Arcturus Capital Forms Fund to Focus On Fundamental and Disruptive Technologies; Venture Firm Has Unprecedented Access To World's Top R&D Facilities.

Business Editors/Technology Writers

LOS ANGELES--(BUSINESS WIRE)--Nov. 6, 2001

Arcturus Capital today announced the launch of the Arcturus Capital Core Technology Fund to capitalize on fundamental and disruptive technologies developed in collaboration with HRL Laboratories, The Jet Propulsion Laboratory (JPL) and other world-class research labs.

The Los Angeles based venture capital firm unveiled its partnership with technology development company X-Laboratories, through which Arcturus will have the exclusive opportunity to finance operating companies addressing large commercial markets and based on technologies developed by top scientists from HRL Laboratories, JPL, and other state-of-the-art research facilities.

"HRL is pleased to work with Arcturus Capital as a major partner in X-Labs," said Art Chester, president and general manager of HRL Laboratories. "Arcturus' team and vision provide a strong complement to the technology commercialization model."

Arcturus Capital's new fund is engineered to take advantage of Southern California's vast R&D infrastructure of corporate and government laboratories and university research centers, such as Caltech, UCLA and USC. Southern California hosts five times the amount of technically trained research talent as Northern California and yet has only 20% of the amount of venture capital under management.

Disruptive Technologies

"These days it seems that every venture capital fund is touting the value of disruptive technology, but one look at most portfolios and current investment slates dismisses that notion," said Frank Tota, Arcturus founder and general partner. "These fundamental technologies are not easy to come by and generally are created in advanced research laboratories like the ones with which we have partnered. HRL alone is responsible for creating disruptive technologies such as the world's first laser, the self-aligned semiconductor gate, the liquid crystal display, and the world's fastest microchip, to name just a few."

Arcturus Capital's relationship with applied research labs affords it the opportunity to evaluate potentially disruptive technologies in a wide range of disciplines. According to Mr. Tota, the fund expects to see three to five operating companies spun out of the labs each year.

Arcturus will evaluate the resulting investment opportunities based on defensible and disruptive technology, pervasive market opportunities, and sound and scalable business models. The X-Laboratories technology development process is designed to yield just such companies.

"We are now uniquely positioned to commercialize a pipeline of technologies that have enormous market potential," explained Gerard Casale, CEO of X-Laboratories. "Our efforts over the past year have focused the work of top scientists to address real commercial and industrial market opportunities. Despite the current economic environment, we continue to be approached by industry leaders with the view that our technology offerings present large-market opportunities."

Management Team Expands

Independent venture fund Rappaport Venture Partners also announced today that they have merged with Arcturus Capital. Rappaport Venture Partners is managed by Neil Rappaport, general partner and formerly part of the founding management teams at both AMCC (Nasdaq:AMCC) and Vitesse Semiconductor (Nasdaq:VTSS), and Howard Rappaport, managing partner and formerly founder and CEO of Professional Orthopedic and Sports Care, which was acquired in 1998 by Nova Care (Nasdaq:NOVC). As a result of the merger, both Neil Rappaport and Howard Rappaport have joined Arcturus Capital as partners.

"We found the Arcturus Capital proposition extremely compelling," said Howard Rappaport. "We felt that Arcturus was the perfect environment for us to continue our successful venture investing and would, in turn, benefit from our hands-on venture and technology expertise and history of co-investing with top firms such as Cisco Systems, NEA and US Venture Partners."

Arcturus Capital's newest fund was organized by Frank Tota and Stephen Watkins. Prior to founding Arcturus Capital and managing its first fund, Mr. Tota, a Harvard educated mathematician, was the co-founder of a Wall Street hedge fund. Mr. Watkins was formerly the founder and CEO of The Start Group, a venture-consulting firm specialized in advanced technologies transferred out of Caltech and other top universities. Both Mr. Tota and Mr. Watkins serve as general partners.

Donald Hall joined the Arcturus team as a general partner in September. Prior to joining the firm, Mr. Hall spent eighteen years at Zurich Scudder Investments, where he was a Managing Director. At Zurich Scudder, Mr. Hall managed institutional and mutual fund equity portfolios and served as Chairman of the firm's Asset Allocation Group and Director of the Los Angeles office.

"The unique deal flow from world class research labs, the underserved Southern California venture market, and the dramatically improved valuations over the last several quarters combine to present an extraordinary opportunity for high returns--even by the standards of early stage venture, the highest performing asset class over the last 20 years," explained Mr. Hall. "This return opportunity is very exciting to me."

About Arcturus Capital

Founded in 2000, Arcturus Capital is an early-stage venture firm that specializes in the development and commercialization of new and disruptive technologies from applied research and state-of-the-art laboratories. The Los Angeles based firm has unprecedented access to world-class research scientists at HRL Laboratories and JPL, through its partner X-Laboratories. Arcturus Capital manages two prior funds and is governed by its four general partners. For more information, contact the firm at 213/473-1800 or on the web at www.arcturusvc.com.

About HRL Laboratories

HRL Laboratories, LLC is one of the top research and development labs in the world. Jointly owned by Boeing (NYSE:BA), General Motors (NYSE:GM) and Raytheon (NYSE:RTN), the lab provides research and development services for its owners and for other parties. HRL has been instrumental in the development of breakthrough technologies such as the atomic clock in the 1950's, the construction of the world's first laser in 1960, ion propulsion for spacecraft, MOSFET (a transistor used as the primary device used in today's high-speed semiconductor devices), liquid crystals and other core technologies. More on HRL can be found at http://www.hrl.com.

About X-Laboratories

Malibu, Calif.-based X-Laboratories is the first true technology developer where venture capitalists and scientists work hand-in-hand identifying, developing and deploying large market technologies of the future. X-Laboratories is impacting the R&D cycle by being a vehicle for research labs - like R&D powerhouse HRL Laboratories - that want to address new market opportunities. Drawing from a diverse pool of researchers and marketing, business, and legal professionals, the company is changing the way technology is brought to market. Further information can be found at http://www.xlaboratories.com/.