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                                                                   Exhibit 10.28

NO FEE DOCUMENT

RECORDING REQUESTED BY:

The Redevelopment Agency of the City of Oakland

WHEN RECORDED, MAIL TO:

The City of Oakland
Community and Economic
Development Agency
250 Frank Ogawa Plaza, 5th Floor
Oakland, California 94612

Attention.:  Doug Cole

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               PURCHASE AND SALE AGREEMENT WITH REPURCHASE OPTIONS

        This Purchase and Sale Agreement with Repurchase Options ("Agreement"),
dated as of January 20, 2000, is made by and between the REDEVELOPMENT AGENCY OF
THE CITY OF OAKLAND, a community redevelopment agency organized and existing
under the California Community Redevelopment Law ("Seller" or the "Agency"), and
ZHONE TECHNOLOGIES, INC., a Delaware corporation ("Buyer" or "Zhone") or its
assignee as permitted under this Agreement, pursuant to Redevelopment Agency
Resolution No. 95-52 C.M.S., for the sale and purchase of certain real property
as hereinafter set forth

                                    RECITALS

        This Agreement is entered into based on the following facts and
understandings of the parties:

        A.      The Agency owns approximately 14.50 acres (i.e., 631,620 square
feet) of unimproved and vacant real property located on Oakport Street between
Hassler Way and 66th Avenue (the "Property"), which is designated as "Lot 2" on
that parcel map attached to this Agreement as Exhibit A-1, and more particularly
described in the attached Exhibit A-2. The Property is located in the Coliseum
Redevelopment Project Area.

        B.      Health and Safety Code Section 33430 authorizes a redevelopment
agency within a survey (project) area or for purposes of redevelopment to sell
real property. Health and Safety Code Section 33432 requires that any sale of
real property by a redevelopment agency in a project area must be conditioned on
redevelopment and use of the property in conformity with the redevelopment plan.
Health and Safety Code Section 33439 provides that a redevelopment

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agency must retain controls and establish restrictions or covenants running with
the land for property sold for private use as provided in the redevelopment
plan.

        C.      Zhone desires to occupy the Property for development and use as
an approximately 300,000 square foot telecommunications research and development
campus (the "Project"), which would include Zhone's corporate headquarters and
at anticipated build-out would house the company's administrative offices,
research and development facilities, and final product assembly facilities for
high technology communications equipment. "Phase 1A" of the Project is a planned
one-story, 30,000 square-foot building, "Phase 1B" is a planned two-story,
60,000 square-foot building, "Phase 2" is a planned three-story, 90,000
square-foot building, and "Phase 3" is a planned four-story, 120,000 square-foot
building. These Project phases are illustrated on that site plan attached to
this Agreement as Exhibit B. The Property is zoned M-40 (Heavy Industrial) Zone,
and the uses contemplated by the Project are permitted by right as of the date
of this Agreement under, and the Project will implement the goals and objectives
of, the Zoning Regulations of the City of Oakland (the "City"), the City's
General Plan, and the Agency's Coliseum Area Redevelopment Plan.

        D.      For purposes of this Agreement, the parties have attached
Exhibit A-3 to this Agreement showing the portion of the Property that the
parties anticipate being attributable to each of the Project phases of the
development. Exhibit A-3 shall delineate the Property into three phases referred
to herein as the "Phase 1 Property", the "Phase 2 Property" and the "Phase 3
Property" (collectively, the "Property Phases"). The Phase 1 Property shall
include all improvements associated with Phase 1A and Phase 1B of the Project.
The Phase 2 Property shall include all improvements associated with Phase 2 of
the Project. The Phase 3 Property shall include all improvements associated with
Phase 3 of the Project. The parties understand that the development of the
Property might necessitate certain adjustments to the boundaries between the
different Property Phases, but the parties agree that the Phase 2 Property and
the Phase 3 Property shall each (i) contain a minimum of 3.625 acres, (ii) have
adequate access to Oakport Street and (iii) be substantially in the location
shown on Exhibit A-3 unless otherwise agreed to in writing by the parties.

        E.      The City has conducted all required hearings on the Project and
has fully analyzed all potentially significant environmental effects in
compliance with the California Environmental Quality Act ("CEQA") and the CEQA
Guidelines as more fully described in the Final Environmental Impact Report
("FEIR") for the Coliseum Shoreline Project certified on November 2, 1994, as
modified by that certain Coliseum Shoreline Project EIR Addendum, dated November
5, 1999.

        F.      The Agency desires to sell to Buyer, and Buyer desires to
purchase from the Agency, the Property on a partial installment payment basis as
set forth in this Agreement. In addition, Buyer desires to grant repurchase
options to the Agency to all or part of the Property as set forth in this
Agreement in the event that Buyer does not make installment payments as planned
or Buyer does not move forward with any of the anticipated Project phases.

        NOW, THEREFORE, in consideration of the foregoing recitals (which are
hereby incorporated into this Agreement) and the mutual covenants and conditions
herein, an in reliance on the representations and warranties set forth herein,
and for other good and valuable

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consideration, the receipt and adequacy of which are hereby acknowledged, Seller
and Buyer hereby agree as follows:

1.      PURCHASE AND SALE OF PROPERTY

        1.1.    Purchase and sale. Upon the terms and subject to the conditions
of this Agreement, Seller agrees to sell to Buyer, and Buyer agrees to purchase
from Seller the Property on the Closing (the "Closing" is defined in Section 7).

