II. BUSINESS CAPABILITIES AND PLAN

D12. The second section of the Registry Operator's Proposal (after the "General Information" section) is a description of the registry operator's Business Capabilities and Plan.

D13. The Business Capabilities and Plan section should consist of at least the following:

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

D13.1.1. Company information.

Company information

Date of formation:	November 21, 1995.

Legal status:	U. S. Corporation incorporated in the State of California

Number of employees:	4

Formal alliances:	none

Primary Location

Image Online Design, Inc.

1201 Johnson Avenue Suite 201

San Luis Obispo, CA 93401

Telephone:	(805) 543-4716

Facsimile:	(805) 543-4735

E-Mail:	info@iodesign.com

The full names, positions and ownership percentages are as follows:

[The information contained in the "Ownership" column in the following table is confidential and may not be disclosed].

Full Name	Positions	Ownership
John S. Frangie	Chief Executive Officer, Chairman of the Board	52.4% ownership
Christopher Ambler	President,

Chief Technology Officer, Director	37% ownership
Peggy Pierce	Secretary,

Chief Operating Officer,

Director	5% ownership
Tracey Thomas	Shareholder	5% ownership

No entity or person, except for the above referenced individuals, own more than 5% of the registry operator.

References

Dave Booker

Chief Executive Officer

First Bank of San Luis Obispo

995 Higuera Street, San Luis Obispo, CA 93401

(805) 641-5100

Reese Davies

President

First Bank of San Luis Obispo

995 Higuera Street , San Luis Obispo, CA 93401

(805) 641-5100

Jeff Priolo

Agent

Neal Truesdale Insurance

1400 Madonna Road , San Luis Obispo, CA 93405

(805) 549-7430

D13.1.2. Current business operations.

Since 1996, Image Online Design has operated the .Web top-level domain name registry. Although not readily accessible to most Internet users, browsers may be configured to resolve domain names ending in.Web. Despite these limitations, we have still registered approaching 20,000 domain names in our registry. The registration of .Web domains and related services comprises Image Online Design's complete product offering; the maintenance and development of the registry represent Image Online Design's core competency. For a more detailed history of Image Online Design and the domain name space, we strongly recommend reading attachment D13.1.2_A, a primer drafted for ICANN's July, 2000 Yokohama meeting.

One year after opening the registry for service, Image Online Design began to offer .Web registrants without access to name servers, low cots DNS services. Upon .Web's entry into the root, Image Online Design plans to offer registrants primary and secondary name service and the choice between email forwarding or an MX record entry.

As always, all Image Online Design services are augmented by customer and technical support. Customers may inquire and receive responses to inquiries by email or over the telephone. Based upon our experience administering support and addressing the concerns of our customers over the past four years, we are in the unique position of being in possession of a customer support plan born of domain registry experience.

D13.1.3. Past business operations/entity history.

Image Online Design, Inc. was formed in 1995 as a webhosting and design company. During 1995 and part of 1996, the Company had great success with this business endeavor. At that point, management decided to expand its operations to pursue becoming an Internet name registry, with the encouragement of Internet Assigned Numbering Authority (IANA).

The .Web registry became operational in July of 1996. The Company has registered nearly 20,000 .Web domain names in over 95 countries.

D13.1.4. Registry/database/Internet related experience and activities.

The Chief Technology Officer of Image Online Design has been involved in Internet development for over 15 years, and Registry development for over 5 years. See attachment D13.1.6_B. Image Online Design has selected subcontractors for critical Registry components that have unmatched experience in Internet technology and Registry & Database development.

D13.1.5. Mission.

We are Image Online Design, the .Web Internet Domain Name Registry. Consistent with the responsibility of administering a registry, our mission is to position ourselves as a global innovator of Internet systems that enhance the utility and stability of the Internet. Through an aggressive research and development program, we seek to improve the Internet of today, and innovate that of tomorrow.

D13.1.6. Management.

Management of Image Online Design has over 15 years of combined experience relevant to the operations of an Internet registry and registrar. Resumes for our management team are attached as D13.1.6_A thru D13.1.6_C. See section D13.1.1 for personal references.

D13.1.7. Staff/employees.

We have separately addressed each of the points above in section D13.2.8. Further, the number of employees and associated salaries are detailed in section D13.3_A, pages F-72 to F-75. Job descriptions on personnel areas can be found at Appendix D13.3_B.

D13.1.8. Commercial general liability insurance.

The company, under advisement with legal counsel and the insurance broker, has obtained the necessary insurance. Please find below the details regarding our insurance arrangement.

Jeff Priolo, Agent

Neal Truesdale Insurance

1400 Madonna Road, San Luis Obispo, CA

(805) 549-7430

Commercial General Liability insurance is currently carried through Neal Truesdale Insurance, with Hartford Casualty Insurance, Hartford Plaza, CT 06115. Policy coverage limits are $1 million per occurrence / $2 million general aggregate. See attachment D13.1.8_A.

Upon selection by ICANN, additional insurance coverage will be purchased. The increased areas of coverage and policy limits address: First party property direct or consequential coverages and third party liability coverages for incidences such as fire & extended coverages, network intrusion, illegitimate use, denial of service attacks, virus, internal or external/malicious or accidental/known or unknown sources.

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

D13.2.1. Services to be provided.

The primary service of Image Online Design's .Web registry is the registration of second-level domains in the .Web Top Level Domain namespace, the generation of a Domain Name System zone file for the .Web Top Level Domain namespace, and the propagation of that zone file to the Internet via distributed zone servers.

Additional services offered include:

Hosting of DNS Records for customers who do not have their own name servers

Redirection of web services for customers who want their .Web domain to be redirected to an existing web site

Forwarding of electronic mail for customers who want all electronic mail to their .Web domain forwarded to an existing mailbox

Search functionality based upon .Web domain name and description of contents of the customer's web site

Additional DNS Services that may be developed from time to time by the Research and Development Department

D13.2.2. Revenue model.

