TeraXion Secures $10 US Million in a Second Round of Financing

Quebec City, March 24 2003 - TeraXion, a technology leader in the development of advanced optical components for high-speed optical networks, announced today it has secured an additional $10 million (USD) in an ongoing second round of financing. SGF Tech inc. lead this round of financing, joined by existing shareholders of TeraXion, such as Business Development Bank of Canada (BDC) and Innovatech Quebec, as well as new investor, Entrepia Inc. The money raised in this round, the formal close of which will be announced at a later date, will help TeraXion to launch its next generation products and sustain sales and marketing efforts worldwide.

"This important investment from SGF Tech in TeraXion confirms our strategy to continue supporting and strengthening the most innovative Quebec-based companies of the photonics sector, such that they be positioned to stand out once the telecommunications market returns to more normal conditions", said Pierre Laflamme, President and Chief Operating Officer of SGF Tech Inc. "This young company has managed to build an impressive customer base, and we are convinced that, with its broad offering of high performance products and outstanding design and manufacturing capabilities, TeraXion is uniquely positioned to become a worldwide leader in its market segment", continued Mr. Laflamme.

"We are pleased to join the TeraXion investment team, as we recognize in the company a sound business plan and an exceptionally focused management team," said Gene Kawaratani, President and CEO of Entrepia, Inc. "That they have now generated revenues for several months consecutively in a very difficult environment reflects well on the value proposition of their product line and potential for profitably expanding into other areas of optical networking."

"We are pleased with the evolution of TeraXion given the challenging market conditions over the last two years," said Charles Cazabon, VP, Venture Capital at BDC. "We are confident that TeraXion has the potential to become a real success story in its industry." "This financing confirms TeraXion's leading position in the high-performance optical components market, and makes it an influential player in Quebec's Optics City. Innovatech Quebec is more than pleased to support a company with such a high level of innovation that is gaining strong market acceptance", said Francine Laurent, CEO of Innovatech Quebec.

"Our investors recognize that we have been able to generate revenues, in a very difficult climate, from a broad customer base by virtue of a diverse product portfolio," said Alain Chandonnet, CEO of TeraXion. "This vote of confidence should be reassuring to our customers as we prepare to launch new tunable components and functional modules for the next generation of optical networking systems." "The excellent cooperation and agreement between our existing investors and our new ones helped make this round a reality," said CFO Richard Kirouac. "This round is a testimony to the strength of our business plan, our team and our ability to withstand today's financing challenges."

TeraXion will demonstrate their latest product innovations at the OFC Conference in Atlanta, March 25 - 27, at the Georgia World Congress Center (booth 6616). The new products include those acquired in the Phaethon Communications intellectual property rights transaction in December 2002.

 

About SGF Tech Inc.

SGF Tech is a subsidiary of Societe generale de financement du Quebec. The mission of Societe generale de financement du Quebec is to carry out economic development projects in cooperation with various partners and under normal profitability conditions. Since its restructuring in 1998, SGF has generated 10,6 billion in investments and created 56,000 direct and indirect jobs. As of December 31, 2001, SGF's consolidated assets exceeded $3 billion. SGF includes 65 international partners operating various establishments in Quebec. (www.sgfqc.com)

About Business Development Bank of Canada

BDC Venture Capital is a major venture capital investor in Canada, active at every stage of a company's development cycle, from start-up through expansion. Its focus is on technology-based businesses with high growth potential that are positioned to become dominant players in their markets. BDC Venture Capital has been involved in venture capital since 1975 and has invested in more than 400 different companies. It currently manages over $400 million in venture capital assets and almost 100% of its portfolio is invested in the areas of life sciences, telecommunications, information technology, and advanced technologies. (www.bdc.ca)

About Entrepia

Entrepia has been offering venture capital financing from its GlobeLinQ International Fund I (Fund I) for private, technology-based, expansion-stage companies that stand to benefit from market or technology affiliation with Japan. Recently closing its 2nd fund, Entrepia operates out of offices in New York, San Jose, Montreal and Tokyo. It actively helps generate international revenue for its portfolio companies by leveraging its access, hands-on approach, on-the-ground presence, and relationships in Asia. Increasingly recognized as the "Go-to-Japan" venture capital, Entrepia assists its portfolio companies to become more competitive and successful through incremental top-line growth. (www.entrepia.com)

About Innovatech Quebec

Innovatech Quebec is a Quebec Government venture capital corporation specializing in pre-start up and start up financial assistance to technology companies. With a $150 million fund, Innovatech's investment portfolio includes over 100 companies and projects in the following fields: information technology and telecommunications, optics and photonics, biotechnology and industrial technology. (www.innovatechquebec.com)

About TeraXion

TeraXion designs and manufactures high performance grating based optical components and modules for high-performance networks. With the design expertise of its R&D team and its internal capabilities in leading-edge holographic phase masks, TeraXion provides optical building blocks for today's high-speed and tomorrow's all-optical network transmission equipment. In only two years since its founding, TeraXion has secured more than fifty customers by offering a complete line of FBG filters for amplifiers, add-drop multiplexers, and dispersion compensators. (www.teraxion.com)

For more information, please contact: Richard Kirouac Chief Financial Officer TeraXion Inc. 418-658-9500 rkirouac@teraxion.com investors@teraxion.com