Presentation of Cascadia Capital LLC to the board of directors of Zones Inc.

Presentation Overview

Introduction

Cascadia Capital (“Cascadia”) has been engaged by the Board of Directors (the “Board”) of Zones,

Inc. (“Zones”, “ZONS”

or the “Company”) to evaluate potential sale alternatives for the Company

given its current Minority Business Enterprise (“MBE”) status

Cascadia

was

asked

assess

the

viability

three

distinct

buyer

populations

–

strategic

buyers,

MBE buyers (those that share the same minority status) and financial buyers

For each of the buyer populations, Cascadia was asked to assess the price and structure at which a

transaction could take place in light of current market conditions, and in some cases, identify

potential parties to a transaction

Relying on analysis provided to us by the Company, we estimated the impact of the MBE

structure on the potential transaction price in all scenarios

Cascadia acknowledges that transaction structures with third parties that might preserve the MBE

status of the Company may exist, but have not been explored in detail as part of our engagement

At the Board’s request, Cascadia has not engaged in any potential sale dialogues as a result of this

analysis, as it was outside the scope of the mandate

Executive Summary

Introduction

Based on current market conditions we estimate the enterprise value of Zones today to be between

$150M -

$180M based on projections prepared in consultation with the Company

A loss of the Company’s MBE status would result in a decline of approximately $20M in value

Related to loss in enterprise sales, primarily at the field sales force level ($56M 2008 sales

budget)

Projections assume that, over time, the Company is able to develop other competitive

advantages

that

mitigate

some

the

account

loss

resulting

from

the

sunset

the

MBE

status

The two transaction structures that are most compelling for the preservation of the MBE status are a

sale to another MBE or take private involving a minority investment from a private equity firm or a

hedge fund

Potential MBE transaction partners are limited and present business model conflict

A take private/leverage buyout of the Company where the MBE status is compromised is less

feasible due to the implied valuation at which a transaction would need to take place given

IRR hurdles of potential investors

Market conditions are not currently optimized to facilitate a sale to a strategic party at a potentially

attractive valuation

Valuation Overview

Valuation

The purpose of our analysis was to establish a baseline valuation for the Company based on

standalone financial projections which assumes Zones remains a public entity

Financial projections were developed for the current period and forward four years based on

discussions with Company senior management

For the purpose of our analysis, we applied commonly accepted valuation techniques, including

comparable company analysis, precedent transaction analysis and discounted cash flow analysis, to

the historical financial results of the Company and the forward projections

Cascadia also took into account current industry and market conditions including the US economic

outlook,

the

condition

financial

and

M&A

markets,

the

2008

spending

outlook

and

the

2008

PC demand outlook, and prevailing industry trends

As these analyses assume the Company is an on-going entity, no discount for the minority status is

applied

Technology distributors face an uncertain domestic economy

Valuation

Economic

Outlook

US economy faces a consumer confidence crisis, if not a recession, in 2008

High energy prices have cut heavily into consumer discretionary spend

Job creation is slowing visibly

Real estate deflation is impacting wealth at a personal level

Consumers face a credit crunch due to declining borrowing base

Risk of a decoupling of US economy from global markets

Global

markets

(ex-US)

expected

grow

5.0%

–

5.5%

vs.

1.0%

1.5%

Decoupling could lead to policy changes in order to support the dollar or stem inflation

Export related businesses expected to thrive in a low US rate environment

US dollar is expected to decline in 1H08 due to policy differences with foreign markets

While risks of a currency crisis are higher than in recent years, it is not an expected outcome

Financial

Markets

Treasury bonds outperformed stocks in 2007, and have extended lead in 1Q08

Large caps and growth outperformed midcaps and value and in 2007

Energy and materials were leaderships sectors, with financials as laggards

Significant market turbulence in 1Q08

Fed cuts seen as too little to late, investors are wary

Slowing service sector, job markets, consumer spending do not bode well for quick u-turn

Credit market concerns are likely to catch up to US financial markets in 2008

Oil prices have spiked over $100/barrel

Falling dollar could send investors on flight to quality towards

overseas markets

Lack of available debt will cool M&A, putting a further damper on markets

Debt is more widely available for sub-$15M EBITDA companies

However, IT budgets are expected to grow, albeit at a slower pace

Valuation

slow

down

spending

expected

2008,

but

significant

contraction

not

anticipated

Economic uncertainty will fuel caution among purchasing organizations

Companies with large North American exposure expected to be hit hardest

4Q07 appeared to be in line with estimates for IT distributors, but stock prices reflect little upside

Potential for delays in enterprise rollouts has resulted in investor caution

Stocks have sold off significantly and trade well below historical multiples

Sentiment is that SMB growth is moderating

VAR surveys indicate caution on sequential growth in SMB for 1Q08 and 1H08

IT spending budgets are expected to rise, albeit at a slower pace

Demand will be driven by server consolidation/virtualization, applications and storage spend

Enterprise customers will also spend significantly on upgrades and business unit support

2008 IT

Spending

Outlook

Median IT Operational Budget Change: 2004-2008

0.0%

2.5%

4.1%

5.0%

2.5%

2004

2005

2006

2007

2008E

Expected 2008 Change in IT Spending by Organizaiton Size

10.0%

7.0%

16.0%

28.0%

10.0%

24.0%

63.0%

83.0%

60.0%

20%

40%

60%

80%

100%

Small

Medium

Large

Budget Cut

Budget Flat

Budget Increase

The PC demand function looks more robust than previously anticipated

Valuation

2007

ended

with

flurry

stock

upgrades

the

back

higher

than

anticipated

demand

Recent MSFT earning report indicates PC demand has been robust compared to estimates

