UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): July 3, 2017
DASAN ZHONE SOLUTIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
 
 
 
 
 
Delaware
 
000-32743
 
22-3509099
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File No.)
 
(I.R.S. Employer
Identification No.)
7195 Oakport Street
Oakland, California 94621
(Address of Principal Executive Offices, Including Zip Code)
(510) 777-7000
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨






Item 1.01
Entry into a Material Definitive Agreement
As previously announced by DASAN Zhone Solutions, Inc. (formerly known as Zhone Technologies, Inc., the “Company” and, with respect to periods prior to the Merger (as defined below), “Legacy Zhone”), due to an internal investigation to determine whether any financial statements of Legacy Zhone prior to the quarter ended June 30, 2016 contain material errors, the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 was delayed beyond the extended filing due date. In connection with the delayed filing, on May 5, 2017, the Company and certain of its subsidiaries executed a consent agreement (the “Consent”) with Wells Fargo Bank, National Association (the “Lender”), under the Company’s Credit and Security Agreement, dated March 13, 2012, by and among the Company, certain of the Company’s subsidiaries and the Lender (as amended, the “Domestic Credit Agreement”) and the Credit and Security Agreement (Ex-Im Subfacility), dated March 13, 2012, by and among the Company, certain of the Company’s subsidiaries and the Lender (as amended, the “Ex-Im Credit Agreement”; and together with the Domestic Credit Agreement, collectively, the “Credit Agreements”). The Consent extended the due date under the Credit Agreements for delivery of the Company’s audited financial statements for the year ended December 31, 2016 (the “Annual Financial Statements”) to June 30, 2017, conditional upon, among other matters, Nasdaq also consenting to or approving the extension of the due date for filing the Annual Financial Statements with the Securities and Exchange Commission (the “SEC”). As previously reported, on June 7, 2017, the Company received a letter stating that the Nasdaq Hearings Panel granted the Company’s request for continued listing on The Nasdaq Capital Market, subject to the Annual Financial Statements being filed with the SEC on or before September 27, 2017. On July 3, 2017, the Company and certain of its subsidiaries executed a second consent agreement (the “Second Consent”) with the Lender to further extend the due date of the Annual Financial Statements from June 30, 2017 to September 27, 2017 to reflect the extension approved by Nasdaq. The Company is diligently working to file the Audited Financial Statements as soon as possible; however, there can be no assurance that the Audited Financial Statements will be filed prior to the deadline set by Nasdaq and in the Second Consent. The delisting of the Company’s common stock from The Nasdaq Capital Market could have a material adverse effect on the Company's business and on the trading of its common stock.
The lenders under the Credit Agreements, and their respective affiliates, have performed, and may in the future perform, for the Company and its affiliates various commercial banking, investment banking, financial advisory or other services, for which they have received and/or may in the future receive customary compensation and expense reimbursement.
The foregoing summary of the Second Consent is subject to, and qualified in its entirety by, the full text of the Second Consent, which is attached to this Current Report on Form 8-K as Exhibit 10.1, and is incorporated herein by reference.
Cautionary Note Regarding Forward Looking Statements : This Current Report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements related to the Company regaining compliance with the periodic filing



requirements set forth in Rule 5250(c)(1) of the Nasdaq Listing Rules, the timing of filings with the SEC and the consequences of delisting the Company's common stock from the Nasdaq Capital Market. The Company uses words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” variations of such words, and similar expressions to identify forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict, including those identified in the Company's other filings with the SEC. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. For information about the factors that could cause such differences, please refer to the Company's SEC filings, including its Annual Report on Form 10-K for the year ended December 31, 2015 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Given these uncertainties, you should not place undue reliance on these forward-looking statements. The forward-looking statements contained in this Current Report on Form 8-K speak only as of the date of this report and the Company assumes no obligation to update any forward-looking statements for any reason.
Item 9.01
Financial Statements and Exhibits
(d)     Exhibits
10.1
Letter agreement, dated July 3, 2017, by and among DASAN Zhone Solutions, Inc., ZTI Merger Subsidiary III, Inc., Premisys Communications, Inc., Zhone Technologies International, Inc., Paradyne Networks, Inc., Paradyne Corporation, Dasan Network Solutions, Inc. and Wells Fargo Bank, National Association





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
 
 
 
 
Date: July 6, 2017
 
 
 
DASAN Zhone Solutions, Inc.
 
