Elastic Networks Secures Second Round of $21M in Funding.

Business Editors &Technology Writers

ALPHARETTA, Ga.--(BUSINESS WIRE)--Feb. 17, 2000

New Executive Appointments Support Elastic Networks'

Rapid Growth in the Market

Elastic Networks, Inc., a spinout of Nortel Networks, closed a $21M round in venture capital funding this week. A leading provider of next-generation DSL technology and high-speed Internet access solutions, Elastic Networks has secured more than $33M in venture funding since it was established in May 1999.

The latest round of funding was led by MF Private Capital, Inc.; Williams, Jones &Associates; ComVentures and Wolfson Equities. Pequot Capital Management and Texas Instruments, original first round equity investors, also participated.

To maintain its explosive growth, Elastic Networks also announced this week the addition of two new members to its executive management team. Michael VanPatten has been appointed Senior Vice President, Business Development, responsible for developing strategic market alliances and business strategies. Robert T. Gallagher has been appointed Vice President, Engineering, responsible for new product development and technology innovation for Elastic Networks.

&uot;The addition of these two seasoned industry professionals is reflective of the value we have created for our customers and investors that has led to our lineup of additional venture partners,&uot; said Guy Gill, CEO of Elastic Networks. &uot;The additional funding provided by our new partners will allow Elastic Networks to accelerate its growth in the dynamic broadband internet access market. The funds will be utilized for increased investment in sales, marketing, engineering and operations infrastructure to support our 2000 growth plans.&uot;

Elastic Networks has recently been awarded several large contracts with service providers in various market segments. In late 1999, Darwin Networks, an Application Service Provider, selected Elastic solutions, in a $30M supply agreement, for its rollout of high-speed internet access service in 1400 hotel properties nationwide. In January, CLEC UniversalCom announced a rollout of EtherLoop-based high-speed services in central office colocations serving nine major markets in the Gulf State Region. Last week, US OnLine, the industry's largest local ISP network, announced a $10M deal with Elastic Networks, designating EtherLoop as the exclusive technology for US OnLine's 100+ ISP nationwide network. Oregon Trail Internet, Inc., an ISP member of that consortium, has already begun rollout of EtherLoop-based high-speed access in rural Oregon.

&uot;Elastic Networks' next generation DSL EtherLoop technology innovation was the attraction for us,&uot; said Steve Brackett, Managing Director of MF Private Capital. &uot;There is a tremendous pent-up demand for high-speed services which cannot be totally fulfilled with the current suite of DSL technologies available in the market. Service providers utilizing EtherLoop technology have proven that high-speed internet access is easily deployed over existing copper infrastructure, without time consuming engineering of the cable plant or costly technician truck rolls. We are very excited to be part of the Elastic Networks team.&uot;

&uot;The high-speed internet access market is experiencing exponential growth and Elastic Networks next generation DSL solutions offer a very simple and innovative way for service providers to meet the high demand,&uot; said Gerald Poch, a principal of Pequot Equity Funds and Pequot Venture Funds. &uot;We continue to be bullish on Elastic Networks growth in this exciting market.&uot;

Elastic Networks' product portfolio addresses the high-speed internet access needs of carriers, enterprises, and vertical markets such as hospitality and multi-tenant housing. Elastic's core suite of high-speed copper access solutions is based on EtherLoop next generation DSL technology, which currently provides up to 4 mb/s access in both directions over regular copper phone lines up to 21,000 feet. Elastic Networks portfolio also includes the YesWare software suite, which provides integrated services management including plug and play connectivity, billing, service branding, local portal capabilities and system management for both EtherLoop and Ethernet networks.

About Michael VanPatten

Prior to joining Elastic Networks, VanPatten was Sr. Vice President and a creator of ViaGate technologies, the first VDSL products company, where he was responsible for international sales, marketing, product management and business development. His extensive background includes leadership roles at DAGAZ Technologies, a developer of ADSL products, and Microdyne, an Ethernet products company, as well as senior management positions with Zircom and Novell.

About Robert T. Gallagher

Gallagher brings more than 18 years of design engineering experience with emphasis on new product development. Prior to joining Elastic Networks, Gallagher served as Vice President, Design Engineering, at ADC Telecommunications where he was responsible for hardware and software development of broadband RF amplifiers. Gallagher also served as Vice President of Hardware Engineering for ADC, and held a variety of management positions with General Datacomm, Telco Oil Field Services, and Raymond Engineering.

About Elastic Networks, Inc.

Elastic Networks is the leader in innovative, next generation DSL technology and high-speed Internet access solutions, enabling telecommunications service providers to easily offer affordable broadband services that simplify the way people connect. By leveraging its technological differentiation in speed, deployability, and economics, and by building strategic relationships with distributor, chip manufacturing, and data networking partners, Elastic Networks continues to increase the pervasiveness of its innovative technology in markets throughout the world.

Elastic Networks Inc., based in Alpharetta, GA, is a private company funded by Nortel Networks; Texas Instruments; Pequot Capital; MF Private Capital; Williams, Jones &Associates; ComVentures and Wolfson Equities. For more information about Elastic Networks and its high-speed access and subscriber management solutions, visit www.elastic.com or contact [phone].

About Pequot Capital Management, Inc.

The Pequot Private Equity Funds are the private placement/direct investment arm of Pequot Capital Management, Inc. The Pequot Private Equity Funds invest in public and late stage private companies in information technology, telecommunications and healthcare. The Pequot Venture Fund invests in seed and early stage technology companies. Pequot Capital Management, Inc. is a research-intensive investment firm with more than US$5 billion in assets under management. Pequot Capital, which is 100 percent employee-owned, is headquartered in Westport, Connecticut, with offices in New York City and California.

About MF Private Capital

MF Private Capital, Inc. (http://www.mfpcinc.com), through its affiliates, offers venture capital, merchant banking and fund management services to companies and investors focused on the communications infrastructure, Internet services, information technology and medical device sectors. MF Private Capital, Inc. is a Boston-based affiliate of The Manufacturers Life Insurance Company (USA), a unit of Manulife Financial Corporation headquartered in Toronto, Ontario.