E-Commerce: Why Offshore

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BermudaThe Future of Offshore, Today

• E-Commerce Why Offshore
• Why Bermuda?

London, January 22, 2001
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E-Commerce Why OffshoreWhy Bermuda?

• Moderator The Hon. MD Renee Webb, JP, MP
• Minister of Telecommunications and e-Commerce
• Tim Marshall
• Leigh Estabrook
• Greg Wojciechowski
• Dr. Robert Edwards

London, January 22, 2001
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Timothy Z. MarshallSenior PartnerMarshall
Aicardi
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The Bermuda Advantage

• Availability of secure and reasonably priced
  bandwidth from multiple sources
• Cable Wireless
• 360 Networks
• Bermuda is a strategic telecommunications hub

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The Bermuda Advantage cont...

• Respected international reputation and political
  stability
• Oldest democracy in Western Hemisphere
• Westminster Style of Government
• Both political parties committed to promoting and
  expanding international business
• Laws and policies designed to let in only those
  businesses that enhance Bermudas reputation

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The Bermuda Advantage cont...

• Familiar legal system, Legislation and policies
• Bermuda Courts and procedures are modelled after
  United Kingdom with ultimate appeal to the Privy
  Council
• Bermudas laws are based on British legal
  traditions
• Companies Act, 1981
• Electronic Transaction Act 1998
• Corporate vehicle flexibility

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The Bermuda Advantage cont...

• Favourable and reputable tax environment
• Bermudas tax structure does not include income
  tax, profit tax, capital gains tax or withholding
  tax
• Opportunities for legitimate tax planning
• OECD approved

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The Bermuda Advantage cont...

• Sensible immigration policies
• Designed to assist international businesses and
  promote opportunities for Bermudians
• Bermuda is strategically located
• Close proximity to the US/Canada
• Direct flights to and from the U.K.
• Businesses are conveniently able to operate in
  multiple time zones

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The Bermuda Advantage cont...

• Sophisticated Infrastructure
• Established banking institutions with worldwide
  offices and affiliates
• Multiple currency credit card processing
  facilities
• A choice of knowledgeable law and accountancy
  firms
• Skilled E-commerce service providers and work
  force

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Examples of BermudasE-Commerce Service Providers
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Service Providers

• 360 Networks/ TeleBermuda Intl
• World-class E-Commerce Secure hardened facility
  with up to 1.28 terabit bandwidth capacity
• climate controlled with back-up power facilities.

• Cable Wireless
• Comprehensive E-business solutions centre
  inclusive of web-hosting
• online payment processing solutions and
  high-speed internet access
• Owned by Cable Wireless PLC

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Global Connectivity
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Service Providers cont.

• BTC
• Dynamic realm of Data Services including
  high-speed LAN
• WAN connectivity
• Ranges of data services from DS-0(64kbs) through
  T3(45mbs)
• Owned by Keytech, a Bermuda publicly traded
  company

• North Rock Communications
• competitively priced e-commerce plans
  encompassing
• credit card processing
• credit card merchant accounts
• fully customizable shopping carts
• Bermudian-owned

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Service Providers cont.

• Logic Communications
• One-stop shop for on-line business
• Provides a range of services from design
  strategies to secure hosting for
  e-commerce
• Owned by Keytech, a Bermuda publicly traded
  company

• E-Venture Centre
• Provides promising start-ups with all the tools
  necessary to build successful e-businesses
  that traverse the globe
• Joint venture between Centre Financial Services
  and Paragon Bermuda Ltd.

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Legislative Environment

• Electronic Transactions Act 1999
• One of the first in the world
• Partnership between Government and private
  industry

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Characteristics of Electronic Transactions Act
1999

• Legal recognition of electronic records and
  signatory
• Recognition of the validity of electronic
  contracts
• The requirement for writing may be met in the
  form of an electronic record
• Electronic records shall be admissible as evidence

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Standard for Electronic Transactions

• Established to protect Bermudas business
  integrity
• Set up as a standard for the service providers
  and intermediaries carrying on business in or
  from Bermuda
• Protection of personal data
• Creation of Safe Harbour Guidelines

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Know Your Customer -Guidelines

• Bermudas internal regulations to protect the
  Islands business and integrity
• Three facets important to know your customer
• Internal regulations
• OECD guidelines
• Anti-Money Laundering Legislation

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Prohibited Activities

• No gaming, lotteries or adult sites permitted to
  operate from Bermuda

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Incorporation Process

• Initial vetting by local service provider
  (normally a law firm)
• Completion of disclosure documents for Government
  (disclosure not for public review)
• Choice of capital structure (minimum US 12,000
  share capital)

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Incorporation Process cont.

• Choice of name and upon receipt of materials,
  submission to Bermuda Monetary Authority for
  review
• Government approval

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Incorporation Process cont.