 
 
 
 
 
 
 
By:
 
/s/ KIRK MISAKA
 
 
 
 
 
 
Kirk Misaka
 
 
 
 
 
 
Chief Financial Officer




EXHIBIT INDEX

 
 
 
Exhibit
Number
 
Description
 
 
10.1
 
Letter agreement, dated July 3, 2017, by and among DASAN Zhone Solutions, Inc., ZTI Merger Subsidiary III, Inc., Premisys Communications, Inc., Zhone Technologies International, Inc., Paradyne Networks, Inc., Paradyne Corporation, Dasan Network Solutions, Inc. and Wells Fargo Bank, National Association



Exhibit 10.1




July 3, 2017

Wells Fargo Bank, National Association
2450 Colorado Avenue, Suite 3000W
Santa Monica, California 90404
Attention: Harry L. Joe, Vice President

Re:
(i) Credit and Security Agreement, dated March 13, 2012 (as heretofore amended, the “ Domestic Credit Agreement ”), among Dasan Zhone Solutions, Inc. (f/k/a Zhone Technologies, Inc.) and ZTI Merger Subsidiary III, Inc. (collectively, the “ Borrowers ”), Premisys Communications, Inc., Zhone Technologies International, Inc., Paradyne Networks, Inc., Paradyne Corporation, and Dasan Network Solutions, Inc. (collectively, the “ Guarantors ”), and Wells Fargo Bank, National Association (the “ Lender ”), and (ii) Credit and Security Agreement (Ex-Im Subfacility), dated March 13, 2012 (as heretofore amended, the “ Ex-Im Credit Agreement ”; and together with the Domestic Credit Agreement, collectively, the “ Credit Agreements ”), among the Borrowers, the Guarantors, and Lender
Ladies and Gentlemen:

Reference is made to the above-described Credit Agreements. The Borrowers and the Guarantors are sometimes collectively referred to in this letter agreement as the “ Loan Parties .” Capitalized terms used but not defined in this letter agreement shall have the meanings set forth in the Domestic Credit Agreement.

The Credit Agreements (including, but not necessarily limited to, Schedule 6.1 thereto) require that the Borrowers provide audited annual financial statements within 120 days after the end of each fiscal year. Pursuant to that certain letter agreement, dated May 5, 2017, among the Borrowers, the Guarantors and Lender, Lender agreed to extend the due date for the annual audited financial statements and related items required by Schedule 6.1 of the Credit Agreements (collectively, the “ 2016 Annual Statement Items ”) for the fiscal year ending December 31, 2016, from April 30, 2017 to June 30, 2017. The Borrowers and the Guarantors hereby request that Lender further extend the due date for the 2016 Annual Statement Items from June 30, 2017 to September 27, 2017 (the “ Extension ”).

Subject to the terms hereof, Lender hereby consents to the Extension for the 2016 Annual Statement Items, subject to the following terms and conditions: (i) Lender shall have received the countersignatures of the Borrowers and Guarantors on this letter agreement agreeing to the terms and conditions of this letter agreement; (ii) all representations and warranties of the Borrowers and the Guarantors in the Loan Documents and this letter agreement shall be true and correct in all material respects as of the date hereof (except for such representations and warranties that by their terms expressly speak as of an earlier date, in which case such



representations and warranties shall continue to be true and correct in all material respects as of such earlier date); and (iii) Borrowers shall deliver to Lender, no later than five (5) days after receipt by Borrowers (or any Borrower’s board of directors), a copy of the investigation report (relating to sales practices and internal controls) produced by Latham & Watkins LLP. With respect to the foregoing clause (iii) , Borrowers’ failure to timely comply with either such requirement shall constitute an immediate Event of Default under the Credit Agreements and other Loan Documents.