Revenue projections for the .Web registry and registrar are based on detailed analysis and review of the historical and present conditions of the domain name registration market. Using the number of .com domain name registrations, and the total number of all domain name registrations (i.e., .com, .net, .org, ccTLDs) and other domain name registration data, reasonably accurate assumptions were used to model the total number of projected competitive top-level domain name registrations. See Section D13.3_A page F-62. Next, the projected market share of .Web registrations is calculated from marketing data, projections, and expert opinion. The total number of projected new domain name registrations is then multiplied by the projected market share to calculate the total number of projected new .Web domain name registrations. Each year a large percentage of .Web domain names is projected to be renewed by the registrants. However, some attrition is expected. Projections show that the registry and the registrar will lose customers due to attrition each year. See Section D13.3_A pages F-63 to F-69.

In time, as competition is introduced at the registrar level, a percentage of .Web registrations currently held by the Image Online registrar will undergo registrar transfer. Accordingly, the Image Online registrar will experience a projected additional attrition factor. Unlike attrition through non-renewal, only the registrar will lose these customers. Even though these customers are lost at the registrar level, the registry will still receive revenue for these customer's renewals. See Section D13.3_A pages F-63 to F-69.

The projected domain name market growth was calculated using actual data provided by Network Solutions (NSI), for the .com zone, during the quarters from 3/1/1996 to 3/1/1998. See Appendix D13.2.2_A, Selected NSI Financial Data, also available at <http://media.corporate-ir.net/media_files/NSD/nsol/reports/nsol98financial.pdf>. Note that while Network Solutions has released data for a more recent period, that data is not broken down by quarter and thus was not incorporated into the model. Using the actual data, a least-squares growth trend analysis was calculated through 12/1/2005. See section D13.3_A page F-64.

Despite several published reports predicting larger substantial growth, our conservative least-squares growth trend provides a solid base-line foundation for financial projections. The conservative nature of the least-squares growth trend analysis is clearly evidenced by comparing the predicted values with known registration values during 1999. For example, the least-squares growth trend predicts 1.06 million new competitive domain name registrations for the 1st quarter, 2000. However, www.NetFactual.com shows an actual 1.4 million total domain name registrations (with .com accounting for approximately 80% of the total or 1.1 million competitive domain name registrations) new domains being registered each month during the same period (See www.NetFactual.com). Of course, the assumption that .net and .org are non-competitive TLDs is not accurate because many competitive registrants are forced to register in .net and .org because the .com domain name they wish is unavailable.

While we believe that it is highly unlikely that any TLD will individually be able to capture the same market share as .com, we believe that the .Web TLD will become a widely accepted generic TLD. The .Web TLD, we project, will capture 15% of all new domain name registrations in the first four quarters and 10% thereafter. The percentage of the market that we believe that we will capture is comparable, but slightly larger, to the market percentage currently captured by .net, or 14% (See www.NetFactual.com).

Further substantiating the projected market share, .Web's world-wide appeal is evident in light of our approximately 20,000 registrations from over 95 countries. (See Appendix D13.2.2_B, C). .Web is free from potentially limiting associations with a type of activity, as in the case of .net or .org (e.g. non-profits or network providers) or geographic associations, as in the case of .com or country codes. See appendix D13.2.2_D, Percentage of World's Domains, By Mathew Zook,, also available at <http://socrates.berkeley.edu/~zook/domain_names/Domains/Domains_by_country.pdf>. The .Web TLD is, however, beneficially associated with the medium of the worldwide web. The phrase "web" is a commonly recognizable term that all users associate with the Internet. Therefore the phrase ".Web" lends itself to branding and .Web should face relatively low barriers to market penetration. Further, .Web stays within the three-letter format that the current TLD has firmly established in many consumer's minds. Internet geographer Matthew Zook, author of "The Role of Regional Venture Capital in the Development of the Internet Commerce Industry" and "Internet Metrics: Using Hosts and Domain Counts to Map the Internet Globally," is a Regents Fellow at the University of California Berkeley. (See Appendix D13.2.2_E) He has stated, "It is my opinion that the proposed .Web TLD has potential to become a major generic TLD along the lines of .org or .net. In fact since it is not associated with a particular type of activity… it could become the primary alternative to .com." See appendix D13.2.3_F, .Web Registration Projections by Matthew Zook. Currently .net represents 14%. of all current registrations (See www.NetFactual.com). In light of the perceived market readiness of .Web, expert Matthew Zook, projects the .Web share of competitive TLDs at 15%. See appendix D13.2.2_F, .Web Registration Projections by Matthew Zook.

The .Web market share is projected to reach an equilibrium point after the initial surge in new registrations subsidies, and the market becomes more competitive with the institution of more TLDs. During the second year of this forecast, additional TLDs are expected to be approved, increasing the competition within the domain name space, resulting in a reduction in market share for all TLDs. To reflect this competition, a projected reduction of 5% market share is presumed. This estimate reflects a realistic, but conservative, adjustment. This share is expected to remain relatively constant for the remainder of the forecast period of five years. See section D13.3_A pages F-63 to F-69.

The .Web registry is expected to experience attrition as .Web domains come up for renewal. NSI has experienced an approximate attrition rate of 2% per quarter. Derived from information found on Network Solutions 31 Dec. 1999 SEC Form 10K, Item 6, Selected Financial Data. This 2% rate does not account for additional attrition resulting from the addition of new TLDs. Accordingly, an increased attrition rate of 4% per quarter is assumed in this forecast. See Appendix D13.3_A page F-65 to F-72.

Registrar revenue projections assume attrition to other registrars of .Web domain names of 35% per quarter for the initial quarter, declining by 5% per quarter to a maximum of 5% at the end of the fifth year. The decay rate is calculated from data on NSI's attrition to competitor registrars during the first four months of competition. See Attachment D13.3_A page F-65 to F-72.

The share of new .Web domain names registered by our registrar will similarly decline from 100% in the first quarter to 30% at the end of the forth year as shown in the financial spreadsheets. This is representative of competition amongst registrars in the registration space. See Section D13.3_A page F-65 to F-72.

Fees anticipated for each .Web domain name registered will be consistent with those currently charged by those currently registering names. Specifically, a list price of $35 per name registered: $20 for the registrar and $15 for the registry.

D13.2.3. Market. Market definition, size, demand, accessibility.

