Chiaro Networks Closes $100 Million in Third Round of Financing; Optical Networking Firm Also Races Past Staffing Milestone, Expands Into New Facilities.

Business/Technology Editors

RICHARDSON, Texas--(BUSINESS WIRE)--Sept. 25, 2000

Chiaro Networks, a pioneering optical networking company that is developing solutions for the most challenging bottlenecks in carriers' optical backbones, today announced that it has completed its third round of financing for more than $100 million.

Company officials believe this places Chiaro Networks in an extremely elite group of companies in this sector that have raised more than $100 million in a financing round. To date, the company has raised a total of $130 million.

Polaris Venture Capital is the lead investor in the latest round of financing. Koor Corporate Venture Capital is the co-lead. "There is a tremendous need in the market for optical networking equipment that will scale even faster than before," said Aaron Mankovski, managing director at Polaris Venture Capital. "So far, other solutions have not performed as well as the market requires. We believe Chiaro is the first company to have all the components in place -- management, technology, and market demand -- to deliver the performance and scalability that is critical to the industry."

In addition to Polaris and Koor, new investors include Charter Growth Capital, Mustang Ventures, Robertson Stephens' Bayview 2000 Fund, and Vitesse Venture Fund. Existing investors who also participated in this round included CenterPoint Ventures, Crown Advisors, Intel Capital, InterWest Partners, Rho Management, Sevin Rosen, and Star Ventures.

"Our investor base is very diverse, and we are extremely excited with the positive response from the financial community," said Chiaro President and Chief Executive Officer Ken Lewis. "We believe our technology will bring a new class of product to the optical routing industry that will have a dramatic impact on the way networks are built in the future."

Further evidence of Chiaro's accomplishments can be seen in the company's recent headquarters expansion from a 20,000-square-foot building to a 60,000-square-foot campus. In December 1999, the company moved its headquarters from Jerusalem to its present space in the North Texas Telecom Corridor(R), but quickly outgrew that location. Chiaro is now expanding into an adjacent building to allow more space for its growth. In Jerusalem, Chiaro recently expanded into a 30,000-square-foot campus including a 5,000-square-foot clean room and fabrication facility.

That growth is highlighted by Chiaro's recent achievement of a personnel milestone. Globally, Chiaro has exceeded 150 employees, with over 100 of these employees in the United States. "People are the most precious resource in our market sector," said Lewis. "Chiaro Networks has attracted exceptional talent to our team, and done so at a remarkably quick rate." Lewis noted that the company has grown from just 20 people prior to December 1999, all of whom were in Chiaro's Israel location.

About Chiaro Networks

Chiaro Networks Ltd., is headquartered in the Telecom Corridor(R) of Richardson, Texas with design centers in Richardson and Jerusalem, Israel. The company designs and manufactures breakthrough data switching solutions to remove the most challenging bottlenecks from carriers' optical backbones. This completely new class of product will allow carriers to deploy reliable data switching solutions with unprecedented scalability. With investments from high-profile venture capitalists and Intel Capital, Chiaro plans to expand its staff in Richardson and Israel to nearly 175 by the end of the year. For more information, visit www.chiaro.com.

About Polaris Venture Capital

Polaris Venture Capital is a leading venture capital and private-equity management company with over $700 million under management investing in Israel-related companies. Polaris possesses vast experience in venture capital investments and high-technology management. Primarily investing in the dynamic high-growth sectors of communications, Internet, software, medical devices and biotechnology, Polaris specializes in creating long-term partnerships with seed to late-stage portfolio companies. The Polaris team works closely with first-rate entrepreneurs and business partners to develop the most appropriate growth strategy for each portfolio company. With offices in Silicon Valley and Israel, as well as a worldwide network of business relationships, Polaris is uniquely positioned to identify promising opportunities for astute investors and portfolio companies alike.

About Charter Growth Capital

Charter Growth Capital invests in expansion stage companies in the communications, electronic commerce and business software markets. Founded in 1997, Charter Growth Capital has received more than $550 million in commitments over two funds. Charter Growth Capital's portfolio investments include Active Software, Agile Software, Alteon WebSystems, BroadBase Software, CommerceOne, and Copper Mountain Networks. For more information about Charter Growth Capital, please visit their Web site at www.chartergrowth.com.

About Koor Corporate Venture Capital

Koor Corporate Venture Capital (Koor CVC) is Koor Industries' corporate venture capital arm. Koor Industries, through Koor CVC is one of the single largest investors in Israeli technology with nearly $250 million of its own balance sheet committed to investing in Israel's early stage high growth companies. Koor CVC provides a unique environment for growth by making access to Koor's corporate telecom and technology assets available to entrepreneurs. Koor CVC invests in the areas of telecommunication, software and information technology, Internet and mobile Internet infrastructure and biotechnology.

Koor Industries is Israel's No. 1 rated investment holding vehicle, with substantial stakes in Israel's top export companies. Koor Industries invests actively in telecommunications through its holdings in ECI Telecom, Telrad Networks and Nortel Networks Israel, and owns controlling stakes in Israel's main Defense Electronics companies through the Elisra - Tadiran Group, and in Agrochemicals through MA Industries. The Koor group of companies is home to more than $2 billion in high-tech sales. Koor Industries is traded on the Tel Aviv and New York Stock Exchanges (NYSE:KOR).

About Mustang Ventures

Mustang Ventures is responsible for the corporate venture activities of the Siemens Information and Communication Networking groups. With offices located in Santa Clara, California, and Munich, Germany, Mustang Ventures focuses on strategic investments in innovative information and communications companies in North America and Europe. Mustang Ventures has currently built up a portfolio of over 30 companies, many of which are involved in optical networking technology -- including Sycamore Inc., Cyras Systems, Inc., and LuxN, Inc. Website: http://www.mustangventures.com.

About Vitesse Semiconductor Corporation

Vitesse Semiconductor Corporation is the leading designer and supplier of innovative, high performance semiconductors utilizing state-of-the-art processes for the manufacturers of next generation DWDM and optical networking communications equipment. Vitesse also develops storage area networking ICs and enclosure management products that monitor and communicate critical reliability and availability information. The company's products address the needs of Core, Access, Optical and Enterprise network equipment manufacturers who demand a combination of high speed, high complexity and low power dissipation. Vitesse is headquartered in Camarillo, California, and operates two fabrication facilities in Camarillo and Colorado Springs. Company/product information can be found on the web at www.vitesse.com.