TeraConnect Enters Optical Component Market

- Firm Spins Out of Sanders - Raises $40M From Goldman Sachs, Kodiak Venture Partners and Spectrum Equity Investors

Nashua, NH. TeraConnect Inc., an emerging optical component company, announced today that it has completed its spinout from Sanders, a Lockheed Martin Company, and raised $40 million from Goldman Sachs, Kodiak Venture Partners and Spectrum Equity Investors. The company will use the proceeds to accelerate the development of its high performance optical and optoelectronic devices.

Based on core technology developed at Sanders, TeraConnect develops optical components for the high performance router, server and telecommunications infrastructure markets. TeraConnect devices eliminate the bottlenecks that currently limit data transmission between digital platforms, enabling greater throughput in advanced communications and computing equipment.

"TeraConnect will bring breakthrough technology to the communications and computing markets in a way that will change the dynamics of high end router and server design," said Dave Furneaux, Managing General Partner at Kodiak Venture Partners and chairman of TeraConnect s Board of Directors. "We re very excited about the opportunity ahead."

"Sanders has a history of technology leadership in defense applications," said Phil Cooper, Managing Director of Goldman Sachs Equity Investment Group. "We are now able to leverage that technology into key products for the commercial high-speed data communications market."

Walter P. Havenstein, President of Sanders, said "TeraConnect offers us the opportunity to focus on our primary defense business, while fully exploiting the commercial potential of our technology. This is a key aspect of Sanders strategic focus."

"We believe that TeraConnect has the right combination of technology and a strong team with a clear vision," said Bill Collatos, Managing Partner of Spectrum Equity Investors. "We believe that the company will quickly establish a leadership position in the market."

About TeraConnect

Based in Nashua, New Hampshire, TeraConnect is an emerging provider of optical components for the high speed router, server and telecommunications infrastructure markets.

About Goldman Sachs

Goldman Sachs is a leading global investment banking and securities firm, providing a full range of investing, advisory and financing services worldwide to a substantial and diversified client base, which includes corporations, financial institutions, governments and individuals.

About Kodiak Venture Partners

Kodiak Venture Partners is a hands-on, back-to-basics, early stage venture investment firm led by seasoned entrepreneurs who accelerate ventures and build market leaders. Based in the Boston area, Kodiak concentrates on fundamental, technology-based new venture opportunities in the Communication and Internet Infrastructure markets. Members of the Kodiak team have entrepreneurial and operating experience at leading companies such as Aironet, Arrowpoint, Bay Networks, Chipcom, Chrysalis, Conexant Systems, Extreme Packet Devices, Geotel, IBM, Lotus and Nortel. We leverage our own expertise and that of our extensive limited partner network to add value to all of our companies. Kodiak s portfolio is concentrated in Eastern North America and includes BTI Photonics, Chrysalis-ITS, Egenera, Extreme Packet Devices, Paceline Systems, Philsar Semiconductor, Sedona Networks, Skystone Systems, Sybridge Technologies, TeraConnect, Trebia Networks, Tropic Networks, TruExchange, and Watchfire. For additional information, visit us at www.kodiakvp.com.

About Spectrum Equity Investors

Spectrum Equity Investors (www.spectrumequity.com) is a leading communications venture capital firm focused on investing both financial and intellectual capital in companies which power the Networked Economy. The firm s limited partners include prominent university endowments, foundations, pension funds, investment banks and corporations. Founded in 1993, Spectrum s investment professionals offer more than 100 years of combined investment experience and currently manage nearly $3 billion in four equity funds. Companies in Spectrum s portfolio include Adero, Inc.; Geneva Technologies Ltd.; ITXC Corp. (Nasdaq: ITXC - news); Jazztel, plc. (Nasdaq: JAZZ - news); MimEcom Corporation; Netscreen Technologies; Qeyton Systems, AB; and Tut Systems, Inc. (Nasdaq: TUTS - news). With offices in Menlo Park, Calif., Boston and London, Spectrum serves investors and portfolio companies around the world.

About Sanders, A Lockheed Martin Company

Sanders is an operating company of the Lockheed Martin Corporation, and a major producer of aircraft self-protection systems and tactical surveillance and intelligence systems for all branches of the armed forces. Other major business areas include microwave, mission and space electronics, infrared imaging and automated mission planning systems.

Contact: TeraConnect, Inc. Glenn Thoren Tel: (603) 885-2988 or Kodiak Venture Partners C.C. Cave Tel: (978) 369-3687 cc@kodiakvp.com or Sanders, A Lockheed Martin Company Marianne Murphy Tel: (603) 885-2812 or Spectrum Equity Investors Bill Collatos Tel: (617) 464-4600