The market place is any business, organization or individual that desires to have a unique address on the Internet. With over 10 million businesses and over 750,000 active trademarks and service marks in the United States alone (source: NSI August 1997 Form S- 1, Prospectus Summary, "The Company" Appendix D13.2.3_A), Image Online Design believes that the potential for continued growth of domain name registrations by commercial entities and services related to those registrations is substantial.

Net registrations for .com, .net, and .org have almost tripled in one year from June 29, 1999 to June 29, 2000 or from 6,657,635 to 18,978,101 (see: www.NetFactuals.com). Douglas Wolford, senior vice president of marketing and sales for Network Solutions predicted last year that the number of domain names could reach 140 million in a few years. (Red Herring, "Does everyone need a virtual home?," April 5, 1999, <http://www.redherring.com/insider/1999/0415/news-netsol.html>) Another study estimates 67 million domain names will be registered by 2003 ( Interim Report of Working Group C of the Domain Name Supporting Organization, Internet Corporation for Assigned Names and Numbers: Position Paper B on New gTLDs, Competition, Innovation, and Cultural Diversity, A Position Paper From Members of Working Group C appendix D13.2.3_B).

Information current as of September 28, 2000 indicates that the number of .com registrations was approaching 19 million. (Calculation derived from information acquired on www.netfactual.com, available on September 30, 2000). Statistically, the availability of .com domain names is becoming more limited with the passage of time. It would appear reasonable that people registering domain names are looking for alternatives to .com domain names. The trend is further evidenced by the trend apparent in .net domain name registrations. ".Net" registrations grew 44% faster than ".com" registrations in the one year period ended June 29, 2000 (see: www.NetFactuals.com). As of September 28, 2000, .net represent 14% of the generic TLD's. We believe that this results from the fact that readily identifiable secondary domain names in the .com TLD that have been taken are still available in the .net TLD. Further, this is a matter of particular importance for prospective registrants outside of the United States of America. Thus far the ".com" has been largely an American phenomenon with a significantly large portion of all registrants being from the United States (http://www. forbes.com/tool/html/00/Apr/0426/featb.htm), opting for the most common generic top-level domain name in lieu of their own country code top-level domain name of ".us." Consequently, many optimal domain names with a ".com" or even a ".net" suffix have already been registered just as the rest of the world is awakening to the countless benefits of a web presence. While many optimal names remain available in the country code top-level domain name registries, consumer choice prefers the generic top- level domain names. .Web would enter the root server in time for the many prospective international registrants to seek prime .Web domain names. Admission of the .Web registry to the root would provide for an additional opportunity for registration of readily identifiable domain names.

For these registrants, as well as others, Image Online Design believes that .Web is a most attractive option. The associational value of "web" is intrinsic to the Internet. Whereas the meanings of .com and .net have been acquired through years of use, the significance of .Web exists independent of top-level domain names. The word itself is ubiquitous.

D13.2.4. Marketing plan.

The Chief Executive Officer of Image Online Design has had a ten year successful relationship with Toland Marketing. Toland Marketing currently handles a one and one-half million dollar annual budget for the Gold Coast Toyota Dealers Association in Central California. They have produced many successful marketing campaigns.

As a part of the our marketing plan, which includes but is not limited to, advertising, publicity, strategy, the company has in a formal strategy meeting with Mr. Scott Toland, the President of Toland Marketing, developed a national marketing program to put the .Web registry and .Web TLD in the minds of prospective customers in all the major market places in the country. See Attachment D13.2.4_A for our formalized marketing plan.

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

The demand for new TLDs will be high. For reasons outlined fully in Section D13.2.2 the .Web TLD shows strong potential to be highly competitive and is projected to exhibit a commensurate level of demand.

We have presented, as part of the assumptions used to generate our proforma financial statements under item D13.3 of this application, our estimated demand for registry services for the .Web domain. See attachment D13.3_A, pages F63 - F71. As detailed in section D13.2.2, we anticipate initial demand for the .Web TLD to represent 15% of the total demand for competitive domains. This represents the 90% confidence level. The 50% confidence level estimates have been developed based on the assumption that the demand for the services will exceed the 90% confidence level by 25%. The 10% confidence level estimates were developed on the assumption that the 90% confidence level demand for service estimates would be exceeded by 50%. While these estimates may be conservative, per review of the current growth rate of the domain name market, they represent our "best guess" as to the likely demand for names on the .Web TLD..

D13.2.6. Resources required to meet demand.

Recognizing the requirements to build and operate a domain name registry are significant, Image Online Design has calculated resource requirements with numbers from the proforma financial statement carrying a 90% confidence level. The expenses used in the proforma financial statements under item D13.3 were our "best guess "estimates of the resources that are required to meet the 90%, 50% and 10% confidence demands for requested services. We are 90% confident that the expenses detailed under the 90% scenario will be required to meet that contemplated level of demand. The resource estimates for the 50% confidence level is demand to exceed the 90% level by 25%, for variable expenses, while fixed expenses, primarily depreciation and selling, are estimated to stay comparable to the 90% level. The 10% level estimates were developed under the assumption that the variable expenses at this level would exceed the 90% level by 50%. The estimated expense levels under the various confidence scenarios are detailed in section D13.3 pages F-50 to F- 61.

FINANCIAL

We anticipate paying Registry Operator's fees to ICANN. This fee is spread among all ICANN Registries. Our portion will be based on the number of total registries. We currently estimate that we will pay ICANN fees of approximately $300,000 per year.

The annual legal and accounting expenses are anticipated to be 1 million dollars and one hundred thousand dollars, respectively, based on comparable experience of NSI and other registrars.

Credit card processing fees have been estimated at 2.1% of credit card receipts (i.e. 90% of revenues) based on a rate that has been negotiated with Wells Fargo Bank.

Office expenses are estimated at, based on the historical experience of comparable businesses, 2% of non-executive salaries.

Repairs and maintenance expenses have been estimated to be 1% of revenue.

We have estimated the business license taxes to be 0.0005 times gross revenue, consistent with rates charged in San Luis Obispo County. The business property taxes have been estimated based on the rates charged of $2.22 per $100.00 of gross used equipment on an annual basis.