Asia a key driver of growth for Lenovo and HP

Corporate

mix

shift

continues

companies

migrate

from

desktops

laptops

Laptop

CAGR

estimated

15%

20%

through

2009

Corporate buyers do not expect Vista to drive significant hardware upgrade cycle in the near term

Many corporations delaying Vista rollouts until 2009/2010

Corporate buyers are waiting for a host of compatibility issues to be resolved

Dual core processors and thin client solutions are increasing factors in upgrade decision

Dell US market share lead beginning to come under pressure from HP and Lenovo

Increasing interest on the thin client side

HP has passed Dell on a worldwide basis; service and support is thought of as superior

2008 PC

Demand

World Wide PC Demand

$232.5

$250.8

$268.4

$278.7

$287.2

$50

$100

$150

$200

$250

$300

2006

2007E

2008E

2009E

2010E

($ in billions)

The end user technology distribution industry continues to evolve

Valuation

2007 was shaped by significant M&A events, earnings shortfalls and Dell’s channel expansion

Key M&A Events:

CDW take private for $6.8B (1.0x LTM Revenue / 13.9x LTM EBITDA)

Platinum Equity sale of CompuCom to Court Square Capital Partners for $628M

Earnings Announcements:

Insight Enterprises earnings shortfall trims 23% off its market cap

Office

Depot

earning

shortfall

trims

off

market

cap

and

leads

delisting

Best Buy lowered sales and earnings guidance on February 15, 2008

Dell announced retail partnerships with Wal-Mart and Staples in the US

Tuck-in acquisitions have been largely focused on adding service capabilities

Insight Enterprises acquired network architecture solutions group Calence

Softchoice acquired IT infrastructure solutions group Optimus Solutions

PC Mall acquired technology service provider SARCOM

While consolidation will continue, several key players will remain on the sidelines

December,

CDW

announced

–

month

hiatus

from

acquisitions

$50M

Court Square anticipates CompuCom will not make a material acquisition in FTM

Equity prices of technology distributors are off 10%+ YTD reflecting economic concerns

Soft economic environment could hit earnings growth rates as companies delay spend

Company’s with EMEA and Asia exposure are likely to fair better than domestic only

Parties with software diversification are likely to maintain better margins

Industry

Conditions

CompuCom purchased by

Court Square Capital for

$628.0M

Insight Enterprises

announces $50M stock

buyback

CompUSA acquired by

Gordon Brothers Group

and wound down

Market Factors Impacting Valuation

Valuation

Office Depot reports a

9% decrease in earnings

resulting in a 4% stock

price decline

June

January

February

October

November

December

Insight Enterprises reports

a 47% decrease in EPS,

resulting in a 23% decline

in stock price, from $26.47

to $20.15

CDW Corp. purchased by

Madison Dearborn/

Providence Equity for $87.75

per share

EV: $6,827.7M

EV/Rev:

1.0x

EV/EBITDA:

13.9x

Office Depot delays third

quarter earnings release

due to internal review of

vendor program fund

recognitions

Softchoice acquires

Software Plus for

$45M

July

Office Depot dropped

from S&P 500

Insight Enterprises

acquires Calence, LLC

for $160M

PC Mall acquires

SARCOM for $54M

Softchoice acquires

Optimus Solutions for

$47M

Best Buy lowers sales and

earning guidance

resulting in a 6% stock

price decline before

recovering

Arrow Electronics

buys Logix SA

from Groupe

Open

EV: $177.9 M

EV/Rev: 0.25x

Staples offers

€7.25 per share for

Corporate Express

EV: €

1,330.0 M

EV/Rev: 0.4x

EV/EBITDA: 8.3x

Summary Financial Projections

Valuation

(1) Per management guidance

($ in millions)

Fiscal Years Ending

LTM

Projected

(1)

CAGR

December 31,

12/31/07

2008

2009

2010

2011

2012

2007–2012

Revenues

$679.5

$799.2

$943.1

$1,194.5

$1,424.5

$1,698.4

20.1%

% Growth

17.6%

18.0%

26.7%

19.3%

19.2%

Gross Profit

$80.3

$91.3

$108.4

$131.1

$147.4

$175.2

16.9%

% of Revenues

11.8%

11.4%

11.5%

11.0%

10.3%

EBITDA

$22.9

$28.6

$39.8

$51.6

$58.2

$74.5

26.7%

% of Revenues

3.4%

3.6%

4.2%

4.3%

4.1%

4.4%

EBIT

$21.0

$27.0

$38.0

$49.5

$55.9

$72.0

27.9%

% of Revenues

3.1%

3.4%

4.0%

4.1%

3.9%

4.2%

Net Income

$13.1

$17.1

$24.1

$31.5

$35.7

$46.2

28.6%

% of Revenues

1.9%

2.1%

2.6%

2.5%

2.7%

Fully Diluted Shares Outstanding

(1)

14.700

Earnings per Share

$0.89

$1.16

$1.64

$2.14

$2.43

$3.14

28.6%

Income

Statement

Public Company Comps

Valuation

(1) Source: Capital IQ

($ in millions, except per share data)

EV/LTM

EV/CY 2008

EV/CY 2009

Company

Ticker

Price as of:

2/27/08

Market

Cap.

Enterprise

Value (EV)

Revenue

EBITDA

LTM P/E

Revenue

EBITDA

CY 2008

P/E

Revenue

EBITDA

CY 2009

P/E

Growth

Broadline

Ingram Micro Inc.

