EXHIBIT 10.5
EXECUTION VERSION

SIXTH AMENDMENT TO CREDIT AND SECURITY AGREEMENTS AND CONSENT

THIS SIXTH AMENDMENT TO CREDIT AND SECURITY AGREEMENTS AND CONSENT (the
“Amendment”), dated as of September 9, 2016, is entered into by and among ZHONE
TECHNOLOGIES, INC., a Delaware corporation (“Zhone Technologies”), ZTI MERGER
SUBSIDIARY III, INC., a Delaware corporation (“ZTI”; Zhone Technologies and ZTI
are sometimes referred to herein individually as a “Borrower” and collectively
as the “Borrowers”), PREMISYS COMMUNICATIONS, INC., a Delaware corporation
(“Premisys”), ZHONE TECHNOLOGIES INTERNATIONAL, INC., a Delaware corporation,
(“Zhone International”), PARADYNE NETWORKS, INC., a Delaware corporation
(“Paradyne Networks”), PARADYNE CORPORATION, a Delaware corporation (“Paradyne
Corporation”; Premisys, Zhone International, Paradyne Networks, and Paradyne
Corporation are sometimes referred to herein individually as a “Guarantor” and
collectively as the “Guarantors”), and WELLS FARGO BANK, NATIONAL ASSOCIATION
(“Lender”).
RECITALS
A.    Borrowers, Guarantors, and Lender are parties to (i) a Credit and Security
Agreement, dated March 13, 2012 (as amended by that certain First Amendment to
Credit and Security Agreements, dated as of March 13, 2013 (the “First
Amendment”), that certain Second Amendment to Credit and Security Agreements,
dated September 30, 2013 (the “Second Amendment”), that certain Third Amendment
to Credit and Security Agreements, dated March 5, 2014 (the “Third Amendment”),
that certain Fourth Amendment to Credit and Security Agreements, dated March 6,
2015 (the “Fourth Amendment”), and that certain Fifth Amendment to Credit and
Security Agreement, dated March 23, 2016 (the “Fifth Amendment”), and as further
amended from time to time, the “Domestic Credit Agreement”), and (ii) a Credit
and Security Agreement (Ex-Im Subfacility), dated March 13, 2012 (as amended by
the First Amendment, the Second Amendment, the Third Amendment, the Fourth
Amendment, and the Fifth Amendment, and as further amended from time to time,
the “Ex-Im Credit Agreement”; and together with the Domestic Credit Agreement,
collectively, the “Credit Agreements”). Capitalized terms used in this Amendment
have the meanings given to them in the Credit Agreements unless otherwise
specified in this Amendment.
B.    Zhone Technologies, Dragon Acquisition Corporation, a California
corporation and wholly-owned subsidiary of Zhone Technologies formed to
effectuate the Merger (as defined below) (“Merger Sub”), DASAN Networks, Inc., a
company incorporated under the laws of Korea (“DASAN”), and Dasan Network
Solutions, Inc., a California corporation (“DNS”), intend to effect a merger of
Merger Sub with and into DNS, pursuant to which Merger Sub will cease to exist,
and DNS will become a wholly-owned subsidiary of Zhone Technologies (the
“Merger”), pursuant to that certain Agreement and Plan of Merger, dated as of
April 11, 2016, by and among Zhone Technologies, Merger Sub, DASAN and DNS (the
“Merger Agreement”), and all other documents related thereto and executed in
connection therewith (collectively, the “Merger Documents”).

