Daily Internet plc (incorporated and registered in England and Wales under the Companies Act 1985 with registered number ) (ISIN: GB00BZ8BM45)

Transcription

1 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action to be taken, you shoud immediatey consut your stockbroker, bank manager, soicitor, accountant or other independent professiona adviser authorised under the Financia Services and Markets Act If you have sod or otherwise transferred a your Ordinary Shares, pease send this document, together with the accompanying Form of Proxy, as soon as possibe to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sae or transfer was effected for transmission to the purchaser or transferee. The Existing Ordinary Shares are admitted to trading on AIM. An appication wi be made for the Pacing Shares and the Debt Capitaisation Shares to be admitted to trading on AIM, which is a condition of the Pacing. It is expected that Admission wi become effective and that deaings in the Pacing Shares and the Debt Capitaisation Shares wi commence on AIM on 19 November Daiy Internet pc (incorporated and registered in Engand and Waes under the Companies Act 1985 with registered number ) (ISIN: GB00BZ8BM45) Acquisition of Netpan Internet Soutions Limited, Pacing of 200,000,000 Ordinary Shares at 1.5 pence per share, Debt Capitaisation and Notice of Genera Meeting Sanam Securities UK Limited, which is authorised and reguated by the Financia Conduct Authority (formery the Financia Services Authority), is acting excusivey as Nominated Adviser and Broker to the Pacing for the Company and is not acting for any other person and wi not be responsibe to any other person for providing the protections afforded to customers of Sanam Securities UK Limited or for advising any other person in connection with the arrangements described in this document. In particuar, Sanam Securities UK Limited, as Nominated Adviser to the Company under the AIM Rues, owes certain responsibiities soey to the London Stock Exchange pc, which are not owed to the Company or to any director or to any other person in respect of his decision to acquire shares in the Company in reiance on any part of this document. This does not constitute a prospectus for the purpose of section 85 of FSMA and any offer to the pubic is exempt by virtue of section 86 of FSMA, nor does it constitute an admission document drawn up in accordance with the AIM Rues. This document has not been approved for issue by any person for the purposes of section 21 of FSMA. This document does not constitute an offer to buy or to subscribe for, or the soicitation of an offer to buy or subscribe for, Ordinary Shares in any jurisdiction in which such offer or soicitation is unawfu. In particuar, the Pacing Shares and the Debt Capitaisation Shares have not been, and wi not be, registered under the United States Securities Act 1933 as amended (the Securities Act ) or quaified for sae under the aws of any state of the United States or under the appicabe aws of any of Canada, Austraia, the Repubic of South Africa or Japan and, subject to certain exceptions, may not be offered or sod in the United States or to, or for the account or benefit of, US persons (as such term is defined in Reguation S under the Securities Act) or to any nationa, resident or citizen of Canada, Austraia, the Repubic of South Africa or Japan. The distribution of this document in other jurisdictions may be restricted by aw and, therefore, persons into whose possession this document comes shoud inform themseves about and observe such restrictions. Any faiure to compy with these restrictions may constitute a vioation of the securities aws of any such jurisdiction. In particuar, this document may not be distributed, directy or indirecty, in or into the United States, Canada, Austraia, the Repubic of South Africa or Japan. Overseas sharehoders and any person (incuding, without imitation, nominees and trustees), who have a contractua or other ega obigation to forward this document to a jurisdiction outside the UK shoud seek appropriate advice before taking any action. A notice convening a Genera Meeting of the Company to be hed at the registered office of the Company at Number 14 Riverview, Vae Road, Heaton Mersey, Stockport, Cheshire SK4 3GN, on 18 November 2013 at a.m. is set out at the end of this document. The Form of Proxy for use in connection with the Genera Meeting is encosed with this document and shoud be returned as soon as possibe and, in any event, so as to be received at the offices of the Company s registrars, Computershare Investor Services PLC, The Paviions, Bridgwater Road, Bristo BS99 6ZY as soon as possibe but in any event not ater than a.m. on 14 November 2013, being 48 hours before the time appointed for the hoding of the Genera Meeting. The competion and depositing of a Form of Proxy wi not precude a Sharehoder from attending and voting in person at the Genera Meeting.

2 Contents Page Definitions 3 Expected timetabe of principa events 5 Share capita statistics 5 PART I Letter from the Chairman 6 Introduction 6 Information on Daiy 6 Current trading and prospects for the Group 6 Information on Netpan 7 Background to and reasons for the Acquisition 8 Historic financia resuts and current trading of Netpan 9 Principa terms of the Acquisition 9 Irrevocabe undertakings to approve the Resoutions 9 The Board 9 Reasons for the Pacing and use of proceeds 9 Detais of the Pacing 10 Debt Capitaisation 10 Reated Party Transaction 10 Dividend Poicy 11 CREST 11 Genera Meeting 11 Admission and deaings 11 Action to be taken 11 Recommendation 12 Notice of Genera Meeting 13 2

