14-
3.10 Contracts....................................................... -14-
3.11 Absence of Default.............................................. -16-
3.12 Litigation...................................................... -16-
3.13 Compliance with Law............................................. -16-
3.14 Intellectual Property; Year 2000................................ -17-
3.15 Tax Matters..................................................... -18-
3.16 Employee Benefit Plans.......................................... -19-
3.17 Executive Employees............................................. -21-
3.18 Employees....................................................... -21-
3.19 Environmental Laws.............................................. -22-
3.20 Bank Accounts, Letters of Credit and Powers of Attorney......... -22-
3.21 Subsidiaries.................................................... -22-
3.22 Affiliate Transactions.......................................... -23-
3.23 Insurance....................................................... -23-
3.24 Leases.......................................................... -23-
3.25 Assets.......................................................... -23-
3.26 Accounts Receivable; Inventory.................................. -24-
3.27 Export Control Laws............................................. -24-
3.28 Minute Books.................................................... -25-
3.29 Financial Projections........................................... -25-
3.30 Complete Copies of Materials.................................... -25-
3.31 Disclosure...................................................... -25-
3.32 Pooling of Interests; Reorganization............................ -25-
3.33 Information in Lucent Registration Statement.................... -25-
3.34 Hart-Scott-Rodino Compliance.................................... -26-

4. Representations and Warranties of Acquisition and Lucent............. -26-
4.1 Organization.................................................... -26-
4.2 Capital Structure............................................... -26-
4.3 Authority....................................................... -26-
4.4 Litigation...................................................... -27-
4.5 SEC Filings; Lucent Financial Statements........................ -28-
4.6 Information Supplied............................................ -28-
4.7 Operations and Obligations...................................... -29-
4.8 Interim Operations of Acquisition............................... -29-
4.9 Pooling of Interests; Reorganization............................ -29-

5. Conduct Pending Closing.............................................. -29-
5.1 Conduct of Business Pending Closing............................. -29-
5.2 Prohibited Actions Pending Closing.............................. -30-
5.3 Access; Documents; Supplemental Information..................... -32-
5.4 No Solicitation................................................. -33-
5.5 Filings; Other Actions.......................................... -33-
5.6 Company Stock Options; Warrants................................. -34-
5.7 Company Stock Plan.............................................. -35-
5.8 Employee Benefit Plans; Existing Agreement...................... -36-
5.9 Indemnification................................................. -36-
5.10 Comfort Letters................................................. -36-
5.11 Stock Exchange Listing.......................................... -37-
5.12 Affiliates...................................................... -37-
5.13 Notification of Certain Matters................................. -37-
5.14 Tax Returns; Cooperation........................................ -37-
5.15 Pooling of Interests; Reorganization............................ -38-
5.16 Working Capital Financing....................................... -38-
5.17 Actions by the Parties.......................................... -38-

6. Conditions Precedent................................................. -39-
6.1 Conditions Precedent to Each Party's Obligation to Effect
the Merger...................................................... -39-
6.2 Conditions Precedent to Obligations of Acquisition and Lucent... -40-

6.3 Conditions Precedent to the Company's Obligations ............... -42-

7. Survival of Representation and Warranties ............................ -43-
7.1 Representations and Warranties .................................. -43-

8. Indemnification ...................................................... -43-
8.1 Escrow Shares ................................................... -43-
8.2 General Indemnification ......................................... -43-
8.3 Damage Threshold ................................................ -44-
8.4 Escrow Period; Release of Escrow Fund ........................... -44-
8.5 Claims Upon Escrow Fund ......................................... -44-
8.6 Objections to Claims ............................................ -45-
8.7 Third-Party Claims .............................................. -45-
8.8 Stockholders' Representative .................................... -46-

9. Brokers' and Finders' Fees ........................................... -46-
9.1 Company ......................................................... -46-
9.2 Acquisition and Lucent .......................................... -47-

10. Expenses ............................................................. -47-

11. Press Releases ....................................................... -47-

12. Contents of Agreement; Parties in Interest; etc. ..................... -47-

13. Assignment and Binding Effect ........................................ -47-

14. Termination .......................................................... -48-

15. Definitions .......................................................... -48-

16. Notices .............................................................. -51-

17. Amendment ............................................................ -52-

18. Governing Law ........................................................ -52-

19. No Benefit to Others ................................................. -52-

20. Severability ......................................................... -52-

21. Section Headings ..................................................... -52-

22. Schedules and Exhibits ............................................... -53-

23. Extensions ........................................................... -53-

24. Counterparts ......................................................... -53-

Glossary of Defined Terms ...................................................... -i-

</TABLE>

<PAGE> 138

AGREEMENT AND
PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of August 12, 1999 by
and among LUCENT TECHNOLOGIES INC., a Delaware corporation ("Lucent"),
XYLOPHONE ACQUISITION INC., a Delaware corporation ("Acquisition"), and XEDIA
CORPORATION, a Delaware corporation (the "Company").

BACKGROUND

A. The Company is a Delaware corporation with its registered office
located at 1209 Orange Street, Wilmington, Delaware and has authorized
19,000,000 shares of common stock, par value $.005 per share ("Company Common
Stock"), and 6,090,467 shares of preferred stock, $.01 par value per share, of
which 57,600 shares have been designated Series A Convertible Preferred Stock
("Series A Preferred Stock"), 165,000 shares have been designated Series B
Convertible Preferred Stock ("Series B Preferred Stock"), 240,000 shares have
been designated Series C Convertible Preferred Stock ("Series C Preferred
Stock"), 2,127,867 shares have been designated Series D Convertible Preferred
Stock ("Series D Preferred Stock") and 3,500,000 shares have been designated
Series E Convertible Preferred Stock ("Series E Preferred Stock"; the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock are collectively referred to
herein as the "Company Preferred Stock" and the Company Common Stock and the
Company Preferred Stock are collectively referred to herein as the "Company
Capital Stock"). The Company is engaged principally in the design, development,
production, marketing, distribution, maintenance and support of products
designed for access to service providers or enterprise networks that support
Internet protocol routing, bandwidth management, traffic shaping and virtual
private networking (the "Business").

B. Lucent is a Delaware corporation with its registered office located
at 1013 Centre Road, Wilmington, Delaware.

C. Acquisition is a wholly-owned subsidiary of Lucent and was formed to
merge with and into the Company so that as a result of the merger the Company
will survive and become a wholly-owned subsidiary of Lucent. Acquisition is a
Delaware corporation with its registered office located at 1013 Centre Road,
Wilmington, Delaware, and has authorized an aggregate of 1,000 shares of common
stock, no par value per share ("Acquisition Common Stock").

D. The Board of Directors of each of Acquisition and the Company has
determined that the merger of Acquisition with and into the Company (the
"Merger") in accordance with the provisions of the Delaware General Corporation
Law, as amended (the "DGCL"), and subject to the terms and conditions of this
Agreement, is in the best interests of Acquisition and the Company and their
respective stockholders.

E. The Boards of Directors of Acquisition and the Company have approved
this Agreement and the transactions contemplated hereby.

A-1

<PAGE> 139

F. The parties intend that, (a) for federal income tax purposes, the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Code and that this Agreement shall constitute a plan of reorganization
and (b) for financial accounting purposes, the Merger shall be accounted for as
a pooling of interests transaction.

NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending to be legally bound do hereby
agree as follows:

1. The Merger

1.1 General.

(a) Subject to the terms and conditions of this Agreement and in
accordance with the DGCL, at the Effective Time, (i) Acquisition shall be
merged with and into the Company, (ii) the separate corporate existence of
Acquisition shall cease and (iii) the Company shall be the surviving
corporation (the "Surviving Corporation") and shall continue its corporate
existence under the laws of the State of Delaware.

(b) The Merger shall become effective at the time of filing of a
Certificate of Merger, substantially in the form of Exhibit A attached hereto
(the "Certificate of Merger"), with the Secretary of State of the State of
Delaware in accordance with the provisions of Section 251 of the DGCL, or at
such later time as may be stated in the Certificate of Merger or such later
date as the parties may mutually agree (the "Effective Time") . Subject to the
terms and conditions of this Agreement, the Company and Acquisition shall duly
execute and file the Certificate of Merger with the Secretary of State of the
State of Delaware at the time of the Closing. The closing of the Merger (the
"Closing") shall take place at the offices of Sidley & Austin, 875 Third
Avenue, New York, N.Y. at 10:00 A.M. two business days after the date on which
the last of the conditions set forth in Section 6 shall have been satisfied or
waived, or on such other date, time and place as the parties may mutually agree
(the "Closing Date").

(c) At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all
the property, rights, privileges, powers and franchises of the Company and
Acquisition shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of the Company
and Acquisition shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.

1.2 Certificate of Incorporation. The Certificate of Incorporation
of Acquisition, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided therein and by law except that Article I of such
Certificate of Incorporation shall be amended to read as follows: "The name of
the Corporation is: Xedia Corporation."

A-2

<PAGE> 140

1.3 By-Laws. The By-laws of Acquisition, as in effect immediately
prior to the Effective Time, shall be the By-laws of the Surviving Corporation
until thereafter amended as provided therein and by law.

1.4 Directors and Officers. From and after the Effective Time, (a)
the directors of Acquisition at the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and By-laws of the Surviving Corporation, and
(b) the officers of Acquisition at the Effective Time shall be the initial
officers of the Surviving Corporation, in each case, until their respective
successors are duly elected or appointed and qualified.

1.5 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Acquisition, the Company or
the holders of any of the following securities:

(a) Each issued and outstanding share of common stock of Acquisition
shall be converted into one validly issued, fully paid and nonassessable share
of Common Stock, no par value per share, of the Surviving Corporation;

(b) Each share of Company Capital Stock held in the treasury of the
Company and each share of Company Capital Stock owned by Acquisition or Lucent
or any of its Subsidiaries shall be canceled without any conversion thereof and
no payment or distribution shall be made with respect thereto; and

(c) Subject to the provisions of Sections 1.6 and 1.8, each share of
Company Capital Stock issued and outstanding immediately prior to the Effective
Time (other than (i) shares canceled in accordance with Section 1.5(b) and (ii)
Dissenting Shares) shall be converted into (A) in the case of each share of
Common Stock, 0.216997 (such number as adjusted in accordance with Section 1.6
(the "Common Stock Exchange Ratio")), (B) in the case of each share of Series A
Preferred Stock, 0.433994 (such number as adjusted in accordance with Section
1.6 (the "Series A Exchange Ratio")), (C) in the case of each share of Series B
Preferred Stock, 0.433994 (such number as adjusted in accordance with Section
1.6 (the "Series B Exchange Ratio")), (D) in the case of each share of Series C
Preferred Stock, 0.647694 (such number as adjusted in accordance with Section
1.6 (the "Series C Exchange Ratio")), (E) in the case of each share of Series D
Preferred Stock, 0.433994 (such number as adjusted in accordance with Section
1.6 (the "Series D Exchange Ratio")) and (F) in the case of each share of
Series E Preferred Stock, 0.216997 (such number as adjusted in accordance with
Section 1.6 (the "Series E Exchange Ratio"; each of the Common Stock Exchange
Ratio, the Series A Exchange Ratio, the Series B Exchange Ratio, the Series C
Exchange Ratio, the Series D Exchange Ratio and the Series E Exchange Ratio is
referred to as an "Exchange Ratio" and collectively referred to as the
"Exchange Ratios") of a validly issued, fully paid and nonassessable share of
Lucent Common Stock, including the corresponding percentage right (the "Right")
to purchase shares of junior preferred stock, par value $1.00 per share,
pursuant to the Rights Agreement dated as of April 4, 1996 between Lucent and
First Chicago Trust Company of New York, as Rights Agent. All references in
this Agreement to Lucent Common Stock to be received in accordance with the
Merger shall be deemed, from and after the Effective Time, to include the
Rights. As of the

A-3

<PAGE> 141

Effective Time, each share of Company Capital Stock shall no longer be
outstanding and shall automatically be canceled and retired, and each holder of
a certificate representing any shares of Company Capital Stock shall cease to
have any rights with respect thereto other than (i) the right to receive shares
of Lucent Common Stock to be issued in consideration therefor upon the
surrender of such certificate, (ii) any dividends and other distributions in
accordance with Section 1.9(c) and (iii) any cash, without interest, to be paid
in lieu of any fractional share of Lucent Common Stock in accordance with
Section 1.8.

1.6 Adjustment of the Exchange Ratios. In the event that, prior to
the Effective Time, any stock split, combination, reclassification or stock
dividend with respect to the Lucent Common Stock, any change or conversion of
Lucent Common Stock into other securities or any other dividend or distribution
with respect to the Lucent Common Stock (other than regular quarterly
dividends) should occur or, if a record date with respect to any of the
foregoing should occur, appropriate and proportionate adjustments shall be made
to each Exchange Ratio, and thereafter all references to an Exchange Ratio
shall be deemed to be to such Exchange Ratio as so adjusted.

1.7 Dissenting Shares. (a) Notwithstanding any provision of this
Agreement to the contrary, shares of Company Capital Stock that are outstanding
immediately prior to the Effective Time and which are held by stockholders who
shall not have voted in favor of the Merger or consented thereto in writing and
who shall have demanded properly in writing appraisal for such shares in
accordance with Section 262 of the DGCL (collectively, the "Dissenting Shares")
shall not be converted into or represent the right to receive the consideration
set forth in Section 1.5(c). Such stockholders shall be entitled to receive
such consideration as is determined to be due with respect to such Dissenting
Shares in accordance with the provisions of Section 262, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
shares under Section 262 shall thereupon be deemed to have been converted into
and to have become exchangeable for, as of the Effective Time, the right to
receive the shares of Lucent Common Stock specified in Section 1.5(c), without
any interest thereon, upon surrender, in the manner provided in Section 1.9, of
the certificate or certificates that formerly evidenced by such Dissenting
Shares less the number of shares of Lucent Common Stock allocable to such
stockholder that have been deposited in the Escrow Fund in respect of Company
Capital Stock pursuant to Sections 1.9(b) and 8.1.

(b) The Company shall give Lucent (i) prompt notice of any demands
for appraisal received by the Company, withdrawals of such demands, and any
other instruments served pursuant to the DGCL and received by the Company and
(ii) the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of Lucent, make any payment with respect to any demands
for appraisal or offer to settle or settle any such demands.

1.8 No Fractional Shares. No certificates or scrip representing
fractional shares of Lucent Common Stock shall be issued upon the surrender for
exchange of Certificates or Warrants, as applicable, and such fractional share
shall not entitle the record or beneficial owner thereof to vote or to any
other rights as a stockholder of Lucent. In lieu of receiving any

A-4

<PAGE> 142

such fractional share, the stockholder shall receive cash (without interest) in
an amount rounded to the nearest whole cent, determined by multiplying (i) the
per share closing price on the New York Stock Exchange, Inc. (the "NYSE") of
Lucent Common Stock (as reported on the NYSE Composite Transactions Tape as
such Tape is reported in the Wall Street Journal or another recognized business
publication) on the date immediately preceding the date on which the Effective
Time shall occur (or, if the Lucent Common Stock did not trade on the NYSE on
such prior date, the last day of trading in Lucent Common Stock on the NYSE
prior to the Effective Time) by (ii) the fractional share to which such holder
would otherwise be entitled. Lucent shall make available to the Exchange Agent
the cash necessary for this purpose.

1.9 Exchange Procedures; Distributions with Respect to Unexchanged
Shares; Stock Transfer Books. (a) As of the Effective Time, Lucent shall
deposit with the Exchange Agent, for the benefit of the holders of shares of
Company Capital Stock and Warrants, certificates representing the shares of
Lucent Common Stock to be issued pursuant to Sections 1.5(c) and 5.6(f) in
exchange for the shares of Company Capital Stock and Warrants, less the number
of shares of Lucent Common Stock to be deposited in the Escrow Fund pursuant to
Section 8.1. Such shares of Lucent Common Stock deposited with the Exchange
Agent, together with any dividends or distributions with respect thereto
pursuant to Sections 1.8 and 1.9(c), are referred to herein as the "Exchange
Fund".

(b) As soon as practicable after the Effective Time, Lucent shall
use its reasonable best efforts to cause the Exchange Agent to send to each
Person who was, at the Effective Time, a holder of record of certificates which
represented outstanding Company Capital Stock (the "Certificates"), which
shares were converted into the right to receive Lucent Common Stock pursuant to
Section 1.5(c), or a holder of Warrants entitled to receive shares of Lucent
Common Stock pursuant to Section 5.6(f), a letter of transmittal which (i)
shall specify that delivery shall be effected and risk of loss and title to
such Certificates or Warrants, as applicable, shall pass, only upon actual
delivery thereof to the Exchange Agent and (ii) shall contain instructions for
use in effecting the surrender of the Certificates or Warrants, as applicable.
Upon surrender to the Exchange Agent of Certificates or Warrants, as
applicable, for cancellation, together with such letter of transmittal duly
executed and such other documents as the Exchange Agent may reasonably require,
such holder shall be entitled to receive in exchange therefor (A) a certificate
representing the number of whole shares of Lucent Common Stock into which the
Company Capital Stock represented by the surrendered Certificate or Warrant, as
applicable, shall have been converted at the Effective Time less such holder's
pro rata portion, if any, of the number of shares of Lucent Common Stock to be
deposited in the Escrow Fund on such holder's behalf pursuant to Section 8.1,
(B) cash in lieu of any fractional share of Lucent Common Stock in accordance
with Section 1.8 and (C) dividends and distributions, if any, that are payable
in accordance with Section 1.9(c), and the Certificates or Warrants, as
applicable, so surrendered shall then be canceled. Subject to Section 1.8 and
Section 1.9(c), until surrendered as contemplated by this Section 1.9(b), each
Certificate or Warrant, as applicable, from and after the Effective Time shall
be deemed to represent only the right to receive, upon such surrender, the
number of shares of Lucent Common Stock into which such Company Capital Stock
or Warrant, as applicable, shall have been converted. As soon as practicable
after the Effective Time, and subject to and in accordance with the provisions
of Section 8, Lucent shall cause to be delivered to the Escrow Agent
certificates representing 291,620 shares of Lucent Common Stock which

A-5
<PAGE> 143
shall be registered in the name of the Escrow Agent as nominee for the holders
of Certificates canceled pursuant to this Section 1.9. Such shares shall be
beneficially owned by such holders, shall be held in escrow and shall be used,
if necessary, to compensate Lucent as provided in Section 8. To the extent not
so used, such shares shall be released, as provided in Section 8.

(c) No dividends or other distributions declared or made after the
Effective Time with respect to the Lucent Common Stock with a record date after
the Effective Time shall be paid to any holder entitled by reason of the Merger
to receive certificates representing Lucent Common Stock and no cash payment in
lieu of a fractional share of Lucent Common Stock shall be paid to any such
holder pursuant to Section 1.8 until such holder shall have surrendered its
Certificates or Warrants, as applicable, pursuant to this Section 1.9. Subject
to applicable law, following surrender of any such Certificate or Warrant, as
applicable, such holder shall be paid, in each case, without interest, (i) the
amount of any dividends or other distributions theretofore paid with respect to
the shares of Lucent Common Stock represented by the certificate received by
such holder and having a record date on or after the Effective Time and a
payment date prior to such surrender and (ii) at the appropriate payment date,
or as promptly as practicable thereafter, the amount of any dividends or other
distributions payable with respect to such shares of Lucent Common Stock and
having a record date on or after the Effective Time but prior to such surrender
and a payment date on or after such surrender.

(d) If any certificate representing shares of Lucent Common Stock or
any cash is to be issued or paid to any Person other than the registered holder
of the Certificate or Warrant, as applicable, surrendered in exchange therefor,
it shall be a condition to such exchange that such surrendered Certificate or
Warrant, as applicable, shall be properly endorsed and otherwise in proper form
for transfer and such Person either (i) shall pay to the Exchange Agent any
transfer or other taxes required as a result of the issuance of such
certificates of Lucent Common Stock and the distribution of such cash payment
to such Person or (ii) shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. Lucent or the Exchange
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Capital
Stock or Warrant, as applicable, such amounts as Lucent or the Exchange Agent
is required to deduct and withhold with respect to the making of such payment
under the Code, or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by Lucent or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Capital Stock or Warrant in
respect of which such deduction and withholding was made by Lucent or the
Exchange Agent. All amounts in respect of taxes received or withheld by Lucent
shall be disposed of by Lucent in accordance with the Code or such state, local
or foreign tax law, as applicable.

(e) If any Certificate or Warrant, as applicable, shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate or Warrant to be lost, stolen or destroyed and
subject to such other conditions as the Board of Directors of the Surviving
Corporation may impose, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed Certificate or Warrant the shares of Lucent Common
Stock as determined under Section 1.5(c) or Section 5.6(f), as applicable, and
pay any cash, dividends or other distributions as determined in accordance with
Sections 1.8 and 1.9(c) in respect of such

A-6
<PAGE> 144
Certificate or Warrant; provided that Lucent may, in its reasonable discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed Certificate or Warrant to deliver a bond in such sum
as it may reasonably require as indemnity against any claim that may be made
against Lucent, the Surviving Corporation or the Exchange Agent with respect to
the Certificate or Warrant alleged to have been lost, stolen or destroyed.

(f) At the close of business on the day on which the Effective Time
occurs, the stock transfer books of the Company shall be closed and thereafter
there shall be no further registration of transfers of shares of Company
Capital Stock on the records of the Company. From and after the Effective Time,
the holders of shares of Company Capital Stock outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such shares
except as otherwise provided herein or by applicable law.

1.10 Return of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the former holders of Company Capital Stock or holders
of Warrants, as applicable, for six months after the Effective Time shall be
delivered to Lucent, upon its request, and any such former holders who have not
theretofore surrendered to the Exchange Agent their Certificates or Warrants,
as applicable, in compliance herewith shall thereafter look only to Lucent for
payment of their claim for shares of Lucent Common Stock, any cash in lieu of
fractional shares of Lucent Common Stock and any dividends or distributions
with respect to such shares of Lucent Common Stock, and Lucent agrees to
promptly pay any such claims. None of Lucent, Acquisition, the Exchange Agent
or the Company shall be liable to any former holder of Company Capital Stock or
Warrants, as applicable, for any such shares of Lucent Common Stock held in the
Exchange Fund (and any cash, dividends and distributions payable in respect
thereof) which are delivered to a public official pursuant to an official
request under any applicable abandoned property, escheat or similar law.

1.11 No Further Ownership Rights in Company Capital Stock. All
certificates representing shares of Lucent Common Stock delivered upon the
surrender for exchange of any Certificate or Warrant, as applicable, in
accordance with the terms hereof (including any cash paid pursuant to Section
1.8 or Section 1.9) shall be deemed to have been delivered (and paid) in full
satisfaction of all rights pertaining to the Company Capital Stock previously
represented by such Certificate or Warrant.

1.12 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either the
Company or Acquisition or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either the Company or Acquisition, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of the Company or
Acquisition, all such other acts and things necessary, desirable or proper to
vest, perfect or confirm its right, title or interest in, to or under any of
the rights, privileges, powers, franchises,

A-7
<PAGE> 145
properties or assets of the Company or Acquisition, as applicable, and otherwise
to carry out the purposes of this Agreement.

