Document:

Supply Agreement

 
EXHIBIT 10.17

 
SUPPLY AGREEMENT 
No. C000325 
 
FOR 
 
MANUFACTURING AND RELATED SERVICES 
 
Between 
 
SOLECTRON CORPORATION 
 
And 
 
ZHONE TECHNOLOGIES, INC. 

 
SUPPLY
AGREEMENT 
No. C000325 
 
This Supply Agreement (“Agreement”) is entered into by and between Solectron Corporation, located at 847 Gibraltar Drive, Milpitas, CA 95035, by
and on behalf of its subsidiaries and affiliates (“Solectron”) and Zhone Technologies, Inc., located at 7677 Oakport Street, Suite 1040, Oakland, CA 94621, by and on behalf of its subsidiaries and affiliates (“Zhone”).

 

	1.0	 	Agreement Structure 

 

	1.1	 	This Agreement shall become effective concurrently with the date of execution of the Asset Purchase Agreement (“Effective Date”).

 

	1.2	 	This Agreement consists of: (i) this base Supply Agreement which defines the basic terms and conditions of the relationship between the parties; (ii) Statements of
Work; and (iii) the following Exhibits, which detail among other things specific information regarding work performed under this Agreement 

 
Exhibit A-1—Products 
Exhibit B-1—Pricing Model 
Exhibit
C-1—Flexibility/Cancellation/Component Liability 
Exhibit D—Out of Warranty Services 
Exhibit E—Commodity Substitution Approval Form 
 

	1.3	 	If there is a conflict among the terms and conditions of the various documents or an ambiguity created by differences between them, the order of decreasing
precedence shall be (i) Statements of Work, (ii) Exhibits, and (iii) Supply Agreement. 

 

	2.0	 	Definitions 

 
“Asset Purchase Agreement” shall mean that certain Asset Purchase Agreement dated March 13, 2000, between Solectron Texas, L.P.
and Premisys Communications, Inc. 
 
“Components” shall mean any parts, material, components, or other items that are used in the manufacture and assembly of Products. 
 
“Engineering Change” or “EC” shall mean any electrical or mechanical change(s) to a Product which would affect the
function, performance, programming model, reliability, safety, serviceability, appearance, dimensions, tolerances, or composition of bills of material, or material sources thereof. 
 
“Engineering Support Services” means those services described in Section 5.3. 
 
“Excess Components” means Components in
Solectron’s inventory that were purchased within agreed to material order Lead Times and in quantities to support Zhone’s demand forecast, which 

are non-cancelable and/or non-returnable and for which the latest demand forecast does not
show consumption in any Product within the next ninety (90) days. 
 
“Final Premium Amount” has the meaning specified in Section 2.5 of the Asset Purchase Agreement. 
 
“Lead Time” means (i) with respect to Components, the minimum length of time prior to a specific delivery date that Solectron
must issue a purchase order for Components to ensure delivery by such date; and (ii) with respect to Products, the minimum length of time prior to a specific delivery date that Solectron must receive an order from Zhone to ensure manufacture and
delivery by such date. 
 
“Manufacturing
Design” means any Work Product or any other material, including mechanical design elements in support of the manufacturing process, that relate to manufacturing equipment, manufacturing processes and/or the manufacturability of Products (i.e.
DFX). 
 
“Manufacturing Services” means
those services described in Section 5.2. 
 
“Material Breach” means those events of breach set forth in Section 16.1. 
 
“No Defect Found” or “NDF” shall mean a Product whose function was suspect, but no specific fault was detected in
Solectron’s performance of failure analysis. 
 
“Obsolete Components” means Components in Solectron’s inventory that were purchased within agreed to material order Lead Times and in quantities to support Zhone’s demand forecast, which are non-cancelable and/or
non- returnable and for which the latest demand forecast does not show consumption in any Product within the next one-hundred eighty (180) days. 
 
“Order” shall have the meaning specified in Section 6.4. 
 
“Pre-existing Work Product” means Work Product created or owned (as between Solectron and Zhone) by
one party prior to the date of this Agreement. 
 
“Pre-Production Services” means those services described in Section 5.1. 
 
“Product(s)” means the completed assemblies manufactured by Solectron and also includes any field replaceable units, specific
components of a field replaceable unit, subassemblies of a field replaceable unit, service Parts, documentation, code and related Services associated with the completed assemblies as specified in the Exhibits. Products shall not include Prototypes.
The initial Products covered by this Agreement are set forth on Exhibit A-1 (“Initial Products”). The parties may add or delete Products from this Agreement only by mutual agreement. Any Products added will be set forth in additional
Exhibits (e.g., Exhibit A-2, Exhibit A-3, etc.) signed by both parties (“Follow-on Products”). In lieu of a separate Product Exhibit, the parties may agree to add Products via quotations against which Orders are placed. The term Products
shall mean only Initial Products and any Follow-on Products, only if applicable. 
 

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“Product Design” means any Work Product or any other material, including
electrical, mechanical, industrial, circuit and/or schematic design elements, and Product Specifications, that relate to the functional design of the Products. 
 
“Prototype” means a preliminary version of a Product which may or may not be functional, is
intended for internal use and testing and not for resale, and is not suitable for production in commercial quantities. 
 
“RMA” means returned material authorization. 
 
“Return” means an amount equal to the product of the Final Premium Amount times 1.333.

 
“Services” shall mean the
pre-production, manufacturing, testing, engineering, and other related services described in this Agreement, applicable Exhibits, and Statements of Work. 
 
“Statement(s) of Work” shall mean documents agreed to in writing by both parties, which describe the work to be performed, the
pricing for such work, the specifications and any supplemental terms that additionally apply to such work. In the absence of such separate document(s), Solectron’s quotation(s) against which Zhone’s orders are submitted and accepted will
constitute the Statement(s) of Work. This Agreement may include multiple Statements of Work. 
 
“Specifications” shall mean that portion of each Statement of Work that provides objective, physical specifications for work to be performed. Solectron will purchase and assemble material
according to such specifications. The Commodity Substitution Approval Forms attached hereto and incorporated herein (Attachment B) shall be considered part of Zhone specifications. 
 
“Test Design” means any Work Product or other material, including test development, programming, or
processes, related to testing a Product. 
 
“Tooling” means equipment, fixtures, tools, testers, code and other similar items used in performance of this Agreement. 
 
“WIP” means work-in-process and relates to partially completed Products in Solectron’s manufacturing process. 
 
“Work Product” means (a) any net list, schematic,
diagram, circuitry, technology, invention, idea, discovery, improvement, design, concept, technique, algorithm, formula, method, process, configuration, mechanism, model, system, network, data, plan, library, work of authorship, file, media, record,
report, copy, pictorial work, graphic work, audiovisual work, hardware, firmware, computer interface (including for example but not limited to programming interfaces), computer language, computer protocol, computer software program or application
(irrespective of whether source code or object code), flow chart, blueprint, drawing, graph, information, material, research or development, irrespective of whether patentable, or (b) any portion, copy or extract of such Work 
 

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Product, irrespective of whether in tangible or intangible form, and irrespective of the
media of such Work Product. 
 

	3.0	 	Term 

 

	3.1	 	Except as provided by Section 16.0, this Agreement shall be effective on the Effective Date and shall remain in force for (i) the Initial Products for four (4)
years, and (ii) any Follow-on Products until such time as the parties execute a separate, definitive agreement covering those Products (the “Initial Term”). Following the Initial Term, this Agreement shall automatically be renewed for one
(1) year. Thereafter, this Agreement shall automatically be renewed for successive one (1) year increments unless either party requests in writing, at least ninety (90) days prior to the anniversary date, that this Agreement not be so renewed. The
parties acknowledge the need to better understand the business model for, and appropriate terms that should apply to, Follow-on Products and the parties will endeavor to negotiate a separate agreement to address these Products.

 

	4.0	 	Purchase Commitment and Prices 

 

	4.1	 	During the Initial Term and subject to the limitations set forth herein, Solectron shall supply and Zhone shall purchase Initial Products and related Manufacturing
Services exclusively from Solectron. 

 

	4.2	 	The pricing model for the Initial Products is set forth in Exhibit B-1, which may be changed by mutual agreement of the parties by executing a new pricing model. The
pricing model for Follow-on Products will be set forth in an additional Exhibit(s) that corresponds to the applicable Product Exhibit (e.g., Exhibit B-1, B-2, etc.) which is signed by both parties, or in a quotation against which Orders are placed.
During the Initial Term of this Agreement, the prices for Initial Products (and any other mutually agreed Products) will include a five percent (5%) mark-up over the agreed base pricing model to enable Solectron to recover the Return. During the
Initial Term of this Agreement, the parties agree to meet on each anniversary of the Effective Date to review the status of Solectron’s recovery of the Return. If Solectron recovers the Return prior to the expiration of the Initial Term of this
Agreement, then the prices then in effect will be reduced by the five percent (5%) mark-up. At each review, if the revenue stream from the Products is not achieving an annual run-rate that is consistent with recovery of the Return during the Initial
Term of this Agreement, then within thirty (30) days of said review, Zhone will make a payment to Solectron equal to that portion of the Return on a pro- rated basis that has not been recovered at the time of the review. The parties further agree
that if Solectron has not recovered the Return by the expiration of the Initial Term of this Agreement, then within thirty (30) days of the expiration of the Initial Term of this Agreement, Zhone will make a payment to Solectron equal to that
portion of the Return that has not been recovered by Solectron. 

 

	4.3	 	In the event that Zhone rightfully terminates this Supply Agreement in accordance with Section 16.1 for Solectron’s Material Breach, Zhone’s purchase
commitment contained in Section 4.1 above and Zhone’s guarantee that Solectron shall receive the Return contained in Section 4.2 above will be terminated without further obligation to Solectron. 

 

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	4.4	 	Prices for Pre-Production, Engineering Support Services, Out-of-Warranty Service, and all other services will be mutually agreed to by the parties.

 

	4.5	 	The parties acknowledge and agree to meet quarterly to review the Product prices for the purpose of reducing the Product prices for the upcoming quarter. Each party
shall diligently pursue cost improvement opportunities for each and every element of the price to reduce the cost of the Products, including but not limited to, recommending design or process changes, and new sources, which may result in an overall
cost reduction. The parties acknowledge and agree that the Price for any particular Product may be increased to the extent of any price increase of any Component incorporated into such Product or any increases in assembly or test time due to any
Engineering Change order or specific instructions from Zhone. Any price change shall apply only to purchase orders or material releases issued after the effective date of such price change. 

 

	5.0	 	Products, Services and Systems 

 

	5.1	 	Pre-Production Services. 

 
(i) Solectron shall provide Pre-Production Services to Zhone as agreed upon by the parties. The specific scope of Pre-production Services
will be specified in the Statement of Work applicable to the Product, and may include, without limitation, the following: 
 

	 	A.	 	design for manufacturing and test evaluations 

	 	B.	 	development of assembly and test processes 

	 	C.	 	development of test programs and/or fixtures 

	 	D.	 	production of prototype and/or validation units 

 
(ii) Solectron will perform such Pre-Production Services and deliver any pre-production deliverables to Zhone in accordance with the
pre-production schedule and accepted order(s) applicable to such Pre-Production Deliverables. If Zhone requires Solectron to produce prototype builds, Solectron will: 
 

	 	A.	 	deliver each such build within five (5) days of commencing production of the prototype build provided Solectron has all necessary material, documentation, tools,
fixtures and equipment; 

	 	B.	 	deliver a DFM report to Zhone within five (5) days after delivering a prototype build to Zhone. 

 
(iii) Solectron shall operate a prototype facility dedicated
to production of pre-production deliverables in such a manner as to ensure that the prototype build activity will not hinder Solectron’s manufacturing capability to meet Zhone’s Product demand requirements and vice versa. 
 
(iv) The parties shall agree in writing upon pricing for
prototype and pilot builds. Costs for other services will be handled in accordance with the provisions of Section 5.3 below. 
 
(v) Test Engineering. Zhone will provide Solectron with test vectors and all other information reasonably necessary to develop test
programs and fixtures for the Products. Solectron will designate a test engineer(s), as Zhone deems necessary and as mutually agreed, who shall be responsible for interacting with Zhone’s test engineering group in a timely manner to develop
and/or support (as specified in the relevant Product plan) test programs and test fixtures for use in manufacturing such Product for Zhone. Upon mutual agreement by the parties, Solectron will locate such test engineer(s) at Zhone’s engineering
facilities. 
 

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(vi) Pre-Production Reports and Reviews. Prior to the award of any pre- production program
by Zhone, Solectron shall provide Zhone with a project plan which includes a detailed timeline with milestones. Upon award of any pre-production program by Zhone the parties will mutually agree upon the detailed project plan. During the
pre-production program, Solectron will provide Zhone with regular written progress reports at least monthly. All such reports shall include, but shall not be limited to, the following: (A) status of progress toward milestones; (B) short description
of problems or potential problems, if any, preventing Solectron from meeting the milestones; (C) recovery method proposed in order to meet milestones, if needed, and (D) any other information related to the pre-production Services as reasonably
requested by Zhone. 
 
(vii) Zhone shall have the
right to conduct periodic reviews of Solectron’s Pre-Production Services. Upon reasonable notice, Solectron will allow Zhone, during Solectron’s normal business hours, to visit those portions of Solectron’s facilities used to perform
such pre-production Services to inspect and discuss the status of pre-production activities. 
 

	5.2	 	Manufacturing Services. Solectron will accept any Orders for Products issued in accordance with this Agreement. Solectron agrees to manufacture, test, package and
deliver the Product quantities committed in accordance with the Specifications and Quality Plan for such Products and deliver such quantities to Zhone or its customers, pursuant to the terms of this Agreement. 

 

	5.3	 	Engineering Support Services. Solectron shall provide Engineering Support Services which shall include, without limitation, the following:

 

	 	A.	 	Designated Component Engineering liaison to interact with Zhone’s designers. Such liaison will, among other things, assist in the selection of Components
meeting design requirements and coordinate Component evaluations and qualifications. 

	 	B.	 	Support Zhone’s quick turn prototype requirements. 

	 	C.	 	Perform Beta Pilot production checkout. 

	 	D.	 	Provide seamless transfer from prototype/pilot environment to Solectron’s volume production sites. 

 
Such services will be provided at mutually agreed pricing
and, except as provided otherwise herein, billed in the period supplied. Designated resources will be billed on a monthly basis. 
 

	5.4	 	Out-of-Warranty Service. Solectron shall provide Out-of-Warranty Service to Zhone under terms and conditions substantially similar to the form attached as Exhibit D.

 

	5.5	 	Failure Analysis, Repair and Refurbishment. Solectron shall provide failure analysis, repair and refurbishment services to Zhone for both in-warranty and
out-of-warranty Products as set forth in Section 15.2 and Exhibit D, respectively. 

 

	5.6.	 	Program Management. Each party shall designate a manager authorized to act as its worldwide single point of contact for all business and strategic issues pertaining
to this Agreement. In addition, Solectron shall designate a program manager(s), who may be physically located at Zhone’s facility, to act as Solectron’s single point of contact with Zhone in connection with each new Product release to be
manufactured by Solectron hereunder. The parties shall agree upon in writing the scope of the program manager’s responsibilities during the Product life cycle. Solectron shall implement a dedicated “customer focus team”, consisting of
(at least) one (1) program manager, one (1) materials manager and one (1) technical manager. The responsibility of the customer focus team shall be to manage Solectron’s performance hereunder. 

 

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	5.7	 	Tooling and NRE. The Parties acknowledge and agree that Solectron may incur non-recurring expenditures for Tooling, software programs and other expenses for the
manufacture of the Products. All such non-recurring expenditures will be agreed upon in writing by Zhone and Solectron prior to incurrence and be the subject of separate purchase orders which will be independent of any Orders for Products. Solectron
will invoice Zhone for such approved expenditures and such invoices will be paid by Zhone within ten (10) days of the date of the invoice. Unless otherwise agreed in writing by the parties, Tooling will be furnished and owned solely by Zhone and
consigned to Solectron, or purchased or manufactured by Solectron and paid for by Zhone. Solectron shall bear the cost of maintaining Tooling; provided, however, that Zhone will bear the cost of repairing or replacing Tooling that becomes obsolete
or experiences significant defects or quality problems. All Zhone Tooling/equipment furnished to Solectron or paid for by Zhone in connection with this Agreement shall: (i) be clearly marked and remain the personal property of Zhone; and (ii) be
kept free of liens and encumbrances. Solectron shall hold Zhone property at its own risk and shall not modify the property without the written permission of Zhone. Upon Zhone’s request, Solectron shall redeliver the property to Zhone in the
same condition as originally received by Solectron with the exception of reasonable wear and tear. In the event the property is lost, damaged or destroyed, Solectron’s liability for the property is limited to the book value of the property.

 

	5.8	 	Systems. Zhone and Solectron agree that Zhone’s order management and fulfillment system will be installed at Solectron on or before the Effective Date of this
Agreement. Zhone is responsible for maintaining this system and will provide all resources and pay for all costs associated with such maintenance. Solectron will have a license to access and use this system for the purpose of performing its
obligations under this Agreement. 

 

	6.0	 	Material Procurement, Orders 

 

	6.1	 	Solectron will procure Components only from Zhone’s authorized vendors. Zhone will provide Solectron with an approved vendor list for each phase of Product
manufacture. Solectron will not procure Components from alternate vendors nor deviate from the approved vendor list without prior written approval or as provided in Exhibit E. Solectron may, from time to time, suggest its preferred suppliers as
alternate vendors to Zhone and Zhone agrees to use reasonable commercial efforts to evaluate and approve Solectron’s preferred suppliers for addition to the approved vendor list. 

 

	6.2	 	Zhone will provide Solectron a rolling six (6) month Product forecast. The most recent three (3) months of such forecast will reflect weekly Product demand and such
portion of the forecast will be updated weekly via the order management and fulfillment system. In addition, during the first month of the current calendar quarter, Zhone will provide Solectron with a quarterly blanket purchase order for the
following calendar quarter, which will be refreshed at least once every thirty (30) days. Such forecast and blanket purchase order will not be binding on Zhone and do not represent a commitment to purchase Products except as otherwise set forth in
this Agreement. 

 

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	6.3	 	Solectron is authorized to purchase Components to support Zhone’s blanket purchase order and forecast pursuant to Component Lead Times and consistent with
standard purchasing practices including, but not limited to, acquisition of economic and minimum order quantities. Zhone recognizes its financial responsibility for the Components purchased by Solectron on behalf of Zhone in accordance with this
provision to the extent such items are non-cancelable and/or non-returnable. 

 

	6.4	 	For the Initial Products and any other mutually agreed Products, Solectron will utilize Zhone’s order management and fulfillment system to monitor and respond
to Zhone’s actual Product demand. Zhone’s receipt of a customer order in its order management and fulfillment system is Solectron’s authorization to manufacture and ship Product and Zhone’s commitment to buy Product in the
quantities specified in the customer order (an “Order”) or as otherwise committed by Solectron pursuant to Sections 7.0 and 8.0. In all other cases, Zhone will issue purchase orders or material releases against a blanket purchase order
(also an “Order”). Solectron will notify Zhone of its acceptance or rejection of the Order within five (5) business days of receipt. Rejections, if any, will be based on the quantities requested as compared to those previously forecasted.
In the event that Solectron does not notify Zhone of its acceptance or rejection, then such Order will be deemed accepted. Accepted Orders will constitute Zhone’s authorization for Solectron to manufacture and ship Product to Zhone in the
quantities agreed. 

 

	6.5	 	In the event of a decrease in Zhone’s forecast or blanket purchase order quantity, reschedule or cancellation of an Order, discontinuance of Product, or an
engineering change, Zhone agrees to compensate Solectron for Excess Components in accordance with Section 10.1 below. 

 

	6.6	 	Solectron shall undertake all commercially reasonable efforts to cancel all applicable Component purchase orders and reduce Component inventory through return for
credit programs or allocate Components for alternate programs if applicable. 

 

	7.0	 	Delivery 

 

	7.1	 	Solectron will use all commercially reasonable efforts to achieve 100% on time delivery, defined as shipment of Product by Solectron within a window of three (3)
days early and zero days late of the committed delivery date. Upon learning of any potential delivery delays, Solectron will notify Zhone as to the cause of such delays and the actions taken by Solectron to resolve such delays. Solectron’s Lead
Time for Orders received with quantities that are equal to or less than those specified in the most recent weekly forecast is ten (10) days unless Zhone is notified otherwise in writing by Solectron at least thirty (30) days prior to receipt of the
Order. For any Orders received with materially different quantities or a shorter Lead Time, Solectron will notify Zhone of the committed delivery date. 

 

	7.2	 	All U.S. origin shipments by Solectron are F.O.B. Solectron’s point of shipment (i.e., at Solectron’s manufacturing plant). All other shipments are Ex
Works-Solectron’s point of shipment (i.e., at Solectron’s manufacturing plant). Title to Product(s) and risk of loss will pass to Zhone upon Zhone’s or its agent’s retrieval of Product(s) at Solectron’s point of shipment.

 

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	7.3	 	Zhone shall have a reasonable time to inspect the Products. Zhone will notify Solectron in writing of particular deficiencies during the inspection period which
shall be the ten (10) day period immediately following receipt. Failure to give notice of or particularize the deficiencies will constitute Zhone’s acceptance. 

 

	7.4	 	If applicable, Solectron shall provide Zhone with a valid, accurate completed Exporter’s Certificate of Origin for all Products which qualify for preferential
duty treatment under the North American Free Trade Agreement (“NAFTA”). Solectron shall deliver the Exporter’s Certificate of Origin to Zhone prior to the first shipment of such Products in order to enable Zhone to claim preferential
duty treatment under NAFTA at the time of entry. Solectron shall notify Zhone in writing prior to making any pricing or sourcing changes that might result in the Products being deemed ineligible for preferential duty treatment under NAFTA. Solectron
recognizes that the Exporter’s Certificate of Origin will be used by Zhone as proof of eligibility for preferential duty treatment and agrees to provide full cooperation to Zhone in connection with any U.S. Customs inquiries into NAFTA claims
relating to this Agreement. 

 

	7.5	 	Zhone reserves the right to claim duty drawback on all purchases from Solectron, and Solectron shall cooperate by providing the necessary certificates of Delivery or
in instances where the imported Product received further processing, shall furnish certificates of manufacture and delivery on all articles and Products which may be subject to drawback as requested by Zhone. 

 

	8.0	 	Flexibility of Shipments 

 

	    	 	The parties may agree to different flexibility terms that will apply to specific Products by executing a Flexibility/Cancellation/Component Liability Terms Exhibit C
that corresponds to the applicable Product Exhibit (e.g., Exhibit C-1, C-2, etc.) In the absence of such different terms, the following flexibility terms will apply to any effective Product Exhibits. 

 

	8.1	 	Request to Accelerate Delivery. Zhone may request acceleration of delivery of Products by issuing an electronic or written (including facsimile) notice to
Solectron, or by increasing its forecasted Product demand in the order management and fulfillment system. Solectron will use all commercially reasonable efforts to accept the requested new delivery date. Solectron will notify Zhone of and seek
Zhone’s prior written agreement to reasonable and actual premium costs, if any, required to meet the requested accelerated delivery date. Zhone will have the option of accepting these premium charges or maintaining the original delivery date.

 

	8.2	 	Confirmation and Acceptance of Request to Change Product Mix or Accelerate Delivery. Solectron agrees to give electronic or written (including facsimile)
confirmation of receipt of Zhone’s request within five (5) business days. Zhone’s request shall be deemed accepted by Solectron if Zhone does not receive Solectron’s electronic or written (including facsimile) acceptance or rejection
within five (5) business days after receipt of Zhone’s request. 

 

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	8.4	 	Request to Delay Delivery 

 
(i) Zhone may reschedule individual shipments of Product. Solectron will use reasonable efforts to accommodate such requests on a
case-by-case basis. Such reschedules may be subject to additional charges and will be contingent upon availability of material, personnel and capacity resources. If the requested rescheduled delivery date is more than ninety (90) days after the
original scheduled delivery date, the affected inventory may be deemed Excess Components, and the terms of Section 10.1 will apply. Such charges shall be reviewed and approved by Customer prior to the reschedule being executed. Any rescheduled item
may be invoiced at the price in effect at the time of shipment. 
 
(ii) Zhone will notify Solectron of its request by issuing an electronic or written (including facsimile) notice to Solectron, or by decreasing its forecasted Product demand in the order management and fulfillment system. Solectron
will respond to Zhone’s request to delay delivery of Product demand within five (5) business days from the receipt of Zhone’s request. If Zhone does not receive Solectron’s written (including facsimile) or electronic response within
five (5) business days after receipt of Zhone’s request, then Zhone’s request shall be deemed accepted by Solectron. 
 

	9.0	 	Cancellation of Shipments 

 
The parties may agree to different cancellation terms that will apply to specific Products by executing a
Flexibility/Cancellation/Component Liability Terms Exhibit C that corresponds to the applicable Product Exhibit (e.g., Exhibit C-1, C-2, etc.) In the absence of such specific terms, the following cancellation terms will apply to any effective
Product Exhibits. 
 

	9.1	 	Zhone’s requests to cancel shipments of Products will be reviewed individually by Solectron. Cancellation charges will be assessed as follows: (a) for shipments
scheduled to ship within forty five (45) days, cancellation charges shall be 100% of the price of the Products being canceled; (b) for shipments scheduled beyond forty five (45) days, cancellation charges will include: (i) the contract price of all
finished Products in Solectron’s possession, (ii) the cost of work-in-process inventory (including handling charges and value add), (iii) the cost of Components on order (including handling charges) or on hand which cannot be canceled or
returned to the vendor pursuant to the terms of Section 10.1 below, (iv) any vendor cancellation charges incurred with respect to material canceled or returned to the vendor, (v) material handling charges, and (vi) charges for non-recurring services
associated with work stoppage. Charges will be based on the date written notice of a cancellation is received at Solectron. 

 

	9.2	 	Where cancellation of a previously rescheduled shipment has occurred, the cancellation charge may be computed as if the previously requested reschedule had instead
been a request for cancellation. 

 

	9.3	 	Orders for Tooling, test equipment or non-recurring services are firm and not cancelable. 

 
 

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	10.0	 	Excess and Obsolete Components 

 
The parties may agree to different Component liability terms that will apply to specific Products by executing a
Flexibility/Cancellation/Component Liability Terms Exhibit C that corresponds to the applicable Product Exhibit (e.g., Exhibit C-1, C-2, etc.) In the absence of such different terms, the following Component liability terms will apply to any
effective Product Exhibits. 
 

	10.1	 	If Zhone cancels or reschedules Orders, changes its forecast, fails to receive customer orders in its order fulfillment and management system, or implements an
Engineering Change notice, or breaches this Agreement (such actions shall collectively be referred to as a “Material Event”), which results in Excess and/or Obsolete Components (including long lead material, MOQ’s, and unique/custom
material), then if those Excess and/or Obsolete Components are not fully consumed prior to the end of sixty (60) days following the date of the Material Event, Solectron may request and Zhone agrees to pay Solectron a carrying charge on the
inventory of two percent (2%) per month. Zhone agrees to pay such carrying charge on such Excess and/or Obsolete Components until it is fully consumed; provided, however, that if it is not consumed by the end of the ninety (90) days following the
date of the Material Event, Solectron may request and Zhone shall purchase such Excess and/or Obsolete Components from Solectron and Solectron will continue, at Zhone’s option, to hold such inventory on Zhone’s behalf, subject to agreed
carrying charges, or Solectron will deliver the Components to Zhone’s designated location at Zhone’s expense. Solectron will use all commercially reasonable efforts to minimize the Excess and/or Obsolete Components.

 

	11.0	 	Invoice and Payment Terms 

 

	11.1	 	Solectron will invoice Zhone upon shipment of Product. Solectron and Zhone agree to payment terms of net ten (10) days from the date of invoice or delivery of
Product, whichever occurs later. If Zhone fails to make timely payment or satisfy credit arrangements, it shall be deemed a Material Breach of this Agreement as more fully set forth in Section 16.1. In this event, Solectron may, in addition to any
other rights and remedies provided at law or in equity, suspend its performance under this Agreement and withhold shipment of Products, refuse to accept further orders, change credit and payment terms, request other assurances and/or take any other
action that Solectron, in its sole discretion, deems appropriate until Zhone makes other arrangements satisfactory to Solectron. In the event Zhone does not cure the Material Breach or make alternative arrangements satisfactory to Solectron,
Solectron may terminate this Agreement and exercise any and all rights and remedies provided at law or in equity or in this Agreement, including this Section 11.1. 

 

	11.2	 	Currency will be in U.S. Dollars unless specifically negotiated otherwise and reflected in a Statement of Work. 

 

	11.3	 	Except for the net value added taxes, prices are exclusive of all taxes, duties, customs or similar charges and are subject to an increase equal in amount to any
charge Solectron may be required to collect or pay upon shipment of the Product. 

 

	12.0	 	Quality 

 
 

11 

 

	12.1	 	Zhone shall for each Product provide an initial proposed quality plan which sets forth, without limitation, the operation flow of each Product, the process control
for each Product, the audit procedures for each Product and the inspection procedures for each Product. Solectron shall have the opportunity to review and provide comments on such plans. A final plan will be mutually agreed to in writing (the
“Quality Plan”) Any changes to the plans will be mutually agreed in writing. 