3 Accounts DEFINITIONS Act the Companies Act 2006 Acquisition the Group s report and accounts for the year ended 31 March 2013 the proposed acquisition by the Company of the entire issued share capita of Netpan pursuant to the Acquisition Agreement Acquisition Agreement the conditiona agreement dated 22 October 2013 between (1) Stuart Gibson and Phiip Thomas (2) the Company and (3) SSUK Admission AIM AIM Rues Computershare Company or Daiy CREST Debt Capitaisation Debt Capitaisation Shares CREST Reguations Directors or Board EBIT EBITDA Enarged Group Enarged Issued Share Capita the admission of the Pacing Shares and the Debt Capitaisation Shares to trading on AIM becoming effective in accordance with Rue 6 of the AIM Rues the AIM Market of the London Stock Exchange the AIM Rues for companies as pubished by London Stock Exchange from time to time Computershare Investor Services pc, the registrars of the Company Daiy Internet pc, a company registered in Engand and Waes with company number the computer-based system estabished under the CREST Reguations which enabes tite to units of reevant securities (as defined in the CREST Reguations) to be evidenced and transferred without a written instrument and in respect of which Eurocear UK & Ireand Limited is the operator (as defined in the CREST Reguations) the satisfaction of certain iabiities of the Company by the issue of the Debt Capitaisation Shares 50,808,400 Ordinary Shares to be issued to Abby Hardoon, Michae Edeson, Hawkstone Capita Limited and John Thompson to satisfy certain iabiities of the Company the Uncertificated Securities Reguations 2001 (SI 2001/3755) the directors of the Company as set out on page 6 of this document earnings before interest and taxation earnings before interest, taxation, depreciation and amortisation the Group as enarged by the Acquisition the issued ordinary share capita of the Company immediatey foowing Admission, being 369,793,292 Ordinary Shares 3

4 Existing Ordinary Shares Form of Proxy or Proxy Form DEFINITIONS (continued) the 118,984,892 existing Ordinary Shares the form of proxy encosed with this document for use by Sharehoders in connection with the Genera Meeting FSMA the Financia Services and Markets Act 2000 Genera Meeting Group London Stock Exchange Netpan Notice Ordinary Shares Pacees Pacing the genera meeting of the Company convened for a.m. on 18 November 2013, notice of which is set out at the end of this document the Company and its subsidiary undertakings London Stock Exchange pc Netpan Internet Soutions Limited, a company registered in Engand and Waes with company number the notice convening the Genera Meeting, which is set out at the end of this document the ordinary shares of (0.5p) in the capita of the Company the subscribers for the Pacing Shares pursuant to the Pacing the conditiona pacing of the Pacing Shares at the Pacing Price pursuant to the Pacing Agreement Pacing Agreement the conditiona agreement dated 22 October 2013 between (1) the Company and (2) the Directors and (3) SSUK reating to the Pacing Pacing Price Pacing Shares Resoutions Sharehoders SSUK UK or United Kingdom 1.5 pence per Pacing Share, being the price at which each Pacing Share is to be issued the 200,000,000 new Ordinary Shares which have been conditionay paced by SSUK pursuant to the Pacing Agreement the resoutions to be proposed at the Genera Meeting, detais of which are set out in the Notice hoders of Ordinary Shares Sanam Securities UK Limited, which is authorised and reguated by the Financia Conduct Authority and is the Company s nominated adviser and broker the United Kingdom of Great Britain and Northern Ireand 4

5 EXPECTED TIMETABLE OF PRINCIPAL EVENTS Despatch of this document 22 October 2013 Latest time and date for receipt of Forms of Proxy a.m. on 14 November 2013 Genera Meeting a.m. on 18 November 2013 Competion of the Acquisition 19 November 2013 Admission becomes effective and trading in the Pacing Shares and the Debt Capitaisation Shares expected to commence on AIM 19 November 2013 CREST account credited with Pacing Shares and Debt Capitaisation Shares 19 November 2013 Share certificates in respect of Pacing Shares and Debt Capitaisation Shares expected to be despatched by no ater than 26 November SHARE CAPITAL STATISTICS Existing Ordinary Shares 118,984,892 Pacing Price 1.5 pence Number of Pacing Shares being issued by the Company for subscription in the Pacing 200,000,000 Number of Debt Capitaisation Shares being issued by the Company 50,808,400 Number of Ordinary Shares in issue foowing Admission 369,793,292 Percentage of Enarged Issued Share Capita being paced Percentage of the Enarged Issued Share Capita represented by the Debt Capitaisation Shares Amount, after expenses, being raised under the Pacing Market capitaisation at the Pacing Price at Admission 54.1 per cent per cent. 2.7 miion 5.55 miion 5