2. Approval by Stockholders

2.1 Approval by Stockholders. Each of Acquisition and the Company
shall either (i) call a meeting of its respective stockholders to be held as
promptly as practicable after the date hereof or (ii) solicit written consents
of its respective stockholders in lieu thereof for purposes of voting upon this
Agreement. Each of the Company and Acquisition will, through their respective
boards of directors, recommend to their respective stockholders approval of
this Agreement. The Company shall provide Lucent with a copy of all materials
to be distributed to its stockholders describing the transactions contemplated
hereby not later than one day prior to distribution. The Company, Acquisition
and Lucent each agree to execute and deliver such further documents and
instruments and to do such other acts and things as may be required to complete
all requisite corporate action in connection with the transactions contemplated
by this Agreement. All materials distributed to the stockholders of the Company
with respect to this Agreement, including any description of the transactions
contemplated hereunder, the recommendation of the Board of Directors of the
Company that such stockholders approve the Merger, the vote by such
stockholders to approve this Agreement and the Merger and any description of
appraisal rights available to such stockholders shall be in form and substance
reasonably acceptable to Lucent and shall be in accordance with applicable law.

3. Representations and Warranties of the Company. The Company represents
and warrants to Acquisition and Lucent as follows:

3.1 Organization. Each of the Company and its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority and all necessary governmental approval to carry on its
business as it has been and is now being conducted. Except as set forth in
Schedule 3.1, each of the Company and its Subsidiaries is duly qualified or
licensed as a foreign corporation to do business and is in good standing in
each jurisdiction where the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
except where the failure to be so qualified or licensed and in good standing,
could not reasonably be expected to have a Material Adverse Effect on the
Company.

3.2 Capitalization; Options and Other Rights. (a) The total
authorized shares of capital stock of the Company consists of (i) 19,000,000
shares of Company Common Stock, of which 4,607,356 shares are issued and
outstanding (the "Outstanding Common Shares"), 8,831,575 shares have been
reserved for issuance upon the conversion of the Company Preferred Stock and
60,003 shares have been reserved for issuance upon exercise of the Warrants
(collectively, the "Reserved Common Shares" and together with the Outstanding
Common Shares, the "Common Shares"); and (ii) 6,090,467 shares of Company
Preferred Stock, of which (A) 57,600 shares have been designated as Series A
Preferred Stock and 57,600 shares are issued and outstanding, (B) 165,000
shares have been designated as Series B Preferred Stock and 165,000 shares are
issued and outstanding, (C) 240,000 shares have been designated as Series C
Preferred Stock and 240,000 shares are issued and outstanding, (D) 2,127,867
shares have been

A-8

<PAGE> 146

designated as Series D Preferred Stock and 2,127,867 shares are issued and
outstanding and (E) 3,500,000 shares have been designated as Series E Preferred
Stock and 3,414,288 shares are issued and outstanding and 8,571 shares are
reserved for issuance upon exercise of the Warrants (collectively, the
"Preferred Shares"; the Common Shares and the Preferred Shares are collectively
referred to herein as the "Shares"). All the Outstanding Common Shares have been
duly and validly authorized and issued and are fully paid and nonassessable and
all the Reserved Common Shares, when issued upon the conversion of the Company
Preferred Stock and the exercise of the Warrants, will be duly and validly
authorized and issued and fully paid and nonassessable. All the Preferred Shares
have been duly and validly authorized and issued and are fully paid and
nonassessable and all the shares of Series E Preferred Stock when issued in
accordance with the terms of the Warrants will be duly and validly authorized
and issued and fully paid and nonassessable. None of the Shares has been issued
and none of such Company Capital Stock will be issued in violation of the
preemptive rights of any stockholder of the Company. The Outstanding Common
Shares, the Preferred Shares and the Warrants have been issued, and the shares
of Company Common Stock to be issued upon the conversion of the Company
Preferred Stock and the exercise of the Warrants and the shares of Series E
Preferred Stock to be issued upon exercise of the Warrants will be issued, in
compliance in all material respects with all applicable Federal and state
securities laws and regulations.

(b) Except as set forth in Section 3.2(a) and in Schedules 3.2(b)
and 3.16(e), there are no existing agreements, subscriptions, options,
warrants, calls, commitments, trusts (voting or otherwise), or rights of any
kind whatsoever granting to any Person any interest in or the right to purchase
or otherwise acquire from the Company or granting to the Company any interest
in or the right to purchase or otherwise acquire from any Person, at any time,
or upon the occurrence of any stated event, any securities of the Company,
whether or not presently issued or outstanding, nor are there any outstanding
securities of the Company or any other entity which are convertible into or
exchangeable for other securities of the Company, nor are there any agreements,
subscriptions, options, warrants, calls, commitments or rights of any kind
granting to any Person any interest in or the right to purchase or otherwise
acquire from the Company or any other Person any securities so convertible or
exchangeable, nor, to the Best Knowledge of the Company, are there any proxies,
agreements or understandings with respect to the voting of the Shares or the
direction of the business operations or conduct of the Company or any of its
Subsidiaries, except as contemplated by this Agreement.

(c) Schedule 3.2(c) sets forth a true and complete list of all
holders of Company Capital Stock (including the amount and type of security
held by such holder).

3.3 Authority; Stockholder Vote. (a) The Company has full power
and authority to execute, deliver and perform this Agreement and the
transactions contemplated hereunder. The execution, delivery and performance of
this Agreement by the Company has been duly authorized and approved by all
necessary corporate or other action and, except for (i) the approval of this
Agreement by the stockholders of the Company and (ii) the filing and
recordation of appropriate merger documents as required by the DGCL, no other
corporate proceedings on the part of the Company are necessary to authorize
this Agreement and the transactions contemplated hereby. This Agreement has
been duly authorized, executed and delivered by the Company and is the legal,
valid and binding obligation of the Company, enforceable in accordance

A-9
<PAGE> 147

with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors rights generally and by the effect of general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).

(b) The execution, delivery and performance by the Company of this
Agreement and the consummation of the Merger do not, and will not, (i) violate
or conflict with any provision of the Certificate of Incorporation or By-laws
or equivalent constituent documents of the Company or any of its Subsidiaries,
(ii) violate any law, rule, regulation, order, writ, injunction, judgment or
decree of any court, governmental authority or regulatory agency applicable to
the Company or any of its Subsidiaries, except for violations which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Company, or (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation or
acceleration) under, any note, bond, indenture, lien, mortgage, lease, permit,
guaranty or other agreement, instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which any of its properties may be
bound, except (A) as set forth in Schedule 3.3(b) and (B) for violations,
breaches or defaults which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Company.

(c) The execution and delivery of this Agreement by the Company do
not, and the performance by the Company of this Agreement will not, require any
consent, approval, authorization or permission of, or filing with or
notification to any governmental or regulatory authority, domestic or foreign,
or any other Person except for (i) the filing and recordation of appropriate
merger documents as required by the DGCL and (ii) any such consent, approval,
authorization, permission, notice or filing which if not obtained or made could
not reasonably be expected to have a Material Adverse Effect on the Company.

(d) The Board of Directors of the Company (i) has approved this
Agreement and the transactions contemplated hereby, (ii) has determined that
the terms of the Merger are in the best interests of the stockholders of the
Company, and (iii) has resolved to recommend the approval of the Merger and the
adoption of this Agreement and the consummation of the transactions
contemplated hereby to the stockholders of the Company.

(e) Pursuant to the provisions of the DGCL, the Certificate of
Incorporation of the Company, the By-laws of the Company and any other
applicable law, the only approval of holders of Company Capital Stock required
to approve the Merger and to approve and adopt this Agreement and the
transactions contemplated hereby is the approval of (i) a majority of the
outstanding shares of Company Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series
E Preferred Stock voting together as a single class, (ii) a majority of the
outstanding shares of each of the Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock, each voting as a separate class, and (iii)
at least two of the following three holders of Series D Preferred Stock (or
such holders' representative elected to the Board of Directors of the Company):
Greylock Equity Limited Partnership, J.P.M. International and D.R.L. Jones, and
prior to Closing this Agreement and the transactions contemplated hereby shall
have been so approved.

A-10

<PAGE> 148

3.4 Charter Documents. The Company has previously furnished to
Lucent a true, complete and correct copy of the Certificate of Incorporation
and the By-laws or equivalent constituent documents of each of the Company and
its Subsidiaries. The Certificate of Incorporation and By-laws or equivalent
constituent documents of each of the Company and its Subsidiaries are in full
force and effect. Neither the Company nor any of its Subsidiaries is in
violation of any provision of its Certificate of Incorporation or By-laws or
equivalent constituent documents.

3.5 Financial Statements. (a) The Company has previously furnished
to Lucent true and complete copies of the following financial statements of the
Company (the "Financial Statements"):

(i) audited consolidated balance sheets of the Company and, to the
extent any of its Subsidiaries were then organized, such Subsidiaries as of
December 31, 1998 (the "Balance Sheet") and December 31, 1997, each audited and
with a report by Arthur Andersen LLP; and

(ii) audited consolidated statements of operations, stockholders'
equity and cash flows of the Company and, to the extent any of its Subsidiaries
were then organized, such Subsidiaries for the fiscal years ended December 31,
1998 and December 31, 1997, each audited and with a report by Arthur Andersen
LLP; and

(iii) the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of June 30, 1999 (the "Unaudited Balance Sheet"); and

(iv) unaudited consolidated statements of operations and cash flows
of the Company and its Subsidiaries for the six-month period ended June 30,
1999.

(b) The Financial Statements were prepared in accordance with GAAP
(except, in the case of the unaudited financial statements, for normal and
recurring year-end adjustments and the omission of footnotes). The Financial
Statements were prepared on the basis of the books and records of the Company
and, to the extent any of its Subsidiaries were then organized, such
Subsidiaries (in each case, as of the date of such Financial Statements) and
present fairly, in all material respects, the financial position of the Company
and such Subsidiaries as of the dates thereof and the results of its operations
and changes in stockholders' equity and cash flows for each of the periods then
ended in conformity with GAAP.

3.6 Absence of Undisclosed Liabilities; Indebtedness. (a) Except as
disclosed in Schedule 3.6(a) or as set forth in the notes to the Financial
Statements, neither the Company nor any of its Subsidiaries has any liability or
obligation of any nature (whether absolute, accrued or contingent or otherwise)
which is materially in excess of amounts shown or reserved therefor in the
Financial Statements other than (a) liabilities or obligations not required
under GAAP on a basis consistent with that of preceding accounting periods to be
reported on such Financial Statements and (b) liabilities or obligations
incurred after the date of the Unaudited Balance Sheet incurred in the ordinary
course of business and consistent with past practice.

A-11

<PAGE> 149

(b) Except as disclosed in Schedule 3.6(b), the Company and its
Subsidiaries do not have any Indebtedness.

3.7 Operations and Obligations. (a) Except as set forth in Schedule
3.7(a), or reflected on the Unaudited Balance Sheet, since December 31, 1998,

(i) there has been no event or condition that has had or
reasonably could be expected to have a Material Adverse Effect on the
Company (other than as a result of (i) general economic conditions,
(ii) business and economic conditions generally affecting the data
networking industry, (iii) liabilities incurred in connection with
this Agreement or the transactions contemplated hereby (including
litigation brought or threatened against the Company or any member of
its Board of Directors in respect of this Agreement), or (iv)
resulting from the announcement of the transactions contemplated
hereby (including loss of personnel, customers or suppliers or the
delay or cancellation of orders or products)); and

(ii) there has been no impairment, damage, destruction, loss or
claim, whether or not covered by insurance, or condemnation or other
taking which could reasonably be expected to have a Material Adverse
Effect on the Company.

(b) Except (i) as set forth in Schedule 3.7(b) and (ii) for
actions required to be taken hereunder or approved in advance thereof by Lucent
in writing, since December 31, 1998, the Company and its Subsidiaries have
conducted their business only in the ordinary course and consistent with past
practice. Without limiting the generality of the foregoing, since December 31,
1998, except as set forth in such Schedule, neither the Company nor any of its
Subsidiaries has:

(i) issued, delivered or agreed (conditionally or unconditionally)
to issue or deliver, or granted any option, warrant or other right to
purchase, any of its capital stock or other equity interest or any
security convertible into its capital stock or other equity interest;

(ii) other than in the ordinary course of business consistent with
past practice, issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver any bonds, notes or other debt
securities, or borrowed or agreed to borrow any funds or entered into any
lease the obligations of which, in accordance with generally accepted
accounting principles, would be capitalized;

(iii) paid any obligation or liability (absolute or contingent) other
than liabilities reflected or reserved against in the Balance Sheet and
liabilities incurred since December 31, 1998 in the ordinary course of
business consistent with past practice;

(iv) declared or made, or agreed to declare or make, any payment of
dividends or distributions to its stockholders or purchased or redeemed,
or agreed to purchase or redeem, any Company Capital Stock or any equity
interest in any of its Subsidiaries;

A-12

<PAGE> 150

(v) except in the ordinary course of business consistent with past
practice, made or permitted any material amendment or termination of any
agreement to which the Company or any of its Subsidiaries is a party and is
or should be set forth on Schedule 3.10;

(vi) undertaken or committed to undertake capital expenditures
exceeding $100,000 for any single project or related series of projects;

(vii) sold, leased (as lessor), transferred or otherwise disposed of,
mortgaged or pledged, or imposed or suffered to be imposed any Lien on, any
of the assets reflected on the Balance Sheet or any assets acquired by the
Company or any of its Subsidiaries after December 31, 1998, except for
inventory and personal property sold or otherwise disposed of for fair
value in the ordinary course of its business consistent with past practice
and except for Permitted Liens;

(viii) canceled any debts owed to or claims held by the Company or any
of its Subsidiaries (including the settlement of any claims or litigation)
other than in the ordinary course of its business consistent with past
practice;

(ix) accelerated or delayed collection of accounts receivable in
advance of or beyond their regular due dates or the dates when the same
would have been collected except in the ordinary course of its business
consistent with past practice;

(x) delayed or accelerated payment of any account payable or other
liability beyond or in advance of its due date or the date when such
liability would have been paid except in the ordinary course of its
business consistent with past practice;

(xi) entered into or become committed to enter into any other material
transaction except in the ordinary course of business;

(xii) allowed the levels of supplies or other materials included in
the inventory of the Company or any of its Subsidiaries to vary materially
from the levels customarily maintained in accordance with past practice;

(xiii) except for increases in the ordinary course of business
consistent with past practice, instituted any increase in any compensation
payable to any employee of the Company or any of its Subsidiaries, amended
any Benefit Plan or modified any other benefits made available to any such
employees;

(xiv) made any change in the accounting principles or made any
material change in accounting practices used by the Company, in each case,
from those applied in the preparation of the Financial Statements; or

(xv) taken any of the actions which, under Section 5.2, they are
prohibited from taking between the date hereof and the Closing Date.

A-13

<PAGE> 151

3.8 Properties. (a) Each of the Company and its Subsidiaries has
good and valid title to all its properties and assets (other than Intellectual
Property Rights and Patents to the extent qualified by Section 3.14) reflected
on the Balance Sheet or acquired after the date thereof except for (i)
properties and assets sold or otherwise disposed of in the ordinary course of
business since the date of such Balance Sheet, (ii) leasehold interests, in
which event the Company or such Subsidiary has a valid leasehold interest and
(iii) properties and assets which individually or in the aggregate are not
material to the operations of the business of the Company and its Subsidiaries
taken as a whole.

(b) Neither the Company nor any or its Subsidiaries owns any real
property.

3.9 Customers and Suppliers. Except as set forth in Schedule 3.9, as
of the date of this Agreement, none of the Company's or its Subsidiaries'
customers which individually account for more than 5% of the Company's
consolidated gross revenues during the 12-month period immediately preceding
the date hereof has terminated or indicated that it intends to terminate any
agreement with the Company or such Subsidiary. During the 12-month period
immediately preceding the date hereof, no material supplier of the Company and
its Subsidiaries taken as a whole has indicated that it will stop, or decrease
the rate of, supplying materials, products or services to the Company or such
Subsidiary.

3.10 Contracts. Schedule 3.10 lists any of the following not otherwise
listed on any other Schedule:

(a) each written contract or commitment which creates an obligation
on the part of the Company or any of its Subsidiaries in excess of $50,000;

(b) each written debt instrument, including, without limitation, any
loan agreement, line of credit, promissory note, security agreement or other
evidence of indebtedness, where the Company or any of its Subsidiaries is a
lender, borrower or guarantor, in a principal amount in excess of $50,000;

(c) each written contract or commitment restricting the Company or
any of its Subsidiaries from engaging in any line of business;

(d) each written contract to which the Company or any of its
Subsidiaries is a party which contains a change of control provision;

(e) each written contract or commitment in excess of $50,000 to
which the Company or any of its Subsidiaries is a party for any charitable
contribution;

(f) each written joint venture or partnership agreement to which the
Company or any of its Subsidiaries is a party;

A-14

<PAGE> 152

(g) each written distributorship, sales agency, sales
representative, reseller or marketing, value added reseller, original equipment
manufacturing, technology transfer, source code license or other license or
other agreement containing the right to sublicense software and/or technology,
in each case, to which the Company or any of its Subsidiaries is a party;

(h) each written agreement in excess of $50,000 to which the Company
or any of its Subsidiaries is a party with respect to any assignment,
discounting or reduction of any receivables of the Company or any of its
Subsidiaries;

(i) each agreement, option or commitment or right with, or held by,
any third party to acquire any assets or properties, or any interest therein,
of the Company or any of its Subsidiaries, having a value in excess of $50,000,
except for contracts for the sale of inventory, machinery or equipment in the
ordinary course of business;

(j) each written employment or consulting contract entered into by
the Company or any of its Subsidiaries; and

(k) each supply agreement that the Company or any of its
Subsidiaries could not readily replace without a material impact on the Company
and its Subsidiaries taken as a whole.

Except as set forth in Schedule 3.10, (i) there are no oral contracts
or oral commitments of the types described in this Section 3.10 which create an
obligation on the part of the Company or any of its Subsidiaries which are
individually in excess of $50,000 or in the aggregate in excess of $100,000,
(ii) there are no contracts or commitments between the Company or any of its
Subsidiaries and any Affiliate, (iii) there are no contracts, commitments or
arrangements between the Company or any of its Subsidiaries and any employee
which require the payment of any compensation upon the occurrence of any
specified contingency, (iv) there are no contracts or arrangements to which the
Company or any of its Subsidiaries is a party, except this Agreement, which
require notice to, the consent of, or any payment of any compensation (whether
as a penalty, liquidated damages or otherwise) to any party with respect to the
Merger or any of the transactions contemplated hereby or in the event of the
termination of such contract or arrangement on or following the Effective Time,
and (v) there are no contracts to which the Company or any of its Subsidiaries
is a party which would create rights to any Person against Lucent or any of its
Affiliates (other than rights against the Company and its Subsidiaries as in
effect on the Closing Date).

3.11 Absence of Default. Except as set forth in Schedule 3.11, (a)
each of the agreements listed in Schedules 3.10, 3.14, 3.17 and 3.24 that
creates obligations of any Person in excess of $50,000 constitutes a valid and
binding obligation of the parties thereto, is in full force and effect and will
continue in full force and effect after giving effect to the Merger, in each
case, without breaching the terms thereof or resulting in the forfeiture or
impairment of any rights thereunder and without notice to, the consent,
approval or act of, or the making of any filing with, any other Person; (b) the
Company and its Subsidiaries have fulfilled and performed in all material
respects their obligations under each such agreement to which they are a party
to the extent such

A-15

<PAGE> 153

obligations are required by the terms thereof to have been fulfilled or
performed through the date hereof; (c) the Company and its Subsidiaries are not
and are not alleged in writing to be, and each other party to any such agreement
is not, to the Best Knowledge of the Company, in default under, nor is there
alleged in writing to be any basis for termination of, any such agreement; (d)
no event has occurred and no condition or state of facts exists which, with the
passage of time or the giving of notice or both, would constitute such a default
or breach by the Company or, to the Best Knowledge of the Company, by any such
other party, and (e) neither the Company nor any of its Subsidiaries is
currently renegotiating any such agreement or paying liquidated damages in lieu
of performance thereunder. Except as set forth in Schedule 3.30, the Company has
previously delivered complete and correct copies of all such agreements
(including all amendments) to Lucent.

3.12 Litigation. There are no actions, suits, arbitrations, legal or
administrative proceedings or investigations pending or, to the Best Knowledge
of the Company, threatened against the Company or any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries, nor the assets, properties or
business of the Company or any such Subsidiary, is subject to any judgment,
order, writ, injunction or decree of any court, governmental agency or
arbitration tribunal. Neither the Company nor any of its Subsidiaries is the
plaintiff in any such proceeding nor is the Company or any of its Subsidiaries
contemplating commencing legal action against any other Person.

3.13 Compliance with Law. (a) Each of the Company and its Subsidiaries
has complied in all material respects with, and is not in violation of, in any
material respect, any law, ordinance or governmental rule or regulation
(collectively, "Laws") which is material to the business of the Company and its
Subsidiaries taken as a whole; and

(b) each of the Company and its Subsidiaries has obtained all
licenses, permits, certificates or other governmental authorizations
(collectively "Authorizations") necessary for the ownership or use of its assets
and properties or the conduct of its business other than Authorizations (i)
which are ministerial in nature and which the Company or such Subsidiary has no
reason to believe would not be issued in due course and (ii) which, the failure
of the Company or such Subsidiary to possess, would not subject the Company and
its Subsidiaries to penalties other than fines not to exceed $20,000 in the
aggregate ("Immaterial Authorizations"); and

(c) neither the Company nor any of its Subsidiaries has received
written notice of violation of, or, to the Best Knowledge of the Company, has
materially violated any Laws to which it or its business is subject or any
Authorization necessary for the ownership or use of its assets and properties or
the conduct of its business (other than Immaterial Authorizations).

3.14 Intellectual Property; Year 2000. (a) The Company and its
Subsidiaries own, or are validly licensed or otherwise have the right to use,
all trademarks, trade secrets, trademark rights, trade names, trade name rights,
service marks, service mark rights and copyrights which are material to the
conduct of the Business (the "Intellectual Property Rights"). Schedule 3.14(a)
contains a list of (i) patents and patent applications ("Patents"), (ii)
trademark registrations and applications and (iii) copyright registrations and
applications owned by the Company and its Subsidiaries.

A-16

<PAGE> 154

(b) To the Best Knowledge of the Company, neither the Company nor any
of its Subsidiaries has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Patent or Intellectual Property Rights of
any other Person. Neither the Company nor any of its Subsidiaries has received
any written charge, complaint, claim, demand or notice alleging any such
interference, infringement, misappropriation or violation (including any claim
that the Company or any such Subsidiary must license or refrain from using any
Patents or Intellectual Property Rights of any other Person) which has not been
settled or otherwise fully resolved. To the Best Knowledge of the Designated
Group, no other Person has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Patents or Intellectual Property Rights of
the Company or any of its Subsidiaries.

(c) Except as disclosed in Schedule 3.14(c), assuming that Lucent
continues to operate the business of the Company and its Subsidiaries as
separate entities and as presently conducted by the Company and such
Subsidiaries, then, to the Company's Best Knowledge, Lucent's use of the Patents
or Intellectual Property Rights which are material to the conduct of the
business by the Company and its Subsidiaries will not interfere with, infringe
upon, misappropriate or otherwise come into conflict with the Patents or
Intellectual Property Rights of any other Person by virtue of any change of
control or prohibition of assignment provisions in agreements between the
Company and any such Person.