Marketing and advertising expenses have been estimated to be approximately 13% of "gross cash revenues," or 12 million dollars, during the first year. The estimated expense for the second through fifth years is approximately 32% to 38% of "gross cash revenues," which we believe will assist in the amount of market penetration that we have projected for those periods. Further, the amounts spent in this area appear comparable to amounts spent by NSI during the year ended December 31, 1999.

The liability insurance expense is estimated at 1% of net revenues, which was calculated from information obtained from a licensed broker.

We have estimated the research and development expenses will approximate 5% of revenue each quarter. The level of expenditure appears reasonable in comparison to the level of spending by NSI for the year ended December 31, 1999, as reported in their annual report filed with the Securities and Exchange Commission (SEC) on Form 10-K.

A provision for income taxes, both current and deferred, has been made at a combined rate of 42% (i.e. the maximum rates of 34% federal and 8% state of California) on the net revenue subject to income tax under the appropriate tax codes for each year in the projections.

TECHNICAL

Our monthly fees related to connectivity (i.e. T3 access) is estimated to be $6,000 per month. We believe that the level of bandwidth provided by this connection will be adequate to meet connectivity needs through the end of year five.

STAFF

We understand that identifying hiring and retaining the appropriate technical staff is a large undertaking. Our estimates relative to salary expenses are generated from a 2000 Mid Year IT Salary Survey compiled by Positive Support Review, Inc. (PSR) between January 2000 and May 2000 which can be found on their web site: http://www.psrinc.com. Additionally, we reviewed the NSI, register.com and other similar companies compensation packages for their comparable staff people, both office and technical, and all levels of executives. We have added in an additional factor of 20% on to the salary base in consideration of employee benefits, including payroll taxes. See section D13.3 for anticipated numbers of employees/executives and associated compensation levels by year.

PHYSICAL PLANT

We currently have operating facilities to support our current registration operations and customer support needs as well as to provide expansion capability for future business. Upon approval of our TLD application, we will acquire one facility that will house our call center and associated telecommunications system, a training center equipped for both computer and telephone training and a computer room with expanded systems and telecommunications services. We estimate that our required square footage in the initial year will be 10,000 square feet, which is projected to increase to 30,000, 35,000, 45,000, and 50,000 square feet in years 2,3,4 and 5, respectively. The rent in the San Luis Obispo, California, based on current market comps, is 1.10 per square foot in the first year, which is projected to increase 4% per year thereafter.

In addition, we plan to operate a secure back-up facility in the Eastern part of the U.S. to provide redundancy and enhanced reliability for our system administration.

Ultra DNS will house our registry systems and our primary server equipment for the first five quarters of operations. The fees to be incurred related to the Ultra DNS services are anticipated to be $25,000 per quarter. Thereafter, we anticipate that we will acquire our own zone servers, which will be co-located at an operational cost of $25,000 per quarter, starting in the sixth quarter of operations. We anticipate that the costs of acquisition of these servers, including all costs to make them completely operational will be an estimated 4.9 million dollars. All of the data will be stored at a third-party data center, at a cost of $15,000 per quarter.

The monthly telephone expenses are estimated to be $45,000, including the operation of a call center, based on experience of comparable entities for comparable services. We anticipate that these expenses will increase at a rate of 10% per year, based on the increase in registrations and number of employees in each year.

The utilities are estimated at $0.20 per month, per square foot, based on the amount of space, commensurate with the type of space utilization.

CUSTOMER SERVICE

Image Online Design believes a salient difference between the .Web registry and the existing registry system is the level of customer support we will provide our registrants. To meet the level of service Image Online Design plans to provide to its customers, customer support will be based on a combination of strategic staffing and sufficient infrastructure.

Image Online Design will utilize a multi-tier technical support system that efficiently allocates personnel on the combined basis of support staff experience and degree of difficulty associated with the call. Calls to Image Online Design's technical and customer support are initially screened by Level I technical support who forward calls to a more seasoned Level II technician only if they are unable to resolve the customer's issue. Based upon the combined experience and/or education required of Level II technicians, we are confident that most issues will be resolved at least by this level. Should a uniquely difficult matter arise, a Level III technical support staff, with impeccable credentials and intimate knowledge of the registry system will be called.

As the registry opens to competing registrations, Image Online Design envisions a shift in demands made on our customer support staff. After introducing competing registrars, we believe that the bulk of calls will originate with registrars and that these matters will increasingly constitute the bulk of duties for Level I and II technology staff.

Supporting the technical staff is an infrastructure that will permit inquiries and responses to be handled by telephone or email. Calls to technical support will be processed by Image Online Design's own call center, accessible by a toll free telephone number for calls originating in North America, and an international collect number for calls originating outside of North America.

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

Much time was spent deciding on the source of equipment and software for the .Web registry, as rapid acquisition of equipment was considered highly important not only in initial building of the registry, but in the replacement of any failed or damaged equipment. Image Online Design estimates that initial capital equipment purchases, which will be paid out of current cash on-hand, will be approximately $450,000. The equipment will be acquired and will be in place prior to January 1, 2001. Initial capital equipment is further detailed in attachment D13.2.7_A and attachment D15.2.1_A. In the first quarter of calendar 2002, we anticipate purchasing our own zone servers and additional hardware (See attachment D13.2.7_B and C), including all costs to make them completely operation at an estimated total cost of 4.9 million dollars.

Image Online Design has selected The Dell Computer Corporation as the primary supplier of both server and workstation computers and storage systems.

Image Online Design has the ability to acquire additional necessary facilities, beyond those already in place, to accommodate current and future growth, by purchasing and/or leasing additional locations for the expansion of the .Web registry. See attachmentD13.2.7_D, business description of San Luis Obispo and Area.

D13.2.8. Staff size/expansion capability.

