Verilink Acquires DACS and Edge Concentrator Product Lines From Zhone Acquisition of ArcaDACS 100/Sechtor 300 Expands Verilink's Reach to the Network Edge; Provides Continuity With Verilink's Largest Customer and Improves Gross Margin CENTENNIAL, CO -- (MARKET WIRE) -- 10/03/05 -- Verilink Corporation (NASDAQ: VRLK), a leading provider of broadband access solutions, today announced the acquisition of the ArcaDACS(TM) 100 Digital Access Cross-Connect System (DACS) and the Sechtor(R) 300 Multiservice Edge Concentrator product lines from Zhone Technologies, Inc. (NASDAQ: ZHNE). The all-stock transaction, which closed on September 30, 2005, follows a successful three-year OEM relationship with Zhone under which Verilink has marketed, sold and supported the ArcaDACS 100. The ArcaDACS 100 is being deployed by Verilink's largest customer, the largest domestic ILEC, as part of a fully managed voice and data bundled T1 service intended for small- to mid-sized businesses in the U.S. Through this asset acquisition, Verilink gains all rights and interests in the ArcaDACS 100 and Sechtor 300 products, including rights to the product designs and all associated intellectual property, saleable inventory, existing customer contracts, as well as future manufacturing rights. No employees were included in this acquisition. "This acquisition is strategic to Verilink as the ArcaDACS is an integral part of the solution we provide to our largest customer, and we look forward to enhancing our value to all customers including those gained through this agreement," said Leigh S. Belden, President and CEO of Verilink. "This acquisition also complements the margin improvement initiatives that we launched in recent quarters. Structured as an all-stock transaction, the terms were attractive from an ROI and balance sheet perspective when combined with the saleable inventory we gained through this transaction." Mory Ejabat, Chairman and CEO of Zhone, said, "We are pleased that Verilink has chosen to include the ArcaDACS and Sechtor 300 products in its family of telecommunications product portfolio. With this transaction, our customers benefit from continued sales of these products as well as from Verilink's experience in servicing these products at its largest customers." The ArcaDACS 100 is a new generation 3/1/0 DACS product designed to consolidate and groom circuits to increase trunk efficiency. The Sechtor 300, a combines the DACS functionality of the ArcaDACS 100 with GR-303 voice concentration and to further increase trunk efficiencies and enable voice over-subscription services between the edge access network and the serving office equipment. The ArcaDACS 100 and Sechtor 300 products are ideally suited for grooming fractional T1s at the network access facility, allowing carriers to choose switching granularity from DS3 down to DS0, all in one efficient, effective, and economical platform. The ArcaDACS 100 and Sechtor 300 are OSMINE-certified and Network Equipment Building Standard (NEBS) Level-3 compliant. Both are carrier-class products designed to deliver reliable 99.999% service with no single-point-of-failure. The products also comply with all physical, power, and software requirements needed for installation in a central office, remote node, or customer site. As an important component of this deployment, both the ArcaDACS 100 and Sechtor 300 have completed the OSMINE Services certification process for Telcordia(TM) Network Configuration Manager (NCON) and Telcordia(TM) Loop Facilities Assignment and Control System (LFACS) support. This certification helps to ensure operations systems automation to deliver services in a timely fashion and on a volume basis. Customers also will benefit from improved billing, ordering, repair and account management services. The OSMINE services process is an important aspect of a carrier's service offering. The completion of the OSMINE services process allows carriers to pre-qualify the ordering, circuit engineering and provisioning of the service. This flow-through integration reduces provisioning intervals and associated costs. The result for the subscriber is quicker turn-up of service. "Building on our strong IAD and CPE portfolio, with the addition of the ArcaDACS 100 and Sechtor 300 product lines, we have expanded our market position to encompass both the customer premise and the network edge and improved our competitive position with all carriers," Belden added. Notice Under Nasdaq Rule 4350(b) Verilink filed its Annual Report on Form 10-K for the fiscal year ended July 1, 2005 with the Securities and Exchange Commission on September 27, 2005. As required under Nasdaq Rule 4350(b), Verilink is providing notice that the report of Ehrhardt Keefe Steiner & Hottman PC , Verilink's registered independent public accounting firm, on Verilink's financial statements as of July 1, 2005 contains an explanatory paragraph, which refers to our working capital deficiency, operating loss, and negative cash flow and notes that these matters raise substantial doubt about Verilink's ability to continue as a going concern. Verilink has initiated several actions that are intended to address the issues cited in the auditors opinion. Although no such assurance can be given, Management believes that our cash and cash equivalents, anticipated cash flow from operations and anticipated proceeds from the sale of the facility located at 950 Explorer Boulevard, Huntsville, Alabama will be sufficient to fund our operations through the next twelve months. For additional information, see Verilink's Annual Report on Form 10-K, which is available from the SEC's website at http://www.sec.gov or the "News" or "Investor" section of Verilink's website at http://www.verilink.com. The information in this release and our Annual Report on Form 10-K on file with the Securities and Exchange Commission supersedes the information in our July 28, 2004 press release. About Verilink Corporation Verilink Corporation (NASDAQ: VRLK) is a leading provider of next-generation broadband access solutions for today's and tomorrow's networks. The company develops, manufactures and markets a broad suite of products that enable carriers (ILECs, CLECs, IXCs, and IOCs) and enterprises to build converged access networks to cost-effectively deliver next-generation communications services to their end customers. The company's products include a complete line of VoIP, VoATM, VoDSL and TDM-based integrated access devices (IADs), optical access products, wire-speed routers, and bandwidth aggregation solutions including CSU/DSUs, multiplexers and DACS. The company also provides turnkey professional services to help carriers plan, manage and accelerate the deployment of new services. Verilink is headquartered in Centennial, CO (metro Denver area), with operations in Madison, AL, and Newark, CA, and sales offices in the U.S., Europe and Asia. To learn more about Verilink, visit the company's website at http://www.verilink.com. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 Except for the historical information contained herein, the matters set forth in this press release, including the statements as to value enhancement to customers as a result of the acquisition and sufficient cash flow to fund operations through the next twelve months, are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including, but not limited to, the ability of Verilink to implement cost reductions and adjust spending levels, and to sell Verilink's Explorer Boulevard facility, risks associated with Verilink's working capital deficiency, operating loss, and negative cash flow and "going concern" explanatory paragraph in the auditor's report and the ability to successfully integrate acquisitions and achieve expected synergies. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements are included in Verilink's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. These forward-looking statements speak only as of the date hereof. Verilink disclaims any intention or obligation to update or revise any forward-looking statements. Verilink and the Verilink logo are registered trademarks of Verilink Corporation. All other trademarks or registered trademarks are the property of the respective owners. Contact: Gary W. Gray Verilink Corporation 510.771.3354 Contact via http://www.marketwire.com/mw/emailprcntct?id=8AD619F3845927F1 Provider ID: 05096827
Verilink Acquires DACS and Edge Concentrator Product Lines From
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