        1.2.    Cash purchase price. The total cash purchase price ("Purchase
Price") for the Property shall be Six Million, Three Hundred Ninety Dollars
($6,000,390). The Purchase Price shall be paid in installments to Seller as
follows:

                1.2.1.  On or before the Closing Date as defined herein, Buyer
shall deposit one-half of the Purchase Price, that is, the sum of $3,000,195
(the "First Installment"), in the Escrow described below, in cash or cashier's
check. Any deposit made by Buyer to Seller pursuant to this Agreement shall be
credited to the First Installment.

                1.2.2.  Prior to the first anniversary of the Closing Date,
Buyer shall deliver to Seller one-half of the Purchase Price, that is, the sum
of $3,000,195 (the "Second Installment"). The obligation to make the Second
Installment payment shall be evidenced by a Promissory Note executed by Buyer in
the amount of $3,000,195 (the "Second Installment Note"), the form of which is
attached to this Agreement as Exhibit C. If Buyer defaults on its obligation to
pay the Second Installment, Seller's sole remedy shall be to exercise its
repurchase option pursuant to Section 12.1.2 hereof.

        1.3.    Additional consideration. As additional consideration for the
purchase of the Property, Buyer shall issue to the City or other designee of
Seller at Closing stock warrants for an aggregate of 100,000 shares of Zhone
common stock at a maximum price of $4.00 per share (the "Warrants"). The
Warrants shall be structured so that the City will have the right to convert
each Warrant into common stock without making any payment. A form of the Warrant
is attached to this Agreement as Exhibit D.

2.      BUYER'S ADDITIONAL FINANCING.

Seller acknowledges that it has been informed by Buyer that Buyer anticipates
that all or a portion of the acquisition costs for the Property may be funded by
a loan, operating lease, or other type of financing arrangement involving Bank
Nationale de Paris ("Lender") itself or through a subsidiary or special purpose
entity, which Buyer currently anticipates to be known as BNP Leasing Corporation
(the "Lessor Entity"). Such an arrangement would require Buyer to assign its
rights under this Agreement to Lender or the Lessor Entity (or designate Lender
or the Lessor Entity as the party to whom title shall be convey at the Closing)
pursuant to the terms and conditions of Section 7, in either case with Lender or
the Lessor Entity to take title to the Property at the Closing and finance or
lease the Property to Zhone, with Zhone to obtain an option to purchase the
Property as part of such arrangement. Seller consents to such an arrangement,
subject to Zhone's right to sublease pursuant to Section 14.2 hereof, under this
arrangement and that Buyer will require Zhone to abide by the Redevelopment
Obligations set

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forth in Section 10, and that any such lease or other document evidencing the
arrangement shall be submitted to Seller for its review and approval prior to
execution. As of the date of execution of this Agreement, it is currently
contemplated that Buyer will enter into such financing arrangements with Lender
and/or the Lessor Entity. However, at any time prior to the Closing, Buyer shall
be entitled to make such arrangements with another lender, a third party trust,
leasing company, financial institution, or subsidiary or affiliate thereof
("Other Lender" ), to provide the funding for the acquisition of the Property,
provided that the Closing shall not be extended by reason thereof except as
specifically provided in Section 7.3 hereof; and provided further, that if any
such arrangement requires that Buyer assign its rights under this Agreement to
any entity other than Lender, the Lessor Entity or Other Lender, Buyer must
obtain the written approval of Seller, which may be granted or withheld in its
sole and absolute discretion.

3.      COSTS AND PRORATIONS.

Except as otherwise specifically provided in this Agreement, Seller and Buyer
shall pay all of their costs, respective attorneys' fees, brokers fees and
commissions, and other expenses incurred or to be incurred by them in
negotiating and preparing this Agreement and in completing the transactions
contemplated hereby.

4.      TITLE.

        4.1.    Condition of title. Seller agrees to convey by Grant Deed to
Buyer marketable fee simple title to the Property free and clear of all recorded
and unrecorded liens, encumbrances, assessments, leases, and taxes, except:

                4.1.1.  Quasi-public utility, public alley, public street
easements and rights of way of record.

                4.1.2.  The Redevelopment Plan for the Coliseum Area
Redevelopment Project.

                4.1.3.  Applicable building and zoning laws and regulations.

                4.1.4.  Any lien for current taxes or taxes accrued subsequent
to the recordation of the Grant Deed.

                4.1.5.  Those items set forth in that First Amended Preliminary
Report issued by Chicago Title Company dated September 30, 1999, attached to
this Agreement as Exhibit E, except for items 6, 7 and 8.

                4.1.6.  Those conditions otherwise set forth in this Agreement.

A form of the Grant Deed is attached to this Agreement as Exhibit F.

        4.2.    Title insurance. Buyer intends to obtain an ALTA Owner's Policy
of Title Insurance. Buyer shall pay the premium for insuring title if Buyer
desires title insurance.

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5.      PHYSICAL CONDITION OF PROPERTY; BUYER'S INSPECTION OF PROPERTY.

        5.1.    Buyer's inspection. Buyer has (or has had the opportunity to
have) conducted on Buyer's behalf and at Buyer's cost such inspections and
analyses of the Property, as Buyer has deemed appropriate. Buyer and Buyer's
consultants, agents, inspectors, contractors, and employees directed by Buyer,
may enter the Property as reasonably necessary to inspect the Property, to
perform any needed test.

        5.2.    Hazardous Materials defined. For purposes of this Agreement, the
term "Hazardous Materials" shall mean any substances that are toxic, corrosive,
inflammable, or ignitable, petroleum and petroleum byproducts, lead, any
hazardous wastes, and any other substances that have been defined as "hazardous
substances, "hazardous materials," "hazardous wastes," "toxic substances," or
other terms intended to convey such meaning, including those so defined in any
of the following federal statutes, beginning at 15 U.S.C. section 2601, et seq.,
22 U.S.C. section 1251, et seq., 42 U.S.C. section 6901, et seq. (RCRA), 42
U.S.C. section 7401, et seq., 42 U.S.C. section 9601, et seq. (CERCLA), 49
U.S.C. section 1801, et seq. (HMTA); or California statutes beginning at
California Health and Safety Code section 25100, et seq., section 25249.5, et
seq., and 25300, et seq, and California Water Code section 13000, et seq., the
regulations and publications adopted and promulgated pursuant to such statutes
and any similar statutes and regulations adopted hereafter.