(d) Except as disclosed in Schedule 3.14(d), each employee, agent,
consultant, officer, director or contractor who has materially contributed to or
participated in the creation or development of any copyrightable, patentable or
trade secret material on behalf of the Company, any of its Subsidiaries or any
predecessor in interest thereto either: (i) is a party to a "work-for-hire"
agreement under which the Company or such Subsidiary is deemed to be the
original owner/author of all property rights therein; or (ii) has executed an
assignment or an agreement to assign in favor of the Company, such Subsidiary or
such predecessor in interest, as applicable, all right, title and interest in
such material, a copy of which assignment or agreement to assign has been made
available to Lucent.

(e) Except as disclosed in Schedule 3.14(e), the Company has taken
all reasonable steps with the intent of ensuring that its and its Subsidiaries'
products (including prior and current products and technology and products and
technology currently under development) will, when used in accordance with
associated documentation on a specified platform or platforms, be capable upon
installation of (i) operating in the same manner on dates in both the Twentieth
and Twenty-First centuries, (ii) accurately processing, providing and receiving
date data from, into and between the Twentieth and Twenty-First centuries,
including the years 1999 and 2000, and (iii) recognizing year 2000 as a leap
year; provided that all non-Company products (e.g., hardware, software and
firmware) used in or in combination with the Company's products, properly
exchange data with the Company's products in the same manner on dates in both
the Twentieth and Twenty-First centuries. Except as disclosed in Schedule
3.14(e), the Company has taken all reasonable steps to assure that the year 2000
date change will not adversely affect its operations or the systems and
facilities that support the operations of the Company and its Subsidiaries,
except as could not reasonably be expected to have a Material Adverse Effect on
the Company.

A-17

<PAGE> 155

(f) Except as disclosed in Schedule 3.14(f), (i) the Company and its
Subsidiaries have not sold, assigned, transferred, licensed or sublicensed, or
entered into any contract to sell, assign, transfer or sublicense their Patents
or Intellectual Property Rights other than, in connection with the Company's and
its Subsidiaries' assets, in the ordinary course of business, permitting their
customers to use any Patents or Intellectual Property Rights embedded in their
products and (ii) the Company and its Subsidiaries have not entered into any
contract (oral or written) or other arrangement pursuant to which the Company or
its Subsidiaries have agreed or are obligated to license, transfer or place in
escrow the source code for any of their products (prior or current) or restrict
the use of any of their Patents or Intellectual Property Rights.

(g) To the Best Knowledge of the Company, no Stockholder or employee
of the Company has any interest in any Intellectual Property Rights or Patents
(other than as a stockholder of the Company) that is material to the business or
operations of the Company.

3.15 Tax Matters. (a) Except as set forth in Schedule 3.15, (i) each
of the Company and its Subsidiaries has filed all Tax Returns required to be
filed; (ii) all such Tax Returns are complete and accurate in all material
respects and all Taxes shown to be due on such Tax Returns have been timely
paid; (iii) all Taxes (whether or not shown on any Tax Return) owed by the
Company and each of its Subsidiaries have been timely paid or the Company has
established adequate reserves therefor; (iv) neither the Company nor any of its
Subsidiaries has waived or been requested to waive any statute of limitations in
respect of Taxes; (v) the Tax Returns referred to in clause (i) have been
examined by the Internal Revenue Service or the appropriate state, local or
foreign taxing authority or the period for assessment of the Taxes in respect of
which such Tax Returns were required to be filed has expired; (vi) there is no
action, suit, investigation, audit, claim or assessment pending or, to the Best
Knowledge of the Company, proposed or threatened with respect to Taxes of the
Company or any of its Subsidiaries; (vii) all deficiencies asserted or
assessments made as a result of any examination of the Tax Returns referred to
in clause (i) have been paid in full; (viii) Tax indemnity arrangements, if any,
will terminate prior to Closing and the Surviving Corporation will not have any
liability thereunder on or after Closing; (ix) there are no liens for Taxes upon
the assets of the Company except liens relating to current Taxes not yet due;
(x) all Taxes which the Company or any of its Subsidiaries is required by law to
withhold or to collect for payment have been duly withheld and collected, and
have been paid or accrued, reserved against and entered on the books of the
Company or such Subsidiary in accordance with GAAP; (xi) since December 31,
1998, neither the Company nor any of its Subsidiaries has taken any action that
would, under applicable law, materially adversely impact Lucent's or the
Company's ability to utilize any net operating carry forwards of the Company and
such Subsidiary; and (xii) neither the Company nor any of its Subsidiaries is or
has been a member of any group of corporations filing a consolidated tax return
for United States federal income tax purposes other than a group comprising
exclusively the Company and one or more of its Subsidiaries.

(b) No consent to the application of Section 341(f)(2) of the Code
has been filed with respect to any property or assets held or acquired or to be
acquired by the Company or any of its Subsidiaries.

A-18

<PAGE> 156

(c) Each of the Company and its Subsidiaries has not agreed to and is
not required to make any adjustment pursuant to Section 481(a) of the Code, and,
to the Best Knowledge of the Company, the Internal Revenue Service ("IRS") has
not proposed any such adjustment or change in accounting method with respect to
the Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has any application pending with the IRS or any other tax authority
requesting permission for any change in accounting method.

(d) Except as set forth in Schedule 3.15, neither the Company nor any
of its Subsidiaries owns an interest in any (i) domestic international sales
corporation, (ii) foreign sales corporation, (iii) controlled foreign
corporation or (iv) passive foreign investment company.

(e) Neither the Company nor any of its Subsidiaries is a party (other
than as an investor) to any industrial development bond.

(f) Each of the Company and its Subsidiaries has never been and is
not a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.

(g) Neither the Company nor any of its Subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section 355 of the
Code (i) in the two years prior to the date of this Agreement or (ii) in a
distribution which could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.

3.16 Employee Benefit Plans. (a) Schedule 3.16(a) contains a list and
brief description of all "employee pension benefit plans" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (sometimes referred to as "Pension Plans"), "employee welfare benefit
plans" (as defined in Section 3(1) of ERISA) (sometimes referred to as "Welfare
Plans") and all other Benefit Plans (together with the Pension Plans and Welfare
Plans, the "Plans") maintained, or contributed to, by the Company or any of its
Subsidiaries or any Person that, together with the Company and its Subsidiaries,
is treated as a single employer under Section 414(b), (c), (m) or (o) of the
Code (the Company and each such other Person, a "Commonly Controlled Entity")
for the benefit of any current or any former employees, officers or directors of
the Company or any of its Subsidiaries. The Company has made available to Lucent
true, complete and correct copies of (i) each Plan (or, in the case of any
unwritten Benefit Plans, descriptions thereof), (ii) the most recent annual
report on Form 5500 filed with the IRS with respect to each Plan (if any such
report was required), (iii) the most recent summary plan description for each
Plan for which such summary plan description is required, (iv) each trust
agreement and group annuity contract relating to any Plan and (v) all
correspondence with the IRS or the United States Department of Labor relating to
any outstanding controversy or audit. Except as could not reasonably be expected
to have a Material Adverse Effect on the Company, (i) each Plan has been
administered in accordance with its terms, and (ii) the Company and all Plans
are in compliance with applicable provisions of ERISA and the Code.

A-19

<PAGE> 157

(b) All Pension Plans that are intended to be qualified under Section
401(a) of the Code have been the subject of a determination opinion,
notification or advisory letter from the IRS to the effect that each such
Pension Plan is so qualified and the trust thereunder is exempt from Federal
income taxes under Section 501(a) of the Code, and no such determination letter
has been revoked nor has any event occurred since the date of such Plan's most
recent determination letter that would adversely affect its qualification or
materially increase its costs.

(c) Neither the Company, nor any of its Subsidiaries, nor any
Commonly Controlled Entity has maintained, contributed to or been obligated to
contribute to any Plan that is subject to Title IV of ERISA.

(d) Neither the Company nor any of its Subsidiaries has any liability
or obligation under any Welfare Plan to provide life insurance or medical
benefits after termination of employment to any employee or dependent other than
as required by Part 6 of Title I of ERISA.

(e) Schedule 3.16(e) lists all outstanding Company Stock Options,
showing for each such Option: (i) the name of the optionee, (ii) the number of
shares issuable, (iii) the number of vested shares and the dates unvested
shares will vest, (iv) the date of expiration and (v) the exercise price.

(f) Except as set forth in Schedule 3.16(f) or as provided by this
Agreement, no employee of the Company or any of its Subsidiaries will be
entitled to any additional compensation or benefits or any acceleration of the
time of payment or vesting of any compensation or benefits under any Plan as a
result of the transactions contemplated by this Agreement.

(g) The deduction of any amount payable pursuant to the terms of the
Plans will not be subject to disallowance under Section 162 (m) of the Code.

(h) The Company has not issued any Company Common Stock under any
restricted stock purchase arrangement and the Company is not a party to any
restricted stock purchase arrangement.

3.17 Executive Employees. (a) Schedule 3.17 lists the names, titles
and current annual salary rates of, and bonuses paid or payable to, all present
officers and employees of each of the Company and its Subsidiaries whose 1998
annual base salary exceeded $100,000 ("Executive Employees").

(b) Except as set forth in Schedules 3.16 or 3.17, neither the
Company nor any of its Subsidiaries has any employment agreement with, or
maintains any employee benefit plan (within the meaning of Section 3(3) of
ERISA) with respect to, any of its Executive Employees. Except as set forth in
Schedule 3.17, there are no agreements with respect to Executive Employees which
would obligate the Company or any of its Subsidiaries to make any payment or
provide any benefit the deduction of which is limited by Section 280G of the
Code or that could be subject to tax under Section 4999 of the Code.

A-20

<PAGE> 158

3.18 Employees. (a) Each of the Company and its Subsidiaries has
complied in all material respects with all applicable laws, rules and
regulations respecting employment and employment practices, terms and conditions
of employment, wages and hours, other than instances of non-compliance which,
individually or in the aggregate, could not be reasonably expected to result in
a Material Adverse Effect on the Company, and neither the Company nor any of its
Subsidiaries is liable for any arrears of wages or any taxes or penalties for
failure to comply with any such laws, rules or regulations; (b) the Company
believes that each of the Company's and its Subsidiaries' relations with their
respective employees is satisfactory; (c) there are no controversies pending or,
to the Best Knowledge of the Company, threatened between the Company or any of
its Subsidiaries and any of their respective employees, which controversies have
or could reasonably be expected to have a Material Adverse Effect on the
Company; (d) neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or any of its Subsidiaries, nor, to the Best
Knowledge of the Company, are there any activities or proceedings of any labor
union to organize any such employees; (e) there are no unfair labor practice
complaints pending against the Company or any of its Subsidiaries before the
National Labor Relations Board or any current union representation questions
involving employees of the Company or any of its Subsidiaries; (f) there is no
strike, slowdown, work stoppage or lockout existing, or, to the Best Knowledge
of the Company, threatened, by or with respect to any employees of the Company
or any of its Subsidiaries; (g) no charges are pending before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices with respect to
the Company or any of its Subsidiaries; (h) there are no claims pending against
the Company or any of its Subsidiaries before any workers' compensation board;
and (i) neither the Company nor any of its Subsidiaries has received written
notice that any federal, state, local or foreign agency responsible for the
enforcement of labor or employment laws intends to conduct an investigation of
or relating to the Company or any of its Subsidiaries and, to the Best Knowledge
of the Company, no such investigation is in progress.

3.19 Environmental Laws. The Company has not received any notice or
claim (and is not aware of any facts that would form a reasonable basis for any
claim), or entered into any negotiations or agreements with any other Person,
and, to the Best Knowledge of the Company, neither the Company nor any of its
Subsidiaries is the subject of any investigation by any governmental or
regulatory authority, domestic or foreign, relating to any material or
potentially material liability or remedial action under any Environmental Laws.
There are no pending or, to the Best Knowledge of the Company, threatened,
actions, suits or proceedings against the Company, any of its Subsidiaries or
any of their respective properties, assets or operations asserting any such
material liability or seeking any material remedial action in connection with
any Environmental Laws.

3.20 Bank Accounts, Letters of Credit and Powers of Attorney. Schedule
3.20 lists (a) all bank accounts, lock boxes and safe deposit boxes relating to
the business and operations of each of the Company and its Subsidiaries
(including the name of the Bank or other institution where such account or box
is located and the name of each authorized signatory thereto), (b) all
outstanding letters of credit issued by financial institutions for the account
of the Company or any of its Subsidiaries (setting forth, in each case, the
financial institution issuing

A-21

<PAGE> 159

such letter of credit, the maximum amount available under such letter of credit,
the terms (including the expiration date) of such letter of credit and the party
or parties in whose favor such letter of credit was issued), and (c) the name
and address of each Person who has a power of attorney to act on behalf of the
Company or any of its Subsidiaries. The Company has heretofore delivered to
Lucent true, correct and complete copies of each letter of credit and each power
of attorney described in Schedule 3.20.

3.21 Subsidiaries. (a) Schedule 3.21 sets forth (i) the name and
jurisdiction of incorporation of each Subsidiary of the Company, (ii) the total
number of shares of each class of capital stock of each Subsidiary authorized,
the number of shares outstanding and the number of shares owned by the Company
or any other Subsidiary of the Company and (iii) a complete list of the
directors and officers of the Company and each Subsidiary. All the issued and
outstanding shares of capital stock of each Subsidiary have been duly and
validly authorized and issued and are fully paid, non-assessable and free of
pre-emptive rights. None of the outstanding shares of capital stock of any
Subsidiary has been issued in violation of the preemptive rights of any
stockholder of such Subsidiary. The shares of each Subsidiary were issued in
compliance with all applicable Federal and state securities laws and
regulations, and are owned free and clear of all Liens.

(b) Except as set forth in Schedule 3.21, there are no existing
agreements, subscriptions, options, warrants, calls, commitments, trusts (voting
or otherwise), or rights of any kind whatsoever granting to any Person any
interest in or the right to purchase or otherwise acquire from the Company or
any Subsidiary, at any time, or upon the occurrence of any stated event, any
shares of capital stock of or equity interest in any Subsidiary, whether or not
presently issued or outstanding, nor are there any outstanding shares of capital
stock of or equity interests in any Subsidiary or any other entity which are
convertible into or exchangeable for other shares of capital stock of or equity
interests in any Subsidiary nor are there any agreements, subscriptions,
options, warrants, calls, commitments or rights of any kind granting to any
Person any interest in or the right to purchase or otherwise acquire from any
Subsidiary or any other Person any shares of capital stock or equity interests
so convertible or exchangeable, nor are there any proxies, agreements or
understandings with respect to the voting of the shares of capital stock of or
equity interests in any Subsidiary. Except for the Company's ownership of the
Subsidiaries as disclosed in Schedule 3.21, the Company does not, directly or
indirectly, have any ownership or other interest in, or control of, any Person,
nor is any Subsidiary controlled by or under common control with any Person.

3.22 Affiliate Transactions. Except for the individuals listed in
Schedule 3.22, (i) no officer or director of the Company or any of its
Subsidiaries has any significant interest in any Person that is engaged in a
business which is in competition with the Business of the Company, and (ii) no
officer or director of the Company is a supplier to, or a customer of, the
Company, or is a party to any contract listed in Schedule 3.10, 3.14 or 3.24.

3.23 Insurance. Schedule 3.23 sets forth a list of all policies of
insurance maintained, owned or held by the Company or any of its Subsidiaries as
of the date hereof and a brief description of any outstanding claims under any
of such insurance policies. Each of the Company and its Subsidiaries shall use
all commercially reasonable efforts to keep such insurance

A-22

<PAGE> 160

or comparable insurance in full force and effect through the Closing Date. Each
of the Company and its Subsidiaries has complied in all material respects with
each such insurance policy to which it is a party and has not failed to give any
notice or present any claim thereunder in a due and timely manner, other than
instances which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company. Except as disclosed
in Schedule 3.23, to the Best Knowledge of the Company, the full policy limits
(subject to deductibles provided in such policies) are available and unimpaired
under each such policy and no insurer under any of such policies has a basis to
void such policy on grounds of non-disclosure on the part of the Company or any
of its Subsidiaries thereunder. Each such policy is in full force and effect and
will not in any way be affected by or terminate or lapse by reason of the
transactions contemplated by this Agreement.

3.24 Leases. Schedule 3.24 lists all outstanding leases, both capital
and operating, or licenses, pursuant to which the Company or any of its
Subsidiaries has (i) obtained the right to use or occupy any real or personal
property where the value of such personal property exceeds $25,000 in the case
of any single lease or $50,000 in the aggregate, or (ii) granted to any other
Person the right to use any property described in Schedule 3.25.

3.25 Assets. (a) Schedule 3.25 lists each material item of machinery,
equipment, furniture, vehicles or other personal property owned by the Company
or any of its Subsidiaries having an original cost of $50,000 or more.

(b) Except as set forth in Schedule 3.25, the assets and properties
owned or leased by the Company or its Subsidiaries constitute all the material
assets and properties used by each of the Company and the Subsidiaries in the
operation of its business (including all books, records, computers and computer
programs and data processing systems but excluding Intellectual Property Rights
and Patents) and are in good and serviceable condition (subject, in each case,
to normal wear and tear and obsolescence and except for assets the book value of
which does not exceed $50,000 in the aggregate; provided that the foregoing
wear, tear and obsolescence shall not materially disrupt the business of the
Company as presently being conducted) and are suitable for the uses for which
intended.

3.26 Accounts Receivable; Inventory. (a) All accounts receivable of
the Company and its Subsidiaries (i) have arisen from bona fide transactions by
the Company or its Subsidiaries in the ordinary course of its business and
represent bona fide claims against debtors for sales and other charges and (ii)
are not subject to discount except for normal cash and immaterial trade
discount. The amount carried for doubtful accounts and allowances accrued on the
books of the Company and its Subsidiaries, based on past loss experience, is
sufficient to provide for any losses that may be sustained on realization of the
accounts receivable of the Company and its Subsidiaries.

(b) The inventories (net of any reserves with respect thereto
that have been established by the Company) of the Company and its Subsidiaries
as of June 30, 1999 are (i) properly reflected in the Unaudited Balance Sheet in
accordance with GAAP (except for normal and recurring year-end adjustments and
the omission of footnotes), (ii) of such quality as to be useable and saleable
in the ordinary course of business (subject in the case of work-in-process

A-23

<PAGE> 161

inventory to completion in the ordinary course of business), and (iii) reflected
in the books and records of the Company or such Subsidiary at the lower of cost
(based on a first-in, first-out basis) or market value.

3.27 Export Control Laws. Each of the Company and its Subsidiaries has
conducted its export transactions in accordance with applicable provisions of
United States export control laws and regulations, including but not limited to
the Export Administration Act and implementing Export Administration
Regulations, except for such violations which could not reasonably be expected
to have a Material Adverse Effect on the Company. Without limiting the
foregoing, the Company represents and warrants that:

(a) Each of the Company and its Subsidiaries has obtained all
export licenses and other approvals required for its exports of products,
software and technologies from the United States except where the failure to
obtain such export licenses and other approvals would not subject the Company or
such Subsidiary to penalties other than fines not to exceed $100,000 in the
aggregate;

(b) Each of the Company and its Subsidiaries is in compliance in
all material respects with the terms of all applicable export licenses or other
approvals;

(c) There are no pending or, to the Company's Best Knowledge,
threatened material claims against the Company or any of its Subsidiaries with
respect to such export licenses or other approvals;

(d) To the Best Knowledge of the Company, there are no actions,
conditions or circumstances pertaining to the Company's or any of its
Subsidiaries' export transactions that may give rise to any future claims; and

(e) No consents or approvals for the transfer of export licenses
to Lucent are required, or such consents and approvals can be obtained
expeditiously without material cost.

3.28 Minute Books. The minute books of the Company made available to
Lucent contain, in all material respects, a complete and accurate summary of all
meetings of directors and stockholders or actions by written resolutions since
the time of incorporation of the Company through the date of this Agreement, and
reflect all transactions referred to in such minutes and resolutions accurately,
except for omissions which are not material.

3.29 Financial Projections. The Company has made available to Lucent
certain financial projections with respect to the Company's business which
projections were prepared by the Company based upon the assumptions reflected
therein. The Company makes no representation or warranty regarding the accuracy
of such projections or as to whether such projections will be achieved or
otherwise, except that the Company represents and warrants that such projections
were prepared in good faith and are based on assumptions believed by it at the
time such projections were presented to Lucent to be reasonable and accurate.

A-24
<PAGE> 162

3.30 Complete Copies of Materials. Except as set forth in Schedule
3.30, the Company has delivered or made available true and complete copies of
each document that has been requested by Lucent or its counsel in connection
with their legal and accounting review of the Company.

3.31 Disclosure. None of the representations or warranties of the
Company contained herein, none of the information contained in the Schedules
referred to in this Section 3, and none of the other information or documents
furnished or to be furnished to Lucent or Acquisition by the Company or any of
its Subsidiaries or pursuant to any provision of this Agreement, contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact herein or therein necessary in order to make the
statements contained herein or therein not misleading in any material respect.

3.32 Pooling of Interests; Reorganization. The Company has not (i)
taken any action or failed to take any action which action or failure would
jeopardize the treatment of the Merger as a pooling of interests in accordance
with GAAP and the regulations and interpretations of the Securities and Exchange
Commission (the "SEC") for accounting purposes or (ii) taken any action or
failed to take any action which action or failure would jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.

3.33 Information in Lucent Registration Statement. None of the
information supplied or to be supplied by the Company or any of its Subsidiaries
specifically for inclusion or incorporation by reference in the registration
statement on Form S-4 to be filed with the SEC by Lucent under the Securities
Act of 1933 (together with the rules and regulations thereunder, the "Securities
Act"), for the purpose of registering shares of Lucent Common Stock to be issued
in the Merger (together with any amendments or supplements thereto, whether
prior to or after the effective date thereof, the "Registration Statement")
will, at the time the Registration Statement is filed with the SEC, at the time
the Registration Statement becomes effective under the Securities Act and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. No representation or warranty is made by the Company with respect to
statements made in the Registration Statement or incorporated by reference
therein based on information supplied by Lucent specifically for inclusion or
incorporation by reference in the Registration Statement.

3.34 Hart-Scott-Rodino Compliance. The Company is its own "ultimate
parent entity" (as defined in 16 CFR Section 801.1(a)(3)). The "person" (as
defined in 16 CFR Section 801.1(a)(1)) in which the Company is included does not
have annual net sales or "total assets" (as each such term is defined in 16 CFR
Section 801.11)) of $10,000,000 or more.

4. Representations and Warranties of Acquisition and Lucent. Each of
Acquisition and Lucent represents and warrants to the Company as follows:

4.1 Organization. Each of Lucent and Acquisition is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has

A-25
<PAGE> 163

all requisite corporate power and authority and all necessary governmental
approvals to enter into and perform this Agreement and the transactions
contemplated hereby to be performed by it.

4.2 Capital Structure. The authorized capital stock of Lucent
consists of (i) 6,000,000,000 shares of common stock, par value $.01 per share
(the "Lucent Common Stock"), of which as of June 30, 1999 approximately
3,000,000,000 shares were issued and outstanding, and (ii) 250,000,000 shares of
preferred stock, par value $1.00 per share ("Lucent Authorized Preferred
Stock"), of which 15,000,000 shares have been designated Series A Junior
Participating Preferred Stock (the "Lucent Junior Preferred Stock") and no
shares are issued or outstanding. All the outstanding shares of Lucent Common
Stock have been duly and validly authorized and issued and are fully paid and
nonassessable. None of the outstanding shares of Lucent Common Stock has been
issued in violation of the preemptive rights of any stockholder of Lucent. The
shares of outstanding Lucent Common Stock were issued in compliance in all
material respects with all applicable federal and state securities laws and
regulations. The shares of Lucent Common Stock to be issued pursuant to the
Merger and upon exercise of the Adjusted Options will be duly and validly
authorized and issued, will be fully paid and non-assessable and will not be
issued in violation of the preemptive rights of any stockholder of Lucent.

