Zhone Technologies Announces Plans for Reverse Stock Split and Stock Option Repricing

OAKLAND, Calif.--(Business Wire)--
Zhone Technologies, Inc. (NASDAQ:ZHNE), a global leader in
multi-service access solutions, announced today that its Board of
Directors has authorized a reverse stock split and repricing of stock
options. Zhone has decided to pursue the reverse stock split in order
to regain compliance with the minimum bid price requirement of The
Nasdaq Stock Market ("Nasdaq"). Zhone plans to select a reverse stock
split ratio of between 1-for-5 and 1-for-10, such that between 5 and
10 shares of issued and outstanding common stock will convert into one
share of common stock. It also plans to exchange stock options held by
current employees, officers and directors for new stock options with
an exercise price equal to the last reported sale price of Zhone's
common stock on the date of grant.

The reverse stock split and stock option repricing are subject to
the approval of Zhone's stockholders. Zhone filed a preliminary proxy
statement with the SEC today for a special meeting of stockholders at
which such approval will be sought. The time, date, location and other
details regarding the special meeting will be communicated to
stockholders at a later date. Zhone currently expects to complete the
transactions in the fourth quarter of 2008.

"After thorough evaluation, we've concluded that a reverse stock
split is the best alternative to comply with Nasdaq's minimum bid
requirements and to ensure that our stock continues to trade on The
Nasdaq Global Market," stated Mory Ejabat, Zhone's chief executive
officer. "We also believe that the repricing of stock options is
necessary to create the proper incentives going forward to ensure that
the company's actions are properly aligned with our stockholders' best
interests."

About Zhone Technologies -- Access for a Converging World

Zhone Technologies, Inc. (NASDAQ:ZHNE) is a global leader in
multi-service access network solutions, serving more than 700 of the
world's most innovative network operators. The company offers the
industry's broadest fully-integrated portfolio of MSAP, FTTx, EFM and
Wi-Fi access technologies, enabling a full suite of services,
including residential and business broadband, VoIP, and
High-Definition IPTV. Zhone's converged multi-service access platform
helps operators rapidly deploy premium services using copper, fiber,
and wireless while improving network agility and reducing costs.
www.zhone.com

Zhone, the Zhone logo, and all Zhone product names are trademarks
of Zhone Technologies, Inc. Other brand and product names are
trademarks of their respective holders. Specifications, products,
and/or product names are all subject to change without notice.
Copyright (C) 2008 Zhone Technologies, Inc. All rights reserved.

Additional Information Regarding the Proposed Transactions

Zhone has filed a preliminary proxy statement with the SEC in
connection with the proposed transactions. In addition, Zhone will
file other information and documents concerning the proposed
transactions with the SEC. ZHONE URGES INVESTORS TO REVIEW THE PROXY
STATEMENT AND OTHER INFORMATION FILED WITH THE SEC BECAUSE THEY
CONTAIN IMPORTANT INFORMATION. These documents are available without
charge on the SEC's web site at www.sec.gov. A free copy of the final
proxy statement may also be obtained from Zhone through its Investor
Relations contacts. INVESTORS SHOULD READ THE PROXY STATEMENT
CAREFULLY BEFORE MAKING ANY VOTING DECISIONS.

The officers and directors of Zhone may have interests in the
proposed transactions, some of which may differ from, or may be in
addition to, those of the stockholders of Zhone generally. A
description of the interests that the officers and directors of Zhone
have in the proposed transactions will be available in the final proxy
statement.

In addition, Zhone, its officers, directors and certain other
members of its management and employees may be deemed to be
participants in the solicitation of proxies from the stockholders of
Zhone in favor of the transactions. Information about the officers and
directors of Zhone and their ownership of Zhone securities is set
forth in the preliminary proxy statement filed with the SEC today.
Investors may obtain more detailed information concerning the
participants by reading the final proxy statement when it is filed
with the SEC.

Forward-Looking Statements

This press release contains forward-looking statements that are
subject to the safe harbors created under the Securities Act of 1933
and the Securities Exchange Act of 1934. 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 are
intended to identify forward-looking statements. Readers are cautioned
that actual results could differ materially from those expressed in or
contemplated by the forward-looking statements. Factors that could
cause actual results to differ include, but are not limited to, the
possibility that the reverse stock split and stock option repricing
may not be completed in accordance with the timing or terms described
in this release, or at all, the possibility that the intended benefits
of the reverse stock split and stock option repricing may not be fully
realized, the possibility that Zhone may not be able to sustain a
stock price adequate to comply with Nasdaq's minimum bid requirements
even with the reverse stock split, the possibility that Zhone may not
meet other criteria for continued listing on Nasdaq, as well as other
risk factors contained in the company's SEC filings available at
www.sec.gov, including without limitation, the company's annual report
on Form 10-K for the year ended December 31, 2007 and Zhone's
quarterly reports on Form 10-Q for the quarters ended March 31, 2008
and June 30, 2008. Readers are cautioned not to place undue reliance
on any forward-looking statements, which speak only as of the date on
which they are made. Zhone undertakes no obligation to update or
revise any forward-looking statements for any reason.

Zhone Technologies, Inc.
Molly Del Toro, +1 510-777-7013
Fax: +1 510-777-7001
Investor Relations
E: investor-relations@zhone.com
or
Tracy Oliver, +1 510-665-7984
Mobile: +1 925-640-0989
Public Relations
E: tracy@skycastlemedia.com

Copyright Business Wire 2008