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ZF Linux Devices Secures $15 Million Expansion Round Funding
Introduces the first real X86 FailSafe PC-on-a-Chip

New York, NY, June 26, 2000

ZF Linux Devices, Inc., the first company to provide a true X86 System-on-a-Chip with Open Source Linux operating system software, today announced that it has received $15 million in funding. This round of funding was led by Sands Brothers Venture Capital LLC of New York, and included additional investments from National Semiconductor, Samsung, TAT Capital Partners, and individual investors.

The venture funding will be used for marketing and to begin volume production, against a backlog of orders, of the company's patented crash-immune FailSafeô MachZ microprocessor chip. The company is also using the funds to develop a family of MachZ-based Internet appliances.

ZF Linux Devices recently introduced its ultra-low power FailSafeô MachZ PC-on-a-Chip, the first and only full PC on a chip, which brings crash-immune PC functionality to a price point never before achieved combined with an integration level that had previously been unattainable. The device makes possible the first sub-$100 PC compatible Internet appliances. No other company produces a chip with a built-in mechanism (FailSafe System) for restoring operation in the event of system software corruption. The MachZ's high level of hardware and software integration means it can reduce the time necessary to bring new products to market by more than 50% and it permits crash-immune software downloads over the Internet.

"The MachZ chip was designed to be the enabling technology for the rapidly growing market for Internet devices, information appliances, and other products in the post-PC era," said David Feldman CEO of ZF Linux Devices, Inc. "The MachZ's combination of crash-immune hardware and complete bundled software makes this 35mm (1.4 inch) square device the first true PC-on-a-chip that allows the creation of sub-$100 PC compatible Internet access devices. Compared to a typical 7watt nightlight, the MachZ's 1/2watt power requirement eliminates the need for cooling fans and gives products a degree of reliability that could not be achieved until now."

"We truly appreciate the confidence and support that Sands Brothers has shown in ZF Linux Devices. Their visionary view of the immense market potential that our products address was instrumental in creating our partnerships with Samsung and National Semiconductor. This financing keeps the company on course for continued growth based on our track-record of developing award-winning solutions for building the Internet infrastructure," concluded Feldman.

ZF Linux Devices plans to introduce a number of internet related products based on the MachZ chip and its Linux services software for fast growing the Small Office and Home Office (SOHO) market such as a sub-$500 Network Attached Storage (NAS) device.

Howard Sterling, Senior Vice President Corporate Finance of Sands Brothers Venture Capital LLC, adds: "With the MachZ's very high performance specs, very low power consumption and its ability to run Linux Open Source natively, without the high-overhead that so-called morphing entails, this chip can add extraordinary intelligence and Internet access to the low-cost portable devices that are coming to market now. The MachZ chip typifies the 'disruptive' type of technology that Professor Clayton Christensen speaks of in his book, The Innovators Dilemma, as causing a new technology to beat entrenched competitors in the new post-PC era," Sterling concluded.

"Linux is rapidly gaining the acceptance of the electronics industry as the new operating system of choice. We think ZF Linux Devices, with its MachZ chip and FailSafeô technology, is poised to take advantage of the immense need for reliable crash-immune products which will comprise the human interface to the Internet infrastructure," said Martin Sands, CEO of Sands Brothers Bank, which has previously backed several investments in the semiconductor industry.

"We believe that ZF Linux Devices has developed a world-beating chip which has the ability to greatly enhance existing products as well as be an integral part of the huge market demand for the next generation of internet related devices, such as the gateways that will bring the Internet into every home," concluded Martin Sands.

About ZF Linux Devices
ZF Linux is a provider of integrated systems encompassing Open Source Linux operating system software and Open Architecture X86 hardware offering a unique systems approach to the design and implementation of products spanning semiconductors to turnkey systems. Their patented FailSafeô MachZ PC-on-a-Chip represents a new paradigm in System-on-a-Chip technology. The company is creating a new standard for integrating X86 PC functionality and Linux into embedded systems, and its devices are currently being used by OEMs in a broad range of embedded applications, including telecommunications devices, Internet gateways, point-of-sale systems, manufacturing automation, and medical equipment. For more information about ZF Linux Devices, Inc., visit their web site at http://www.zflinux.com/.

The Company is headquartered in Palo Alto, California and has offices in Buenos Aires and Paris. Its products are distributed by 18 distributors worldwide.

About Sands Brothers Bank
Sands Brothers & Co., Ltd. is an international investment banking and securities brokerage firm. Established in 1990, Sands Brothers is a member of the New York Stock Exchange and provides a full range of services, principally to high net worth individuals, institutional money managers, and corporations (both public and private). Sands Brothers has earned a reputation as counselor and advocate for informed, committed investors and corporate clients. Over the years, Sands Brothers has earned the trust and confidence of clients by providing superior investments returns and a high degree of personalized service.

ZF Linux Devices Corporate Headquarters: 1052 Elwell Court, Palo Alto, CA 94303 USA … Toll Free: 1.800.683.5943 … Direct: 650.965.3800 … Fax: 650-965-4050 … E-mail: info@zflinux.com … Web: www.zflinux.com | European Headquarters: 30 Rue du Morvan, Silic 558, 94643 Rungis, CËdex, France … Tel: 33.(O)141.80.0410 | Fax: 33.(0)141.80.0411 | South American Sales Office: Prometeo 3036, Buenas Aires, Argentina … Tel/Fax: +54.1.544.4033