6 LETTER FROM THE CHAIRMAN Daiy Internet pc (incorporated and registered in Engand and Waes under the Companies Act 1985 with registered number ) Directors John Michae Edeson (Non-Executive Chairman) Abby Hardoon Aduayavichit (Managing Director) Juie Ann Joyce (Finance Director) Robert Khaastchy (Non-Executive Director) Number 14 Riverview Vae Road Heaton Mersey Stockport Cheshire SK4 3GN 22 October 2013 To Sharehoders and, for information purposes ony, to the hoders of options and warrants over Ordinary Shares. Dear Sharehoder, Introduction Earier today, the Board announced the acquisition of the entire issued share capita of Netpan Internet Soutions Limited for a consideration of at east 2.5 miion. At the same time, the Board announced the terms of a pacing to raise 3.0 miion (before expenses) at a price of 1.5 pence per share to, inter aia, fund the cash consideration payabe in respect of the Acquisition, and the terms of a capitaisation of 762,126 of debt to strengthen the Company s baance sheet. The consideration for the Acquisition wi be satisfied by the payment of: 2.5 miion initia cash consideration upon Admission; and further earn-out consideration, payabe after September 2014 which is subject to the achievement of certain performance targets. Further detais of the terms and conditions of the Acquisition are set out beow under the heading Principa Terms of the Acquisition. The Directors beieve that the Acquisition wi significanty expand the Company s product reach and provide it with a strong foothod in its target markets. The Directors aso beieve that the Acquisition wi provide Daiy with significant dedicated server expertise in the form of Netpan s key empoyees, which wi reduce the Company s risk in expanding into these markets. The Acquisition is the first step to creating a one-stop suppier of reiabe, scaabe, high performance and resiient infrastructure based hosting products within the fast-growing UK and European markets with a muti-brand and muti-ocation strategy. The Company currenty does not have the necessary authorities to issue the Pacing Shares and the Debt Capitaisation Shares and to aot such shares free of any pre-emption rights. Accordingy, the Pacing and the Debt Capitaisation and, hence, the Acquisition are conditiona, inter aia, on the passing of the Resoutions at the Genera Meeting and Admission. If the Resoutions are approved by Sharehoders, it is expected that Admission wi become effective and deaings in the Pacing Shares and the Debt Capitaisation Shares wi commence on AIM on 19 November The purpose of this etter is to convene the Genera Meeting, to provide you with information on, the background to and reasons for the Resoutions and to recommend that you vote at the Genera Meeting in favour of the Resoutions which are necessary to give effect to the Pacing, the Debt Capitaisation and the Acquisition. The notice of Genera Meeting is set out at the end of this document. Information on Daiy Daiy is an estabished internet hosting services provider focused on deivering a broad range of reiabe, cost effective and scaeabe hosting services to sma and medium sized businesses and individuas in the UK. The Group provides hosting services to more than 50,000 customers throughout the UK and is currenty ranked 6

7 as the 12th argest suppier of.uk domain registrations out of over 2,500 suppiers (source: Nominet). The Group has historicay focused on mass-market web hosting products, which has driven a high recurring revenue mode, with 63 per cent. of customers currenty bringing repeat business, and has deivered continued organic growth over a number of years. As set out in the Company s AIM admission document in January 2013, Daiy has initiated the Group s Phase II deveopment, which has expanded the Group s reach up the vaue chain into coud hosting and dedicated servers together with compementary managed soutions, which the Directors beieve wi aow the Group to become a compete one-stop outsourcing partner. These deveopments were initiated with a view to bringing higher revenue per customer and increasing gross margin. Earier this year, the Company announced the aunch of the Group s panned range of dedicated server packages, incuding fuy customisabe options, aimed at high voume onine businesses. The Group s investment in dedicated servers offers the Group access to a far wider share of the UK web hosting industry and accordingy the Group is abe to provide comprehensive hosting soutions to individua consumers a the way through to high-turnover, web orientated businesses. The Group s dedicated server packages offer: high specification, brand new De hardware ocated in a purpose buit, high security UK data centre; per cent. uptime guarantee; fuy customisabe servers and choice of operating systems, RAM, hard disk choices and managed soutions for specific requirements; 4 hour hardware repacement guarantee; and 24/7 persona support from skied on-site Daiy engineers. In tandem with this organic growth strategy, it is the Company s stated intention to pursue a buy and buid strategy to aow it to increase critica mass more rapidy and have greater penetration of the market pace. Accordingy, the Company has identified Netpan as its first acquisition. Current trading and prospects for the Group Your attention is drawn to the announcement made on 30 September 2013 of the Group s preiminary resuts for the year ended 31 March During the year ended 31 March 2013 the Group achieved an underying EBITDA oss of 169,000 (2012: oss of 88,000), on turnover of 1.56 miion (2012: 1.45 miion). Information on Netpan Netpan, which was estabished in 2000, is a UK based internet infrastructure as a service (IaaS) provider focused on high security, e-commerce and coud based infrastructure and speciaises in VMware coud hosting, PCI hosting and managed dedicated hosting services. Netpan became an accredited VMware Enterprise Service Provider in 2011 and became a VISA certified PCI Leve One Service Provider in Netpan is an internet service provider with over 12 years experience in offering hosting soutions at a eves from singe websites to arge, compex, high avaiabiity custers and was nominated in 2012 for Best SME Business Hosting and Best Large Business Hosting by the Internet Service Provider Association. Netpan s primary co-ocation faciity is based in Teehouse West, London Dockands, which is a nine storey, state of the art datacentre with high eves of security, power, cooing and technica support. In addition to Teehouse West, Netpan has Points of Presence (PoP) and co-ocation avaiabe in mutipe ocations incuding the foowing datacentres: Goba Switch (London Dockands); Next Generation Data (Newport); Centra Switch (Coventry); Interxction (London); and Teecity (Manchester). 7

