TeraGlobal Announces ``Going Private'' Transaction; Common Stockholders to Receive $0.29 Per Share in Reverse Split.

Business Editors

SAN DIEGO--(BUSINESS WIRE)--May 15, 2002

TeraGlobal Communications Corp. (OTCBB:TGCM) announced today that it intends to reorganize its capital structure as part of a "going private" transaction.

The reorganization will take place in three steps: (i) the assignment of assets to an operating subsidiary, (ii) a reverse split of the company's outstanding Common Stock, and (iii) a merger of the remaining entity into a new subsidiary. The company cited the need to secure additional capital as the primary reason for the reorganization.

"We are increasing our ability to generate high margin revenues with our Session(TM) product for the Windows(R) operating system," said Robert Randall, president of TeraGlobal. "We are booking initial sales and we are continuing to pursue channel sales with VARs, system integrators and network service providers. But the bottom line is that we need substantial additional capital to fund immediate operations and to complete development of the Session(TM) product line. This is a tough market to fund communications and technology companies in general, and we have been unable to secure investment banking interest in our current capital structure. Based on our size and the state of our business development, we believe that we are more likely to secure that financing from the venture capital and private equity markets."

Formation of Operating Subsidiary

In the initial step of the reorganization, the company transferred its operating assets and liabilities to Wave Three Software Inc., a Delaware corporation, effective May 14, 2002. Wave Three is an operating entity formed by the company for the purpose of receiving its assets. In exchange for the assets Wave Three issued the company 55,000 shares of its Class B Common Stock, and agreed to assume certain of TeraGlobal's liabilities.

The assumption of liabilities included $2.8 million in Convertible Promissory Notes that were due and payable. The Convertible Promissory Notes were secured by a first lien on all of the company's assets, including its intellectual property. The holders of those Convertible Promissory Notes had the right to foreclose on the company's assets, but have agreed to the assignment of those Notes to Wave Three and to their conversion into shares of Series A Convertible Preferred Stock of Wave Three.

Concurrently, with the assignment of the assets and liabilities, Wave Three secured commitments for an additional $1.3 million in financing from the sale of Series A Convertible Preferred Stock and Warrants. The principal investor for the Wave Three financing was WallerSutton 2000, L.P., the principal stockholder in TeraGlobal.

Reverse Split of Common Stock

The company has also filed a preliminary information statement with the SEC announcing its intention to effect a 1 for 1,000 reverse split of its outstanding Common Stock on or about June 15, 2002. The company will not issue fractional shares generated from the Reverse Split. Instead, it will purchase the fractional shares from stockholders on the basis of $0.29 per share of pre-split Common Stock.

All stockholders owning less than one full share of stock after the Reverse Split will be paid cash for such fractional share and will cease to be a stockholder of the company. Stockholders owning greater than one full share after the Reverse Split will remain as a stockholder of the company, owning any full shares after the Reverse Split and receiving cash for any fractional share.

Follow on Merger

The third step of the Reorganization will be a merger of TeraGlobal into a newly formed subsidiary of Wave Three. Stockholders that continue to hold TeraGlobal stock after the Reverse Split, will receive Common Stock of Wave Three in the merger. TeraGlobal will become a wholly-owned subsidiary of Wave Three in the merger, having only those assets and liabilities that it did not transfer to Wave Three in the assignment of assets and liabilities. It will not have any operating assets.

Going Private

The company's SEC filings state that the specific purpose of the Reverse Split is to reduce the number of the holders of the company's Common Stock below 100. As a result of having fewer stockholders, the company will be eligible to file, and intends to file, a Form 15 with the SEC to terminate its public company reporting obligations under Section 15(d) of the Securities Exchange Act of 1934, as amended.

The company will also file the appropriate documents with the OTC Bulletin Board to de-list its Common Stock, and terminate the public trading market for the Common Stock. Consequently, there is not expected to be any public market for the company's Common Stock after the Reverse Split. The company has also stated that there are no current plans to develop a public market for trading in Wave Three Common Stock.

Alternatives Considered

The company aggressively exhausted a number of alternatives for providing economic value to its stockholders ranging from bankruptcy to a tender offer or sale of the company.

