Reasons to Consider A Mezzanine Market Listing

Young, innovative companies with high growth potential, such as E-commerce and Technology stocks, require stock markets geared to their specific needs - markets which are easily accessible, where equity finance is readily available, and which attract international as well as domestic, institutional as well as private investor interest. Such markets must be efficient and well-regulated, providing investor confidence through demonstrable fairness and transparency, and should be structured to maximize liquidity.

Small and medium-sized companies with high growth potential aim to achieve the following objectives through a listing on a recognized exchange:

• increase market recognition
• expand market share
• diversify their financing and shareholder base
• raise the capital to develop their product, start production, increase sales and recruit personnel
• expand abroad
• realize a high market value based on future growth prospects

The BSX Mezzanine Market is specifically designed to meet these criteria in the following ways…

Increased market recognition

A listing on the BSX can create worldwide recognition for a company. All listed securities are added to Bloomberg, Reuters and, in the near future, the Bridge/Telerate information systems. In addition, the BSX web site at http://www.bsx.com/ carries details on all listed securities. The BSX also formally announces all new listings and can tie this publicity in with a larger PR campaign organized by the Issuer.

Expanded market share

Although a Mezzanine Market listing is restricted to Qualified Investors, it represents a full public listing on a recognized stock exchange. As a result the company achieves an enhanced status as a "listed" and "publicly traded security". This adds considerably to the prestige of the firm when dealing with customers and suppliers and helps the company to expand its market sharing.

Diversification of financing and shareholder base

A listing on the Mezzanine Market can be associated with a private placement fund raising. Raising public capital can assist the company to diversify its financing options beyond bank debt and pure venture capital funds. However, marketing is restricted to institutional investors and high net worth individuals so that the company does not introduce a retail shareholder base.

Raising capital to develop product, start production, increase sales and recruit personnel Many institutional investors - especially in Europe and Asia, where venture capital firms are not so well established - prefer to invest in "listed" securities. In fact many institutions outside of the US will limit the amount of their assets that they may invest in unlisted securities to 10% or below. Thus, listing a company on a recognized stock exchange like the BSX ensures that the securities of the company are much more attractive and "marketable" to such institutions because they are listed securities. For this reason, many companies combine the Mezzanine Market listing on the BSX with a private placement fund raising round.

Overseas expansion

A large number of E-commerce and Technology companies are drawn to Bermuda in order to incorporate a holding company or an overseas sales organization. Two of the main attractions of Bermuda are its neutral corporate tax regime - with no profits, income or capital gains taxes - and its new unique E-Commerce legislation. Putting a Bermuda company into the corporate structure thus enables the company to start its worldwide expansion. Having incorporated in Bermuda the company is attracted by the opportunity to list on the Bermuda Stock Exchange - its "home" exchange - and thus raise its profile in Bermuda and reinforce its choice of Bermuda as its corporate domicile.

Higher market value based on future growth prospects

Listing on the BSX creates a publicly tradable security. Securities with a public market place are generally worth more than private equity that is not publicly tradable. In this way, a Mezzanine Market listing on the BSX assists a company to realize a higher market value for its securities.

The New "Silk Route" for the 21st Century

In summary, the BSX aims to establish the Mezzanine Market as a logical first step for issuers who wish to eventually list on another international market and create a clear "Roadmap" for that listing. Private companies can then list on the Mezzanine Market at the earliest stage. Once they reach the minimum standards required they can move up to this special section and thus prepare themselves properly for a full IPO.

The BSX plans to further develop this special market to "groom" high-potential early-stage E-commerce and Technology so that they can eventually meet the full international listing standards of the exchange they choose for their ultimate IPO (e.g. adopting a big six accounting firm and a proper Board of Directors).

Accordingly, the BSX will become part of a new "Silk Route" for entrepreneurs into the 21st Century. New start-up companies will incorporate in Bermuda - attracted by its tax neutral environment and offshore E-Commerce credentials - raise venture capital from global investors and list on the BSX's Mezzanine Market - on their way to a full IPO.

Building a Public Profile

Any company which contemplates a full public listing within the next five years is strongly recommended to consider obtaining a Mezzanine Market listing on the BSX.

The public profile created by the Mezzanine Market listing will prepare the institutional market for the subsequent IPO and create a public profile in advance of a full public listing. The BSX's publications, information systems and Internet capabilities, as well as our frequent road shows extend the company's reach into the institutional investor community.

Listing Requirements

All listing applications for the Mezzanine Market must be sponsored by one of the BSX's Trading Members. The sponsor will guide the way through the listing process and submit the formal application on behalf of the company. The costs of obtaining a Mezzanine Market listing are minimal and comprise:

• BSX listing fees;
• Sponsorship fees;
• Production of a full prospectus. (The prospectus may be the same document as the private placement offering document.)

Subject to the restriction to Qualified Investors and the obligation to make full disclosure, there are no other onerous qualifications for listing on the Mezzanine Market.

Listing Fees The BSX listing fee is dependent on the market capitalization of the company, as follows:   Market Capitalization $   Initial Fee Annual Fee Not exceeding 10m $ 5,000 $ 5,000   50m 10,000 7,500   100m 15,000 12,500   200m 25,000 15,000   500m 30,000 17,500   1,000m 35,000 20,000 Exceeding 1,000m 40,000 25,000   In the first year, the Initial and Annual Fee are both payable upon application for listing. In subsequent years only the Annual Fee is payable on each anniversary of the listing.

BSX Members

Trading Members

The following is a short list of BSX Trading Members and listing sponsors who can assist you with your Mezzanine Market listing:

Barrington Investments Ltd.

BCB Securities Ltd.

Bermuda International Securities Ltd.

Brooke Securities (Bermuda) Limited

Butterfield Securities Ltd.

First Bermuda Securities Ltd.

Capital G BSX Services Ltd.

Instinet (Bermuda) Ltd.

Lines Overseas Management (Bermuda) Ltd.

Nomura Securities (Bermuda) Ltd.

Trafalgar Securities Ltd.

Listing Sponsors:

Argonaut Financial Services Ltd.

Continental Sponsors Ltd.

Harbour Financial Services Ltd.

Reid Services Ltd.

View all trading members