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

C.    Lender and Borrowers now wish for Lender to (i) consent to (a) the Merger,
(b) the Change of Control resulting from DASAN becoming the beneficial owner of
58% of the Stock of Zhone Technologies as a result of the Merger and the related
changes to the Board of Directors of Zhone Technologies (collectively, the
“DASAN Change of Control”), and (c) the proposed name change of Zhone
Technologies to “DASAN Zhone Solutions, Inc.” (the “Zhone Name Change”), and
(ii) amend the Credit Agreements on the terms and conditions set forth herein.
D.    Borrowers are entering into this Amendment with the understanding and
agreement that, except as specifically provided herein, none of the Lender’s
rights and remedies as set forth in the Credit Agreements or any other Loan
Document is being waived or modified by the terms of this Amendment.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements herein contained, it is agreed as follows:
1.Amendments to Credit Agreements. The Credit Agreements are amended as follows:
1.1    General.
(a)    Prior to DNS becoming a party to the Credit Agreement (as contemplated by
Section 6.1 hereof), each reference to “Subsidiary” and “Subsidiaries” in
Sections 2.4(f), 4.2(a), 6, and 7 (other than Section 7.12) of the Credit
Agreements, and in Exhibit D to the Credit Agreements, including any such
reference in a defined term that is used in any such Section or Exhibit, shall
exclude DNS and its Subsidiaries, but shall include DNS and its Subsidiaries
from and after such date to the extent set forth in the amendment contemplated
by Section 6.1 hereof;
(b)    Whenever the term “Borrowers”, “Borrower and its Subsidiaries” or
“Borrowers and their Subsidiaries” is used in respect of a financial covenant or
a related definition set forth in the Credit Agreements (including, without
limitation, the definitions of Excess Availability, EBITDA, and Fixed Charge
Coverage Ratio), prior to and after DNS becoming a party to the Credit Agreement
(as contemplated by Section 6.1 hereof), it shall be understood to mean
Borrowers and their respective Subsidiaries (other than DNS and its
Subsidiaries) on a consolidated basis, unless the context clearly requires
otherwise; and
(c)    Each reference to “Zhone Technologies, Inc.” in the Credit Agreements and
any other Loan Document shall be replaced with a reference to “DASAN Zhone
Solutions, Inc.”
1.2    Section 6.15 of the Credit Agreements. Section 6.15 of the Credit
Agreements is hereby amended by replacing the phrase “first tier Subsidiary of a
Borrower” with the phrase “first tier Subsidiary of a Loan Party”.
1.3    Section 7.12 of the Credit Agreements. Section 7.12 of the Credit
Agreements is hereby amended as follows:

2

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

(a)    The following is hereby added immediately after the phrase “series of
related transactions” in clause (b) thereof:
“; provided that, to the extent requested by Lender, the Loan Parties shall
provide Lender with information relating to any such transactions regardless of
the size of such transaction;
(b)    The “and” at the end of clause (d) thereof is hereby deleted, the “.” at
the end of clause (e) thereof is hereby replaced with “; and”, and new clauses
(f), (g) and (h) are hereby added at the end thereof to read in their entirety
as follows:
“(f)    transactions pursuant to the DASAN Loan Agreement to the extent not
otherwise prohibited by this Agreement, the DASAN Subordination Agreement, or
the other Loan Documents and not constituting an Event of Default;
(g)    transactions between DASAN Zhone Solutions, Inc. and DASAN expressly
contemplated by, and entered into pursuant to the terms of, the Merger
Agreement; and
(h)    transactions between or among DNS or any of its Subsidiaries, on the one
hand, and DASAN or any of its Affiliates (prior to giving effect to the Merger),
on the other hand, that were in existence prior to the consummation of the
Merger.”
1.4    Section 9.9 of the Credit Agreements. Section 9.9 of the Credit
Agreements is hereby amended to read in its entirety as follows:
“9.9    If the obligation of any Guarantor or DNS under a Guaranty is limited or
terminated by operation of law or by such Guarantor or DNS (other than in
accordance with the terms of this Agreement or the Guaranty), or if any
Guarantor or DNS fails to perform any obligation under a Guaranty, or repudiates
or revokes or purports to repudiate or revoke any obligation under a Guaranty,
or any individual Guarantor dies or becomes incapacitated, or any other
Guarantor or DNS ceases to exist for any reason;”
1.5    Schedule 1.1 to the Credit Agreements.
(a)    Clause (a) of the definition of “Change of Control” that appears in
Schedule 1.1 to the Credit Agreements is hereby amended to read in its entirety
as follows:
“(a)    (i) any “person” or “group” (within the meaning of Sections 13(d) and
14(d) of the Exchange Act) other than any Permitted Holder becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 20%, or more, of the Stock of DASAN Zhone Solutions, Inc. having
the right to vote for the election of members of the Board of Directors, or (ii)
a Permitted Holder becomes the beneficial owner, directly or indirectly, of 65%,
or more, of the Stock of DASAN Zhone Solutions, Inc. having the right to vote
for the election of members of the Board of Directors; or”

