Securities Law & Instruments


Application under subsection 74(1) for relieffrom the registration and prospectus requirements -- issueris in the business of negotiating favourable buying programsand volume rebates on behalf of its 112 members - the issuerwants to expand its operations by establishing new hardwaredistribution channels - to cover the costs of establishing thenew distribution channels, the issuer will issue Class A sharesto interested members at an initial subscription price of $10,000- relief granted subject to conditions, including first traderestrictions.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 53, 74(1).









(Subsection 74(1))

UPON the application (the "Application")of Homecare Building Centres Limited ("Homecare")to the Ontario Securities Commission (the "Commission")pursuant to subsection 74(1) of the Act for a ruling (the "Ruling")that, subject to certain conditions, trades in the securitiesof a subsidiary of Homecare to certain existing shareholdersof Homecare shall not be subject to the registration and prospectusrequirements set out in sections 25 and 53 of the Act (the "Registrationand Prospectus Requirements");

AND UPON considering the Applicationand the recommendation of staff of the Commission;

AND UPON Homecare having representedto the Commission that:

1. Homecare is a corporation existing underthe laws of the province of Ontario. Homecare is not, andhas no current intention of becoming, a reporting issuer inany jurisdiction. No securities of Homecare are listed orquoted on any stock exchange or market.

2. Homecare obtained a ruling from the Commissionon February 18, 1987 that, subject to certain conditions,exempted Homecare from the Registration and Prospectus Requirementsin connection with the issuance of securities to its securityholders.

3. Homecare has 112 securityholders (togetherwith any future Homecare securityholders, the "HomecareMembers"). Each Homecare Member is a company that carrieson business as an independent building supply dealer. Thetypical Homecare Member building supply business is family-operatedand services rural based communities throughout Ontario. Homecareis in the business of providing services to Homecare Memberswho specialize in the sale of lumber, building materials,hardware and seasonal products. Homecare negotiates favourablebuying programs and volume rebates on purchases with selectedsuppliers on behalf of Homecare Members.

4. In order to provide greater stability inthe supply of hardware inventory to Homecare Members, Homecareintends to expand its operations by establishing new hardwaredistribution channels (the "Warehouse Project").

5. The Warehouse Project will be establishedin two stages. In the first stage, a newly incorporated subsidiaryof Homecare ("Newco") will fill hardware inventorypurchase orders by sourcing hardware products from the existinghardware distribution operations of a separate Montreal-basedcentral purchasing company (the "Montreal Warehouse").In the second stage, Newco will establish its own hardwaredistribution operations by opening a hardware warehouse anddistribution centre in Ontario (the "Ontario Warehouse").When the Ontario Warehouse opens for business, Newco's sourcingof hardware products from the Montreal Warehouse will diminishgreatly.

6. Homecare Members who wish to purchase hardwareinventory through the Warehouse Project will be invited tobecome shareholders of Newco ("Newco Members").Through Newco's sourcing of hardware inventory from the MontrealWarehouse and subsequent operation of the Ontario Warehouse,Newco Members will benefit from the economies of scale achievedthrough the central purchasing and distribution of hardwareinventory. The interests of Homecare Members who do not participatein the Warehouse Project will remain unchanged as they willcontinue to participate as shareholders of Homecare and willbe entitled to purchase hardware inventory from Homecare'sother suppliers and elsewhere.

7. Newco will be incorporated under the BusinessCorporations Act (Ontario) (the "OBCA") andwill have authorized capital consisting of an unlimited numberof voting shares and an unlimited number of Class A shares(the "Class A shares"). Newco will not be a reportingissuer in any jurisdiction. Neither the voting shares northe Class A shares will be listed or quoted on any stock exchangeor market.

8. The voting shares of Newco, which willbe fully voting but will not participate in the profits ofNewco, will be held by Homecare and entitle Homecare to electNewco's board of directors. Newco's board of directors willbe composed of individual representatives of Homecare Members.