NYSE:IM

$16.42

$2,833.1

$2,776.6

0.1x

5.5x

10.5x

0.1x

4.8x

9.1x

0.1x

4.4x

8.1x

11.3%

SYNNEX Corp.

NYSE:SNX

21.54

686.1

1,015.6

0.1

7.8

11.1

0.1

6.9

9.9

0.1

6.2

9.0

12.3%

Tech Data Corp.

NasdaqNM:TECD

34.09

1,890.6

1,788.3

0.1

6.8

20.0

0.1

5.7

12.0

0.1

5.0

9.9

12.2%

Median

0.1x

6.8x

11.1x

0.1x

5.7x

9.9x

0.1x

5.0x

9.0x

12.2%

Mean

0.1x

6.7x

13.9x

0.1x

5.8x

10.3x

0.1x

5.2x

9.0x

11.9%

Specialty

Agilysys

Inc.

NasdaqNM:AGYS

$12.96

$304.9

$166.5

0.2x

4.0x

26.4x

0.1x

2.9x

15.9x

16.0%

Bell Microproducts Inc.

NasdaqNM:BELM

3.48

105.8

425.6

0.1

8.6

0.1

5.6

4.7

0.1

5.7

4.5

18.8%

ScanSourceInc.

NasdaqNM:SCSC

35.85

930.2

977.7

0.5

10.2

18.3

0.4

16.1

16.8%

Median

0.2x

9.4x

18.3x

0.2x

4.8x

16.1x

0.1x

4.3x

10.2x

16.8%

Mean

0.3x

9.4x

18.3x

0.2x

4.8x

15.7x

0.1x

4.3x

10.2x

17.2%

Direct Marketers

GTSI Corp.

NasdaqNM:GTSI

$8.91

$89.3

$126.3

0.2x

19.2x

Insight Enterprises Inc.

NasdaqNM:NSIT

18.81

911.1

1,056.6

0.2

6.5

13.0

0.2x

5.3x

10.3x

0.2x

4.8x

9.0x

14.7%

PC Connection Inc.

NasdaqNM:PCCC

10.15

273.0

264.0

0.1

6.0

11.9

0.1

10.6

0.1

9.7

12.0%

PC Mall Inc.

NasdaqNM:MALL

8.90

118.0

170.7

0.1

6.0

9.8

0.1

8.1

22.5%

Systemax Inc.

NYSE:SYX

11.53

416.1

319.1

0.1

3.7

8.0

Median

0.1x

6.0x

11.9x

0.1x

5.3x

10.3x

0.2x

4.8x

9.4x

14.7%

Mean

0.2x

5.6x

12.4x

0.2x

5.3x

9.7x

0.2x

4.8x

9.4x

16.4%

Components

Arrow Electronics Inc.

NYSE:ARW

$34.52

$4,244.8

$5,033.3

0.3x

6.6x

10.5x

0.3x

6.3x

9.7x

0.3x

5.9x

8.9x

13.2%

Avnet Inc.

NYSE:AVT

35.57

5,348.3

6,211.4

0.4

7.7

11.3

0.3

6.7

10.2

0.3

6.6

9.7

16.7%

Nu Horizons Electronics Corp.

NasdaqNM:NUHC

5.48

100.8

166.3

0.2

13.3

39.7

0.2

6.3

11.2

20.0%

Median

0.3x

7.7x

11.3x

0.3x

6.3x

10.2x

0.3x

6.2x

9.3x

16.7%

Mean

0.3x

9.2x

20.5x

0.3x

6.4x

10.4x

0.3x

6.2x

9.3x

16.6%

Aggregate Range:

High

0.5x

13.3x

39.7x

0.4x

6.9x

26.4x

0.3x

6.6x

15.9x

22.5%

Median

0.2x

6.7x

11.6x

0.2x

5.7x

10.3x

0.1x

5.3x

9.0x

15.3%

Mean

0.2x

7.4x

15.3x

0.2x

5.7x

11.5x

0.2x

5.2x

9.4x

15.5%

Low

0.1x

3.7x

8.0x

0.1x

4.0x

4.7x

0.1x

2.9x

4.5x

11.3%

Twilight

$9.72

$127.9

$136.1

0.2x

6.0x

10.8x

0.2x

4.8x

8.4x

0.1x

3.4x

5.9x

20.1%

Precedent Transactions

Valuation

($ in millions)

Date

Enterprise

EV/LTM

Announced

Acquiror Name

Target Name

Target Business Description

Value

Revenue

EBITDA

02/25/2008

Arrow Electronics

LOGIX France

Markets e-business and infrastructure solutions for the technology industry

$177.9

0.2x

01/24/2008

Insight Enterprises

Calence

Designs, implements, and manages network architecture solutions

160.0

0.5

9.9

(1)

01/02/2008

Softchoice

Optimus Solutions

Provides IT products and solutions

47.0

0.3

(2)

12/11/2007

Softchoice

Software Plus

Reseller of computer software, software licensing, and accessories

45.0

0.2

08/17/2007

PCMall

SARCOM

Provides IT services and solutions

142.1

0.5

17.1

08/02/2007

Dell Inc.

ASAP Software

Provides IT products and services to corporations and governments

340.0

0.3

8.8

07/09/2007

Court Square Capital Partners

CompuCom

Provides information technology managed services

628.0

0.4

05/29/2007

Madison Dearborn Partners

CDW Corp.

