D1:

D2       Full legal name:          CentralNic Limited

Principal address:      163 New Kings Road

                                                London

                                                SW6 4SN

                                                United Kingdom

                                                Tel:       +44 (0)20 7751 9000

                                                Fax:      +44 (0)20 7751 0958

                                                Email: stephen.dyer@centralnic.com

D3.      Other business locations: there are no other business locations of the registry operator.

D4.      Business entity: Centralnic Limited (referred to in this document as CentralNic) is a private limited company incorporated in England on 17^th May 1999 under the Companies Act 1985. The company’s registered number is 3771833.

D5.      URL of registry operator's principal world wide web site: www.centralnic.com

D6.      Dun & Bradstreet D-U-N-S Number: None

D7.      Number of employees: 19

D9.      Registry operator's directors, other officers, relevant managers and owners of five per cent or more of registry operator.

(i) Directors:

Stephen Gerard Crispin Dyer (Chairman)

Cathy Bosworth Horton (Director)

                        Advisory Board members:

D10.    Name, telephone and fax number, and e-mail address of person to contact for additional information regarding this proposal:

            Enquiries on technical information should be directed to:

            Joel Rowbottom (Chief Technical Officer)

Tel:       +44 (0)20 7751 9000

                        Fax:      +44 (0)20 7751 0958

                        Email: joel@centralnic.com

            All other enquiries regarding this proposal should be directed to:

Stephen Dyer (Chairman)

                        Tel:       +44 (0)20 7751 9000

                        Fax:      +44 (0)20 7751 0958

Email: stephen.dyer@centralnic.com

D11.    The full legal name, principal address, telephone and fax numbers, e-mail address, and Dun & Bradstreet D-U-N-S Number (if any) of all subcontractors: There are no subcontractors.

II. BUSINESS CAPABILITIES AND PLAN

D12:

D13.1. Detailed description of the registry operator's capabilities.

CentralNic describes in detail its capabilities as a registry operator in the following sections of this application:

·        Technical –  D13.1.4, D15

·        Marketing – D13.2.4

·        Operational and Management – D13.1.2, D13.1.6, D13.1.7

·        Legal – CentralNic considers that its ability to draw upon the specialist legal expertise of one of its founders and directors, Cathy Horton, and the firm of Squire, Sanders & Dempsey, of which she is an equity partner, is of very considerable value. Further information on Cathy Horton is under D13.1.6. In addition, the creation of CentralNic-led legal forums is an integral part of CentralNic’s marketing strategy (D13.2.4).

D13.1.1. Company information: CentralNic

CentralNic is a private limited company based in London, United Kingdom. The company is 70% owned by the founders and drivers and 30% held by passive investors. CentralNic was legally formed on 17th May 1999.

CentralNic’s operations, together with its predecessor company, NomiNation, date back to 1995. CentralNic has a full-time staff of nineteen based at CentralNic’s headquarters in Fulham, London.

A copy of a letter of reference from Mr Clive Hammond, CentralNic’s bank manager at HSBC is under 13.4.2 at the end of this document.

CentralNic is a company limited by shares. It has an authorised share capital of 1,000,000 ordinary £1 shares of which 11,758 are issued. There are no other classes of shares.

The company has no formal alliances.

D13.1.2. Current business operations.

CentralNic corporate profile

Originally founded in 1995 as NomiNation, CentralNic was established in April 2000 as an independent global domain name registry committed to making it easier for Internet users to establish new and distinctive domain names with regional and country-specific identities.

Headquartered in London, CentralNic currently has a portfolio of more than 17 domain names available to users world-wide, including eu.com (Europe), uk.com (United Kingdom), us.com, (United States), cn.com (China) and ru.com (Russia). Additional domain names will be added this year.

CentralNic uses the .com and .net standard domain name structure to offer additional regional and country-specific domain names, ensuring a secure, inexpensive solution for creating easily identifiable Internet addresses world-wide.

CentralNic's registry service is particularly useful for Internet users in countries where domain names are difficult to obtain due to restrictive domain regulations. However, the CentralNic portfolio also has wide appeal to individuals and companies seeking to define an Internet identity in a region or country where they intend to establish or expand their business, or for any other reason establish a geographically distinct identity.

Users often turn to CentralNic when a conventional Top Level Domain (TLD) such as .com, or a country TLD such as .uk address has already been claimed by another party. CentralNic customers include such well-known companies as Creative Labs, Gucci and Sharp.

Registration of a new domain name of choice costs approximately $99 for a two-year period, after which it can be renewed. CentralNic has a world-wide network of more than 350 resellers that provides customers with efficient local access for registration. The company also provides extensive customer support, including legal expertise on such issues such as country specific regulations and individual vs. corporate ownership of domain names.

