``Visually Perfect'' Compression Firm DemoGraFX Inc. Lands $10 Million Investment; Baker Capital Finances Pioneering Video Compression Technology.

Business Editors & High-Tech Writers

NAB2001

Room N205

SANTA MONICA, Calif.--(BUSINESS WIRE)--April 19, 2001

DemoGraFX Inc., a digital video compression technology company, announced $10 million in financing from Baker Capital.

DemoGraFX is led by two pioneers in digital video and film, Bob Rast and Gary Demos. The investment will fund commercialization of DemoGraFX "Visually Perfect" video compression for applications ranging from digital cinema to television to personal computers. Baker Capital is a New York-based private equity firm focused on communications industry investments.

Baker Capital has $1.5 billion under management, and is one of the largest equity pools focused exclusively on the digital communications industry. "We found the perfect partner in Baker Capital," said Robert M. Rast, president and CEO of DemoGraFX. "Baker's previous investments show they have great insight into the future of broadband communications. We are privileged to join a roster that includes Internet leader Akamai (Nasdaq:AKAM), broadband equipment vendor Advanced Switching Communications (Nasdaq:ASCX), and German broadband service provider QSC AG (Neuer Markt: QSC; Nasdaq: QSCG)." The investment is through Baker Communications Fund II L.P., which raised $1.1 billion last year.

"Gary Demos achieved a true breakthrough in cinematic quality at extremely competitive bit rates," said Dr. Henry G. Baker, partner at Baker Capital. "The system also scales very well to the lower bit rates required for applications such as streaming over cable and DSL modems. Gary's quarter-century history of consistently producing the highest quality digital images, both computer-generated and natural, uniquely qualifies him to develop the next-generation of video compression technology. The next generation of broadband services will feature ubiquitous high-quality digital video, whether for entertainment, conferencing, enterprise or educational applications. We believe DemoGraFX layered digital compression technology will play a vital role. This technology is now ready for the marketplace. Bob Rast's background at General Instrument and Dolby Labs, and his leadership in HDTV and digital cinema make him a natural leader for this commercialization," Dr. Baker concluded.

DemoGraFX will be demonstrating its technology April 23-26 at the National Association of Broadcasters (NAB) convention in Room N205 at the Las Vegas Convention Center, North Hall.

In the coming months, DemoGraFX will be discussing rollout strategies with potential partners in the entertainment, motion picture, television, home video and computer industries. "Delivering 'Visually Perfect' images at competitive bit rates can change the game in each of these industries," Rast said.

About DemoGraFX

DemoGraFX provides "Visually Perfect" compression algorithms yielding superior picture quality at competitive bit rates for the movie, television, cable, computer and Internet markets. The algorithms and supporting technology compress vast amounts of motion image data for efficient delivery via satellite, broadcast and cable without compromising picture quality. The company has previously received research and development funding from the Department of Defense, the National Institute of Standards and Technology and the state of California to develop compression technology that retains the visual integrity of the original pictures.

Bob Rast recently joined DemoGraFX. He played a vital role in the development of FCC-adopted standards for digital television (DTV) and HDTV. Rast was a vice president at General Instrument (GI) from 1990 to 1998. He led the GI's effort to establish an all-digital HDTV standard, and was its principal interface with the FCC Advisory Committee on Advanced Television Service. Rast joined Dolby Labs in 1998 as vice president, business development. He led Dolby's efforts in digital cinema.

Gary Demos, founder of DemoGraFX, now serves as its chief technology officer. Prior to founding DemoGraFX, Demos pioneered the convergence of film and digital technologies for visual effects applications on such landmark films as Tron, The Last Starfighter and 2010. Demos has been honored as co-recipient of three Academy of Motion Picture Arts and Sciences' Scientific and Technical Awards for his work. He is also an Associate Member of the American Society of Cinematographers (ASC).

About Baker Capital

Founded in 1995, Baker Capital is the investment manager of Baker Communications Fund L.P. ($406 million) and Baker Communications Fund II L.P. ($1.1 billion), private equity funds focused on communications industry investments. Baker Capital makes investments in equipment, services and applications companies. For more information, please visit www.bakercapital.com.

(Editor's note: Electronic photos of Bob Rast and/or Gary Demos are available. Please email [e-mail], and specify resolution and format if other than JPEG.)