        5.3.    Notice. Seller hereby gives notice to Buyer that, to the best of
its present knowledge, there are no Hazardous Materials present on or beneath
the Property. This notice constitutes the notice required under California
Health and Safety Code Section 25359.7 and other laws.

        5.4.    Remediation. Seller shall be responsible at its own expense for
remediating contamination of soils and groundwater by Hazardous Materials, if
any, on or beneath the Property as of the date the Property is conveyed to Buyer
to within legal limits, in the context of the Project, as may be determined by
government regulatory agencies with jurisdiction over the matter (the
"Remediation Work"). For purposes of this Agreement, the Remediation Work shall
include all work associated with the investigation, removal, cleanup, treatment,
transportation, disposal, and monitoring of Hazardous Materials as needed to
bring contamination levels for Hazardous Materials to within said legal limits.
The Remediation Work shall not include those ordinary construction items that
Buyer would have incurred in the course of development of the Project in the
absence of Hazardous Material contamination of the Property. The Remediation
Work shall not include work associated with remediation of any amounts of
Hazardous Materials that are introduced on to the Property after conveyance of
the Property to Buyer pursuant to this Agreement.

                5.4.1.  If Remediation Work is necessary, Seller shall be solely
responsible for supervising the performance of the Remediation Work. Buyer and
Seller shall work together in good faith at each stage of the Remediation Work
to pursue the most cost-efficient method to conduct the Remediation Work. Prior
to the commencement of the Remediation Work, if any, the Buyer and Seller shall
work with the general contractor for the Project to ensure that the

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Remediation Work is coordinated with the overall construction of the Project, in
order to minimize duplicative work and maximize savings to the Project.

                5.4.2.  If Remediation Work is conducted, Seller shall
diligently seek, and upon receipt shall provide Buyer with, written
acknowledgement from all governmental agencies with jurisdiction over the
Remediation Work stating that the Remediation Work is complete and no further
work is required (the "Final Reports"). The Final Reports must be approved by
Buyer, provided that any such approval shall not be unreasonably withheld or
delayed.

        5.5.    Subsurface conditions. Seller is not and shall not be in any way
responsible for removing or relocating any structures, debris, rubble,
demolition material, or subsurface construction on the Property, including,
without limitation, any underground utility, facilities or improvements. After
Seller's conveyance, it shall be Buyer's sole responsibility and obligation to:
(1) take such action as may be necessary to place the Property in all respects
in a physical condition entirely suitable for the development described in this
Agreement (with the exception of the Remediation Work, if any); and (2) take
such action to remove, relocate or otherwise accommodate any utility facilities
or improvements (both above ground and underground) including, without
limitation, any telephone cables, as required by the appropriate governmental or
public utility entity as a condition for vacating.

        5.6.    Governmental regulations. Buyer shall be responsible for
undertaking any investigation and acquiring necessary knowledge of operative or
proposed governmental laws and zoning regulations, all as applicable to or
affecting the Property, including, but not limited to, existing and proposed
restrictions, zoning, environmental and land use laws and regulations to which
the Property may be subject, and shall acquire the Property subject to the
foregoing, as well as to such other laws and regulations that pertain to the
Property.

6.      CONDITIONS TO SALE AND PURCHASE.

        6.1.    Buyer's conditions precedent. Buyer's obligation to purchase the
Property is expressly conditioned on the fulfillment of the following conditions
precedent:

                6.1.1.  Seller is able to transfer title to the Property to
Buyer in accordance with and subject to the provisions of Section 4;

                6.1.2.  Buyer is able to secure a title insurance policy, as
described in Section 4.2, if desired by Buyer;

                6.1.3.  Seller's representations and warranties contained herein
as of the Closing are true and correct except as otherwise disclosed in writing;
and

                6.1.4.  Seller has performed or Buyer has waived, in writing,
all covenants of Seller set forth in this Agreement to be performed by Seller
prior to the Closing Date, which shall be conclusively established by Buyer's
consummation of the purchase contemplated hereby, unless the writings executed
at Closing shall otherwise provide.

        6.2.    Seller's conditions precedent. Seller's obligation to sell the
Property is expressly conditioned upon the fulfillment of each of the following
conditions precedent:

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                6.2.1.  Buyer has performed or Seller has waived, in writing,
all covenants and obligations of Buyer set forth in this Agreement to be
performed by Buyer prior to the Closing Date, which shall be conclusively
established by Seller's consummation of the sale contemplated hereby, unless the
writings executed at Closing shall otherwise provide;

                6.2.2.  Buyer's representations and warranties contained herein
as of the Closing are true and correct except as otherwise disclosed in writing;

                6.2.3.  Seller has elected to either construct the off-site
infrastructure improvements necessary for the Project or reached an agreement
with a third party to construct such off-site infrastructure improvements;

                6.2.4.  The Closing occurs when provided herein; and

                6.2.5.  Buyer has paid the First Installment of the Purchase
Price, issued the Warrants to the City or other Seller designee as provide for
herein, and executed the Second Installment Note in favor of Seller.