4.3 Authority. (a) Each of Lucent and Acquisition has full corporate
power and authority to execute, deliver and perform this Agreement and the
transactions contemplated hereunder. The Board of Directors of Acquisition has
declared the Merger advisable and approved this Agreement and resolved to
recommend the approval of the Merger and adoption of this Agreement and the
consummation of the transactions contemplated hereby to the sole stockholder of
Acquisition. The execution, delivery and performance of this Agreement by each
of Lucent and Acquisition has been duly authorized and approved (i) in the case
of Acquisition, by its Board of Directors and (ii) in the case of Lucent, by all
necessary corporate action and, except for (A) the adoption of this Agreement by
the stockholders of Acquisition and (B) the filing of appropriate merger
documents as required by the DGCL, no other corporate proceedings other than
actions previously taken on the part of either Lucent or Acquisition are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by each of
Lucent and Acquisition and is the legal, valid and binding obligation of each of
Lucent and Acquisition, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law). The filing of the Registration Statement has been duly authorized by
Lucent.

(b) The execution, delivery and performance by each of Lucent and
Acquisition of this Agreement and the consummation of the Merger do not, and
will not, (i) violate or conflict with any provision of the Certificate of
Incorporation or By-laws of either Lucent or Acquisition, (ii) violate any law,
rule, regulation, order, writ, injunction, judgment or decree of any court,
governmental authority, or regulatory agency, except for violations which,
individually or in the aggregate, will not have a Material Adverse Effect on
Lucent and Acquisition taken as a whole, or (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination,

A-26
<PAGE> 164

cancellation or acceleration) under, any note, bond, indenture, lien, mortgage,
lease, permit, guaranty or other agreement, instrument or obligation, oral or
written, to which Lucent or Acquisition is a party or by which any of the
properties of Lucent or Acquisition may be bound, except for violations,
breaches or defaults which, individually or in the aggregate, will not have a
Material Adverse Effect on Lucent, its Subsidiaries and Acquisition taken as a
whole.

(c) The execution and delivery of this Agreement by each of Lucent
and Acquisition does not, and the performance by each of Lucent and Acquisition
of this Agreement will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, domestic or foreign, or any other Person except for (i) the filing
and recordation of appropriate merger documents as required by the DGCL; (ii)
any such consent, approval, authorization, permission, notice or filing which is
required under the Securities Act, the Securities Exchange Act of 1934 (together
with the rules and regulations promulgated thereunder, the "Exchange Act") and
applicable state securities laws; and (iii) any such consent, approval,
authorization, permission, notice or filing which if not obtained or made would
not have a Material Adverse Effect on Lucent, its Subsidiaries and Acquisition
taken as a whole.

4.4 Litigation. (a) Neither Lucent nor Acquisition is a party to any
suit, action, arbitration or legal, administrative, governmental or other
proceeding or investigation pending or, to its knowledge threatened, which
reasonably could adversely affect or restrict its ability to consummate the
transactions contemplated by this Agreement or to perform its obligations
hereunder.

(b) There is no judgment, order, writ, injunction or decree of any
court, governmental agency or arbitration tribunal to which Lucent or
Acquisition is subject which might adversely affect or restrict its ability to
consummate the transactions contemplated by this Agreement or to perform its
obligations hereunder.

4.5 SEC Filings; Lucent Financial Statements. (a) Since October 1,
1997, Lucent has filed with the SEC all required reports, schedules, forms,
statements and other documents (including exhibits and all other information
incorporated therein) required under the Securities Act and the Exchange Act
(the "Lucent SEC Documents"). As of their respective dates, the Lucent SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Lucent SEC
Documents and, except to the extent that information contained in any Lucent SEC
Document has been revised or superseded by a later filed Lucent SEC Document,
none of the Lucent SEC Documents when filed contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Lucent included in the Lucent SEC Documents comply as to form, as
of their respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes

A-27
<PAGE> 165

thereto) and fairly present in all material respects the consolidated financial
position of Lucent and its consolidated Subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal recurring
year-end audit adjustments) and are consistent in all material respects with the
books and records of Lucent.

(b) Except for liabilities (i) reflected in such financial statements
or in the notes thereto, (ii) incurred in the ordinary course of business
consistent with past practice since September 30, 1998, the date of the most
recent audited financial statements of Lucent included in the Lucent SEC
Documents, (iii) incurred in connection with this Agreement or the transactions
contemplated hereby, or (iv) disclosed in Schedule 4.5, neither Lucent nor any
of its Subsidiaries has any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
Lucent and its Subsidiaries taken as a whole.

4.6 Information Supplied. None of the information supplied or to be
supplied by Lucent specifically for inclusion or incorporation by reference in
the Registration Statement, at the time the Registration Statement becomes
effective under the Securities Act, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The Registration
Statement will comply as to form in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by Lucent with
respect to statements made or incorporated by reference therein based on
information supplied by the Company specifically for inclusion or incorporation
by reference in the Registration Statement. No representation or warranty is
made by Lucent with respect to statements made in the Registration Statement or
incorporated by reference therein based on information supplied by the Company
specifically for inclusion or incorporation by reference in the Registration
Statement.

4.7 Operations and Obligations. Except as described in the Lucent SEC
Documents, since September 30, 1998, the date of the most recent audited balance
sheet of Lucent contained in the Lucent SEC Documents, (i) except as a result of
the transactions contemplated by this Agreement or in connection with the
acquisition by Lucent or any of its Subsidiaries of all or substantially all the
capital stock or all or substantially all the assets of another Person, there
has not been any development that has had or reasonably would be expected to
have a Material Adverse Effect on Lucent and its Subsidiaries taken as a whole;
(ii) there has not been any material change by Lucent in its accounting methods,
principles or practices, except as required by changes in GAAP or any other
change provided such other change could not reasonably be expected to have a
Material Adverse Effect on Lucent and its Subsidiaries; or (iii) except as a
result of the transactions contemplated by this Agreement or in connection with
the acquisition by Lucent or any of its Subsidiaries of all or substantially all
the capital stock or all or substantially all the assets of another Person,
there has not been any material revaluation by Lucent of any of its assets
including, without limitation, writing down the value of capitalized software or
inventory or writing off notes or accounts receivable which would have a
Material Adverse Effect.

A-28
<PAGE> 166

4.8 Interim Operations of Acquisition. Acquisition was formed solely
for the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted its operations only as
contemplated hereby.

4.9 Pooling of Interests; Reorganization. Neither Lucent nor any of
its Subsidiaries has (i) taken any action or failed to take any action which
action or failure would jeopardize the treatment of the Merger as a pooling of
interests in accordance with GAAP and the regulations and interpretations of the
SEC for accounting purposes or (ii) taken any action or failed to take any
action which action or failure would jeopardize the qualification of the Merger
as a reorganization within the meaning of Section 368(a) of the Code.

5. Conduct Pending Closing.

5.1 Conduct of Business Pending Closing. From the date hereof until
the Closing, the Company will (and will cause each of its Subsidiaries to):

(a) maintain its existence in good standing;

(b) maintain the general character of its business and properties and
conduct its business in the ordinary and usual manner consistent with past
practices, except as expressly permitted by this Agreement;

(d) use its reasonable best efforts (i) to preserve its business
intact, (ii) to keep available to the Company the services of its present
officers and employees, and (iii) to preserve for the Company or such Subsidiary
the goodwill of its suppliers, customers and others having business relations
with the Company or such Subsidiary.

5.2 Prohibited Actions Pending Closing. Except as set forth in
Schedule 5.2 or otherwise provided for herein or approved by Lucent in writing,
from the date hereof until the Closing, the Company shall not (and shall not
permit any of its Subsidiaries to):

(a) amend or otherwise change its Certificate of Incorporation or
By-laws;

(b) issue, sell or authorize for issuance or sale any shares of its
capital stock or any other of its securities (other than in connection with the
exercise of outstanding options or warrants of the Company); or issue, grant or
take any action with respect to any options (including any modification of any
option plan or the vesting of any options previously granted), or make other
agreements with respect to, any shares of its capital stock or any other of its
securities, except for (i) the grant of stock options to purchase up to an
aggregate of 100,000 shares of Company Common Stock granted to employees of the
Company hired after the date hereof consistent with past practice and with an
exercise price reflecting such Company Common Stock's fair market value and
which are granted in the ordinary course of business and (ii) those

A-29
<PAGE> 167

provisions of the agreement with the Exchange Agent which provisions are in
furtherance of this Agreement;

(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise with respect to any
of its capital stock;

(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;

(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership,
other business organization or any division thereof or any material amount of
assets; (ii) incur any indebtedness for borrowed money (other than as
contemplated by Section 5.16 or as disclosed in Schedule 3.6(b)) or issue any
debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any Person, or make any
loans or advances, except for interest and fees on Indebtedness set forth in
Schedule 3.6 incurred in the ordinary course of business and consistent with
past practice: (iii) enter into any contract or agreement (or series of related
contracts or agreements) in excess of $100,000 other than in the ordinary course
of business, consistent with past practice; (iv) authorize any capital
commitment which is in excess of $25,000 or capital expenditures which are, in
the aggregate, in excess of $100,000; or (v) enter into or amend any contract,
agreement, commitment or arrangement with respect to any matter set forth in
this Section 5.2(e);

(f) mortgage, pledge or subject to Lien, any of its assets or
properties or agree to do so except for Permitted Liens;

(g) assume, guarantee or otherwise become responsible for the
obligations of any other Person or agree to so do;

(h) enter into or agree to enter into or terminate (prior to the
expiration date thereof) any employment agreement or increase the number of
employees of the Company above 108; provided that in the event of any increase
in the number of employees beyond the number employed by the Company as of the
date hereof, the Company shall notify Lucent in writing at the end of each month
following the date of such increase of the number of employees of the Company at
the end of such month;

(i) increase the compensation or benefits payable or to become
payable to its officers or employees, except for increases to employees of the
Company or any of its Subsidiaries who are not officers in the ordinary course
of business and in accordance with past practices in salaries or wages of
employees of the Company or such Subsidiary who are not officers of the Company
or such Subsidiary, or grant any severance or termination pay to, or enter into
any severance agreement with any director, officer or other employee of the
Company or any of its Subsidiaries, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any such director, officer or employee;

A-30
<PAGE> 168

(j) take any action, other than in the ordinary course of business
and consistent with past practice, with respect to accounting policies or
procedures (including, without limitation, procedures with respect to the
payment of accounts payable and collection of accounts receivables);

(k) make any material Tax election or settle or compromise any
material federal, state, local or foreign income Tax liability;

(l) settle or compromise any pending or threatened suit, action or
claim which is material or which relates to any of the transactions contemplated
by this Agreement;

(m) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
(i) the payment, discharge or satisfaction, in the ordinary course of business
and consistent with past practice, of liabilities reflected or reserved against
in the Balance Sheet or subsequently incurred in the ordinary course of business
and consistent with past practice and (ii) other claims, liabilities or
obligations (qualified as aforesaid) that in the aggregate do not exceed $25,000
and as to which the Company's or any of its Subsidiaries' failure to so pay,
discharge or satisfy could not reasonably be expected to have a Material Adverse
Effect on the Company;

(n) except in connection with the sale or licensing of the Company's
products in the ordinary course of business and consistent with past practice,
sell, assign, transfer, license, sublicense, pledge or otherwise encumber any of
the Intellectual Property Rights; or

(o) announce an intention, commit or agree to do any of the
foregoing.

5.3 Access; Documents; Supplemental Information. (a) From and after
the date hereof until the Closing, the Company shall afford, shall cause its
Subsidiaries to afford and, with respect to clause (ii) below, shall use its
reasonable best efforts to cause the independent certified public accountants
for the Company to afford, (i) to the officers, independent certified public
accountants, counsel and other representatives of Acquisition and Lucent, upon
reasonable notice, free and full access at all reasonable times to the
properties, books and records, including tax returns filed and those in
preparation of the Company or any of its Subsidiaries, and the right to consult
with the officers, employees, accountants, counsel and other representatives of
the Company or any of its Subsidiaries in order that Acquisition and Lucent may
have full opportunity to make such investigations as they shall reasonably
desire to make of the operations, properties, business, financial condition and
prospects of the Company and its Subsidiaries, (ii) to the independent certified
public accountants of Acquisition and Lucent, free and full access at all
reasonable times to the work papers and other records of the accountants
relating to the Company and its Subsidiaries, and (iii) to Acquisition and
Lucent and their representatives, such additional financial and operating data
and other information as to the properties, operations, business, financial
condition and prospects of the Company and its Subsidiaries as Acquisition and
Lucent shall from time to time reasonably require.

(b) From the date of this Agreement through and including the
Closing, Acquisition, Lucent and the Company agree to furnish to each other
copies of any notices,

A-31
<PAGE> 169

documents, requests, court papers, or other materials received from any
governmental agency or any other third party with respect to the transactions
contemplated by this Agreement, except where it is obvious from such notice,
document, request, court paper or other material that the other party was
already furnished with a copy thereof.

(c) The Company shall deliver to Lucent, without charge, the
following financial information (the "Supplemental Financial Information"): (i)
within 45 days after each fiscal quarter ending after the date hereof and prior
to the Effective Time, the unaudited consolidated balance sheet of the Company
and its Subsidiaries as of the end of such quarter and the unaudited
consolidated statements of operations, stockholders' equity and cash flows of
the Company and its Subsidiaries for such quarter and for the portion of the
fiscal year then completed, (ii) within 90 days after each fiscal year ending
after the date hereof and prior to the Effective Time, the audited consolidated
balance sheet of the Company and its Subsidiaries as of the end of such year and
the audited consolidated statements of operations, stockholders' equity and cash
flows of the Company and its Subsidiaries for such year, in each case prepared
in accordance with GAAP certified by Arthur Andersen LLP, and (iii) promptly
upon the reasonable request by Lucent, such additional financial information as
may be required in connection with any filing by Lucent pursuant to the
requirements of federal or state securities laws. Such Supplemental Financial
Information shall present fairly, in all material respects, the consolidated
financial position of the Company and its Subsidiaries for the period covered,
subject, in the case of unaudited financials, to normal year-end adjustments and
the omission of footnotes.

(d) Lucent shall deliver to the Company, without charge a copy of any
filing made by Lucent with the SEC under the Exchange Act, including, without
limitation, any Form 10-Q, 8-K, 10-K or amendments thereto, not later than five
business days after the date of such filing with the SEC.

5.4 No Solicitation. The Company shall not, nor shall it authorize or
permit any of its Affiliates over which the Company exercises control or any
officer, director, employee, investment banker, attorney or other adviser or
representative of the Company or any of its Affiliates to (i) solicit, initiate,
or encourage the submission of, any Acquisition Proposal (as hereinafter
defined) or (ii) participate in any discussions or negotiations regarding, or
furnish to any Person any information for the purpose of facilitating the making
of, or take any other action to facilitate any inquiries or the making of, any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal. Without limiting the foregoing, it is understood that any
violation, of which the Company or any of its Affiliates had knowledge at the
time of such violation, of the restrictions set forth in the immediately
preceding sentence by any officer, director, employee, investment banker,
attorney, employee, or other adviser or representative of the Company or any of
its Affiliates, whether or not such Person is purporting to act on behalf of the
Company or any of its Affiliates or otherwise, shall be deemed to be a breach of
this Section 5.4 by the Company and its Affiliates. The Company promptly shall
advise Lucent of any Acquisition Proposal and inquiries with respect to any
Acquisition Proposal. "Acquisition Proposal" means any proposal for a merger or
other business combination involving the Company or any of its Affiliates or any
proposal or offer to acquire in any manner, directly or indirectly, an equity
interest in the Company or any of its Affiliates, any voting securities of the
Company or

A-32
<PAGE> 170

any of its Affiliates or a substantial portion of the assets of the Company
(other than sales of the Company's products in the ordinary course of business
consistent with past practice).

5.5 Filings; Other Actions. (a) As promptly as practicable after the
date hereof, Lucent shall prepare and file the Registration Statement with the
SEC. Lucent acknowledges that the Company and its counsel may participate in the
preparation of the Registration Statement, provided that the final determination
of any issues related thereto shall be made by Lucent. Lucent shall use its
reasonable best efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after such filing. Lucent
shall also take such actions (other than qualifying to do business in any
jurisdiction in which Lucent is now not so qualified) as may be required to be
taken under any applicable state securities laws in connection with the issuance
of Lucent Common Stock in the Merger and upon the exercise of the Adjusted
Options. The Company shall furnish all information concerning the Company and
the holders of Company Capital Stock as may be reasonably requested in
connection with any of the foregoing.

(b) Each party hereto agrees, subject to applicable laws relating to
the exchange of information, promptly to furnish the other parties hereto with
copies of written communications (and memoranda setting forth the substance of
all oral communications) received by such party, or any of its Subsidiaries,
affiliates or associates (as such terms are defined in Rule 12b-2 under the
Exchange Act as in effect on the date hereof), from, or delivered by any of the
foregoing to, any governmental or regulatory authority, domestic or foreign,
relating to or in respect of the transactions contemplated under this Agreement.

5.6 Company Stock Options; Warrants. (a) As soon as practicable
following the date of this Agreement, the Board of Directors of the Company (or,
if appropriate, any committee administering the Xedia Corporation 1993 Stock
Option Plan (the "Company Stock Plan") shall adopt such resolutions or take such
other actions as may be required to effect the following:

(i) adjust the terms of all outstanding options to purchase
shares of Company Capital Stock under the Company Stock Plan (the
"Company Stock Options"), whether vested or unvested, as necessary to
provide that, at the Effective Time, each Company Stock Option
outstanding immediately prior to the Effective Time shall be amended
and converted into an option to acquire, on the same terms and
conditions as were applicable under such Company Stock Option, the
number of shares of Lucent Common Stock (rounded down to the nearest
whole share) equal to (A) the number of shares of Company Common Stock
subject to such Company Stock Option immediately prior to the
Effective Time multiplied by (B) the Common Stock Exchange Ratio, at
an exercise price per share of Lucent Common Stock (rounded to the
nearest 1/100th of a whole cent) equal to (x) the exercise price per
share of such Company Common Stock immediately prior to the Effective
Time divided by (y) the Common Stock Exchange Ratio (each Company
Stock Option as so adjusted, an "Adjusted Option"); and

A-33
<PAGE> 171

(ii) make such other changes to the Company Stock Plan as the
Company and Lucent may agree are appropriate to give effect to the
Merger, including as provided in Section 5.7.

(b) As soon as practicable after the Effective Time, Lucent shall
deliver to the holders of Company Stock Options appropriate notices (the
"Company Stock Option Notices") setting forth (i) such holders' rights pursuant
to the Company Stock Plan and the agreements evidencing the grants of such
Company Stock Options and that such Company Stock Options and agreements shall
be assumed by Lucent and shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section 5.6 after giving
effect to the Merger) and (ii) the procedures for the exercise of the Adjusted
Options. The term, exercisability, vesting schedule (including any acceleration
provisions therein), status as an "incentive stock option" under Section 422 of
the Code, if applicable, and all of the other terms of the Company Stock Options
shall otherwise remain unchanged.

(c) A holder of an Adjusted Option may exercise such Adjusted Option
in whole or in part by (i) following the exercise procedures to be delivered by
Lucent as set forth in the Company Stock Option Notice and (ii) concurrently
delivering to Lucent the consideration therefor and the federal withholding tax
information, if any, required in accordance with the related Company Stock Plan.

(d) Except as otherwise contemplated by this Section 5.6 and except
to the extent required under the respective terms of the Company Stock Options
all restrictions or limitations on transfer and vesting with respect to Company
Stock Options awarded under the Company Stock Plan or any other plan, program or
arrangement of the Company or any of its Subsidiaries, to the extent that such
restrictions or limitations shall not have already lapsed, shall remain in full
force and effect with respect to such options after giving effect to the Merger
and the assumption by Lucent as set forth above.

(e) No later than 30 days after the Effective Time, Lucent shall
prepare and file with the SEC a registration statement on Form S-8 (or another
appropriate form) registering the number of shares subject to the Adjusted
Options. Such registration statement shall be kept effective (and the current
status of the prospectus required thereby shall be maintained in accordance with
the relevant requirements of the Securities Act and the Exchange Act) at least
for so long as any Adjusted Options remain outstanding.

(f) Prior to the Effective Time, the Company shall take all actions
to receive from each holder of an outstanding warrant (each, a "Warrant") to
purchase shares of Company Capital Stock an agreement that, as of the Effective
Time, such Warrant shall be converted into a right of such holder to receive
from the Exchange Agent the consideration set forth in the next sentence at the
same time that each such holder of Company Capital Stock is entitled to receive
shares of Lucent Common Stock in connection with the Merger. Each holder of a
Warrant shall be entitled to receive from the Exchange Agent, (A) in respect of
the shares of Series E Preferred Stock to be issued upon the exercise of such
Warrant, the number of shares of Lucent Common Stock (rounded down to the
nearest whole share) equal to the number of shares of Series E Preferred Stock
subject to such Warrant immediately prior to the Effective Time multiplied by

A-34
<PAGE> 172

0.161423 (the "Series E Warrant Exchange Ratio") and (B) in respect of the
shares of Company Common Stock to be issued upon the exercise of such Warrant,
the number of shares of Lucent Common Stock (rounded down to the nearest whole
share) equal to the number of shares of Company Common Stock subject to such
Warrant immediately prior to the Effective Time multiplied by 0.137605 (the
"Common Stock Warrant Exchange Ratio", and together with the Series E Warrant
Exchange Ratio, the"Warrant Exchange Ratios"). Lucent shall pay cash (without
interest) to holders of Warrants in lieu of issuing fractional shares of Lucent
Common Stock in an amount, rounded to the nearest whole cent, computed in
accordance with the formula set forth in Section 1.8.

5.7 Company Stock Plan. At the Effective Time, by virtue of the
Merger, the Company Stock Plan and the Company Stock Options granted thereunder
shall be assumed by Lucent, with the result that all obligations of the Company
under the Company Stock Plan, including with respect to awards outstanding at
the Effective Time under the Company Stock Plan, shall be obligations of Lucent
following the Effective Time; provided that in the case of any Company Stock
Option to which Section 421 of the Code applies by reason of its qualification
under Section 422 or Section 423 of the Code, the option price, number of shares
purchasable pursuant to such Company Stock Option and the terms and conditions
of exercise of such Company Stock Option shall be determined in order to comply
with Section 424 of the Code. Prior to the Effective Time, Lucent shall take all
necessary actions (including, if required to comply with Section 162(m) of the
Code (and the regulations thereunder) or applicable law or rule of the NYSE,
obtaining the approval of its stockholders at the next regularly scheduled
annual meeting of Lucent following the Effective Time) for the assumption of the
Company Stock Plan, including the reservation, issuance and listing of Lucent
Common Stock in a number at least equal to the number of shares of Lucent Common
Stock that will be subject to the Adjusted Options.

5.8 Employee Benefit Plans; Existing Agreement. As soon as
practicable after the Effective Time (the "Benefits Date"), Lucent shall
provide, or cause to be provided, employee benefit plans, programs and
arrangements to employees of the Company that are the same as those made
generally available to similarly situated employees of Lucent's Internetworking
Systems Group who are hired by Lucent after July 1, 1999. From the Effective
Time to the Benefits Date (which the parties acknowledge may occur on different
dates with respect to different plans, programs or arrangements of the Company),
Lucent shall provide, or cause to be provided, the employee benefit plans,
programs and arrangements of the Company provided to employees of the Company as
of the date hereof.

