Zhone Technologies (ZHNE)

We have significant debt obligations, which could adversely affect our business, operating results and financial condition.

As of December 31, 2008, we had approximately $34.1 million of total debt, of which $15.4 million was current and $18.7 million was long-term. Our debt obligations could materially and adversely affect us in a number of ways, including:

We cannot assure you that we will be able to generate sufficient cash flow in amounts sufficient to enable us to service our debt or to meet our working capital and capital expenditure requirements. If we are unable to

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generate sufficient cash flow from operations or to borrow sufficient funds to service our debt, due to borrowing base restrictions or otherwise, we may be required to sell assets, reduce capital expenditures or obtain additional financing. We cannot assure you that we will be able to engage in any of these actions on reasonable terms, if at all.

We have significant debt obligations, which could adversely affect our business, operating results and financial condition.

As of December 31, 2007, we had approximately $34.4 million of total debt, of which $15.3 million was current and $19.1 million was long-term. Our debt obligations could materially and adversely affect us in a number of ways, including:

We cannot assure you that we will be able to generate sufficient cash flow in amounts sufficient to enable us to service our debt or to meet our working capital and capital expenditure requirements. If we are unable to generate sufficient cash flow from operations or to borrow sufficient funds to service our debt, due to borrowing base restrictions or otherwise, we may be required to sell assets, reduce capital expenditures or obtain additional financing. We cannot assure you that we will be able to engage in any of these actions on reasonable terms, if at all.

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We have significant debt obligations, which could adversely affect our business, operating results and financial condition.

As of December 31, 2006, we had approximately $41.5 million of total debt, of which $22.1 million was current and $19.4 million was long-term. Our debt obligations could materially and adversely affect us in a number of ways, including:

We cannot assure you that we will be able to generate sufficient cash flow in amounts sufficient to enable us to service our debt or to meet our working capital and capital expenditure requirements. If we are unable to generate sufficient cash flow from operations or to borrow sufficient funds to service our debt, due to borrowing base restrictions or otherwise, we may be required to sell assets, reduce capital expenditures or obtain additional financing. We cannot assure you that we will be able to engage in any of these actions on reasonable terms, if at all.

We have significant debt obligations, which could adversely affect our business, operating results and financial condition.

As of December 31, 2005, we had approximately $44.3 million of total debt, of which $15.7 million was current and $28.6 million was long-term. Our debt obligations could materially and adversely affect us in a number of ways, including:

We cannot assure you that we will be able to generate sufficient cash flow in amounts sufficient to enable us to service our debt or to meet our working capital and capital expenditure requirements. If we are unable to generate sufficient cash flow from operations or to borrow sufficient funds to service our debt, due to borrowing base restrictions or otherwise, we may be required to sell assets, reduce capital expenditures or obtain additional financing. We cannot assure you that we will be able to engage in any of these actions on reasonable terms, if at all.

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We have significant debt obligations, which could adversely affect our business, operating results and financial condition.

As of September 30, 2005, we had approximately $56.0 million of total debt, of which $47.1 million was current and $8.9 million was long-term. Our debt obligations could materially and adversely affect us in a number of ways, including:

We cannot assure you that we will be able to refinance our current debt, or generate sufficient cash flow in amounts sufficient to enable us to service our debt or to meet our working capital and capital expenditure requirements. If we are unable to generate sufficient cash flow from operations or to borrow sufficient funds to service our debt, due to borrowing base restrictions or otherwise, we may be required to sell assets, reduce capital expenditures, or obtain additional financing. We cannot assure you that we will be able to engage in any of these actions on reasonable terms, if at all.

We have significant debt obligations, which could adversely affect our business, operating results and financial condition.

As of June 30, 2005, we had approximately $56.7 million of total debt, of which $47.9 million was current and $8.8 million was long-term. Our debt obligations could materially and adversely affect us in a number of ways, including:

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We cannot assure you that we will be able to refinance our current debt, or generate sufficient cash flow in amounts sufficient to enable us to service our debt or to meet our working capital and capital expenditure requirements. If we are unable to generate sufficient cash flow from operations or to borrow sufficient funds to service our debt, due to borrowing base restrictions or otherwise, we may be required to sell assets, reduce capital expenditures, or obtain additional financing. We cannot assure you that we will be able to engage in any of these actions on reasonable terms, if at all.

We have significant debt obligations, which could adversely affect our business, operating results and financial condition.

As of March 31, 2005, we had approximately $59.0 million of total debt, of which $18.9 million is current and $31.1 million matures in April 2006. Our debt obligations could materially and adversely affect us in a number of ways, including:

We cannot assure you that we will generate sufficient cash flow or be able to borrow funds in amounts sufficient to enable us to service our debt or to meet our working capital and capital expenditure requirements. If we are unable to generate sufficient cash flow from operations or to borrow sufficient funds to service our debt, due to borrowing base restrictions or otherwise, we may be required to sell assets, reduce capital expenditures, refinance all or a portion of existing debt or obtain additional financing. We cannot assure you that we will be able to engage in any of these actions on reasonable terms, if at all.

We have significant debt obligations, which could adversely affect our business, operating results and financial condition.

As of December 31, 2004, we had approximately $39.9 million in long-term debt. Our debt obligations could materially and adversely affect us in a number of ways, including:

We cannot assure you that we will generate sufficient cash flow or be able to borrow funds in amounts sufficient to enable us to service our debt or to meet our working capital and capital expenditure requirements. If we are unable to generate sufficient cash flow from operations or to borrow sufficient funds to service our debt, due to borrowing base restrictions or otherwise, we may be required to sell assets, reduce capital expenditures, refinance all or a portion of existing debt or obtain additional financing. We cannot assure you that we will be able to engage in any of these actions on reasonable terms, if at all.

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