Provides multi-branded information technology products

6,827.7

1.0

13.9

04/01/2007

Xerox Corporation

Global Imaging Systems

Provides office technology solutions to middle market businesses

1,666.9

1.5

11.5

(3)

02/27/2007

Westcon Group

NOXS

Distributor of security solutions for resellers and end users

70.2

0.3

8.1

02/27/2007

SYNNEX

PC Wholesale

Distributor of IT products

30.0

0.1

6.7

(4)

01/02/2007

Arrow Electronics

The Agilysys KeyLink Systems

Reseller of enterprise computer technology solutions

485.0

0.4

11/06/2006

Avnet Inc.

GE Access Solutions

Distributes computer products, solutions, and services

412.5

0.2

5.6

10/17/2006

Esprinet SpA

UMD S.A.

Distributes IT products in Spain

98.8

0.3

6.5

09/18/2006

CDW Corp.

Berbee Information Networks

Provides information technology solutions

184.0

0.5

8.4

07/20/2006

Insight Enterprises

Software Spectrum

Global business-to-business software services provider

287.0

0.2

11.0

06/19/2006

Ementor ASA

Atea Holding AB

Distributor of IT products and infrastructure in Nordic countries

143.1

0.1

6.7

11/21/2005

Esprinet SpA

Memory Set, S.A.U.

Distributes IT products in Spain

218.8

0.3

8.0

10/27/2005

Arrow Electronics

Digital Network Services GmbH

Distributes IT products in Europe

155.0

0.4

10.0

09/29/2005

Fenway Partners

Targus Group International

Provides mobile accessory solutions and computing accessories

382.5

05/10/2005

Agilysys

Communication Technical Systems

Provides various IT solutions

27.5

0.8

8.0

04/26/2005

Avnet Inc.

Memec, Inc.

Engineering solutions

690.0

0.3

11.0

04/18/2005

Caxton-Iseman Capital, Inc.

Electrograph Technologies Corp.

Technology solutions for enterprises

66.5

0.2

11.0

04/12/2005

WinWholesale, Inc

Noland Co.

Engineering solutions

293.7

0.5

9.2

04/04/2005

eXpansys Limited

MobilePlanet, Inc.

Direct reseller of mobile computing and wireless products

3.8

0.2

12/20/2004

Black Box Corp.

Norstan Inc.

Network security solutions

103.0

0.4

5.9

12/07/2004

Lenovo Group Limited

IBM's Personal Computing Division

Designs and develops desktop, laptop, and notebook computers

1,750.0

0.2

09/26/2004

Ingram Micro

Tech Pacific Limited

Distributes IT products in the Asia Pacific region

545.0

0.2

10.5

11/23/2004

Getronics NV

PinkRoccade NV

IT infrastructure solutions

471.4

0.5

7.6

10/26/2004

Avaya Inc.

Tenovis

Telecommunications and Internet solutions

635.5

0.6

09/06/2004

Telstra Corp. Ltd.

Damovo (Australia)

Network solutions for enterprises

44.5

06/22/2004

Bell Microproducts

OpenPSL

Value added distributor of enterprise, storage, and security products

35.8

0.2

05/27/2004

Platinum Equity

CompuCom

Provides information technology managed services

161.1

0.1

4.8

Range:

High

$6,827.7

1.5x

17.1x

Median

177.9

0.3x

8.6x

Mean

525.1

0.4x

9.1x

Low

3.8

0.1x

4.8x

(1) Includes earnout of up to $35M

(2) Includes additional contingency payment of $9M

(3) LTM pro-forma for the Berbee transaction

(4) LTM EBIT used as proxy for LTM EBITDA

Discounted Cash Flow Analysis

Valuation

(1) Based on management projections

(2) Shares outstanding based on fully diluted estimates of 14.7M

($ in millions, except per share data)

($ in millions)

Projected

(1)

Projected

(1)

2008 -

2012

Fiscal Year ending December 31

2008

2009

2010

2011

2012

CAGR

Revenues

$799.2

$943.1

$1,194.5

$1,424.5

$1,698.4

20.7%

EBITDA

28.6

39.8

51.6

58.2

74.5

27.0%

EBIT

Taxes

27.0

38.0

49.5

55.9

72.0

27.8%

Less: Taxes

37.9%

(10.2)

(14.4)

(18.8)

(21.2)

(27.3)

Tax-adjusted EBIT

$16.8

$23.6

$30.7

$34.7

$44.7

27.8%

Plus: Depreciation & Amortization

1.5

1.8

2.0

2.2

2.4

Less: Capital Expenditures

(2.0)

(2.6)

(2.8)

Less: Change in Working Capital

(18.6)

(13.9)

(28.2)

(29.2)

(34.2)

Unlevered Free Cash Flow

($2.3)

$8.9

$2.0

$4.9

$10.1

Discount Rate

20.0%

22.5%

25.0%

Terminal EBITDA Multiple

5.0x

5.5x

6.0x

5.0x

5.5x

6.0x

5.0x

5.5x

6.0x

2012 EBITDA

$74.5

Terminal Value

372.6

409.9

447.1

372.6

409.9

447.1

372.6

409.9

447.1

PV of Terminal Value

179.7

197.7

215.6

165.5

182.0

198.6

152.6

167.9

183.1

PV of Free Cash Flows ('09 -

'12)

16.5

15.7

15.0

Implied Enterprise Value

$196.2

$214.1

$232.1

$181.2

$197.7

$214.3

$167.6

$182.9

$198.1

Plus: Cash & Equivalents

(1)