5.9 Indemnification. (a) From and after the Effective Time, Lucent
shall, or shall cause the Surviving Corporation to, fulfill and honor in all
respects the obligations of the Company to indemnify each Person who is or was a
director or officer (an "Indemnified Party") of the Company or any of its
Subsidiaries pursuant to any indemnification provision of the Certificate of
Incorporation or By-laws or equivalent constituent documents of the Company or
any of its Subsidiaries as each is in effect on the date hereof.

(b) For a period of six years after the Effective Time, Lucent shall
cause to be maintained in effect officers' and directors' liability insurance
with respect to each Indemnified

A-35
<PAGE> 173

Party of the Company or any of its Subsidiaries covering acts or omissions by
such Person occurring prior to the Effective Time under customary terms and
conditions. This Section 5.9 shall survive the closing of all the transactions
contemplated hereby, is intended to benefit the Indemnified Parties and their
respective heirs and personal representative (each of which shall be entitled to
enforce this Section 5.9 against Lucent and the Surviving Corporation, as the
case may be, as a third-party beneficiary of this Agreement).

5.10 Comfort Letters. (a) The Company shall use its reasonable best
efforts to cause to be delivered to Lucent a "comfort" letter of Arthur Andersen
LLP, the Company's independent public accountants, dated the date on which the
Registration Statement shall become effective and as of the Effective Time, and
addressed to Lucent and the Company, in form and substance reasonably
satisfactory to Lucent and reasonably customary in scope and substance for
letters delivered by independent public accounts in connection with transactions
such as those contemplated by this Agreement.

(b) Lucent shall use its reasonable best efforts to cause to be
delivered to the Company a "comfort" letter of PricewaterhouseCoopers LLP,
Lucent's independent public accountants, dated the date on which the
Registration Statement shall become effective and as of the Effective Time,
addressed to the Company and Lucent, in form and substance reasonably
satisfactory to the Company and reasonably customary in scope and substance for
letters delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.

5.11 Stock Exchange Listing. Lucent shall use all reasonable best
efforts to list on the NYSE, upon official notice of issuance, the shares of
Lucent Common Stock to be issued in connection with the Merger and upon exercise
of Adjusted Options.

5.12 Affiliates. As soon as practicable after the date hereof, the
Company shall deliver to Lucent a letter identifying all Persons who are, at the
time this Agreement is submitted for adoption by the stockholders of the
Company, "affiliates" of the Company for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations. The Company shall use
its reasonable best efforts to cause each such Person to deliver to Lucent as of
the Closing Date, a written agreement substantially in the form attached as
Exhibit E hereto. Lucent shall use its reasonable best efforts to cause all
Persons who are "affiliates" of Lucent for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations to deliver to the
Company as of the Closing Date a written agreement substantially in the form
attached as Exhibit F hereto; provided that Lucent and its "affiliates" may
deliver a letter substantially in the form of Exhibit F hereto which covers the
same period even if such letter was previously executed.

5.13 Notification of Certain Matters. The Company shall give prompt
notice to Lucent, and Lucent shall give prompt notice to the Company, of (a) the
occurrence, or non-occurrence, of any event which would be likely to cause (i)
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (ii) any covenant, condition or agreement
contained in this Agreement not to be complied with or

A-36
<PAGE> 174

satisfied; and (b) any failure of the Company, Lucent or Acquisition, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided that the delivery of any
notice pursuant to this Section 5.13 shall not limit or otherwise affect the
remedies available to the party receiving such notice.

5.14 Tax Returns; Cooperation. The Company on the one hand and Lucent
on the other will cooperate with each other and provide such information as any
party may require in order to file any return to determine Tax liability or a
right to a Tax refund or to conduct a Tax audit or other Tax proceeding. Such
cooperation shall include, but not be limited to, making employees available on
a mutually convenient basis to explain any documents or information provided
hereunder or otherwise as required in the conduct of any audit or other
proceeding. The Company and Lucent will retain until the expiration of any
applicable statutes of limitations (including any extensions thereof) all Tax
Returns, schedules and workpapers and all other material records or documents
relating to the Company for all Tax periods through the first Tax period ending
after the Closing Date. At the expiration of such statutory period (including
any extensions thereof), each party shall have the right to dispose of any such
Returns and other documents or records on thirty (30) days written notice to the
other party. Any information, documents or records obtained under this Section
5.14 shall be kept confidential, except as may be otherwise necessary in
connection with the filing of Tax Returns or claims for refund or in conducting
an audit or other proceeding.

5.15 Pooling of Interests; Reorganization. Each of Lucent and the
Company shall cooperate and work together with its respective accountants, with
the objective that the Merger shall qualify as a pooling of interests under
Opinion 16 of the Accounting Principles Board and the applicable SEC rule and
regulations and Lucent's and the Company's conclusion that such accounting
treatment is appropriate for the Merger to be concurred with by each of the
Company's and Lucent's auditors and the SEC respectively, and each of the
Company and Lucent agrees that it shall voluntarily take no action that would
cause such accounting treatment not to be obtained. Neither Lucent or any of its
Subsidiaries nor the Company or any of its Subsidiaries shall take any action
which could reasonably be expected to jeopardize such qualification. Each of
Lucent and the Company shall use its reasonable best efforts to cause the
business combination of the Merger to be qualified as a reorganization under
Section 368(a) of the Code.

5.16 Working Capital Financing. Lucent agrees, at the request of the
Company, to provide prior to the Closing Date up to $5,000,000 in working
capital financing to the Company for a term of one year on commercially
reasonable terms and conditions consistent with past practice and reasonably
acceptable to Lucent and the Company.

5.17 Actions by the Parties. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties hereto will use its
reasonable best efforts to take or cause to be taken all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable law
and regulations to consummate and make effective in the most expeditious manner
practicable, the transactions contemplated by this Agreement including (i) the
obtaining of all necessary actions and non-actions, waivers and consents, if
any, from any governmental agency or authority and the making of all necessary
registrations and filings and the taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to

A-37
<PAGE> 175

avoid an action or proceeding by any governmental agency or authority; (ii) the
obtaining of all necessary consents, approvals or waivers from any other Person;
(iii) the defending of any claim, investigation, action, suit or other legal
proceeding, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby; and (iv) the execution
of additional instruments necessary to consummate the transactions contemplated
by this Agreement. Each party will promptly consult with the other and provide
necessary information (including copies thereof) with respect to all filings
made by such party with any agency or authority in connection with this
Agreement and the transactions contemplated hereby.

6. Conditions Precedent.

6.1 Conditions Precedent to Each Party's Obligation to Effect the
Merger. The respective obligations of each party hereto to effect the Merger
shall be subject to the fulfillment or satisfaction, prior to or on the Closing
Date of the following conditions:

(a) Stockholder Approval. The Merger shall have been duly approved by
the requisite vote of the outstanding shares of Company Capital Stock as set
forth in Section 3.3(e) and the common stock, no par value per share, of
Acquisition entitled to vote thereon in accordance with the DGCL and the
Certificate of Incorporation and By-laws of each of the Company and Acquisition,
respectively. Each holder of Company Preferred Stock shall have agreed to waive
any rights to receive any liquidation premium payable in cash in lieu of shares
of Lucent Common Stock.

(b) Approvals. All authorizations, consents, orders, declarations or
approvals of, or filings with, or terminations or expirations of waiting periods
imposed by, any governmental or regulatory authority, domestic or foreign, which
the failure to obtain, make or occur would have the effect of making the Merger
or any of the transactions contemplated hereby illegal or would have a Material
Adverse Effect on Lucent or the Company (as Surviving Corporation), assuming the
Merger had taken place, shall have been obtained, made or occurred.

(c) No Litigation. No judgment, order, decree, statute, law,
ordinance, rule or regulation, entered, enacted, promulgated, enforced or issued
by any court or other Governmental Entity of competent jurisdiction or other
legal restraint or prohibition (collectively, "Restraints") shall be in effect
specifically referencing any of the parties hereto or the transactions
contemplated by this Agreement which (i) prevents or materially delays the
consummation of the Merger or (ii) otherwise would materially impair the ability
of the Company or Lucent to perform its obligations under this Agreement. No
action or proceeding shall have been commenced seeking any temporary restraining
order, preliminary or permanent injunction or other order from any court of
competent jurisdiction or seeking any other legal restraint or prohibition
preventing or materially delaying the consummation of the Merger or which would
materially impair the ability of the Company or Lucent to perform its
obligations under this Agreement other than any of the foregoing which shall
have been dismissed with prejudice; provided that each of the parties shall have
used its reasonable best efforts to prevent the entry of any such temporary
restraining order, preliminary or permanent injunction or other order and to
appeal as promptly as possible any of the foregoing.

A-38
<PAGE> 176

(d) Escrow Agreement. Each of Lucent, the Company, the Escrow Agent
and the Stockholders' Representative shall have entered into the Escrow
Agreement substantially in the form of Exhibit B hereto (the "Escrow
Agreement").

(e) Exchange Agency Agreement. Each of Lucent and the Exchange Agent
shall have entered into the Exchange Agency Agreement to be agreed to by Lucent
and the Exchange Agent.

(f) Representation Letters. Each of the Company and Lucent shall have
executed and delivered a letter of representation relating to certain tax
matters substantially in the form of Exhibits C and D hereto.

(g) Affiliate Letters. Each of the Company and its Affiliates and
Lucent and its Affiliates shall have executed and delivered a letter relating to
pooling of interests substantially in the form of Exhibits E and F hereto,
respectively, and each such letter shall be true and correct in all respects and
in full force and effect; provided that Lucent and its Affiliates may deliver a
letter substantially in the form of Exhibit F hereto which covers the same
period even if such letter was previously executed.

(h) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act. No
stop order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have been
initiated or, to the knowledge of Lucent or the Company, threatened by the SEC.

(i) Stock Exchange Listing. The shares of Lucent Common Stock issued
in accordance with the Merger and issuable upon exercise of the Adjusted Options
shall have been authorized for listing on the NYSE, subject to official notice
of issuance.

(j) Amendment to Certificate of Incorporation. The Board of Directors
shall have recommended to the stockholders of the Company and a majority of the
outstanding shares of the Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock voting together as a single class and each of the Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock each
voting as separate classes shall have approved an amendment to the Amended and
Restated Certificate of Incorporation of the Company substantially in the form
of Exhibit G. The Company shall have taken all necessary or appropriate action
to cause such amendment to the Amended and Restated Certificate of Incorporation
of the Company to be, and the Amended and Restated Certificate of Incorporation
of the Company as so amended shall be, in full force and effect.

6.2 Conditions Precedent to Obligations of Acquisition and Lucent.
All obligations of Acquisition and Lucent under this Agreement are subject to
the fulfillment or satisfaction, prior to or on the Closing Date, of each of the
following conditions precedent:

(a) Performance of Obligations; Representations and Warranties. The
Company shall have performed and complied in all material respects with all
agreements and

A-39
<PAGE> 177

conditions contained in this Agreement that are required to be performed or
complied with by it prior to or at the Closing. Each of the Company's
representations and warranties contained in Section 3 of this Agreement to the
extent it is qualified by Material Adverse Effect or materiality and the
Company's representations and warranties contained in Section 3.14 shall be true
and correct and each of the Company's representations and warranties to the
extent it is not so qualified by Material Adverse Effect or materiality shall be
true and correct in all material respects, in each case, on and as of the
Closing with the same effect as though such representations and warranties were
made on and as of the Closing, except for changes permitted by this Agreement
and except to the extent that any representations and warranties expressly
relate to an earlier date, in which case such representations and warranties
shall be as of such earlier date. Lucent and Acquisition shall have received a
certificate dated the Closing Date and signed by the Chairman, President or a
Vice-President of the Company, certifying that, the conditions specified in this
Section 6.2(a) have been satisfied.

(b) Opinion of Counsel. Lucent and Acquisition shall have received
the favorable written opinion dated the Closing Date of Hale and Dorr LLP,
counsel to the Company, in form satisfactory to Lucent and Acquisition.

(c) Pooling Letter. Lucent shall have received a letter, dated as of
the Closing Date, from Arthur Andersen LLP, in form and substance satisfactory
to Lucent stating in substance that Arthur Andersen LLP concurs with the
conclusion of the Company's management that no condition exists that would
preclude the Company from being a party to a transaction that would be accounted
for as a pooling of interests under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations.

(d) Officer and Director Terminations. In accordance with Section
1.4, each director and officer of the Company shall cease to act in such
capacity.

(e) No Material Adverse Change. There shall have been no material
adverse change in the assets, business, financial condition or operations of the
Company and no event or events shall have occurred that could reasonably be
expected to have a Material Adverse Effect (other than as a result of (i)
general economic conditions, (ii) business and economic conditions generally
affecting the data networking industry, (iii) liabilities incurred in connection
with this Agreement or the transactions contemplated hereby (including
litigation brought or threatened against the Company or any member of its Board
of Directors in respect of this Agreement), or (iv) resulting from the
announcement of the transactions contemplated hereby (including loss of
personnel, customers or suppliers or the delay or cancellation of orders or
products)) on the Company, and Lucent shall have received a certificate signed
on behalf of the Company by its Chief Executive Officer and Chief Financial
Officer to such effect.

(f) Consents; Waivers. The Company shall have received all necessary
consents, in form and substance satisfactory to Lucent and Acquisition, from the
other parties to each contract, lease or agreement to which the Company is a
party, except where the failure to receive such consent would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company. The Company shall have received the waivers set forth in Schedule
3.2(b) in form and substance satisfactory to Lucent.

A-40
<PAGE> 178
(g) Non-Competition Agreements and Non-Disclosure Agreements. Each of
Ashley Stephenson and Jeremy Greene shall have entered into Non-Competition and
Non-Disclosure Agreements with the Surviving Corporation, each substantially in
the form of Exhibit H hereto, and such agreements shall be in full force and
effect.

(h) Real Property Certificate. Lucent shall have received a
certificate from the Company certifying that each of the Company and its
Subsidiaries has never been and is not a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code pursuant to
Treas. Reg. Sec. 1.897-2(h) and Treas. Reg. Sec. 1.1445-2(c)(3)(i) at the
Closing.

(i) Stockholder Agreements, Registration Rights Agreements and Voting
Agreements. Each of the stockholder agreements and voting agreements entered
into by the Stockholders prior to the date hereof, registration rights
agreements entered into by the Company and other parties thereto prior to the
date hereof and other similar agreements shall have been terminated by the
Company and each of the other parties thereto.

6.3 Conditions Precedent to the Company's Obligations6.3 Conditions
Precedent to the Company's Obligations. All obligations of the Company under
this Agreement are subject to the fulfillment or satisfaction, prior to or on
the Closing Date, of each of the following conditions precedent:

(a) Performance of Obligations; Representations and Warranties.
Acquisition and Lucent shall have performed and complied in all material
respects with all agreements and conditions contained in this Agreement that are
required to be performed or complied with by them prior to or at the Closing.
Each of the representations and warranties of Acquisition and Lucent contained
in Section 4 of this Agreement to the extent it is qualified by Material Adverse
Effect or materiality shall be true and correct and each of the representations
and warranties of Acquisition and Lucent to the extent it is not so qualified by
Material Adverse Effect or materiality shall be true and correct in all material
respects, in each case, on and as of the Closing with the same effect as though
such representations and warranties were made on and as of the Closing, except
for changes permitted by this Agreement and except to the extent that such
representations and warranties expressly relate to an earlier date, in which
case such representations and warranties shall be as of such earlier date. The
Company shall have received certificates dated the Closing Date and signed by
the President or a Vice-President of Acquisition and an authorized signatory of
Lucent, certifying that the conditions specified in this Section 6.3(a) have
been satisfied.

(b) Opinion of Counsel. The Company shall have received the favorable
written opinions dated the Closing Date of Sidley & Austin, special counsel to
Acquisition and Lucent, and internal counsel to Acquisition and Lucent, each in
form satisfactory to the Company. The Company shall have received a written
opinion dated the Closing Date of Hale and Dorr LLP, counsel to the Company,
that the Merger should be treated, for federal income tax purposes, as a
reorganization within the meaning of Section 368(a) of the Code.

A-41
<PAGE> 179

(c) Pooling Letter. The Company shall have received a letter, dated
as of the Closing Date, from PricewaterhouseCoopers LLP, in form and substance
satisfactory to the Company stating in substance that PricewaterhouseCoopers LLP
concurs with the conclusion of Lucent's management that no condition exists at
Lucent that would preclude accounting of the Merger as a pooling of interests
under Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations.

(d) No Material Adverse Change. There shall have been no material
adverse change in the assets, business, financial condition or operations of
Lucent and no event or events shall have occurred that could reasonably be
expected to have a Material Adverse Effect (other than as a result of (i)
general economic conditions, (ii) business and economic conditions generally
affecting the data networking industry, (iii) liabilities incurred in connection
with this Agreement or the transactions contemplated hereby (including
litigation brought or threatened against Lucent or any member of its Board of
Directors in respect of this Agreement), or (iv) resulting from the announcement
of the transactions contemplated hereby (including loss of personnel, customers
or suppliers or the delay or cancellation of orders or products)) on Lucent, and
the Company shall have received a certificate signed on behalf of Lucent by an
authorized signatory thereof.

(e) Employment Arrangements. Lucent shall have delivered to each of
Ashley Stephenson, Robert A. Steinkrauss and Jeremy Greene letters relating to
their employment with the Company following the Closing Date substantially in
form and substance to the letters previously delivered by Lucent to the Company.

7. Survival of Representation and Warranties.

7.1 Representations and Warranties. The representations and
warranties of the Company contained in this Agreement (including the schedules
to the Agreement which are hereby incorporated by reference) or in any
instrument delivered pursuant to this Agreement shall survive for 12 months
following the Effective Time. This Section shall not limit any claim for fraud
or any covenant or agreement by the parties which contemplates performance after
the Effective Time.

8. Indemnification.

8.1 Escrow Shares. As soon as practicable after the Closing Date, a
total of 291,620 shares of Lucent Common Stock (the "Escrow Fund") shall be
deposited with The Bank of New York (or another institution selected by Lucent),
as escrow agent (the "Escrow Agent"), such deposit to be governed by the terms
set forth herein and in the Escrow Agreement. The Escrow Fund shall be the sole
and exclusive source available to compensate Lucent for the indemnification
obligations of each holder of Company Capital Stock (each, a "Stockholder" and
collectively, the "Stockholders") under Section 8.2 except that Lucent may elect
not to have recourse to the Escrow Fund for any claim of fraud.

8.2 General Indemnification. (a) Subject to the limitations set forth
in this Section 8, the Stockholders will indemnify and hold harmless Lucent and
each Person, if any, who controls, may control or is controlled by Lucent within
the meaning of the Securities Act and their

A-42
<PAGE> 180

respective officers, directors, employees, agents and advisors (each such
indemnitee being referred to herein as an "Indemnified Person"), from and
against any and all losses, costs, damages, liabilities, obligations,
impositions, inspections, assessments, fines, deficiencies and expenses arising
from claims, demands, actions, causes of action, including, without limitation,
reasonable legal fees (collectively, "Damages"), arising out of (i) any
inaccuracy in any representation or warranty made by the Company in this
Agreement or in any exhibit or schedule to this Agreement, and (ii) any breach
or default by the Company of any of the covenants or agreements given or made by
any of them in this Agreement or any exhibit or schedule to this Agreement.

(b) Lucent and the Stockholders each acknowledge that such Damages,
if any, would relate to unresolved contingencies existing at the Closing Date,
which if resolved at the Closing Date would have led to a reduction in the total
consideration that Lucent would have agreed to pay in connection with the
transactions contemplated hereby.

8.3 Damage Threshold; Damages Cap. (a) Notwithstanding anything to
the contrary contained in this Agreement, solely with respect to any claim by
Lucent for indemnification under Section 8.2(a)(i), Lucent may not seek
indemnification with respect to any claim for Damages until the aggregate amount
of all Damages for which Lucent is seeking indemnification under Section
8.2(a)(i) equals or exceeds $750,000 (the "Threshold"), whereupon Lucent shall
be entitled to seek indemnification with respect to all such Damages that exceed
the Threshold.

(b) In determining the amount of any Damage for which Lucent may seek
indemnification under Section 8.2(a)(i) or Section 8.2(a)(ii), any materiality
standard contained in a representation, warranty or covenant shall be
disregarded.

(c) The liability of the Stockholders to Lucent for all Damages for
which indemnification is provided hereunder shall not exceed the Escrow Fund.

8.4 Escrow Period; Release of Escrow Fund. The Escrow Fund shall
commence on the date hereof and terminate on the first anniversary of the
Closing Date (the "Escrow Period"). On such first anniversary, all shares of
Lucent Common Stock then remaining in the Escrow Fund shall be released;
provided that the amount of any claim made pursuant to Section 8.5 during the
Escrow Period shall be withheld and remain in the Escrow Fund pending resolution
of such claim; provided further that the number of shares of Lucent Common Stock
in the Escrow Fund which is necessary to satisfy any unsatisfied claims
specified in any Lucent Notice theretofore delivered to the Escrow Agent prior
to the termination of the Escrow Period with respect to facts and circumstances
existing prior to the expiration of the Escrow Period, shall remain in the
Escrow Fund until such claims have been resolved. Any portion of the Escrow Fund
for which there is no claim pursuant to this Section 8 shall be promptly
distributed by the Escrow Agent to the Stockholders' Representative for
distribution by the Escrow Agent to the Stockholders in accordance with each
Stockholder's percentage of the Escrow Fund as set forth in the Escrow
Agreement.

A-43
<PAGE> 181

8.5 Claims Upon Escrow Fund. Subject to the provisions of this
Section 8, Lucent shall make claims upon the Escrow Fund by delivering to the
Escrow Agent on or before the last day of the Escrow Period of a notice signed
by an authorized representative of Lucent (a "Lucent Notice") specifying in
reasonable detail the individual items of Damages for which indemnification is
being sought, the date each such item was paid, or properly accrued or arose and
the nature of the misrepresentation, breach of warranty or claim to which such
item is related. Lucent shall, concurrently with the sending of any Lucent
Notice to the Escrow Agent, provide a copy of such Lucent Notice to the
Stockholders' Representative. Within 20 days after the receipt of any Lucent
Notice, the Stockholders' Representative, on behalf of the Stockholders, shall
deliver a notice to Lucent and the Escrow Agent (a "Stockholders' Representative
Notice") certifying that the Stockholders either agree with the Lucent Notice or
object to the Lucent Notice. If the Stockholders agree with the Lucent Notice,
the Escrow Agent shall deliver to Lucent out of the Escrow Fund, as promptly as
practicable after receipt of a Stockholders' Representative Notice, the number
of Shares held in the Escrow Fund having a fair market value on the Closing Date
equal to such Damages. If the Stockholders' Representative objects to the Lucent
Notice within the 20-day period after receipt of the Lucent Notice, Lucent and
the Stockholders' Representative shall resolve such dispute in accordance with
Section 8.6. If the Stockholders' Representative fails to deliver a
Stockholders' Representative Notice within such 20-day period, the Stockholders'
Representative shall be deemed to have consented to the Lucent Notice and given
a Stockholders' Representative Notice to Lucent and the Escrow Agent, and the
Escrow Agent shall deliver to Lucent out of the Escrow Fund, as promptly as
practicable after such 20-day period, the number of Shares held in the Escrow
Fund having a fair market value on the Closing Date equal to such Damages.