3

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

(b)    The following definition of “DASAN” is hereby added in alphabetical order
to Schedule 1.1 to the Credit Agreements:
““DASAN” means DASAN Networks, Inc., a company incorporated under the laws of
Korea.”
(c)    The following definition of “DASAN Loan Agreement” is hereby added in
alphabetical order to Schedule 1.1 to the Credit Agreements:
““DASAN Loan Agreement” means that certain Loan Agreement, dated as of September
9, 2016, between DASAN and DASAN Zhone Solutions, Inc., as the same may be
amended, restated, replaced, modified or supplemented from time to time in
accordance with the terms thereof and the terms of this Agreement and the DASAN
Subordination Agreement.”
(d)    The following definition of “DASAN Subordination Agreement” is hereby
added in alphabetical order to Schedule 1.1 to the Credit Agreements:
““DASAN Subordination Agreement” means that certain Subordination Agreement,
dated as of September 9, 2016, made by DASAN for the benefit of Lender and
acknowledged by DASAN Zhone Solutions, Inc., as the same may be amended,
modified, or supplemented from time to time.”
(e)    The following definition of “DNS” is hereby added in alphabetical order
to Schedule 1.1 to the Credit Agreements:
““DNS” means Dasan Network Solutions, Inc., a California corporation.”
(f)    The definition of “Guarantor” that appears in Schedule 1.1 to the Credit
Agreements is hereby amended to read in its entirety as follows:
““Guaranty” means any guaranty that may be executed and delivered from time to
time by a Guarantor or DNS in favor of Lender in form and substance reasonably
satisfactory to Lender.”
(g)    The definition of “Loan Document” that appears in Schedule 1.1 to the
Credit Agreements is hereby amended to read in its entirety as follows:
““Loan Documents” means this Agreement, any Borrowing Base Certificate, the
Control Agreements, the Cash Management Documents, the Copyright Security
Agreement, each Guaranty, the Intercompany Subordination Agreement, the DASAN
Subordination Agreement, the Letters of Credit, the Mortgages, the Patent and
Trademark Security Agreement, any note or notes executed by any Borrower in
connection with this Agreement and payable to Lender, any Letter of Credit
Applications and other Letter of Credit Agreements entered into by any Borrower
in connection with this Agreement, and any other instrument or agreement entered
into, now or in the future, by any Loan Party

4

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

or any of its Subsidiaries and Lender in connection with this Agreement, but
specifically excluding all Hedge Agreements.”
(h)    The following definition of “Merger” is hereby added in alphabetical
order to Schedule 1.1 to the Credit Agreements:
““Merger” means the merger of Dragon Acquisition Corporation, a California
corporation, with and into DNS, with DNS surviving as a wholly-owned subsidiary
of DASAN Zhone Solutions, Inc., as contemplated by the Merger Agreement.”
(i)    The following definition of “Merger Agreement” is hereby added in
alphabetical order to Schedule 1.1 to the Credit Agreements:
““Merger Agreement” means that certain Agreement and Plan of Merger, dated as of
April 11, 2016, by and among Zhone Technologies, Inc. (now known as DASAN Zhone
Solutions, Inc.), Dragon Acquisition Corporation, a California corporation,
DASAN and DNS.”
(j)    The definition of “Permitted Acquisition” that appears in Schedule 1.1 to
the Credit Agreements is hereby amended by inserting “(i)” immediately prior to
the phrase “any Acquisition” in the first line thereof, inserting the phrase
“pursuant to this clause (i)” immediately after the phrase “the purchase price
consideration payable in respect of all Permitted Acquisitions” in clause (j)
thereof, replacing the “.” at the end of clause (j) thereof with “; and”, and
inserting a new clause (ii) at the end thereof to read in its entirety as
follows:
“(ii)    the Acquisition of DNS and its Subsidiaries pursuant to the Merger
Agreement.”
(k)    The following definition of “Permitted Holder” is hereby added in
alphabetical order to Schedule 1.1 to the Credit Agreements:
““Permitted Holder” means DASAN or any Person that is an beneficial owner of
Stock of DASAN Zhone Solutions, Inc. solely through such Person’s ownership of
Stock of DASAN; provided that in no event shall any Loan Party or any Subsidiary
of a Loan Party constitute a Permitted Holder.”
(l)    The definition of “Permitted Indebtedness” that appears in Schedule 1.1
to the Credit Agreements is hereby amended by deleting the “and” and the end of
clause (h) thereof, replacing the “.” at the end of clause (i) thereof with “;
and”, and adding a new clause (j) at the end thereof to read in its entirety as
follows:
“(j)    unsecured Indebtedness incurred pursuant to the DASAN Loan Agreement in
an aggregate principal amount not to exceed $5,000,000 (together with accrued
and unpaid interest thereon), so long as such Indebtedness remains subject to
the DASAN Subordination Agreement.”

