BCSC

Exemption Orders (Discretionary)

FORMATION CAPITAL CORPORATION

2001 BCSECCOM 169

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

AND

IN THE MATTER OF FORMATION CAPITAL CORPORATION

Exemption Order Under Sections 48 and 76

[para 1]
WHEREAS Formation Capital Corporation has applied to the Executive Director for an order under sections 48 and 76 of the Securities Act, R.S.B.C. 1996, c. 418 that the intended trade by Formation of up to 660,000 common shares and warrants to purchase up to 1,210,000 common shares of Formation to Clubb Capital Limited are exempt from the requirements of sections 34(1)(a) and 61 of the Act;

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

1. Formation is a company incorporated under the laws of British Columbia, is a reporting issuer under the Act and is not in default of any requirement of the Act or the Securities Rules, R.B.C. Reg. 194/97;

2. the authorized capital of Formation consists of 100,000,000 common shares without par value and 50,000,000 Preference Shares without par value, of which 29,525,121 common shares and no Preference Shares were issued and outstanding as of December 6, 2000;

3. the common shares of Formation are listed and posted for trading on The Toronto Stock Exchange (the “TSE”);

4. Formation is proposing to close a private placement (the “Private Placement”) of up to 8,800,000 units (the “Units”), all of which will be sold to purchasers resident outside of Canada; each Unit will be comprised of one common share and one-half of one whole non-transferable common share purchase warrant (a “Warrant”) of Formation;

5. in connection with the Private Placement, Formation has agreed to: (i) pay to Clubb Capital, a United Kingdom based corporate finance company, a fee equal to 7.5% of the gross proceeds of the Units sold to purchasers introduced to Formation by Clubb Capital, payable, at the option of Clubb Capital, in cash or Units, at a deemed price of $0.40 per Unit (the “Fee Units”) (or a combination thereof) for a maximum of 660,000 Fee Units; and (ii) issue to Clubb Capital Warrants (the “Fee Warrants”) to purchase that number of common shares of Formation as is equal to 10% of the aggregate number of Units issued at the closing of the Private Placement to purchasers introduced to Formation by Clubb Capital, for a maximum of 880,000 Fee Warrants; the Fee Warrants will have the same terms and conditions as the Warrants;

6. Clubb Capital is not an insider of Formation or an associate of an insider of Formation;

7. the TSE has approved the issuance of the Fee Units and the Fee Warrants to Clubb Capital; and

8. but for the fact that Formation is not an “exchange issuer” under the Act, the distribution of the Fee Units and the Fee Warrants by Formation to Clubb Capital would be exempt from the requirements of sections 34(1)(a) and 61 of the Act under the registration and prospectus exemptions contained in sections 89(e)(ii) and 128(f)(ii) of the Rules;

[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:

1. under sections 48 and 76 of the Act, that the intended trade by Formation of up to 660,000 Fee Units and 880,000 Fee Warrants to Clubb Capital are exempt from the requirements of sections 34(1)(a) and 61 of the Act provided that Formation:

(a) delivers a copy of this order to Clubb Capital prior to the trades; and

(b) files a Form 20 on or before the 10th day after each distribution of the Fee Units and the Fee Warrants to Clubb Capital;

2. under section 76 of the Act, that any trade in common shares of Formation acquired by Clubb Capital under this order or upon exercise of the Warrants comprising part of the Fee Units or the Fee Warrants acquired by Clubb Capital under this order, is deemed to be a distribution unless:

(a) twelve months or, if Formation complies with the provisions of BC Instrument 45-506 in connection with the distribution, four months, have elapsed from the date of issuance of the Fee Units and Fee Warrants;

(b) if the seller is an insider of Formation, other than a director or senior officer of Formation, the seller has filed all records required to be filed under sections 87 and 90 of the Act;

(c) if the seller is a director or senior officer of Formation, the seller has filed all records required to be filed under sections 87 and 90 of the Act and Formation has filed all records required to be filed under Part 12 of the Act and of the Rules;

(d) the trade is not a distribution from the holdings of a control person;

(e) no unusual effort is made to prepare the market or to create a demand for the securities; and

(f) no extraordinary commission or other consideration is paid in respect of the trade.

[para 5]
DATED February 6, 2001.

Derek E. Patterson
Manager