8 Customers Netpan has a database of 840 customers from a wide range of sectors due to the demand for high eve security, PCI hosting and coud hosting services. The majority of Netpan s customers are ocated throughout the UK; however, 10 per cent. of the business saes are to customers ocated within the EU and Russia. Accreditations/Partnerships Netpan has the foowing accreditations and partnerships: ISO9001:2008 Quaity Management System. ISO27001:2005 Information Security Management ISPA (The Internet Service Providers Association) finaist. VMware Enterprise Service Provider. VEEAM Siver Service Provider. Cisco accredited. Microsoft Partner Siver Hosting. VISA Certified PCI Leve 1 Service Provider Background to and reasons for the Acquisition During 2012, goba mobie data traffic grew by 70 per cent, reaching 885 petabytes per month, by the end of the year, in comparison to 520 petabytes per month at the end of Goba IP traffic has increased more than fourfod in the ast five years and is expected to increase threefod over the next five years. (Source: Cisco Visua Networking Index). Overa, IP traffic is expected to grow at a CAGR of 23 per cent. from 2012 to 2017 and it is expected that, at this forecast rate of growth, annua goba IP traffic wi surpass the zettabyte eve (1.4 zettabytes) by the end of 2017, being exabytes per month. This confirms to the Board that the Group s target market is growing and shoud continue to do so for the foreseeabe future and that the Board beieves that the Group is ideay positioned to everage this opportunity for growth. As such, Daiy continues with its stated strategy to achieve strong organic growth for the Group by maximising revenue opportunities through its current product range and to expand and deveop the Group s portfoio of services by seeking compementary acquisition opportunities which enhance market penetration and provide access to new markets as we as improve product usabiity and function. The acquisition of Netpan is the first of such opportunities for the Company, offering a compementary fit of products and services. The Group s current base services incude: (i) domain registration & emai services; (ii) shared server hosting, ecommerce and instant website buiding toos; and (iii) virtua private services which usuay generate between approximatey 5 and 280 average revenue per customer per annum ( ARPU ). The Group s recenty introduced dedicated server packages generate between 850 and 3,800 ARPU and infrastructure as a service, the Group s next target area, generates between 5,000 and 200,000 ARPU. Athough the higher APRU products and services have a onger saes process and require increased data centre usage, aong with increased staff requirements, resuting in higher capita expenditure, the revenues generated from these products and services are notaby arger and have a greater repeat business percentage. This, in the Directors opinion, shoud utimatey ead to improved quaity revenues generated by the Group. Netpan s services incude dedicated services and IaaS, being the highest ARPU generating products. These products are an idea fit with the Group s current offering, offering minimum overap in the dedicated services market, athough some synergies can be achieved. In addition, as Netpan has its own datacentres faciities, this shoud reduce certain datacentre costs for the Enarged Group and the Group s risk upon entering into this market. Accordingy, competion of the Acquisition wi provide the Group with access to estabished products, cients and compementary services. That estabished product range wi incude products which are new to the Group and aready profitabe with higher ARPU hosting revenues. In addition, the combination with 8

9 Netpan wi reduce the Group s risk in the managed dedicated servers and dedicated servers market by adding strategic critica mass and wi bring technicay experienced empoyees within the managed coud and dedicated servers market into the Group. Furthermore, the Acquisition shoud offer opportunities for cross-seing and synergies, aong with cost rationaisations which the Board beieves shoud increase Daiy s gross margin. The Directors consider that the Acquisition is a further step to achieving its goa of becoming a top 10 infrastructure based internet hosting soutions provider in Europe to SMEs. Historic financia resuts and current trading of Netpan During the year ended 30 September 2012, the audited accounts show Netpan achieved an EBITDA (after excuding non-recurring items) of 320,264 and an EBIT (after excuding non-recurring items) of 221,428, on turnover of 1.08 miion. Netpan s EBITDA for the year ended 30 September 2013 is expected to be approximatey 425,000 per Netpan s management accounts. The net assets of Netpan as at 30 September 2012 were 110,794. Principa terms of the Acquisition Daiy has entered into the Acquisition Agreement pursuant to which Daiy has conditionay agreed to acquire the entire issued share capita of Netpan, for a consideration of at east 2.5 miion. The consideration wi be satisfied by the payment of: 2.5 miion initia cash consideration upon Admission; and a further 750,000 earn-out consideration, payabe after September 2014 subject to Netpan s EBIT being 500,000 or greater for the year ended September Such earn-out consideration wi be satisfied as to two-thirds in cash and as to one third in Ordinary Shares (subject to a maximum of 250,000 in Ordinary Shares at the Pacing Price). In addition, the earn-out consideration wi be increased by 3 for every 1 by which the 2014 EBIT exceeds 525,000 or decreased by 6 for every 1 by which the 2014 EBIT is ess than 500,000 subject to a maximum reduction of 750,000. In addition, a further amount of 230,000 wi be payabe to the Netpan vendors reating to the surpus cash in the business. This amount wi be offset by competion adjustments incuding vendor oans and other reated matters totaing approximatey 173,000. Competion of the Acquisition, the Pacing and the Debt Capitaisation is conditiona, inter aia, on the passing of the Resoutions and Admission becoming effective by not ater than 8.00 a.m. on 19 November Subject to the conditions being satisfied, competion is expected to take pace upon Admission. Irrevocabe undertakings to approve the Resoutions Each of the Directors have irrevocaby undertaken to the Company to vote in favour of the Resoutions to be proposed at the Genera Meeting, in respect of their aggregate ega and beneficia hodings totaing 24,396,615 Existing Ordinary Shares, representing approximatey per cent. of the Existing Ordinary Shares. The Board Foowing competion of the Acquisition, the Board wi remain as currenty constituted. Reasons for the Pacing and use of proceeds The net proceeds of the Pacing receivabe by the Company wi be approximatey 3.0 miion which wi be used to finance the cash consideration for the Acquisition, to fund the transaction costs and for working capita generay. 9