The company is currently experiencing growth rates of more than 50 per cent a month and has currently more than 50,000 registered domain names (as of June 2000).

To serve its customers without interruption, CentralNic operates an international network of Domain Name Servers running on the latest versions of Solaris and Linux to ensure maximum reliability and performance. The servers are co-ordinated and controlled from the company's network operations centre in London, United Kingdom.

The company plans to install four additional operation centres in various locations around the world to form a global network. This network will be enhanced to support the new TLD.

D13.1.3. Past business operations/entity history.

D13.2. Business plan for the proposed registry operations.

D13.2.1. Services to be provided.

CentralNic will be providing registry services to the TLD applicant which are functionally close to those it is already familiar with providing in its existing registry business.

These registry services are:

1)      Direct registration.

2)      Reseller registration.

CentralNic provides resellers and registrars with traditional registration and whois interfaces which can be integrated with registrars’ local systems.

D13.2.2. Revenue model.

It is anticipated that there will be two distinct stages for the revenue model, which apply to different levels of maturity for the TLD applicant’s proposal.

1)      Start-up phase. In this phase the revenues that CentralNic will receive reflect both the immaturity of the new operation and the heavy, pre-operational investment which CentralNic will make in capital equipment. The revenues which CentralNic receives at this stage will be in the order of $7 per annum for a two year registration and $4 per annum for each subsequent re-registration.

2)      Intermediate/mature phase. At this stage there will be detailed evidence of the demand and the likely demand for registrations, allowing more accurate projection of future revenues to be made. At this stage it is anticipated that CentralNic will agree a ‘cost plus’ revenue formula, which will fall considerably below the assumption of revenue in stage 1 as demand is seen to be increasing substantially.

The revenues are incorporated into the pro-forma financial projections at D13.3, below.

D13.2.3. Market.

Present

CentralNic’s existing business addresses the following key groups directly:

·        Internet Service Providers.

·        Web Hosting specialists.

·        Web design agencies.

·        Domain Name Brokers.

·        Small to medium sized business consultants.

·        Brand protectors.

·        The press.

And indirectly:

·        All Internet users.

Future

In the event of the award of the TLD to Telnic Limited (“Telnic”) , CentralNic anticipates addressing the following groups:

Telcos.

Telco's resellers.

New VoIP operators.

The market can be potentially any IP enabled device and there will be no restriction on access.

D13.2.4. Marketing plan.

CentralNic’s marketing plan under this registry operator’s proposal will be finalised in conjunction with Telnic.

However, as an indication of CentralNic’s existing marketing strengths and abilities, the following gives a detailed picture of CentralNic’s marketing programme for the next twelve months.

CentralNic’s Marketing Objectives

·        Provide a premium customer support service

·        Expand the marketing team

·        Continue to further develop a world-wide reseller network

·        Appointment of Global PR Consultancy

·        Exhibit at relevant Internet exhibitions

·        Become a recognised authority on legal issues relating to domain names and Internet governance.

Activities to fulfil CentralNic’s marketing objectives

Expanding the Marketing Team

CentralNic’s current business plan includes a Marketing Director and a staff of six and funding for Marketing of $1.8 million.

One of CentralNic’s shareholders, US/Austrian-based Romanian Mariana Bozesan has significant marketing experience with Oracle and brings that strength to the company. Despite this expertise CetralNic is currently searching for a full-time Marketing Director.

Further immediate personnel requirements include:

·        UK Sales and Marketing Director

·        European Business Development Manager

·        US Business Development Manager

·        PR Executive/Exhibition Assistant

·        Customer Support staff x 2 for 24 hours cover

Continue the Development of the World-wide Reseller Network

CentralNic’s current activities address the continued growth of our reseller base, with a focus on recruiting and assisting a backbone of European and US resellers.

It becomes increasingly easy to penetrate a national market when there is a core of recognised resellers already in existence (currently 350+ resellers in the UK).  This activity is helped by PR back-up and the maintenance of a high profile campaign in international domain name circles to consolidate CentralNic’s profile.

The future consists of a much more aggressive marketing strategy.

One such area of activity includes the establishment of partnerships with industry heavyweights. CentralNic therefore seeks relationships with companies such as Yahoo and Verio, where there is positive two-way supportive activity and CentralNic can gain from the huge traffic generated from such sites. These companies are mostly US-centric, but we feel that we can bring a strength in the European arena that they may find a compelling argument for joining forces with us in their pushes into Europe.

Activities currently being carried out include the following:

·        Direct mail campaign, involving individually addressed key personnel.  The French market is currently being targeted.

·        Immediate response to requests for information plus follow-up telephone calls.

CentralNic is recruiting resellers internationally and we already have in place a discount structure and a joint marketing development plan for these resellers.  This effectively rebates five per cent of revenues back to the largest resellers for use in advertising or other activities.