• Organisation - either
• two Bermuda directors or
• one Bermuda director and one Bermuda secretary
  or
• one Bermuda secretary and one resident
  representative
• Annual Fees
• Normal Process time - one to two weeks

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Bermudas Legislative Approach is Responsiveto
Innovative Businesses and a World Economy

• Transparency of laws and regulations guarantee
  recognition of Bermuda companies by foreign
  jurisdictions
• OECD and EU endorsed regulations
• An E-Commerce Ministry and Governments close
  partnership with Bermudas business community
  means legislation and regulations can be fast
  tracked to take advantage or respond to world
  conditions, business needs and opportunities

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Leigh EstabrookExecutive Vice PresidentFirst
Atlantic Commerce
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Fundamentals

• Internet merchants are the first generation of
  "mobile" merchants who can now choose where they
  wish to domicile their e-business
• To be successful in the B2C world, e-businesses
  need to be able to accept credit and debit cards
  in currencies suitable for their target consumer
  markets
• Mid-size B2B entities are now shifting from
  traditional payment methodologies to credit card
  payment solutions

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Fundamentals

• VISA and MasterCard mandate that a corporate
  presence and back office support is required in
  the same country as the settlement bank
• Currency of the Internet (for the time being) is
  USD shifting towards multi-currency capabilities
• Bermuda falls into the Latin America Caribbean
  Region which is a USD denominated processing
  interchange
• Two processors in the LACR are able to provide
  multicurrency payment solutions to banks and
  Internet merchants

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Why Bermuda?

• Business simplification - Obvious advantages
• Legal system based on English Common Law
• Political and economic stability
• Tax neutrality ie corporate income tax and sales
  tax
• Well regulated e-commerce environment ETA, The
  Standard, Proceeds of Crime, etc.
• Access to reputable legal, accounting, banking,
  technology services
• Bandwidth galore one "wired" island!

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Why Bermuda?

• Business simplification - Not-so-obvious
  advantages
• Ability to establish an e-business for USD or
  multi-currency processing, including the Euro and
  pound sterling without the requirement of a US
  incorporation
• Free access to foreign currency no foreign
  currency exchange controls
• Banks will review/accept virtual e-business
  start-ups
• Multi-currency pricing and settlement services
  available

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Why Bermuda?

• Business simplification - Not-so-obvious
  advantages
• Separate region for Card Association compliance
  regulations from Europe and North America
• Banks can provide VISA, MasterCard, AMEX through
  a single merchant account no duality issues in
  the region
• Ability to establish a "VirtualCorp" under the
  First Atlantic Commerce E-commerce Act 1999

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What is a VirtualCorp?

• Enables businesses to establish a corporate
  presence in Bermuda without the requirement of a
  "full" incorporation
• A VirtualCorp is based on the Segregated Cell
  concept adopted from the captive reinsurance
  market
• Each clients assets and liabilities are
  firewalled from other clients, thus segregating
  one account from another
• Deemed approved legal structure by Visa and
  MasterCard for the purposes of their regulatory
  compliance requirements

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What is the value of a VirtualCorp?

• Enables e-businesses to establish their
  incorporation in their choice of jurisdiction for
  the purposes of meeting their business
  requirementsAND
• Fully access all the obvious and not-so-obvious
  business advantages that Bermuda has to offer to
  maximize their e-business growth

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Who's setting up offshore?
Primarily digital content e-businesses such as

• Software
• E-Media
• online magazines
• distance learning
• university registration services
• Conferences with online registration
• Legal firms for incorporation and registry
  services
• Telephony services subscription based billing

• Online rental payments
• Travel portals and vacation rentals
• Online investment sites
• Entertainment sites
• CDs
• videos
• concert simulcasts
• graphic arts
• Business information portals
• Domain name registration services
• Insurance companies (consumer)

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First Atlantic Commerce Ltd

• Bermuda-based established in April 1998
• Provide turn-key e-commerce solutions for
  e-businesses and financial institutions
• FAC solves complex business issues through the
  use of unique Internet payment solutions (split
  jurisdictional, multi-jurisdictional, etc.)
• Advanced industry expertise with e-commerce
  payment solutions, fraud management, web site
  security and international Card Association
  compliance regulations

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First Atlantic Commerce Ltd

• First Data Corporation qualified Internet Payment
  Gateway providing multi-currency payment
  solutions to banks on their North American and
  Caribbean platform
• Qualified Internet payment gateway with First
  E-commerce Data Services (FEDS) in Bermuda,
  offering full end-to-end multi-currency payment
  solutions
• Strategic partners include VISA International,
  First Data Corporation, Bank of Bermuda, Cable
  Wireless, and others located in other
  jurisdictions

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ACCESS AN OCEAN OF INNOVATION.
BERMUDA
The advances of the Internet have created an
explosive opportunity in offshore e-business that
is only starting to be realized
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Greg WojciechowskiChief Operating
OfficerBermuda Stock Exchange
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Bermuda Stock Exchange