10 Detais of the Pacing SSUK as brokers to the Pacing has conditionay paced a tota of 200,000,000 new Ordinary Shares at the Pacing Price on behaf of the Company, to raise 3.0 miion before expenses. The net cash proceeds of the Pacing receivabe by the Company wi be approximatey 2.7 miion. The Pacing is not underwritten. It is conditiona, inter aia, on Admission. Pursuant to the Pacing, I have subscribed for 3,333,333 Pacing Shares at the Pacing Price. The Pacing Shares wi, in aggregate, represent approximatey 54.1 per cent. of the Enarged Issued Share Capita. The Pacing Shares wi, on Admission, rank equay in a respects with the Existing Ordinary Shares. It is expected that Admission wi become effective and deaings in the Pacing Shares wi commence on 19 November Debt Capitaisation Conditiona on Admission, certain of the Directors, have agreed to capitaise oans (together with accrued interest, where appicabe) and certain existing convertibe oans notes, totaing 170,966. The debts wi be satisfied through the issue by the Company of 11,397,734 Ordinary Shares to these directors at the Pacing Price. The number of Ordinary Shares to be issued as a resut of the Debt Capitaisation and the resuting aggregate sharehoding of each Director is as foows: Percentage Ordinary of the Shares share capita Ordinary Ordinary hed foowing hed foowing Existing Shares issued Shares the Pacing the Pacing debts to be on Debt issued in the and the Debt and Debt capitaised Capitaisation Pacing Capitaisation Capitaisation Michae Edeson 5, ,334 3,333,333 7,566, Abby Hardoon 165,966 11,064,400 31,298, Furthermore, Hawkstone Capita Limited has aso agreed to capitaise certain existing oans, totaing 503,660 by subscribing for 33,577,333 Ordinary Shares at the Pacing Price. In addition, John Thompson, an existing sharehoder, has agreed to capitaise certain oans due to him totaing 65,000 by subscribing for 4,333,333 Ordinary Shares at the Pacing Price. Convertibe Loan Note John Thompson, has aso agreed to extend the maturity date of his 105,000 nomina convertibe oan note (9 per cent.) from January 2015 to January The Company has agreed to issue John Thompson 1,500,000 Ordinary Shares at the Pacing Price in respect of this extension. It is expected that Admission wi become effective and deaings in the 50,808,400 Ordinary Shares arising from the Debt Capitaisation wi commence on 19 November Foowing the Pacing and the Debt Capitaisation, the Company wi have 369,793,292 Ordinary Shares in issue and admitted to trading on AIM. Reated Party Transaction Abby Hardoon and I, as directors of the Company, are reated parties for the purposes of the Pacing and the Debt Capitaisation. The independent directors (being Juie Joyce and Robert Khaastchy) having consuted with SSUK, the Company s Nominated Adviser, consider the terms of the Pacing and the Debt Capitaisation to be fair and reasonabe insofar as the Company s sharehoders are concerned. In advising the independent directors, SSUK has taken into account the commercia judgement of the independent directors 10