In order to induce Lender to execute and deliver this letter agreement, the Loan Parties hereby (i) represent and warrant that no Default or Event of Default exists on the date hereof, (ii) ratify and confirm all of the Obligations of the Loan Parties pursuant to the Loan Documents, and (iii) acknowledge that no investigation by Lender shall affect any representations or warranties made by the Loan Parties in this letter agreement or the right of Lender to rely upon them.

Except as expressly set forth herein, (i) the Loan Documents remain in full force and effect, (ii) this letter agreement shall not be deemed to be a waiver, amendment or modification of, or consent to or departure from, any provisions of the Credit Agreements or any other Loan Document or to be a waiver of any Default or Event of Default under the Loan Documents whether arising before or after the date hereof or as a result of the transactions contemplated hereby (except for the specific consent referenced above in this letter agreement), and (iii) this letter agreement shall not preclude the future exercise of any right, remedy, power or privilege available to Lender whether under the Credit Agreements, the other Loan Documents or otherwise and shall not be construed or deemed to be a satisfaction, novation, cure, modification, amendment or release of the Obligations, Credit Agreements, or other Loan Documents.

To further induce Lender to enter into this letter agreement, the Loan Parties each hereby absolutely and unconditionally releases and forever discharges Lender, and any and all participants, parent corporations, subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof, together with all of the present and former directors, officers, agents, attorneys, and employees of any of the foregoing, from any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which any Loan Party has had, now has or has made claim to have against any such person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the beginning of time to and including the date of this letter agreement, whether such claims, demands and causes of action are matured or unmatured or known or unknown. It is the intention of the Loan Parties in executing this release that the same shall be effective as a bar to each and every claim, demand and cause of action specified and in furtherance of this intention each Loan Party waives and relinquishes all rights and benefits under Section 1542 of the Civil Code of the State of California, which provides:

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“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MIGHT HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”
The parties acknowledge that each may hereafter discover facts different from or in addition to those now known or believed to be true with respect to such claims, demands, or causes of action and agree that this instrument shall be and remain effective in all respects notwithstanding any such differences or additional facts.

This letter agreement (i) constitutes the entire understanding of the parties with respect to the subject matter hereof, and any other prior or contemporaneous agreements, whether written or oral, with respect hereto are expressly superseded hereby, (ii) shall be governed by and construed in accordance with the laws of the State of California, and (iii) shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. This letter agreement may be executed in one or more counterparts (which taken together shall constitute one and the same instrument) and by facsimile or email (pdf) transmission, which facsimile or pdf signatures shall be considered original executed counterparts.

This letter agreement shall be deemed to be a “ Loan Document ” for purposes of the Credit Agreements and the other Loan Documents.


[signatures on following pages]




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Kindly acknowledge your agreement with the terms and conditions of this letter agreement, by executing one copy of this letter in the space provided and returning it to Lender.

Very truly yours,

DASAN ZHONE SOLUTIONS, INC.        ZTI MERGER SUBSIDIARY III, INC.

By: /s/ KIRK MISAKA                 By: /s/ KIRK MISAKA
Name: Kirk Misaka                    Name: Kirk Misaka
Title: Chief Financial Officer                Title: Chief Financial Officer

PREMISYS COMMUNICATIONS, INC.        ZHONE TECHNOLOGIES
                            INTERNATIONAL, INC.

By: /s/ KIRK MISAKA                 By: /s/ KIRK MISAKA
Name: Kirk Misaka                    Name: Kirk Misaka
Title: Chief Financial Officer                Title: Chief Financial Officer

PARADYNE NETWORKS, INC.            PARADYNE CORPORATION

By: /s/ KIRK MISAKA                 By: /s/ KIRK MISAKA
Name: Kirk Misaka                    Name: Kirk Misaka
Title: Chief Financial Officer                Title: Chief Financial Officer

DASAN NETWORK SOLUTIONS, INC.

By: /s/ KIRK MISAKA         
Name: Kirk Misaka
Title: Chief Financial Officer


[signatures continued on next page]

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Acknowledged and agreed to by Lender
as of the date first above written :

WELLS FARGO BANK, NATIONAL ASSOCIATION


By: /s/ HARRY L. JOE     
Name: Harry L. Joe
Title: Authorized Signatory

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