"Once we were certain that securing additional capital would be predicated on a restructuring as a private entity, we considered a number of alternatives to maximize stockholder value," said James A. Mercer III, chief financial officer of TeraGlobal. "The reverse split provides the company with the certainty that it could restructure as a privately held entity, and provides the stockholders with a certain degree of autonomy over their investment decision."

Stockholders who wish to obtain cash for their shares have the opportunity to sell those shares on the OTC Bulleting Board prior to the Reverse Split being effective. They can also receive payment for any fractional share in cash following the Reverse Split, without incurring brokerage commissions or other transactions costs. Stockholders that hold, or acquire, in excess of 1,000 shares will retain an equity interest in the privately held enterprise.

Previous Disclosure

In a series of releases, the company has announced its efforts to secure additional financing to fund operations. TeraGlobal began soliciting capital sources for investment in the third quarter of 2001. Its Annual Report for the year ended Dec. 31, 2002 contains a cautionary statement from its independent auditors that there is substantial doubt about the company's ability to continue as a going concern.

In the first quarter of 2002, TeraGlobal took several actions designed to give it the flexibility to offer securities that would appeal to a range of prospective investors. Each of these activities was aimed at increasing TeraGlobal's options for, and the likelihood of, a future financing. TeraGlobal's Board of Directors and stockholders approved: (1) an amendment to the company's Certificate of Incorporation to authorize 1,000,000 shares of "blank check" Preferred Stock; (2) an amendment to the company's Certificate of Incorporation to effect a 1-for-25 reverse split of the company's issued and outstanding Common Stock; and (3) approval of the formation of a subsidiary corporation, and the authorization to transfer all of the company's operating assets and certain of its liabilities to the new subsidiary. The authorization of the blank check Preferred Stock and the 1 for 25 reverse stock split was effected on March 15, 2002. TeraGlobal caused Wave Three to be formed, as a potential operating subsidiary, on April 2, 2002.

Despite its efforts TeraGlobal was unsuccessful in securing any interest in the sale of its securities or the sale of the company, either with an investment banker or with a strategic alliance partner. While it sought long term financing, TeraGlobal funded its operations by borrowing $2.8 million under short term Convertible Promissory Notes. The Convertible Promissory Notes, issued primarily by WallerSutton, were secured by a first lien on all of TeraGlobal's assets and are due and payable. The holders of those Notes had the right to foreclose on the company's assets and force a liquidation of the company.

Approvals

When it became clear that WallerSutton would likely be the lead investor in the financing for Wave Three, the Board of Directors formed a special committee of its members to review and make recommendations concerning the transactions. The special committee was comprised of three directors, none of whom are affiliated with WallerSutton. The special committee, after independent review and consultation with advisors, recommended the Reverse Split to the Board of Directors, which approved the transaction on May 13, 2002.

The Board of Directors also engaged the investment banking firm Duff & Phelps, LLC to render an opinion on the fairness of the consideration offered to fractional stockholders. Duff & Phelps is a nationally recognized investment banking firm that is regularly engaged to render financial opinions in connection with mergers and acquisitions, tax matters, corporate planning and other purposes.

The company obtained stockholder approval of the Reverse Split by a written consent resolution signed by the owners of a majority of the company's outstanding voting power.

Additional Information

The company has filed a preliminary information statement with the SEC which describes in detail the terms and reasons for the "going private" transaction. The preliminary information statement is available for review on the SEC's EDGAR database at www.sec.gov. The company will file a final Information Statement with the SEC on or about May 25, 2002. That Information Statement will also be mailed to stockholders, along with directions for receiving payment for fractional shares resulting from the Reverse Split. In accordance with applicable federal securities laws, the transactions would take place at least 20 days after the final Information Statement is mailed to stockholders.

About TeraGlobal Communications

TeraGlobal's corporate office is in San Diego. TeraGlobal stock is traded on the OTCBB under the symbol "TGCM" and is expected to continue to trade until the effective date of the Reverse Split. Additional information concerning the reorganization can be found on TeraGlobal's Web site at www.teraglobal.com. Email inquiries concerning the Reverse Split and the "going private" transaction can be directed to [e-mail].