Recruiting

Image Online Design believes that human capital is a competitive measure of our corporate worth. Therefore, in order to maximize the Company's potential, Image Online Design has decided that a crucial hire immediately following selection for admission to the root server will be our Director of Personnel who will be responsible for administering the aggressive hiring programs we believe are necessary to acquire the talent that will grow the .Web registry, and in turn the Internet

One of the primary duties of the Director of Personnel will be Image Online Design's campus recruiting program. Colleges and universities provide a bedrock of competent and aggressive young technical and business graduates with the basic skills, education and aptitude to be trained by our company for the positions they will fill upon being hired. The Director of Personnel will maintain relations with university career placement offices, represent Image Online Design at university career fairs and for increasing and maintaining Image Online Design's presence on universities. From a logistical standpoint, we believe that we can maximize our efforts by initially targeting the many fine universities in the state of California, and gradually expanding our college and university recruiting efforts to a wider base.

Another program that the Director of Personnel will oversee is our two-tier "Student Development Program." Once admitted to the root server, Image Online Design will form partnerships with the educational institutions in our own backyard: California State Polytechnic University, San Luis Obispo and Cuesta College. California State Polytechnic University is a four year public university, renowned for its Engineering Departments, and Cuesta College, a California community college offering educational programs in business, computer sciences, electronics, engineering and technology. Under tier one of this program, our engineers will assist professors in the development of cutting-edge, hands-on curriculum, and by sharing resources, prepare graduates to step into positions that with Image Online Design and make immediate contributions. Tier two of the program will be a reinforcing internship whereby students will have the opportunity to apply their classroom knowledge by working at Image Online Design, acquiring practical experience.

Likewise, we intend to utilize the usual channels of recruiting. Our web site will list job openings as they come available, and provide information for applicants such as contact information, job function descriptions and material describing benefits, compensation, and our work environment. We will also accept and review unsolicited resumes and utilize online job posting services if necessary.

Training

Integral to the development of our company is the development of our employees. At Image Online Design, employee education will be an on-going process, from orientation onwards. Through our training programs, we hope to create a happy, productive and efficient workforce, capable of adapting to the continuous changes in technology, and cultivated for advancement within the company. For these reasons, we are looking for employees who are receptive to continuing education and thirsting for knowledge and will offer varying programs to meet this need.

All employee training will begin with a thorough orientation. Orientation will serve as an opportunity to welcome new hires to Image Online Design and introduce them to the company. Orientation will introduce employees to the corporate structure and history of Image Online Design, as well as its mission statement and personnel rules and regulations, including issues of confidentiality, non-discrimination, sexual harassment, and the employee code of conduct.

Following orientation, all support and customer personnel will begin a mandatory training program for their respective positions. Emphasizing competence and courtesy, the Image Online Design employees who will have regular contact with the public will under-go in house customer service training, preparing employees to provide over-the- phone support, including matters of correct phone etiquette, company policy and procedures. Lessons will be reinforced by roleplaying exercises conducted by management with phone support personnel.

All technical staff, including telephone support staff, will undergo in-house technology education. Technology education will be tailored to the employee's job responsibilities. As the science and engineering of the field continue to evolve, Image Online Design will take all steps necessary to educate our employees of these developments.

CAREER DEVELOPMENT

In addition to that training which is mandatory, Image Online Design plans to offer a varied program of optional training opportunities for employees looking for further professional development. Using a combination of lectures, on-site classes, computer training modules and online development sites, Image Online Design hopes to be able to groom their employees to grow with the company. Although the program will be tailored to fit needs as they are assessed by management, future training programs will likely address instruction in effective management and software applications.

For the ambitious, Image Online Design intends to offer tuition reimbursement for employees pursuing a course of study relevant to their professional development. San Luis Obispo is home to the California State Polytechnic University, San Luis Obispo and Cuesta Community College, where employees may either pursue master's, bachelor's and associate's degrees, or enroll in classes independent of a formal course of study. Reimbursement will be pending successful completion of the courses previously approved by Image Online Design Management.

HIRING POLICY

As an equal opportunity employer, it is the policy of Image Online Design, Inc. to attract and retain the best qualified people available without regard to race, color, religion, national origin, gender, sexual orientation, age, disability or status as a special disabled veteran, Vietnam Era Veteran or other qualifying veteran.

Applicants for employment must accurately complete an Image Online Design application. Failure to provide accurate information may result in disqualification for employment.

All applicants for employment agree to submit to a background check. Image Online Design reserves the right to utilize any of the following techniques for investigating potential employees: running credit reports with a credit bureau; investigation of an applicant's criminal history; requesting references from prior employers. This information will remain confidential and is compiled solely for the purposes of assessing the suitability of applicants for employment in the capacity sought.

All employment is at solely at the will of Image Online Design and employees may be terminated with or without cause, subject to the laws of the State of California.

STAFFING ASSESSMENT

Image Online Design anticipates that as the .Web registry grows, so too will the company's staffing needs to provide increased technical, support, escrow and registry service. After consultation with accounting staff, we have compiled estimates of the number and types of personnel that Image Online Design will need to hire over the course of the next five years. (See attachment D.13.3_A, page F-53 -F-57) In addition, we have further taken into consideration the additional facilities necessary to house the anticipated personnel expansion and have allocated budgetary resources in preparation for both events. (See Appendix D.13.3_A, page F-50 - F-53)

D13.2.9. Availability of additional management personnel.

At the time of this writing, Image Online Design has already begun to staff its management positions. Founders John Frangie and Chris Ambler have assumed the positions of Chief Executive Officer and Chief Financial Officer respectively and have identified the offices of Chief Financial Officer, Chief Operating Officer and Office Manager as positions deserving immediate attention. Current efforts to fill these jobs include interviewing prospective candidates from a pool of talent the company has come in contact with since beginning the .Web registry four years ago. In the event these open positions can not be filled through this avenue, Image Online Design is prepared to enlist the assistance of an experienced executive recruiting firm.

Future management hires will be recruited through a variety of mediums. We believe that a portion of future management positions will continue to be filled by contacts Image Online Design has developed in the Internet community over the past four years, however, as detailed in our staffing plan, we plan on being aggressive recruiters of top-line business and technical management. Furthermore, we realistically anticipate that admission to the root server will spur quality applicants to pro-actively contact Image Online Design with employment inquiries.

Finally, we are confident that applicants will be enticed by the unique employment opportunity that Image Online Design affords. Upon being admitted to the root server, Image Online Design will experience a re-genesis and exponential growth. Experienced management personnel will have the opportunity to be immediate contributors to the growth and development of this company and to future expansion of the Internet in an entrepreneurial environment. For this, personnel will receive competitive salaries and benefits packages.