12.2

Less: Total Debt

(1)

(22.0)

Implied Value of Equity

$186.5

$204.4

$222.4

$171.5

$188.0

$204.6

$157.9

$173.2

$188.4

Implied Share Price

(2)

$12.68

$13.91

$15.13

$11.66

$12.79

$13.92

$10.74

$11.78

$12.82

Overview

Impact of MBE

Zones is a certified minority-owned business

With

annual

Revenues

$679M,

the

Company

one

the

largest

MBEs

The benefit of this minority status is two fold:

Certain entities are required to procure, or derive social benefit from procuring, from an MBE

MBE

status

can,

times,

get

the

Company

“seat

the

table”

RFP

process

It is unclear, however, what percentage of these contracts are won directly as a result of the MBE

Estimating the impact of the MBE on the Company’s value is not a straight forward exercise

The theoretical impact on valuation should be the market value of earnings garnered solely as a function of the

MBE

Contracts directly won as a result of an MBE purchase requirement are more easily identified

Contracts won by utilizing the MBE to gain entrée to an RFP process, that are won as a result of the

MBE are not clear

Projecting impact into the future is very difficult due to the nature of the Company’s business

There are very limited valuation comps, publicly traded or precedent transaction, for MBEs from which to

glean

insight

–

statistical

similarities

exist

among

the

dataset

The feasibility of engaging in a transaction that preserves the MBE status is also murky

There may exist some transaction structures involving non-MBEs that enable the preservation of the status

This issue has not been explored in any detail by Cascadia

The number of MBEs who have the financial resources to purchase Zones is small

These corporations have limited acquisition histories, and lack transparency into capital availability

Impact of MBE on Company Financial Performance

Impact of MBE

Based on the Company’s 2007 sales records, there exist 39 accounts, among the top 100, where ZONS has completed

MBE registration

These accounts total nearly $254M in Revenues and over $13M in Gross Margin contribution

However, not all of these accounts were garnered directly as a result of the MBE status

Based on an account-by-account review, it appears 8 accounts, totaling approximately $87M in Revenues and $4M in

Gross Margin contribution in 2007, can be directly attributable to the MBE

Federal contract holders, parties who report to utility commissions, those active in diversity programs

Select local Fortune 1000 companies

Impact of MBE loss going forward would be felt most in the enterprise arena

Field sales force ($56M Revenue budget) trades heavily on MBE status, but often only as a door opener

Majority of SMB customers do not benefit from ZONS MBE status

Limited MBE options in technology distribution, so existing relationships are important

Realistic to assume that enterprise sales force would develop means to overcome loss of MBE status

Many customers have long tenures, are geographically proximate and have been satisfied with historical

service levels

Field sales force is characterized by senior professionals with significant sales history within the industry

Adjusted Projections –

Improving Function Over Time

Impact of MBE

(1) Per management guidance and Cascadia assumptions

($ in millions)

Fiscal Years Ending

LTM

Projected

(1)

CAGR

December 31,

12/31/07

2008

2009

2010

2011

2012

2007–2012

Revenues

$679.5

$709.6

$858.5

$1,119.0

$1,366.9

$1,664.3

19.6%

% Growth

4.4%

21.0%

30.3%

22.1%

21.8%

Gross Profit

$80.3

$82.4

$100.0

$124.2

$142.5

$172.3

16.5%

% of Revenues

11.8%

11.6%

11.1%

10.4%

EBITDA

$22.9

$21.1

$32.8

$45.8

$54.2

$72.2

25.8%

% of Revenues

3.4%

3.0%

3.8%

4.1%

4.0%

4.3%

EBIT

$21.0

$19.5

$30.9

$43.7

$51.9

$69.7

27.1%

% of Revenues

3.1%

2.7%

3.6%

3.9%

3.8%

4.2%

Net Income

$13.1

$12.5

$19.7

$27.8

$33.0

$44.4

27.6%

% of Revenues

1.9%

1.8%

2.3%

2.5%

2.4%

2.7%

Fully Diluted Shares Outstanding

(1)

14.700

Earnings per Share

$0.89

$0.85

$1.34

$1.89

$2.25

$3.02

27.6%

Income

Statement

Adjusted Projections –

Straight Line Loss Over Time

Impact of MBE

(1) Per management guidance and Cascadia assumptions

($ in millions)

Fiscal Years Ending

LTM

Projected

(1)

CAGR

December 31,

12/31/07

2008

2009

2010

2011

2012

2007–2012

Revenues

$679.5

$709.6

$837.4

$1,068.7

$1,280.4

$1,528.3

17.6%

% Growth

4.4%

18.0%

27.6%

19.8%

19.4%

Gross Profit

$80.3

$82.4

$97.9

$119.5

$135.3

$160.7

14.9%

% of Revenues

11.8%

11.6%

11.7%

11.2%

10.6%

10.5%

EBITDA

$22.9

$21.1

$31.0

$41.9

$48.3

$62.7

22.4%

% of Revenues

3.4%

3.0%

3.7%

3.9%

3.8%

4.1%

EBIT

$21.0

$19.5

$29.1

$39.8

$45.9

$60.2

23.4%

% of Revenues

3.1%

2.7%

3.5%

3.7%

3.6%

3.9%

Net Income

$13.1

$12.5

$18.6

$25.4

$29.4

$38.5

24.0%

% of Revenues

1.9%

1.8%

2.2%

2.4%

2.3%

2.5%

Fully Diluted Shares Outstanding

(1)