 

	12.2	 	Upon reasonable notice and during normal business hours, Zhone shall have the right to review, inspect, test and evaluate Solectron’s facilities, operations,
manufacturing and test processes, and procedures that relate to Solectron’s performance of this Agreement for the purposes of determining compliance with this Agreement and quality control. 

 

	13.0	 	Engineering Changes 

 

	13.1	 	Zhone may submit Engineering Changes to Solectron in writing for incorporation into the Product. It is important that this notification include documentation of the
change to effectively support an investigation of the impact of the Engineering Change. Solectron will use all commercially reasonable efforts to review the Engineering Change and respond to Zhone within one (1) week. If any such change affects the
price, delivery, or quality performance of said Product, an equitable adjustment will be negotiated between Solectron and Zhone prior to implementation of the change. In the event Zhone requests that a change be implemented prior to Solectron’s
evaluation of pricing and schedule impact, Solectron will use all commercially reasonable efforts to perform as directed and Zhone will be liable for all costs associated with such implementation. The terms of Section 10.1 shall apply to any Excess
or Obsolete Components that result from an Engineering Change. 

 

	13.2	 	Solectron agrees not to undertake significant process changes, product design changes, or process step discontinuance affecting electrical performance and/or
mechanical form, fit and function without prior written notification and concurrence of Zhone. 

 

	14.0	 	Confidential Information 

 

	14.1	 	All proprietary and confidential information exchanged between the parties in connection with this Agreement shall be subject to the terms of that certain
Nondisclosure Agreement, dated March 13, 2000, between Solectron and Zhone attached as Exhibit A to the Asset Purchase Agreement. Such Nondisclosure Agreement shall be deemed to run concurrently with the term of this Agreement.

 

	14.2	 	Subject to the terms of the Nondisclosure Agreement and the proprietary rights of the parties, Solectron and Zhone agree to exchange, at least semi-annually,
relevant process development information and business plans to include market trends, process technologies, product requirements, new product developments, available capacity and other information to support technology advancements by both Solectron
and Zhone. 

 

	15.0	 	Warranty 

 
 

12 

 

	15.1	 	The parties intend to collect data for one hundred eighty (180) days with the goal of agreeing to a warranty period of eighteen (18) months from the date of
shipment. Until a separate agreement in writing is reached, and unless otherwise agreed in a Product Exhibit, Solectron warrants for a period of twelve (12) months from the date of manufacture of the Product that (i) the Product will conform to the
specifications applicable to such Product at the time of its manufacture, which are furnished in writing by Zhone and accepted by Solectron; and (ii) such Product will be of good material (supplied by Solectron) and be free from defects in
workmanship. If Products are subject to a third-party manufacturers’ warranty, then to the extent permitted by such third-party, Solectron hereby assigns such warranties to Zhone. 

 

	15.2	 	ZHONE’S SOLE AND EXCLUSIVE REMEDY AND SOLECTRON’S ENTIRE LIABILITY FOR BREACH OF WARRANTY IS AS STATED IN THIS SECTION 15.2. In the event that any Product
manufactured shall not be in conformity with the foregoing warranties, Solectron shall, at Solectron’s option, either credit Zhone for any such nonconformity (not to exceed the purchase price paid by Zhone for such Product), or, at
Solectron’s expense, replace, repair or correct such Product. Repaired or replaced Product shall be warranted for the remainder of the original warranty period or ninety (90) days, whichever is greater. Zhone agrees to pay a screening fee for
assemblies submitted for warranty work that are not packed appropriately, result in No Defect Found, or are required to be tested against a later version test software than was used at the time of manufacture. Such fee will be negotiated and
established in good faith by the parties based on historical field data and other relevant information. Zhone will cover all transportation costs to and from Solectron for warranty repairs and shall retain title to returned Product.

 

	15.3	 	Solectron shall have no liability or responsibility for any costs, losses or damages due to defective or failed Product claims to the extent that the claims result
from: (a) Solectron’s compliance with Zhone’s supplied Specifications and/or manufacturing processes, (b) inadequate operating environment, accident, disaster, neglect, abuse, or misuse, (c) design flaws or design parameters exceeding or
violating component specifications, (d) external or environmental factors after shipment from Solectron, (e) follow-on handling, processing, or manufacturing of Products after shipment of the Product from Solectron or the SLC, as applicable, (f)
repair, attempted repair, modification, or alteration of the Product by a party other than Solectron, (g) electrostatic discharge damage (not caused by Solectron), (h) defects related to components provided by third party suppliers selected by
Zhone, which defects Solectron could not reasonably detect, prevent or control, and (i) Products for which Zhone has not provided functional or other tests to adequately diagnose failures. 

 
Solectron makes NO WARRANTY as to software which is supplied
on an “AS IS” basis. Likewise, Solectron makes NO WARRANTY as to prototypes, pre-production units, or units shipped at Zhone’s request with less than the testing provided for in the work order for production units. 
 

	15.4	 	THE WARRANTIES CONTAINED IN THIS SECTION ARE IN LIEU OF, AND SOLECTRON EXPRESSLY DISCLAIMS AND ZHONE WAIVES ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS,
IMPLIED, STATUTORY OR ARISING BY COURSE OF DEALING OR PERFORMANCE, CUSTOM, USAGE IN THE TRADE OR OTHERWISE, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE AND FITNESS FOR A PARTICULAR USE. 

 

13 

 

	15.5	 	Zhone represents and warrants to Solectron that it is the owner of all proprietary rights in the information provided to Solectron in order to manufacture the
Products, and that it has the unqualified right to make available to Solectron, material and other information, including drawings, designs and specifications, and the order management and fulfillment system. Additionally, Zhone represents and
warrants to Solectron that it is the owner of software provided to Solectron hereunder and/or has the right to supply the software. Zhone hereby grants to Solectron a license to use and reproduce the software, and any other documentation or
information provided to Solectron for the purposes contemplated by this Agreement. 

 

	16.0	 	Breach; Remedies and Termination 

 

	16.1	 	The following failures in performance will be deemed a Material Breach by the applicable party: 

 

	 	(i)	 	material failure by Solectron to meet committed delivery dates; 

 

	 	(ii)	 	material failure by Solectron to maintain the quality standards set forth in Section 12.1; 

 

	 	(iii)	 	failure by Zhone to pay for Products or Services as required under this Agreement. 

 

	16.2	 	If either party fails to meet any one or more of the terms and conditions as stated in this Agreement, or upon the occurrence of a Material Breach, Solectron and
Zhone agree to negotiate in good faith to resolve such default or Material Breach. If the defaulting party fails to cure such default or Material Breach, or submit an acceptable written plan to resolve such default or Material Breach within thirty
(30) days following notice of default or Material Breach, the nondefaulting party shall have the right to terminate this Agreement by furnishing the defaulting party with written notice of termination, which termination shall be effective within
thirty (30) days of the date of such notice. 

 

	16.3	 	Either party may immediately terminate this Agreement if the other party (i) becomes insolvent; (ii) enters into or file a petition, arraignment or proceeding
seeking an order for relief under the bankruptcy laws of its respective jurisdiction; (iii) enters into a receivership of any of its assets; or (iv) enters into a dissolution of liquidation of its assets or an assignment for the benefit of its
creditors. 

 

	16.4	 	Upon termination of this Agreement or individual Statement of Work, Zhone agrees to reimburse Solectron for applicable charges as set forth in Sections 9.1 and 10.1.
Except for termination due to Zhone’s default or Material Breach, Solectron shall, at Zhone’s election, complete all work in process and deliver such Product to Zhone’s designated location. Upon any termination, Solectron shall work
cooperatively with Zhone to ensure the orderly transfer of the Products to Zhone or its designated third party in a manner so as to minimize any adverse impact to Zhone. 

 

	17.0	 	Dispute Resolution 

 
 

14 

 

	17.1	 	In the spirit of continued cooperation, the parties intend to and hereby establish the following dispute resolution procedure to be utilized in the unlikely event
any controversy should arise out of or concerning the performance of this Agreement. 

 

	17.2	 	It is the intent of the parties that any dispute be resolved informally and promptly through good faith negotiation between Solectron and Zhone. Either party may
initiate negotiation proceedings by written notice to the other party setting forth the particulars of the dispute. The parties agree to meet in good faith to jointly define the scope and a method to remedy the dispute. If these proceedings are not
productive of a resolution, then either party may choose to escalate the problem to senior management. 

 

	17.3	 	Should any disputes remain existent between the parties after completion of the two-step resolution process set forth above, or in any event, more than thirty (30)
days following written request by a party to escalate the dispute to senior management, then the parties shall promptly submit any dispute to mediation with an independent mediator as administered by the American Arbitration Association. In the
event mediation is not successful in resolving the dispute, the parties agree to submit the dispute to binding arbitration in accordance with the then-current Commercial Rules and supervision of the American Arbitration Association. The arbitration
will be held in the US headquarters city of the party not initiating the claim before a sole arbitrator who is knowledgeable in business information and electronic manufacturing services. The arbitrator will not have the power to award any damages
excluded by, or in excess of, any damage limitations expressed in this Agreement. Issues of arbitrability will be determined in accordance solely with the federal substantive and procedural laws relating to arbitration; in all other respects, the
arbitrator will be obligated to apply and follow the substantive law of the state specified in this Agreement. Each party will bear its own attorney’s fees associated with the arbitration and other costs and expenses of the arbitration will be
borne as provided by the rules of the American Arbitration Association. 

 

	18.0	 	Limitation of Liability 

 

	18.1	 	OTHER THAN DAMAGES ARISNG OUT OF SECTION 4.1 AND SECTION 10.1, IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY, TORT (INCLUDING NEGLIGENCE), STRICT
LIABILITY, PRODUCT LIABILITY, OR OTHERWISE, SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL, INDIRECT, CONSEQUENTIAL, OR EXEMPLARY DAMAGES OF ANY KIND, INCLUDING WITHOUT LIMITATION, LOSS OF PROFITS, LOSS OF USE OR DATA OR
INTERRUPTION OF BUSINESS, WHETHER OR NOT EITHER PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. 

 

	18.2	 	Solectron is performing work per specifications provided by Zhone. Therefore, Solectron shall not be liable for the technical adequacy or design of the product(s);
nor shall Solectron be liable for the safety or regulatory compliance of the Product(s), including but not limited to ensuring that the Products meet applicable government or responsible agency regulations. Should the Products or changes fail to
meet the applicable approvals, standards or regulations, Solectron may cease production until Zhone and Solectron agree to required changes and applicable qualifications are met, without being in breach of this Agreement. Zhone is responsible for
obtaining required 

 
 

15 

 

	  	 	approvals relative to any changes and will be responsible for all costs attributable to such requirements. Zhone agrees to indemnify and save Solectron harmless from
and against all losses, expenses or damages arising out of any claim resulting from Solectron’s compliance with Zhone’s specifications. 

 

	19.0	 	Intellectual Property Rights and Licenses 

 

	19.1	 	Scope. The provisions of this Section 19.0 will apply to the services provided by Solectron which are related to Manufacturing Services. If Zhone desires to
engage Solectron to provide circuit, board, system and/or schematic design services, ASIC design services, or other specific services then the parties either will execute a separate agreement. 

 

	19.2	 	Agreements with Employees and Consultants. Each party shall have agreements with its employees and consultants such that ownership of such persons’
inventions and authored works vests in the employer or in the entity which hired the consultant, respectively. 

 

	19.3	 	Pre-Existing Work Product. If either party creates or owns Pre- existing Work Product: (a) such party (“owning party”) shall solely own such
Pre-existing Work Product (subject to any right of any third party), notwithstanding disclosure or delivery to the other party of such Pre-existing Work Product; (b) the owning party shall have the right to hold in its own name all Intellectual
Property Rights that may be available in (or result from) such Pre-existing Work Product; and (c) the other party shall have no license, sublicense, right or immunity, either directly or indirectly, or by implication, estoppel or otherwise, under
such Intellectual Property Rights, except as expressly provided elsewhere in this Agreement or in a separate written agreement. 

 

	19.4	 	Work Product Related to Product Design. To the extent that Work Product is created, whether solely by either party or jointly by both parties, in the
provision of Manufacturing Services under this Agreement, and such Work Product relates to Product Design, then: (a) Zhone shall solely own such Work Product, notwithstanding disclosure or delivery of such Work Product to Solectron; (b) Zhone shall
have the right to hold in its own name all Intellectual Property Rights that may be available in (or result from) such Work Product; and (c) Solectron shall have no license, sublicense, right or immunity, either directly, indirectly, or by
implication, estoppel or otherwise, under such Intellectual Property Rights, except as expressly provided elsewhere in this Agreement. Hereafter all such Work Product, together with all Pre-existing and Test Design Work Product solely owned by
Zhone, shall be referred to as “Zhone Work Product”. 

 

	19.5	 	Work Product Related to Manufacturing Design. To the extent that Work Product is created, whether solely by Solectron or jointly by Zhone and Solectron, in
performing this Agreement, and such Work Product relates to Manufacturing Design, then: (a) Solectron shall solely own such Work Product, notwithstanding disclosure or delivery of such Work Product to Zhone; (b) Solectron shall have the right to
hold in its own name all Intellectual Property Rights that may be available in (or result from) such Work Product; and (c) Zhone shall have no license, sublicense, right or immunity, either directly, indirectly, or by implication, estoppel or
otherwise, under such Intellectual Property Rights, except as expressly provided elsewhere in this Agreement. Hereafter all such Work Product, together with all Pre-existing and Test Design Work Product solely owned by Solectron, shall be referred
to as “Solectron Work Product.” 

 

16 

 

	19.6	 	Solectron Work Product License to Zhone. Notwithstanding anything to the contrary in this Agreement, to the extent that in connection with performing this
Agreement, Solectron Work Product is disclosed or delivered to Zhone, or incorporated directly into the Products: Solectron grants to Zhone a worldwide, nonexclusive, fully paid-up, right and license under Solectron’s Intellectual Property
Rights (available in or resulting from the Solectron Work Product) to use such Solectron Work Product solely in connection with the Products; subject, however, to the condition that, to the extent that such Solectron Work Product is Confidential
Information, the provisions of Section 14.0 shall apply. 

 

	19.7	 	Zhone Work Product License to Solectron. Notwithstanding anything to the contrary in this Agreement, to the extent that in connection with the performance of
this Agreement, Zhone Work Product is disclosed or delivered to Solectron, or is incorporated directly into the Products: Zhone grants to Solectron during the term of this Agreement, a worldwide, nonexclusive, nontransferable, fully paid-up, right
and license under Zhone’s Intellectual Property Rights (available in or resulting from the Zhone Work Product) to do any of the following solely for the purpose of manufacturing Product and providing related services under this Agreement: to
use, make, have made, reproduce, and prepare derivative works based upon such Zhone Work Product; subject, however, to the condition that to the extent that such Zhone Work Product is Confidential Information, the provisions of Section 14.0 shall
apply. 

 

	19.8	 	Work Product Related to Test Design. To the extent that Work Product is created, whether solely by Solectron or jointly by Zhone and Solectron, in performing
this Agreement, and such Work Product relates to Test Design, then: (a) the party (or parties) creating such Work Product shall solely (or jointly, as the case may be) own such Work Product, notwithstanding disclosure or delivery of such Work
Product to the non-creating party; (b) the party (or parties) creating such Work Product shall have the right to hold in its own name (or their joint names, as the case may be) all Intellectual Property Rights that may be available in (or result
from) such Work Product; and (c) the other party, if applicable, shall have no license, sublicense, right or immunity, either directly, indirectly, or by implication, estoppel or otherwise, under such Intellectual Property Rights, except as
expressly provided elsewhere in this Agreement. If the parties jointly own such Work Product, they shall have no obligation to account to each other for any use of such Work Product. 

 

	19.9	 	No Other Licenses Granted. Except as expressly provided otherwise in this Agreement, nothing in this Agreement shall be deemed to grant to either party,
either directly or indirectly, or by implication, estoppel or otherwise, any license, sublicense, right or immunity under any Intellectual Property Rights of the other party or its licensors. 

 

	20.0	 	Intellectual Property Indemnification 

 

	20.1	 	Zhone will defend, at its expense, any action or claim brought against Solectron or its subsidiaries alleging that Products provided by Solectron under this
Agreement infringe any patent, copyright, trademark, or any other proprietary right, and Zhone will pay all costs and damages (including 

 
 

17 

 

	  	 	attorney’s fees) incurred by Solectron or its subsidiaries that are attributable to such actions or claims; provided that Zhone is promptly notified in writing
and furnished a copy of each allegation of infringement and is given authority, information, and assistance (at Zhone’s expense) necessary to defend or settle such claim. Zhone shall have no liability under this Section for a claim or suit if
the alleged infringement or violation is the result of Solectron’s unauthorized modification or alteration of the Specification, or Zhone’ compliance with Solectron’s specifications, designs, or manufacturing processes.

 

	20.2	 	Solectron will defend, at its expense, any action or claim brought against Zhone alleging that Solectron’s manufacturing processes utilized in the performance
of this Agreement infringe any patent, copyright, trademark, or any other proprietary right, and Solectron will pay all costs and damages (including attorney’s fees) incurred by Zhone that are attributable to such actions or claims; provided
that Solectron is promptly notified in writing and furnished a copy of each allegation of infringement and is given authority, information, and assistance (at Solectron’s expense) necessary to defend or settle such claim. Solectron shall have
no liability under this Section for any claim or suit where: (i) infringement or violation is attributable to Solectron’s incorporation of Zhone’s Specification into the Product unless Solectron knew that such designs, if so incorporated,
would so infringe or violate; and (ii) such claim or suit would have been avoided but for the combination, operation, or use of the Product with devices, parts, or software not supplied by Solectron unless Solectron knew that such combination,
operation or use would so infringe or violate. 

 

	21.0	 	Personal Injury Indemnification 

 

	21.1	 	Each party agrees to indemnify and hold the other harmless against any loss, cost or expense, including reasonable attorneys’ fees, finally awarded against the
other in connection with a claim by a third party for personal injury or property damage, to the extent that such damage is caused by a negligent act or omission by the indemnifying party or its agents. Each indemnitor’s obligations hereunder
shall be conditioned upon receiving a prompt notice of each such claim from the indemnitee and the sole authority to defend, and the indemnitee shall cooperate and provide reasonable assistance to the indemnitor in defense of the claim. Each party
agrees to carry commercial liability, property damage, and automobile liability coverage, including contractual endorsement and products hazard coverage in reasonable amounts. 

 

	22.0	 	Independent Contractor; Competition 

 

	22.1	 	Each of the parties hereto shall conduct the work to be performed hereunder as an independent contractor and not as an agent or employee of the other party. Subject
to the terms and conditions of this Agreement, each party shall choose the means to be employed and the manner of carrying out its obligations hereunder. 

 

	22.2	 	Nothing in this Agreement shall limit the right of Zhone or Solectron to develop, have developed, procure and/or market products or services now or in the future,
including any which may be competitive with those which are the subject of this Agreement. Neither party shall be required to disclose planning information to the other. 

 
 

18 

 

	23.0	 	General 

 

	23.1	 	Each party to this Agreement will maintain insurance to protect itself from claims (i) by the party’s employees, agents and subcontractors, (ii) for damages
because of injury to or destruction of tangible property resulting out of any negligent act, omission or willful misconduct of the party or the party’s employees or subcontractors, (iii) for damages because of bodily injury, sickness, disease
or death of its employees or any other person arising out of any negligent act, omission, or willful misconduct of the party or the party’s employees, agents or subcontractors. 

 

	23.2	 	Neither party shall delegate, assign or transfer its rights or obligations under this Agreement, whether in whole or part, without the written consent of the other
party; provided, however, that either party may assign this Agreement to a wholly owned subsidiary upon written notice to the other party subject to the condition that such assignment will be null and void in the event that such subsidiary ceases to
be wholly owned by the contracting party. Failure by either party to enforce any provision of this Agreement shall not be deemed to be a continuing waiver or a waiver of any other default or other term and condition. 

 

	23.3	 	Neither party shall be liable for any failure or delay in its performance under this Agreement due to acts of God, acts of civil or military authority, fires,
floods, earthquakes, riots, wars or any other cause beyond the reasonable control of the delayed party provided that the delayed party: (i) gives the other party written notice of such cause within fifteen (15) days of the discovery of the event;
and (ii) uses its reasonable efforts to remedy such delay in its performance. If such delay shall continue for more than thirty (30) days, the party injured by the inability of the other to perform shall have the right upon written notice to the
other party to either (a) terminate this Agreement as set forth in Section 16.0, or (b) treat this Agreement as suspended during the delay, find alternative sourcing, and reduce any commitment in proportion to the duration of the delay.

 

	23.4	 	Each party agrees that it will not knowingly (a) export or re-export, directly or indirectly, any technical data (as defined by the U.S. Export Administration
Regulations), including software received from the other under this Agreement, (b) disclose such technical data for use in, or (c) export or re-export, directly or indirectly, any direct product of such technical data, including software, to any
destination to which such export or re-export is restricted or prohibited by U.S. or non-U.S. law without obtaining prior authorization from U.S. Department of Commerce and other competent government authorities to the extent required by those laws.
This clause shall survive termination or cancellation of this Agreement. 

 

	23.5	 	All notices required by this Agreement shall be in writing and delivered postage paid to the addresses set forth below or at such other address as either party may
furnish to the other in writing: 

 

	 To Solectron:
	  	 Solectron Corporation
 847 Gibraltar Drive
 Milpitas, CA 95035
 Attn: Saeed Zohouri, Sr. V.P. & COO

 

19 

 

	 	    	 with a copy to
	  	 Solectron Texas, L.P.

	 	    	 	  	 12455 Research Blvd.
 Austin, TX 78759
 Attn: Joe Farmer, Director, M/S 2197
 Attn: Legal
Department

	
	 	    	 To Zhone:
	  	 Zhone Technologies, Inc.

	 	    	 	  	 7677 Oakport Street, Suite 1040,
 Oakland, CA 94621
 Attn: Ebrahim Abassi, V.P. Operations

	
	 	    	 with a copy to
	  	 Zhone Technologies, Inc.

	 	    	 	  	 7677 Oakport Street, Suite 1040
 Oakland, CA 94621
 Attn: General Counsel

 

	23.6	 	Failure of either party to enforce any term or condition of this Agreement will not be deemed to be a waiver of such term or condition. If any provision of this
Agreement is held to be invalid, the other provisions will not be affected. 

 

	23.7	 	This Agreement, the Exhibits and the Statement(s) of Work constitute the entire agreement of the parties concerning the subject matter covered herein, and shall
supersede all prior discussions, oral or other agreements. This Agreement may be executed in one or more counterparts, each of which will be deemed the original, but all of which will constitute but one and the same document. The parties agree this
Agreement, including the Exhibits, may not be modified except in writing signed by both parties. 

 

	23.8	 	The parties hereto agree that the terms and conditions contained in either party’s printed or electronic documents shall not apply to the purchase and/or sale
of the Products and that the terms and conditions set forth herein shall govern all such transactions; provided, however, that the terms and conditions typed or hand-written on the face of a purchase order, acknowledgment or other document relating
to the Product types, quantities, prices, ship-to locations and shipment dates shall, if accepted by both parties hereto, also apply to all such transactions and shall augment the terms and conditions set forth herein. 

 

	23.9	 	The parties hereto agree that this Agreement shall not be construed, enforced or governed by the United Nations Convention on Contracts for the International Sale of
Goods; rather this Agreement is entered into in the State of California, U.S.A. and shall be construed, enforced and governed solely in accordance with the laws of the State of California, U.S.A without giving effect to any choice of law provisions
thereof. In any action to enforce this Agreement, the prevailing party shall be awarded all court or arbitration costs and reasonable attorney fees incurred. 

 

	23.10	 	Each party shall comply with all applicable laws (including environmental laws), ordinances, regulations and codes, foreign or domestic, and shall maintain all
required permits, certificates, licenses, approvals and inspections in performance of this Agreement. 

 

20 

	23.11	 	Neither party shall engage in publicity related to this Agreement without the prior written approval of the other party. 

 

	23.12	 	The provisions of Sections 1, 2, 4, 8, 9, 10, 14, 15, 17, 18, 19, 20, 21, and 23 shall survive expiration or termination of this Agreement.

 

	 Agreed:
	 	 	 	 
	
	 SOLECTRON CORPORATION
	 	 	 	 ZHONE TECHNOLOGIES, INC.

	
	 By:
	 	 /s/    Susan Wang

	 	 	 	 By:
	 	

	 Name:
	 	 Susan Wang

	 	 	 	 Name:
	 	

	 Title:
	 	 SR. VP, CFO & SECRETARY

	 	 	 	 Title:
	 	

	
	 Date:
	 	
	 	 	 	 Date:
	 	

 

21 

	23.13	 	Neither party shall engage in publicity related to this Agreement without the prior written approval of the other party. 

 

	23.14	 	The provisions of Sections 1, 2, 4, 8, 9, 10, 14, 15, 17, 18, 19, 20, 21, and 23 shall survive expiration or termination of this Agreement.

 

	 Agreed:
	 	 	 	 
	
	 SOLECTRON CORPORATION
	 	 	 	 ZHONE TECHNOLOGIES, INC.

	
	 By:
	 	
	 	 	 	 By:
	 	 /s/    Ebrahim Abbasi

	 Name:
	 	
	 	 	 	 Name:
	 	 Ebrahim Abbasi

	 Title:
	 	
	 	 	 	 Title:
	 	 VP, Operations

	 Date:
	 	
	 	 	 	 Date:
	 	 March 10, 2000

 

22 

 
EXHIBIT A-1

 
Products 
 
IMACS Product Family 
 

23 

 
EXHIBIT A-2

 
Products 
 
Sechtor and ARCA-DACS Products 
 

24 

 
EXHIBIT B-1

 
Pricing Model 
 
for the 
 
IMACS Product Family 
 

25 

 
Zhone Order
Fulfillment Pricing 
 
Costing/Pricing for Processing Product
to FGI Status (unit charge) 
 

	 P/N

	    	 Description

	  	 Mat’l

	  	 Cost of
 Acquisition

	  	 Total Mat’l

	  	 PWBA Assy

	  	 PWBA Test

	 	    	 	  	 	  	 	  	 	  	 Time

	 	 Rate

	  	 Time

	 	 Rate

	 	    	 	  	 	  	 8.0%
	  	 	  	 	 	 $40.70
	  	 	 	 $40.70

	 2525-N4N
	    	 	  	 	  	 	  	 	  	 	 	 	  	 	 	 
	
	 2525-N9N
	    	 	  	 	  	 	  	 	  	 	 	 	  	 	 	 

 
Costing/Pricing for
Processing Product from FGI through Systems Configuration (monthly charge) 
 

	 P/N

	    	 Number of
 Systems Shipped

	 	 Systems
 Configuration & Test

	 	 QA

	    	 Total Systems
 Configuration Cost

	 	    	 	 	 Time

	 	 Rate

	 	 Time

	 	 Rate

	    	 
	 	    	 	 	 Hr
	 	 $40.70
	 	 0.1333
	 	 $40.70
	    	 

 
Costing/Pricing for
Order Fulfillment Services (monthly charge) 
 

	 	    	 Number of
 Items Shipped

	 	 Time

	 	 Rate

	  	 Margin
 6.0%
 (/0.94)

	    	 Goodwill
 Margin
 5.0%

	  	 Monthly
 Charge

	 	    	 	 	 0.16666
	 	 $ 40.70
	  	 	    	 	  	 

 
Costing/Pricing for
Processing Product to FGI Status (unit charge) 
 

	 25% Pre-
 Test Mfg

	  	 Common
 Value Add

	  	 Re-Test 5.0%

	  	 Total PWBA Assy, Test & CVA

	  	 FGI Cost

	  	 Margin 6.0%
 (/0.94)

	    	 Goodwill Margin
 5.0%

	  	 Qty
 Per

	    	 Extended Value

	 Time

	 	 Rate

	  	 Time

	 	 Rate

	  	 	  	 Time

	 	 Rate

	  	 	  	 	    	 	  	 	    	 
	 	 	 $40.70
	  	 	 	 $40.70
	  	 	  	 	 	 $40.70
	  	 	  	 	    	 	  	 	    	 
	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	  	 	    	 Value per system
	    	 
	
	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	  	 	    	 Value Per System
	    	 

 
Costing/Pricing for
Processing Product from FGI through Systems Configuration (monthly charge) 
 

	 Margin
 6.0%
 (/0.94)

	    	 Goodwill
 Margin
 5.0%

	  	 Monthly
 Charge

	 	 	 	 	 	 	 	 

 
EXHIBIT B-1

 
Pricing 
 
For the 
 
Sechtor and ARCA-DACS Products 
 
Pricing will be provided via quotation. 
 

