PROPOSAL 1:

ELECTION OF DIRECTORS

General

Our Board of Directors has fixed its membership at nine. In accordance with our certificate of incorporation, we divide our Board into three classes with each class currently consisting of three members. We elect one class of directors to serve a three year term at each annual meeting of stockholders. At this year’s annual meeting of stockholders, we will elect two Class I directors to hold office until the 2008 annual meeting. At next year’s annual meeting of stockholders, we will elect three Class II directors to hold office until the 2009 annual meeting, and the following year, we will elect three Class III directors to hold office until the 2010 annual meeting. Thereafter, elections will continue in a similar manner at subsequent annual meetings. Each elected director will continue to serve until his successor is duly elected or appointed.

The Board of Directors unanimously nominated Adam Clammer and Robert K. Dahl as Class I nominees for election to the Board. One of our directors, Barton Y. Shigemura, will be retiring at the annual meeting. Zhone is grateful to him for the time and wise counsel he has provided since joining the Board in 2003, and wishes him well in his future endeavors. As a result of Mr. Shigemura’s retirement, the Board will reduce its size from nine to eight and will reduce the size of the Class I directors being elected at the annual meeting from three to two, effective immediately prior to the election of the Class I directors at the annual meeting.

Unless proxy cards are otherwise marked, the persons named as proxies will vote all proxies received “FOR” the election of Messrs. Clammer and Dahl. If any director nominee is unable or unwilling to serve as a nominee at the time of the annual meeting, the persons named as proxies may vote either (1) for a substitute nominee designated by the present Board to fill the vacancy or (2) for the balance of the nominees, leaving a vacancy. Alternatively, the Board may reduce the size of the Board. The Board has no reason to believe that any of the nominees will be unable or unwilling to serve if elected as a director.

The following table sets forth for each nominee to be elected at the annual meeting and for each director whose term of office will extend beyond the annual meeting, the age of each nominee or director, the positions currently held by each nominee or director with Zhone, the year in which each nominee’s or director’s current term will expire, and the class of director of each nominee or director.

Class I Directors with Terms Expiring at this Annual Meeting

Adam Clammer has served as a director of Zhone since August 2002. Mr. Clammer is a Director at Kohlberg Kravis Roberts & Co., or KKR, a private equity investment firm, where he has worked since 1995. Prior to joining KKR, he was in the Mergers and Acquisitions Department at Morgan Stanley & Co. from 1992 to 1995. Mr. Clammer also serves as a director of Jazz Pharmaceuticals, MedCath Corporation and NuVox, Inc. Mr. Clammer received his B.S. in Business Administration from the University of California and his M.B.A. from Harvard Business School.

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Robert K. Dahl has served as a director of Zhone since June 1999. Since January 1998, Mr. Dahl has served as a partner of Riviera Ventures LLP, a private investment firm. Previously, Mr. Dahl held various senior management positions with Ascend Communications, Inc., most recently as Executive Vice President from October 1997 to January 1998 and Chief Financial Officer from January 1994 to October 1997. Mr. Dahl also serves as a director of the Dahl Family Foundation and NorCal Community Bancorp. Mr. Dahl holds a B.S. in Finance from the University of California at Berkeley.

Barton Y. Shigemura has served as a director of Zhone since November 2003 following the consummation of Zhone’s merger with Tellium, Inc. Mr. Shigemura currently serves as President and CEO for Yotta Yotta Inc., a high performance net storage company. From December 2002 to March 2003, Mr. Shigemura worked as a consultant. From 1999 to 2002, Mr. Shigemura was Chairman of Alidian Networks, a developer of layer two metro optical networking platforms. From 1998 to 1999, Mr. Shigemura was Vice President of Marketing for all data products at Lucent Technologies, which he joined through the acquisition of Yurie Systems. From 1996 to 1998, Mr. Shigemura was a board member and the Senior Vice President of Sales and Marketing at Yurie Systems. Mr. Shigemura has held a number of sales and marketing roles at Premisys Communications, Nortel Networks, General DataComm, and IBM. Mr. Shigemura also serves as a director of Cibernet Corporation, LMIC, Inc., Rappahannock Cellars and Yotta Yotta Inc. Mr. Shigemura earned his B.S. in Finance and Marketing from University of Southern California.

Class II Directors with Terms Expiring in 2006

James G. Coulter has served as a director of Zhone since November 1999. Since January 1993, Mr. Coulter has been a founding partner of Texas Pacific Group, or TPG, a private equity investment firm. Mr. Coulter serves on the board of directors of J. Crew Group, Inc. and Seagate Technology. Mr. Coulter holds a B.A. in Engineering Sciences from Dartmouth College and an M.B.A. from Stanford University.