7.      ESCROW AND CLOSING.

        7.1.    Escrow. Upon Buyer's execution of this Agreement, Buyer shall
open and establish an escrow account (the "Escrow") with Chicago Title Insurance
Company or other mutually acceptable title and escrow company (the " Escrow
Holder"). Prior to the Closing, each party shall execute and deliver to the
Escrow Holder its written instructions consistent with the terms of this
Agreement, or joint instructions, if mutually acceptable, and shall supply the
Escrow Holder with such other information or documents as the Escrow Holder may
reasonably require to close the transaction by the Closing Date.

        7.2.    Deposit. Upon opening of escrow, Buyer shall deposit into escrow
a deposit (the "Deposit") in the amount of $20,000, which will be refunded in
the event that any of the conditions precedent set forth above are not satisfied
or waived prior to the Closing. Said deposit and accrued interest shall be
applied toward the First Installment of the Purchase Price. Escrow Holder shall
deposit the Deposit in an interest bearing account for the benefit of Buyer.

        7.3.    Closing. Buyer and Seller shall consummate the purchase and sale
of the Property (the "Closing") not more than ten (10) business days after the
satisfaction or waiver of Buyer's and Seller's conditions precedent set forth
above (the "Closing Date"). The Closing shall be held at such place and at such
time as shall be mutually agreed upon. Following the Closing, the "Closing Date"
shall be deemed to be the date on which the Grant Deed was recorded.
Notwithstanding the foregoing, Buyer shall have the right to extend the Closing
Date for up to forty-five (45) days if Buyer has not been able to complete its
financing of the Property by the otherwise scheduled Closing Date. Buyer shall
provide written notice of such extension to Seller and Escrow Agent prior to the
otherwise scheduled Closing Date.

        7.4.    Obligations of Seller for Closing. Prior to the Closing Date,
Seller shall deliver or cause to be delivered to the Escrow Holder the executed
Grant Deed to the Property.

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        7.5.    Obligations of Buyer for Closing. Prior to the Closing Date,
Buyer shall deliver or caused to be delivered to Escrow Holder the entire First
Installment of the Purchase Price, the Warrants duly issued to the City or other
Seller designee, and the executed Second Installment Note in favor of Seller.

        7.6.    Possession. Seller shall retain possession of the Property until
Closing and shall deliver possession to Buyer upon Closing.

        7.7.    Funds. All funds received in this Escrow shall be deposited with
other escrow funds in a general escrow trust account(s) and may be transferred
to any other such escrow trust account in any state or national bank doing
business in the State of California. All disbursements shall be made by check
from such account.

        7.8.    Fees and costs. Buyer and Seller shall share equally the cost of
all escrow fees, recording fees, and closing costs. All City and Alameda County
real estate transfer taxes and documentary transfer taxes shall be shared
equally between Buyer and Seller. Buyer shall be responsible for paying all
brokers fees and commissions.

8.      DEFAULT AND EXPIRATION.

        8.1.    Default. If Closing fails to occur by reason of default of Buyer
or Seller under the terms of this Agreement, which default is not cured within
ten (10) business days (but in any event prior to Closing) after written notice
given by the non-defaulting party to the defaulting party, the non-defaulting
party may waive the default and complete the purchase herein, terminate this
Agreement and the rights and obligations of Buyer and Seller hereunder, or seek
any other remedy available at law or equity (provided, Seller's remedies shall
be limited to those set forth in Section 8.2). Notwithstanding the above, if
Closing fails to occur for any reason whatsoever by January 21, 2000 (except, if
Buyer extends the Closing pursuant to Section 7.3, then the outside date will be
March 7, 2000), this Agreement shall automatically terminate, unless extended by
both parties in writing.

        8.2.    Liquidated Damages: BUYER AND SELLER AGREE THAT IF BUYER
DEFAULTS ON ITS OBLIGATION TO PURCHASE THE PROPERTY PURSUANT HERETO, THE DAMAGES
TO SELLER WOULD BE DIFFICULT AND IMPRACTICAL TO DETERMINE. ACCORDINGLY, BUYER
AND SELLER HAVE AGREED TO FIX AS LIQUIDATED DAMAGES THE DEPOSIT SPECIFIED IN
SECTION 7.2 AND SUCH AMOUNT SHALL BE RETAINED BY SELLER AS LIQUIDATED DAMAGES,
AND SHALL CONSTITUTE SELLER'S SOLE AND EXCLUSIVE REMEDY FOR SUCH DEFAULT.
SELLER'S RETAINING SUCH RELEASED AMOUNTS AS LIQUIDATED DAMAGES IS NOT INTENDED
AS A FORFEITURE OR PENALTY UNDER CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369,
BUT INSTEAD, IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER PURSUANT TO
SECTIONS 1671, 1676 AND 1677 OF THE CALIFORNIA CIVIL CODE. SELLER HEREBY WAIVES
THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3389. SELLER AGREES THAT THESE
LIQUIDATED DAMAGES SHALL BE IN LIEU OF ANY OTHER MONETARY RELIEF OR OTHER
REMEDY, INCLUDING WITHOUT LIMITATION SPECIFIC PERFORMANCE, TO WHICH SELLER
OTHERWISE MIGHT BE ENTITLED UNDER THIS AGREEMENT, AT

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LAW OR IN EQUITY. BUYER AND SELLER SPECIFICALLY ACKNOWLEDGE THEIR AGREEMENT TO
THE FOREGOING LIQUIDATED DAMAGES PROVISION BY INITIALING THIS PARAGRAPH IN THE
APPROPRIATE SPACES PROVIDED BELOW:

                  Buyer's Initials _________ Seller's Initials __________

9.      DAMAGE AND DESTRUCTION.

In the event of the destruction of or damage to all or a portion of the Property
from any cause prior to Closing, either party may elect to terminate this
Agreement by the delivery of notice to the other party within fifteen (15)
business days thereafter. If neither party terminates this Agreement, Buyer
shall purchase the Property "as is."

