Deal Description: On January 5, 2024, DZS Inc. (“DZS”) and its subsidiary DZS California Inc. entered into a Stock Purchase Agreement with Korea-based DASAN Networks, Inc., a significant stockholder of DZS (“DNI”), pursuant to which DZS agreed to sell its Asia business to DNI for approximately $48 million, consisting of cash and the assumption or elimination of debt. The Asia business is comprised of DZS’ subsidiaries in Korea, China, India, Japan and Vietnam. The sale is expected to close in February 2024, subject to regulatory approvals and other customary closing conditions.

In addition, on December 29, 2023, DZS, as borrower, entered into a Loan Agreement with EdgeCo, LLC, as lender. Pursuant to the Loan Agreement, DZS received a three-year term $15,000,000 loan (the “Loan”). The principal amount of the Loan is payable on December 29, 2026 and bears interest at a fixed rate of 13.0% per annum. The Loan is secured by certain assets of the Company. In connection with the Loan Agreement, DZS and EdgeCo also entered into (i) a Warrant Agreement, pursuant to which DZS issued a warrant to EdgeCo to subscribe for 6,100,000 shares of DZS common stock at an exercise price of $1.84 per share (the prior day’s closing price), and (ii) a Registration Rights Agreement that provides EdgeCo customary demand and piggyback registration rights for the shares of common stock underlying the warrant, in the event the warrant is exercised.

Also on December 29, 2023, DZS entered into a Securities Purchase Agreement with Korea-based IV Global Fund No. 4. The general partner of IV Global Fund No. 4 is Invites Ventures Co., Ltd. and its limited partners are affiliates of DNI. On January 3, 2024, pursuant to the Securities Purchase Agreement, DZS issued 5,434,783 shares of common stock to IV Global Fund No. 4, at a purchase price of $1.84 per share (the prior day’s closing price), in a private placement. In connection with such private placement, the parties entered into an Amended and Restated Registration Rights Agreement, which amended and restated the existing Registration Rights Agreement between DZS and DNI.

Baker Botts represented DZS in the sale of its Asia business, as well as the loan and warrant transaction and the private placement.

DZS Inc. (Nasdaq: DZSI) is a global leader of access, optical and AI-driven cloud software solutions.

In-House Counsel for DZS: Justin Ferguson

Korean Counsel for Asia Sale: Jipyong LLC

Baker Botts Lawyers/Office Involved:

Corporate: Preston Bernhisel (Partner, Dallas); Derek Gabriel (Associate, Dallas); Maddie Boezinger (Associate, Dallas)

Finance: Luke Weedon (Partner, Dallas); Demi Kampakis (Associate, Dallas)

Tax: Steve Marcus (Partner, Dallas)

IP License: Steve Mann (Partner, Dallas)

For more information, please see DZS’ news release by clicking here.

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