Exemption Orders (Discretionary)

RAMPART SECURITIES INC.


2001 BCSECCOM 526



IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418

AND

IN THE MATTER OF RAMPART SECURITIES INC.

AND

IN THE MATTER OF H2O INNOVATION (2000) INC.

Exemption Order Under Section 48

[para 1]
WHEREAS Rampart Securities Inc. (the “Applicant”) has applied to the Executive Director for an order under section 48 of the Securities Act, R.S.B.C. 1996, c. 418, that the Applicant be exempt from the underwriter registration requirements of section 34(1)(b) of the Act in connection with the distribution of common shares and warrants, as defined in paragraphs 9 and 10 following, of H2O Innovation (2000) Inc. (the “Issuer”) in the Province of British Columbia through the Applicant as agent (the “Distribution”);

[para 2]
AND WHEREAS the Applicant has represented to the Executive Director that:

1. the Applicant was incorporated under the laws of the Province of Ontario on September 25, 1962;

2. the Applicant is a member in good standing of The Toronto Stock Exchange (the “TSE”), the Montreal Exchange (the “ME”), the Canadian Venture Exchange (the “CDNX”) and the Investment Dealers Association of Canada (the “IDA”);

3. the Applicant is registered as a broker/investment dealer under the securities legislation of Quebec, Ontario, Alberta and New Brunswick and is subject to the regulatory rules and restrictions of the TSE, the ME, the Canadian Venture Exchange and the IDA;

4. the Applicant is subject to the by-laws, rules and other regulatory instruments or policies of the TSE, the ME, the CDNX and the IDA and to directions, decisions, orders and rulings made under such by-laws, rules and other regulatory instruments or policies;

5. the Applicant is not registered as an underwriter under the Act and does not maintain a business office in British Columbia;

6. the Issuer was incorporated under the Canada Business Corporations Act by Certificate of Incorporation issued August 23, 1995;

7. the Issuer is currently a reporting issuer in the Province of Québec and is not in default under any requirement of the Securities Act (Québec);

8. on October 2, 2000, the Issuer distributed 1,924,000 Special Warrants (the “Special Warrants-1”. On October 10, 2000, the Issuer distributed 800,000 Special Warrants (the “Special Warrants-2”). The Special Warrants-1 and the Special Warrants-2 are collectively referred to as the “Special Warrants”. The Applicant acted as agent in connection with the sale of all such Special Warrants;

9. each Special Warrant entitles the holder to acquire one common share (a “Common Share”) of the Issuer and one-half of a Common Share purchase warrant at no additional cost, at any time until the expiry time of the Special Warrants;

10. the Issuer created purchase warrants (the “Purchase Warrants-1” and the “Purchase Warrants-2”) pursuant to a purchase warrant indenture dated October 2, 2000 (the “Purchase Warrant Indenture”). The Purchase Warrants-1 and the Purchase Warrants-2 are collectively referred to as the “Warrants”;

11. each whole Purchase Warrant-1 received upon the exercise of the Special Warrants-1 will entitle the holder thereof to subscribe for one additional Common Share at a subscription price of $0.65 per Common Share until April 2, 2002. Each whole Purchase Warrant-2 received upon the exercise of the Special Warrants-2 will entitle the holder thereof to subscribe for one additional Common Share at a subscription price of $0.65 per Common Share until April 10, 2002;

12. of the 2,724,000 Special Warrants 600,000 were distributed in British Columbia, through the Applicant, to a total of one purchaser pursuant to the dealer registration and prospectus exemption requirements under sections 45(2)(5) and 74(2)(4) of the Act, respectively, and the Applicant did not advise the purchaser in connection with such distribution;

13. the Applicant would be exempt from the requirement to be registered as an underwriter pursuant to section 87 of the Securities Rules, B.C. Reg. 194/97 (the “Rules”), if the Distribution were not being made pursuant to a prospectus or other offering document that the Executive Director specifies for the purposes of section 87 of the Rules;