• The worlds leading fully electronic offshore
  stock exchange
• GOING PUBLIC

Its a Question of WHEN not IF
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Why Go Public?
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Benefits of Going Public

• Raise Public Capital
• Increase Market Recognition
• Greater Marketability
• Improved Valuations
• Improved Opportunities for Future Financing

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Benefits of Listing on a Stock Exchange

• Trading venue Liquidity
• Listed Shares are a form of Currency
• Regulatory Oversight/Investor Protection
• Information dissemination

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BSX Shorts

• Founded 1971
• SEC Recognition, DIE pending
• FIBV Full Member
• OECD Member Nation
• Over 320 Listings 210 Funds
• Daily Trading and rolling T3 Settlement
• Trading volume 2000 230 Billion
• Market Cap gt in excess 148 Billion

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Timing is Everything

• Is the Company Ready?
• Are Market Conditions Favourable?
• Has the Market been Prepared for the Company?
• Is the Company Large Enough to Get Noticed?
• You Only Have One Chance to Make a Good
  Impression!
• Plan Carefully

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Disadvantages of GoingPublic Too Early

• Enormous Pressure on Managements Time
• Poor Valuation in the Secondary Market
• Investor Relations Nightmare

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Onshore Stock ExchangeListing Requirements

• Initial Listing Requirements
• Minimum Market Cap (size)
• Minimum Profitability
• Minimum Track Record (ongoing operations)
• Minimum Shareholder Spread
• Minimum Share Price

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Key Stock ExchangeListing Requirements

• Ongoing Listing Requirements
• Regular Reporting (qtrly, semi-annual and annual)
• Compliance with accounting standards
• Disclosure of major/material events
• Disclosure of substantial shareholders
• Disclosure of directors and officers remuneration

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Early Listing Options

• North America
• NASDAQ National Market, largest and most
  actively traded stocks. More than 4,400
  securities. Small Cap market created for
  emerging growth companies, some 1,800 securities
  listed. www.nasdaq.com
• The Canadian Venture Exchange (CDNX), newly
  established market (following the Canadian
  capital market re-structuring in 1999) for small
  to medium sized companies (min mkt cap . Over
  2,400 securities listed. www.cdnx.ca

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Early Listing Options

• Europe
• EASDAQ, modelled on NASDAQ, for the listing and
  trading of shares in high-growth companies.
  Currently lists 56 companies and dual lists 17.
  www.easdaq.com
• Euro.NM, the pan-European network of regulated
  stock markets. Its sector focus is high growth,
  small and medium sized companies within the
  European time zone. Currently over 400 companies
  are listed. www.euronm.com
• Neuer Market, established by the Deutsche Borse
  in March of 1997 for high-growth potential start
  up companies. Neuer Market listing contribute up
  to nearly 50 of the stocks listed on the
  Euro.NM. The Neuer Market has over 200 listed
  securities. www.neuer-markt.de.

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The BSXs Mezzanine Market

• And Now For Something Completely Different

www.mezzmarket.com
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Going Public Without Doing an IPOThe BSX
Mezzanine Market

• Listed Private Equity
• Institutional Marketplace Qualified Investors
  only
• Sits Between the Family, Friends and Fools
  Round and the Ultimate IPO on an International
  Exchange Hence Mezzanine
• QIs The Wealth, Wise and Well Advised
• Focused on E-commerce and Hi-Tech Companies

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Advantages of theMezzanine Market

• Extremely Simple Listing Requirements
• Preparatory phase for future IPO, thus providing
  insulation from market gyrations that may impact
  share/company valuation
• Enhances Public Image and Prestige of Company
• Exposes management to regulatory oversight and
  reporting requirements while not being
  overbearing
• Secondary trading facility via a fully electronic
  central limit order book trading platform
• Gives Angels VCs comfort that a liquidity
  event (IPO) pending

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BSX/Mezzanine Market Success Stories

• FirstEcom.com Inc.
• 360 Networks (formerly TBI and GlobeNet
  Communications)
• Earthport.com
• Conexys Corporation
• Imumed International

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Admission Procedure

• Appoint Sponsoring Broker
• Application letter
• Supporting documentation
• A Prospectus Private Placement Memorandum

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On Going Responsibilities

• Material News
• Annual Financial Results
• Authorized Representation in Bermuda

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BSX-Mezzanine Market When is Now!

• The answer to your timing problem
• Prepare the market for your IPO from a recognized
  offshore stock exchange in a highly regarded
  jurisdiction.
• Get management accustomed to regulatory
  compliance.
• Enhanced distribution to a sophisticated investor
  base.

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Dr. Robert EdwardsChairman and FounderDrawn and
Quartered.com Ltd.London
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