8.6 Objections to Claims. (a) If the Stockholders' Representative
shall object to a Lucent Notice within the twenty-day period after receipt
thereof, then Lucent and the Stockholders' Representative shall use their good
faith efforts to resolve such dispute. If Lucent and the Stockholders'
Representative resolve such dispute, the parties shall deliver a written notice
to the Escrow Agent directing the delivery of the Escrow Fund based upon such
resolution.

(b) If Lucent and the Stockholders' Representative are unable to
resolve such dispute within 30 days after the Stockholders' Representative
objects to such Lucent Notice, either Lucent or the Stockholders' Representative
may, by written notice to the other and the Escrow Agent, demand arbitration of
such dispute. Any such arbitration shall be conducted by JAMS/Endispute, Inc. or
such other alternative dispute service ("Arbitration Service") as shall be
reasonably acceptable to Lucent and the Stockholders' Representative. The
Arbitration Service shall select one arbitrator reasonably acceptable to Lucent
and the Stockholders' Representative who shall be expert in the area of
development and production of data networking products. The decision by the
arbitrator shall be binding and conclusive and, notwithstanding any other
provisions of this Section 8, the Escrow Agent shall be entitled to act in
accordance with such decision and make delivery of the Escrow Fund in accordance
therewith.

(c) The arbitration shall be held in New York, New York. The costs of
any such arbitration shall be borne one-half for the account of Lucent and
one-half by the Stockholders (out of the Escrow Fund to the extent available).
Judgment upon any award rendered by the arbitrator may be entered in any court
of competent jurisdiction.

A-44
<PAGE> 182

8.7 Third-Party Claims. In the event Lucent becomes aware of a
third-party claim which Lucent believes may result in a demand pursuant to this
Section 8, Lucent shall promptly notify the Stockholders' Representative of such
claim, and the Stockholders' Representative shall be entitled, at the
Stockholders' expense (out of the Escrow Fund to the extent available ), to
participate in any defense of such claim; provided that Lucent shall control
such defense, and shall have the right with the consent of the Stockholders'
Representative (which consent shall not be unreasonably withheld) to settle any
such claim (it being understood that no such consent of the Stockholders'
Representative shall be required where the third-party claim, which Lucent
proposes to settle involves the business reputation of Lucent or its Affiliates
in any material adverse respect, or the possible criminal liability of Lucent or
its Affiliates or any of their respective officers, directors or employees). In
the event that the Stockholders' Representative has consented to any such
settlement, the Stockholders shall have no power or authority to object under
any provision of this Section 8 to the amount of any claim by Lucent for
indemnity with respect to such settlement.

8.8 Stockholders' Representative. (a) Robert A. Steinkrauss is hereby
appointed as the representative (the "Stockholders' Representative") for and on
behalf of the Stockholders to take all actions necessary or appropriate in the
judgment of the Stockholders' Representative for the accomplishment of the terms
of this Agreement. The holders of a majority in interest of the shares of Lucent
Common Stock held in the Escrow Fund may replace the Stockholders'
Representative upon not less than 10 days' prior written notice to Lucent. No
bond shall be required of the Stockholders' Representative and the Stockholders'
Representative shall receive no compensation for his services. Notices of
communications to or from the Stockholders' Representative shall constitute
notice to or from each of the Stockholders. If Robert A. Steinkrauss dies or is
otherwise no longer able or willing to serve as the Stockholders'
Representative, a new Stockholders' Representative shall be chosen by the
Stockholders holding a majority of the shares of Lucent Common Stock issued in
connection with the Merger.

(b) The Stockholders' Representative shall not be liable for any act
done or omitted in such capacity while acting in good faith and in the exercise
of reasonable judgment, and any act done or omitted pursuant to the advise of
counsel shall be conclusive evidence of such good faith. The Stockholders shall
severally indemnify the Stockholders' Representative and hold him harmless
against any loss, liability or expense (including any expenses of legal counsel
retained by the Stockholders' Representative) incurred without gross negligence
or bad faith on the part of the Stockholders' Representative and arising out of
or in connection with the acceptance or administration of his duties hereunder.

(c) Any decision, act, consent or instruction of the Stockholders'
Representative shall constitute a decision of all and shall be final, binding
and conclusive upon every Stockholder and the Escrow Agent and Lucent may rely
upon any decision, act, consent or instruction of each and every Stockholder.
The Escrow Agent and Lucent are hereby relieved from any liability to any person
for acts done by them in accordance with such decision, act, consent or
instruction of the Stockholders' Representative.

A-45
<PAGE> 183

9. Brokers' and Finders' Fees.

9.1 Company. The Company represents and warrants to Acquisition and
Lucent that, except as set forth in Schedule 9.1, no broker, investment banker
or financial advisor is entitled to receive a brokerage fee, financing
commission or other commission from the Company in respect of the execution of
this Agreement or the consummation of the transactions contemplated hereby. The
Company agrees that if the transactions contemplated by this Agreement are not
consummated (other than as a result of a breach or default by Lucent or
Acquisition), it shall indemnify and hold Acquisition and Lucent harmless
against any and all claims, losses, liabilities, costs or expenses which may be
asserted against them as a result of the Company's or any of its Affiliates'
dealings, arrangements or agreements with any such Person.

9.2 Acquisition and Lucent Acquisition and Lucent represent and
warrant to the Company that no broker, investment banker or financial advisor is
entitled to receive any brokerage fee, financing commission or other commission
from Lucent in respect of the execution of this Agreement or the consummation of
the transactions contemplated hereby. Acquisition and Lucent agree that if the
transactions contemplated hereby are not consummated (other than as a result of
a breach or default by the Company), they shall jointly and severally indemnify
and hold the Company harmless against any and all claims, losses, liabilities,
costs or expenses which may be asserted against them, as a result of
Acquisition's or Lucent's or any of their respective Affiliates' dealings,
arrangements or agreements with any such Person.

10. Expenses. Lucent and the Company shall each pay its own expenses
incidental to the preparation of this Agreement, the carrying out of the
provisions of this Agreement and the consummation of the transactions
contemplated hereby, whether or not the Merger is consummated.

11. Press Releases. Except as required by law or Lucent's listing
agreement with the New York Stock Exchange, Lucent, Acquisition and the Company
shall not issue any press release or otherwise make public any information with
respect to this Agreement nor the transactions contemplated hereby, prior to the
Closing, without the prior written consent of the other parties to this
Agreement.

12. Contents of Agreement; Parties in Interest; etc. This Agreement and
the agreements, schedules and exhibits referred to or contemplated herein and
the letter agreement dated January 21, 1999 concerning confidentiality (the
"Confidentiality Agreement") set forth the entire understanding of the parties
hereto with respect to the transactions contemplated hereby, and, except as set
forth in this Agreement, such other agreements and the Exhibits hereto and the
Confidentiality Agreement, there are no representations or warranties, express
or implied, made by any party to this Agreement with respect to the subject
matter of this Agreement and the Confidentiality Agreement. Except for the
matters set forth in the Confidentiality Agreement, any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement and the
agreements referred to or contemplated herein. All statements contained in
schedules, exhibits, certificates and other instruments attached hereto shall be
deemed representations and warranties (or exceptions thereto) by the Company,
Acquisition or Lucent, as the case may be.

A-46
<PAGE> 184

13. Assignment and Binding Effect. This Agreement may not be assigned by
either party hereto without the prior written consent of the other parties;
provided, that Acquisition may assign its rights and obligations under this
Agreement to any directly or indirectly wholly-owned Subsidiary of Lucent, upon
written notice to the Company if the assignee shall assume the obligations of
Acquisition hereunder and Lucent shall remain liable for its obligations
hereunder. All the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.

14. Termination. This Agreement may be terminated, and the Merger may be
abandoned at any time prior to the Effective Time whether before or after the
approval and adoption of this Agreement and the transactions contemplated hereby
by the stockholders of the Company or the stockholders of Acquisition:

(a) by the mutual agreement of the Boards of Directors of Acquisition
and the Company and the appropriate corporate authority of Lucent;

(b) by Lucent, Acquisition or the Company if (i) the Effective Time
shall not have occurred by December 31, 1999; provided that the right to
terminate this Agreement under this Section 14(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date; or (ii) any court of competent jurisdiction in the United
States or other United States governmental authority shall have issued an order,
decree, ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and nonappealable;

(c) by the Company, in the event Lucent or Acquisition materially
breaches its obligations under this Agreement, unless such breach is cured
within 15 days after notice to Lucent by the Company; or

(d) by Lucent or Acquisition, in the event the Company materially
breaches its obligations under this Agreement unless such breach is cured within
15 days after notice by Lucent or Acquisition.

15. Definitions. As used in this Agreement the terms set forth below shall
have the following meanings:

(a) "Affiliate" of a Person shall mean any other Person who (i)
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, such Person or (ii) owns more
than 7.5% of the capital stock or equity interest in such Person. "Control"
means the possession of the power, directly or indirectly, to direct or cause
the direction of the management and policies of a Person whether through the
ownership of voting securities, by contract or otherwise.

(b) "Benefit Plan" shall mean any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical or other

A-47

<PAGE> 185

material plan, arrangement or understanding (whether or not legally binding)
providing material benefits to any current or former employee, officer or
director of the Company or any Subsidiary.

(c) "Best Knowledge" in respect of (i) any representation and
warranty of the Company set forth in this Agreement (other than Section 3.14)
shall mean the actual and constructive knowledge of Ashley Stephenson, Robert A.
Steinkrauss, Martin Meyer and Jeremy Greene to the extent such knowledge would
have been obtained by due inquiry of the officers and directors of the Company
and employees charged with responsibility for the particular matter which is the
subject of such representation or warranty and (ii) the representations and
warranties of the Company set forth in Section 3.14 shall mean the actual and
constructive knowledge (to the extent such knowledge would have been obtained by
the reasonable exercise of due diligence in the ordinary course of business) of
the Designated Group; provided, that with respect to Patents, such term shall
only mean the actual knowledge of the Designated Group.

(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.

(e) "Designated Group" shall mean Ashley Stephenson, Robert A.
Steinkrauss, Martin Meyer, Jeremy Greene, Scott Barvick and Bill Lippitt.

(f) "Environmental Laws" shall mean all applicable federal, state,
local or foreign laws, rules and regulations, orders, decrees, judgments,
permits, filings and licenses relating (i) to protection and clean-up of the
environment and activities or conditions related thereto, including those
relating to the generation, handling, disposal, transportation or release of
Hazardous Substances and (ii) the health or safety of employees in the workplace
environment, all as amended from time to time, and shall also include any common
law theory based on nuisance, trespass, negligence or other tortious conduct.

(g) "Exchange Agent" shall mean a bank or trust company designated as
the exchange agent by Lucent (which designation shall be reasonably acceptable
to the Company).

(h) "Final Determination" shall mean (i) a decision of the United
States Tax Court, or a decision, judgment, decree or other order by another
court of competent jurisdiction, which has become final and is either no longer
subject to appeal or for which a determination not to appeal has been made; (ii)
a closing agreement made under Section 7121 of the Code or any comparable
foreign, state, local or municipal Tax statute; (iii) any disallowance of a
claim for refund or credit in respect of an overpayment of Tax unless a suit
related thereto is filed on a timely basis; (iv) any final disposition by reason
of the expiration of the applicable statute of limitations; or (v) the actual
payment by the Company of Taxes.

(i) "GAAP" shall mean United States generally accepted accounting
principles.

(j) "Hazardous Substances" shall mean any and all hazardous and toxic
substances, wastes or materials, any pollutants, contaminants, or dangerous
materials (including, but not limited to, polychlorinated biphenyls, PCBs,
friable asbestos, volatile and semi-volatile organic compounds, oil, petroleum
products and fractions, and any materials which include

A-48
<PAGE> 186

hazardous constituents or become hazardous, toxic or dangerous when their
composition or state is changed), or any other similar substances or materials
which are included under or regulated by any Environmental Laws.

(k) "Indebtedness" shall mean as at any date of determination, the
sum of the following items of the Company and its Subsidiaries, without
duplication: (i) obligations created, issued or incurred for borrowed money,
including all fees and obligations thereunder (including, without limitation,
any prepayment or termination fees arising or which will arise out of the
prepayment of such Indebtedness prior to its maturity and termination), (ii)
obligations to pay the deferred purchase price or acquisition price of property
or services, other than trade or accounts payable arising, and accrued expenses
incurred, in the ordinary course of business consistent with past practice,
(iii) the face amount of all letters of credit issued for the account of the
Company or its Subsidiaries and all drafts thereunder, (iv) capital lease
obligations, if any, and (v) any obligation guaranteeing any Indebtedness or
other obligations of any other Person (including any obligations under any keep
well or support agreements).

(l) "Liens" shall mean any mortgage, pledge, lien, security interest,
conditional or installment sale agreement, encumbrance, charge or other claims
of third parties of any kind.

(m) "Material Adverse Effect" on a Person shall mean (unless
otherwise specified) any condition or event that may: (a) have a material
adverse effect on the assets, business, financial condition or operations of
such Person and its Subsidiaries, taken as a whole; (b) materially impair the
ability of the such Person to perform its obligations under this Agreement; or
(c) prevent or delay the consummation of the transactions contemplated under
this Agreement.

(n) "Permitted Liens" shall mean (a) Liens for taxes, assessments, or
similar charges, incurred in the ordinary course of business that are not yet
due and payable or are being contested in good faith; (b) pledges or deposits
made in the ordinary course of business; (c) Liens of mechanics, materialmen,
warehousemen or other like Liens securing obligations incurred in the ordinary
course of business that are not yet due and payable or are being contested in
good faith; and (d) similar Liens and encumbrances which are incurred in the
ordinary course of business and which do not in the aggregate materially detract
from the value of such assets or properties or materially impair the use thereof
in the operation of such business.

(o) "Person" shall mean any individual, corporation, partnership,
limited partnership, limited liability company, trust, association or entity or
government agency or authority.

(p) "reasonable best efforts" shall mean prompt, substantial and
persistent efforts as a prudent Person desirous of achieving a result would use
in similar circumstances; provided that the Company, Lucent or Acquisition, as
applicable, shall be required to expend only such resources as are commercially
reasonable in the applicable circumstances.

A-49
<PAGE> 187

(q) "Subsidiary" of a Person shall mean any corporation, partnership,
joint venture or other entity in which such Person (a) owns, directly or
indirectly, 50% or more of the outstanding voting securities or equity interests
or (b) is a general partner.

(r) "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
shall mean any federal, state, local, municipal or foreign net income, gross
income, gross receipts, windfall profit, severance, property, production, sales,
use, license, excise, franchise, employment, payroll, withholding, alternative
or add-on minimum, ad valorem, value-added, transfer, stamp, or environmental
tax, or any other tax, custom, duty, tariff levy, import, governmental fee or
other like assessment or charge, together with any interest or penalty, addition
to tax or additional amount imposed by any governmental authority.

(s) "Tax Return" shall mean any return, report or similar statement
required to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.

16. Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by facsimile transmission (promptly
followed by a hard-copy delivered in accordance with this Section 16) or by
registered or certified mail (return receipt requested), with postage and
registration or certification fees thereon prepaid, addressed to the party at
its address set forth below:

If to Acquisition or Lucent:

Lucent Technologies Inc.
c/o Data Networking Systems
211 Mount Airy Road
Basking Ridge, New Jersey 07920-2332
Att: President - Data Networking

with copies to:

Lucent Technologies Inc.
c/o Data Networking Systems
211 Mount Airy Road
Basking Ridge, New Jersey 07920-2332
Att: General Counsel - Data Networking

A-50
<PAGE> 188

If to the Company:

Xedia Corporation
50 Nagog Park
Acton, MA 01720
Attn: President

with a copy to:

Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attn: Paul P. Brountas, Esq.

or to such other address or Person as any party may have specified in a notice
duly given to the other party as provided herein. Such notice, request, demand,
waiver, consent, approval or other communication will be deemed to have been
given as of the date so delivered, telegraphed or mailed.

17. Amendment. This Agreement may be amended, modified or supplemented at
any time prior to the Effective Time by the respective Boards of Directors of
the parties hereto notwithstanding the approval hereof by the stockholders of
the Company or the stockholders of Acquisition, as applicable, except as
provided in Section 251(d) of the DGCL. Any amendment, modification or revision
of this Agreement and any waiver of compliance or consent with respect hereto
shall be effective only if in a written instrument executed by the parties
hereto.

18. Governing Law. This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the State of New York as applied to
contracts made and fully performed in such state, except insofar as the DGCL
shall be mandatorily applicable to the Merger and the rights of the stockholders
of the Company in connection therewith.

19. No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto, and their respective successors and assigns, and they shall not be
construed as conferring, and are not intended to confer, any rights on any other
Person.

20. Severability. If any term or other provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other terms and provisions of the Agreement shall
remain in full force and effect. Upon such determination, the parties hereto
shall negotiate in good faith to modify this Agreement so as to give effect to
the original intent of the parties to the fullest extent permitted by applicable
law.

21. Section Headings. All section headings are for convenience only and
shall in no way modify or restrict any of the terms or provisions hereof.

A-51
<PAGE> 189

22. Schedules and Exhibits. All Schedules and Exhibits referred to herein
are intended to be and hereby are specifically made a part of this Agreement.

23. Extensions. At any time prior to the Effective Time, any party may by
corporate action, extend the time for compliance by or waive performance of any
representation, warranty, condition or obligation of any other party.

24. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and the Company,
Acquisition and Lucent may become a party hereto by executing a counterpart
hereof. This Agreement and any counterpart so executed shall be deemed to be one
and the same instrument.

[Remainder of page intentionally left blank.]

A-52
<PAGE> 190

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Agreement as of the date first above written.

LUCENT TECHNOLOGIES INC.

By: /s/ HARRY J. CARR
---------------------------------
Name: Harry J. Carr
Title: Vice President

XYLOPHONE ACQUISITION INC.

By: /s/ HARRY J. CARR
---------------------------------
Name: Harry J. Carr
Title: Vice President

XEDIA CORPORATION

By: /s/ R. ASHLEY STEPHENSON
---------------------------------
Name: R. Ashley Stephenson
Title: Chairman

A-53
<PAGE> 191

GLOSSARY OF DEFINED TERMS

<TABLE>
<CAPTION>
Defined Term Location of Definition
- ------------ ----------------------

<S> <C>
Acquisition.................................................................... Preamble
Acquisition Common Stock ...................................................... Recitals
Acquisition Proposal........................................................... Section 5.4
Adjusted Option................................................................ Section 5.6
Affiliate...................................................................... Section 15(a)
Agreement...................................................................... Preamble
Authorizations................................................................. Section 3.13(b)
Balance Sheet.................................................................. Section 3.5(a)
Benefit Plan................................................................... Section 15(b)
Best Knowledge................................................................. Section 15(c)
Certificate of Merger.......................................................... Section 1.1(b)
Certificates................................................................... Section 1.9(b)
Closing........................................................................ Section 1.1(b)
Closing Date................................................................... Section 1.1(b)
Code........................................................................... Section 15(d)
Common Shares.................................................................. Section 3.2(a)
Common Stock Exchange Ratio.................................................... Section 1.5(c)
Common Stock Warrant Exchange Ratio............................................ Section 5.6(f)
Commonly Controlled Entity..................................................... Section 3.16(a)
Company........................................................................ Preamble
Company Capital Stock.......................................................... Recitals
Company Common Stock........................................................... Recitals
Company Preferred Stock........................................................ Recitals
Company Stock Options.......................................................... Section 5.6(a)
Company Stock Plan............................................................. Section 5.6(a)
Confidentiality Agreement...................................................... Section 12
DGCL........................................................................... Recitals
Designated Group............................................................... Section 15(c)
Effective Time................................................................. Section 1.1(b)
Environmental Laws............................................................. Section 15(f)
ERISA.......................................................................... Section 3.16(a)
Exchange Act................................................................... Section 4.3(c)
Exchange Agent................................................................. Section 15(g)
Exchange Fund.................................................................. Section 1.9
Exchange Ratio................................................................. Section 1.5(c)
Executive Employees............................................................ Section 3.17(a)
Final Determination............................................................ Section 15(h)
Financial Statements........................................................... Section 3.5(a)
GAAP........................................................................... Section 15(i)
Hazardous Substances........................................................... Section 15(j)
Immaterial Authorizations...................................................... Section 3.13(b)
Indebtedness................................................................... Section 15(k)
</TABLE>

A-i
<PAGE> 192

<TABLE>
<S> <C>
Intellectual Property Rights................................................... Section 3.14(a)
IRS............................................................................ Section 3.15(c)
Laws........................................................................... Section 3.13(a)
Liens.......................................................................... Section 15(l)
Lucent......................................................................... Preamble
Lucent Common Stock............................................................ Section 4.2
Lucent Authorized Preferred Stock.............................................. Section 4.2
Lucent SEC Documents........................................................... Section 4.5(a)
Material Adverse Effect........................................................ Section 15(m)
Merger......................................................................... Recitals
NYSE........................................................................... Section 1.8
Outstanding Common Shares...................................................... Section 3.2(a)
Pension Plans.................................................................. Section 3.16(a)
Permitted Liens................................................................ Section 15(n)
Person......................................................................... Section 15(o)
Plans.......................................................................... Section 3.16(a)
Preferred Shares............................................................... Section 3.2(a)
Reasonable Best Efforts........................................................ Section 15(p)
Registration Statement......................................................... Section 3.33
Reserved Common Shares......................................................... Section 3.2(a)
Right.......................................................................... Section 1.5(c)
SEC............................................................................ Section 3.32
Securities Act................................................................. Section 3.33
Series A Exchange Ratio........................................................ Section 1.5(c)
Series A Preferred Stock....................................................... Recitals
Series B Exchange Ratio........................................................ Section 1.5(c)
Series B Preferred Stock....................................................... Recitals
Series C Exchange Ratio........................................................ Section 1.5(c)
Series C Preferred Stock....................................................... Recitals
Series D Exchange Ratio........................................................ Section 1.5(c)
Series D Preferred Stock....................................................... Recitals
Series E Exchange Ratio........................................................ Section 1.5(c)
Series E Preferred Stock....................................................... Recitals
Series E Warrant Exchange Ratio................................................ Section 5.6(f)
Shares......................................................................... Section 3.2(a)
Stockholder.................................................................... Section 8.1
Stockholders' Representative................................................... Section 8.8
Stockholders' Representative Notice............................................ Section 8.5
Subsidiary..................................................................... Section 15(q)
Supplemental Financial Information............................................. Section 5.3(c)
Surviving Corporation.......................................................... Section 1.1(a)
Tax............................................................................ Section 15(r)
Tax Return..................................................................... Section 15(s)
Warrant........................................................................ Section 5.6(f)
Warrant Exchange Ratios........................................................ Section 5.6(f)
Welfare Plans.................................................................. Section 3.16(a)
</TABLE>

A-ii
<PAGE> 193

ANNEX B

PROPOSED AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF XEDIA

The following is the text of Section 2(c) of Part B of Article FOURTH of the
certificate of incorporation, as proposed to be amended:

B-1
<PAGE> 194

ANNEX C

SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW

Section 262. Appraisal rights

(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:

(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock,
which stock, or depository receipts in respect thereof, at the record
date fixed to determine the stockholders entitled to receive notice of
and to vote at the meeting of stockholders to act upon the agreement
of merger or consolidation, were either (i) listed on a national
securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or (ii) held of record by more than 2,000
holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation
surviving a merger if the merger did not require for its approval the
vote of the stockholders of the surviving corporation as provided in
subsection (f) of Section 251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any
class or series of stock of a constituent corporation if the holders
thereof are required by the terms of an agreement of merger or
consolidation pursuant to Sections 251, 252, 254, 257, 258, 263 and
264 of this title to accept for such stock anything except:

C-1
<PAGE> 195

a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;

b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;

c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or

d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.