9. Each Homecare Member who wishes to purchasehardware inventory through the Warehouse Project will subscribefor one Class A share and commit to purchase a second ClassA share at such time as the board of directors of Newco decideto commence the second stage of the Warehouse Project.

10. In becoming a Class A shareholder of Newco,Homecare Members will become Newco Members and will be entitledto participate in the Warehouse Project by ordering hardwareinventory from Newco at reduced cost. Newco will negotiaterebate programs with hardware suppliers. Newco Members willbe entitled to various rebates on their hardware purchases.The Class A shares will be non-voting (except as requiredby the OBCA) and transferable only to Eligible Transferees(as defined below) upon the consent of the board of directorsof Newco. The Class A shares will also participate in theprofits of Newco. If Newco Members decide to no longer participatein the Warehouse Project, the Class A shares will be repurchasedby Newco at their fair market value (as determined by theboard of directors of Newco from time to time), provided thatcertain initial hold periods have been satisfied. If NewcoMembers decide to no longer participate in the Warehouse Projectprior to the expiry of the hold period, the Class A shareswill be repurchased by Newco for a nominal amount. To coverthe costs of establishing the Warehouse Project, Class A shareswill be issued to Newco Members at an initial subscriptionprice of $10,000. It is anticipated that this subscriptionprice will be quickly recovered by Newco Members through rebatesand savings on hardware inventory purchases.

11. When the board of directors of Newco issatisfied that the ongoing success of Newco's participationin the Montreal Warehouse is indicative of the ongoing viabilityof the Ontario Warehouse, the board of directors of Newcowill authorize Newco to carry out the second stage of theWarehouse Project.

12. In order to establish the Ontario Warehouse,Newco Members will be required to fulfill their agreementto purchase a second Class A share. Homecare will providefinancing (a "Homecare Loan") to each Newco Memberwho is not otherwise able to pay the full subscription priceof the second Class A share. Each Newco Member who takes advantageof the Homecare Loan will forfeit its right to any rebateentitlement from Newco for each year in which the HomecareLoan remains outstanding. In addition, Newco Members who takeadvantage of the Homecare Loan will agree to forfeit bothClass A shares if the Homecare Loan is not repaid in accordancewith its terms.

13. Newco Members will be restricted to holdinga maximum of two Class A shares, one issued in connectionwith each stage of the Warehouse Project.

14. The Class A shares may be transferredonly to (i) Newco; (ii) an affiliate of Newco; (iii) an affiliateof the Newco Member; or (iv) a corporate successor to theentirety of a Newco Member's business, provided that suchcorporate successor is also a Homecare Member (each an "EligibleTransferee").

15. Newco will prepare and send audited annualfinancial statements to each Newco Member.

16. The only Homecare Members to whom ClassA shares will be issued pursuant to this Ruling are thoseHomecare Members who (i) are not "accredited investors"under Commission Rule 45-501 -- Exempt Distributions,and (ii) are not able to avail themselves of any other exemptionfrom the Registration and Prospectus Requirements.

AND UPON the Commission being satisfiedthat to do so would not be prejudicial to the public interest;

IT IS RULED pursuant to section 74(1)of the Act that the issuance of Class A shares to Homecare Membersshall not be subject to the Registration and Prospectus Requirementsprovided that:

A. prior to the initial issuance of the ClassA shares, Newco will deliver to each subscriber for ClassA shares a copy of the Ruling and a statement that, as a resultof the Ruling, certain protections, rights and remedies providedby the Act, including statutory rights of rescission or damages,will not be available to such subscriber;

B. Newco will prepare and send audited financialstatements to each Newco Member on an annual basis;

C. the first trade of Class A shares issuedin reliance upon the Ruling to a person or company who isnot an Eligible Transferee will be deemed to be a distribution;

D. the certificates representing the ClassA shares are engrossed with a legend disclosing the relevanttransfer restrictions; and

E. the Ruling shall cease to be effectiveif any of the restrictions on the transfer of the Class Ashares are amended in any material respect without the priorwritten consent of the Commission.

October 10, 2003.

"R.L. Shirriff"
"R.W. Davis"