James H. Greene, Jr. has served as a director of Zhone since November 1999. Since January 1996, Mr. Greene has been a member of the limited liability company which serves as the general partner of KKR. Mr. Greene also serves as a director of Accuride Corporation, Alliance Imaging Inc., NuVox, Inc., Owens-Illinois, Inc. and Shoppers Drug Mart Corp. Mr. Greene holds a B.S. in Economics from the University of Pennsylvania.

C. Richard Kramlich has served as a director of Zhone since November 1999. Since June 1978, Mr. Kramlich has been a general partner of New Enterprise Associates, or NEA, a venture capital firm. Mr. Kramlich also serves as a director of Celetronix Ltd., Decru, Inc., Fabric7 Systems, Inc., Financial Engines, Inc., Force 10 Networks, Inc., Foveon, Inc., Graphic Enterprises, Inc., Informative, Inc., Panda Micro Devices, Inc., Sierra Monitor Corp. and Xoom Corporation. Mr. Kramlich holds a B.S. in History from Northwestern University and an M.B.A. from Harvard University.

Class III Directors with Terms Expiring in 2007

Morteza Ejabat is a co-founder of Zhone and has served as Chairman of the Board of Directors and Chief Executive Officer since June 1999. Prior to co-founding Zhone, from June 1995 to June 1999, Mr. Ejabat was President and Chief Executive Officer of Ascend Communications, Inc., a provider of telecommunications equipment which was acquired by Lucent Technologies, Inc. in June 1999. Previously, Mr. Ejabat held various senior management positions with Ascend from September 1990 to June 1995, most recently as Executive Vice President and Vice President, Operations. Mr. Ejabat holds a B.S. in Industrial Engineering and an M.S. in Systems Engineering from California State University at Northridge and an M.B.A. from Pepperdine University.

Michael M. Connors has served as a director of Zhone since November 2003 following the consummation of Zhone’s merger with Tellium, Inc. Dr. Connors had been a member of Tellium’s board of directors since June 2000. From 1992 to 1998, Dr. Connors held the office of President of AOL Technologies, an internet service provider, where he led the creation and growth of AOLnet and the development of AOL software and services.

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Dr. Connors is currently a director of The Connors Foundation. Dr. Connors earned a B.S. in Engineering, an M.S. in Statistics and a Ph.D. in Operations Research from Stanford University.

James D. Timmins has served as a director of Zhone since July 2002. From 1998 to 2004, Mr. Timmins was a general partner and Managing Director for NIF Ventures, the U.S. venture capital operation of The Daiwa Securities Group of Japan, an investment banking firm. From 1991 to 1998, Mr. Timmins was a partner at Redwood Partners, an investment firm. From 1987 to 1990, Mr. Timmins was a principal at Hambrecht & Quist, an investment banking firm. Previously, Mr. Timmins was co-founder and Chief Executive Officer of McKewon & Timmins, an investment firm, and an associate in the Corporate Finance Department at Salomon Brothers, an investment firm, from 1982 to 1984. Mr. Timmins also serves as a director of Escend Technologies, Inc., NetContinuum, Inc. and WaveSplitter Technologies, Inc. Mr. Timmins holds a B.A. in History and Philosophy from the University of Toronto and an M.B.A. from Stanford University.

There are no family relationships among any of the executive officers, directors or director nominees of Zhone. Messrs. Clammer, Coulter, Greene and Kramlich are associated with Zhone’s major stockholders as described above and as set forth in the section entitled “Ownership of Securities.” Zhone has entered into letter agreements with each of KKR-ZT L.L.C., TPG-Zhone, L.L.C. and New Enterprise Associates VIII, Limited Partnership, each dated as of November 13, 2003, relating to the nomination of designees to the Board of Directors. These letter agreements provide that at any annual or special meeting called or in any other action taken for the purpose of electing directors to Zhone’s Board of Directors, Zhone agrees to nominate as directors (1) two nominees designated by KKR, who shall initially be Messrs. Clammer and Greene and who shall be placed in separate classes if Zhone has a classified Board of Directors, (2) two nominees designated by TPG, who shall initially be Messrs. Coulter and Timmins and who shall be placed in separate classes if Zhone has a classified Board of Directors, and (3) one nominee designated by New Enterprise Associates VIII, Limited Partnership, who shall initially be Mr. Kramlich. Each of KKR’s and TPG’s rights to designate one nominee to the Zhone Board of Directors shall terminate at such time that KKR or TPG holds less than 50% of the shares of capital stock issued to it in connection with the merger with Tellium, and each of KKR’s and TPG’s rights to designate any remaining nominee shall terminate at such time that KKR or TPG holds less than 25% of the shares issued to it in connection with the merger with Tellium. NEA’s rights to designate its nominee shall terminate at such time that NEA holds less than 50% of the shares of capital stock issued to it in connection with the merger with Tellium.

Recommendation of the Board

The Board of Directors unanimously recommends that you vote “ FOR ” the election of Messrs. Clammer and Dahl.

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