27 

 
EXHIBIT C-1

Flexibility/Cancellation/Component Liability Terms 
 
IMACS Product Family 
 
Intentionally Left Blank 
 

28 

 
EXHIBIT C-2

 
Flexibility/Cancellation/Component
Liability Terms 
 
Sechtor and ARCA-DACS
Products 
 
Intentionally Left Blank

 
 

29 

 
EXHIBIT D

 
Out of Warranty Service 
 
 

30 

 
EXHIBIT E

 
PASSIVE COMMODITY SUBSTITUTION
APPROVAL FORM 
 
ZHONE TECHNOLOGIES, INC

 
This form sets forth the conditions under which Solectron
Corporation (“Solectron”) may substitute certain components for those specified on Zhone’s BOM and sourced through Zhone’s approved vendor list (AVL). Zhone’s signature will constitute its express authorization for any
substitutions made by Solectron in accordance with the criteria and conditions listed below. 
 
Resistors: Substitution is approved for these components using the following criteria: 
 

	 	•	 	Equal/Better than Tolerance (i.e., 5% when AVL specs 10%) 

 

	 	•	 	Equal/Better than Zhone Rating (i.e., 1/4 watt when AVL specs 1/8 watt) 

 
Conditions: 
 

	 	1.	 	Applies to carbon film, metal film, and surface mount resistors only. 

 

	 	2.	 	Wire wound resistors must meet AVL, no exceptions. 

 

	 	3.	 	In all cases, resistance values must meet AVL specifications. 

 

	 	4.	 	The temperature coefficient (PPM/DEG C) will be “equal to” or “better than”. 

 

	 	5.	 	Substitution can be done provided form, fit, and function meet original specification. 

 
Inductors: Substitution is approved for these components using the following criteria: 
 

	 	•	 	Equal/Better than Tolerance (i.e., 10% when AVL specs 20%) 

 
Conditions: 
 

	 	1.	 	Surface mount shall be of the same size and pitch as specified. 

 

	 	2.	 	The temperature coefficient (PPM/DEG C) will be “equal to” or “better than”. 

 

	 	3.	 	Q Value must be “equal to” unless AVL reads Q=XX or greater. 

 

	 	4.	 	Substitution can be done provided form, fit, and function meet original specification. 

 

31 

 
All
substitutions are limited to Solectron, Preferred+, and Preferred suppliers, and Zhone approved suppliers. 
 
Capacitors: Substitution is approved for these components using the following criteria: 
 

	 	•	 	Equal/Better than Tolerance (i.e., 10% when AVL specs 20%) 

 

	 	•	 	Equal/Better than Voltage (i.e., 20 volt when AVL specs 1 volt) 

 

	 	•	 	Equal/Better than Dielectric (i.e., NPO in place of X7R or X5U and X7R in place of Z5U.) 

 
Conditions: 
 

	 	1.	 	Tantalum or electrolytic capacitors shall be replaced by the same type. 

 

	 	2.	 	Surface mount shall be of the same size and pitch as specified. 

 

	 	3.	 	Reel and Ammo pack radial/axial lead components with a smaller case size is acceptable. 

 

	 	4.	 	The temperature coefficient (PPM/DEG C) will be “equal to” or “better than”. 

 

	 	5.	 	The type of film will remain the same (i.e., polyester can not be substituted for polycarbonate, and polycarbonate can not be substituted for polysulfone, etc.)

 

	 	6.	 	The type of construction will remain the same (i.e., WRAP and fill cannot be substituted for hermetically sealed, etc.) 

 

	 	7.	 	Substitution can be done provided form, fit, and function meet original specification. 

 
ZHONE APPROVES THESE SUBSTITUTIONS WITH THE AUTHORIZED SIGNATURE BELOW: 
 
ZHONE TECHNOLOGIES, INC. 
 

	 Signature:
	 	  

	 Name:
	 	  

	 Title:
	 	  

	 Date:
	 	  

 

32 

 
CONNECTOR
COMMODITY SUBSTITUTION APPROVAL FORM 
 
ZHONE TECHNOLOGIES, INC. 
 
This form sets
forth the conditions under which Solectron may substitute certain components for those specified on Zhone’s Bills of Materials (BOM) and sourced through Zhone’s approved vendor list (AVL). Zhone’s signature will constitute its’
express authorization for any substitutions made by Solectron in accordance with the criteria and conditions listed below. 
 
Connector: Substitution is approved for these components using the following criteria: 
 

	 	•	 	Thicker gold plating (i.e., 30u > 15u > gold flash) 

 

	 	•	 	Higher temperature material (i.e., LCP > polyester) 

 

	 	•	 	Retention, i.e., kinked, leads 

 

	 	•	 	Different color material 

 
In addition, the following substitutions may also be made for the designated part type: 
 

	 	•	 	Headers—substitute “breakaway” for “solid” 

 

	 	•	 	DSUB’s—substitute “screwlock installed” for units with separate screwlocks 

 

	 	•	 	PLCC Sockets—substitute low insertion force for standard insertion force 

 

	 	•	 	DIP Sockets – substitute better than plating (i.e., beryllium> phosphor bronze > copper alloy and, dual leaf > single leaf) 

 

	 	•	 	SIMMs – substitute metal latches for plastic latches 

 

	 	•	 	DIN – substitute level I > level II > level IIII 

 
Exceptions: 
 

	 	•	 	SIMMs – substation of gold vs. tin plating on contacts is not allowed 

 

33 

 
All
substitutions are limited to Solectron, Preferred+ and Preferred suppliers and, Zhone approved suppliers. 
 
ZHONE APPROVES THESE SUBSTITUTIONS WITH THE AUTHORIZED SIGNATURE BELOW: 
 
ZHONE TECHNOLOGIES, INC. 
 

	 Signature:
	 	  

	 Name:
	 	  

	 Title:
	 	  

	 Date:
	 	  

 

34<PAGE>

                                                                   Exhibit 10.18

                            ZHONE ACQUISITION CORP.

           (to be merged with and into Premisys Communications, Inc.

              and then to be succeeded by Premisys Systems, LLC)

                           -------------------------

                                  $125,000,000

                                CREDIT AGREEMENT

                          dated as of November 29, 1999

                           -------------------------

CREDIT    FIRST
SUISSE    BOSTON

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                           Page
                                                                                                                           -----
<S>                                                                                                                        <C>
SECTION 1. DEFINITIONS.....................................................................................................  1

     1.1  Defined Terms....................................................................................................  1

            "Commitment....................................................................................................  4

            "Uniform Customs............................................................................................... 15

     1.2  Other Definitional Provisions.................................................................................... 15

SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS....................................................................... 15

     2.1  Term Loans....................................................................................................... 15

     2.2  Procedure for Term Loan Borrowing................................................................................ 15

     2.3  Amortization of Term Loans....................................................................................... 16

     2.4  Use of Proceeds of Term Loans.................................................................................... 17

SECTION 3. AMOUNT AND TERMS OF ACQUISITION LOAN COMMITMENTS................................................................ 17

     3.1  Acquisition Term Loans........................................................................................... 17

     3.2  Procedure for Acquisition Loan Borrowing......................................................................... 17

     3.3  Maturity of Acquisition Loans.................................................................................... 18

     3.4  Use of Proceeds of Acquisition Loans............................................................................. 18

SECTION 4. PROVISIONS RELATING TO THE LOANS; FEES AND PAYMENTS............................................................. 18

     4.1  Repayment of Loans; Evidence of Debt............................................................................. 18

     4.2  Commitment Fee................................................................................................... 19

     4.3  Optional Prepayments............................................................................................. 19

     4.4  Optional Termination or Reduction of Aggregate Acquisition Loan Commitment....................................... 20

     4.5  Mandatory Prepayments............................................................................................ 20

     4.6  Conversion and Continuation Options.............................................................................. 20

     4.7  Minimum Amounts and Maximum Number of Tranches................................................................... 21
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                                         <C>
     4.8  Interest Rates and Payment Dates................................................................................. 21

     4.9  Computation of Interest and Fees................................................................................. 21

     4.10 Inability to Determine Interest Rate............................................................................. 22

     4.11 Pro Rata Treatment and Payments.................................................................................. 22

     4.12 Illegality....................................................................................................... 23

     4.13 Requirements of Law.............................................................................................. 24

     4.14 Taxes............................................................................................................ 25

     4.15 Indemnity........................................................................................................ 26

     4.16 Certain Fees..................................................................................................... 26

     4.17 Change of Lending Office......................................................................................... 26

SECTION 5. REPRESENTATIONS AND WARRANTIES.................................................................................. 27

     5.1  Financial Condition.............................................................................................. 27

     5.2  No Change........................................................................................................ 28

     5.3  Corporate Existence; Compliance with Law......................................................................... 28

     5.4  Corporate Power; Authorization; Enforceable Obligations.......................................................... 28

     5.5  No Legal Bar..................................................................................................... 29

     5.6  No Material Litigation........................................................................................... 29

     5.7  No Default....................................................................................................... 29

     5.8  Ownership of Property; Liens..................................................................................... 29

     5.9  Intellectual Property............................................................................................ 30

     5.10 No Burdensome Restrictions....................................................................................... 30

     5.11 Taxes............................................................................................................ 30

     5.12 Federal Regulations.............................................................................................. 30

     5.13 ERISA............................................................................................................ 30

     5.14 Investment and Holding Company Status............................................................................ 31
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                                         <C>
     5.15 Environmental Matters............................................................................................ 31

     5.16 Security Documents............................................................................................... 32

     5.17 Acquisition Documents............................................................................................ 32

     5.18 Capital Call Obligations......................................................................................... 32

     5.19 Accuracy and Completeness of Information......................................................................... 33

     5.20 Solvency......................................................................................................... 33

SECTION 6. CONDITIONS PRECEDENT............................................................................................ 33

     6.1  Conditions to Initial Loans...................................................................................... 33

     6.2  Conditions to Term Loan.......................................................................................... 36

     6.3  Conditions to Each Loan.......................................................................................... 37

SECTION 7. AFFIRMATIVE COVENANTS........................................................................................... 37

     7.1  Financial Statements............................................................................................. 37

     7.2  Certificates; Other Information.................................................................................. 38

     7.3  Payment of Obligations........................................................................................... 39

     7.4  Conduct of Business and Maintenance of Existence................................................................. 39

     7.5  Maintenance of Property; Insurance............................................................................... 39

     7.6  Inspection of Property; Books and Records; Discussions........................................................... 40

     7.7  Notices.......................................................................................................... 40

     7.8  Environmental Laws............................................................................................... 41

     7.9  Further Assurances............................................................................................... 41

     7.10 Additional Collateral............................................................................................ 41

     7.11 Consummation of Merger........................................................................................... 42

SECTION 8. NEGATIVE COVENANTS.............................................................................................. 42

     8.1  Financial Condition Covenants.................................................................................... 42

     8.2  Limitation on Indebtedness....................................................................................... 43
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                                         <C>
     8.3  Limitation on Liens.............................................................................................. 44

     8.4  Limitation on Guarantee Obligations.............................................................................. 45

     8.5  Limitation on Fundamental Changes................................................................................ 45

     8.6  Limitation on Sale of Assets..................................................................................... 45

     8.7  Limitation on Leases............................................................................................. 46

     8.8  Limitation on Restricted Payments................................................................................ 46

     8.9  Limitation on Capital Expenditures............................................................................... 47

     8.10 Limitation on Investments, Loans and Advances.................................................................... 47

     8.11 Limitation on Transactions with Affiliates....................................................................... 48

     8.12 Limitation on Sales and Leasebacks............................................................................... 48

     8.13 Limitation on Changes in Fiscal Year............................................................................. 48

     8.14 Limitation on Negative Pledge Clauses............................................................................ 48

     8.15 Limitation on Lines of Business.................................................................................. 48

     8.16 Rights under Acquisition Documents............................................................................... 49

     8.17 Asset Transfer................................................................................................... 49

     8.18 Optional Payments and Modifications of Certain Debt Instruments.................................................. 50

SECTION 9. EVENTS OF DEFAULT............................................................................................... 50

SECTION 10. THE ADMINISTRATIVE AGENT....................................................................................... 54

     10.1 Appointment...................................................................................................... 54

     10.2 Delegation of Duties............................................................................................. 54

     10.3 Exculpatory Provisions........................................................................................... 54

     10.4 Reliance by Administrative Agent................................................................................. 54

     10.5 Notice of Default................................................................................................ 55

     10.6 Non-Reliance on Administrative Agent and Other Lenders........................................................... 55

     10.7 Indemnification.................................................................................................. 56
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                                         <C>
     10.8  Administrative Agent in Its Individual Capacity................................................................. 56

     10.9  Successor Administrative Agent.................................................................................. 56

SECTION 11. MISCELLANEOUS.................................................................................................. 56

     11.1  Amendments and Waivers.......................................................................................... 56

     11.2  Releases of Collateral and Credit Support....................................................................... 57

     11.3  Notices......................................................................................................... 59

     11.4  No Waiver; Cumulative Remedies.................................................................................. 59

     11.5  Survival of Representations and Warranties...................................................................... 60

     11.6  Payment of Expenses and Taxes................................................................................... 60

     11.7  Successors and Assigns; Participations and Assignments.......................................................... 60

     11.8  Adjustments; Set-off............................................................................................ 63

     11.9  Counterparts.................................................................................................... 64

     11.10 Severability.................................................................................................... 64

     11.11 Integration..................................................................................................... 64

     11.12 GOVERNING LAW................................................................................................... 64

     11.13 Submission To Jurisdiction; Waivers............................................................................. 64

     11.14 Acknowledgments................................................................................................. 65

     11.15 WAIVERS OF JURY TRIAL........................................................................................... 65

     11.16 Confidentiality. Each of the Administrative Agent and the Lenders, on
           behalf of itself and each of its affiliates, agents, directors,
           officers and employees, agrees to keep confidential all non-public
           information provided to it by any Credit Party pursuant to this
           Agreement that is clearly designated by such Credit Party in writing
           as "confidential"; provided that nothing herein shall prevent the
           Administrative Agent or any Lender from disclosing any such
           information (a) to the Administrative Agent, any other Lender or any
           affiliate, agent, director, officer or employee of any Lender, (b) to
           any Transferee or prospective Transferee which agrees to comply with
           the provisions of this Section, (c) any of its employees, directors,
           agents, attorneys, accountants and other professional advisors, (d)
           upon the request or demand of any Governmental Authority having
           jurisdiction over it, (e) in response to any order of any court or
           other
</TABLE>

<PAGE>

<TABLE>
           <S>                                                                                                              <C>
           Governmental Authority or as may otherwise be required pursuant
           to any Requirement of Law, (f) if requested or required to do so in
           connection with any litigation or similar proceeding, (g) which has
           been publicly disclosed other than in breach of this Section 11.16,
           (h) to the National Association of Insurance Commissioners or any
           similar organization or any nationally recognized rating agency that
           requires access to information about a Lender's investment portfolio
           in connection with ratings issued with respect to such Lender or (i)
           in connection with the exercise of any right or remedy hereunder or
           under any other Credit Document................................................................................. 65
</TABLE>

<PAGE>

                                                                           Page
                                                                           ----
     SCHEDULES
--------------------------------------------------------------------------------
Schedule I        Lenders; Commitments

Schedule II       Addresses for Notices

Schedule 5.9      Intellectual Property

Schedule 8.2      Existing Indebtedness

Schedule 8.3      Existing Liens

Schedule 8.4      Existing Guarantee Obligations

Schedule 8.17     Subsidiaries

     EXHIBITS
--------------------------------------------------------------------------------
Exhibit A         Form of Term Loan Note

Exhibit B         Form of Acquisition Note

Exhibit C-1       Form of Capital Call Agreement

Exhibit C-2       Form of Assignment of Capital Call Rights

Exhibit D-1       Form of Initial Collateral Agreement

Exhibit D-2       Form of AcquisitionCo Cash Collateral Agreement

Exhibit E         Form of Premisys Escrow Agreement

Exhibit F         Form of Subsequent Collateral Agreement

Exhibit G         Form of LegacyCo Cash Collateral Agreement

Exhibit H         Form of Assumption Agreement

Exhibit I         Form of License Letter

Exhibit J         Form of Assignment and Acceptance

Exhibit K-1       Form of Notice of Borrowing (Drawings)

Exhibit K-2       Form of Notice of Borrowing (Continuations)

                                     -viii-

<PAGE>

                                                                           Page
                                                                           ----

Exhibit K-3       Form of Notice of Borrowing (Conversions)

Exhibit L         Form of Zhone Subordinated Note

                                      -ix-

<PAGE>

                                                                               1

               CREDIT AGREEMENT, dated as of November 29, 1999, among:

(a)   ZHONE ACQUISITION CORP., a Texas corporation ("AcquisitionCo") (to be
      merged with and into Premisys Communications, Inc. and then to be
      succeeded by Premisys Systems, LLC);

(b)   the Lenders (as hereinafter defined) from time to time parties hereto; and

(c)   CREDIT SUISSE FIRST BOSTON, as administrative agent (in such capacity, the
      "Administrative Agent") for the Lenders.

                             W I T N E S S E T H:

            WHEREAS, AcquisitionCo has entered into the Agreement and Plan of
Merger, dated as of October 20, 1999 (as amended, supplemented or otherwise
modified from time to time in accordance with the terms hereof, the "Merger
Agreement") among AcquisitionCo, Zhone Technologies, Inc., a Delaware
corporation ("Zhone"), and Premisys Communications, Inc., a Delaware corporation
("Premisys"), pursuant to which AcquisitionCo has commenced a tender offer for
all of the issued and outstanding capital stock (all of such capital stock and
any related options collectively, the "Shares") of Premisys (the "Tender
Offer");

            WHEREAS, as promptly as is practicable following the consummation of
the Tender Offer, the acquisition of the Shares tendered pursuant thereto (the
"Tendered Shares") and the completion (if necessary) of a proxy solicitation,
AcquisitionCo will be merged with and into Premisys, with Premisys being the
survivor of such merger (the "Merger");

            WHEREAS, following the consummation of the Merger, Premisys (as the
survivor of the Merger) will transfer certain existing product lines of Premisys
and its obligations on account of the Term Loans (as hereinafter defined) to
Premisys Systems, LLC, a Delaware limited liability company ("LegacyCo"; such
transfers, the "Asset Transfer");

            WHEREAS, AcquisitionCo has requested that the Lenders make loans to
it for the purpose of financing the Tender Offer, the Merger and the Asset
Transfer (collectively, the "Transaction") and for the other purposes permitted
by this Agreement;

            WHEREAS, the Lenders are willing to make such loans, and the
Administrative Agent is willing to assume its obligations hereunder, only upon
the terms and subject to the conditions set forth herein;

            NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereto hereby agree as follows: have the
following meanings:

                             SECTION 1. DEFINITIONS

      1.1   Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:

            "ABR": for any day, a rate per annum equal to the greater of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%.

<PAGE>

                                                                               2

Any change in the ABR due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective as of the opening of business on the effective
day of such change in the Prime Rate or the Federal Funds Effective Rate,
respectively.

            "ABR Loans": Loans the rate of interest applicable to which is based
upon the ABR.

            "Acquisition": as defined in the recitals hereto.

            "AcquisitionCo": as defined in the preamble hereto.

            "AcquisitionCo Cash Collateral Agreement": the Cash Collateral
Agreement, substantially in the form of Exhibit D-2, made by AcquisitionCo in
favor of the Administrative Agent, as the same may be amended, supplemented or
otherwise modified from time to time.

            "Acquisition Documents": the collective reference to the Tender
Offer Documents, the Merger Agreement and all other documents and information
sent by AcquisitionCo or any of its Subsidiaries or Premisys to the shareholders
of Premisys or filed with the SEC in connection with the Transaction.

            "Acquisition Loan Commitment": as to any Acquisition Lender, its
obligation to make its Acquisition Loans to the Borrower hereunder in an
aggregate principal amount not to exceed the amount set forth opposite such
Acquisition Lender's name on Schedule I under the heading "Acquisition Loan
Commitment".

            "Acquisition Loan Commitment Percentage": as to any Acquisition
Lender at any time, the percentage which such Acquisition Lender's Acquisition
Loan Commitment then constitutes of the Aggregate Acquisition Loan Commitment
(or, at any time after the Closing Date, the percentage which the aggregate
principal amount of such Term Loan Lender's Acquisition Loans then outstanding
constitutes of the aggregate principal amount of the Acquisition Loans then
outstanding).

            "Acquisition Lender": each bank or other financial institution
holding an Acquisition Loan Commitment hereunder (or, after the Closing Date and
subject to the provisions of subsection 11.7(d), holding any Acquisition Loans
hereunder); collectively, the "Acquisition Lenders".

            "Acquisition Loan": as defined in subsection 3.1.

            "Acquisition Note": as defined in subsection 4.1(e).

            "Administrative Agent": as defined in the preamble hereto.

            "Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (a)
vote 10% or more of the securities having ordinary voting power for the

<PAGE>

                                                                               3

election of directors of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.

            "Aggregate Acquisition Loan Commitment": $75,000,000, as such amount
may be reduced from time to time pursuant to this Agreement.

            "Aggregate Term Loan Commitment": $50,000,000, as such amount may be
reduced from time to time pursuant to this Agreement.

            "Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.

            "Applicable Margin": with respect to (a) Eurodollar Loans, 1% per
annum and (b) with respect to ABR Loans, 0% per annum.

            "Asset Transfer": as defined in the recitals hereto.

            "Assigned Interests": the rights under the Capital Call Agreements
which have been assigned to the Borrower pursuant to the Assignment of Capital
Call Rights and pledged to the Administrative Agent pursuant to the Security
Documents.

            "Assignee": as defined in subsection 11.7(c).

            "Assignment of Capital Call Rights": the Assignment of Capital Call
Rights, substantially in the form of Exhibit C-2, among Zhone, the Borrower and
the Administrative Agent, as the same may be amended, supplemented or otherwise
modified from time to time.

            "Borrower": AcquisitionCo (at all times prior to the Merger Date),
Premisys (at all times from the Merger Date to the Reorganization Date) or
LegacyCo (at all times from and after the Reorganization Date), as the context
shall require.

            "Borrowing Date": any Business Day specified in a Notice of
Borrowing pursuant to subsection 2.2 or 3.2 as a date on which the Borrower
requests the Lenders to make Loans hereunder.

            "Business": as defined in subsection 5.15(b).

            "Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close; provided, however, that, with respect to matters relating to Eurodollar
Loans, any day on which commercial banks in London, England are authorized or
required by law to close also shall not constitute a "Business Day".

            "Capital Call Agreement": the "Capital Call Agreements" described in
the Assignment of Capital Call Rights, each substantially in the form of Exhibit
C-2 hereto (with such modifications as may be approved by the Administrative
Agent).

<PAGE>

                                                                               4

            "Capital Stock": any and all shares, interests (including, without
limitation, membership interests in limited liability companies), participations
or other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.

            "Cash Equivalents": (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit and
eurodollar time deposits with maturities of one year or less from the date of
acquisition and overnight bank deposits of any Lender or of any commercial bank
having capital and surplus in excess of $500,000,000, (c) repurchase obligations
of any Lender or of any commercial bank satisfying the requirements of clause
(b) of this definition, having a term of not more than 30 days with respect to
securities issued or fully guaranteed or insured by the United States
Government, (d) commercial paper of a domestic issuer rated at least A-2 by
Standard and Poor's Rating Group ("S&P") or P-2 by Moody's Investors Service,
Inc. ("Moody's"), (e) securities with maturities of one year or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States, by any political subdivision or taxing authority
of any such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody's, (f) securities with maturities of one year or less from
the date of acquisition backed by standby letters of credit issued by any Lender
or any commercial bank satisfying the requirements of clause (b) of this
definition or (g) shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through (f) of
this definition.

            "Closing Date": the date on which the conditions precedent set forth
in subsection 6.1 shall be satisfied.

            "Code": the Internal Revenue Code of 1986, as amended from time to
time.

            "Collateral": all assets of the Credit Parties, now owned or
hereinafter acquired, upon which a Lien is purported to be created by any
Security Document.

            "Collateral Substitution Date": the date upon which the requirements
specified in the proviso to subsection 11.2(c) have been satisfied.

            "Commitment": as to any Lender, its Acquisition Loan Commitment or
its Term Loan Commitment, as the context shall require; as to all Lenders, the
"Commitments".

            "Commitment Percentage": as to any Lender at any time, its
Acquisition Loan Commitment Percentage or its Term Loan Commitment Percentage,
as the context shall require.

            "Commitment Period": the period from and including the date hereof
to but not including the Merger Date (or, if earlier, the date which is 180 days
following the date hereof).

            "Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is

<PAGE>

                                                                               5

part of a group which includes the Borrower and which is treated as a single
employer under Section 414 of the Code.

            "Consolidated Net Income" or "Consolidated Net Loss": for any fiscal
period, the amount which, in conformity with GAAP, would be set forth opposite
the caption "net income" (or any like caption) or "net loss" (or any like
caption), as the case may be, on a consolidated statement of earnings of the
Borrower and its Subsidiaries for such fiscal period.

            "Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.

            "Credit Documents": this Agreement, the Notes, the Security
Documents, the Premisys Escrow Agreement, the License Letters, the Capital Call
Agreements and the Assignment of Capital Call Rights.

            "Credit Parties": each of (a) the Borrower and each Subsidiary of
the Borrower which is a party to a Credit Document, (b) prior to the
Reorganization Date, Zhone and (c) from and after the Merger Date, Premisys.

            "Default": any of the events specified in Section 9, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.

            "Dollars" and "$": dollars in lawful currency of the United States
of America.

            "Domestic Subsidiary": any Subsidiary of the Borrower organized
under the laws of any jurisdiction within the United States.

            "EBITDA" for any period, the Consolidated Net Income or Consolidated
Net Loss, as the case may be, for such period, after restoring thereto amounts
deducted for (a) depreciation and amortization (including write-offs or write-
downs of amortizable and depreciable items) for such period, (b) the amount of
interest expense of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP, for such period on the aggregate
principal amount of their consolidated Indebtedness, (c) the amount of tax
expense of the Borrower and its Subsidiaries, determined on a consolidated basis
in accordance with GAAP, for such period, (d) non-cash write-offs of acquired
in-process research and development expenses for such period and (e) non-cash
restructuring charges and reserves for such period.

            "Environmental Laws": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.

            "ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.

<PAGE>

                                                                               6

            "Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto) dealing with
reserve requirements prescribed for eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such System.

            "Eurodollar Base Rate": the rate per annum determined by the
Administrative Agent at approximately 11:00 a.m. (London time) on the date which
is two Business Days prior to the beginning of the relevant Interest Period (as
specified in the applicable Notice of Borrowing) by reference to the "British
Bankers' Association Interest Settlement Rates" for deposits in Dollars (as set
forth by any service selected by the Administrative Agent which has been
nominated by the British Bankers' Association as an authorized information
vendor for the purpose of displaying such rates) for a period equal to such
Interest Period (rounded, if necessary, upward to the nearest whole multiple of
1/16th of 1%); provided that, to the extent that an interest rate is not
ascertainable pursuant to the foregoing provisions of this definition, the
"Eurodollar Base Rate" shall be the interest rate per annum determined by the
Administrative Agent to be the average (rounded, if necessary, upward to the
nearest whole multiple of 1/16th of 1% per annum, if such average is not such a
multiple) of the rates per annum at which deposits in Dollars are offered for
such relevant Interest Period to major banks in the London interbank market in
London, England by Credit Suisse First Boston at approximately 11:00 a.m.
(London time) on the date which is two Business Days prior to the beginning of
such Interest Period.

            "Eurodollar Loans": Loans the rate of interest applicable to which
is based upon the Eurodollar Rate.

            "Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward to the nearest 1/100th
of 1%):

                              Eurodollar Base Rate
                   ----------------------------------------
                   1.00 - Eurocurrency Reserve Requirements

            "Event of Default": any of the events specified in Section 9,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.

            "Excess Cash Flow": for any fiscal year of the Borrower, EBITDA of
the Borrower for such fiscal year, minus (without duplication) (a) the sum of
(i) the aggregate amount of expenditures during such fiscal year in respect of
the purchase or other acquisition by the Borrower and its Subsidiaries of fixed
or capital assets, (ii) any increase in Net Working Capital during such fiscal
year, (iii) the aggregate amount of cash income taxes paid by the Borrower and
its Subsidiaries during such fiscal year (including, without limitation, the
aggregate amount paid in cash during such fiscal year to Affiliates in reliance
upon the provisions of the proviso to subsection 8.8), (iv) the aggregate amount
of interest expense of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP, for such fiscal year on the
aggregate principal amount of their consolidated Indebtedness and (v) all

<PAGE>

                                                                               7

prepayments of the Term Loans (but not the Acquisition Loans) during such fiscal
year plus (b) decreases in Net Working Capital during such fiscal year. As used
in this definition, the term "Net Working Capital" shall mean, at any date, the
amount equal to the current assets of the Borrower and its Subsidiaries at such
date (as determined on a consolidated basis in accordance with GAAP) minus
current liabilities of the Borrower and its Subsidiaries at such date (as
determined on a consolidated basis in accordance with GAAP). Notwithstanding
anything to the contrary contained herein, for purposes of calculating Excess
Cash Flow, "EBITDA" shall not include the proceeds of asset sales permitted by
Section 8.6(i) to the extent that the net proceeds received by the Borrower and
its Subsidiaries since the Closing Date on account thereof does not exceed
$18,000,000 in the aggregate.

