1. Hillary Stiff Cheval Capital, Inc. April 27, 2007 How Much is Your Company Worth?

2. How Much Is Your Company Worth – Cheval Capital, Inc.2 Agenda Cheval Capital, Inc. Valuation Methodology Multiples-Historical, Current and Projected Terms-Price Versus Risk Factors in Valuation Deal Volume Summary

3. How Much Is Your Company Worth – Cheval Capital, Inc.3 Cheval Capital, Inc. Who we are.  Boutique investment bank active in hosting/ISPs since 1996.  Completed over 85 Hosting/ISP acquisitions, 20 in 2006 and 6 in the first few months of 2007. Who we work for.  Endurance International Group, Verio, Rackspace, Nextel, etc.  Clearinghouse for small and mid sized companies. What we do.  Use our contacts, market knowledge & experience to get the best terms and increase the likelihood for success.  Distribute a weekly deal listing with over 30 sellers, creating a deal marketplace.

4. How Much Is Your Company Worth – Cheval Capital, Inc.4 Valuation I Generally quoted as a multiple of recurring revenues. Multiples can be calculated based on historic recurring revenues; trailing twelve months or trailing six/three months annualized. Multiples typically calculated on current annualized recurring revenue basis. Non-recurring revenues are typically not included or if included will be calculated at a lower multiple with payments made post close.

5. How Much Is Your Company Worth – Cheval Capital, Inc.5 Annualized Recurring Revenue Annualized Recurring Revenue is the most commonly used revenue base for valuation purposes. Illustration of how to calculate Annualized Recurring Revenue.  10,000 customers @ $10/mo x 12 pmts = $1,200,000  15,000 customers @ $15/mo x 12 pmts = $2,700,000  25,000 customers @ $25/qtr x 4 pmts = $2,500,000  3,000 customers @ $100/yr x 1 pmt = $ 300,000  Total Annualized Revenues = $6,700,000

6. How Much Is Your Company Worth – Cheval Capital, Inc.6 Market Conditions – Buyer Types Consolidators  Makes up the bulk of all buyers.  Looking to add customers to their existing infrastructure.  Concerned with profitability of acquired customers on their infrastructure. Platform/Strategic buyers  Looking for a base of operations for a new product line or company.  Concerned with systems, processes, network, employees & profitability.

7. How Much Is Your Company Worth – Cheval Capital, Inc.7 Valuation II Consolidating buyers concerned with their profitability not the seller’s. Buyers look at a variety of things to determine profitability of seller’s revenues to them.  Bandwidth usage  ARPU  Customer growth and churn rates  Support & infrastructure intensity Assets used to produce revenues are not separately valued – they are part of the revenue valuation.

8. How Much Is Your Company Worth – Cheval Capital, Inc.8 Market Conditions - Multiples 2.5x – 7.0x 1.0x – 2.5x Multiple of Annual Revenue 2x – 4x 0.5x-1.2x digitalNation

9. How Much Is Your Company Worth – Cheval Capital, Inc.9 Terms - Price Versus Risk Price paid (and when) is a direct function of;  How profitable the business is to the buyer; and  How much risk there is of realizing that profit. Two examples  100% paid upfront in cash means more risk for the buyer and thus a lower price.  100% paid over time based on profits means more risk for the seller and thus a higher price.

10. How Much Is Your Company Worth – Cheval Capital, Inc.10 Market Conditions – Future Multiples Hosting Transaction Multiples 1999 2007 Lower industry growth rates Lower industry growth rates High churn High churn Pricing pressure Pricing pressure Noisy advertising environment Noisy advertising environment No big new buyers No big new buyers Google, Yahoo, etc. Google, Yahoo, etc. No barriers to entry No barriers to entry 10x 1x

11. How Much Is Your Company Worth – Cheval Capital, Inc.11 Valuation III – Other Factors Control Panel Billing Systems Credit Card Information OS (Linux)‏ Responsive Seller US Based Clean Records Type of Hosting Deal Size (under $100,000 or larger)‏ ARPU Pure Play

12. How Much Is Your Company Worth – Cheval Capital, Inc.12 Market Conditions – Deal Volume Sharp increase in numbers of buyers.  Buyers looking to offset difficulties in organic growth (churn, advertising noise, etc).  More companies have matured and have the systems and management to do an acquisition.  Most are small to medium sized hosters buying out of cash flow. Sharp increase in numbers of sellers.  Customer base growth slows/stops/declines.  Management or investor fatigue.  Static multiples.  Out of space or power.

13. How Much Is Your Company Worth – Cheval Capital, Inc.13 Summary Good News  Transaction values stable.  More companies buying & selling.  Transactions fairly easy to accomplish for mainstream sellers at market multiples.  Deal volume increasing. Not so Good News  Transaction values at risk if big players reduce industry profitability.  Unique companies difficult to sell.  Few well financed large buyers.