10.     REDEVELOPMENT OBLIGATIONS.

        10.1.   Compliance with Redevelopment Plan. The Grant Deed for the
Property shall provide that Buyer covenants for itself, its lessees, successors,
assigns and every successor in interest to the Property that Buyer, such
lessees, successors and assigns shall develop and use the Property, for so long
as the Redevelopment Plan remains in effect, in conformance with the
Redevelopment Plan. For purposes of this Agreement, the "Redevelopment Plan"
means the Redevelopment Plan for the Coliseum Area Redevelopment Project adopted
on July 25, 1995, and subsequently amended on July 29, 1997.

        10.2.   Obligation to redevelop. Buyer hereby warrants and represents
that it is not acquiring the Property for speculative purposes, and further
warrants that it intends to commence and complete development of the Project
according to the timeline set forth herein. Should Buyer fail to commence
development of any Project phase within the specified time period, Seller shall
have the right to exercise its repurchase options as set forth herein.

        10.3.   Nondiscrimination. The Grant Deed shall provide that Buyer
covenants for itself, its heirs, executors, administrators and assigns and all
persons claiming under or through it, that there shall be no discrimination
against or segregation of any person or group of persons on account of race,
color, religion, creed, sex, sexual preference, marital status, ancestry,
national origin, AIDS or AIDS-related complex, or disability in the sale, lease,
sublease, transfer, use occupancy, tenure or enjoyment of the Property, nor
shall Buyer or any person claming under or through Buyer establish or permit any
such practice or practices of discrimination or segregation with reference to
the selection, location, number, use or occupancy of tenants, lessees,
subtenants, sublessees or vendees in the Property. The foregoing covenants shall
run with the land. The foregoing provisions shall be binding upon and shall
obligate Buyer and any subcontracting party or parties, or other transferees
under this Agreement. Notwithstanding the foregoing, Seller's sole remedy in the
event of a breach of this covenant shall be to seek an injunction and in no
event shall Seller have any reversionary right or right to regain title in the
Property based upon a breach of this nondiscrimination covenant.

11.     OFF-SITE IMPROVEMENTS.

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Seller shall be responsible for the cost of installing those off-site
infrastructure improvements within the public right-of-way identified as
mitigation measures for the Project in that Final Environmental Impact Report
for the Coliseum Shoreline Project certified by the Planning Commission on
November 2, 1994, as modified by that Coliseum Shoreline Project Environmental
Impact Report Addendum dated November 5, 1999, or as otherwise required by
permitting agencies for the Project (the "Off-Site Improvements"), including the
widening of Oakport Street, traffic signalization, new sewer and storm drains,
new sidewalks, new street landscaping, and new street lighting. Seller may
install the Off-Site Improvements itself, or, at Seller's election (which
election must be made by Seller on or prior to the Closing), the Off-Site
Improvements shall be installed by Buyer or Buyer's contractor as part of the
Project, with reimbursement by Seller to Buyer for the cost of such Off-Site
Improvements within 90 calendar days of completion (the "Reimbursement
Obligation"). If such Off-Site Improvements are done in phases, then Seller
shall be obligated to reimburse Buyer within 90 calendar days of completion of
each phase. Buyer's contractor shall be entitled to reasonable compensation for
its profit and overhead, in the event Buyer constructs the Off-Site
Improvements. Should Seller elect to have the Off-Site Improvements constructed
by Buyer, Buyer and Seller shall negotiate and enter into an Owner Participation
Agreement or similar agreement setting forth, among other things, the scope of
the work, the budget, the allowable overhead and profit, and the method of
reimbursement. If the parties cannot agree on the Owner Participation Agreement
by the Closing, then Seller's election to have Buyer perform the Off-Site
Improvements shall be deemed revoked and Seller shall be obligated to complete
the Off-Site Improvements in accordance with the schedule which Buyer's
contractor would have completed the Off-Site Improvements. If for any reason
Seller defaults on the Reimbursement Obligation with respect to the Off-Site
Improvements pursuant to this Section 11, Buyer shall have the right to offset
the amount of the Reimbursement Obligation against the amount owed by Buyer on
the Second Installment Note.

12.     OPTIONS TO REPURCHASE.

        12.1.   Grant of options. In further consideration for the sale of the
Property to Buyer, Buyer hereby grants to Seller the following optional rights
to repurchase all or part of the Property (together, the "Options"):

                12.1.1. Option One. Seller shall have the option to buy the
entire Property, including the fee interest in the Property, as well as all of
Buyer's interest in all rights, privileges and easements appurtenant to the
Property, starting on that date which is six (6) months from the Closing Date,
if Buyer has not commenced construction of Phase 1A of the Project by this date.
The purchase price under Option One shall be $9.50 per square foot. The purchase
price under Option One shall be made by the cash payment of $3,000,195 to Buyer
and by cancellation of the Second Installment Note by Seller and delivery of the
original cancelled Second Installment Note to Buyer.

                12.1.2. Option Two. Seller shall have the option to buy the
Phase 2 Property and the Phase 3 Property (as those terms are defined below),
starting on that date which is one (1) year from the Closing Date, if Buyer has
not made the Second Installment by this date. The purchase price for the Phase 2
Property and the Phase 3 Property under this Option Two shall be $9.50 per
square foot. The purchase price under Option Two shall be paid by cancellation
of the

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Second Installment Note by Seller and delivery of the original cancelled Second
Installment Note to Buyer. The Phase 2 Property and the Phase 3 Property shall
include a fee interest in such Property Phases, as well as all of Buyer's
interest in all rights, privileges and easements appurtenant to such Property
Phases.

