'Beau Herrold on 03/08/2001 10:07:42 AM Please respond to Beau Herrold To: "Lay, Ken' cc: Lay, Mark" Subject: photofete Ken - Since our last conversation regarding Photofete, I told you that I didn't feel to strongly about investing more money into the company. Primarily reservations include: many similar players in the DAM (Digital Asset Management) space with big name backings (Enron has invested in eMotion & Artesia Technologies); no apparent proprietary technology; smaller start-up versus more established players; not sure if management is comprised of enough seasoned players to get them to that next level executing sizeable contracts. However, I will credit photofete with a couple of things. They apparentently have a well received product, because Enron uses them and they just signed a large contract with BP. Skilling thinks highly of photofete, is on the advisory board, and has committed a total $150,000, which includes his original $60,000 investment. Also, Wincrest Ventures, Chuck Watson's group, will put in $90,000 bringing their total to $150,000 like Skilling FYI, Skilling called me two weeks ago after their investor meeting and really put the pressure on me/us. He was pretty excited about the company and recommended that we follow-up on our original investment. With all do respect, I must say it appeared that Skilling isn't that familiar with the DAM space, no pun intended. I told him about some things that I had discovered through my own due diligence, which he had no rebuttal for other than to try at that point to get off the phone with me. They finally have a draft of the terms for this Series A Preferred shares financing, which puts the company's post money valuation of about $1.8 million. Skilling, Wincrest Ventures, us and two or three others it will bring this Series A round close to $400,000. It appears that our original $60,000 investment will be converted from a promissory note to these Series A shares, as well as all outstanding interest on the note. Per our last conservation, I made Jennifer sweat. Since the terms are shaping-up, I gave her word yesterday that we would do up to an additional .1 hope that this allows them to ramp-up their revenues and win the race, at least lo~Ily>~t this time, I think that they have a viable chance, but I wouldn't put this is the home-run catergory, n~ would I call it a pop-fly. Maybe, a close single that will hopefully generate a run. (Pardon my baseball analogies, I guess with all this good weather I am ready for the Astros season to begin again at Enron). - Beau / I