(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this title
is not owned by the parent corporation immediately prior to the
merger, appraisal rights shall be available for the shares of the
subsidiary Delaware corporation.

(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior
to the meeting, shall notify each of its stockholders who was such on
the record date for such meeting with respect to shares for which
appraisal rights are available pursuant to subsection (b) or (c)
hereof that appraisal rights are available for any or all of the
shares of the constituent corporations, and shall include in such
notice a copy of this section. Each stockholder electing to demand the
appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after

C-2
<PAGE> 196

the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has
not voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become effective; or

(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten
days thereafter, shall notify each of the holders of any class or
series of stock of such constituent corporation who are entitled to
appraisal rights of the approval of the merger or consolidation and
that appraisal rights are available for any or all shares of such
class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of
stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date
of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder's shares. Such
demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger
or consolidation, either (i) each such constituent corporation shall
send a second notice before the effective date of the merger or
consolidation notifying each of the holders of any class or series of
stock of such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or (ii)
the surviving or resulting corporation shall send such a second notice
to all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20
days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal
rights and who has demanded appraisal of such holder's shares in
accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that
is required to give either notice that such notice has been given
shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix, in
advance, a record date that shall be not more than 10 days prior to
the date the notice is given, provided, that if the notice is given on
or after the effective date of the merger or consolidation, the record
date shall be such effective date. If no record date is fixed and the
notice is given prior to the effective date, the record date shall be
the close of business on the day next preceding the day on which the
notice is given.

(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any

C-3
<PAGE> 197

stockholder shall have the right to withdraw such stockholder's demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after such stockholder's written
request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.

(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.

(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.

(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this

C-4
<PAGE> 198

section and who has submitted such stockholder's certificates of stock to the
Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not entitled
to appraisal rights under this section.

(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.

(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.

(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.

(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.

C-5
<PAGE> 199
ANNEX D

OPINION OF MORGAN STANLEY & CO. INCORPORATED

August 12, 1999

Board of Directors
Xedia Corporation
50 Nagog Park
Acton, MA 01720

Members of the Board:

We understand that Xedia Corporation ("Xedia" or the "Company"), Lucent
Technologies Inc. ("Lucent") and Xylophone Acquisition Inc., a wholly-owned
subsidiary of Lucent ("Acquisition Sub"), have entered into an Agreement and
Plan of Merger, dated August 12, 1999 (the "Merger Agreement"), which provides,
among other things, for the merger (the "Merger") of Acquisition Sub with and
into Xedia. Pursuant to the Merger, Xedia will become a wholly owned subsidiary
of Lucent and each outstanding share of common stock, par value $0.005 per
share, of Xedia (the "Common Stock"), and each outstanding share of Series A,
Series B, Series C, Series D and Series E Convertible Preferred Stock, par value
$0.01 per share, of Xedia (collectively, "Preferred Stock" and together with the
Common Stock, the "Equity"), other than shares held in treasury or held by
Lucent or any affiliate of Lucent or as to which dissenters' rights have been
perfected, shall be converted into the right to receive a certain number of
shares of common stock, par value $0.01 per share, of Lucent (the "Lucent Common
Stock"), and the corresponding percentage right to purchase shares of junior
preferred stock, par value $1.00 per share, of Lucent, each as determined
pursuant to certain formulas set forth in the Merger Agreement (collectively,
the "Consideration"). The terms and conditions of the Merger, including any
escrow required for indemnification obligations, are more fully set forth in the
Merger Agreement.

You have asked for our opinion as to whether the Consideration to be received in
the aggregate by the holders of shares of the Equity pursuant to the Agreement
is fair from a financial point of view to such holders.

For purposes of the opinion set forth herein, we have:

(i) reviewed certain internal financial statements and other financial
and operating data concerning Xedia prepared by the management of
the Company;

(ii) reviewed certain financial projections prepared by the management of
the Company;

(iii) discussed the past and current operations and financial condition
and the prospects of the Company, including information relating to
certain strategic, financial and operational benefits anticipated
from the Merger, with senior executives of the Company;

D-1
<PAGE> 200
(iv) compared the financial performance of the Company with that of
certain comparable publicly-traded companies and their securities;

(v) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;

(vi) reviewed certain publicly-available financial statements and other
information of Lucent;

(vii) discussed the past and current operations and financial condition
and the prospects of Lucent with representatives of Lucent;

(viii) analyzed the pro forma impact of the Merger on Lucent's earnings
per share and other financial ratios;

(ix) reviewed the reported prices and trading activity for Lucent Common
Stock;

(x) discussed with representatives of Lucent certain publicly available
research analyst projections for Lucent;

(xi) compared the financial performance and prices and trading activity
of Lucent Common Stock with that of certain other comparable
publicly-traded companies and their securities;

(xii) participated in discussions and negotiations among representatives
of Xedia and Lucent and their financial and legal advisors;

(xiii) reviewed the Agreement and certain related documents; and

(xiv) performed such other analyses and considered such other factors as
we have deemed appropriate.

We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, including information
relating to certain strategic, financial and operational benefits anticipated
from the Merger, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performance of the Company. We have relied upon the assessment
by the management of Xedia and Lucent of their ability to retain key employees
of Xedia. We have also relied upon, without independent verification, the
assessment by the management of Xedia of the Company's technologies and
products, the timing and risks associated with the integration of Xedia with
Lucent and the validity of, and risks associated with, the Company's existing
and future products and technologies. As you are aware, Lucent did not make
available its forecasts of future financial performance. Instead, for purposes
of our analysis, we have relied with your consent on the estimates of certain
research analysts for Lucent. In addition, we have assumed that the Merger will
be consummated in accordance with the terms set forth in the Agreement,
including, among other things, that the Merger will be accounted for as a
"pooling-of-interests"

D-2
<PAGE> 201
business combination in accordance with U.S. Generally Accepted Accounting
Principles and the Merger will be treated as a tax-free reorganization and/or
exchange, each pursuant to the Internal Revenue Code of 1986. We have not made
any independent valuation or appraisal of the assets or liabilities of the
Company, nor have we been furnished with any such appraisals. We note that the
capital structure of the Company is comprised of the Common Stock and the Series
A, Series B, Series C, Series D and Series E Convertible Preferred Stock, and we
express no opinion as to the fairness of the Consideration to be received among
the various classes or series of stock. Our opinion is necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.

We have acted as financial advisor to the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financing services for Lucent and have received fees for the rendering of these
services.

It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that our opinion may be referenced or described in
any document required to be filed in connection with the Merger with the
Securities and Exchange Commission or to be sent to shareholders pursuant to the
Delaware General Corporation Law. In addition, this opinion does not in any
manner address the prices at which Lucent Common Stock will trade following the
consummation of the Merger and we express no opinion and make no recommendation
as to how the holders of Xedia Equity should vote at the stockholders' meeting
held in connection with the Merger.

Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Consideration to be received in the aggregate by the holders of
the shares of the Equity pursuant to the Agreement is fair from a financial
point of view to such holders.

Very truly yours,

MORGAN STANLEY & CO. INCORPORATED

By: /s/ James M. Head
--------------------------
James M. Head
Vice President

D-3
<PAGE> 202

ANNEX E

VOTING AGREEMENT

This Voting Agreement ("Agreement"), dated as of August 12, 1999, is made
by and among Lucent Technologies Inc. ("Lucent"), a Delaware corporation,
Xylophone Acquisition Inc., a Delaware corporation ("Acquisition"), and each of
the undersigned holders of shares of capital stock (each, a "Stockholder" and
collectively, the "Stockholders") of Xedia Corporation, a Delaware corporation
(the "Company").

PRELIMINARY STATEMENTS

Lucent has made an offer to purchase all the outstanding shares of capital
stock of the Company pursuant to which each such share shall be converted into
the right to receive the number of shares of common stock, par value $.01 per
share, of Lucent (including the corresponding percentage right to purchase
shares of junior preferred stock, par value $1.00 per share, pursuant to the
Rights Agreement dated as of April 4, 1996 between Lucent and First Chicago
Trust Company of New York, as Rights Agent) set forth in Schedule A attached
hereto (the "Lucent Offer").

A competing proposal to purchase all the outstanding shares of capital
stock of the Company has been made by a third party, a copy of which has
previously been provided to each Stockholder.

The Board of Directors of the Company has approved the terms of the Lucent
Offer and the Agreement and Plan of Merger dated as of the date hereof (as the
same may be amended from time to time, the "Merger Agreement") among the
Company, Lucent and Acquisition, providing for the merger of Acquisition with
and into the Company, with the Company being the surviving corporation (the
"Merger"), which Merger is subject to the approval of the holders of shares of
capital stock of the Company as provided in the Merger Agreement, Delaware
General Corporation Law, as amended, and the Company's Certificate of
Incorporation, as amended.

The Stockholders own (a) the shares of the Company common stock, par value
$.005 per share (the "Company Common Stock"), set forth opposite their
respective names on Exhibit A hereto; (b) the shares of the Company Series A
Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred
Stock"), set forth opposite their respective names on Exhibit B hereto; (c) the
shares of the Company Series B Convertible Preferred Stock, par value $.01 per
share (the "Series B Preferred Stock"), set forth opposite their respective
names on Exhibit C hereto; (d) the shares of the Company Series C Convertible
Preferred Stock, par value $.01 per share (the "Series C Preferred Stock"), set
forth opposite their respective names on Exhibit D hereto; (e) the shares of the
Company Series D Convertible Preferred Stock, par value $.01 per share (the
"Series D Preferred Stock"), set forth opposite their respective names on
Exhibit E hereto; and/or (f) the shares of the Company Series E Convertible
Preferred Stock, par value $.01 per share (the "Series E Preferred Stock"), set
forth opposite their respective names on Exhibit F hereto (the Company Common
Stock, Series A Preferred Stock, Series B Preferred Stock, Series

E-1

<PAGE> 203

C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock are
collectively referred to herein as the "Company Capital Stock"). As used herein,
the term "Shares" includes all shares of such Company Common Stock, Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock as to which each Stockholder (at
any time prior to the termination of this Agreement) is the beneficial owner or
is otherwise able to direct the voting thereof and all securities issued or
exchanges with respect to any such Shares upon any reclassification,
recapitalization, reorganization, merger, consolidation, spin-off, stock split,
combination, stock or other dividend or any other change in the Company's
capital structure.

To induce Lucent and Acquisition to enter into the Merger Agreement, each
Stockholder has agreed, upon the terms and subject to the conditions set forth
herein, in his capacity as a stockholder of the Company, to vote his or her
Shares in favor of the Merger Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, the parties to this
Agreement agree as follows:

1. Stockholders' Representations and Warranties. Each Stockholder, as to
itself only, represents and warrants to Lucent and Acquisition that:

(a) such Stockholder owns the Shares set forth on Exhibits A, B, C,
D, E and/or F hereto, as the case may be, free and clear of any mortgage,
pledge, lien, security interest, claim, restriction on voting or otherwise or
other encumbrance.

(b) such Stockholder has the right to vote such Shares free of any
mortgage, pledge, lien, security interest, claim, restriction on voting or
otherwise or other encumbrance (other than any general fiduciary obligation
imposed by law).

2. No Voting Trusts. Each Stockholder hereby revokes any and all proxies
and voting instructions with respect to the Shares previously given by such
Stockholder and such Stockholder agrees that it will not grant or give any other
proxies or voting instructions with respect to the voting of the Shares, enter
into any voting trust or other arrangement or agreement with respect to the
voting of the Shares (and if given or executed, such proxies, voting
instructions, voting trust or other arrangement or agreement shall not be
effective) in matters which directly relate to the Merger.

3. Agreements with Respect to the Shares.

(a) Each Stockholder agrees during the term of this Agreement:

(i) to vote the Shares, to the extent entitled to vote, (x) in
favor of the approval of the Merger Agreement and the Merger, at every meeting
of the stockholders of the Company at which such matters are considered and at
every adjournment thereof and (y) with respect to all other proposals submitted
to the stockholders of the Company which directly relate to the Merger, in such
manner as Acquisition or Lucent may direct; provided, that this clause (y)

E-2
<PAGE> 204

shall not be construed to require any action which would contravene paragraph
47c of APB 16 and its relevant interpretations; and

(ii) not to solicit, encourage or recommend to other stockholders
of the Company that (w) they vote their shares of Company Capital Stock or any
such other securities in any contrary manner, (x) they not vote their shares of
Company Capital Stock at all, (y) they tender, exchange or otherwise dispose of
their shares of Company Capital Stock pursuant to a Competing Transaction, as
hereinafter defined, or (z) they attempt to exercise any statutory appraisal or
other similar rights they may have; provided, that this clause (ii) shall not be
construed to require any action which would contravene paragraph 47c of APB 16
and its relevant interpretations.

(b) Except with the prior written consent of Lucent or Acquisition,
during the term of this Agreement, each Stockholder agrees that such Stockholder
will not, and shall use its reasonable best efforts not to permit any employee,
attorney, accountant, investment banker or other agent or representative of such
Stockholder to initiate, solicit, negotiate or encourage any Competing
Transaction.

(c) For purposes of this Agreement, a "Competing Transaction" shall
mean a transaction of any kind (including, without limitation, a merger,
consolidation, share exchange, reclassification, reorganization,
recapitalization, sale or encumbrance of substantially all the assets of the
Company outside the ordinary course of business, or sale or exchange by
stockholders of the Company of all or substantially all the shares of Company
Capital Stock) proposed by any person(s) in lieu of or in opposition to the
Merger Agreement and the Merger.

4. Proxies. In furtherance of the foregoing, each Stockholder is granting
to Richard Godfrey, a Vice President of Acquisition, Jean Rankin, Secretary of
Acquisition and/or Janet O'Rourke, an Assistant Secretary of Acquisition, or to
his or her designee(s), irrevocable proxies and powers of attorney (which may be
in the form annexed hereto or such other form consistent with the terms hereof
and thereof as Lucent or Acquisition may specify) to vote the Shares, to the
extent such Shares are entitled to vote, and hereby specifically agrees not to
revoke such proxies granted under any circumstances:

(a) at any and all meetings of stockholders of the Company,
notice of which meetings are given prior to the due and proper
termination of this Agreement, with respect to matters presented to
the Company's stockholders for vote which directly relate to the
Merger or the Merger Agreement or the approval of either thereof; or

(b) with respect to actions to be taken by written consent of the
stockholders of the Company which directly relate to or affect any of
the foregoing, and which consent is solicited prior to the due and
proper termination of this Agreement.

5. Limitation on Sales. During the term of this Agreement, except
pursuant to the Merger, each Stockholder agrees not to sell, assign, transfer,
loan, tender, pledge, hypothecate,

E-3
<PAGE> 205

exchange, encumber or otherwise dispose of, or issue an option or call with
respect to, any of the Shares, or impair such Stockholder's Shares; provided,
that any Stockholder may sell or otherwise dispose of any of his or her Shares
provided that the transferee of such Shares agrees to be bound by and subject to
the terms and conditions of this Agreement.

6. Specific Performance. Each Stockholder acknowledges that it will be
impossible to measure in money the damage to Lucent or Acquisition if the
Stockholder fails to comply with the obligations imposed by this Agreement, and
that, in the event of any such failure, neither Lucent nor Acquisition will have
an adequate remedy at law or in damages. Accordingly, each Stockholder agrees
that injunctive relief or any other equitable remedy, in addition to any
remedies at law or damages, is the appropriate remedy for any such failure and
will not oppose the granting of any such remedy on the basis that Lucent or
Acquisition has an adequate remedy at law. Each Stockholder agrees not to seek,
and agrees to waive any requirement for, the securing or posting of a bond in
connection with Lucent or Acquisition seeking or obtaining such equitable
relief.

7. Reasonable Efforts. Each Stockholder will use all reasonable efforts
to cause to be satisfied the conditions to the obligations of the Company to
effect the Closing under the Merger Agreement.

8. Publicity. Each Stockholder agrees that, from the date hereof through
the Closing Date, such Stockholder shall not issue any public release or
announcement concerning the transactions contemplated by this Agreement and the
Merger Agreement without the prior consent of Lucent, except as such release or
announcement may, in the opinion of such Stockholder's counsel, be required by
applicable law, in which case such Stockholder shall allow Lucent reasonable
time to comment on such release or announcement in advance of such issuance.

9. Term of Agreement, Termination.

(a) The term of this Agreement shall commence on the date hereof
and shall terminate upon the earlier to occur of (i) the Effective
Time of the Merger (as defined in the Merger Agreement) and (ii) the
due and proper termination of the Merger Agreement in accordance with
its terms. Upon such termination, no party shall have any further
obligations or liabilities hereunder.

(b) The obligations of the Stockholders set forth in this
Agreement shall not be effective or binding upon any Stockholder until
after such time as the Merger Agreement is executed and delivered by
Lucent, Acquisition and the Company.

10. Miscellaneous.

(a) Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter of this
Agreement

E-4
<PAGE> 206

and supersedes all prior written and oral and all contemporaneous oral
agreements and understandings with respect to the subject matter of
this Agreement.

(b) Notices. Any notice, request, instruction or other document
to be given hereunder by any party to the others shall be in writing
and shall be deemed to have been duly given on the next business day
after the same is sent, if delivered personally or sent by telecopy or
overnight delivery, or five calendar days after the same is sent, if
sent by registered or certified mail, return receipt requested,
postage prepaid, as set forth below, or to such other persons or
addresses as may be designated in writing in accordance with the terms
hereof by the party to receive such notice.

If to Acquisition or Lucent:

Lucent Technologies Inc.
c/o Data Networking Systems
211 Mount Airy Road
Basking Ridge, New Jersey 07920-2332
Att: President - Data Networking

with a copy to:

Lucent Technologies Inc.
c/o Data Networking Systems
211 Mount Airy Road
Basking Ridge, New Jersey 07920-2332
Attn: General Counsel - Data Networking

If to a Stockholder, to the
address set forth below such
Stockholder's name on Exhibits
A, B, C, D, E and/or F hereto,
with copies to:

Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: Paul P. Brountas, Esq.

(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York as
applied to contracts made and fully performed in such state without
giving effect to the principles of conflict of laws thereof and except
insofar as the Delaware General Corporation Law, as amended, shall be
mandatorily applicable to the Merger and the rights of the
Stockholders of the Company in connection therewith.

(d) Rules of Construction. The descriptive headings in this
Agreement are inserted for convenience of reference only and are not
intended to be part of or

E-5
<PAGE> 207

to affect the meaning or interpretation of this Agreement. Words used
in this Agreement, regardless of the gender and number specifically
used, shall be deemed and construed to include any other gender,
masculine or feminine, or neuter, and any other number, singular or
plural, as the context requires. As used in this Agreement, the word
"including" is not limiting, and the word "or" is not exclusive.

(e) Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of the parties to this Agreement and their
legal successors-in-interest, and nothing in this Agreement, express
or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this
Agreement.

(f) Counterparts. This Agreement may be executed in one or more
counterparts, and each of such counterparts shall for all purposes be
deemed to be an original, but all such counterparts together shall
constitute but one instrument.

(g) Assignment. No party hereto shall assign its rights and
obligations under this Agreement or any part thereof, nor shall any
party assign or delegate any of its rights or duties hereunder without
the prior written consent of the other party, and any assignment made
without such consent shall be void. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted
assigns.

(h) Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of all the parties.

(i) Extension; Waiver. Any party to this Agreement may extend the
time for the performance of any of the obligations or other acts of
any of the other parties to this Agreement or waive compliance by any
other party with any of the agreements or conditions contained herein
or any breach thereof. Any agreement on the part of any party to any
such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.

(j) Severability. The provisions of this Agreement are severable
and, if any thereof are invalid or unenforceable in any jurisdiction,
the same and the other provisions hereof shall not be rendered
otherwise invalid or unenforceable.

(k) Fiduciary Duty as Director. The parties hereto acknowledge
and agree that each Stockholder's obligations hereunder are solely in
his capacity as a stockholder of the Company, and that none of the
provisions herein set forth shall be deemed to restrict or limit any
fiduciary duty any of the undersigned or any of their respective
affiliates may have as a member of the Board of Directors of the
Company, as an executive officer of the Company, or otherwise as a
fiduciary to any person (other than any of the stockholders of the
Company) resulting from any circumstances other than as a stockholder
of the Company; provided that, no such duty shall excuse the
Stockholder from his obligations as a stockholder of the
Company to vote the Shares, to the extent that they may be so voted,
or otherwise perform any obligation as herein provided and to
otherwise comply with the terms and conditions of this Agreement.

E-6
<PAGE> 208

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Voting Agreement on the date first above
written.

STOCKHOLDERS:

----------------------------------

LUCENT TECHNOLOGIES INC.

By: /s/ HARRY J. CARR
------------------------------
Name: Harry J. Carr
Title: Vice President

XYLOPHONE ACQUISITION INC.

By: /s/ HARRY J. CARR
------------------------------
Name: Harry J. Carr
Title: Vice President

Acknowledged and Agreed to by:

XEDIA CORPORATION

By: /s/ R. ASHLEY STEPHENSON
----------------------------
Name: R. Ashley Stephenson
Title: Chairman

E-7
<PAGE> 209

SCHEDULE A

Subject to the provisions of Sections 1.6 and 1.8 of the Merger Agreement, each
share of Company Capital Stock issued and outstanding immediately prior to the
effective time of the Merger (other than (i) shares canceled in accordance with
Section 1.5(b) of the Merger Agreement and (ii) dissenting shares) shall be
converted into (A) in the case of each share of Common Stock, 0.216997 (such
number as adjusted in accordance with Section 1.6 of the Merger Agreement ), (B)
in the case of each share of Series A Preferred Stock, 0.433994 (such number as
adjusted in accordance with Section 1.6 of the Merger Agreement), (C) in the
case of each share of Series B Preferred Stock, 0.433994 (such number as
adjusted in accordance with Section 1.6 of the Merger Agreement), (D) in the
case of each share of Series C Preferred Stock, 0.647694 (such number as
adjusted in accordance with Section 1.6 of the Merger Agreement), (E) in the
case of each share of Series D Preferred Stock, 0.433994 (such number as
adjusted in accordance with Section 1.6 of the Merger Agreement) and (F) in the
case of each share of Series E Preferred Stock, 0.216997 (such number as
adjusted in accordance with Section 1.6 of the Merger Agreement) of a validly
issued, fully paid and nonassessable share of common stock, par value $.01 per
share, of Lucent, including the corresponding percentage right to purchase
shares of junior preferred stock, par value $1.00 per share, pursuant to the
Rights Agreement dated as of April 4, 1996 between Lucent and First Chicago
Trust Company of New York, as Rights Agent.

E-8
<PAGE> 210

FORM OF
IRREVOCABLE PROXY AND POWER OF ATTORNEY

The undersigned hereby appoints Richard Godfrey, a Vice President of
Xylophone Acquisition Inc., a Delaware corporation ("Acquisition"), Jean Rankin,
Secretary of Acquisition and/or Janet O'Rourke, an Assistant Secretary of
Acquisition, as the undersigned's attorney-in-fact and proxy, with full power of
substitution, for and in the undersigned's name, to vote, express consent or
disapproval, or otherwise act in such manner (including pursuant to written
consent, but excluding the right to assert, perfect and prosecute dissenters'
rights of appraisal) and upon such matters as Richard Godfrey, Jean Rankin
and/or Janet O'Rourke or their respective proxies or substitutes shall, in their
sole discretion, deem proper with respect to all of the shares of Company Common
Stock, par value $.005 per share, Series A Convertible Preferred Stock, par
value $.01 per share, Series B Convertible Preferred Stock, par value $.01 per
share, Series C Convertible Preferred Stock, par value $.01 per share, Series D
Convertible Preferred Stock, par value $.01 per share, and/or Series E
Convertible Preferred Stock, par value $.01 per share, of Xedia Corporation, a
Delaware corporation (the "Company"), owned of record by the undersigned.