D13.2.10. Term of registry agreement.

The terms under which NSI's .com registry has been allocated call for a 4-year term, to be extended to 8 years in the case in which NSI separates their registry and registrar facilities. See Appendix D13.2.3_B. Image Online Design agrees that this term, as specifically noted in the ICANN instructions, is acceptable.

Image Online Design believes that this term should be automatically renewable at the end of the 8-year period unless there are material reasons not to renew.

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

In response to the requirements of section D13.2.6, which requested detail related to the resources needed to meet the various demand scenarios, we also addressed the estimated operational costs in that section. See section D13.2.6 and projected financial statements at section D13.3 pages F-50 to F-61

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

We have performed a detailed analysis of our market and projected revenues, under each demand scenario, associated with the operation of the proposed registry in sections D13.2.3 and D13.2.5, respectively. The projected financial statements, which detail the projected revenues based on our assumptions analysis, are included in section D13.3 pages F-63 to F-71.

D13.2.13. Capital requirements.

Prior to commencement of our operation as a primary TLD, we believe that cashflow from current operations would be significant enough to fund operational and primary TLD startup costs. Further, we have two separate $1,000,000 credit commitments from financial institutions which can be found at Appendices D13.4.4_A and D13.4.4_B. After .Web enters the root, we believe that our operations will provide significant cash flows to cover operational needs and that we would retire any outside credit commitments in the first quarter offiscal year one.

D13.2.14. Business risks and opportunities.

Image online design has a limited history operating a registry. Image Online Design's experience with operating a top level domain name has been limited by the fact that the .Web TLD has not been admitted to the ICANN administered root server. Since 1996, Image Online Design has administered a fully operational registry for the .Web top level domain name, however, the non-recognition by the root server has severely limited the accessibility of domain names in our registry. The root server is a system of central computers that resolve domain names, directing users to computers on the basis of a uniquely selected domain name. Computers that are identified by a top-level domain name not recognized by the root server can only be accessed if the searching party configures their own browser to search for the .Web extension. Few users are aware of, or competent enough to make these changes. Consequently, after four years of operation, Image Online Design manages a registry of only 20,000 domain names.

This limited history makes an evaluation of the our's future prospects very difficult. As such, because of the limited operational history of Image Online Design, there can be no assurances that the service will meet the needs of potential customers or that the financial projections will unfold as forecasted. However, Image Online Design's experience in this area is greater than can be expected for most applicants.

Image Online Design faces risks of early an stage company in a rapidly changing market. No new generic top-level domain names have ever been admitted to the root server. Those TLD's that are presently recognized by the root server were developed under the supervision of the United States government, and the registrar business has been competitive for less than two years time. The market is at an early stage, and changing rapidly. Its rate of growth and change is unpredictable, as is the nature of this change. The Company will encounter the risks and difficulties often encountered by early-stage companies in new and rapidly evolving markets. No assurance can be given that the Company will be successful in the marketplace, or if successful, that it will attract significant numbers of clients. There can be no assurance that an adequate demand for, and usage of, the Company's services will develop.

Image Online Design faces risk of dependence upon the registry as its sole source of income. The Company expects that when revenues do develop, substantially all of those revenues will come from registrations of the Web domain name. Although the fees collected through operating the registry and a registrar are believed by management of Image Online Design to be competitive, future reductions in competitive prices could negatively impact the demand for .Web domain names. These changes may impede Image Online Design's ability to achieve broad market acceptance, thus negatively impacting the Company's opportunity to eventually become profitable. There can be no assurance that broad and timely acceptance of a .Web top-level domain, which is critical to the Company's future success, will be achieved. Failure to achieve anticipated revenues would have adverse consequences.

Image Online Design faces risk of dependence upon the a single product. At the present time all of Image Online Design's resources are being devoted to the development and marketing of the .Web registry. We expect to depend on this top-level domain name for substantially all of our revenues for the foreseeable future. Accordingly, if .Web is not accepted by customers or potential customers, or does not generate the demand or revenues necessary to Image Online Design, we may face serious or irreparable harm.

Image Online Design faces risk of dependence upon the sales and marketing relationships for Growth. Our business model includes generating sales through our alliance and affiliate programs. Consequently, Image Online Design will depend, in part, on sales and marketing strategic relationships for growth. We have established and plans to continue to establish sales and marketing strategic relationships as part of our growth strategy. Such relationships may not contribute to increased use of Image Online Design's services, help us add new clients, or increase our revenue. Image Online Design may not be able to enter into new relationships or renew existing relationships on favorable terms, if at all. In addition, we may not be able to recover costs and the expenses associated with the formation of these programs.

Third party dependence may have a negative impact upon revenue goals if third parties are unavailable or do not perform. Image Online Design expects to rely, to a large degree, on a number of third parties to provide the information infrastructure necessary to operation of a top-level domain registry. If we are unable to establish and maintain effective, long-term relationships with these third parties, if these third parties are unable to meet the needs and expectations of Image Online Design, we will likely have difficulty achieving its revenue goals.

Image Online Design faces risk of dependence upon the unsuccessful acquisitions. Image Online Design may acquire businesses, products and technologies that complement or augment our existing businesses, services and technologies. The inability to integrate any newly acquired entities or technologies effectively could harm Image Online Design's operating results, business and growth. Integrating any newly acquired businesses or technologies may be expensive and time consuming. To finance any acquisitions, Image Online Design may need to raise additional funds through public or private financings. Any equity or debt financings, if available at all, may be on terms that are not favorable to Image Online Design and, in the case of equity financings, may result in dilution to our stockholders. Image Online Design may not be able to operate any acquired businesses profitably or otherwise implement our business strategy successfully.