            "Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for the day of such transactions received by the
Administrative Agent from three federal funds brokers of recognized standing
selected by it.

            "Financing Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.

            "Foreign Pledge Agreement": each pledge agreement (or analogous
document), which pledge agreement (or analogous document) shall be in form and
substance reasonably satisfactory to the Administrative Agent, pursuant to which
the Borrower or any of its Domestic Subsidiaries purports to grant a Lien on all
or any portion of the Capital Stock of any Foreign Subsidiary, as the same may
be amended, supplemented or otherwise modified from time to time.

            "Foreign Subsidiary": any Subsidiary of the Borrower organized under
the laws of any jurisdiction outside the United States of America.

            "GAAP": generally accepted accounting principles in the United
States of America as in effect from time to time; provided that, for purposes of
determining compliance with the provisions of subsection 8.1, "GAAP" shall mean
generally accepted accounting principles in the United States of America as in
effect on June 25, 1999.

            "Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

            "Granting Lender": as defined in subsection 11.7(h).

            "Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations (the
"primary

<PAGE>

                                                                               8

obligations") of any other third Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, any obligation of
the guaranteeing person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or payment of any
such primary obligation or (2) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the term

Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good faith.

            "Guarantor": each Person who guarantees the obligations of the
Borrower under this Agreement (including, without limitation, after the Merger
Date and subject to Section 7.10, each Domestic Subsidiary of the Borrower).

            "Indebtedness": of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all obligations of such Person under Financing Leases,
(d) all obligations of such Person in respect of acceptances issued or created
for the account of such Person and (e) all liabilities secured by any Lien on
any property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof.

            "Initial Collateral Agreement": the Guarantee and Collateral
Agreement, substantially in the form of Exhibit D-1 hereto, made by Zhone and
certain of its Subsidiaries in favor of the Administrative Agent, as the same
may be amended, supplemented or otherwise modified from time to time.

            "Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.

            "Insolvent": pertaining to a condition of Insolvency.

            "Interest Expense": for any period, the amount equal to the interest
expense (both expensed and capitalized) of the Borrower and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP, for such period on
the aggregate principal amount of their consolidated Indebtedness.

<PAGE>

                                                                               9

            "Interest Payment Date": (a) as to any ABR Loan, the last Business
Day of each March, June, September and December, (b) as to any Eurodollar Loan
having an Interest Period of three months or less, the last day of such Interest
Period and (c) as to any Eurodollar Loan having an Interest Period longer than
three months, each day which is three months, or a whole multiple thereof, after
the first day of such Interest Period (or, if such day is not a Business Day,
the next succeeding Business Day) and the last day of such Interest Period.

            "Interest Period": with respect to any Eurodollar Loan: (a)
initially, the period commencing on the borrowing or conversion date, as the
case may be, with respect to such Eurodollar Loan and ending one, two, three,
six or (if available to all Lenders) nine months thereafter, as selected by the
Borrower in its Notice of Borrowing given with respect thereto; and (b)
thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Eurodollar Loan and ending one, two, three or
six or (if available to all Lenders) nine months thereafter, as selected by the
Borrower by irrevocable notice to the Administrative Agent not less than three
Business Days prior to the last day of the then current Interest Period with
respect thereto; provided that, all of the foregoing provisions relating to
Interest Periods are subject to the following:

            (1)   if any Interest Period would otherwise end on a day that is
      not a Business Day, such Interest Period shall be extended to the next
      succeeding Business Day unless the result of such extension would be to
      carry such Interest Period into another calendar month in which event such
      Interest Period shall end on the immediately preceding Business Day;

            (2)   any Interest Period that would otherwise extend beyond the
      Maturity Date shall end on the Maturity Date;

            (3)   any Interest Period that begins on the last Business Day of a
      calendar month (or on a day for which there is no numerically
      corresponding day in the calendar month at the end of such Interest
      Period) shall end on the last Business Day of a calendar month;

            (4)   the Borrower shall select Interest Periods so as not to
      require a payment or prepayment of any Eurodollar Loan during an Interest
      Period for such Loan; and

            (5)   no Interest Period applicable to an Acquisition Loan shall be
      longer than one month.

            "Investors": the collective reference to the Persons (other than
Zhone) who are parties to the Capital Call Agreements; each, an "Investor."

            "LegacyCo": as defined in the recitals hereto.

<PAGE>

                                                                              10

            "LegacyCo Cash Collateral Agreement": the Cash Collateral Agreement,
substantially in the form of Exhibit G, made by LegacyCo in favor of the
Administrative Agent, as the same may be amended, supplemented or otherwise
modified from time to time.

            "Lenders": the collective reference to the Acquisition Lenders and
the Term Loan Lenders.

            "License Letter": a letter agreement, substantially in the form of
Exhibit I hereto, duly executed and delivered by each Affiliate of the Borrower
in accordance with the provisions of subsection 8.6(f).

            "Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Financing Lease
having substantially the same economic effect as any of the foregoing).

            "Loan": any Acquisition Loan or any Term Loan, as the context shall
require.

            "Majority Lenders": at any time, Lenders having Commitment
Percentages which aggregate more than 50% of the sum of the Aggregate Term Loan
Commitment then in effect (or, after the Term Loan Borrowing Date, the aggregate
outstanding principal amount of Term Loans), the portion of the Aggregate
Acquisition Loan Commitment which remains unutilized and the aggregate
outstanding principal amount of Acquisition Loans.

            "Material Adverse Effect": a material adverse effect upon (a) the
consummation of the Transaction, (b) the business, assets, property or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a whole,
(c) the validity or enforceability of any of the Credit Documents or the rights
and remedies of the Administrative Agent and the Lenders thereunder, (d) prior
to the Collateral Substitution Date, the right or ability of the Administrative
Agent to draw upon the Assigned Interests or (e) prior to the Collateral
Substitution Date, the ability of any Investor to perform its respective
obligations under the Capital Call Agreement provided by it, unless another
Investor shall have assumed the obligations of the relevant Investor under the
Capital Call Agreement to which it is a party pursuant to documentation which is
in form and substance reasonably satisfactory to the Administrative Agent.

            "Material Environmental Amount": an amount payable by the Borrower
and/or its Subsidiaries in excess of $500,000 for remedial costs, compliance
costs, compensatory damages, punitive damages, fines, penalties or any
combination thereof.

            "Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.

            "Maturity Date": November 28, 2004.

            "Merger": as defined in the recitals hereto.

<PAGE>

                                                                              11

            "Merger Agreement": as defined in the recitals hereto.

            "Merger Date": the date upon which the Merger is consummated.

            "Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.

            "Net Proceeds": with respect to any Net Proceeds Event, (a) the
gross cash consideration, and all cash proceeds (as and when received) of
non-cash consideration (including, without limitation, any such cash proceeds in
the nature of principal and interest payments on account of promissory notes or
similar obligations), received by Zhone and its Subsidiaries in connection with
such Net Proceeds Event, minus (b) the sum, without duplication, of (i) any
taxes which are paid or actually payable to any federal, state, local or foreign
taxing authority by the Borrower and its Subsidiaries and are directly
attributable to the receipt of such Net Proceeds, (ii) the amount of fees and
commissions (including reasonable investment banking fees payable to Persons
other than Affiliates of the Borrower), legal, accounting, consulting, survey,
title and recording tax expenses and other costs and expenses directly incident
to such Net Proceeds Event which are paid or payable by the Borrower and its
Subsidiaries, (iii) the amount of such net cash proceeds which are attributable
to (and payable to) minority interests, (iv) the amount of any reserve
reasonably maintained by the Borrower and its Subsidiaries with respect to
indemnification obligations owing pursuant to the definitive documentation
pursuant to which the Net Proceeds Event is consummated (with any unused portion
of such reserve to constitute Net Proceeds on the date upon which the
indemnification obligations terminate) and (v) the amount of Indebtedness (other
than intercompany Indebtedness), if any, which is required to be repaid at the
time or as a result of such Net Proceeds Event out of the proceeds thereof.

            "Net Proceeds Event": (a) the incurrence by the Borrower or any of
its Subsidiaries of any Indebtedness (other than Indebtedness permitted pursuant
to subsection 9.2, as in effect on the date hereof); (b) the issuance or sale of
any equity securities by Zhone, the Borrower or any of its Subsidiaries to any
Person (other than any proceeds of capital calls made pursuant to the Stock
Purchase Agreements) in (in the case of Zhone only) a public or other widely
distributed offering, other than (i) in the case of the Borrower or any of its
Subsidiaries, the issuance or sale of any such equity securities to the Borrower
or any of its Subsidiaries, (ii) the issuance of Capital Stock upon the sale or
exercise of stock options, (iii) the issuance and sale of Capital Stock under
employee stock purchase plans, (iv) the issuance and sale of Capital Stock
and/or stock options under employee stock ownership and incentive plans and
similar programs or individual arrangements; provided that any issuance or sale
of equity securities by Zhone which is consummated on or after the Collateral
Substitution Date shall be deemed not to constitute a "Net Proceeds Event"; (c)
the sale, transfer or other disposition by the Borrower or any of its
Subsidiaries of any real or personal, tangible or intangible, property
(including, without limitation, any Capital Stock, but other than (x) inventory
sold, transferred or otherwise disposed of in the ordinary course of business or
pursuant to the Asset Transfer, (y) other inventory sold in reliance upon the
provisions of subsection 8.6(h) and (z) manufacturing assets sold in reliance
upon the provisions of subsection 8.6(i)) of the Borrower or such Subsidiary to
any Person (other than to the Borrower or any of its Subsidiaries); and (d) the
recovery by the Borrower of amounts owing to it under property insurance
policies.

<PAGE>

                                                                              12

            "Non-Excluded Taxes": as defined in subsection 4.14(a).

            "Note": an Acquisition Note or a Term Loan Note, as the context
shall require; collectively, the "Notes."

            "Notice of Borrowing": with respect to (a) any borrowing of Loans, a
Notice of Borrowing (Drawings), substantially in the form of Exhibit K-1, (b)
any continuation of Eurodollar Loans, a Notice of Borrowing (Continuations),
substantially in the form of Exhibit K-2 and (c) any conversion from or to
Eurodollar Loans, a Notice of Borrowing (Conversions), substantially in the form
of Exhibit K-3 hereto.

            "Offer to Purchase": the Offer to Purchase, dated as of October 27,
1999, of AcquisitionCo relating to the Tender Offer, as amended, supplemented or
modified to the date hereof and as the same may be further amended, supplemented
or otherwise modified from time to time in accordance with the terms hereof;

            "Participant": as defined in subsection 11.7(b).

            "PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.

            "Person": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.

            "Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.

            "Premisys": as defined in the recitals hereto.

            "Premisys Escrow Agreement": the Escrow Agreement, substantially in
the form of Exhibit E hereto, among Premisys, the Administrative Agent and
Credit Suisse First Boston (as escrow agent), as the same may be amended,
supplemented or otherwise modified from time to time.

            "Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by the Administrative Agent as its prime rate in
effect at its principal office in New York City.

            "Properties": as defined in subsection 5.15(a).

            "Register": as defined in subsection 11.7(d).

            "Regulation U": Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.

<PAGE>

                                                                              13

            "Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.

            "Reorganization Date": the date upon which the Term Loans are
assumed by LegacyCo pursuant to the Asset Transfer and in accordance with the
provisions of subsection 8.17 hereof.

            "Reportable Event": any of the events set forth in Section 4043(b)
of ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. (S) 2615.

            "Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

            "Responsible Officer": the chief executive officer and the president
of the Borrower or, with respect to financial matters, the chief financial
officer of the Borrower.

            "Security Documents": the collective reference to: (a) at any date
prior to the Reorganization Date, the AcquisitionCo Cash Collateral Agreement,
the Initial Collateral Agreement and any Foreign Pledge Agreements; or (b) at
any date which is on or after the Reorganization Date, the Subsequent Collateral
Agreement, the LegacyCo Cash Collateral Agreement and any Foreign Pledge
Agreements.

            "Shares": as defined in the recitals hereto.

            "Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.

            "SPC": as defined in subsection 11.7(h).

            "Stock Purchase Agreements": as defined in the Assignment of Capital
Call Rights.

            "Subsequent Collateral Agreement": the Guarantee and Collateral
Agreement, substantially in the form of Exhibit F, made by Premisys and certain
of its Subsidiaries in favor of the Administrative Agent, as the same may be
amended, supplemented or otherwise modified from time to time.

            "Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person.

<PAGE>

                                                                              14

Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Borrower. For purposes hereof, a Subsidiary shall be deemed to be "wholly
owned" by the Borrower despite the ownership by a third-party of a de minimis
amount of shares of such Subsidiary in order to comply with local Requirements
of Law (such as directors' qualifying shares or ownership by a local resident).

            "Substitute Collateral": as defined in subsection 11.2(c).

            "Tender Offer": as defined in the recitals hereto.

            "Tender Offer Documents" shall be the collective reference to (a)
the tender offer statement on Schedule 14D-1, dated October 27, 1999, filed by
AcquisitionCo with the SEC pursuant to Section 14(d)(1) of the Exchange Act,
together with all exhibits thereto, including the Offer to Purchase, the
solicitation/recommendation statement on Schedule 14D-9, dated October 27, 1999,
filed by Premisys pursuant to Section 14(d)(4) of the Exchange Act, in each
case, as amended, supplemented or otherwise modified from time to time, and (b)
the Offer to Purchase.

            "Tendered Shares": as defined in the recitals hereto.

            "Term Loan Borrowing Date": as defined in Section 2.1.

            "Term Loan Commitment": as to any Term Loan Lender, its obligation
to make its Term Loan to the Borrower hereunder in an aggregate principal amount
not to exceed the amount set forth opposite such Term Loan Lender's name on
Schedule I under the heading "Term Loan Commitment".

            "Term Loan Commitment Percentage": as to any Term Loan Lender at any
time, the percentage which such Term Loan Lender's Term Loan Commitment then
constitutes of the Aggregate Term Loan Commitment (or, at any time after the
Term Loan Borrowing Date, the percentage which the aggregate principal amount of
such Term Loan Lender's Term Loans then outstanding constitutes of the aggregate
principal amount of the Term Loans then outstanding).

            "Term Loan Lender": each bank or other financial institution holding
a Term Loan Commitment hereunder (or, after the Term Loan Borrowing Date and
subject to the provisions of subsection 11.7(d), holding any Term Loans
hereunder); collectively, the "Term Loan Lenders".

            "Term Loan": as defined in subsection 2.1.

            "Term Loan Note": as defined in subsection 4.1(e).

            "Tranche": the collective reference to Eurodollar Loans the then
current Interest Periods with respect to all of which begin on the same date and
end on the same later date (whether or not such Loans shall originally have been
made on the same day); Tranches may be identified as "Eurodollar Tranches".

            "Transaction": as defined in the recitals hereto.

<PAGE>

                                                                              15

            "Transferee": as defined in subsection 11.7(h).

            "Type": as to any Loan, its nature as an ABR Loan or a Eurodollar
Loan.

            "Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended from time to time.

            "Zhone": as defined in the recitals hereto.

            "Zhone Subordinated Note": the subordinated promissory note,
substantially in the form of Exhibit L, evidencing certain Indebtedness owing by
AcquisitionCo (or, after the Merger Date, Premisys) to Zhone, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms hereof.

            1.2   Other Definitional Provisions. (a) Unless otherwise specified
      therein, all terms defined in this Agreement shall have the defined
      meanings when used in any Notes or any certificate or other document made
      or delivered pursuant hereto.

            (b)   As used herein and in any Notes, and any certificate or other
      document made or delivered pursuant hereto, accounting terms relating to
      the Borrower and its Subsidiaries not defined in subsection 1.1 and
      accounting terms partly defined in subsection 1.1, to the extent not
      defined, shall have the respective meanings given to them under GAAP.

            (c)   The words "hereof", "herein" and "hereunder" and words of
      similar import when used in this Agreement shall refer to this Agreement
      as a whole and not to any particular provision of this Agreement, and
      Section, subsection, Schedule and Exhibit references are to this Agreement
      unless otherwise specified.

            (d)   The meanings given to terms defined herein shall be equally
      applicable to both the singular and plural forms of such terms.

             SECTION 2.  AMOUNT AND TERMS OF TERM LOAN COMMITMENTS

            2.1   Term Loans. Subject to the terms and conditions hereof, each
Term Lender severally agrees to make a term loan (a "Term Loan") to the Borrower
on any single date (the "Term Loan Borrowing Date") during the period from the
Closing Date through and including the Merger Date (and, in any event, on or
prior to February 15, 2000) in an amount not to exceed the amount of the Term
Loan Commitment of such Term Loan Lender then in effect. The Term Loans may from
time to time be (a) Eurodollar Loans, (b) ABR Loans or (c) a combination
thereof, as determined by the Borrower and notified to the Administrative Agent
in accordance with subsections 2.2 and 4.6.

            2.2   Procedure for Term Loan Borrowing. The Borrower shall give the
Administrative Agent its irrevocable Notice of Borrowing (which notice must be
received by the Administrative Agent prior to 1:00 P.M., New York City time, (a)
three Business Days prior to the Term Loan Borrowing Date, if all or any part of
the requested Term Loans are to be initially Eurodollar Loans or (b) one
Business Day prior to the Term Loan Borrowing Date, otherwise) requesting that
the Term Loan Lenders make the Term Loans on the Term Loan Borrowing Date

<PAGE>

                                                                              16

and specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date,
(iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a
combination thereof and (iv) if the borrowing is to be entirely or partly of
Eurodollar Loans, the amount of such Type of Loan and the length of the initial
Interest Period therefor. Upon receipt of such Notice of Borrowing, the
Administrative Agent shall promptly notify each Term Loan Lender thereof. Each
Term Loan Lender will make the amount of its pro rata share of the Term Loans
available to the Administrative Agent for the account of the Borrower at the
office of the Administrative Agent specified in subsection 11.3 prior to 11:00
A.M., New York City time, on the Term Loan Borrowing Date in funds immediately
available to the Administrative Agent. Such Term Loans will then be made
available to the Borrower by the Administrative Agent transferring to the
account directed by the Borrower (which account need not be maintained by the
Administrative Agent) with the aggregate of the amounts made available to the
Administrative Agent by the Term Loan Lenders and in like funds as received by
the Administrative Agent.

            2.3   Amortization of Term Loans. (a) The Borrower shall repay the
Term Loans on each date set forth below (or, if such date is not a Business Day,
on the immediately preceding Business Day) by the percentage of the aggregate
principal amount of Term Loans borrowed on the Term Loan Borrowing Date as set
forth below:

<TABLE>
<CAPTION>
==========================================================================
         Date                                                     Amount
  <S>                                                         <C>
  December 31, 1999                                           $          0
  --------------------    ------------------------------------------------
  March 31, 2000                                                         0
  June 30, 2000                                                          0
  September 30, 2000                                                  5.00%
  December 31, 2000                                                   5.00%
  --------------------    ------------------------------------------------
  March 31, 2001                                                      3.75%
  June 30, 2001                                                       3.75%
  September 30, 2001                                                  3.75%
  December 31, 2001                                                   3.75%
  --------------------    ------------------------------------------------
  March 31, 2002                                                      6.25%
  June 30, 2002                                                       6.25%
  September 30, 2002                                                  6.25%
  December 31, 2002                                                   6.25%
  --------------------    ------------------------------------------------
</TABLE>

<PAGE>

                                                                              17

<TABLE>
<S>                                                                   <C>
  --------------------    ------------------------------------------------
  March 31, 2003                                                      6.25%
  June 30, 2003                                                       6.25%
  September 30, 2003                                                  6.25%
  December 31, 2003                                                   6.25%
  --------------------    ------------------------------------------------
  March 31, 2004                                                      6.25%
  June 30, 2004                                                       6.25%
  September 30, 2004                                                  6.25%
==========================================================================
</TABLE>

            (b)   The Borrower shall repay any then-outstanding Term Loans on
the Maturity Date.

            2.4 Use of Proceeds of Term Loans. The proceeds of the Term Loans
shall be utilized by the Borrower only (a) to finance a portion of the
consideration paid to tendering shareholders of Premisys on account of the
Tendered Shares or otherwise to acquire Shares, (b) to refinance any such
consideration which is paid out of equity of the Borrower or with the proceeds
of loans from Zhone and (c) to pay any fees and expenses relating to the
Transaction.

      SECTION 3   AMOUNT AND TERMS OF ACQUISITION LOAN COMMITMENTS

            3.1   Acquisition Term Loans. Subject to the terms and conditions
hereof, each Acquisition Lender severally agrees to make term loans (each, an
"Acquisition Loan") to the Borrower from time to time during the Commitment
Period in an aggregate principal amount not to exceed the amount of the
Acquisition Loan Commitment of such Acquisition Lender then in effect. The
Acquisition Loans may from time to time be (a) Eurodollar Loans, (b) ABR Loans
or (c) a combination thereof, as determined by the Borrower and notified to the
Administrative Agent in accordance with subsections 3.2 and 4.6.

            3.2   Procedure for Acquisition Loan Borrowing. (a) The Borrower may
borrow under the Aggregate Acquisition Loan Commitment during the Commitment
Period on any Business Day, provided that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 1:00 P.M., New York City time, (x) three Business
Days prior to the requested Borrowing Date, if all or any part of the requested
Acquisition Loans are to be initially Eurodollar Loans or (y) one Business Day
prior to the requested Borrowing Date, otherwise), specifying (i) the amount to
be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is
to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the
borrowing is to be entirely or partly of Eurodollar Loans, the amount of such
Type of Loan and the length of the initial Interest Period therefor. Each
borrowing under the Aggregate Acquisition Loan Commitment shall be in an amount
equal to $2,000,000 or a whole multiple of $1,000,000 in excess thereof (or, in
the case of borrowings of ABR Loans when the then unutilized amount of the
Aggregate Acquisition Loan Commitment is less than $2,000,000, such lesser
amount). Upon receipt of any such notice from the Borrower, the Administrative
Agent shall promptly notify each Acquisition Lender thereof. Each

<PAGE>

                                                                              18

Acquisition Lender will make the amount of its pro rata share of each borrowing
available to the Administrative Agent for the account of the Borrower at the
office of the Administrative Agent specified in subsection 11.3 prior to 11:00
A.M., New York City time, on the Borrowing Date requested by the Borrower in
funds immediately available to the Administrative Agent. Such borrowing will
then be made available to the Borrower by the Administrative Agent crediting the
account of the Borrower on the books of such office with the aggregate of the
amounts made available to the Administrative Agent by the Acquisition Lenders
and in like funds as received by the Administrative Agent.

            (b)   Notwithstanding anything to the contrary contained herein, (i)
the Borrower may make not more than six borrowings under the Aggregate
Acquisition Loan Commitments and (ii) the Borrower may only borrow Acquisition
Loans on any day to the extent necessary to pay obligations described in
subsection 3.4 which are then due and payable.

            3.3   Maturity of Acquisition Loans. The Acquisition Loans shall be
due and payable in a single installment on the
Merger Date.

            3.4   Use of Proceeds of Acquisition Loans. The proceeds of the
Acquisition Loans shall be utilized by the Borrower only (a) to finance the
purchase of Shares (including shares which are issued pursuant to the Company
Option Agreement described in the Merger Agreement), (b) to pay any fees and
expenses relating to the Transaction and (c) to finance interest payable on
account of the Loans.

      SECTION 4.  PROVISIONS RELATING TO THE LOANS; FEES AND PAYMENTS

            4.1   Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each applicable Lender:

            (i)   the then unpaid principal amount of each Term Loan of each
      Term Loan Lender on the dates and in the amounts set forth in
      subsection 2.3 (or the then unpaid principal amount of such Term Loan, on
      any earlier date that the Term Loans become due and payable pursuant to
      Section 9); and

            (ii)  the then unpaid principal amount of the Acquisition Loan of
      each Acquisition Lender on the Merger Date (or on any earlier date that
      the Acquisition Loans become due and payable pursuant to Section 9).

            The Borrower hereby further agrees to pay interest on the unpaid
principal amount of the Loans from time to time outstanding from the date hereof
until payment in full thereof at the rates per annum, and on the dates, set
forth in subsection 4.8.

            (b)   Each Lender shall maintain in accordance with its usual
      practice an account or accounts evidencing indebtedness of the Borrower to
      such Lender resulting from each Loan of such Lender from time to time,
      including the amounts of principal and interest payable and paid to such
      Lender from time to time under this Agreement.

            (c)   the Administrative Agent shall maintain the Register pursuant
      to subsection 11.7(d), and a subaccount therein for each Lender, in which
      shall be recorded

<PAGE>

                                                                              19

      (i) the amount of each Loan made hereunder, the Type thereof and each
      Interest Period applicable thereto, (ii) the amount of any principal or
      interest due and payable or to become due and payable from the Borrower to
      each Lender hereunder and (iii) both the amount of any sum received by the
      Administrative Agent hereunder from the Borrower and each applicable
      Lender's share thereof.

            (d)   The entries made in the Register and the accounts of each
      Lender maintained pursuant to subsection 4.1(b) shall, to the extent
      permitted by applicable law, be prima facie evidence of the existence and
      amounts of the obligations of the Borrower therein recorded; provided,
      however, that the failure of any Lender or the Administrative Agent to
      maintain the Register or any such account, or any error therein, shall not
      in any manner affect the obligation of the Borrower to repay (with
      applicable interest) the Loans made to the Borrower by such Lender in
      accordance with the terms of this Agreement.

            (e)   The Borrower agrees that, upon request of any Lender through
      the Administrative Agent, the Borrower will execute and deliver to such
      Lender (i) in the case of a Term Loan Lender, a promissory note of the
      Borrower evidencing the Term Loan of such Term Loan Lender, substantially
      in the form of Exhibit A with appropriate insertions as to date and
      principal amount (a "Term Loan Note") and (ii) in the case of an
      Acquisition Lender, a promissory note of the Borrower evidencing the
      Acquisition Loans of such Acquisition Lender, substantially in the form of
      Exhibit B with appropriate insertions as to date and principal amount
      (an "Acquisition Note").

            4.2   Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee for the
period from and including the date upon which this Agreement shall be executed
and delivered by each of the parties hereto to and including the Merger Date,
computed at the rate equal to 3/8 of 1% per annum on the average daily amount of
the unutilized portion of the Acquisition Loan Commitment and the Term Loan
Commitment then in effect for such Lender during the period for which payment is
made. Such commitment fee shall be payable quarterly, in arrears, on the last
Business Day of each March, June, September and December and on the Merger Date
or such earlier date as the Aggregate Acquisition Loan Commitment shall
terminate as provided herein.

            4.3   Optional Prepayments.  The Borrower may at any time and from
time to time prepay the Acquisition Loans or (if no Acquisition Loans are then
outstanding) the Term Loans, in whole or in part, without premium or penalty,
upon at least three Business Days' (or, in the case of prepayments of ABR Loans,
one Business Day's) irrevocable notice to the Administrative Agent (which notice
must be received by the Administrative Agent prior to 1:00 P.M., New York City
time, on the date upon which such notice is due), specifying the date and amount
of prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a
combination thereof, and, if of a combination thereof, the amount allocable to
each. Upon receipt of any such notice, the Administrative Agent shall promptly
notify each affected Lender thereof. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified therein,
together with any amounts payable pursuant to subsection 4.15 and accrued
interest to such date on the amount prepaid. Partial prepayments of the Term
Loans shall be applied to the remaining installments of principal thereof in
such order as the Borrower shall specify. Amounts prepaid on account of the
Loans may not be reborrowed. Partial

<PAGE>

                                                                              20

prepayments shall be in an aggregate principal amount of $2,000,000 or a whole
multiple of $1,000,000 in excess thereof.

            4.4  Optional Termination or Reduction of Aggregate Acquisition Loan
Commitment. The Borrower shall have the right, upon not less than five Business
Days' notice to the Administrative Agent, to terminate or, from time to time,
reduce the unutilized portion of the Aggregate Acquisition Loan Commitment. Any
such reduction shall be in an amount equal to $2,000,000 or a whole multiple of
$1,000,000 in excess thereof and shall reduce permanently the Aggregate
Acquisition Loan Commitment then in effect.

            4.5   Mandatory Prepayments.  (a)  The Borrower shall, as promptly
as is practicable (and, in any event, within one Business Day following the
receipt thereof), repay the Loans by the amount equal to the aggregate amount of
Net Proceeds received from any Net Proceeds Event; provided that no such
repayment and reduction shall be due pursuant to this subsection 4.5(a) with
respect to any Net Proceeds Event on account of the recovery by the Borrower of
amounts owing to it under property insurance policies, except to the extent that
either (i) such recoveries exceed the reasonably estimated cost of replacing the
property on account of which such amounts were paid to the Borrower and its
Subsidiaries or (ii) the Borrower and its Subsidiaries are not diligently
proceeding with such replacement. Any payments of the Loans made pursuant to
this subsection 4.5(a) shall be applied, first, to the prepayment of the
Acquisition Loans and, second, to the prepayment of the Term Loans, with such
prepayment of the Term Loans being applied ratably to the remaining installments
thereof. Unless the Borrower otherwise elects, the application of prepayments
made pursuant to this subsection 4.5(a) shall be made, first, to ABR Loans and,
second, to Eurodollar Loans. Amounts prepaid on account of the Loans may not be
reborrowed.