14.700

Earnings per Share

$0.89

$0.85

$1.26

$1.73

$2.00

$2.62

24.0%

Income

Statement

Summary of Historical M&A Dialogs

Public Company Buyers

Company

Contacts

Key Interactions

Feedback

•

Kuk Yi, SVP, Corporate Development

•

Fit and capabilities discussion with Yi

•

David Hemler, Pres., Best Buy For Business

•

Supply chain discussion with Hemler/Frenchu

•

Thomas Frenchu, Dir., Best Buy For Business

McFaddan, Jiwani

•

Ryan Robinson, SVP, Enterprise Services

•

John Edwardson, CEO

•

Discussed opportunity with Harczak and Ireland

•

Harry Harczak, EVP, Business Development

•

Lalji met with Edwardson and Harczak

•

Anne Ireland, VP, Business Development

•

Financial review discussion with Ireland

•

Luke Johnson, VP, Platinum Equity

•

Opportunity overview with Johnson

•

Andre Gessell, Partner, Court Square Capital

•

Opportunity overview with Gessell

•

Jeff Vogel, VP, Court Square Capital

•

Detailed business discussion with Vogel

•

Richard Fennessy, CEO

•

Lalji had direct conversations with Fennessy

•

Dave Roshak, SVP, Corporate Development

•

Opportunity overview with Roshak

•

Monica Leutchfeld, SVP, Corporate Development

•

Opportunity overview with Leutchfeld

Generally unresponsive. Company announced negative

earnings event during the process.

•

Dave MacDonald, CEO

•

Lalji met with MacDonald

•

Anne Brace, CFO

•

Valuation discussions with Martin Wolf team

•

Martin Wolf, CEO, Martin Wolf Securities

•

Financials conversation with Anne Brace

•

Chris Covington, VP, Martin Wolf Securities

•

Jay Baitler, SVP, Contract Technology Solutions

•

Opportunity overview with Sallay

•

John Sallay, SVP, Strategy

•

Detailed business discussion with Murphy

•

Candace Murphy, VP, Contract Technology Solutions

•

Telephonic management team meeting

Platinum Equity expressed interest prior to selling

CompuCom to Court Square. Court Square indicated an

M&A focus on services.

Shortly after engaging in discussions, Insight announced

a negative earnings event. Company subsequently made

services acquisition.

Company was interested in a transaction, but was actively

closeing another deal. Significant gap in valuation

expectations between the two sides.

Staples is interested in getting into the space, but was not

ready to commit the resources to an acquisition of this

size. Team staffed to build Staples in the category had

only recently joined.

Concluded that there were significant systems

compatibility issues with respect to infrastructure

whereby investment necessary to converge supply chains

would undermine deal valuation.

Expressed interest in doing a deal, but timing was not

conducive given take private process. Company appears

to be in near term acquisition holding pattern.

Company

Market

Cap ($M)

Financial

Resources ($M)

Recent Acquisition

History ($M)

Rationale

Concerns

$263.3

$13.7

•

1/2/08 Optimus Solutions ($47.1)

$334.6

$11.2

•

12/11/07 Software Plus ($45.1)

•

10/7/07 NexInnovations ($10.2)

•

5/22/07 American Identity (NA)

$15662.3

$1032.2

•

1/24/07 Veripack/Chiswick (NA)

•

12/31/06 Thrive Networks (NA)

•

12/2/06 Kross Office Outfitters (NA)

Acquisition would make PC

Connection dominant technology

distributor in the SMB.

Would combined like size hardware

and software distribution capabilities.

Foreign currency strength makes US

acquisitions attractive for Softchoice.

Technology distribution capability is

missing component in Staples arsenal

vis-a-vis Office Depot.

Company lacks financial resources

and cultural fit may be an issue

Company appears to be an

opportunistic buyer and is likely

out of the market until late 2Q08

An acquisition of Corporate

Express would serve as a material

distraction for Staples

Assessment of Potential Public Company Buyers

Public Company Buyers

A number of potential buyers were considered but not pursued

Public Company Buyers

Note: Excludes technology distribution related MBEs

Company

Primary Business

Rationale

Agilysys

IT solutions provider to corporations and public sector

Divested distribution business (KeyLink) in 2007

Arrow Electronics

Global distributor of electronic components and enterprise hardware

Business model conflict

ASAP Software

Provider of IT products to businesses

Acquired by Dell

Avnet

Global distributor of electronic components and enterprise hardware

Business model conflict

Bell Microproducts

Storage centric distributior of electronic components and computer products

Distribution business is product centric

Circuit City

Specialty retailer of consumer electronics

Bussiness model is not a fit

CompUSA

Specialty retailer of consumer electronics

Going out of business

GTSI

Vertically focused IT solutions provider

Size/vertical focus

Ingram Micro

Distributor of IT-related products

Business model conflict

INTCOMEX

Distributor of IT-related products

Geographic focus is not a fit

PC Mall

Direct marketer of computer hardware

Size, financial resources, recent services merger

Synnex

Distributor of IT-related products

Business model conflict

Tech Data

Distributor of IT-related products

Business model conflict

Company

Revenues

($M)

Employees

Rationale

Concerns

Recent Acquisity History

$1,500

1,500

$2,230

1,000

$2,100

1,050

An acquisition would only be logical is

WWT needed a large West Coast presence

or wanted to diversify into the SMB or pan-

industry. Company has made no material

acquisitions.

Company competes on price and business

models appears to be in conflict. Company

has no acquisition history.