Image Online Design faces risk of dependence upon the competitive domain registry and registrar market - this may have an effect on market share. Additionally, the business market for .Web is competitive, evolving and subject to rapid technological change. Intensity of competition is likely to increase in the future as additional top-level domain names are added to the root server and Image Online Design opens the registry to competing registrars. Increased competition from new competitors is likely to result in loss of market share, which could negatively impact our business. Competitors vary in size, and in the scope and breadth of the products and services offered. Image Online Design will encounter registry competition from Network Solutions and the yet-to-be named parties who will administer new top-level domain names. Image Online Design will also encounter competition from registrars such as Register.com, Tucows, Dotster and Albanza, Inc., amongst others. In addition, because there are relatively low barriers to entry in the registrar market, additional competition from other established and emerging companies may develop.

Many current and potential competitors have longer operating histories, significantly greater financial, technical, marketing and other resources than Image Online Design, significantly greater name recognition, and a larger installed base of customers. In addition, many of the competitors have well-established relationships with our clients and potential clients, and have extensive knowledge of the industry. Current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the ability of their products to address customer needs. Accordingly, it is possible that new competitors, or alliances among competitors, may emerge and rapidly acquire significant market share. Actions taken by Image Online Design's competitors, including price cuts, new product introductions and enhancements could have material adverse consequences for us. There can be no assurance that we will be able to compete with price cuts, or develop, introduce and market enhancements to its service on a timely basis to compete successfully in this market.

Image Online Design's ability to deploy enhanced features and functionality of new products. Due to changes in the Market, the success of Image Online Design will depend on our ability to tailor the .Web registry to meet the requirements of our clients, not only as we are presently know and understood such requirements, but also as such requirements evolve. Such requirements may be driven by competitive products or the changing preferences of Image Online Design's client base. An inability to offer enhanced products or features which anticipate or meet such requirements in a timely and efficient manner may result in a loss of sales and revenues and the obsolescence of our products. There can be no assurance that we can make the changes and enhancements to its products necessary to meet and satisfy the demands of its clients.

In addition, the rapid technological changes and rapidly changing industry standards which have characterized domain name registries may have the effect of rendering Image Online Design, our business model and services obsolete. Making the adjustments, changes and adaptations necessary in this market may also require significant expenditures in equipment, infrastructure and product development. There can be no assurance that we will be able to adapt to such rapid changes.

The failure to maintain accurate databases is also of concern. Image Online Design must update and maintain our extensive databases for our clients. Our computer systems and databases must allow for expansion without losing performance. Database capacity constraints may result in data maintenance and accuracy problems which could cause a disruption in service and our ability to provide accurate information to our clients. These problems may result in a loss of clients which could severely harm the Image Online Design's business.

The .web registry is dependent upon complex software and hardware. Any defects in software and hardware will negatively impact the company. Software and hardware often contain defects, particularly when first introduced or when new versions are released. Testing procedures may not discover defects that affect new or current services or enhancements until after they are deployed. Such defects could cause service interruptions, which could damage Image Online Design's reputation or increase our service costs, cause us to lose revenue, delay market acceptance or divert development resources, any of which could severely harm the Company's business.

System failures or service delays and interruptions may negatively impact Image Online Design's ability to provide acceptable levels of customer service. This largely depends on the efficient and uninterrupted operation of Image Online Design's computer and communications hardware and procurement network systems. Any interruptions could severely harm business and result in a loss of customers. Image Online Design's computer and communications systems are located in the state of California. Although Image Online Design does not presently maintain a redundant site, plans have been made for one. Image Online Design's systems and operations are vulnerable to damage or interruption from a variety of sources including human error, sabotage, fire, flood, earthquake, power loss, telecommunications failure and similar events. We cannot give assurances that it will not experience system failures in the future. The occurrence of any system failure or similar event could harm our business dramatically.

At present the Company has a limited disaster recovery plan, and does not yet have redundant systems at an alternate site to permit the company to continue to provide services on the event of a major failure in its computer and communications systems. Accordingly, any such failure would cause severe harm to Image Online Design's business.

Any product liability claims may negatively impact the company. Due to errors, defects or other performance problems with the .Web registry, the company could result in financial or other damages to our clients. Management believes that the contractual limits of liability, indemnification provisions and disclaimers of warranties should minimize the exposure of Image Online Design in the event of a product liability claim. A product liability claim, however, even if not successful, would likely be time consuming and costly and could seriously harm Image Online Design. Image Online Design does not maintain product liability insurance. Although the terms and conditions in registry user agreements contain disclaimers of any warranties designed to limit exposure to these claims, existing or future laws, or unfavorable judicial decisions, could weaken or negate these provisions and have materially adverse consequences for Image Online Design.

A strain on already limited resources due to the need to manage growth and expansion would cause undue hardship to the company. Image Online Design anticipates a period of significant expansion and growth, which most likely will place significant strain upon management, employees, systems, and resources. Because the market is developing rapidly it is difficult to project the rate of growth, if any. Failure to properly manage growth and expansion, if and when it occurs, will jeopardize the ability of Image Online Design to sustain its third party and customer relationships. There can be no assurances that we will properly be able to manage growth, especially if such growth is more rapid than anticipated.

Increases of use or rates of such items as high-speed Internet connectivity to Image Online Design's registry may increase to the point where we must expand and upgrade some of our transaction processing systems and systems and software. While our systems are scalable and can be expanded, we may not be able to accurately predict the rate of increase in the usage of our registry. This may affect our timing and ability to expand and upgrade our systems, hardware and software capabilities to accommodate increased use of our registry. If Image Online Design does not upgrade its systems, hardware and software appropriately, the Company may experience downgraded service, interruptions or delays which could damage its business reputation, relationship with clients and its operating results.

The protection of intellectual property, including patents could play a substantial role on Image Online Design's success. The Company's success depends to a large extent on its exclusive technology, and relies on a combination of contractual provisions, confidentiality procedures, trade secrets, copyrights and trademark protections. Image Online Design has no patents at this point, and our technologies may not be patentable. Despite efforts to protect its exclusive rights, unauthorized parties may attempt to copy aspects of that technology, or to obtain and use our exclusive information. Policing unauthorized use of this technology is difficult. While Image Online Design does not suspect that any of our software has been subject to piracy, there can be no assurances that such piracy will not occur. Further, competitors may independently develop similar technology, or duplicate our services without violating intellectual property rights. At present, Image Online Design's technologies are owned outright by Image Online Design. However, we may in the future have to license or otherwise obtain access to intellectual property of third parties in order to remain competitive in the marketplace.