            (b)   The Borrower shall, immediately upon receipt thereof, repay
      the Loans by the amount equal to 100% of the gross proceeds received by it
      on account of capital calls under the Capital Call Agreements. Any
      payments of the Loans made pursuant to this subsection 4.5(b) shall be
      applied in such manner as the Administrative Agent shall elect.

            4.6   Conversion and Continuation Options. (a)  The Borrower may
elect from time to time to convert Eurodollar Loans to ABR Loans by delivering
to the Administrative Agent an irrevocable Notice of Borrowing (Conversion) by
1:00 P.M., New York City time, at least one Business Day prior to the requested
date of conversion; provided that any such conversion of Eurodollar Loans may
only be made on the last day of an Interest Period with respect thereto. The
Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans by
delivering to the Administrative Agent an irrevocable Notice of Borrowing by
1:00 P.M., New York City time, at least three Business Days' prior to the
requested conversion date. Any such Notice of Borrowing (Conversion) with
respect to a conversion to Eurodollar Loans shall specify the length of the
initial Interest Period or Interest Periods therefor. Upon receipt of any such
Notice of Borrowing (Conversion), the Administrative Agent shall promptly notify
each Lender thereof. All or any part of outstanding Eurodollar Loans and ABR
Loans may be converted as provided herein, provided that (i) no Loan may be
converted into a Eurodollar Loan when any Event of Default has occurred and is
continuing and the Administrative Agent has or the Majority Lenders have
determined that such a conversion is not appropriate and (ii) no Term Loan may
be converted into a Eurodollar Loan after the date that is one month prior to
the Maturity Date.

<PAGE>

                                                                              21

            (i)   Any Eurodollar Loans may be continued as such upon the
      expiration of the then current Interest Period with respect thereto by the
      Borrower delivering to the Administrative Agent an irrevocable Notice of
      Borrowing (Continuation), in accordance with the applicable provisions of
      the term "Interest Period" set forth in subsection 1.1, setting forth
      (among other things) the length of the next Interest Period to be
      applicable to such Loans, provided that (i) no Loan may be continued as a
      Eurodollar Loan when any Event of Default has occurred and is continuing
      and the Administrative Agent has or the Majority Lenders have determined
      that such a continuation is not appropriate and (ii) no Term Loan may be
      continued as a Eurodollar Loan after the date that is one month prior to
      the Maturity Date and provided, further, that if the Borrower shall fail
      to give such notice or if such continuation is not permitted such Loans
      shall be automatically converted to ABR Loans on the last day of such then
      expiring Interest Period. Upon receipt of any such Notice of Borrowing
      (Continuation), the Administrative Agent shall promptly notify each Lender
      thereof.

            4.7   Minimum Amounts and Maximum Number of Tranches. All
borrowings,conversions and continuations of Loans hereunder and all selections
of Interest Periods hereunder shall be in such amounts and be made pursuant to
such elections so that, after giving effect thereto, the aggregate principal
amount of the Loans comprising each Eurodollar Tranche shall be equal to
$2,000,000 or a whole multiple of $1,000,000 in excess thereof. In no event
shall there be more than 6 (or, prior to the Merger Date, 8) Eurodollar Tranches
outstanding at any time.

            4.8   Interest Rates and Payment Dates.  (a)  Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin with respect thereto.

            (b)   Each ABR Loan shall bear interest at a rate per annum equal to
      the ABR plus the Applicable Margin with respect thereto.

            (c)   If all or a portion of (i) any principal of any Loan, (ii) any
      interest payable thereon, (iii) any commitment fee or (iv) any other
      amount payable hereunder shall not be paid when due (whether at the stated
      maturity, by acceleration or otherwise), the principal of the Loans and
      any such overdue interest, commitment fee or other amount shall bear
      interest at a rate per annum which is (x) in the case of principal, the
      rate that would otherwise be applicable thereto pursuant to the foregoing
      provisions of this subsection plus 2% or (y) in the case of any such
      overdue interest, commitment fee or other amount, the rate described in
      paragraph (b) of this subsection plus 2%, in each case from the date of
      such non-payment until such overdue principal, interest, commitment fee or
      other amount is paid in full (as well after as before judgment).

            (d)   Interest shall be payable in arrears on each Interest Payment
      Date, provided that interest accruing pursuant to paragraph (c) of this
      subsection shall be payable from time to time on demand.

            4.9   Computation of Interest and Fees.  (a)  Commitment fees and,
whenever it is calculated on the basis of the Prime Rate, interest shall be
calculated on the basis of a 365- (or

<PAGE>

                                                                              22

366-, as the case may be) day year for the actual days elapsed; and, otherwise,
interest shall be calculated on the basis of a 360-day year for the actual days
elapsed. The Administrative Agent shall as soon as practicable notify the
Borrower and the affected Lenders of each determination of a Eurodollar Rate.
Any change in the interest rate on a Loan resulting from a change in the ABR or
the Eurocurrency Reserve Requirements shall become effective as of the opening
of business on the day on which such change becomes effective. The
Administrative Agent shall as soon as practicable notify the Borrower and the
affected Lenders of the effective date and the amount of each such change in
interest rate.

            (b)   Each determination of an interest rate by the Administrative
      Agent pursuant to any provision of this Agreement shall be conclusive and
      binding on the Borrower and the Lenders in the absence of manifest or
      demonstrable error. The Administrative Agent shall, at the request of the
      Borrower, deliver to the Borrower a statement showing the quotations used
      by the Administrative Agent in determining any interest rate pursuant to
      subsection 4.9(a).

            4.10  Inability to Determine Interest Rate.  If prior to the first
day of any Interest Period:

            (a)   the Administrative Agent shall have determined (which
      determination shall be conclusive and binding upon the Borrower) that, by
      reason of circumstances affecting the relevant market, adequate and
      reasonable means do not exist for ascertaining the Eurodollar Rate for
      such Interest Period, or

            (b)   the Administrative Agent shall have received notice from the
      Lenders holding 66-2/3% of the Loans to which such Interest Period is
      applicable that the Eurodollar Rate determined or to be determined for
      such Interest Period will not adequately and fairly reflect the cost to
      such Lenders (as conclusively certified by such Lenders) of making or
      maintaining their affected Loans during such Interest Period, then the
      Administrative Agent shall give telecopy or telephonic notice thereof to
      the Borrower and the affected Lenders as soon as practicable thereafter.
      If such notice is given (x) any Eurodollar Loans requested to be made on
      the first day of such Interest Period shall be made as ABR Loans, (y) any
      Loans that were to have been converted on the first day of such Interest
      Period to Eurodollar Loans shall be converted to or continued as ABR Loans
      and (z) any outstanding Eurodollar Loans shall be converted, on the first
      day of such Interest Period, to ABR Loans. Until such notice has been
      withdrawn by the Administrative Agent, no further Eurodollar Loans under
      such Commitments shall be made or continued as such, nor shall the
      Borrower have the right to convert Loans to Eurodollar Loans.

            4.11  Pro Rata Treatment and Payments.  (a)  Each borrowing by the
      Borrower from the Lenders hereunder, each payment by the Borrower on
      account of any commitment fee hereunder and any reduction of the
      Commitments of the Lenders shall be made pro rata according to the
      respective relevant Commitment Percentages of the Lenders holding
      obligations in respect of which such amounts were paid. Each payment
      (including each prepayment) by the Borrower on account of principal of and
      (subject to the provisions of subsection 4.12) interest on the Loans shall
      be made pro rata according to the respective outstanding principal amounts
      of such Loans then held by the Lenders.

<PAGE>

                                                                              23

      Except as otherwise set forth herein, all payments (including prepayments)
      to be made by the Borrower hereunder, whether on account of principal,
      interest, fees or otherwise, shall be made without set off or counterclaim
      and shall be made prior to 12:00 Noon, New York City time, on the due date
      thereof to the Administrative Agent, for the account of the applicable
      Lenders, at the Administrative Agent's office specified in subsection
      11.3, in Dollars and in immediately available funds. The Administrative
      Agent shall distribute such payments to the Lenders holding obligations on
      account of which such amounts were paid promptly upon receipt in like
      funds as received. If any payment hereunder becomes due and payable on a
      day other than a Business Day, such payment shall be extended to the next
      succeeding Business Day, and, with respect to payments of principal,
      interest thereon shall be payable at the then applicable rate during such
      extension.

            (b)   Unless the Administrative Agent shall have been notified in
      writing by any Lender prior to a borrowing that such Lender will not make
      the amount that would constitute its relevant Commitment Percentage of
      such borrowing available to the Administrative Agent, the Administrative
      Agent may assume that such Lender is making such amount available to the
      Administrative Agent, and the Administrative Agent may, in reliance upon
      such assumption, make available to the Borrower a corresponding amount. If
      such amount is not made available to the Administrative Agent by the
      required time on the Borrowing Date therefor, such Lender shall pay to the
      Administrative Agent, on demand, such amount with interest thereon at a
      rate equal to the daily average Federal Funds Effective Rate for the
      period until such Lender makes such amount immediately available to the
      Administrative Agent. A certificate of the Administrative Agent submitted
      to any Lender with respect to any amounts owing under this subsection 4.11
      shall be conclusive in the absence of manifest or demonstrable error. If
      such Lender's relevant Commitment Percentage of such borrowing is not made
      available to the Administrative Agent by such Lender within three Business
      Days of such Borrowing Date, the Administrative Agent shall also be
      entitled to recover such amount with interest thereon at the rate per
      annum applicable to ABR Loans hereunder, on demand, from the Borrower.

            (c)   Notwithstanding anything to the contrary contained herein, in
      the event that the Administrative Agent shall make any payment to a Lender
      on account of amounts owing to such Lender by the Borrower hereunder and
      the Administrative Agent either (i) shall not receive the corresponding
      amount from the Borrower or (ii) shall be required to return such amount
      to the Borrower, such Lender shall (upon the request of the Administrative
      Agent) promptly return to the Administrative Agent the amount of such
      payment.

            4.12  Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert ABR Loans to Eurodollar Loans shall forthwith be cancelled and (b) such
Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to ABR Loans on the respective last days of the then current
Interest Periods with respect to such Loans or within such earlier period as
required by law. If any such

<PAGE>

                                                                              24

conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to subsection
4.15.

            4.13  Requirements of Law. (a) If the adoption of or any change in
any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:

            (i)   shall subject any Lender to any tax of any kind whatsoever
      with respect to this Agreement, any Note or any Eurodollar Loan made by
      it, or change the basis of taxation of payments to such Lender in respect
      thereof (except for Non-Excluded Taxes covered by subsection 4.14 and
      changes in the rate of tax on the overall net income of such Lender);

            (ii)  shall impose, modify or hold applicable any reserve, special
      deposit, compulsory loan or similar requirement against assets held by,
      deposits or other liabilities in or for the account of, advances, loans or
      other extensions of credit by, or any other acquisition of funds by, any
      office of such Lender which is not otherwise included in the determination
      of the Eurodollar Rate hereunder; or

            (iii) shall impose on such Lender any other condition; and the
      result of any of the foregoing is to increase the cost to such Lender, by
      an amount which such Lender deems to be material, of making, converting
      into, continuing or maintaining Eurodollar Loans or to reduce any amount
      receivable hereunder in respect thereof, then, in any such case, the
      Borrower shall promptly pay such Lender such additional amount or amounts
      as will compensate such Lender for such increased cost or reduced amount
      receivable.

            (b)   If any Lender shall have determined that the adoption of or
      any change in any Requirement of Law regarding capital adequacy or in the
      interpretation or application thereof or compliance by such Lender or any
      corporation controlling such Lender with any request or directive
      regarding capital adequacy (whether or not having the force of law) from
      any Governmental Authority made subsequent to the date hereof shall have
      the effect of reducing the rate of return on such Lender's or such
      corporation's capital as a consequence of its obligations hereunder to a
      level below that which such Lender or such corporation could have achieved
      but for such adoption, change or compliance (taking into consideration
      such Lender's or such corporation's policies with respect to capital
      adequacy) by an amount reasonably deemed by such Lender to be material,
      then from time to time, the Borrower shall promptly pay to such Lender
      such additional amount or amounts as will compensate such Lender for such
      reduction.

            (c)   If any Lender becomes entitled to claim any additional amounts
      pursuant to this subsection, it shall promptly notify the Borrower (with a
      copy to the Administrative Agent) of the event by reason of which it has
      become so entitled. A certificate as to any additional amounts payable
      pursuant to this subsection submitted by such Lender to the Borrower (with
      a copy to the Administrative Agent) shall be conclusive in the absence of
      manifest or demonstrable error. The agreements in this

<PAGE>

                                                                              25

      subsection shall survive the termination of this Agreement and the payment
      of the Loans and all other amounts payable hereunder.

            4.14  Taxes. (a)  All payments made by the Borrower under this
Agreement and any Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Administrative Agent or any Lender
as a result of a present or former connection between the Administrative Agent
or such Lender and the jurisdiction of the Governmental Authority imposing such
tax or any political subdivision or taxing authority thereof or therein (other
than any such connection arising solely from the Administrative Agent or such
Lender having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or any Note). If any such non-
excluded taxes, levies, imposts, duties, charges, fees deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
payable to the Administrative Agent or any Lender hereunder or under any Note,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement, provided, however, that the Borrower shall not be required to
increase any such amounts payable to any Lender that is not organized under the
laws of the United States of America or a state thereof if such Lender fails to
comply with the requirements of paragraph (b) of this subsection. Whenever any
Non-Excluded Taxes are payable by the Borrower, as promptly as possible
thereafter the Borrower shall send to the Administrative Agent for its own
account or for the account of such Lender, as the case may be, a certified copy
of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Administrative Agent or any
Lender as a result of any such failure. The agreements in this subsection shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.

            (b)   Each Lender that is not incorporated under the laws of the
      United States of America or a state thereof shall:

            (i)   deliver to the Borrower and the Administrative Agent (A) two
      duly completed copies of United States Internal Revenue Service Form 1001
      or 4224, or successor applicable form, as the case may be, and (B) an
      Internal Revenue Service Form W-8 or W-9, or successor applicable form, as
      the case may be;

            (ii)  deliver to the Borrower and the Administrative Agent two
      further copies of any such form or certification on or before the date
      that any such form or certification expires or becomes obsolete and after
      the occurrence of any event requiring a change in the most recent form
      previously delivered by it to the Borrower; and

            (iii) obtain such extensions of time for filing and complete such
      forms or certifications as may reasonably be requested by the Borrower or
      the Administrative Agent; unless in any such case an event (including,
      without limitation, any change in

<PAGE>

                                                                              26

      treaty, law or regulation) has occurred prior to the date on which any
      such delivery would otherwise be required which renders all such forms
      inapplicable or which would prevent such Lender from duly completing and
      delivering any such form with respect to it and such Lender so advises the
      Borrower and the Administrative Agent. Such Lender shall certify (i) in
      the case of a Form 1001 or 4224, that it is entitled to receive payments
      under this Agreement without deduction or withholding of any United States
      federal income taxes and (ii) in the case of a Form W-8 or W-9, that it is
      entitled to an exemption from United States backup withholding tax. Each
      Person that shall become a Lender or a Participant pursuant to subsection
      11.7 shall, upon the effectiveness of the related transfer, be required to
      provide all of the forms and statements required pursuant to this
      subsection, provided that in the case of a Participant such Participant
      shall furnish all such required forms and statements to the Lender from
      which the related participation shall have been purchased.

            4.15  Indemnity. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Borrower in making a borrowing
of, conversion into or continuation of Eurodollar Loans after the Borrower has
given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which
is not the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market. This covenant shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.

            4.16  Certain Fees. The Borrower agrees to pay to the Administrative
Agent, for its own account, a non-refundable administration's fee in an amount
previously agreed to with the Administrative Agent, payable in the manner and on
the dates so previously agreed.

            4.17  Change of Lending Office. Each Lender agrees that if it makes
any demand for payment under subsection 4.13 or 4.14(a), or if any adoption or
change of the type described in subsection 4.13 shall occur with respect to it,
it will use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Borrower to make payments under subsection 4.13 or
4.14(a), or would eliminate or reduce the effect of any adoption or change
described in subsection 4.12.

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                                                                              27

                    SECTION 5 REPRESENTATIONS AND WARRANTIES

            To induce the Administrative Agent and the Lenders to enter into
this Agreement and to make the Loans, the Borrower hereby represents and
warrants to the Administrative Agent and each Lender (on the date of each
borrowing hereunder and on the Reorganization Date, with LegacyCo being deemed
to be the "Borrower" on the Reorganization Date) that:

            5.1   Financial Condition. (a) The audited consolidated balance
sheets of Premisys as at June 25, 1999 and June 26, 1998, and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by and accompanied by an unqualified report from
PricewaterhouseCoopers LLP, present fairly the consolidated financial condition
of Premisys as at such date, and the consolidated results of its operations and
its consolidated cash flows for the respective fiscal years then ended. The
unaudited consolidated balance sheet of Premisys as at September 24, 1999, and
the related unaudited consolidated statements of income and cash flows for the
three-month period ended on such date, present fairly the consolidated financial
condition of Premisys as at such date, and the consolidated results of its
operations and its consolidated cash flows for the three- month period then
ended (subject to normal year-end audit adjustments). All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except as approved by the aforementioned firm of accountants and
disclosed therein). The Borrower and its Subsidiaries do not have any material
Guarantee Obligations, contingent liabilities and liabilities for taxes, or any
long-term leases or unusual forward or long-term commitments, including any
interest rate or foreign currency swap or exchange transaction or other
obligation in respect of derivatives, that are not reflected in the most recent
financial statements referred to in this paragraph. During the period from June
25, 1999 to and including the Closing Date, there has been no sale, transfer or
other disposition by Premisys of any material part of its business or property,
other than the sales, transfers and other dispositions constituting the
Transaction.

            (b)   The unaudited pro forma consolidated balance sheet of Premisys
      as at each of June 25, 1999 and September 24, 1999, and the related
      unaudited consolidated statements of income and cash flows for the fiscal
      year or fiscal quarter (as the case may be) ended on each such date,
      present fairly the consolidated financial condition of Premisys as at such
      date, and the consolidated results of its operations and its consolidated
      cash flows for the fiscal period then ended (subject to normal year-end
      audit adjustments, in the case of the financial statements as at September
      24, 1999). All such financial statements, including the related schedules
      and notes thereto, have been prepared in accordance with GAAP applied
      consistently throughout the periods involved and have been adjusted to
      reflect, on a pro forma basis, the financial performance and position only
      of the businesses which will comprise LegacyCo on the Reorganization Date.

            (c)   The unaudited pro forma consolidated balance sheet (including
      the notes thereto) as at September 24, 1999 of:

                  (i)    AcquisitionCo and its consolidated Subsidiaries, copies
            of which have heretofore been furnished to each Lender, has been
            prepared giving effect

<PAGE>

                                                                              28

            (as if such events had occurred on such date) to the consummation of
            the Tender Offer, the Merger and the Loans to be made hereunder on
            the Closing Date; and

                  (ii)   LegacyCo and its consolidated Subsidiaries, copies of
            which have heretofore been furnished to each Lender, have been
            prepared giving effect (as if such events had occurred on such date)
            to the consummation of the Transaction and the Loans to be made
            hereunder.

Each such pro forma consolidated balance sheet has been prepared based on the
best information reasonably available to the Borrower as of the date of delivery
thereof, and presents fairly on a pro forma basis the estimated financial
position of Borrower and its consolidated Subsidiaries as at September 24, 1999,
assuming that the events specified in the preceding sentence had actually
occurred at such date.

            (d)   The unaudited pro forma consolidated summary cash flow
      statement for the period of four consecutive fiscal quarters ended
      September 24, 1999 of LegacyCo and its consolidated Subsidiaries, copies
      of which have heretofore been furnished to each Lender, have been prepared
      giving effect (as if such events had occurred on such date) to the
      consummation of the Transaction and the Loans to be made hereunder. Such
      unaudited pro forma consolidated summary balance sheet has been prepared
      based on the best information reasonably available to the Borrower as of
      the date of delivery thereof, and presents fairly on a pro forma basis the
      estimated cash flow results of LegacyCo and its consolidated Subsidiaries
      for the period ended September 24, 1999, assuming that the events
      specified in the preceding sentence had actually occurred at the first day
      of such period. Such unaudited pro forma consolidated summary cash flow
      statement demonstrates that LegacyCo would have had positive cash flow
      (after, among other things, the payment of debt service) if the
      Transaction had occurred on the first day of the period of four
      consecutive fiscal quarters ended September 24, 1999.

            5.2   No Change. Since June 25, 1999, there has been no development
or event which has had or could reasonably be expected to have a Material
Adverse Effect (it being understood that the consummation of the Asset Transfer
does not, in itself, constitute such a development or event).

            5.3   Corporate Existence; Compliance with Law. Each of the Borrower
and its Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
corporate power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification except where the failure to so qualify could not, in
the aggregate, reasonably be expected to have a Material Adverse Effect and (d)
is in compliance with all Requirements of Law except to the extent that the
failure to comply therewith could not, in the aggregate, reasonably be expected
to have a Material Adverse Effect.

            5.4   Corporate Power; Authorization; Enforceable Obligations. Each
Credit Party has the corporate (or analogous) power and authority, and the legal
right, to make, deliver

<PAGE>

                                                                              29

and perform the Credit Documents to which it is a party and has taken all
necessary corporate (or analogous) action to authorize the execution, delivery
and performance of the Credit Documents to which it is a party. The Borrower has
the corporate (or analogous) power and authority, and the legal right, to borrow
hereunder and has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Agreement. To the best of the
Borrower's knowledge, after reasonable inquiry, no consent or authorization of,
filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the borrowings
hereunder or with the execution, delivery, performance, validity or
enforceability of the Credit Documents to which any Credit Party is a party.
This Agreement has been, and each other Credit Document to which it is a party
will be, duly executed and delivered on behalf of each Credit Party. This
Agreement constitutes, and each other Credit Document to which it is a party
when executed and delivered will constitute, a legal, valid and binding
obligation of each Credit Party, enforceable against the Borrower or the
relevant Subsidiary, as the case may be, in accordance with its terms, subject
to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.

            5.5   No Legal Bar. The execution, delivery and performance of each
Credit Document, the incurrence or issuance of and use of the proceeds of the
Loans and the transactions contemplated by the Credit Documents (a) will not
violate any Requirement of Law or any Contractual Obligation applicable to or
binding upon the Borrower or any of its Subsidiaries or any of their respective
properties or assets, in any manner which could reasonably be expected to result
in a Material Adverse Effect and (b) will not result in the creation or
imposition of any Lien on any of its properties or assets pursuant to any
Requirement of Law applicable to it, as the case may be, or any of its
Contractual Obligations, except for the Liens arising under the Security
Documents.

            5.6   No Material Litigation. No litigation by, investigation by, or
proceeding of or before any arbitrator or any Governmental Authority is pending
or, to the knowledge of the Borrower, threatened by or against the Borrower or
any of its Subsidiaries or against any of its or their respective properties or
revenues (including after giving effect to the Tender Offer and Merger) (a) with
respect to any Credit Document, the Loans made hereunder, the use of proceeds
thereof and the other transactions contemplated hereby, (b) with respect to any
Acquisition Document or any transactions contemplated thereby which affect any
material provisions or any material transaction contemplated thereby or (c)
which could reasonably be expected to have a Material Adverse Effect.

            5.7   No Default. Neither the Borrower nor any of its Subsidiaries
is in default under or with respect to any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.

            5.8   Ownership of Property; Liens. The Borrower and each of its
Subsidiaries has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real property, and good title to, or a valid
leasehold interest in, all its other property, and none of such property is
subject to any Lien except as permitted by subsection 8.3.

<PAGE>

                                                                              30

            5.9   Intellectual Property. The Borrower and each of its
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes material to the conduct of its
business as currently conducted (the "Intellectual Property"). Except as set
forth in Schedule 5.9, no claim has been asserted and is pending by any Person
challenging or questioning the use of any such Intellectual Property or the
validity or effectiveness of any such Intellectual Property, nor does the
Borrower know of any valid basis for any such claim. Except as set forth in
Schedule 5.9, the use of such Intellectual Property by the Borrower and its
Subsidiaries does not infringe on the rights of any Person, except for such
claims and infringements that, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.

            5.10  No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation of the Borrower or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect.

            5.11  Taxes. Each of the Borrower and its Subsidiaries has filed or
caused to be filed all tax returns (or has requested and has received extensions
from the appropriate Governmental Authority) which, to the knowledge of the
Borrower, are required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of the Borrower or its Subsidiaries, as the case may be); no tax Lien has
been filed, and, to the knowledge of the Borrower, no claim is being asserted,
with respect to any such tax, fee or other charge.

            5.12  Federal Regulations. No part of the proceeds of any Loans will
be used for any purpose which violates, or would be inconsistent with, the
provisions of Regulation T, U or X of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect.

            5.13  ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Plan has arisen, during such five-year period. The
present value of all accrued benefits under each Single Employer Plan (based on
those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits. Neither the Borrower nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan, and neither the
Borrower nor any Commonly Controlled Entity would become subject to any
liability under ERISA if the Borrower or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made. No such Multiemployer Plan is in Reorganization or Insolvent.

<PAGE>

                                                                              31

            5.14  Investment and Holding Company Status. Neither the Borrower
nor any of its Subsidiaries is (a) an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.

            5.15  Environmental Matters. Except to the extent that the facts and
circumstances giving rise to all such failures to be so true and correct are
not, in the aggregate, reasonably likely to result in the payment of a Material
Environmental Amount:

            (a)   The facilities and properties owned, leased or operated by the
      Borrower or any of its Subsidiaries (the "Properties") do not contain, and
      have not previously contained, any Materials of Environmental Concern in
      amounts or concentrations which (i) constitute or constituted a violation
      of, or (ii) could reasonably be expected to give rise to liability under,
      any Environmental Law.

            (b)   The Properties and all operations at the Properties are in
      compliance, and have in the last five years been in compliance, in all
      material respects with all applicable Environmental Laws, and there is no
      contamination at, under or about the Properties or violation of any
      Environmental Law with respect to the Properties or the business operated
      by the Borrower or any of its Subsidiaries (the "Business") which could
      materially interfere with the continued operation of the Properties or
      materially impair the fair saleable value thereof.

            (c)   Neither the Borrower nor any of its Subsidiaries has received
      any notice of violation, alleged violation, non-compliance, liability or
      potential liability regarding environmental matters or compliance with
      Environmental Laws with regard to any of the Properties or the Business,
      nor does the Borrower have knowledge or reason to believe that any such
      notice will be received or is being threatened.

            (d)   Materials of Environmental Concern have not been transported
      or disposed of from the Properties in violation of, or in a manner or to a
      location which could reasonably be expected to give rise to liability
      under, any Environmental Law, nor have any Materials of Environmental
      Concern been generated, treated, stored or disposed of at, on or under any
      of the Properties in violation of, or in a manner that could reasonably be
      expected to give rise to liability under, any applicable Environmental
      Law.

            (e)   No judicial proceeding or governmental or administrative
      action is pending or, to the knowledge of the Borrower, threatened, under
      any Environmental Law to which the Borrower or any Subsidiary is or will
      be named as a party with respect to the Properties or the Business, nor
      are there any consent decrees or other decrees, consent orders,
      administrative orders or other orders, or other administrative or judicial
      requirements outstanding under any Environmental Law with respect to the
      Properties or the Business.

            (f)   There has been no release or threat of release of Materials of
      Environmental Concern at or from the Properties, or arising from or
      related to the operations of the Borrower or any Subsidiary in connection
      with the Properties or otherwise in connection with the Business, in
      violation of or in amounts or in a manner

<PAGE>
                                                                              32

      that could reasonably give rise to liability under Environmental Laws.

      (a) Each of the representations and warranties set forth in subsections
      5.16(a) through (f) is true and correct with respect to each parcel of
      real property owned or operated by the Borrower or any of its Subsidiaries
      (other than the Properties).

            5.16  Security Documents. (a) Upon execution and delivery thereof by
the parties thereto, each Security Document will be effective to create in favor
of the Administrative Agent, for the ratable benefit of the Lenders, a legal,
valid and enforceable security interest in the Collateral described therein and,
when the actions specified each Security Document have been duly taken, the
security interests granted pursuant thereto shall constitute a perfected first
lien on, and security interest in, all right, title and interest of the pledgor
party thereto in the Collateral described therein.

            (b)   Upon execution and delivery thereof by the parties thereto,
      each Foreign Pledge Agreement will be effective to create in favor of the
      Administrative Agent, for the ratable benefit of the Lenders, a legal,
      valid and enforceable security interest in not less than 65% of the
      Capital Stock of each Foreign Subsidiary which is directly owned by a
      Domestic Subsidiary and, when the actions (if any) specified in the legal
      opinion delivered in connection with such Foreign Pledge Agreement have
      been duly taken, the security interests granted pursuant thereto shall
      constitute a perfected first lien on, and security interest in, all right,
      title and interest of the pledgor party thereto in such Capital Stock.

