Verso Acquires iMarc Product Line from Zhone Technologies.

Acquisition Expands Access Offerings Portfolio and Adds Tier-1 Carrier Customers

ATLANTA -- Verso Technologies, Inc. (Nasdaq: VRSO), a global provider of next generation network solutions, announced today that it acquired the iMarc product line from Paradyne Networks, Inc., a subsidiary of Zhone Technologies, Inc., on December 29, 2006.

The iMarc product line is closely aligned with the Verso portfolio and distribution model, which Verso recently expanded as a result of the June 2006 acquisition of the assets of Verilink Corporation. In particular, the iMarc product line strengthens Verso's access offerings, substantially expands its Tier-1 customer base, and is complementary to the Verso Verilink WanSuite[R] product line. Prior to the acquisition of the iMarc product line, Verso served as a reseller of Zhone products and therefore has strong existing knowledge of the products and market, and long-term relationships with relevant senior management.

The iMarc product line is a family of asynchronous transfer mode (ATM), IP service units, and branch monitors. The product line provides intelligent demarcation between carrier and enterprise networks, allowing for easier management. Specifically, it offers service level management products and services, end-to-end network monitoring, and the greatest degree of application and service monitoring in the industry. This provides carriers the critical ability to monitor and manage compliance of Service Level Agreements (SLAs) to enterprise customers, which ensures that Quality of Service (QoS) is delivered. As a result, iMarc solutions enable new services to be deployed faster, existing services to remain reliable, and inactive services to be restored more quickly.

"As carriers began transitioning bandwidth to packet-based transmission, they realized they no longer retained the same monitoring and delivery control mechanisms to deliver the level of SLA capabilities that their enterprise customers enjoy today. The new version of the iMarc technology, which is expected to be released in the second quarter of 2007, will fill this void in the carrier market. A significant portion of the currently installed iMarc product market base that provides these capabilities for traditional telephony can be upgraded to the new firmware for a smooth migration to a fully converged packet-based solution," said Steven A. Odom, executive chairman, Verso Technologies. "Additionally, with this acquisition, Verso can now count among its customers the two largest carrier customers in the world, one of whom we believe will be commencing a major VoIP initiative in 2007 for which the iMarc product is well suited. The iMarc product line will also give us the opportunity to re-engage other major Verso carrier customers who can offer the iMarc products to their enterprise customers."

"Verso is well equipped to capitalize on this acquisition, with a complementary distribution model and product portfolio. With the combined iMarc and Verso Verilink WANSuite portfolio, Verso has one of the strongest offerings in the access space. We plan to leverage our Huntsville, Alabama and Montreal facilities, consolidating product engineering and sales and reducing costs. Overall, this is a synergistic and strategic move for Verso that offers strong cash flow and opportunities for additional revenue expansion," said Jim Nevelle, senior vice president of operations, Verso Technologies.

In payment of the purchase price for this acquisition, Verso paid $1.0 million at closing on December 29, 2006 and will pay an additional $1.5 million on January 19, 2007 (at which time Zhone will transfer to Verso the intellectual property associated with the iMarc product line which is being licensed to Verso pending the January payment). In addition, Zhone will provide contract manufacturing services to Verso for a period of up to six months following the closing and, upon the conclusion of those services, Verso will then purchase from Zhone the inventory relating to the iMarc product line for an additional purchase price equal to the value of such inventory. Verso utilized borrowing availability under its $14.0 million credit facility with its primary lender to fund the $1.0 million paid at closing.

"We are pleased that Verso has chosen to include iMarc products in its family of telecommunications products," said Mory Ejabat, chairman and chief executive officer of Zhone. "With this transaction, our customers benefit from continued sales of these products as well as from Verso's experience in servicing these types of products."

About Verso Technologies

Verso is a global provider of next generation network solutions offering a core-to-edge product portfolio primarily for telecommunications service providers. The company's products enable its customers to secure and optimize network bandwidth, generate additional revenue, and reduce costs. Verso's applications and services are cost-effective, deploy quickly, and provide a superior return on investment. For more information, contact Verso at www.verso.com or call 678.589.3500.

About Zhone Technologies

Zhone Technologies, Inc. (Nasdaq: ZHNE) is a global provider of advanced communications equipment to more than 600 operators in both emerging and established markets. Zhone's market-leading Broadband Loop Carrier equipment enables operators to rapidly deploy revenue-generating access services using their existing infrastructure, while providing a migration path to a cost-efficient, all-IP access network. The company's products address a broad range of applications including residential and business broadband, VoIP, IPTV, and Ethernet over both

copper and fiber access lines. Zhone's advanced networking solutions include the Single Line Multi-Service architecture (SLMS)[TM], Multi-Access Line Concentrator (MALC)[TM], Raptor[TM] ATM/IP DSLAMs, Zhone Residential Gateways (ZRG)[TM], GigaMux[TM] Optical Transport Systems and Zhone Management System (ZMS)[TM]. For more information, please visit www.zhone.com.