After your call I thought I should give you some background on Datacentric =
1.=09The company was founded by Leslie Anderson a woman entrepreneur in Con=
roe Texas. Leslie continues to be the largest non institutional shareholde=
r and is Chairman of the Board. The president is Gary Remy, a Hispanic, wh=
om you met recently at the YPO gathering.=20
2.=09DCB is in the broadband wireless access market focusing on smaller cit=
ies in Texas. They have deployed in nine different locations and have a st=
rategy to grow from a regional player to a national player. The market the=
y are in requires no license fees and is one where being first to locate in=
a city is critical to success.
3.=09We have invested $2 million in DCB to date and brought in Redstone Inv=
estors who also invested $2 million. Redstone should continue to participat=
e with us in any future investments we make in DCB.
4.=09We have talked to Kevin Garland to solicit interest from him, however=
he made it clear that DCB was not in his target market and he was not inte=
rested in the investment.
5.=09DCB has engaged Arthur Andersen to help raise additional funds for con=
tinued growth. We along with AA have been talking to other potential inves=
tors and have found a receptive yet cautious reception.
6.=09About two weeks ago we were approached by representatives of Union Pac=
ific Railroad and Norfolk Southern Railroad with a proposal to invest up to=
$75 million in DCB over the next five years beginning with an initial inve=
stment of $15 million. U P asked if Enron would be willing to invest a sim=
ilar amount alongside them to help DCB grow into a national broadband wirel=
ess access provider to smaller cities. After this request I asked Ken Rice =
if EBS would be interested in an investment in DCB either in conjunction wi=
th U P or on a stand alone basis. My hope was that EBS would view DCB as a=
strategic fit to their business model and would be interested in a much cl=
oser relationship with DCB perhaps leading to a buyout. ( Although EBS and =
DCB are in different businesses I know that the trading group of EBS has u=
sed DCB to provide liquidity and last mile access for many of their trades.=
) Ken's response was that EBS was not interested in an investment in DCB a=
nd he didn't see a strategic fit between the two companies. =20
7.=09We have also talked to Lou's group, the Xcelerator, and to LJM about i=
nvestments in DCB and it appears that LJM is very interested in committing =
funds however I don't think they will be ready in time to match U P's commi=
8. =09At a subsequent meeting with U P we told them not to expect any addit=
ional funds from Enron other that a possible $2 to $3 million from ourselve=
s since that is all of the capacity that we have left for this investment. =
They are very disappointed that Enron does not see the strategic potential=
of this business the way they do, but nevertheless are still moving forwar=
d in their efforts to invest in DCB in the $75 million range. We are curre=
ntly in the due diligence process with U P and hope to wrap up a deal struc=
ture by the end of May.
=09 We have solicited the support of other Enron groups all along the way w=
hile making our investment decision. I truly believe that DCB is in a spac=
e that could be very integral to the success of EBS and had hoped that we c=
ould work together more closely, however EBS does not see a strategic fit w=
ith DCB. We will continue to develop relationships with other strategic an=
d financial partners in order to enhance and grow the value of our investme=
nt in DCB.
=09I will be happy to talk to you further about DCB and our investment. We=
will of course seek your approval for any additional investments that we m=
ake in DCB. Please call me if you have any additional questions.