11 Dividend Poicy The Company has not paid any dividends since incorporation. It is the intention of the Directors to expand the activities of the Group. At the reevant time in the Group s deveopment, the Company s dividend poicy wi be reviewed in the ight of the avaiabiity of distributabe reserves and the need to retain funds to finance the further growth of the Group. CREST The Pacing Shares and the Debt Capitaisation Shares are eigibe for CREST settement. Accordingy, foowing Admission, settement of transactions in the Ordinary Shares wi take pace within the CREST system if the reevant pacee/debtors so wishes. CREST is a vountary system and pacees/debtors who wish to receive and retain share certificates wi be abe to do so. Genera Meeting The notice convening the Genera Meeting is set out at the end of this document. The Genera Meeting has been convened for a.m. on 18 November 2013 at the registered office of the Company at Number 14, Riverview, Vae Road, Heaton Mersey, Stockport, Cheshire SK4 3GN for the purpose of considering and, if thought fit, passing the foowing resoutions: (1) an ordinary resoution to authorise the Directors to aot reevant equity securities (incuding the Pacing Shares and the Debt Capitaisation Shares) under Section 551 of the Act up to an aggregate nomina amount of 3,312,719 ( Resoution 1 ); and (2) a specia resoution to disappy statutory pre-emption rights in respect of the Pacing Shares, the Debt Capitaisation Shares, the Acquisition and generay ( Resoution 2 ). To be passed, Resoution 1 requires a majority of more than 50 per cent. and Resoution 2 requires a majority of not ess than 75 per cent. of the Sharehoders voting in person or by proxy in favour of the reevant Resoution. Admission and deaings Appication wi be made to the London Stock Exchange for the Pacing Shares and the Debt Capitaisation Shares to be admitted to trading on AIM. It is expected that Admission wi become effective and that deaings in the Pacing Shares and the Debt Capitaisation Shares wi commence on 19 November Action to be taken A Form of Proxy is encosed with this document for use by Sharehoders in connection with the Genera Meeting. Whether or not you intend to be present at the Genera Meeting, Sharehoders are asked to compete, sign and return the Form of Proxy in accordance with the instructions printed thereon. To be vaid, competed Forms of Proxy must be received by the Company s Registrars, Computershare Investor Services PLC, The Paviions, Bridgwater Road, Bristo BS99 6ZY, as soon as possibe and in any event so as to arrive not ater than a.m. on 14 November 2013, being 48 hours before the time appointed for the hoding of the Genera Meeting. The competion and return of the Form of Proxy wi not precude Sharehoders from attending the Genera Meeting and voting in person shoud they wish to do so. Accordingy, whether or not Sharehoders intend to attend the Genera Meeting they are urged to compete and return the Form of Proxy as soon as possibe. 11

12 Recommendation The Directors consider that the Acquisition, the Pacing and the Debt Capitaisation are in the best interests of the Company and its Sharehoders as a whoe. Accordingy, the Directors unanimousy recommend that Sharehoders vote in favour of the Resoutions, as they have undertaken to do in respect of their aggregate ega and beneficia hodings of 24,394,615 Existing Ordinary Shares representing approximatey per cent. of the Existing Ordinary Shares, by signing and returning the Form of Proxy to the Company s Registrars. Yours faithfuy Michae Edeson Non-executive Chairman 12

13 Daiy Internet pc (incorporated and registered in Engand and Waes under the Companies Act 1985 with registered number ) NOTICE OF GENERAL MEETING NOTICE IS HEREBY GIVEN that a genera meeting of Daiy Internet pc ( the Company ) wi be hed at the registered office of the Company at Number 14, Riverview Vae Road, Heaton Mersey, Stockport, Cheshire SK4 3GN on 18 November 2013, at a.m. for the purpose of considering and, if thought fit, passing the foowing resoutions of which resoution 1 wi be proposed as an ordinary resoution and resoution 2 wi be proposed as a specia resoution: ORDINARY RESOLUTION 1. THAT, pursuant to the provisions of section 551 of the Companies Act 2006 ( the Act ) the Directors be and are hereby generay and unconditionay authorised (in substitution for a previous authorities conferred upon the Directors pursuant to section 551 of the Act but without prejudice to the aotment of any reevant securities aready made or offered or agreed to be made pursuant to such authorities) to exercise a or any of the powers of the Company to aot or grant rights to subscribe for reevant securities (within the meaning of section 560(1) of the Act) up to an aggregate nomina amount of 3,312,719, to such persons at such times and generay on such terms and conditions as the Directors may determine (subject aways to the artices of association of the Company) provided that this authority, uness it is (prior to its expiry) duy revoked or varied or is renewed, sha expire at the concusion of the next annua genera meeting of the Company or, if earier, 15 months after the passing of this resoution, save that the Directors of the Company may, before such expiry, make an offer or agreement which woud or might require reevant securities to be aotted after such expiry and the Directors may aot reevant securities in pursuance of such offer or agreement as if the authority conferred hereby had not expired. SPECIAL RESOLUTION 2. THAT, in substitution for any existing and unexercised authorities, the Directors be and are hereby empowered pursuant to section 570(1) of the Act to aot equity securities whoy for cash pursuant to the authority conferred by resoution 1 above, as if section 561(1) of the Act did not appy to any such aotment, provided that this authority and power sha be imited to: (i) (ii) (iii) (iv) (v) (vi) the aotment of 200,000,000 ordinary shares of (0.5 pence) each ( Ordinary Shares ) in connection with the Pacing (as defined in the circuar to sharehoders accompanying this notice of genera meeting); the aotment of 50,808,400 Ordinary Shares in connection with the Debt Capitaisation (as defined in the circuar to sharehoders accompanying this notice of genera meeting) the aotment of a maximum of 16,666,667 Ordinary Shares in connection with the Acquisition (as defined in the circuar to sharehoders accompanying this notice of genera meeting); the aotment of Ordinary Shares pursuant to options granted to directors, empoyees and consutants to the Company up to an aggregate nomina vaue of 21,196; the aotment of Ordinary Shares pursuant to the convertibe oan note instrument dated 4 January 2012 up to an aggregate nomina vaue of 45,833 (incuding interest); the aotment of Ordinary Shares pursuant to warrants granted pursuant to a warrant instruments dated 21 January 2008 and 4 January 2012 up to an aggregate nomina vaue of 59,348; 13