                12.1.3. Option Three. Seller shall have the option to buy the
Phase 2 Property and the Phase 3 Property, starting on that date which is two
(2) years from the Closing Date, if Buyer has not commenced construction of
Phase 2 of the Project by this date. The purchase price for the Phase 2 Property
and the Phase 3 Property under this Option Three shall be $9.50 per square foot.
The purchase price under Option Three shall be made by the cash payment of
$3,000,195 to Buyer. The Phase 2 Property and the Phase 3 Property shall include
a fee interest in such Property Phases, as well as all of Buyer's interest in
all rights, privileges and easements appurtenant to such Property Phases.

                12.1.4. Option Four. Seller shall have the option to buy the
Phase 3 Property, starting on that date which is four (4) years from the Closing
Date, if Buyer has not commenced construction of Phase 3 of the Project by this
date. The purchase price for the Phase 3 Property under this Option Four shall
be $9.50 per square foot. The purchase price under Option Four shall be made by
the cash payment of $1,500,097.50 to Buyer. The Phase 3 Property shall include a
fee interest in the Phase 3 Property, as well as all of Buyer's interest in all
rights, privileges and easements appurtenant to the Phase 3 Property.

        For purposes of this Agreement, construction shall be deemed to be
commenced on the date that the building foundation for the particular Project
phase has been completed.

        12.2.   Priority of Options. All of the Options shall be senior in
priority to any private liens, leases, mortgages or encumbrances on the Property
entered into after the date of this Agreement, including without limitation (a)
any lease or other financing arrangement between Zhone and Lender, the Lessor
Entity or Other Lender, (b) any option to purchase held by Zhone under such
financing arrangement, or (c) any deeds of trust or other instruments securing
any acquisition, construction or permanent loans for any phase of the Project.
Upon exercise of any of the Options, Buyer shall deliver title to the optioned
property to Seller free and clear of any such junior liens, leases, mortgages,
or encumbrances.

        12.3.   Exercise of Options. The period for exercising any of the
Options shall begin on the starting date as set forth above for each Option, and
shall terminate 120 calendar days thereafter (each such period is referred to
herein as an "Exercise Period"), provided if Buyer makes the required payment or
commences the construction prior to Seller exercising such Option, such Option
shall lapse and be of no further force or effect. In addition, Seller shall not
be allowed to exercise any Option during any period in which Seller is in
default of the Reimbursement Obligation for the Off-Site Improvements. Seller
may exercise any Option by delivering written notice of the exercise to Buyer
during the Exercise Period. If Seller does not provide such written notice
during the Exercise Period, then such Option shall lapse and be of no further
force or effect. If all of the Options expire without Seller exercising any of
such Options, then Seller agrees to provide Buyer with a quitclaim deed in order
to remove such Options from title to the Property. Upon exercise of any of
Options Two through Four, Buyer and Seller shall cooperate in good faith to
subdivide the Property in accordance with the Subdivision Map Act

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and other applicable laws to accommodate the repurchase, if the subdivision has
not already occurred. Escrow for the sale of any of the option properties shall
close and Buyer shall execute and deliver a grant deed to the optioned property
no later than 120 calendar days after Buyer's receipt of Seller's notice of
exercise of the Option (or immediately following the completion of the
subdivision of the Property if such subdivision is not completed within such 120
day period), at which time the purchase price shall be payable. Prior to the
close of escrow, Buyer shall take all necessary steps to ensure that a title
company will be able to issue to Seller, upon close of escrow, a standard CLTA
owner's policy of title insurance, in an amount equal to the purchase price of
the property, showing title to the property vested in the Agency, with only the
following exceptions:

                12.3.1. Liens for property taxes not yet due and payable;

                12.3.2. Any existing encumbrances as of the date of this
Agreement as set forth in the title policy attached to this Agreement;

                12.3.3. Any other lien or encumbrance approved in writing by
Seller in its sole discretion.

        At any time during the Exercise Period, Seller may enter the optioned
property for purposes of inspection, survey, tests, or other actions reasonably
related to acquisition of the property by Seller. Seller shall indemnify and
defend Buyer for any liability, claims or damages arising from such entry.

                12.3.4. Assignment of Options. Seller may assign any of the
Options to any other entity in its sole discretion.

13.     WARRANTIES AND REPRESENTATIONS.

        13.1.   Seller's warranties and representations. Seller hereby warrants
and represents as of the date hereof and as of the Closing Date that:

                13.1.1. Seller is a public body, corporate and politic, and has
all requisite legal power, right and authority to enter into this Agreement and
consummate this transaction.

                13.1.2. This transaction has been approved by its governing
body.

                13.1.3. This Agreement, and all the documents to be delivered by
Seller to Buyer at Closing, will be duly authorized, executed, and delivered by
Seller and will be legal, valid and binding obligations of Seller enforceable in
accordance with their respective terms.

                13.1.4. To the extent Seller has not previously done so, Seller
shall, within three (3) days after the effective date of this Agreement, provide
Buyer with copies of all soil and hydrology reports, environmental or toxic
material reports, engineering reports, traffic studies, environmental impact
studies, civil, architectural, structural, electrical, mechanical-plumbing, fire
sprinkler and landscape drawings, working drawings, specifications,
architectural renderings or models or any other plans developed or prepared for
the Property in Seller's possession or control.

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<PAGE>

                13.1.5. The Warrants and Zhone's common stock issuable upon
conversion of such Warrants (collectively, the "Securities") will be acquired
for investment for the City's own account, not as a nominee or agent, and not
with a view to the public resale or distribution thereof within the meaning of
the 1933 Act, and the City has no present intention of selling, granting any
participation in, or otherwise distributing the same.