Would provide e-commerce company a call

center and sales force presence

Acquisition would preserve MBE status and

provide SHI a West Coast / SMB presence

from which to push its service offerings

An acquisition would only be logical if

WWT needed a large West Coast presence

or wanted to diversify into the SMB or pan-

industry

Business models are in direct conflict and

financial resources appear to be limited.

Company has no acquisition history.

Assessment of Minority Business Company Buyers

Minority Business Buyers

Overview

Financial Buyers

Cascadia was asked to assess financial buyers as a distinct buyer set based on recent market activity

CDW/Madison Dearborn Partners; CompuCom/Court Square Capital Partners

Our analysis focused on not only on a full buyout, but also a minority supported deal

In order to determine the feasibility of a financial buyer (majority or minority) transaction Cascadia

conducted a debt capacity analysis on the business

Bank

America

and

Morgan

chase

were

given

limited

access

due

diligence

under

NDA

Each debt provider was asked to provide guidance on structure and associated costs

Analysis assumes private company debt structure with a focus on total debt as opposed to

cost minimization

An imputed IRR analysis was completed in order to verify feasibility of a transaction at given debt

levels outlined by third parties

IRR analysis yields the conclusion that a full buyout that compromises the MBE status would result

in a loss of approximately $1/share

Debt Capacity Analysis Summary

Financial Buyers

Based on feedback from the potential lenders, they anticipated the requirement for an asset based facility, given

current debt market conditions and the nature of the Company’s business

Margins, cash flow, cyclicality, inventory requirements make a senior debt structure challenging

Higher cost due to departure from flooring structure, but greater availability day one

$50M

$60M

available

support

transaction

(higher

end

based

Mezzanine

availability)

General parameters were outlined as follows:

Structure. Revolver, Stretch Loan, Mezzanine

Amounts. $50M

$60M

Revolver,

$10M

Stretch

Loan

Cost. Revolver: LIBOR

200

–

250

bps,

Stretch

Loan:

LIBOR

275

–

300

bps

Other Considerations. Stretch

Loan

amortization

–

months,

suppression

availability

the

Revolver, normal fees and expenses

Loan

amount

and

associated

cost

for

mezzanine

debt

not

yet

clear

both

institutions

indicated

their

mezzanine

groups would not be interested in the paper

Analysis assumes $10M mezzanine piece as available

LBO Analysis –

Base Case

Financial Buyers

2) Shares outstanding based on fully diluted estimates of 14.7M

($ in millions)

Illustrative EBITDA Exit Multiple

5.0x

5.5x

6.0x

2012 Projected EBITDA

$74.5

Implied 2012 Enterprise Value

$372.6

$409.9

$447.1

Less: Net Debt & Preferred Equity in 2013

(37.8)

Less: Sub Debt's 0.0% Ownership

0.0

Less: Preferred Equity's 0.0% Ownership

0.0

Implied 2013 Equity Value

$334.7

$372.0

$409.3

Illustrative Required Return

20.0%

25.0%

30.0%

20.0%

25.0%

30.0%

20.0%

25.0%

30.0%

Implied Maximum Equity Contribution

$161.4

$137.1

$117.2

$179.4

$152.4

$130.2

$197.4

$167.6

$143.3

Plus: Maximum Transaction Net Debt & Preferred

(1)

55.0

Less: Financing & Transaction Fees

(2.0)

Implied Transaction Value

$214.4

$190.1

$170.2

$232.4

$205.4

$183.2

$250.4

$220.6

$196.3

Less: Existing Net Debt, Preferred & Minority Int.

(9.7)

Implied Price Paid to Seller

$204.7

$180.4

$160.5

$222.7

$195.7

$173.5

$240.7

$210.9

$186.6

Implied Share Price

(2)

$13.93

$12.27

$10.92

$15.15

$13.31

$11.81

$16.37

$14.35

$12.69

Enterprise Value as a multiple of 2008 EBITDA

7.5x

6.6x

5.9x

8.1x

7.2x

6.4x

8.7x

7.7x

6.9x

Equity Contribution as a % of Transaction Value

75.3%

72.1%

68.9%

77.2%

74.2%

71.1%

78.8%

76.0%

73.0%

Maximum Transaction Net Debt & Preferred of $55.0 million is 1.9x LTM 2008 EBITDA of $28.6 million

IRR at Various Prices Analysis –

Base Case

Financial Buyers

1) Majority shareholder fully diluted share amount assumed at 7.4M

($ and shares in millions, except per share values)

Analysis at Various Prices

Price per Share

$9.00

$10.00

$11.00

$12.00

$13.00

$14.00

Fully Diluted Shares Outstanding

14.700

Equity Value

$132.3

$147.0

$161.7

$176.4

$191.1

$205.8

Plus: Total Debt FY 2008

22.0

Plus: Minority Int. & Pref. FY 2008

0.0

Less: Cash & Equivalents FY 2008

(12.2)

Enterprise Value

$142.0

$156.7

$171.4

$186.1

$200.8

$215.5

Twilight

Metric

(1)

Revenues

LTM 12/31/07

679.5

0.2x

0.3x

FY 2008E

799.2

0.2

0.3

Enterprise

FY 2009E

943.1

0.2

Value

Multiples

EBITDA

LTM 12/31/07

22.9

6.2x

6.9x

7.5x

8.1x

8.8x

9.4x

FY 2008E

28.6

5.0

5.5

6.0

6.5

7.0

7.5

FY 2009E

39.8

3.6

3.9

4.3

4.7

5.0

5.4

Equity

Net Income

LTM 12/31/07

13.1

10.1x

11.2x

12.3x

13.4x

14.6x

15.7x

Value

FY 2008E

17.1

7.7

8.6

9.5

10.3

11.2

12.0

Multiples

FY 2009E

24.1

5.5

6.1

6.7

7.3

7.9

8.5

Total Equity Value

$132.3

$147.0

$161.7

$176.4

$191.1

$205.8

Debt used for Purchase

43.0

Majority Shareholder Value

(1)