            5.17  Acquisition Documents. The Administrative Agent and each
Lender has received complete and correct copies of each of the Acquisition
Documents (including, without limitation, all exhibits, schedules and disclosure
letters referred to therein or delivered pursuant thereto) and all amendments
thereto, waivers relating thereto and other side letters or agreements affecting
the terms thereof. None of the Acquisition Documents will have been amended,
supplemented or otherwise modified (including waivers) since the date hereof,
except (a) amendments, supplements and other modifications (including waivers)
to the Acquisition Documents which (i) do not increase the price paid for the
Shares, (ii) do not affect the material conditions to AcquisitionCo's obligation
to purchase the Shares (other than any waiver of the requirement that the
Tendered Shares constitute at least 75% of the issued and outstanding Shares)
and (iii) would not adversely affect the rights or interests of the
Administrative Agent and the Lenders or (b) as approved by the Administrative
Agent. Each Acquisition Document to which the Borrower or any of its
Subsidiaries is a party has been duly executed and delivered by the Borrower or
such Subsidiary, as the case may be, and to the best knowledge of the Borrower
and each of its Subsidiaries, each Acquisition Document has been duly executed
and delivered by the parties thereto other than the Borrower and its
Subsidiaries, is in full force and effect and is enforceable against the parties
thereto. The representations and warranties of the Borrower and each of its
Subsidiaries contained in each Acquisition Document to which the Borrower or
such Subsidiary, as the case may be, is a party were true and correct in all
material respects on each date when made. To the knowledge of the Borrower and
each of its Subsidiaries, the representations and warranties of each other party
to each Acquisition Document contained therein were true and correct in all
material respects on each date when made.

            5.18  Capital Call Obligations. To the best knowledge of the
Borrower, (a) the Capital Call Agreement to which each Investor is a party
remains in full force and effect and is

<PAGE>

                                                                              33

enforceable against such Investor, (b) the Assignment of Capital Call Rights
remains in full force and effect and is enforceable against Zhone and (c) after
giving effect to the provisions of the Security Documents, the Administrative
Agent has the right and ability to make capital calls upon the Investors with
respect to the Assigned Interests without the consent of any Person at any time
when an Event of Default is continuing; provided that the representations and
warranties contained in this subsection 5.18 shall be made (or deemed made) by
the Borrower only prior to the Collateral Substitution Date.

            5.19  Accuracy and Completeness of Information. No information,
financial statement, report, certificate or other document prepared or furnished
by or on behalf of any Credit Party to the Administrative Agent or any Lender in
connection with this Agreement (including, without limitation, the materials
furnished to the Lenders in connection with the syndication of the Commitments
hereunder), any other Credit Document, or any of the Acquisition Documents (but
excluding all projections and pro forma financial statements, which shall have
been prepared in good faith and based upon reasonable assumptions) contains any
untrue statement of a fact or omits to state any fact necessary to make the
statements herein or therein not misleading in any material respect.

            5.20  Solvency. Each Credit Party is, and after giving effect to the
Transaction and the incurrence of all Indebtedness and obligations being
incurred in connection herewith and therewith will be and will continue to be,
Solvent. For purposes of this subsection 5.20, the term "Solvent," when used
with respect to any Person, means that, as of any date of determination, (a) the
amount of the "present fair saleable value" of the assets of such Person will,
as of such date, exceed the amount of all "liabilities of such Person,
contingent or otherwise", as of such date, as such quoted terms are determined
in accordance with applicable federal and state laws governing determinations of
the insolvency of debtors, (b) the present fair saleable value of the assets of
such Person will, as of such date, be greater than the amount that will be
required to pay the liability of such Person on its debts as such debts become
absolute and matured, (c) such Person will not have, as of such date, an
unreasonably small amount of capital with which to conduct its business, and (d)
such Person will be able to pay its debts as they mature. For purposes of this
definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any
(x) right to payment, whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured or (y) right to an equitable
remedy for breach of performance if such breach gives rise to a right to
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured
or unsecured.

                         SECTION 6. CONDITIONS PRECEDENT

            6.1   Conditions to Initial Loans. The agreement of each Lender to
make the initial Loans requested to be made by it is subject to the
satisfaction, immediately prior to or concurrently with the making of such Loan
(and, in any event, on or prior to December 31, 1999), of the following
conditions precedent:

            (a)   Credit Documents. The Administrative Agent shall have received
      (i) this Agreement, executed and delivered by a duly authorized officer of
      the Borrower, (ii) each of the Security Documents contemplated by the
      definition of such term to be in

<PAGE>

                                                                              34

effect on the Closing Date and (iii) the Premisys Escrow Agreement, each
executed and delivered by a duly authorized officer of the parties thereto.

            (b)   Related Agreements. The Administrative Agent shall have
received, with a copy for each Lender, true and correct copies, certified as to
authenticity by the Borrower, of (i) each of the Acquisition Documents and (ii)
such other documents or instruments as may be reasonably requested by the
Administrative Agent.

            (c)   Corporate Matters regarding Credit Parties. The Administrative
Agent shall have received, with a counterpart for each Lender, (i) a true and
complete copy of the certificate of incorporation (or analogous document) of
each Credit Party, (ii) a true and complete copy of the By-laws (or analogous
document) of each Credit Party and (iii) a true and complete copy of the
resolutions of the Board of Directors (or analogous document) of each Credit
Party authorizing (A) the execution, delivery and performance by such Credit
Party of the Credit Documents to which it is a party, (B) in the case of the
Borrower, the borrowings contemplated hereunder, (C) the granting by such Credit
Party of any Liens purported to be created by it pursuant to the Security
Documents and (D) in the case of Premisys, the execution, delivery and
performance of its obligations under the Premisys Escrow Agreement. Such
documents shall be certified by the Secretary or an Assistant Secretary of such
Credit Party (or, if such credit party is not a corporation, a duly authorized
general partner or member thereof) as of the Closing Date, which certificate
shall (w) be in form and substance reasonably satisfactory to the Administrative
Agent, (x) certify that such documents are true and correct copies of the
originals thereof, (y) certify as to the incumbency and signature of the
officers of such Credit Party executing any Credit Document and (z) state that
the resolutions (or analogous authorizations) described in clause (iii) above
have not been amended, modified, revoked or rescinded.

            (d)   Consents, Licenses and Approvals. The Administrative Agent
shall have received, with a counterpart for each Lender, a certificate of a
Responsible Officer of the Borrower stating that all consents, authorizations
and filings, if any, referred to in subsection 5.4 are in full force and effect.

            (e)   Legal Opinions. The Administrative Agent shall have
received, with a counterpart for each Lender, (i) from Latham & Watkins and/or
other acceptable counsel to Zhone, the Borrower and the other Credit Parties an
executed legal opinion which is in form and substance reasonably satisfactory to
the Administrative Agent and (ii) copies of all opinions delivered on or prior
to the Closing Date in connection with the Tender Offer, the Merger and the
Asset Transfer, with satisfactory reliance letters in favor of the
Administrative Agent and the Lenders; each such legal opinion shall be in form
and substance reasonably acceptable to the Administrative Agent and shall cover
such other matters incident to the transactions contemplated by this Agreement
as the Administrative Agent may reasonably require.

            (f)   Pledged Stock. The Administrative Agent shall have received
the certificates representing the shares of Capital Stock of AcquisitionCo which
are to be pledged pursuant to the Initial Collateral Agreement, together with an
undated stock

<PAGE>

                                                                              35

power for each such certificate executed in blank by a duly authorized officer
of the pledgor thereof.

            (g)   Actions to Perfect Liens. The Administrative Agent shall have
received evidence in form and substance satisfactory to it that all
filings, recordings, registrations and other actions, including, without
limitation, the filing of duly executed financing statements on form UCC-1,
necessary or, in the opinion of the Administrative Agent, desirable to perfect
the Liens created by the Security Documents (including, without limitation, the
Lien on the Tendered Shares of Premisys which are to be acquired by
AcquisitionCo on the Closing Date, but other than any Lien on the Assigned
Interests) shall have been completed.

            (h)   Lien Searches. The Administrative Agent shall have received
the results of a recent search by a Person reasonably satisfactory to the
Administrative Agent, of the Uniform Commercial Code, judgement and tax lien
filings which may have been filed with respect to personal property of Zhone,
AcquisitionCo, LegacyCo, Premisys and their respective subsidiaries, and the
results of such search shall be reasonably satisfactory to the Administrative
Agent.

            (i)   Escrow. Premisys shall have placed in escrow pursuant to the
Premisys Escrow Agreement an amount of cash and securities (which securities
shall be reasonably satisfactory to the Administrative Agent) having an
aggregate fair market value equal to not less than the amount of the Aggregate
Acquisition Loan Commitment then in effect.

            (j)   Receipt of Capital. The Administrative Agent shall have
received a certificate of a Responsible Officer, dated the Closing Date, stating
that (i) Zhone has received irrevocable and unconditional capital commitments
with respect to at least $400,000,000 in equity from the Investors upon terms
reasonably satisfactory to the Administrative Agent, (ii) Zhone shall have
received at least $140,000,000 in cash equity through drawings under the capital
commitments described in clause (i) above and shall have contributed or loaned
(in accordance with the terms hereof) such amounts to the Borrower and (iii) the
Borrower shall have utilized the $140,000,000 in capital contributions and loans
received by it pursuant to clause (ii) above to purchase Shares.

              (k)  Tender Offer. (i) The Merger Agreement and all related
documentation shall have been duly executed and delivered by the parties thereto
in form and substance reasonably satisfactory to the Administrative Agent and
the Lenders, (ii) the material conditions to the Tender Offer specified in the
Tender Offer Documents (as in effect on the date hereof) shall have been and
shall continue to be satisfied in all material respects, (iii) the Acquisition
Documents shall not have been amended, supplemented, waived or otherwise
modified in any material respect, except as contemplated by subsection 8.16,
(iv) the obligations of the parties thereto to be performed at or prior to the
acceptance and purchase of the Tendered Shares (other than the payment of the
purchase price for the Tendered Shares) shall have been performed or complied
with by AcquisitionCo and Premisys, except where the failure so to comply or
perform could not reasonably be expected to have a Material Adverse Effect, (v)
the Board of Directors of Premisys shall have approved and/or recommended the
Acquisition

<PAGE>

                                                                              36

to the shareholders of Premisys, (vi) the portion of the Shares beneficially
owned by AcquisitionCo, together with the portion of the Shares accepted for
payment pursuant to the Tender Offer, is not less than the amount necessary to
permit the Merger to be consummated without the affirmative vote of any
shareholders other than the Borrower and its Subsidiaries and there shall not
have been a material change in the number of Shares since June 25, 1999 and
(vii) AcquisitionCo shall have accepted all Tendered Shares for purchase, shall
have deposited the funds necessary for the purchase of such Tendered Shares with
the depositary and instructed the depositary to promptly pay for such Tendered
Shares.

            (l)   Purchase Price. The aggregate consideration to be paid for
purchase of the Shares pursuant to the Tender Offer and the Merger shall be not
more than $255,000,000 and the aggregate amount of fees and expenses to be
incurred in connection with the Transaction shall not exceed $10,000,000.

            (m)   No Consents. Each of Zhone, AcquisitionCo, LegacyCo, Premisys
and their respective Subsidiaries shall have obtained all consents and approvals
of Governmental Authorities and third parties necessary or reasonably advisable
in connection with the Transaction, the Loans hereunder and the continuing
operations of the Borrower and its Subsidiaries (after giving effect to the
Transaction); all such consents and approvals shall be in full force and effect
and all applicable appeal and waiting periods shall have expired without any
governmental or judicial action being taken or threatened that has had or would
be reasonably likely to have the effect of restraining, preventing or imposing
burdensome conditions on the Transaction and the other transactions contemplated
hereby.

            (n)   Corporate Structure. The Administrative Agent and the Lenders
shall have received a written description of the material assets and liabilities
to be transferred to LegacyCo and its Subsidiaries pursuant to the Asset
Transfer, and such assets and liabilities shall be reasonably satisfactory to
the Administrative Agent.

            (o)   Fees. The Administrative Agent shall have received all fees
and other amounts due and payable on or prior to the Closing Date, including, to
the extent invoiced a reasonable time prior to the Closing Date, reimbursement
or payment of all out-of-pocket expenses required to be reimbursed or paid by
the Borrower and its Subsidiaries hereunder or under any other Credit Document.

            (p)   Business Plan. The Borrower shall have delivered a business
plan for LegacyCo and its Subsidiaries for the period from the Closing Date
through the Maturity Date, which business plan shall be consistent in all
material respects with the projections and other information provided to the
Administrative Agent prior to the Closing Date.

            6.2   Conditions to Term Loan. In addition to the satisfaction or
waiver of the conditions specified in subsection 6.1, the agreement of each Term
Loan Lender to make its Term Loan is subject to the satisfaction of the
following conditions precedent:

<PAGE>

                                                                              37

            (a)   Related Agreements. The Administrative Agent shall have
received, with a copy for each Lender, true and correct copies, certified as to
authenticity by the Borrower, of each of (i) each Stock Purchase Agreement, (ii)
each Capital Call Agreement, (iii) the Assignment of Capital Call Rights and
(iv) such other documents or instruments as may be reasonably requested by the
Administrative Agent.

            (b)   Capital Call Payments. The Administrative Agent shall have
received a true and correct copy of written instructions from Zhone to each
Investor specifying that, until such time as such Investor receives the
instructions contemplated by subsection 8.17(g) hereof, all payments made by
such Investor to Zhone on account of the Assigned Interests shall be paid
directly into the Cash Collateral Account (as defined in the AcquisitionCo Cash
Collateral Agreement); such instructions shall be irrevocable and unconditional,
and shall be in form and substance reasonably satisfactory to the Administrative
Agent.

            (c)   Actions to Perfect Liens. The Administrative Agent shall have
received evidence in form and substance satisfactory to it that all filings,
recordings, registrations and other actions, including, without limitation, the
filing of duly executed financing statements on form UCC-1, necessary or, in the
opinion of the Administrative Agent, desirable to perfect the Liens created by
the Security Documents on the Assigned Interests shall have been completed.

            6.3   Conditions to Each Loan. The agreement of each Lender to make
any Loan requested to be made by it on any date (including, without limitation,
any Loan to be made on the Closing Date) is subject to the satisfaction of the
following conditions precedent:

                  (a)    Representations and Warranties. Each of the
representations and warranties made by the Borrower and the other Credit Parties
in or pursuant to the Credit Documents shall be true and correct in all material
respects on and as of such date as if made on and as of such date.

                  (b)    No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the Loans and
other extensions of credit requested to be made on such date.

                  (c)    Margin Regulations. The Borrower shall have furnished
to the Administrative Agent and each Lender a duly completed and executed
counterpart of FR Form U-1 referred to in Regulation U.

                        SECTION 7. AFFIRMATIVE COVENANTS

            The Borrower hereby agrees that, so long as any Commitments remain
in effect or any amount is owing to any Lender or the Administrative Agent
hereunder or under any other Credit Document, the Borrower shall and (except in
the case of delivery of financial information, reports and notices) shall cause
each of its Subsidiaries to:

            7.1   Financial Statements. Furnish to each Lender:

<PAGE>

                                                                              38

            (a)   as soon as available, but in any event within 90 days after
the end of each fiscal year of the Borrower, a copy of the consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at the end of such
year and the related consolidated statements of income and retained earnings and
of cash flows for such year, setting forth in each case in comparative form the
figures for the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of the
audit, by independent certified public accountants of nationally recognized
standing; and

            (b)   as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal year
of the Borrower, the unaudited consolidated balance sheet of the Borrower and
its consolidated Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income and retained earnings and of cash
flows of the Borrower and its consolidated Subsidiaries for such quarter and the
portion of the fiscal year through the end of such quarter, setting forth in
each case in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects (subject to
normal year-end audit adjustments); all such financial statements shall be
complete and correct in all material respects and shall be prepared in
reasonable detail and in accordance with GAAP applied consistently throughout
the periods reflected therein and with prior periods (except as approved by such
accountants or officer, as the case may be, and disclosed therein).

            7.2   Certificates; Other Information. Furnish to each Lender:

            (a)   concurrently with the delivery of the financial statements
referred to in subsection 7.1(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in making
the examination necessary therefor no knowledge was obtained of any Default or
Event of Default, except as specified in such certificate;

            (b)   concurrently with the delivery of the financial statements
      referred to in subsections 7.1(a) and (b), a certificate of a Responsible
      Officer certifying:

                  (i)    that, during such period, no Subsidiary has been formed
            or acquired (or, if any such Subsidiary has been formed or acquired,
            the Borrower has complied with the requirements of subsection 7.10
            with respect thereto);

                  (ii)   that, during such period, neither the Borrower nor any
            of its Subsidiaries has changed its name, its principal place of
            business, its chief executive office or the location of any material
            item of tangible Collateral without complying with the requirements
            of this Agreement and the Security Documents with respect thereto;

                  (iii)  that, during such period, each of the Borrower and its
            Subsidiaries has observed or performed all of its covenants and
            other agreements, and satisfied every condition, contained in this
            Agreement and the other Credit Documents to

<PAGE>

                                                                              39

            be observed, performed or satisfied by it (and including therein a
            reasonably detailed calculation of the covenants contained in
            subsection 8.1 hereof as of the last day of such period); and

                  (iv)   prior to the Collateral Substitution Date, the amount
            remaining undrawn and available from each Investor as of the last
            day of such period on account of the Assigned Interests and the
            expiration date of each Capital Call Agreement;

      and that such Officer has obtained no knowledge of any Default or Event of
      Default except as specified in such certificate;

            (c)   not later than thirty days prior to the end of each fiscal
      year of the Borrower, a copy of the projections by the Borrower of the
      operating budget and cash flow budget of the Borrower and its Subsidiaries
      for the succeeding fiscal year, such projections to be accompanied by a
      certificate of a Responsible Officer to the effect that such projections
      have been prepared on the basis of sound financial planning practice and
      that such Officer has no reason to believe they are incorrect or
      misleading in any material respect;

            (d)   within five days after the same are sent, copies of all
      financial statements and reports which the Borrower sends to its
      stockholders generally, and within five days after the same are filed,
      copies of all financial statements and reports which the Borrower may make
      to, or file with, the Securities and Exchange Commission or any successor
      or analogous Governmental Authority; and

            (e)   promptly, such additional financial and other information as
      any Lender may from time to time reasonably request.

            7.3   Payment of Obligations. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the Borrower or its Subsidiaries, as the case may be.

            7.4   Conduct of Business and Maintenance of Existence. Continue to
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except as otherwise permitted
pursuant to subsection 8.5; comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, be reasonably expected to have a Material Adverse Effect.

            7.5   Maintenance of Property; Insurance. Keep all property useful
and necessary in its business in good working order and condition; maintain with
financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks as are usually
insured against in the same general area by companies

<PAGE>

                                                                              40

engaged in the same or a similar business; and furnish to each Lender, upon
written request, full information as to the insurance carried.

            7.6   Inspection of Property; Books and Records; Discussions. Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time (and, in the absence of a Default or an Event of Default, with reasonable
notice) and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of the Borrower and its
Subsidiaries with officers and employees of the Borrower and its Subsidiaries
and with its independent certified public accountants.

            7.7   Notices. Promptly give notice to the Administrative Agent and
each Lender of:

            (a)   the occurrence of any Default or Event of Default;

            (b)   any (i) default or event of default under any Contractual
      Obligation of the Borrower or any of its Subsidiaries or (ii) litigation,
      investigation or proceeding which may exist at any time between the
      Borrower or any of its Subsidiaries and any Governmental Authority, which
      in either case, if not cured or if adversely determined, as the case may
      be, could reasonably be expected to have a Material Adverse Effect;

            (c)   any litigation or proceeding affecting the Borrower or any of
      its Subsidiaries in which the amount involved is $1,000,000 or more and
      not covered by insurance or in which injunctive or similar relief is
      sought;

            (d)   the following events, as soon as possible and in any event
      within 30 days after the Borrower knows or has reason to know thereof: (i)
      the occurrence or expected occurrence of any Reportable Event with respect
      to any Plan, a failure to make any required contribution to a Plan, the
      creation of any Lien in favor of the PBGC or a Plan or any withdrawal
      from, or the termination, Reorganization or Insolvency of, any
      Multiemployer Plan or (ii) the institution of proceedings or the taking of
      any other action by the PBGC or the Borrower or any Commonly Controlled
      Entity or any Multiemployer Plan with respect to the withdrawal from, or
      the terminating, Reorganization or Insolvency of, any Plan;

            (e)   prior to the Collateral Substitution Date, the delivery by
      Zhone, AcquisitionCo or LegacyCo to any Investor of a capital call
      pursuant to any Stock Purchase Agreement; and

            (f)   any development or event which has had or could reasonably be
      expected to have a Material Adverse Effect.

Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.

<PAGE>

                                                                              41

            7.8   Environmental Laws. (a) Comply with, and ensure compliance by
all tenants and subtenants, if any, with, all applicable Environmental Laws and
obtain and comply in all material respects with and maintain, and ensure that
all tenants and subtenants obtain and comply in all material respects with and
maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws, except to the extent that
failure to do so could not be reasonably expected to have a Material Adverse
Effect.

            (b)   Conduct and complete all investigations, studies, sampling and
      testing, and all remedial, removal and other actions required under
      Environmental Laws and promptly comply in all material respects with all
      lawful orders and directives of all Governmental Authorities regarding
      Environmental Laws, except to the extent that the same are being contested
      in good faith by appropriate proceedings and the pendency of such
      proceedings could not be reasonably expected to have a Material Adverse
      Effect.

            7.9   Further Assurances. Upon the request of the Administrative
Agent, promptly perform or cause to be performed any and all acts and execute or
cause to be executed any and all documents (including, without limitation,
financing statements and continuation statements) for filing under the
provisions of the Uniform Commercial Code or any other Requirement of Law which
are necessary or reasonably advisable to maintain in favor of the Administrative
Agent, for the benefit of the Lenders, Liens on the Collateral that are duly
perfected in accordance with all applicable Requirements of Law.

            7.10  Additional Collateral. (a) With respect to any Person that,
subsequent to the Closing Date, becomes a Domestic Subsidiary, promptly (and, in
any event, within ten Business Days after such Person becomes a Domestic
Subsidiary): (i) execute and deliver to the Administrative Agent, for the
benefit of the Lenders, a new pledge agreement or such amendments to the
relevant Security Document as the Administrative Agent reasonably shall deem
necessary or advisable to grant to the Administrative Agent, for the benefit of
the Lenders, a Lien on the Capital Stock of such Subsidiary which is owned by
the Borrower or any of its Subsidiaries, (ii) deliver to the Administrative
Agent the certificates representing such Capital Stock, together with undated
stock powers executed and delivered in blank by a duly authorized officer of the
Borrower or such Subsidiary, as the case may be, (iii) cause such new Subsidiary
(A) to become a party to the Initial Collateral Agreement or the Subsequent
Collateral Agreement, as applicable, in each case pursuant to documentation
which is in form and substance satisfactory to the Administrative Agent, and (B)
to take all actions necessary or advisable to cause the Lien created by the
Initial Collateral Agreement or the Subsequent Collateral Agreement, as
applicable, to be duly perfected in accordance with all applicable Requirements
of Law, including, without limitation, the filing of financing statements in
such jurisdictions as may be requested by the Administrative Agent and (iv) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described in clauses (i), (ii) and (iii)
immediately preceding, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.

            (b)   With respect to any Person that, subsequent to the Closing
      Date, becomes a Foreign Subsidiary and which has Capital Stock which is
      owned directly by the Borrower or a Domestic Subsidiary, promptly (and, in
      any event, within 30 days following the date upon which such Person
      becomes a Foreign Subsidiary): (i) execute and deliver to the
      Administrative Agent a new Foreign Pledge Agreement or such

<PAGE>

                                                                              42

      amendments to the relevant Foreign Pledge Agreement as the Administrative
      Agent reasonably shall deem necessary or advisable to grant to the
      Administrative Agent, for the benefit of the Lenders, a Lien on the
      Capital Stock of such Subsidiary which is owned by the Borrower or any of
      its Subsidiaries (provided that in no event shall more than 65% of the
      Capital Stock of any such Subsidiary be required to be so pledged if the
      pledge of more than such amount would be reasonably likely to cause
      adverse tax consequences), (ii) to the extent reasonably deemed advisable
      by the Administrative Agent, deliver to the Administrative Agent any
      certificates representing such Capital Stock, together with undated stock
      powers executed and delivered in blank by a duly authorized officer of the
      Borrower or such Subsidiary, as the case may be, (iii) take or cause to be
      taken all such other actions under the law of the jurisdiction of
      organization of such Foreign Subsidiary as may be necessary or advisable
      to perfect such Lien on such Capital Stock and (iv) if requested by the
      Administrative Agent, deliver to the Administrative Agent legal opinions
      relating to the matters described in clauses (i) through (iii) immediately
      preceding, which opinions shall be in form and substance, and from
      counsel, reasonably satisfactory to the Administrative Agent.

            (c)   In furtherance of the foregoing provisions of this subsection
      7.10, Premisys and each of its Subsidiaries shall, on the Merger Date, be
      deemed to be a Subsidiary of the Borrower and shall comply with the
      provisions of this subsection 7.10; provided that (i) it being understood
      that Premisys and each of its Subsidiaries shall, for purposes of this
      subsection 7.10 only, be deemed not to constitute a Subsidiary of the
      Borrower prior to the Merger Date and (ii) if the Borrower provides to the
      Administrative Agent a certificate of a Responsible Officer certifying
      that the Reorganization Date is anticipated in good faith to occur within
      60 days following the Merger Date, then the Borrower need not comply with
      the provisions of clause (b) of this subsection 7.10 (or any similar
      requirement of any Security Document) until the earlier of the
      Reorganization Date or such 60th day following the Merger Date.
      Notwithstanding the foregoing, the Borrower shall pledge the Capital Stock
      of Premisys which is held by it pursuant to the Initial Collateral
      Agreement from and after the Closing Date.

            7.11  Consummation of Merger. Cause the Merger to be consummated in
accordance with the terms of the Acquisition Documents and applicable
Requirements of Law as soon as is practicable following the consummation of the
Tender Offer, and to comply in all material respects with the obligations of the
Borrower and AcquisitionCo under the Acquisition Documents.

                              8. NEGATIVE COVENANTS

            The Borrower hereby agrees that, so long as any Commitments remain
in effect or any amount is owing to any Lender or the Administrative Agent
hereunder or under any other Credit Document, the Borrower shall not, and
(except with respect to subsection 8.1) shall not permit any of its Subsidiaries
to, directly or indirectly:

            8.1   Financial Condition Covenants.

            (a)   Minimum Interest Coverage Ratio. Permit the ratio of (i)
      EBITDA for any period of four consecutive fiscal quarters to (i) Interest
      Expense for such period (excluding any Interest Expense paid in cash on
      account of the Zhone Subordinated Note

<PAGE>

                                                                              43

      pursuant to the provisions of subsection 8.18(a)), to be less than 3.25 to
      1.0; provided that, until the completion of four full fiscal quarters
      following the Closing Date, (x) EBITDA of the Borrower and its
      Subsidiaries for periods prior to the Closing Date shall be deemed to be
      equal to the actual EBITDA for such periods of the businesses to be held
      by LegacyCo following the Reorganization Date and (y) Interest Expense
      shall be determined on a pro forma basis by annualizing the Interest
      Expense of the Borrower and its Subsidiaries for the period following the
      Closing Date.

            (b)   Maximum Leverage Ratio. Permit the ratio of (i) total
      Indebtedness of the Borrower and its Subsidiaries (excluding any
      Indebtedness on account of the Zhone Subordinated Note) to (ii) EBITDA for
      the period of four consecutive fiscal quarters ended most recently prior
      to such date, to be greater than the ratio set forth opposite such period
      below:

================================================================================
          Period                                           Ratio
--------------------------  ----------------------------------------------------
 Closing Date - 12/31/03                                3.25 to 1.0

  01/01/04 - thereafter                                 2.50 to 1.0

================================================================================

      ; provided that, until the completion of four full fiscal quarters
      following the Closing Date, compliance with the provisions of this clause
      (b) shall be determined on a pro forma basis, with (x) the amounts
      borrowed hereunder on the Closing Date being deemed to be outstanding on
      each day of such period prior to the Closing Date and (y) EBITDA of the
      Borrower and its Subsidiaries for periods prior to the Closing Date being
      deemed to be equal to the actual EBITDA for such periods of the businesses
      to be held by LegacyCo following the Reorganization Date.

            8.2   Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness (including, in any event, any preferred stock), except:

            (a)   Indebtedness of the Borrower under this Agreement;

            (b)   Indebtedness of the Borrower to any Subsidiary and of any
      Subsidiary to the Borrower or any other Subsidiary;

            (c)   Indebtedness of the Borrower and any of its Subsidiaries
      incurred to finance the acquisition of fixed or capital assets (whether
      pursuant to a loan, a Financing Lease or otherwise) in an aggregate
      principal amount not exceeding as to the Borrower and its Subsidiaries
      $500,000 at any time outstanding;

            (d)   Indebtedness outstanding on the date hereof and listed on
      Schedule 8.2 and any refinancings, refundings, renewals or extensions
      thereof;

<PAGE>

                                                                              44

            (e)   Prior to the Reorganization Date, Indebtedness of the Borrower
      owing to Zhone which is evidenced by a Zhone Subordinated Note; and

            (f)   Additional Indebtedness not exceeding $500,000 in aggregate
      principal amount at any one time outstanding.