14. the Issuer filed a preliminary prospectus dated March 23, 2001 (the “Preliminary Prospectus”) with the Commission des valeurs mobilières du Québec (the “CVMQ”) and the Executive Director, and the Issuer proposes to file a final prospectus (the “Prospectus”) with the CVMQ and the Executive Director in order to qualify the distribution of the Common Shares and the Warrants issuable upon the exercise of the Special Warrants;

15. because the Applicant is not registered as an underwriter under the Act, the Applicant requires an exemption from the underwriter registration requirements of section 34(1)(b) of the Act because the certificate page of the Prospectus to be filed by the Issuer in British Columbia, in the absence of an order under section 48, could not be signed by an underwriter that is not registered as an underwriter in British Columbia;

16. the Applicant has conducted appropriate due diligence investigations in order to enable it responsibly to execute the certificate page attached to the Preliminary Prospectus;

17. the Applicant has agreed to execute the certificate page attached to the Prospectus and any amendment thereto and to conduct appropriate due diligence investigations in order to enable it to responsibly execute such certificate page; and

18. purchasers of the Common Shares and the Warrants qualified under the Prospectus will have the benefit of the due diligence investigations of the Issuer conducted by the Applicant and the potential liability faced by the Applicant as a signatory to the certificate is not diminished by the fact that the Applicant is not registered under the Act;

[para 3]
AND WHEREAS the Executive Director considers that to do so would not be prejudicial to the public interest;

[para 4]
IT IS ORDERED under section 48 of the Act that the Applicant is exempt from the underwriter registration requirements of section 34(1)(b) of the Act with respect to the Applicant acting as agent solely for the purpose of executing the certificate page of the Prospectus and any amendment thereto, and delivering a copy of the Prospectus to purchasers of the Special Warrants who are resident in British Columbia provided that:

1. the Applicant shall remain registered and in good standing in accordance with the registration requirements of the securities legislation of Quebec, Ontario, Alberta and New Brunswick throughout the period of the Distribution;

2. the Applicant shall remain a member in good standing of the TSE, the ME, the CDNX and the IDA throughout the period of the Distribution;

3. in respect of the Distribution, the Applicant shall not solicit, accept subscriptions or engage in any other act or activity that would constitute a trade or trading in British Columbia of any of the securities of the Issuer except in relation to or through a registered dealer or pursuant to exemptions from the dealer registration requirements under the Act and pursuant to the underwriter registration exemption provided under this order;

4. the Applicant has provided an irrevocable undertaking to:

(a) produce in British Columbia at its expense all books, papers, documents, records and correspondence that are in its possession, control or power forthwith following the request of the Executive Director in connection with or arising from its business in British Columbia in respect of the Distribution;

(b) use its best efforts to obtain any necessary consents in the event the laws of Québec, Ontario, Alberta or New Brunswick, as the case may be, where such books, papers, documents, records and correspondence are situated prohibit their production except with the consent of the regulatory body having jurisdiction in Québec, Ontario, Alberta or New Brunswick, as the case may be; and

(c) upon demand of the Executive Director, forthwith produce in British Columbia at the Applicant’s expense, the Applicant’s officers and directors or other employees of the Applicant as witnesses to give evidence on oath or otherwise;

5. if requested by the Executive Director, the Applicant and its officers and directors shall appoint an agent for service in British Columbia that is acceptable to the Executive Director under the Act;

6. the Applicant and its directors and officers shall;

(a) agree in writing with the Executive Director to attorn to the jurisdiction of the British Columbia Securities Commission, the Executive Director and the courts of British Columbia in connection with any action or inquiry arising out of the Distribution in British Columbia; and

(b) agree to waive any defence on the ground that the Executive Director is exercising any power under the Act extra-territorially in connection with any action or inquiry arising out of the Distribution in British Columbia.

[para 5]
DATED May 24, 2001.




Gerry Halischuk
Director
Capital Markets Regulation
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