66.5

73.9

81.3

88.7

96.1

103.4

New Equity Value

22.8

30.1

37.4

44.7

52.0

59.3

Total Equity Invested

$89.3

$104.0

$118.7

$133.4

$148.1

$162.8

Equity

Illustrative EBITDA Exit Multiple

5.0x

IRR

2012 Projected EBITDA

$74.5

Analysis

Exit Value

$372.6

Less Net Debt

(37.8)

Equity Value

$334.7

Equity % Ownership

100.0%

Equity Proceeds

$334.7

Total Equity IRR

39.2%

34.0%

29.6%

25.9%

22.6%

19.8%

Valuation

LBO Analysis –

Adjusted Projections (Improving Function)

Financial Buyers

2) Shares outstanding based on fully diluted estimates of 14.7M

($ in millions)

Illustrative EBITDA Exit Multiple

5.0x

5.5x

6.0x

2012 Projected EBITDA

$72.2

Implied 2012 Enterprise Value

$360.8

$396.8

$432.9

Less: Net Debt & Preferred Equity in 2013

(56.4)

Less: Sub Debt's 0.0% Ownership

0.0

Less: Preferred Equity's 0.0% Ownership

0.0

Implied 2013 Equity Value

$304.4

$340.5

$376.6

Illustrative Required Return

20.0%

25.0%

30.0%

20.0%

25.0%

30.0%

20.0%

25.0%

30.0%

Implied Maximum Equity Contribution

$146.8

$124.7

$106.6

$164.2

$139.5

$119.2

$181.6

$154.2

$131.8

Plus: Maximum Transaction Net Debt & Preferred

(1)

55.0

Less: Financing & Transaction Fees

(2.0)

Implied Transaction Value

$199.8

$177.7

$159.6

$217.2

$192.5

$172.2

$234.6

$207.2

$184.8

Less: Existing Net Debt, Preferred & Minority Int.

(9.7)

Implied Price Paid to Seller

$190.1

$168.0

$149.9

$207.5

$182.8

$162.5

$224.9

$197.5

$175.1

Implied Share Price

(3)

$12.93

$11.43

$10.20

$14.12

$12.43

$11.05

$15.30

$13.44

$11.91

Enterprise Value as a multiple of 2008 EBITDA

9.5x

8.4x

7.6x

10.3x

9.1x

8.2x

11.1x

9.8x

8.8x

Equity Contribution as a % of Transaction Value

73.5%

70.2%

66.8%

75.6%

72.5%

69.2%

77.4%

74.4%

71.3%

Maximum Transaction Net Debt & Preferred of $55.0 million is 2.6x LTM 2008 EBITDA of $21.1 million

IRR at Various Prices Analysis –

Adjusted Projections (Improving Function)

Financial Buyers

1) Majority shareholder fully diluted share amount assumed at 7.4M

($ and shares in millions, except per share values)

Analysis at Various Prices

Price per Share

$9.00

$10.00

$11.00

$12.00

$13.00

$14.00

Fully Diluted Shares Outstanding

14.700

Equity Value

$132.3

$147.0

$161.7

$176.4

$191.1

$205.8

Plus: Total Debt FY 2008

22.0

Plus: Minority Int. & Pref. FY 2008

0.0

Less: Cash & Equivalents FY 2008

(12.2)

Enterprise Value

$142.0

$156.7

$171.4

$186.1

$200.8

$215.5

Twilight

Metric

(1)

Revenues

LTM 12/31/07

679.5

0.2x

0.3x

FY 2008E

709.6

0.2

0.3

Enterprise

FY 2009E

858.5

0.2

0.3

Value

Multiples

EBITDA

LTM 12/31/07

22.9

6.2x

6.9x

7.5x

8.1x

8.8x

9.4x

FY 2008E

21.1

6.7

7.4

8.1

8.8

9.5

10.2

FY 2009E

32.8

4.3

4.8

5.2

5.7

6.1

6.6

Equity

Net Income

LTM 12/31/07

13.1

10.1x

11.2x

12.3x

13.4x

14.6x

15.7x

Value

FY 2008E

12.5

10.6

11.8

12.9

14.1

15.3

16.5

Multiples

FY 2009E

19.7

6.7

7.5

8.2

9.0

9.7

10.5

Total Equity Value

$132.3

$147.0

$161.7

$176.4

$191.1

$205.8

Debt used for Purchase

43.0

Majority Shareholder Value

66.5

73.9

81.3

88.7

96.1

103.4

New Equity Value

22.8

30.1

37.4

44.7

52.0

59.3

Total Equity Invested

$89.3

$104.0

$118.7

$133.4

$148.1

$162.8

Equity

Illustrative EBITDA Exit Multiple

5.0x

IRR

2012 Projected EBITDA

$72.2

Analysis

Exit Value

$360.8

Less Net Debt

(56.4)

Equity Value

$304.4

Equity % Ownership

100.0%

Equity Proceeds

$304.4

Total Equity IRR

35.9%

30.8%

26.6%

22.9%

19.7%

16.9%

Valuation