14 (vii) (viii) the aotment of equity securities in connection with a rights issue, open offer or other offer of securities in favour of the hoders of Ordinary Shares in the Company on the register of members at such record dates as the Directors may determine and other persons entited to participate therein where the equity securities respectivey attributabe to the interests of the ordinary sharehoders are proportionate (as neary as may be) to the respective numbers of ordinary shares in the Company hed or deemed to be hed by them on any such record dates (which sha incude the aotment of equity securities to any underwriter in respect of such issue or offer), subject to such excusions or other arrangements as the Directors may deem necessary or expedient to dea with fractiona entitements or ega or practica probems arising under the aws of any overseas territory or the requirements of any reguatory body or stock exchange or by virtue of shares being represented by depositary receipts or any other matter whatever; the aotment of equity securities (otherwise than pursuant to sub-paragraphs (i) to (vii) above) to any person or persons up to an aggregate nomina amount of 277,345, provided that the authorities conferred by this resoution (uness renewed, varied or revoked by the Company) sha expire at the concusion of the next annua genera meeting of the Company or, if earier, 15 months after the passing of this resoution, save that the Directors of the Company may, before such expiry, make an offer or agreement which woud or might require equity securities to be aotted after such expiry and the Directors may aot equity securities in pursuance of any such offer or agreement notwithstanding that the power conferred hereby has expired and that a previous authorities under section 570(1) of the Act be and they are, to the extent not used, hereby revoked (and in this resoution the expression equity securities and references to the aotment of equity securities sha bear the same respective meaning as in section 560(1) of the Act). Registered office: By order of the Board Number 14 Riverview Cive Maudsey Vae Road Company Secretary Heaton Mersey Stockport Dated: 22 October 2013 Cheshire SK4 3GN NOTES Entitement to attend and vote 1 In accordance with Reguation 41 of the Uncertificated Securities Reguations 2001, the Company gives notice that ony those sharehoders entered on the reevant register of members (the Register ) for certificated or uncertificated shares of the Company (as the case may be) at 6.00 p.m. on 14 November 2013 (the Specified Time ) wi be entited to attend or vote at the Genera Meeting in respect of the number of shares registered in their name at the time. Changes to entries on the Register after the Specified Time wi be disregarded in determining the rights of any person to attend or vote at the Genera Meeting. Shoud the Genera Meeting be adjourned to a time not more than 48 hours after the Specified Time, that time wi aso appy for the purpose of determining the entitement of members to attend and vote (and for the purpose of determining the number of votes they may cast) at the adjourned Genera Meeting. Shoud the Genera Meeting be adjourned for a onger period, then to be so entited, members must be entered on the Register at the time which is 48 hours before the time fixed for the adjourned Genera Meeting or, if the Company gives notice of the adjourned Genera Meeting, at the time specified in the notice. Appointment of proxies 2 As a member of the Company, you are entited to appoint a proxy to exercise a or any of your rights to attend, speak and vote at the Genera Meeting and you shoud have received a Proxy Form with this notice of meeting. You can ony appoint a proxy using the procedures set out in these notes and the notes to the Proxy Form. 14