                13.1.6. Seller and the City believe that they have received or
have had full access to all the information it considers necessary or
appropriate to make an informed investment decision with respect to the
Securities. Seller and the City further have had an opportunity to ask questions
and receive answers from Zhone regarding the terms and conditions of the
offering of the Securities and to obtain additional information (to the extent
Zhone possessed such information or could acquire it without unreasonable effort
or expense) necessary to verify any information furnished to Seller and/or the
City or to which Seller or the City had access.

                13.1.7. Seller and the City understand that the purchase of the
Securities involves substantial risk. Seller and the City (i) have experience in
securities of companies in the development stage and acknowledge that Seller and
the City are able to fend for themselves, can bear the economic risk of Seller
and the City's investment in the Securities and have such knowledge and
experience in financial or business matters that Seller and the City are capable
of evaluating the merits and risks of this investment in the Securities and
protecting their own interests in connection with this investment and/or (ii)
have a preexisting personal or business relationship with Zhone and certain of
its officers, directors or controlling persons of a nature and duration that
enable Seller and the City to be aware of the character, business acumen and
financial circumstances of such persons.

                13.1.8. Seller and the City are "accredited investor(s)" within
the meaning of Regulation D promulgated under the 1933 Act.

        13.2.   Buyer's warranties and representations. Buyer hereby warrants
and represents that, as of the date hereof and as of the Closing Date, that:

                13.2.1. Buyer has all requisite legal power to enter into this
Agreement.

                13.2.2. This transaction has been approved by its governing
body.

                13.2.3. This Agreement has been, and all the documents to be
delivered by Buyer to Seller at Closing will be, duly authorized, executed, and
delivered and will be legal, valid, and binding obligations of Buyer enforceable
in accordance with their respective terms.

14.     ASSIGNMENT AND TRANSFER.

        14.1.   Limitations on assignment. Buyer shall not assign this Agreement
without the prior written consent of Seller, which Seller may withhold in
Seller's sole discretion; provided however, that Buyer may assign its rights
under this Agreement to Lender, the Lessor Entity or Other Lender or may
designate Lender, the Lessor Entity or Other Lender as the party to whom title
shall be conveyed at the Closing as provided for above, in either case without
Seller's consent; and provided further, that Buyer shall be permitted, without
Seller's consent, to assign Buyer's rights under this Agreement to any affiliate
of Buyer. Notwithstanding the foregoing, no

                                       13

<PAGE>

assignment of this Agreement to anyone other than to Lender, the Lessor Entity
or Other Lender shall relieve Buyer of any obligations hereunder or release
Buyer from any of its warranties or representations hereunder. In the event
Buyer assigns this Agreement to Lender, the Lessor Entity, Other Lender or
Buyer's affiliate, all obligations of Seller shall inure to the benefit of such
permitted assignee.

        14.2.   Limitations on transfer of Property. Following Closing and prior
to the expiration of the Exercise Periods for all of the Options as set forth
herein or the lapse or expiration of the Options pursuant to their terms, Buyer
may not sell or lease any portion of the Property, except to Zhone or another
high technology company (other than for retail purposes), without the written
consent of Seller. This restriction does not include the granting of easements
or permits to facilitate development of the Project or the granting of any
security interest in the Property.

15.     MISCELLANEOUS.

        15.1.   Unavoidable delay in performance. Performance by either party
under this Agreement shall not be deemed to be in default where delays or
default are due to war; insurrection; strikes; lockouts; riots; floods;
earthquakes; fires; casualties; acts of God; acts of the public enemy,
epidemics; quarantine restrictions; freight embargoes; lack of transportation;
or unusually severe weather. An extension of time for any such cause shall be
for the period of the enforced delay and shall commence to run from the time of
the commencement of the cause, if notice by the party claiming such extension is
sent to the other party within fifteen (15) business days of the commencement of
the cause. Times of performance under this Agreement may also be extended in
writing by Buyer and Seller.

        15.2.   Publicity. Any publicity generated by Zhone for the Project
shall make reference to the contribution of the Agency in making the Project
possible. The words "Redevelopment Agency of the City of Oakland" and "Community
and Economic Development Agency" shall be prominently displayed in all pieces of
publicity generated by Zhone, including flyers, press releases, posters, signs,
brochures, and public service announcements. Agency staff will be available
whenever possible at the request of Zhone to assist Zhone in generating
publicity for the Project. Zhone agrees to cooperate with the Agency in any
Agency-generated publicity or promotional activities with respect to the
Project.

        15.3.   Nonliability. No member, official , employee, or agent of Seller
or the City of Oakland shall be personally liable to Buyer, or any successor in
interest, in the event of any default or breach of this Agreement by the Seller.

        15.4.   Severability. It is agreed that if any term, covenant,
provision, paragraph or condition of this Agreement shall be illegal, such
illegality shall not invalidate the whole Agreement, but the Agreement shall be
construed as if not containing the illegal part and the rights and obligations
of the parties shall be construed and enforced accordingly.

        15.5.   Entire understanding. This Agreement represents the entire
understanding of the parties hereto and supersedes all prior written or oral
agreements or representations, if any, relative to the subject matter involved.

                                       14

<PAGE>

        15.6.   California law. The laws of the State of California shall govern
the interpretations and performance of this Agreement, except for those
provisions preempted by federal law.

        15.7.   Attorneys' fees. In the event any legal action is commenced to
interpret or to enforce the terms of this Agreement, or to collect damages as a
result of any breach of this Agreement, the party prevailing in any such action
shall be entitled to recover against the party not prevailing all reasonable
attorneys fees and costs incurred in the action.