5

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

(m)    The definition of “Permitted Investments” that appears in Schedule 1.1 to
the Credit Agreements is hereby amended by deleting the “and” and the end of
clause (f) thereof, replacing the “.” at the end of clause (g) thereof with “;
and”, and adding a new clause (h) at the end thereof to read in its entirety as
follows:
“(h)    Permitted Acquisitions.”
2.    No Other Changes. Except as explicitly amended by this Amendment or the
other Loan Documents delivered in connection with this Amendment, all of the
terms and conditions of the Credit Agreements and the other Loan Documents shall
remain in full force and effect and shall apply to any advance or letter of
credit thereunder. This Amendment shall be deemed to be a “Loan Document” (as
defined in the Credit Agreements).
3.    Amendment Fee. [Intentionally Omitted].
4.    Consents. Upon satisfaction of the conditions precedent set forth in
Sections 5.1, 5.6, 5.8 and 5.10 of this Amendment, and notwithstanding any
restrictions in the Credit Agreements, Lender hereby consents to (i) the Merger,
so long as that the Merger is consummated in accordance with the terms of the
Merger Agreement, (ii) the DASAN Change of Control, and (iii) the Zhone Name
Change, so long as each of the foregoing occurs, and all of the conditions
precedent set forth in Section 5 have been satisfied, on or prior to September
12, 2016.
5.    Conditions Precedent. Except as provided in Section 4, this Amendment
shall be effective when Lender shall have received each of the following, each
in substance and form acceptable to Lender in its reasonable discretion and duly
executed by all relevant parties:
5.1    A duly executed original of this Amendment;
5.2    A Continuing Guaranty duly executed by DNS;
5.3    A Subordination Agreement duly executed by DASAN and acknowledged by
Zhone Technologies;
5.4    An Agreement of Merger duly executed by DNS and Merger Sub and filed with
the Secretary of State of the State of California;
5.5    Certificates of Authority from the corporate secretaries of the Borrowers
and Guarantors and the corporate secretary of DNS;
5.6    A certificate of an Authorized Person of Zhone Technologies certifying as
to true, correct and complete copy of the Merger Agreement;
5.7    A certificate of an Authorized Person of Zhone Technologies certifying as
to true, correct and complete copy of that certain Loan Agreement, dated as of
the date of consummation of the Merger, between DASAN and Zhone Technologies;

6

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

5.8    Consent and approval of this Amendment by the Export Import Bank of the
United States;
5.9    Evidence reasonably satisfactory to Lender that the Zhone Name Change has
occurred; and
5.10    The representations and warranties set forth in this Amendment must be
true and correct.
6.    Post-Amendment Covenants. The obligations of Lender to continue to make
Advances (or otherwise extend credit under the Credit Agreements) is subject to
the satisfaction of the following covenants, and the failure by Borrowers to so
perform or cause to be performed the following as and when required, unless
extended or otherwise waived in writing by Lender (in Lender’s sole discretion),
shall constitute an Event of Default:
6.1    Within 30 days after the date of this Agreement, the Credit Agreements
shall be amended, in form and substance reasonably satisfactory to Lender, to
join DNS as a “Guarantor” and a “Loan Party” under, and as a party to, the
Credit Agreements and the other Loan Documents, as applicable, and the Loan
Parties and DNS shall take such action as may be required pursuant to Section
6.15 of the Credit Agreements with respect to DNS and its Subsidiaries; provided
that such amendment shall not permit any Loan Party to make any Investments in
DNS or its Subsidiaries following the consummation of the Merger without
Lender’s consent; and
6.2    Within 30 days after the date of this Agreement, the Information
Certificate shall be amended and restated, in form and substance satisfactory to
Lender, by the Loan Parties and DNS to include information about DNS.
7.    Representations and Warranties. Borrowers and Guarantors hereby represent
and warrant to Lender as follows:
7.1    Borrowers and Guarantors have all requisite power and authority to
execute this Amendment and any other agreements or instruments required
hereunder and to perform all of their obligations hereunder, and this Amendment
and all such other agreements and instruments have been duly executed and
delivered by Borrowers and Guarantors and constitute the legal, valid and
binding obligation of Borrowers and Guarantors, enforceable against Borrowers
and Guarantors in accordance with its terms, except as enforcement may be
limited by equitable principles or by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors’ rights generally.
7.2    The execution, delivery and performance by Borrowers and Guarantors of
this Amendment and any other agreements or instruments required hereunder have
been duly authorized by all necessary corporate action on the part of Borrowers
and Guarantors and do not (i) require any authorization, consent or approval by
any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, other than authorizations, consents or
approvals that have been obtained and are in full force and effect or as
contemplated by