Substantial costs of any intellectual property infringement claims could effect the company negatively. There has been a substantial amount of litigation in the software industry and the Internet industry regarding intellectual property rights. It is possible that in the future, third parties may claim that Image Online Design's technology may infringe their intellectual property. Management is not aware of any infringement or claim of infringement by a third party. It is expected, however, that software

Product developers and providers of registry services will increasingly be subject to infringement claims as the number of products and competitors grows and the functionality of products in different industry segments overlaps. Any claims, with or without merit, could be time-consuming and result in costly litigation.

Dependence upon Internet plays a crucial role in the company's success. The demand for a .Web registry depends on the increased acceptance and use of the Internet as a medium of commerce and communication. While management believes that acceptance and use of the Internet will continue to increase at very rapid rates, there can be no assurances that such increase will continue to develop, or that use of the Internet as a means of conducting business will continue or increase. If growth in the use of the Internet does not continue, clients may not adopt or use these new Internet technologies at the rates or for the purposes management has assumed. This could, in turn, adversely impact the Company and the results of its business operations. Further, even if acceptance and use of the Internet does increase rapidly, but the technology underlying the Internet and other necessary technology and related infrastructure does not effectively support that growth, Image Online Design's future would be negatively impacted.

Any potential breaches of the company's security systems are also a risk. Domain name registry and registrar services requires the secure transmission and maintenance of confidential information over public networks and company data centers. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments could result in compromises or breaches of Image Online Design's security systems or those of other web sites to protect our exclusive information. If any well-publicized compromises of security were to occur, it could have the effect of substantially reducing the use of the web for commerce and communications. Anyone who circumvents our security measures could misappropriate our exclusive information or cause interruptions in services or operations. The Internet is a public network, and data is sent over this network from many sources. In the past, computer viruses, software programs that disable or impair computers, have been distributed and have rapidly spread over the Internet. Computer viruses could theoretically be introduced into our systems, or those of our clients or vendors, which could disrupt the .Web registry. Although language in its user agreement places responsibility with users to protect from such threats, Image Online Design may be required to expend significant capital and other resources to protect against the threat of security breaches or to alleviate problems caused by breaches. To the extent that Image Online Design's activities may involve the storage and transmission of exclusive information, such as credit card numbers, security breaches could expose Image Online Design to a risk of loss or litigation and possible liability. Despite provisions to the contrary in its user agreements, Image Online Design's security measures may be inadequate to prevent security breaches, and our business could be seriously impacted if they are not prevented.

Lastly, government regulation may undermine the company's business goals. As Internet commerce continues to grow, the risk that the Internet Corporation for Assigned Names and Numbers, or the federal, state or foreign agencies will adopt regulations covering issues such as user privacy, pricing, content and quality of products and services, increases. It is possible that legislation could expose companies involved in electronic commerce to liability, which could limit the growth of electronic commerce generally. Legislation could dampen the growth in Internet usage and decrease its acceptance as a communications and commercial medium. If enacted, these laws, rules or regulations could limit the market for the Company's services. One or more states, furthermore, may seek to impose sales tax collection obligations on out-of-state companies like Image Online Design that engages in or facilitates electronic commerce throughout numerous states. These proposals, if adopted, could substantially impair the growth of electronic commerce and could adversely affect Image Online Design's opportunity to derive financial benefit from these activities.

Image Online Design is confident that their business and technical plans spell a successful venture for the company. The radical growth in the registration of domain names over the past year indicates that a receptive, if not hungry consumer audience awaits the admission of additional top-level domain names to the root server. We are confident that if selected, admission to the root server would translate into a comfortable return on our invest in maintaining the .Web registry over the past four years.

In addition to bottom-line projections, Image Online Design believes that the upside of admitting the .Web registry to the root server may be reflected by measurements that are not readily quantifiable.

The formation of the .Web registry was in part driven by the opportunity to offer a competitive registry in a market that Image Online Design viewed as subject to monopoly control. With only a single provider, Image Online Design's founders feared that the Internet could conceivably have fallen victim to the ills born of other trusts: high prices, stagnant innovation and consumer victimization. Adding .Web, with its strong market appeal, would serve to dismantle the current monopolistic dominion over competitive domain names. Introducing competition into the market, and its attendant benefits, is an upside to admitting a competitive top-level domain, such as ".web" to the root server.

A successful registry will also be capable of supporting high level research and development. Based upon market forecasts of the ".web" top-level domain, Image Online Design has estimated an ability to be able to commit 5% of their revenues to this very kind of research and development, aimed at enhancing the utility and stability of the Internet. The success of ".web" will enable Image Online to commit themselves to a course of research focused on improving the Internet of today while innovating that of tomorrow.

Because utility and stability mean little if there is no accessibility, Image Online Design considers it their responsibility, in the face of a successful admission to the root server, to commit itself to increasing global connectivity. With a program aimed initially at schools, hospitals and libraries, Image Online Design will utilize its standing as top-level domain name registry, as well as its own financial resources to serving this cause.

D13.215. Registry failure provisions.

In the event of failure, Image Online Design shall authorize the escrow agent to transfer the Registry Data to ICANN. Escrow fees will be pre-paid to ensure smooth transfer of Registry Data.

Financial provisions will be made, by use of a trust fund or the like, to maintain the operation of the Registry database and zone servers for 90 days in the event of registry failure.

Normal business wind down procedures will allow the registry to retire debt and disperse corporate assets.

D13.3. Pro-forma financial projections.

The pro-forma financial projections (attachments D13.3_A and D13.3_B) that are included in these appendices, pages F-1 to F-75, inclusive, have been developed based on the assumptions detailed in sections D13.2.5 and D13.2.6. See also attachment D13.3_C

D13.4. Supporting documentation.

D13.4.1. Registry operator's organizational documents. See attached D13.4.1_A

D13.4.2. References.

A list of significant trade and credit references. See attached D13.4.2_A

D13.4.3. Annual report.

See Appendix D13.4.3_A

D13.4.4. Proof of capital.

See Appendices D13.4.4_A, B, C.

D13.4.5. Proof of insurance.

See Appendix D13.4.5_A