        15.8.   Waiver. Other than deemed waivers provided for herein, all
waivers by either party shall be in writing. The waiver by either party of any
breach of any term, covenant or condition of this Agreement shall not be deemed
a waiver of such term, covenant or condition for any subsequent breach of the
same or any other term, covenant or condition of this Agreement.

       15.9.    Notices. Any and all notices or other communication required or
permitted by this Agreement or by law to be served on or given to a party hereto
by the other party shall be given personally (including overnight courier), or
by registered or certified mail (postage fully prepared) addressed as follows:

                To Seller:      Redevelopment Agency of the City of Oakland
                                c/o City of Oakland, Projects Division
                                250 Frank H. Ogawa Plaza, Fifth Floor
                                Oakland, California 94612
                                Attention: Doug Cole

                Copy to:        Agency Counsel
                                c/o Office of the City Attorney
                                One Frank Ogawa Plaza, Sixth Floor
                                Oakland, California 94612
                                Attention: Daniel Rossi

                To Buyer:       Zhone Technologies, Inc.
                                7677 Oakport Street, Suite 1040
                                Oakland, California 94621
                                Attention:  Bruce Ruberg

                Copy to:        Gray Cary Ware & Freidenrich
                                400 Hamilton Avenue
                                Palo Alto, California 94301-1809
                                Attention:  James E. Anderson

Either party may change such address by written notice to the other. Any notice
deposited in the United States mail as provided above shall be conclusively
deemed to have been received by the party to whom the same is addressed at the
latest of (a) within three (3) business days if deposited in the same state as
the addressee, (b) within 96 hours if deposited in a state other than

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<PAGE>

the addressee, or (c) on the delivery date shown on the return receipt in
connection therewith. Any notice personally delivered shall be deemed received
on the date of personal delivery.

        15.10.  Captions. The captions inserted herein are inserted only as a
matter of convenience and for reference and in no way define, limit or describe
either the scope of this Agreement nor the intent of any of the provisions
hereof.

        15.11.  Time of the essence. Time is of the essence in this Agreement
and failure to comply with this provision shall be a material breach of this
Agreement.

        15.12.  Additional documents. Seller and Buyer agree to execute such
additional documents as may be necessary or desirable to carry out the
provisions of this Agreement.

        15.13.  No merger. None of the provisions of this Agreement are intended
to or shall be merged with the Grant Deed, and the Grant Deed shall not affect
or impair this Agreement.

        15.14.  Defense of Challenge. In the event a legal action is filed
challenging this Agreement or the actions undertaken pursuant to this Agreement,
each party shall bear their own defense at no cost to the other party. The
parties agree to cooperate to the greatest extent possible in the defense of any
legal challenge. In the event any legal challenge is successful, the parties
agree to consult in good faith for thirty (30) days following a final court
judgment about other actions that may be agreed to that may substitute for the
action held unlawful or void.

        15.15.  Exercise of Police Power. The parties acknowledge and agree that
Seller has exercised its police power in the interest of the parties, the
citizens of the City of Oakland and the general public, and that full
implementation of this Agreement will confer substantial benefits to the
citizens of the City of Oakland and the general public.

        15.16.  Parking. Prior to completion of the Project, the parties shall
cooperate in good faith to prevent guests and customers of the Oakland Coliseum
to park on the Property.

        15.17.  Amendments. Any amendment to this Agreement must be in writing
and must be executed by both Seller and Buyer.

        15.18.  Counterparts. This Agreement may be signed in multiple
counterparts, which, when signed by all parties, shall constitute a binding
agreement.

        15.19.  Exhibits. The following Exhibits are attached to this Agreement
and are hereby incorporated into this Agreement by reference:

        Exhibit A-1:      Property map
        Exhibit A-2:      Property description
        Exhibit A-3:      Subdivision Map
        Exhibit B:        Project site plan
        Exhibit C:        Form of Second Installment Note
        Exhibit D:        Form of stock warrant
        Exhibit E:        Title Report
        Exhibit F:        Form of Grant Deed

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<PAGE>

        IN WITNESS WHEREOF, the parties hereto have executed this Purchase and
Sale Agreement with Repurchase Options, as of the date first above indicated.

"BUYER"

ZHONE TECHNOLOGIES, INC.,
a Delaware corporation

By:
   ------------------------------------
Its:
    -----------------------------------

"SELLER"

REDEVELOPMENT AGENCY OF
THE CITY OF OAKLAND,
a community redevelopment agency
organized and existing under the
California Community Redevelopment Law

By:
   ------------------------------------
          Agency Administrator

Approved as to form and legality:

By:
   ------------------------------------
            Agency Counsel

                                       17

<PAGE>

STATE OF CALIFORNIA        )
                           ) ss.
COUNTY OF ________________ )

On _____________________________, 19____  before me,____________________ the
undersigned, personally appeared

         (        )        personally known to me
         (        )        proved to me on the basis of satisfactory evidence

to be the person(s) whose name(s) (is/are) subscribed to the within instrument
and acknowledged to me that (he/she/they) executed the same in (his/her/their)
authorized capacity(ies), and that by (his/her/their) signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.

WITNESS my hand and official seal.

---------------------------------
Signature

STATE OF CALIFORNIA        )
                           ) ss.
COUNTY OF ________________ )

On _____________________________, 19____ before me,____________________ the
undersigned, personally appeared

         (        )        personally known to me
         (        )        proved to me on the basis of satisfactory evidence

to be the person(s) whose name(s) (is/are) subscribed to the within instrument
and acknowledged to me that (he/she/they) executed the same in (his/her/their)
authorized capacity(ies), and that by (his/her/their) signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.

WITNESS my hand and official seal.


---------------------------------
Signature

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