7

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

Section 4.2, (ii) violate any material provision of any law, rule or regulation
or of any order, writ, injunction or decree presently in effect, having
applicability to Borrowers or Guarantors, or the certificates of incorporation
or by-laws of Borrowers or Guarantors, or (iii) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other Material Contract to which Borrowers or Guarantors are a party or by which
Borrowers and Guarantors or their respective properties may be bound or
affected, except to the extent that any such breach or default could not
individually or in the aggregate reasonably be expected to cause a Material
Adverse Change.
7.3    All of the representations and warranties contained in Section 5 and
Exhibit D of the Credit Agreements are true and correct in all material respects
on and as of the date hereof as though made on and as of such date, except to
the extent that such representations and warranties relate solely to an earlier
date (in which case such representations and warranties continue to be true and
correct in all material respects as of such earlier date).
8.    References. All references in the Credit Agreements to “this Agreement”
shall be deemed to refer to the Credit Agreements as amended hereby; and any and
all references in the other Loan Documents to the Credit Agreements shall be
deemed to refer to the Credit Agreements as amended hereby.
9.    No Waiver. The execution of this Amendment and the acceptance of all other
agreements and instruments related hereto shall not be deemed to be a waiver of
any Default or Event of Default under the Credit Agreements or a waiver of any
breach, default or event of default under any Loan Document or other document
held by Lender, whether or not known to Lender and whether or not existing on
the date of this Amendment.
10.    Release. Borrowers and Guarantors hereby absolutely and unconditionally
release and forever discharge 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 Borrowers or Guarantors
have had, now have or have 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 Amendment, whether such
claims, demands and causes of action are matured or unmatured or known or
unknown. It is the intention of the Borrowers and Guarantors 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
of the Borrowers and Guarantors waives and relinquishes all rights and benefits
under Section 1542 of the Civil Code of the State of California, which provides:
“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

8

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

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.
11.    Costs and Expenses. Borrowers agree to pay all reasonable out-of-pocket
fees and disbursements of counsel to Lender for the services performed by such
counsel in connection with the preparation of this Amendment and the documents
and instruments incidental hereto. Borrowers hereby agree that Lender may, at
any time or from time to time in its sole discretion and without further
authorization by Borrowers, make a loan to Borrowers under the Credit
Agreements, or apply the proceeds of any loan, for the purpose of paying any
such reasonable out-of-pocket fees, disbursements, costs and expenses.
12.    Miscellaneous. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall constitute one and
the same instrument. Transmission by facsimile or “pdf” file of an executed
counterpart of this Amendment shall be deemed to constitute due and sufficient
delivery of such counterpart. Any party hereto may request an original
counterpart of any party delivering such electronic counterpart. This Amendment
and the rights and obligations of the parties hereto shall be construed in
accordance with, and governed by, the laws of the State of California. In the
event of any conflict between this Amendment and the Credit Agreements, the
terms of this Amendment shall govern.
[Signature Pages Follow]

9

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

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.

BORROWERS:

ZHONE TECHNOLOGIES, INC.
By: /s/ KIRK MISAKA
Name: Kirk Misaka
Title: Chief Financial Officer

ZTI MERGER SUBSIDIARY III, INC.
By: /s/ KIRK MISAKA
Name: Kirk Misaka
Title: Chief Financial Officer

[SIGNATURES CONTINUED ON NEXT PAGE]

WFB/Zhone
Sixth Amendment to Credit and Security Agreements
and Consent
S-1

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

GUARANTORS:
 

PREMISYS COMMUNICATIONS, INC.
By: /s/ KIRK MISAKA
Name: Kirk Misaka
Title: Chief Financial Officer

ZHONE TECHNOLOGIES INTERNATIONAL, INC.
By: /s/ KIRK MISAKA
Name: Kirk Misaka
Title: Chief Financial Officer

PARADYNE NETWORKS, INC.
By: /s/ KIRK MISAKA
Name: Kirk Misaka
Title: Chief Financial Officer

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

WFB/Zhone
Sixth Amendment to Credit and Security Agreements
and Consent
S-2

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

LENDER:

WELLS FARGO BANK, NATIONAL ASSOCIATION

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

WFB/Zhone
Sixth Amendment to Credit and Security Agreements
and Consent
S-3