            8.3   Limitation on Liens. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:

            (a)   Liens for taxes not yet due or which are being contested in
      good faith by appropriate proceedings, provided that adequate reserves
      with respect thereto are maintained on the books of the Borrower or its
      Subsidiaries, as the case may be, in conformity with GAAP (or, in the case
      of Foreign Subsidiaries, generally accepted accounting principles in
      effect from time to time in their respective jurisdictions of
      incorporation);

            (b)   carriers', warehousemen's, mechanics', materialmen's,
      repairmen's or other like Liens arising in the ordinary course of business
      which are not overdue for a period of more than 60 days or which are being
      contested in good faith by appropriate proceedings;

          (c) pledges or deposits in connection with workers' compensation,
     unemployment insurance and other social security legislation and deposits
     securing liability to insurance carriers under insurance or self-insurance
     arrangements;

            (d)   deposits to secure the performance of bids, trade contracts
      (other than for borrowed money), leases, statutory obligations, surety and
      appeal bonds, performance bonds and other obligations of a like nature
      incurred in the ordinary course of business;

            (e)   easements, rights-of-way, restrictions and other similar
      encumbrances incurred in the ordinary course of business which, in the
      aggregate, are not substantial in amount and which do not in any case
      materially detract from the value of the property subject thereto or
      materially interfere with the ordinary conduct of the business of the
      Borrower or such Subsidiary;

            (f)   Liens in existence on the date hereof listed on Schedule 8.3,
      securing Indebtedness permitted by subsection 8.2(d), provided that no
      such Lien is spread to cover any additional property after the Closing
      Date and that the amount of Indebtedness secured thereby is not increased;

            (g)   Liens securing Indebtedness of the Borrower and its
      Subsidiaries permitted by subsection 8.2(c) incurred to finance the
      acquisition of fixed or capital assets, provided that (i) such Liens shall
      be created substantially simultaneously with the acquisition of such fixed
      or capital assets, (ii) such Liens do not at any time encumber any
      property other than the property financed by such Indebtedness and (iii)
      the amount of Indebtedness secured thereby is not increased;

            (h)   Liens (not otherwise permitted hereunder) which secure
      Indebtedness not exceeding (as to the Borrower and all Subsidiaries)
      $500,000 in aggregate amount at any time outstanding; and

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                                                                              45

            (i)   Liens created pursuant to the Security Documents.

            8.4   Limitation on Guarantee Obligations. Create, incur, assume or
suffer to exist any Guarantee Obligation except:

            (a)   Guarantee Obligations in existence on the date hereof and
                  listed on Schedule 8.4;

            (b)   Guarantee Obligations incurred after the date hereof
                  supporting Indebtedness in an aggregate amount not to exceed
                  $500,000 at any one time outstanding;

            (c)   Guarantees made in the ordinary course of its business by the
                  Borrower or (prior to the Merger Date, at which time Premisys
                  will become the Borrower) Premisys of obligations of any of
                  its Subsidiaries, which obligations are otherwise permitted
                  under this Agreement; and

            (d)   the Security Documents.

            8.5   Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, except:

                  (a)    the Merger and the Asset Transfer;

                  (b)    any Subsidiary of the Borrower may be merged or
            consolidated with or into the Borrower (provided that the Borrower
            shall be the continuing or surviving corporation) or with or into
            any one or more wholly owned Subsidiaries of the Borrower (provided
            that the wholly owned Subsidiary or Subsidiaries shall be the
            continuing or surviving corporation); and

                  (c)   any Subsidiary may sell, lease, transfer or otherwise
            dispose of any or all of its assets (upon voluntary liquidation or
            otherwise) to the Borrower or any other wholly owned Subsidiary of
            the Borrower.

            8.6   Limitation on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of such Subsidiary's Capital Stock to any Person other than the
Borrower or any wholly owned Subsidiary, except:

            (a)   the sale or other disposition of obsolete or worn out property
      in the ordinary course of business;

            (b)   the sale of inventory in the ordinary course of business;

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                                                                              46

            (c)   the sale or other disposition of any property (other than
      assets described in clauses (a) and (b) above) in the ordinary course of
      business, provided that the aggregate book value of all assets so sold or
      disposed of in any period of twelve consecutive months shall not exceed
      $1,000,000;

            (d)   the sale or discount without recourse of accounts receivable
      arising in the ordinary course of business in connection with the
      compromise or collection thereof;

            (e)   as permitted by subsection 8.5;

            (f)   the sale, transfer or other disposition of assets to LegacyCo
      and its Subsidiaries pursuant to the Asset Transfer;

            (g)   the sale, transfer or other disposition of intellectual
      property to Affiliates of the Borrower; provided that each Affiliate to
      which any such intellectual property is transferred (whether from the
      Borrower, any Subsidiary or any other Affiliate) shall have executed and
      delivered to the Administrative Agent a License Letter;

            (h)   the sale, transfer or other disposition of raw materials and
      work-in-process inventory of LegacyCo (or, prior to the Reorganization
      Date, of businesses which, after the Reorganization Date, will constitute
      a part of LegacyCo) to contract manufacturers who will be utilized by the
      Borrower to manufacture inventory for LegacyCo; and

            (i)   the sale of the manufacturing assets of the Borrower and its
      Subsidiaries.

            8.7   Limitation on Leases. Permit the aggregate amount of fixed and
contingent rentals payable by LegacyCo (including, for periods prior to the
Reorganization Date, any such amounts payable by AcquisitionCo and Premisys on
account of the assets and business which will comprise LegacyCo) in any fiscal
year of the Borrower with respect to leases of real and personal property
(determined on a consolidated basis in accordance with GAAP) to exceed
$3,500,000.

            8.8   Limitation on Restricted Payments. Declare or pay any dividend
(other than dividends payable solely in common stock of the Borrower) on, or
make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of Capital Stock of the Borrower or any
warrants or options to purchase any such Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of the Borrower or
any Subsidiary (a "Restricted Payment"); provided that,

            (a)   during such time as no Default or Event of Default has
      occurred and is continuing, the Borrower may make Restricted Payments in
      an amount not to exceed the tax liabilities which would have been payable
      to Governmental Authorities by the Borrower and its Subsidiaries on a
      stand- alone basis if they were not members of a consolidated group
      taxpayer group with Zhone (but net of any such liabilities which are

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                                                                              47

      payable directly by the Borrower and its Subsidiaries as members of such
      consolidated taxpayer group); and

            (b)   during any such time as any Default or Event of Default is
      continuing, the Borrower may make Restricted Payments in an amount not to
      exceed the tax liabilities which are payable by Zhone to Governmental
      Authorities within 30 days following the date of such Restricted Payment
      and which would have been payable by the Borrower and its Subsidiaries on
      a stand-alone basis if they were not members of a consolidated group
      taxpayer group with Zhone (but net of any such liabilities which are
      payable directly by the Borrower and its Subsidiaries as members of such
      consolidated taxpayer group).

            8.9   Limitation on Capital Expenditures. Make or commit to make (by
way of the acquisition of securities of a Person or otherwise) any expenditure
in respect of the purchase or other acquisition of fixed or capital assets
(excluding any such asset acquired in connection with normal replacement and
maintenance programs properly charged to current operations) except for
expenditures in the ordinary course of business not exceeding, in the aggregate
for the Borrower and its Subsidiaries, $1,000,000 during any fiscal year of the
Borrower; provided that any portion of such amount which is not so expended in
the fiscal year for which it is permitted above may be carried-over to increase
the amount permitted for the next fiscal year of the Borrower (and shall be
deemed to be the last amounts expended in such next fiscal year).

            8.10  Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in, any Person,
except :

            (a)   extensions of trade credit in the ordinary course of business;

            (b)   investments in Cash Equivalents;

            (c)   the Asset Transfer;

            (d)   loans and advances to employees of the Borrower or its
      Subsidiaries for travel, entertainment and relocation expenses in the
      ordinary course of business in an aggregate amount for the Borrower and
      its Subsidiaries not to exceed $150,000 at any one time outstanding and
      additional loans and advances to employees which exist on the Closing
      Date;

            (e)   investments by the Borrower in, and loans, advances and
      capital contributions by the Borrower to, its Subsidiaries and investments
      by such Subsidiaries in, and loans, advances and capital contributions by
      Subsidiaries to, the Borrower and other Subsidiaries;

            (f)   loans made by the Borrower to Zhone or Premisys at any time
      when no Default or Event of Default is continuing in an aggregate
      principal amount for any fiscal year of the Borrower not to exceed the
      amount equal to 100% of Excess Cash Flow for the fiscal year of the
      Borrower most recently ended minus the aggregate amount of repayments made
      by the Borrower of amounts owing under the Zhone Subordinated Note made
      during the current fiscal year; provided that (i) for the fiscal year
      during which the

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                                                                              48

      Closing Date and the Reorganization occur, Excess Cash Flow shall be
      determined on a pro forma basis as if the Closing Date, the Reorganization
      and the other transactions contemplated hereby had occurred on the first
      day of such fiscal year and (ii) any such loans shall be subordinated to
      the other obligations of Zhone or Premisys (as the case may be) upon terms
      reasonably satisfactory to the Administrative Agent and shall be evidenced
      by promissory notes which are delivered to the Administrative Agent and
      pledged pursuant to the Subsequent Collateral Agreement;

            (g)   additional investments, loans and advances to the extent that
      the sum of (i) the aggregate principal amount of such investments and
      loans at any one time outstanding and (ii) the aggregate amount of such
      investments made since the Closing Date, does not exceed $500,000 in the
      aggregate.

            8.11  Limitation on Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, (b) in the
ordinary course of the Borrower's or such Subsidiary's business and (c) upon
fair and reasonable terms no less favorable to the Borrower or such Subsidiary,
as the case may be, than it would obtain in a comparable arm's length
transaction with a Person which is not an Affiliate; provided that nothing
contained in this subsection 8.11 shall be deemed to prohibit (i) the
consummation of the Asset Transfer or (ii) the payment of amounts owing under
tax sharing agreements with Affiliates to the extent that such amounts are
permitted to be paid pursuant to subsection 8.8.

            8.12  Limitation on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Subsidiary of
real or personal property which has been or is to be sold or transferred by the
Borrower or such Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property
or rental obligations of the Borrower or such Subsidiary.

            8.13  Limitation on Changes in Fiscal Year. Permit the fiscal year
of LegacyCo to end on a day other than December 31.

            8.14  Limitation on Negative Pledge Clauses. Enter into with any
Person any agreement which prohibits or limits the ability of the Borrower or
any of its Subsidiaries to create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired, other than (a) this Agreement, (b) any lease agreement which restricts
the granting of Liens upon the property leased to the Borrower and its
Subsidiaries thereunder from an unaffiliated third party (it being understood
that the License Letter shall in no event constitute such a lease agreement) and
(c) any agreement governing the sale, transfer or other disposition of property
to an unaffiliated third party in accordance with the terms of this Agreement
which restricts the granting of Liens upon the property to be sold, transferred
or otherwise disposed of thereunder.

            8.15  Limitation on Lines of Business. Enter into any business,
either directly or through any Subsidiary, except for those businesses in which
the Borrower and its Subsidiaries are engaged on the date of this Agreement or
which are directly related thereto.

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                                                                              49

            8.16  Rights under Acquisition Documents. Amend, supplement or
otherwise modify (including any waiver thereof) the Acquisition Documents in any
material respect, without the prior written consent of the Majority Lenders.

            8.17  Asset Transfer. Consummate the Asset Transfer or permit the
Reorganization Date to occur, unless:

            (a)   the Administrative Agent has received counterparts of (i) each
      of the Security Documents to be in effect after the Reorganization Date,
      executed and delivered by a duly authorized officer of each Credit Party
      which is a party thereto and (ii) the Assumption Agreement, executed and
      delivered by a duly authorized officer of LegacyCo; by its execution of
      this Agreement, each Lender hereby authorizes and instructs the
      Administrative Agent to execute and deliver the Assumption Agreement and
      agrees to be bound by the terms of the Assumption Agreement;

            (b)   The Administrative Agent shall have received (i) the
      certificates representing the shares pledged pursuant to each of the
      Security Documents, together with an undated stock power for each such
      certificate executed in blank by a duly authorized officer of the pledgor
      thereof and (ii) evidence in form and substance satisfactory to it that
      all filings, recordings, registrations and other actions, including,
      without limitation, the filing of duly executed financing statements on
      form UCC-1, necessary or, in the opinion of the Administrative Agent,
      desirable to perfect the Liens created by the Security Documents shall
      have been completed;

            (c)   to the extent not previously received pursuant to the
      provisions of Section 6.1, the Administrative Agent shall have received,
      with a counterpart for each Lender, (i) a true and complete copy of the
      certificate of incorporation (or analogous document) of each Credit Party,
      (ii) a true and complete copy of the By-laws (or analogous document) of
      each Credit Party and (iii) a true and complete copy of the resolutions of
      the Board of Directors (or analogous document) of each Credit Party
      authorizing (A) the execution, delivery and performance by such Credit
      Party of the Credit Documents to which it is a party, (B) in the case of
      the Borrower, the assumption of the Loans and other obligations
      contemplated hereunder and (C) the granting by such Credit Party of any
      Liens purported to be created by it pursuant to the Security Documents.
      Such documents shall be certified by the Secretary or an Assistant
      Secretary of such Credit Party (or, if such credit party is not a
      corporation, a duly authorized general partner or member thereof) as of
      the Reorganization Date, which certificate shall (w) be in form and
      substance reasonably satisfactory to the Administrative Agent, (x) certify
      that such documents are true and correct copies of the originals thereof,
      (y) certify as to the incumbency and signature of the officers of such
      Credit Party executing any Credit Document and (z) state that the
      resolutions (or analogous authorizations) described in clause (iii) above
      have not been amended, modified, revoked or rescinded;

            (d)   the Administrative Agent has received from Latham & Watkins
      and/or other acceptable counsel to Zhone, the Borrower and the other
      Credit Parties an executed legal opinion which is in form and substance
      reasonably satisfactory to the Administrative Agent;

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                                                                              50

            (e)   Premisys shall own 100% of the equity interests (on a fully
      diluted basis) in LegacyCo. Schedule 8.17 hereto shall list all
      Subsidiaries of LegacyCo immediately after giving effect to the Asset
      Transfer and the percentage of the equity interests of such Subsidiary
      which is owned by LegacyCo;

            (f)   after giving effect to the occurrence of the Reorganization
      Date, each of the representations and warranties contained in this
      Agreement and in the other Credit Documents contemplated to be in effect
      after the Reorganization Date shall be true and correct in all material
      respects; and

            (g)   the Administrative Agent shall have received a true and
      correct copy of written instructions from LegacyCo to each Investor
      specifying that all payments made by such Investor to LegacyCo on account
      of the Assigned Interests shall be paid directly into the Cash Collateral
      Account (as defined in the LegacyCo Cash Collateral Agreement); such
      instructions shall (x) be irrevocable and unconditional, (y) unless such
      acknowledgment and consent is provided in the Capital Call Agreement to
      which such Investor is a party, contain a duly executed and delivered
      acknowledgment and consent from each Investor and (z) be in form and
      substance reasonably satisfactory to the Administrative Agent; and

            (h)   the principal of and accrued interest on the Acquisition Loans
      shall have been paid in full.

From and after the Reorganization Date, Zhone shall have no further obligations
or liabilities hereunder or under any other Credit Document which is to
terminate on such date pursuant to subsection 11.2 hereof.

            8.18  Optional Payments and Modifications of Certain Debt
                  Instruments.
(a) Make or offer to make any optional or voluntary payment, prepayment,
repurchase or redemption of or otherwise optionally or voluntarily defease or
segregate funds with respect to the obligations (including, without limitation,
Interest Expense on account thereof) evidenced by the Zhone Subordinated Note,
other than, during such time as no Default or Event of Default is continuing or
would result therefrom, (i) payments made with the proceeds of the Loans
hereunder within one Business Day following the borrowing of such Loans and (ii)
payments made with the proceeds received by Premisys on account of the sale to
AcquisitionCo of Capital Stock of Premisys pursuant to the Company Option
Agreement described in the Merger Agreement.

            (b)   Prior to the Reorganization Date, amend, modify, waive or
otherwise change, or consent or agree to any amendment, modification, waiver or
other change to, any of the terms of the Zhone Subordinated Note or the
obligations of the Borrower evidenced thereby.

                           SECTION 9 EVENTS OF DEFAULT

            If any of the following events shall occur and be continuing:

            (a)   The Borrower shall fail to pay any principal of any Loan when
      due in accordance with the terms thereof or hereof; or the Borrower shall
      fail to pay any interest

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                                                                              51

      on any Loan, or any other amount payable hereunder, within five days after
      any such interest or other amount becomes due in accordance with the terms
      thereof or hereof; or

            (b)   Any representation or warranty made or deemed made by the
      Borrower or any other Credit Party herein or in any other Credit Document
      or which is contained in any certificate, document or financial or other
      statement furnished by it at any time under or in connection with this
      Agreement or any such other Credit Document shall prove to have been
      incorrect in any material respect on or as of the date made or deemed
      made; or

            (c)   The Borrower or any other Credit Party shall default in the
      observance or performance of any agreement contained in Section 8;

            (d)   The Borrower or any other Credit Party shall default in the
      observance or performance of any other agreement contained in this
      Agreement or any other Credit Document (other than as provided in
      paragraphs (a) through (c) of this Section 9), and such default shall
      continue unremedied or unwaived for a period of 30 days; or

            (e)   The Borrower or any of its Subsidiaries shall (i) default in
      any payment of principal of or interest on any Indebtedness (other than
      the Loans) or in the payment of any Guarantee Obligation, beyond the
      period of grace (not to exceed 30 days), if any, provided in the
      instrument or agreement under which such Indebtedness or Guarantee
      Obligation was created; or (ii) default in the observance or performance
      of any other agreement or condition relating to any such Indebtedness or
      Guarantee Obligation or contained in any instrument or agreement
      evidencing, securing or relating thereto, or any other event shall occur
      or condition exist, the effect of which default or other event or
      condition is to cause, or to permit the holder or holders of such
      Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation
      (or a trustee or Administrative Agent on behalf of such holder or holders
      or beneficiary or beneficiaries) to cause, with the giving of notice if
      required, such Indebtedness to become due prior to its stated maturity or
      such Guarantee Obligation to become payable; provided, however, that no
      Default or Event of Default shall exist under this paragraph unless the
      aggregate amount of Indebtedness and/or Guarantee Obligations in respect
      of which any default or other event or condition referred to in this
      paragraph shall have occurred shall be equal to at least $250,000; or

            (f)   (i) The Borrower or any of its Subsidiaries or, prior to the
      Reorganization Date, Zhone shall commence any case, proceeding or other
      action (A) under any existing or future law of any jurisdiction, domestic
      or foreign, relating to bankruptcy, insolvency, reorganization or relief
      of debtors, seeking to have an order for relief entered with respect to
      it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
      reorganization, arrangement, adjustment, winding-up, liquidation,
      dissolution, composition or other relief with respect to it or its debts,
      or (B) seeking appointment of a receiver, trustee, custodian, conservator
      or other similar official for it or for all or any substantial part of its
      assets, or the Borrower or any of its Subsidiaries or, prior to the
      Reorganization Date, Zhone shall make a general assignment for the benefit
      of its creditors; or (ii) there shall be commenced against the Borrower or
      any of its Subsidiaries or, prior to the Reorganization Date, Zhone any
      case, proceeding or other action of a nature referred to in clause (i)
      above which (A) results in the entry of an order for relief or any such

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                                                                              52

      adjudication or appointment or (B) remains undismissed, undischarged or
      unbonded for a period of 60 days; or (iii) there shall be commenced
      against the Borrower or any of its Subsidiaries or, prior to the
      Reorganization Date, Zhone any case, proceeding or other action seeking
      issuance of a warrant of attachment, execution, distraint or similar
      process against all or any substantial part of its assets which results in
      the entry of an order for any such relief which shall not have been
      vacated, discharged, or stayed or bonded pending appeal within 60 days
      from the entry thereof; or (iv) the Borrower or any of its Subsidiaries
      or, prior to the Reorganization Date, Zhone shall take any action in
      furtherance of, or indicating its consent to, approval of, or acquiescence
      in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v)
      the Borrower or any of its Subsidiaries or, prior to the Reorganization
      Date, Zhone shall generally not, or shall be unable to, or shall admit in
      writing its inability to, pay its debts as they become due; or

            (g)   (i) Any Person shall engage in any "prohibited transaction"
      (as defined in Section 406 of ERISA or Section 4975 of the Code) involving
      any Plan, (ii) any "accumulated funding deficiency" (as defined in Section
      302 of ERISA), whether or not waived, shall exist with respect to any Plan
      or any Lien in favor of the PBGC or a Plan shall arise on the assets of
      the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event
      shall occur with respect to, or proceedings shall commence to have a
      trustee appointed, or a trustee shall be appointed, to administer or to
      terminate, any Single Employer Plan, which Reportable Event or
      commencement of proceedings or appointment of a trustee is, in the
      reasonable opinion of the Majority Lenders, likely to result in the
      termination of such Plan for purposes of Title IV of ERISA, (iv) any
      Single Employer Plan shall terminate for purposes of Title IV of ERISA,
      (v) the Borrower or any Commonly Controlled Entity shall, or in the
      reasonable opinion of the Majority Lenders is likely to, incur any
      liability in connection with a withdrawal from, or the Insolvency or
      Reorganization of, a Multiemployer Plan or (vi) any other event or
      condition shall occur or exist with respect to a Plan; and in each case in
      clauses (i) through (vi) above, such event or condition, together with all
      other such events or conditions, if any, involve an aggregate amount in
      excess of $1,000,000; or

            (h)   One or more judgments or decrees shall be entered against the
      Borrower or any of its Subsidiaries involving in the aggregate a liability
      (not paid or fully covered by insurance) of $1,000,000 or more, and all
      such judgments or decrees shall not have been vacated, discharged, stayed
      or bonded pending appeal within 60 days from the entry thereof; or

            (i)   (i) Any of the Security Documents or the Premisys Escrow
      Agreement (or any material provision of any thereof) shall cease, for any
      reason (other than pursuant to the express terms thereof or of subsection
      11.2 hereof), to be in full force and effect, or the Borrower or any other
      Credit Party which is a party to any of the Security Documents shall so
      assert or (ii) the Lien created by any of the Security Documents shall
      cease to be enforceable and of the same effect and priority purported to
      be created thereby; or

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                                                                              53

            (j)   At any time, Zhone shall cease to beneficially own, directly
      or indirectly, 100% of the issued and outstanding Capital Stock of the
      Borrower; or

            (k)   At any time prior to the Collateral Substitution Date, any of
      (i) the Capital Call Agreement to which any Investor is a party (or any
      material provision of any thereof) shall cease, for any reason, to be in
      full force and effect, or Zhone, the Borrower, any other Credit Party or
      the relevant Investor shall so assert, (ii) any capital commitment
      constituting an Assigned Interest shall cease to be enforceable by the
      Borrower or the Administrative Agent against the Investor with respect
      thereto or (iii) any Capital Call Agreement shall have a remaining term of
      less than 45 days; unless, in any such case, another Investor shall have
      assumed the obligations of the relevant Investor under the Capital Call
      Agreement to which it is a party pursuant to documentation which is in
      form and substance reasonably satisfactory to the Administrative Agent; or

            (l)   At any time prior to the Collateral Substitution Date, any of
      (i) any Capital Call Agreement or the Assignment of Capital Call Rights
      shall be amended, supplemented or otherwise modified without the prior
      written consent of the Administrative Agent, (ii) any of Zhone Investors
      I, L.L.C., Zhone Investors II, L.L.C. or Zhone Investors III, L.L.C. shall
      fail to pay any amounts owing by it under the Stock Purchase Agreement to
      which it is a party, (iii) the Assignment of Capital Call Rights (or any
      material provision of any thereof) shall cease, for any reason, to be in
      full force and effect, or Zhone, the Borrower or any other Credit Party
      shall so assert, (iv) the amount remaining available to be drawn in
      respect of the Assigned Interests is less than 120% of the aggregate
      then-outstanding principal amount of the Term Loans or (v) any amount
      payable on account of any Assigned Interest shall be paid by the relevant
      Investor to an account other than the Cash Collateral Account (as defined
      in the AcquisitionCo Cash Collateral Agreement or the LegacyCo Cash
      Collateral Agreement, as then applicable); or

            (m)   At any date from and after the Collateral Substitution Date,
      the fair market value of the collateral held in the Cash Collateral
      Account (as defined in the AcquisitionCo Cash Collateral Agreement or the
      LegacyCo Cash Collateral Agreement, as then applicable) is less than 120%
      of the aggregate then-outstanding principal amount of the Term Loans; or

            (n)   The Reorganization Date does not occur on or prior to the date
      which is 60 days after the Merger Date;

then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section 9 with respect to the
Borrower, automatically the Commitments shall immediately terminate and the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement shall immediately become due and payable, and (B) if such
event is any other Event of Default, either or both of the following actions may
be taken: (i) with the consent of the Majority Lenders, the Administrative Agent
may, or upon the request of the Majority Lenders, the Administrative Agent
shall, by notice to the Borrower declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; and (ii) with
the consent of the Majority Lenders, the Administrative Agent may, or upon the
request of the Majority Lenders, the Administrative Agent shall, by notice to
the

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                                                                              54

Borrower, declare the Loans hereunder (with accrued interest thereon) and all
other amounts owing under this Agreement to be due and payable forthwith,
whereupon the same shall immediately become due and payable.

            Except as expressly provided above in this Section 9, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.

                       SECTION 10 THE ADMINISTRATIVE AGENT

            10.1  Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Credit Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Credit Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Credit
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Credit Document or
otherwise exist against the Administrative Agent.

            10.2  Delegation of Duties. The Administrative Agent may execute any
of its duties under this Agreement and the other Credit Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agent or attorneys
in-fact selected by it with reasonable care.

            10.3  Exculpatory Provisions. Neither the Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Credit Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrower or
any officer thereof contained in this Agreement or any other Credit Document or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Administrative Agent under or in connection with,
this Agreement or any other Credit Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Credit Document or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Administrative Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Credit Document, or to inspect the properties, books or
records of the Borrower.

            10.4  Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent

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                                                                              55

or made by the proper Person or Persons and upon advice and statements of legal
counsel (including, without limitation, counsel to the Borrower), independent
accountants and other experts selected by the Administrative Agent. The
Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Credit Document unless it shall first
receive such advice or concurrence of the Majority Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement and the other Credit Documents in accordance with a request of
the Majority Lenders (or such larger number of Lenders as may be explicitly
required hereunder), and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders of
the Loans.

            10.5  Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give notice thereof to the Lenders. The Administrative Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Majority Lenders; provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.

            10.6  Non-Reliance on Administrative Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
the Borrower, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and made its own decision to make
its Loans hereunder and enter into this Agreement. Each Lender also represents
that it will, independently and without reliance upon the Administrative Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Credit Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Borrower. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness

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                                                                              56

of the Borrower which may come into the possession of the Administrative Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.

            10.7  Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Commitment Percentages in effect on the
date on which indemnification is sought, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of, the Commitments, this Agreement, any of the
other Credit Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by the Administrative Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's gross negligence or willful misconduct. The agreements in
this subsection shall survive the payment of the Loans and all other amounts
payable hereunder.

            10.8  Administrative Agent in Its Individual Capacity. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower as though the
Administrative Agent were not the Administrative Agent hereunder and under the
other Credit Documents. With respect to the Loans made by it, the Administrative
Agent shall have the same rights and powers under this Agreement and the other
Credit Documents as any Lender and may exercise the same as though it were not
the Administrative Agent, and the terms "Lender" and "Lenders" shall include the
Administrative Agent in its individual capacity.

            10.9  Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 10 days' notice to the Lenders. If the
Administrative Agent shall resign as "Administrative Agent" under this Agreement
and the other Credit Documents, then the Majority Lenders shall appoint from
among the Lenders a successor Administrative Agent for the Lenders, which
successor Administrative Agent (provided that, to the extent that no Default or
Event of Default is continuing at the time of such appointment, such
Administrative Agent shall have been approved by the Borrower), shall succeed to
the rights, powers and duties of the Administrative Agent hereunder. Effective
upon such appointment and approval, the term "Administrative Agent" shall mean
such successor Administrative Agent, and the former Administrative Agent's
rights, powers and duties as Administrative Agent shall be terminated, without
any other or further act or deed on the part of such former Administrative Agent
or any of the parties to this Agreement or any holders of the Loans. After any
retiring Administrative Agent's resignation as Administrative Agent, the
provisions of this Section 10 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Administrative Agent under this
Agreement and the other Credit Documents.