CentralNic is aiming to support local resellers, not only through the Global Branding activities described above, but also through locally focused activities.   Here we will work with the resellers.   We cannot hope to fully understand the diversity of cultures and markets into which we are selling, neither do we wish our resellers to perceive us as remote and arrogant.  By working with our reseller channel and taking a sensitive approach to each market we intend to maximise the effectiveness of our marketing and PR spend in each marketplace.

Premier Customer Support Service

Domain name registries are renowned for poor customer service.

CentralNic is putting in place a 24 hour multi-lingual customer support system. A current CentralNic policy is that all customer queries are dealt with by the end of each business day.

Notwithstanding the fact that registrars will typically be the first point of contact for customers, CentralNic will itself be supporting every major language from its London base.

CentralNic already has the reputation of providing good quality customer care in the UK and plans to mirror this image to other parts of the world.

Appointment of Global PR Consultancy

To strengthen its marketing position and aid the transition to a fully global marketing company CentralNic has engaged Hill and Knowlton - one of the world’s biggest global public relations consultancies - to advise the company. Hill and Knowlton has a huge portfolio of blue chip clients and has a world-wide business, split approximately 40% in Europe and 40% in the US. Hill and Knowlton's advice is likely to impact the plans described in this section.

CentralNic is particularly keen on appointing this agency due to several factors:

·        The Hill and Knowlton Board Director responsible for IT clients has a particular key understanding of our market, having already purchased a number of CentralNic’s names prior to our approach.

·        The consultancy has a strong lobbying team, including representation in Brussels to the European Community - an emerging player in the domain name environment.

·        The consultancy also has an impressive US network, with offices in most cities including 2 in San Francisco.

·        For stage 2 of the marketing rollout, the consultancy has offices in China.

Hill and Knowlton will play an integral part of assisting CentralNic in achieving one of its objectives which is to position CentralNic as a global brand for quality, security and confidence.

CentralNic’s experience in the UK market has been that a critical factor in this business is trust.  We have to be a Trusted Third Party  (“TTP”) because companies that use our names are entrusting their IP to us and investing money in branding their company with our name.  It therefore follows that growth in the use of a particular name is much easier if that name is seen to be backed by a TTP and to this end we wish to position CentralNic as a global brand.

This is not an overnight activity, and our current marketing plan does not contain the sort of sums normally associated with the roll-out of a global brand.   We envisage the gentle growth of this position through our strong presence in the area of domain name law, our international profile, and the more nationally-based marketing activity.  All these activities will be supported by Hill and Knowlton.

Internet Exhibitions

CentralNic recently exhibited at the Internet World Show in London. This forum has been very valuable for meeting and signing up overseas resellers and for making further potentially valuable contacts.

CentralNic plans to exhibit at Internet World Shows in the following countries: Paris – November 2000, New York, Russia, possibly Berlin in November, UK 2001.

Organisation of Legal Forums

One of CentralNic’s great strengths is to have as a board director and shareholder a prominent corporate lawyer.  Cathy Horton, Senior Partner and Head of Global IT of Squire, Sanders and Dempsey.

Cathy and her team are pioneering CentralNic’s legal centre of excellence for the domain name industry, bringing a knowledge base and order to an area which needs stability and leadership. This activity will provide also project the company into the global arena.

D13.2.5. Estimated demand for registry services in the new TLD.

The estimated demand for new registrations is:

Year 1:            1,090,000

Year 2:            1,625,000

Year 3:            3,500,000

Year 4:            6,120,000

Year 5:            9,780,000

D13.2.6. Resources required to meet demand.

The resources required to meet the estimated demand levels shown under 13.2.5 have been considered in detail in the following sections of this proposal:

Financial – 13.2.13

Technical and physical plant – D15

Staff – 13.1.7

Customer service – 13.2.4

Legal – 13.1.6

It should be noted that the estimated demand levels noted under 13.2.5 are mid-case estimates and CentralNic is very confident that it will be able, with a wide ‘comfort’ margin, to satisfactorily service demand.

Variance significantly above these demand levels would clearly lead to CentralNic being required to deploy financial and staffing resources quickly to meet these demands.

However, CentralNic’s experience of huge growth over the most recent period of its operational history means that it already has the systems in place to meet demand levels even if they are significantly in excess of those shown at 13.2.5.

CentralNic is capable of reacting successfully to the 'quantum leap' growth situations often encountered in the domain name market.

D13.2.7. Plans for acquiring necessary systems and facilities.

The current systems that are in place allow for easy expansion, with the simple of addition of more units configured to perform the same job as the existing ones. However, new equipment will be coming from Network Engines Inc. and Sun Microsystems - the prices for which are detailed below.

Oracle Licences:

Network Engines Hardware:

D13.2.8. Staff size/expansion capability.