The proxy granted hereby shall be irrevocable and may be exercised at any
meeting of stockholders notice of which is given or in respect of any written
consent which is solicited prior to the due and proper termination of, and
subject to and in accordance with the terms and conditions of, the Voting
Agreement, dated of even date herewith, among the undersigned, Lucent
Technologies Inc., Acquisition and the stockholders of the Company signatory
thereto. This proxy is coupled with an interest sufficient in law to support
such proxy.

Dated: August 12, 1999

------------------------------
Name:

E-9
<PAGE> 211

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The registrant's Certificate of Incorporation provides that a director of
the registrant shall not be personally liable to the registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except, if required by the Delaware General Corporation Law, for liability (1)
for any breach of the director's duty of loyalty to the corporation or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) under Section 174 of
the Delaware General Corporation Law or (4) for any transaction from which the
director derived an improper personal benefit. Neither the amendment nor repeal
of such provision shall eliminate or reduce the effect of such provision in
respect of any matter occurring, or any cause of action, suit or claim that, but
for such provision, would accrue or arise prior to such amendment or repeal.

While the registrant's Certificate of Incorporation provides directors with
protection from awards for monetary damages for breach of their duty of care, it
does not eliminate such duty. Accordingly, the registrant's Certificate of
Incorporation will have no effect on the availability of equitable remedies such
as an injunction or rescission based on a director's breach of his or her duty
of care.

The registrant's Certificate of Incorporation provides that each person who
was or is made a party to or is threatened to be made a party to or is involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that such
person, or a person of whom such person is the legal representative, is or was a
director or officer of the registrant or is or was serving at the request of the
registrant as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the registrant to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the registrant to provide broader
indemnification rights than said law permitted the registrant to provide prior
to such amendment), against all expense, liability and loss reasonably incurred
or suffered by such person in connection therewith. Such right to
indemnification includes the right to have the registrant pay the expenses
incurred in defending any such proceeding in advance of its final disposition,
subject to the provisions of the Delaware General Corporation Law. Such rights
are not exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the registrant's Certificate of
Incorporation or By-Laws, agreement, vote of stockholders or disinterested
directors or otherwise. No repeal or modification of such provision will in any
way diminish or adversely affect the rights of any director, officer, employee
or agent of the registrant thereunder in respect of any occurrence or matter
arising prior to any such repeal or modification.

II-1
<PAGE> 212

The registrant's Certificate of Incorporation also specifically authorizes
the registrant to maintain insurance and to grant similar indemnification rights
to employees or agents of the registrant. The directors and officers of the
registrant are covered by insurance policies indemnifying them against certain
liabilities, including certain liabilities arising under the Securities Act of
1933, which might be incurred by them in such capacities.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) See Exhibit Index.

(b) Not applicable.

(c) Opinion of Morgan Stanley & Co. Incorporated, attached as Annex D to
the proxy statement/prospectus which is part of this registration
statement on Form S-4.

ITEM 22. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933.

(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar amount of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.

(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new

II-2
<PAGE> 213

registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.

(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items of
the applicable form.

(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (c)(1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the
Securities Act of 1933 and is used in connection with an offering
of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.

(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or

II-3
<PAGE> 214

controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.

(e) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the
effective date of this registration statement through the date of
responding to the request.

(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject
of and included in the registration statement when it became
effective.

II-4
<PAGE> 215

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Murray Hill, New
Jersey, on September 24, 1999.

LUCENT TECHNOLOGIES INC.
(Registrant)

By: /s/ Donald K. Peterson
---------------------------------------
Name: Donald K. Peterson
Title: Executive Vice President and
Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment thereto has been signed by the following
persons in the capacities and on the date indicated.

<TABLE>
<S> <C> <C> <C>
PRINCIPAL EXECUTIVE OFFICER: #
#
Richard A. McGinn Chairman of the Board and #
Chief Executive Officer #
#
PRINCIPAL FINANCIAL OFFICER: #
#
Donald K. Peterson Executive Vice President and #
Chief Financial Officer #
###### By: /s/ Donald K. Peterson
PRINCIPAL ACCOUNTING # ----------------------
OFFICER: # (Donald K. Peterson,
# attorney-in-fact)*
James S. Lusk Vice President and Controller #
#
DIRECTORS: # * by power of attorney
#
Paul A. Allaire #
Carla A. Hills # Date: September 24, 1999
Drew Lewis #
Richard A. McGinn #
Paul H. O'Neill #
Donald S. Perkins #
Henry B. Schacht #
Franklin A. Thomas #
John A. Young #
#
#
</TABLE>

II-5
<PAGE> 216

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION

2.1** Agreement and Plan of Merger dated as of August 12, 1999 by and
among the registrant, Xylophone Acquisition Inc. and Xedia
Corporation (included as Annex A to the proxy
statement/prospectus which is part of this registration statement
on Form S-4).

4.1* Provisions of the Certificate of Incorporation of the registrant,
as amended effective February 17, 1999, that define the rights of
security holders of the registrant (incorporated by reference to
Exhibit (3)(i) to the registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999).

4.2* Provisions of the By-Laws of the registrant, as amended effective
February 17, 1999, that define the rights of security holders of
the registrant (incorporated by reference to Exhibit (3)(ii) to
the registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999).

4.3* Rights Agreement between the registrant and The Bank of New York
(successor to First Chicago Trust Company of New York), as rights
agent, dated as of April 4, 1996 (incorporated by reference to
Exhibit 4.2 to Registration Statement (No. 333-00703) on Form
S-1).

4.4* Amendment to Rights Agreement between the registrant and The Bank
of New York (successor to First Chicago Trust Company of New
York), dated as of February 18, 1998 (incorporated by reference
to Exhibit (10)(i)5 to the registrant's Annual Report on Form
10-K for the period ended September 30, 1998).

4.5* Indenture dated as of April 1, 1996 between the registrant and
The Bank of New York, as trustee (incorporated by reference to
Exhibit 4A to Registration Statement (No. 333-01223) on Form
S-3).

4.6 Other instruments in addition to Exhibit 4.5 which define the
rights of holders of long term debt of the registrant and all of
its consolidated subsidiaries are not filed herewith pursuant to
Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this
regulation, the registrant hereby agrees to furnish a copy of any
such instrument to the Commission upon request.

5.1 Opinion of Pamela F. Craven, Vice President -- Law and Secretary
of the registrant, as to the legality of the securities to be
issued.

8.1 Opinion of Hale and Dorr LLP as to certain United States federal
income tax consequences of the merger.

10.1 Voting Agreement dated as of August 12, 1999 by and between the
registrant, Xylophone Acquisition Inc. and certain stockholders
of Xedia Corporation (included as Annex E to the proxy
statement/prospectus which is a part of this registration
statement on Form S-4).

II-6
<PAGE> 217

23.1 Consent of Pamela F. Craven, Vice President -- Law and Secretary
of the registrant (included as part of Exhibit 5.1 to this
registration statement).
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.3 Consent of Arthur Andersen LLP, Independent Accountants.
23.4 Consent of Hale and Dorr LLP (included as part of Exhibit 8.1 to
this registration statement).
23.5 Consent of Morgan Stanley & Co. Incorporated.
24.1 Powers of Attorney.
99.1 Form of Proxy to be mailed to holders of Xedia stock.
99.2 Opinion of Morgan Stanley & Co. Incorporated (included as Annex D
to the proxy statement/prospectus which is a part of this
registration statement on Form S-4).

- ---------------
* Incorporated herein by reference.

**The registrant hereby agrees to furnish supplementally a copy of any omitted
schedules to this agreement to the Securities and Exchange Commission upon its
request.

II-7

<PAGE> 1

EXHIBIT 5.1

[Letterhead of Pamela F. Craven]

September 22, 1999

Lucent Technologies Inc.
600 Mountain Avenue
Murray Hill, New Jersey 07974

Ladies and Gentlemen:

I have acted as counsel for Lucent Technologies Inc., a Delaware
corporation ("Lucent"), in connection with the preparation of a Registration
Statement on Form S-4 (the "Registration Statement") to be filed by Lucent with
the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Act of 1933 (the "Act"). The Registration Statement relates to the
proposed issuance by Lucent of up to 3,928,471 shares (the "Shares") of its
common stock, par value $0.01 per share (together with the attached rights to
purchase junior preferred stock, the "Common Stock"), pursuant to the Agreement
and Plan of Merger (the "Merger Agreement") dated as of August 12, 1999, among
Lucent, Xylophone Acquisition Inc., a Delaware corporation and a wholly owned
subsidiary of Lucent ("Acquisition"), and Xedia Corporation, a Delaware
corporation ("Xedia"). The Merger Agreement provides for the merger of
Acquisition with and into Xedia, with Xedia surviving as a wholly owned
subsidiary of Lucent.

I have examined such corporate records, certificates and other
documents as I have considered necessary or appropriate for the purposes of
this opinion. In such examination, I have assumed the genuineness of all
signatures and the authenticity of all documents submitted to me as copies. In
examining agreements executed by parties other than Lucent and Acquisition, I
have assumed that such parties had the power, corporate or other, to enter into
and perform all obligations thereunder and also have assumed the due
authorization by all requisite action, corporate or other, and execution and
delivery by such parties of such documents, and the validity and binding effect
thereof. As to any facts material to the opinion expressed herein which I have
not independently verified or established, I have relied upon statements and
representations of officers and representatives of Lucent and others.

Based on such examination, I am of the opinion that the Shares have
been duly authorized for issuance and, when issued in accordance with the terms
and conditions of the Merger Agreement, will be validly issued, fully paid and
non-assessable.

<PAGE> 2

I hereby consent to the inclusion of this opinion as an exhibit to the
Registration Statement and to the reference to me and this opinion in the proxy
statement/prospectus that forms a part of the Registration Statement. In
giving such consent, I do not hereby admit that I am in the category of persons
whose consent is required under Section 7 of the Act.

Very truly yours,

/s/ PAMELA F. CRAVEN

<PAGE> 1

EXHIBIT 8.1

[LETTERHEAD OF HALE AND DORR LLP]

September 22, 1999

Xedia Corporation
50 Nagog Park
Acton, MA 01720

Re: Merger Pursuant to Agreement and Plan of Merger
Among Lucent Technologies Inc., Xylophone Acquisition Inc.,
and Xedia Corporation

Ladies and Gentlemen:

This opinion is being delivered to you in connection with the filing
of a registration statement (the "Registration Statement") on Form S-4, which
includes the Joint Proxy Statement and Prospectus relating to the Agreement and
Plan of Merger dated as of August 12, 1999 (the "Merger Agreement"), by and
among Lucent Technologies Inc., a Delaware corporation ("Lucent"), Xylophone
Acquisition Inc., a Delaware corporation and wholly owned subsidiary of Lucent
("Sub"), and Xedia Corporation, a Delaware corporation ("Xedia"). Pursuant to
the Merger Agreement, Sub will merge with and into Xedia (the "Merger").
Except as otherwise provided, capitalized terms not defined herein have the
meanings set forth in the Merger Agreement and the exhibits thereto or in the
letters to Hale and Dorr LLP from Lucent and Xedia containing certain
representations of Lucent and Xedia relevant to this opinion (the
"Representation Letters"). All section references, unless otherwise indicated,
are to the United States Internal Revenue Code of 1986, as amended (the
"Code").

In our capacity as counsel to Xedia in the Merger, and for purposes of
rendering this opinion, we have examined and relied upon the Registration
Statement, the Merger Agreement and the exhibits thereto, the Representation
Letters, and such other documents as we considered relevant to our analysis.
In our examination of documents, we have assumed the authenticity of original
documents, the accuracy of copies, the genuineness of signatures, and the legal
capacity of signatories.

<PAGE> 2

We have assumed that all parties to the Merger Agreement and to any
other documents examined by us have acted, and will act, in accordance with the
terms of such Merger Agreement and documents and that the Merger will be
consummated at the Effective Time pursuant to the terms and conditions set
forth in the Merger Agreement without the waiver or modification of any such
terms and conditions. Furthermore, we have assumed that all representations
contained in the Merger Agreement, as well as those representations contained
in the Representation Letters, are, and at the Effective Time will be, true and
complete in all material respects, and that any representation made in any of
the documents referred to herein "to the best of the knowledge and belief" (or
similar qualification) of any person or party is correct without such
qualification. We have also assumed that as to all matters for which a person
or entity has represented that such person or entity is not a party to, does
not have, or is not aware of, any plan, intention, understanding, or agreement,
there is no such plan, intention, understanding, or agreement. We have not
attempted to verify independently such representations, but in the course of
our representation, nothing has come to our attention that would cause us to
question the accuracy thereof.

The conclusions expressed herein represent our judgment as to the
proper treatment of certain aspects of the Merger under the income tax laws of
the United States based upon the Code, Treasury Regulations, case law, and
rulings and other pronouncements of the Internal Revenue Service (the "IRS") as
in effect on the date of this opinion. No assurances can be given that such
laws will not be amended or otherwise changed prior to the Effective Time, or
at any other time, or that such changes will not affect the conclusions
expressed herein. Nevertheless, we undertake no responsibility to advise you
of any developments after the Effective Time in the application or
interpretation of the income tax laws of the United States.

Our opinion represents our best judgment of how a court would decide
if presented with the issues addressed herein and is not binding upon either
the IRS or any court. Thus, no assurances can be given that a position taken
in reliance on our opinion will not be challenged by the IRS or rejected by a
court.

This opinion addresses only the specific United States federal income
tax consequences of the Merger set forth below, and does not address any other
federal, state, local, or foreign income, estate, gift, transfer, sales, use,
or other tax consequences that may result from the Merger or any other
transaction (including any transaction undertaken in connection with the
Merger). We express no opinion regarding the tax consequences of the Merger to
shareholders of Xedia that are subject to special tax rules, and we express no
opinion regarding the tax consequences of the Merger arising in connection with
the ownership of options for Xedia stock.

On the basis of, and subject to, the foregoing, and in reliance upon
the representations and assumptions described above, we are of the opinion that
the Merger will constitute a reorganization within the meaning of Section
368(a).

2
<PAGE> 3

No opinion is expressed as to any federal income tax consequence of
the Merger except as specifically set forth herein, and this opinion may not be
relied upon except with respect to the consequences specifically discussed
herein.

This opinion is intended solely for the purpose of inclusion as an
exhibit to the Registration Statement. It may not be relied upon for any other
purpose or by any other person or entity, and may not be made available to any
other person or entity without our prior written consent. We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement and
further consent to the use of our name in the Registration Statement in
connection with references to this opinion and the tax consequences of the
Merger. In giving this consent, however, we do not hereby admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.

Very truly yours,

/s/ Hale and Dorr LLP
----------------------
Hale and Dorr LLP

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in this
Registration Statement on Form S-4 of Lucent Technologies Inc. of our report,
dated June 24, 1999, except for the seventh and eighth paragraphs of Note 15,
as to which the date is July 15, 1999 and July 19, 1999, respectively, relating
to the consolidated financial statements and financial statement schedule ended
at September 30, 1998 and 1997 and for each of the two years in the period
ended September 30, 1998 and for the nine-month period ended September 30,
1996, which appears in Exhibit 99.1 to Lucent Technologies Inc. Current Report
on Form 8-K dated August 2, 1999. We also consent to the reference to us under
the heading "Experts" in such Registration Statement.

/s/ PRICEWATERHOUSECOOPERS LLP
------------------------------
PRICEWATERHOUSECOOPERS LLP

New York, New York
September 23, 1999

<PAGE> 1

EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
report (and all references to our Firm) included in or made a part of this
registration statement.

/s/ ARTHUR ANDERSEN LLP
-----------------------
ARTHUR ANDERSEN LLP

Boston, Massachusetts
September 22, 1999

<PAGE> 1

EXHIBIT 23.5

CONSENT OF MORGAN STANLEY & CO. INCORPORATED

We hereby consent to the use in the Registration Statement of Lucent
Technologies Inc., on Form S-4 and in the Proxy Statement/Prospectus of Lucent
Technologies Inc., and Xedia Corporation, which is part of the Registration
Statement, of our opinion dated August 12, 1999 appearing as Annex D to such
Proxy Statement/Prospectus, to the description therein of such opinion and to
the references therein to our name. In giving the foregoing consent, we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended (the "Securities
Act"), or the rules and regulations promulgated thereunder, nor do we admit
that we are experts with respect to any part of such Registration Statement
within the meaning of the term "experts" as used in the Securities Act or the
rules and regulations promulgated thereunder.

MORGAN STANLEY & CO. INCORPORATED

By: /s/ JAMES M. HEAD
-----------------
James M. Head
Vice President

New York, New York
September 21, 1999

<PAGE> 1

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL MAN BY THESE PRESENTS:

WHEREAS, Lucent Technologies Inc., a Delaware corporation
(hereinafter referred to as the "Company"), proposes to file with the
Securities and Exchange Commission, under the provisions of the Securities Act
of 1933, as amended, a registration statement or registration statements (on
Form S-3, Form S-4, Form S-8 or any other appropriate form) with respect to the
issuance of common shares, par value $.01 per share, of the Company (including
the related Preferred Share Purchase Rights), in connection with the
acquisition by the Company of Xedia Corporation, including up to 10,000 shares
to be offered under Xedia's 401(k) Plan; and

WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:

NOW, THEREFORE, the undersigned hereby constitutes and
appoints Donald K. Peterson and James S. Lusk and each of them, as attorneys
for and in the name, place and stead of the undersigned, and in the capacity of
the undersigned as a director and/or officer of the Company, to execute and
file any such registration statement with respect to the above-described common
shares and thereafter to execute and file any amended registration statement or
statements with respect thereto or amendments or supplements to any of the
foregoing, hereby giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing whatsoever
requisite and necessary to be done in and about the premises, as fully, to all
intents and purposes, as the undersigned might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 23rd day of August, 1999.

By: /s/ PAUL A. ALLAIRE
-------------------
Paul A. Allaire
Director

<PAGE> 2

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL MAN BY THESE PRESENTS:

WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:

IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20th day of August, 1999.

By: /s/ CARLA A. HILLS
------------------
Carla A. Hills
Director

<PAGE> 3

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL MAN BY THESE PRESENTS:

WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:

IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 25th day of August, 1999.

By: /s/ DREW LEWIS
--------------
Drew Lewis
Director

<PAGE> 4

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL MAN BY THESE PRESENTS:

WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:

IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 24th day of August, 1999.

By: /s/ RICHARD A. McGINN
---------------------
Richard A. McGinn
Chairman of the Board and
Chief Executive Officer

<PAGE> 5

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL MAN BY THESE PRESENTS:

WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:

IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 24th day of August, 1999.

By: /s/ PAUL H. O'NEILL
-------------------
Paul H. O'Neill
Director

<PAGE> 6

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL MAN BY THESE PRESENTS:

WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:

IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20th day of August, 1999.

By: /s/ DONALD S. PERKINS
---------------------
Donald S. Perkins
Director

<PAGE> 7

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL MAN BY THESE PRESENTS:

WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:

IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 24th day of August, 1999.

By: /s/ HENRY B. SCHACHT
--------------------
Henry B. Schacht
Director

<PAGE> 8

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL MAN BY THESE PRESENTS:

WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:

IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 20th day of August, 1999.

By: /s/ FRANKLIN A. THOMAS
----------------------
Franklin A. Thomas
Director

<PAGE> 9

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL MAN BY THESE PRESENTS:

WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:

IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 31st day of August, 1999.

By: /s/ JOHN A. YOUNG
-----------------
John A. Young
Director

<PAGE> 10

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL MAN BY THESE PRESENTS:

WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:

IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 23rd day of August, 1999.

By: /s/ DONALD K. PETERSON
----------------------
Donald K. Peterson
Executive Vice President and
Chief Financial Officer

<PAGE> 11

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL MAN BY THESE PRESENTS:

WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:

IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 23rd day of August, 1999.

By: /s/ JAMES S. LUSK
-----------------
James S. Lusk
Vice President and Controller

<PAGE> 1

EXHIBIT 99.1

XEDIA CORPORATION
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON -, -, 1999

The undersigned stockholder of Xedia Corporation revoking all prior
proxies, hereby appoints Ashley Stephenson, Robert A. Steinkrauss and Paul P.
Brountas, or any of them acting singly, proxies, with full power of
substitution, to vote all shares of capital stock of Xedia which the
undersigned is entitled to vote at the special meeting of stockholders to be
held at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109, on -, -, 1999, beginning at - a.m., local time, and at
any adjournments of the meeting, upon matters set forth in the Notice of
Special Meeting dated -, 1999, and the related proxy statement/prospectus,
copies of which have been received by the undersigned, and in their discretion
upon any adjournment of the meeting or upon any other business that may
properly be brought before the meeting by the Xedia board of directors.
Attendance of the undersigned at the meeting or any adjourned session of the
meeting will not be deemed to revoke this proxy unless the undersigned will
affirmatively indicate the intention of the undersigned to vote the shares
represented hereby in person prior to the exercise of this proxy.

THIS PROXY IS SOLICITED ON BEHALF OF THE XEDIA BOARD OF DIRECTORS. A
STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD
OF DIRECTORS NEED ONLY SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE.

(Please fill in the appropriate boxes on the other side)

<PAGE> 2

A. [X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.

1. To approve the Agreement and Plan of Merger dated as of August
12, 1999, among Lucent Technologies Inc., Xylophone Acquisition
Inc., a wholly owned subsidiary of Lucent, and Xedia.

FOR [ ]

AGAINST [ ]

ABSTAIN [ ]

2. To approve an amendment to Xedia's Certificate of
Incorporation to provide that a consolidation or merger of
Xedia with or into another corporation or entity in a
transaction involving the disposition of more than 50% of the
voting power of Xedia, or a sale of all or substantially all
the assets of Xedia, shall not be deemed to be a liquidation,
dissolution or winding up of Xedia.

FOR [ ]

AGAINST [ ]

ABSTAIN [ ]

3. To approve an amendment to Xedia's 1993 stock option plan
increasing the shares of common stock authorized for issuance
form 4,700,000 to 5,950,000 shares.

FOR [ ]

AGAINST [ ]

ABSTAIN [ ]

THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF
NO DIRECTION IS GIVEN WITH RESPECT TO A PROPOSAL SET FORTH ABOVE, WILL BE VOTED
FOR SUCH PROPOSAL.

DATED: -, 1999

- ---------------------------
Signature of Stockholder(s)

<PAGE> 3

Please promptly complete, date and sign this proxy and mail it in the
enclosed envelope to assure representation of your shares. No postage need be
affixed if mailed in the United States. PLEASE SIGN EXACTLY AS NAME(S) APPEAR
ON THE STOCK CERTIFICATE.

If stockholder is a corporation, please sign full corporate name by
president or other authorized officer and, if a partnership, please sign full
partnership name by an authorized partner or other persons. If shares are held
by joint tenants, both should sign. Attorneys-in-fact, executors,
administrators, trustees, guardians or others signing in a representative
capacity should indicate the capacity in which they are signing.

Mark here if you plan to attend the meeting [ ]