                            SECTION 11. MISCELLANEOUS

            11.1  Amendments and Waivers. Neither this Agreement nor any other
Credit Document, nor any terms hereof or thereof may be amended, supplemented or
modified except

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                                                                              57

in accordance with the provisions of this subsection. The Majority Lenders may,
or, with the written consent of the Majority Lenders, the Administrative Agent
may, from time to time, (a) enter into with the Borrower and/or any other
applicable Credit Party written amendments, supplements or modifications hereto
and to the other Credit Documents for the purpose of adding any provisions to
this Agreement or the other Credit Documents or changing in any manner the
rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive,
on such terms and conditions as the Majority Lenders or the Administrative
Agent, as the case may be, may specify in such instrument, any of the
requirements of this Agreement or the other Credit Documents or any Default or
Event of Default and its consequences; provided, however, that no such waiver
and no such amendment, supplement or modification shall:

            (i)   without the consent of each Lender directly affected thereby,
      reduce the amount or extend the scheduled date of maturity of any Loan or
      of any installment thereof, or reduce the stated rate of any interest or
      fee payable hereunder or extend the scheduled date of any payment thereof
      or increase the amount or extend the expiration date of any Lender's
      Commitments;

            (ii)  without the written consent of all the Lenders, amend, modify
      or waive any provision of this subsection or reduce the percentage
      specified in the definition of Majority Lenders, or consent to the
      assignment or transfer by the Borrower of any of its rights and
      obligations under this Agreement (other than any transfer to LegacyCo
      pursuant to the Asset Transfer) and the other Credit Documents, or (except
      to the extent provided in subsection 11.2) release all or substantially
      all of the Collateral, or (except to the extent provided in subsection
      11.2) release any Investor from any material obligation relating to the
      Assigned Interests;

            (iii) amend, modify or waive any provision of Section 10 without the
      written consent of the then Administrative Agent; or

            (iv)  have the effect of waiving any prepayment required pursuant to
      subsection 4.5(a) on account of a Net Proceeds Event described in clause
      (b) of the definition of such term without the prior written consent of
      Investors holding a majority of the voting interests in the Capital Stock
      of Zhone (with the determination of the voting interests held by each such
      Investor being based, without independent inquiry by the Administrative
      Agent, solely upon a certification from the Borrower).

Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Borrower, any
applicable Credit Party, the Lenders, the Administrative Agent and all future
holders of the Loans. In the case of any waiver, the Borrower, any applicable
Credit Party, the Lenders and the Administrative Agent shall be restored to
their former positions and rights hereunder and under the other Credit
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any right consequent thereon.

            11.2  Releases of Collateral and Credit Support. (a) On the Merger
Date, the Premisys Escrow Agreement shall terminate without any action or
consent on the part of the Administrative Agent or any other Person and Premisys
and (after delivery of the amounts then

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                                                                              58

held in escrow thereunder in accordance with the terms thereof) the Escrow Agent
(as defined therein) shall be released from their respective obligations
thereunder; provided that nothing contained herein shall be deemed to cause the
termination of any provision of any such agreement which is expressly stated to
survive the termination thereof or to release any Credit Party from its
obligations under any such provision.

            (b)   On the Reorganization Date, each of the AcquisitionCo Cash
      Collateral Agreement and the Initial Collateral Agreement shall terminate
      without any action or consent on the part of the Administrative Agent or
      any other Person and the Credit Parties which are parties thereto shall be
      released from their respective obligations thereunder; provided that
      nothing contained herein shall be deemed to cause the termination of any
      provision of any such agreement which is expressly stated to survive the
      termination thereof or to release any Credit Party from its obligations
      under any such provision.

            (c)   On the date upon which Zhone consummates an initial public
      offering of its Capital Stock, the Assignment of Capital Call Rights shall
      terminate without any action or consent on the part of the Administrative
      Agent or any other Person and the Credit Parties which are parties thereto
      shall be released from their respective obligations thereunder; provided
      that no such termination and release shall occur unless:

                  (i)    the Administrative Agent shall have received an amount
            of cash and Cash Equivalents which, at the date of determination, is
            equal to at least 120% of the aggregate then-outstanding principal
            amount of the Term Loans (the "Substitute Collateral");

                  (ii)   the Administrative Agent shall hold a first priority,
            perfected security interest in the Substitute Collateral, pursuant
            to the LegacyCo Cash Collateral Agreement or other documentation
            reasonably satisfactory to the Administrative Agent; and

                  (iii)  the Administrative Agent shall have received a
            satisfactory legal opinion from independent counsel to Zhone with
            respect to such perfection and other matters reasonably requested by
            the Administrative Agent.

Notwithstanding the foregoing, nothing contained in this subsection 11.2(c)
shall be deemed to cause the termination of any provision of the Assignment of
Capital Call Rights which is expressly stated to survive the termination thereof
or to release any Credit Party from its obligations under any such provision.

            (d)   At any time and from time to time when the fair market value
      of the Substitute Collateral exceeds 120% of the aggregate
      then-outstanding principal amount of the Term Loans, the Administrative
      Agent shall (upon written request of Zhone and the Borrower) promptly
      release its security interest in, and deliver to Zhone, a portion of the
      Substitute Collateral which is equal to such excess.

            (e)   Following the termination of any Security Document pursuant to
      the provisions of this Section 11.2 or in accordance with the terms of
      such Security

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                                                                              59

      Document, the Administrative Agent will (upon the request and at the
      expense of the Borrower) take such action as the Borrower reasonably shall
      request in order to evidence the termination of the Liens created pursuant
      to such Security Document and to return to the Borrower any Collateral
      which is then in the possession of the Administrative Agent.

            11.3  Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by mail, three days after being
deposited in the mails, postage prepaid, or (c) in the case of delivery by
facsimile transmission, when sent and receipt has been confirmed, addressed as
follows in the case of the Borrower and the Administrative Agent, and as set
forth in Schedule II in the case of the other parties hereto, or to such other
address as may be hereafter notified by the respective parties hereto:

            Prior to the Reorganization Date: Zhone Acquisition Corp.

                  c/o Zhone Technologies, Inc.
                  7677 Oakport Street - Suite 1040
                  Oakland, California 94621
                  Attention: Mory Ejabat
                  Fax: 510/777-7010

            After the Reorganization Date: Premisys Systems, LLC
                  c/o Zhone Technologies, Inc.
                  7677 Oakport Street - Suite 1040
                  Oakland, California 94621
                  Attention: Mory Ejabat
                  Fax: 510/777-7010

            The Administrative Agent: Credit Suisse First Boston
                  11 Madison Avenue
                  New York, New York 10010
                  Attention: Mark Callahan
                  Fax: 212/325-8304

provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.2, 3.2, 4.3, 4.4, 4.6 or 4.11(b) shall
not be effective until received.

            11.4  No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Credit Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.

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                                                                              60

            11.5  Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Credit Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans hereunder.

            11.6  Payment of Expenses and Taxes. The Borrower agrees (a) to pay
or reimburse the Administrative Agent for its reasonable out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution
of, and any amendment, supplement or modification to, this Agreement and the
other Credit Documents and any other documents prepared in connection herewith
or therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Administrative Agent, (b) to pay or
reimburse each Lender and the Administrative Agent for its reasonable costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the other Credit Documents and any such other
documents, including, without limitation, the fees and disbursements of counsel
(including the allocated fees and expenses of in-house counsel) to each Lender
and of counsel to the Administrative Agent, (c) to pay, indemnify, and hold each
Lender and the Administrative Agent harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the other Credit Documents and any such other
documents and (d) to pay, indemnify, and hold each Lender and the Administrative
Agent harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement, the
other Credit Documents, the documentation relating to the Transaction and the
other transactions contemplated hereby, or the use of the proceeds of the Loans
and other extensions of credit hereunder and any such other documents,
including, without limitation, any of the foregoing relating to the violation
of, noncompliance with or liability under, any Environmental Law applicable to
the operations of the Borrower, any of its Subsidiaries or any of the Properties
(all the foregoing in this clause (d), collectively, the "indemnified
liabilities"), provided that the Borrower shall have no obligation hereunder to
the Administrative Agent or any Lender with respect to indemnified liabilities
arising from the gross negligence or willful misconduct of the Administrative
Agent or any such Lender. The agreements in this subsection shall survive
repayment of the Loans and all other amounts payable hereunder.

            11.7  Successors and Assigns; Participations and Assignments. (a)
This Agreement shall be binding upon and inure to the benefit of the Borrower,
the Lenders, the Administrative Agent and their respective successors and
assigns, except that the Borrower may not assign or transfer any of its rights
or obligations under this Agreement (other than pursuant to the Asset Transfer)
without the prior written consent of each Lender.

            (b)   Any Lender may, in the ordinary course of its commercial
      banking business and in accordance with applicable law, at any time sell
      to one or more banks or other entities ("Participants") participating
      interests in any Loan owing to such Lender, any Commitment of such Lender
      or any other interest of such Lender hereunder and

<PAGE>

                                                                              61

      under the other Credit Documents. In the event of any such sale by a
      Lender of a participating interest to a Participant, such Lender's
      obligations under this Agreement to the other parties to this Agreement
      shall remain unchanged, such Lender shall remain solely responsible for
      the performance thereof, such Lender shall remain the holder of any such
      Loan for all purposes under this Agreement and the other Credit Documents,
      and the Borrower and the Administrative Agent shall continue to deal
      solely and directly with such Lender in connection with such Lender's
      rights and obligations under this Agreement and the other Credit
      Documents. No Lender shall be entitled to create in favor of any
      Participant, in the participation agreement pursuant to which such
      Participant's participating interest shall be created or otherwise, any
      right to vote on, consent to or approve any matter relating to this
      Agreement or any other Credit Document except for those specified in
      clause (ii) of the proviso to subsection 11.1 or, to the extent that such
      Lender would have the right to vote on any matter specified therein,
      clause (i) of such proviso. The Borrower agrees that if amounts
      outstanding under this Agreement are due or unpaid, or shall have been
      declared or shall have become due and payable upon the occurrence of an
      Event of Default, each Participant shall, to the maximum extent permitted
      by applicable law, be deemed to have the right of setoff in respect of its
      participating interest in amounts owing under this Agreement to the same
      extent as if the amount of its participating interest were owing directly
      to it as a Lender under this Agreement, provided that, in purchasing such
      participating interest, such Participant shall be deemed to have agreed to
      share with the Lenders the proceeds thereof as provided in subsection
      11.8(a) as fully as if it were a Lender hereunder. The Borrower also
      agrees that each Participant shall be entitled to the benefits of
      subsections 4.13, 4.14 and 4.15 with respect to its participation in the
      Commitments and the Loans outstanding from time to time as if it was a
      Lender; provided that, in the case of subsection 4.14, such Participant
      shall have complied with the requirements of said subsection and provided,
      further, that no Participant shall be entitled to receive any greater
      amount pursuant to any such subsection than the transferor Lender would
      have been entitled to receive in respect of the amount of the
      participation transferred by such transferor Lender to such Participant
      had no such transfer occurred.

            (c)   Any Lender may, in the ordinary course of its commercial
      banking business and in accordance with applicable law, at any time and
      from time to time assign to (i) any Lender or any affiliate thereof or
      (ii) with the consent of the Administrative Agent and the Borrower (which,
      in each case, shall not be unreasonably withheld), to any additional bank
      or financial institution (any assignee described in clause (i) or (ii), an
      "Assignee") all or any part of its rights and obligations under this
      Agreement and the other Credit Documents pursuant to an Assignment and
      Acceptance, substantially in the form of Exhibit J, executed by such
      Assignee, such assigning Lender (and, in the case of an Assignee that is
      not then a Lender or an affiliate thereof, by the Administrative Agent
      and, to the extent required pursuant to clause (ii) above, by the
      Borrower) and delivered to the Administrative Agent for its acceptance and
      recording in the Register, provided that, in the case of any such
      assignment to an additional bank or financial institution, the sum of the
      aggregate principal amount of the Loans and the aggregate unutilized
      amount of the Aggregate Acquisition Loan Commitment being assigned and, if
      such assignment is of less than all of the rights and obligations of the
      assigning Lender, the sum of the aggregate principal amount of the Loans
      and the aggregate unutilized amount of the Aggregate Acquisition Loan
      Commitment remaining with the assigning Lender are each

<PAGE>

                                                                              62

      not less than $2,500,000 (or such lesser amount as may be agreed to by the
      Borrower and the Administrative Agent). Upon such execution, delivery,
      acceptance and recording, from and after the effective date determined
      pursuant to such Assignment and Acceptance, (x) the Assignee thereunder
      shall be a party hereto and, to the extent provided in such Assignment and
      Acceptance, have the rights and obligations of a Lender hereunder with a
      Commitment as set forth therein, and (y) the assigning Lender thereunder
      shall, to the extent provided in such Assignment and Acceptance, be
      released from its obligations under this Agreement (and, in the case of an
      Assignment and Acceptance covering all or the remaining portion of an
      assigning Lender's rights and obligations under this Agreement, such
      assigning Lender shall cease to be a party hereto). Notwithstanding any
      provision of this paragraph (c) and paragraph (e) of this subsection, the
      consent of the Borrower shall not be required, and, unless requested by
      the Assignee and/or the assigning Lender, new Notes shall not be required
      to be executed and delivered by the Borrower, for any assignment which
      occurs at any time when any of the events described in Section 9(f) shall
      have occurred and be continuing.

            d)    The Administrative Agent, on behalf of the Borrower, shall
      maintain at the address of the Administrative Agent referred to in
      subsection 11.3 a copy of each Assignment and Acceptance delivered to it
      and a register (the "Register") for the recordation of the names and
      addresses of the Lenders and the Commitments of, and principal amounts of
      the Loans owing to, each Lender from time to time. The entries in the
      Register shall be conclusive, in the absence of manifest or demonstrable
      error, and the Borrower, the Administrative Agent and the Lenders may
      (and, in the case of any Loan or other obligation hereunder not evidenced
      by a Note, shall) treat each Person whose name is recorded in the Register
      as the owner of a Loan or other obligation hereunder as the owner thereof
      for all purposes of this Agreement and the other Credit Documents,
      notwithstanding any notice to the contrary. Any assignment of any Loan or
      other obligation hereunder not evidenced by a Note shall be effective only
      upon appropriate entries with respect thereto being made in the Register.

            e)    Upon its receipt of an Assignment and Acceptance executed by
      an assigning Lender and an Assignee (and, in the case of an Assignee that
      is not then a Lender or an affiliate thereof, by the Borrower and the
      Administrative Agent), together with payment to the Administrative Agent
      of a registration and processing fee of $3,500, the Administrative Agent
      shall (i) promptly accept such Assignment and Acceptance and (ii) on the
      effective date determined pursuant thereto record the information
      contained therein in the Register and give notice of such acceptance and
      recordation to the Lenders and the Borrower.

            f)    The Borrower authorizes each Lender to disclose to any
      Participant or Assignee (each, a "Transferee") and any prospective
      Transferee which agrees to comply with the provisions of subsection 11.16
      any and all financial information in such Lender's possession concerning
      the Borrower and its Affiliates which has been delivered to such Lender by
      or on behalf of the Borrower pursuant to this Agreement or which has been
      delivered to such Lender by or on behalf of the Borrower in connection
      with such Lender's credit evaluation of the Borrower and its Affiliates
      prior to becoming a party to this Agreement.

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                                                                              63

            (g)   For avoidance of doubt, the parties to this Agreement
      acknowledge that the provisions of this subsection concerning assignments
      of Loans and Notes relate only to absolute assignments and that such
      provisions do not prohibit assignments creating security interests,
      including, without limitation, any pledge or assignment by a Lender of any
      Loan or Note to any Federal Reserve Bank in accordance with applicable
      law.

            (h)   Funding by Special Purpose Funding Vehicles. Notwithstanding
anything to the contrary contained herein, any Lender (a "Granting Lender") may
grant to a special purpose funding vehicle ("SPC"), identified as such in
writing from time to time by the Granting Lender to the Administrative Agent and
the Borrower, the option to provide to the Borrower all or any part of any Loan
that such Granting Lender otherwise would be obligated to make to the Borrower
pursuant to this Agreement, provided that (i) nothing herein shall constitute a
commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise
such option to make a Loan or otherwise fails to provide all or any part
thereof, the Granting Lender shall be obligated to make such Loan pursuant to
the terms hereof. The making of a Loan by an SPC hereunder shall be deemed to
constitute a utilization of the Commitment of the Granting Lender to the same
extent, and as if, such Loan were made by the Granting Lender. Each party hereto
hereby agrees that no SPC shall be liable for any indemnity or similar payment
obligation under this Agreement (all liability for which shall remain with the
related Granting Lender). In furtherance of the foregoing, each party hereto
hereby agrees (which agreement shall survive the termination of this Agreement)
that, prior to the date that is one year and one day after the payment in full
of all outstanding commercial paper or other senior indebtedness of any SPC, it
will not institute against, or join any other person in instituting against,
such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or similar proceedings under the laws of the United States or any
State thereof. In addition, notwithstanding anything to the contrary contained
in this subsection 11.7, any SPC may (i) with notice to, but without the prior
written consent of, the Borrower or the Administrative Agent and without paying
any processing fee therefor, assign all or a portion of its interests in any
Loans to its Granting Lender or to any financial institutions (consented to by
the Borrower and the Administrative Agent) providing liquidity and/or credit
support to or for the account of such SPC to support the funding or maintenance
of Loans and (ii) disclose on a confidential basis any non-public information
relating to its Loans to any rating agency, commercial paper dealer or provider
of a surety, guarantee or credit or liquidity enhancement to such SPC. The
provisions of this subsection 11.7(h) may not be amended, supplemented or
otherwise modified without the prior written consent of the SPC.

            11.8  Adjustments; Set-off. (a) If any Lender (a "benefitted
Lender") shall at any time receive any payment of all or part of any of its
Loans owing to it under any Commitment, or interest thereon, pursuant to a
guarantee or otherwise, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off or otherwise), in a greater proportion
than any such payment to and collateral received by any other Lender, if any, in
respect of such other Lender's Loans owing to it under such Commitment or
interest thereon, such benefitted Lender shall purchase for cash from the other
Lender such portion of each such other Lender's similar Loans, or shall provide
such other Lender with the benefits of any such collateral, or the proceeds
thereof, as shall be necessary to cause such benefitted Lender to share the
excess payment or benefits of such collateral or proceeds ratably with each of
the Lenders which hold such Commitment; provided, however, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
benefitted Lender, such purchase shall be

<PAGE>

                                                                              64

rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. The Borrower agrees that each Lender so
purchasing a portion of another Lender's Loans may exercise all rights of
payment (including, without limitation, rights of set-off) with respect to such
portion as fully as if such purchasing Lender were the direct holder of such
portion.

            (b)   In addition to any rights and remedies of the Lenders provided
by law, each Lender shall have the right, without prior notice to the Borrower,
any such notice being expressly waived by the Borrower to the extent permitted
by applicable law, upon any amount becoming due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise) to set-
off and appropriate and apply against such amount any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Borrower. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such set-off and application
made by such Lender, provided that the failure to give such notice shall not
affect the validity of such set-off and application.

            11.9  Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.

            11.10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

            11.11 Integration. This Agreement and the other Credit Documents
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to subject matter hereof not expressly set forth or referred to
herein or in the other Credit Documents.

            11.12 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

            11.13 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:

            (a)   submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Credit Documents to which it
is a party, or for recognition and enforcement of any judgement in respect
thereof, to the non-exclusive

<PAGE>

                                                                              65

      general jurisdiction of the Courts of the State of New York, the courts of
      the United States of America for the Southern District of New York, and
      appellate courts from any thereof;

            (b)   consents that any such action or proceeding may be brought in
      such courts and waives any objection that it may now or hereafter have to
      the venue of any such action or proceeding in any such court or that such
      action or proceeding was brought in an inconvenient court and agrees not
      to plead or claim the same;

            (c)   agrees that service of process in any such action or
      proceeding may be effected by mailing a copy thereof by registered or
      certified mail (or any substantially similar form of mail), postage
      prepaid, to the Borrower at its address set forth in subsection 11.3 or at
      such other address of which the Administrative Agent shall have been
      notified pursuant thereto;

            (d)   agrees that nothing herein shall affect the right to effect
      service of process in any other manner permitted by law or shall limit the
      right to sue in any other jurisdiction; and

            (e)   waives, to the maximum extent not prohibited by law, any right
      it may have to claim or recover in any legal action or proceeding referred
      to in this subsection any special, exemplary, punitive or consequential
      damages.

            11.14 Acknowledgments. The Borrower hereby acknowledges that:

            (a)   it has been advised by counsel in the negotiation, execution
      and delivery of this Agreement and the other Credit Documents;

            (b)   neither the Administrative Agent nor any Lender has any
      fiduciary relationship with or duty to the Borrower arising out of or in
      connection with this Agreement or any of the other Credit Documents, and
      the relationship between Administrative Agent and Lenders, on one hand,
      and the Borrower, on the other hand, in connection herewith or therewith
      is solely that of debtor and creditor; and

            (c)   no joint venture is created hereby or by the other Credit
      Documents or otherwise exists by virtue of the transactions contemplated
      hereby among the Lenders or among the Borrower and the Lenders.

            11.15 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

            11.16 Confidentiality. Each of the Administrative Agent and the
Lenders, on behalf of itself and each of its affiliates, agents, directors,
officers and employees, agrees to keep confidential all non-public information
provided to it by any Credit Party pursuant to this Agreement that is clearly
designated by such Credit Party in writing as "confidential"; provided

<PAGE>

                                                                              66

that nothing herein shall prevent the Administrative Agent or any Lender from
disclosing any such information (a) to the Administrative Agent, any other
Lender or any affiliate, agent, director, officer or employee of any Lender, (b)
to any Transferee or prospective Transferee which agrees to comply with the
provisions of this Section, (c) any of its employees, directors, agents,
attorneys, accountants and other professional advisors, (d) upon the request or
demand of any Governmental Authority having jurisdiction over it, (e) in
response to any order of any court or other Governmental Authority or as may
otherwise be required pursuant to any Requirement of Law, (f) if requested or
required to do so in connection with any litigation or similar proceeding, (g)
which has been publicly disclosed other than in breach of this Section 11.16,
(h) to the National Association of Insurance Commissioners or any similar
organization or any nationally recognized rating agency that requires access to
information about a Lender's investment portfolio in connection with ratings
issued with respect to such Lender or (i) in connection with the exercise of any
right or remedy hereunder or under any other Credit Document.

<PAGE>

                                                                              67

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.

                            ZHONE ACQUISITION CORP. (to be merged
                            with and into Premisys Communications, Inc. and
                            then to be succeeded by Premisys Systems, LLC)

                            By:   ____________________________________________
                                  Title:

                            CREDIT SUISSE FIRST BOSTON, as
                            Administrative Agent

                            By:   /s/ Robert Hetu
                                  --------------------------------------------
                                  Title: Robert Hetu, Vice President

                            By:   /s/ Vitaly G. Butenko
                                  --------------------------------------------
                                  Title: Vitaly G. Butenko, Asst. Vice President

                            CREDIT SUISSE FIRST BOSTON, as a Term
                            Loan Lender and as an Acquisition Lender

                            By:   /s/ Robert Hetu
                                  --------------------------------------------
                                  Title: Robert Hetu, Vice President

                            By:   /s/ Vitaly G. Butenko
                                  --------------------------------------------
                                  Title: Vitaly G. Butenko, Asst. Vice President

<PAGE>

                                                                              68

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.

                              ZHONE ACQUISITION CORP. (to be merged with and
                              into Premisys Communications, Inc. and then to be
                              succeeded by Premisys Systems, LLC)

                              By:   /s/ Mory Ejabat
                                    --------------------------------------------
                              Title:

                              CREDIT SUISSE FIRST BOSTON, as
                              Administrative Agent

                              By:   ____________________________________________
                                    Title:

                              By:   ____________________________________________
                                    Title:

                              CREDIT SUISSE FIRST BOSTON, as a Term Loan Lender
                              and as an Acquisition Lender

                              By:   ____________________________________________
                                    Title:

                              By:   ____________________________________________
                                    Title:

<PAGE>

                                                                              69

                                                                      SCHEDULE I

                              LENDERS; COMMITMENTS
================================================================================
              Lender                   Term Loan             Acquisition Loan
                                      Commitment                Commitment
--------------------------------                            --------------------
Credit Suisse First Boston          $   50,000,000.00       $      75,000,000.00
                                                            --------------------
                                    $   50,000,000.00       $      75,000,000.00

===============================================================================

<PAGE>

                                                                              70

                                                                     SCHEDULE II

                              ADDRESSES FOR NOTICES
===============================================================================
          CREDIT SUISSE FIRST BOSTON

Credit Matters:                           Administrative Matters:

    Eleven Madison Avenue                    Eleven Madison Avenue

    New York, New York 10010                 New York, New York  10010

    Attention: Robert Hetu                   Attention:

    Telephone: 212/325-4542                  Telephone:

    Facsimile: 212/325-8309                  Facsimile:

===============================================================================

<PAGE>

                                                                              71

                                                                    SCHEDULE 5.9

                              INTELLECTUAL PROPERTY

In March of 1999, Premisys Communications, Inc. ("Premisys") received notice
from the Lemelson Medical, Education & Research Foundation Limited Partnership
("Lemelson Foundation") alleging that Premisys was infringing certain Lemelson
Foundation owned and issued United States Patents (as well as claims of certain
Lemelson Foundation owned and pending US Patent applications). Premisys and the
Lemelson Foundation have entered into discussions concerning the settlement of
the above allegations, such settlement to be in the form of a proposed license
agreement by which the Lemelson Foundation would grant to the Company fully-paid
up licenses (collectively, the "Lemelson License") with respect to the allegedly
infringed-upon patents. The currently proposed, fully-paid up, aggregate license
fee for the Lemelson License is approximately $47,500, calculated according to
the following formula: a royalty rate of 0.00005, multiplied by the sum of the
US component of both (i) the Company's actual Company-wide revenues for the past
five years and (ii) the Company's projected revenues over the next five years.
The proposed license agreement, a draft of which has been made available to
Zhone Technologies, Inc., has not yet been executed; however, the substantive
terms of the proposed license agreement have been agreed to "in principle" by
the parties. As currently drafted, the proposed license agreement is assignable
provided notice is given to the Lemelson Foundation. The Company does not know
how this "agreement in principle," if not executed in writing prior to the
execution of this Agreement, might be affected by the proposed acquisition,
including whether the "agreement in principle" would be rescinded or whether the
royalty amount would be recalculated.

<PAGE>

                                                                              72

                                                                    SCHEDULE 8.2

                              EXISTING INDEBTEDNESS

The following equipment financing leases with respect to Premisys
Communications, Inc. provided by Premisys Communications, Inc.:

<TABLE>
<CAPTION>
===========================================================================================================================
       Company                           Equipment Leased          Lease Start       Lease End Date        Monthly
                                                                      Date                                 Payment
<S>                                 <C>                              <C>                 <C>             <C>
AT&T Credit Corporation              Lucent Definity GS8 PBX         April 1998          March 2001      $ 1,014.88

AT&T Credit Corporation              PBX voice mail capacity         July 1998           June 2001       $ 1,144.96

AT&T Credit Corporation                Definity PBX add-on           June 1998           May 2001        $   116.09

AT&T Credit Corporation                Definity PBX add-on           June 1998           May 2001        $   638.42

AT&T Credit Corporation             T-1 cards for PacBell trunk      May 1999            August 2001     $ 1,168.53

AT&T Credit Corporation                Definity PBX add-on           July 19999          August 2001     $   269.94

Eastman Kodak Credit Corp.             Kodak Ektaprint copies        September 1996      August 2000     $   388.00

Lucent Technologies Product             Phone system add-on          May 1999            December 2003   $    80.15
  Finance
===========================================================================================================================
</TABLE>

<PAGE>

                                                                              73

                                                                    SCHEDULE 8.3

                                 EXISTING LIENS

None, other than those disclosed by Premisys Communications, Inc. with respect
to liens on the equipment described in Schedule 8.2 securing the related finance
leases.

<PAGE>

                                                                              74

                                                                    SCHEDULE 8.4

                               EXISTING GUARANTEES

Premisys Communications, Inc. guarantees the debt and other obligations of its
overseas subsidiaries Premisys Communications (Canada) Inc. and Premisys
Communications Ltd. (U.K.).

<PAGE>

                                                                              75

                                                                   SCHEDULE 8.17

                      SUBSIDIARIES OF PREMISYS SYSTEMS, LLC
===============================================================================
Name of Subsidiary                                    Interest Owned
                                                  by

                                                      Premisys
                                                      Systems, LLC

Premisys Communications (Canada), Inc.*               100%

Premisys Communications Ltd. (U.K.)                   100%

Premisys Communications Pte. Ltd. (Singapore)         approx. 100%

===============================================================================
* Prior to the Reorganization Date, the Borrower may elect to structure the
Asset Transfer in a manner which causes Premisys Communications (Canada), Inc.
not to be a Subsidiary of Premisys Systems, LLC, in which event Premisys
Communications (Canada), Inc. shall be deemed to be deleted from this Schedule
8.17.

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