CentralNic's ability to recruit and expand staff numbers in all areas of it's operation as well as employment policies, training and space to accommodate new members of staff has been described in detail under section 13.1.7.

D13.2.9. Availability of additional management personnel.

To date the company has an excellent record of recruiting the ablest technical and management people by word-of-mouth as well as the active seeking of key staff through other channels.

CentralNic is proud of its record in recruitment and staff retention and feels that this augurs well for the company’s future ability to recruit first-rank personnel.

D13.2.10. Term of registry agreement.

CentralNic believes that an initial assumption of at least a four year term for the registry agreement would be prudent. CentralNic believes that a term of less than two years would result in costings not appropriate to this proposal.

It is in the nature of the market in which CentralNic intends to operate that, subject to the professional running of the registry, CentralNic expects that the registry agreement would be automatically renewed for terms well in excess of the initial agreement period.

D13.2.11. Expected costs associated with the operation of the proposed registry.

These costs are shown in the pro-forma financial projections at 13.3. Revenue assumed to be paid to ICANN is shown in these projections.

D13.2.12. Expected revenue associated with the operation of the proposed registry.

These revenues are shown in the pro-forma financial projections at 13.3 and arise from the demand levels shown in the table at 13.2.5.

D13.2.13. Capital requirements.

Quantification of capital requirements in amount and timing

Based on the demand figures provided to it by Telnic, CentralNic estimates that the following capital requirements will need to be met:

Year 1:            $2,200,000

Year 2:            $1,500,000

Year 3:            $2,300,000

Year 4:            $3,200,000

Year 5:            $4,800,000

Obtaining capital

CentralNic is presently closely engaged in seeking new investors to fund the next stage of the company’s expansion.

CentralNic has already had offers (subject to commercial due diligence) from potential investors indicating that substantial funds are available to purchase a significant minority interest in CentralNic. These funds, combined with current revenues are more than sufficient to fund the expansion envisaged above.

CentralNic’s financial advisers Cavendish Corporate Finance are optimistic that a valuation of not less than $35 million can be obtained. This figure is substantially lower that might have been expected if the current general investor wariness of TMT stocks was not present. A letter from Cavendish Corporate Finance is at 13.4.4.

The investment partner with which CentralNic will probably choose to ally itself has an understanding and knowledge of CentralNic’s present field of operation as well as an understanding of the opportunities which are available to it as a registry operator for the present TLD applicant.

The potential funding sources with which CentralNic is in negotiation have a highly positive view of the further capital requirements necessary to meet the registry operator demands under this application and the opportunity this would present to CentralNic.

Sources, costs of capital

As described above, CentralNic is presently engaged in discussions for equity funding requiring the issue of new shares in CentralNic for an ownership interest in the company.

It is possible that the investment will be in the form of some debt or convertible finance. However, the strong likelihood is that CentralNic will remain debt-free during the next stage of its growth.

It should be noted that CentralNic has very substantial free cash flow and that this is highly advantageous to CentralNic in whatever route it takes to new capital.

D13.2.14. Business risks and opportunities.

Risks

The principal risks associated with the registry operator’s proposal stem from the ability of Telnic to predict accurately or not the demand for registrations.

There are business risks for CentralNic in either of the following circumstances:

1) Demand for registrations far in excess of that assumed in this application. This would lead to CentralNic being required to scale up its technical plan, perhaps in a very short period, leading to considerable pressure on staff and equipment.

2) Demand for registrations well below that assumed in this application. In the event of low demand, CentralNic would have scaled up its capital expenditure significantly in the pre-operational phase leaving capital resources under-utilised and staffing levels in excess of those required.

Opportunities

The success of Telnic would provide CentralNic with a potentially large increase in the volume of registrations.

Part of CentralNic’s success in its relatively short period of operation has been its ability to increase its management and technical systems to respond to a rapidly expanding market. CentralNic views the challenge of increased business volume in all areas of its operations with confidence based on its proven technical and operational ability for:

·        Scalability.

·        Total reliability.

·        Security.

·        World-wide, redundant servers.

·        Fast access/high bandwidth.

D13.2.15. Registry failure provisions.

CentralNic is presently addressing the legal requirements of new minority shareholders seeking to make a substantial investment in the company. Part of this due diligence process is identifying and valuing the assets of the company.

Unusually for a company in CentralNic’s area of operation it has bankable ‘real estate’ assets in the form of domain names. These assets are divisible from CentralNic and ones which it is possible to value independently of CentralNic’s overall worth.

In the very unlikely event of any reversal leading to the financial failure of the registry operator, CentralNic is confident that registrants would be served without interruption by any new entity taking on the management of the registry operator. This is because the domain names and their users form a substantial and valuable asset in their own right and one which a third party company would be keen to acquire and maintain.