15 3 A proxy does not need to be a member of the Company but must attend the Genera Meeting to represent you. Detais of how to appoint the Chairman of the meeting or another person as your proxy using the Proxy Form or via CREST are set out in the notes to the Proxy Form. If you wish your proxy to speak on your behaf at the Genera Meeting you wi need to appoint your own choice of proxy (not the Chairman) and give your instructions directy to them. 4 If you do not give your proxy an indication of how to vote on any resoution, your proxy wi vote or abstain from voting at his or her discretion. Your proxy wi vote (or abstain from voting) as he or she thinks fit in reation to any other matter which is put before the Genera Meeting. Appointment of proxy using hard copy Proxy Form 5 The notes to the Proxy Form expain how to direct your proxy how to vote on each resoution or withhod their vote. 6 To appoint a proxy using the Proxy Form, the form must be: competed and signed; sent or deivered to Computershare Investor Services PLC, The Paviions, Bridgwater Road, Bristo BS99 6ZY; and received by Computershare Investor Services PLC no ater than a.m. on 14 November In the case of a member which is a company, the Proxy Form must be executed under its common sea or signed on its behaf by an officer of the company or an attorney for the company. 8 Any power of attorney or any other authority under which the Proxy Form is signed (or a duy certified copy of such power or authority) must be incuded with the Proxy Form. Appointment of proxy via CREST 9 CREST members who wish to appoint a proxy or proxies through the CREST eectronic proxy appointment service may do so by using the procedures described in the CREST Manua. CREST persona members or other CREST sponsored members and those CREST members who have appointed voting service provider(s), shoud refer to their CREST sponsor or voting service provider(s) who wi be abe to take the appropriate action on their behaf. 10 In order for a proxy appointment or instruction made using the CREST service to be vaid, the appropriate CREST message (a CREST Proxy Instruction ) must be propery authenticated in accordance with Eurocear UK & Ireand Limited s (formery CRESTCo s) specifications and must contain the information required for such instructions, as described in the CREST Manua. The message, regardess of whether it constitutes the appointment of a proxy or an amendment to the instruction given to a previousy appointed proxy, must in order to be vaid, be transmitted so as to be received by Computershare (ID 3RA50) by no ater than a.m. on 14 November No such message received through the CREST network after this time wi be accepted. For this purpose, the time of receipt wi be taken to be the time (as determined by the timestamp appied to the message by the CREST Appications Host) from which the registrars are abe to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST shoud be communicated to the appointee through other means. 11 CREST members and, where appicabe, their CREST sponsors or voting service provider(s) shoud note that Eurocear UK & Ireand Limited does not make avaiabe specia procedures in CREST for any particuar message. Norma system timings and imitations wi therefore appy in reation to the input of CREST Proxy Instructions. It is the responsibiity of the CREST member concerned to take (or, if the CREST member is a CREST persona member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as sha be necessary to ensure that a message is transmitted by means of the CREST system by any particuar time. In this connection, CREST members and, where appicabe, their CREST sponsors or voting service providers are referred, in particuar, to those sections of the CREST Manua concerning practica imitations of the CREST system and timings. 12 The Company may treat as invaid a CREST Proxy Instruction in the circumstances set out in Reguation 35(5)(a) of the Uncertificated Securities Reguations Appointment of proxy by joint members 13 In the case of joint hoders, where more than one of the joint hoders purports to appoint a proxy, ony the appointment submitted by the most senior hoder wi be accepted. Seniority is determined by the order in which the names of the joint hoders appear in the Register in respect of the joint hoding (the first-named being the most senior). Changing proxy instructions 14 To change your proxy instructions simpy submit a new proxy appointment using the methods set out above. Note that the cut-off time for receipt of proxy appointments (see above) aso appy in reation to amended instructions; any amended proxy appointment received after the reevant cut-off time wi be disregarded. 15

16 15 Where you have appointed a proxy using the hard-copy Proxy Form and woud ike to change the instructions using another hard-copy Proxy Form, pease contact Computershare Investor Services PLC on from within the UK or on if caing from outside the UK. Cas to the number cost 10 pence per minute pus network extras. Lines are open 8.30 a.m. to 5.30 p.m. (London time) Monday to Friday (except UK pubic hoidays). Cas to the hepine from outside the UK wi be charged at the appicabe internationa rate. Different charges may appy to cas from mobie teephones and cas may be recorded and randomy monitored for security and training purposes. The hepine cannot provide advice on the merits of the Proposas nor give any financia, ega or tax advice. 16 If you submit more than one vaid proxy appointment, the appointment received ast before the atest time for the receipt of proxies wi take precedence. Termination of proxy appointments 17 In order to revoke a proxy instruction (other than a CREST Proxy instruction) you wi need to inform Computershare by sending a signed hard copy notice ceary stating your intention to revoke your proxy appointment to Computershare, The Paviions, Bridgwater Road, Bristo BS99 6ZY. In the case of a member which is a company, the revocation notice must be executed under its common sea or signed on its behaf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the revocation notice is signed (or a duy certified copy of such power or authority) must be incuded with the revocation notice 18 The revocation notice must be received by Computershare no ater than a.m. on 14 November If you attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject to the paragraph directy beow, your proxy appointment wi remain vaid. 19 Appointment of a proxy does not precude you from attending the Genera Meeting and voting in person. If you have appointed a proxy and attend the Genera Meeting in person, your proxy appointment wi automaticay be terminated. Communication 20 Except as provided above, members who have genera queries about the Genera Meeting shoud contact Computershare Investor Services PLC on from within the UK or on if caing from outside the UK. Cas to the number cost 10 pence per minute pus network extras. Lines are open 8.30 a.m. to 5.30 p.m. (London time) Monday to Friday (except UK pubic hoidays). Cas to the hepine from outside the UK wi be charged at the appicabe internationa rate. Different charges may appy to cas from mobie teephones and cas may be recorded and randomy monitored for security and training purposes. The hepine cannot provide advice on the merits of the Proposas nor give any financia, ega or tax advice. 21 You may not use any eectronic address provided either: in this notice of Genera Meeting; or any reated documents (incuding the Proxy Form), to communicate with the Company for any purposes other than those expressy stated.