OESC Exchange Inc. - ss. 74(1)

April 20, 2001

Ruling

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, CHAPTER S.5, AS AMENDED (the "Act)

AND

IN THE MATTER OF

OESC EXCHANGE INC.

RULING
(Subsection 74(1))

UPON the application of OESC Exchange Inc. ("Exchangeco") to the Ontario Securities Commission (the "Commission") for a ruling pursuant to subsection 74(1) of the Securities Act, R.S.O. 1990, c. S.5, as amended (the "Act"), that certain trades in trust units ("Units") of Ontario Energy Savings Income Fund (the "Fund") by Exchangeco to holders of Preference Shares (as hereinafter defined) of Ontario Energy Savings Corp. ("OESC") pursuant to the exercise by such shareholders of the Shareholder Exchange Rights (as hereinafter defined) is not subject to section 25 of the Act;

AND UPON reading the application and the recommendation of the staff of the Commission;

AND UPON the Fund having represented to the Commission that:

1. The Fund is an open-ended, limited purpose trust established under the laws of the Province of Ontario pursuant to a declaration of trust (the "Declaration of Trust") dated as of the 14^th day of February, 2001.

2. The Fund was created to hold the securities of its subsidiaries.

3. On March 13, 2001, the Fund filed a preliminary prospectus (the "Preliminary Prospectus") dated March 9, 2001 with the securities regulatory authority in each of the provinces and territories of Canada to qualify the issuance of Units to the public. Upon the issuance of a receipt for the final prospectus (the "Prospectus") of the Fund with respect to the Offering by the securities regulatory authority in each of the provinces and territories of Canada, the Fund will become a reporting issuer or the equivalent in each of the provinces and territories of Canada. The net proceeds of the offering (the "Offering") of Units pursuant to the Prospectus will be used to acquire unsecured subordinated notes (the "Notes") of OESC Acquisitions Inc. ("Acquireco").

4. The Fund was established with nominal capitalization and currently has only nominal assets and no liabilities. The only activity currently anticipated to be carried on by the Fund will be the holding of securities of OESC, Acquireco and Exchangeco.

5. OESC is a corporation incorporated under the laws of Ontario on May 26, 1997. It is a private company as defined in the Act and is not a reporting issuer under the Act or the securities legislation of any other jurisdiction.

6. OESC carries on the business of buying gas at the wholesale level and selling it through local distribution companies ("LDC's") (such as Consumers Gas Company Ltd. and Union Gas Limited, each of which is a natural gas distributor for a geographic franchise area) to its residential and small to mid-size commercial customers under long-term agreements (generally for terms ranging from three to five years).

7. Acquireco was incorporated under the laws of the Province of Ontario on January 26, 2001. It is a private company as defined in the Act and is not a reporting issuer under the Act or the securities legislation of any other jurisdiction. All of the outstanding shares of Acquireco are held by the Fund.

8. Acquireco will use all of the cash proceeds from the sale of Notes to the Fund (less an amount to be retained by Acquireco to pay liabilities of OESC which will exist on the closing of the Offering, including accrued bonuses, and to provide for working capital) and will issue Class A Preference Shares ("Class A Preference Shares") and Class B Preference Shares ("Class B Preference Shares") in the capital of Acquireco and transfer Units purchased from the Fund pursuant to the prospectus in exchange for additional Notes; to acquire all of the outstanding shares of OESC from the shareholders of OESC (the "Shareholders"). Shareholders which are registered retirement savings plans (the "RRSP Shareholders") will receive cash and Units from Acquireco in respect of the sale of their shares of OESC. Shareholders who will be officers, employees or consultants of OESC on the completion of the Offering (the "Management Shareholders") will receive from Acquireco cash and Class A Preference Shares in respect of the sale of their shares of OESC. Shareholders who are not Management Shareholders or RRSP Shareholders (the "Non-Management Shareholders") will receive cash and Class B Preference Shares from Acquireco in respect of the sale of their shares of OESC. The Class A Preference Shares and the Class B Preference Shares are referred to collectively herein as the "Preference Shares".

9. Immediately following the acquisition by Acquireco of all of the outstanding shares of OESC, Acquireco and OESC will amalgamate under the name Ontario Energy Savings Corp.

10. Exchangeco is a corporation incorporated under the laws of Province of Ontario on February 13, 2001. It is a private company as defined in the Act and is not a reporting issuer under the Act or the securities legislation of any other jurisdiction. All of the outstanding shares of Exchangeco are owned by the Fund.

11. Pursuant to the shareholders' agreement (the ''Shareholders' Agreement'') to be made as of the closing of the Offering among, inter alia, the Fund, OESC, the Management Shareholders and the Non-Management Shareholders, Exchangeco will grant to the Management Shareholders and the Non-Management Shareholders rights (the ''Shareholder Exchange Rights'') to require Exchangeco to acquire such Preference Shares in exchange for Units.

12. The Shareholder Exchange Rights may be exercised by the Shareholders with respect to such number of Preference Shares up to the number of Preference Shares held by the relevant Shareholder at such time on the last day of any calendar quarter upon 10 days written notice to the Fund, the Corporation and Exchangeco.

13. To enable Exchangeco to honour its obligations pursuant to the Shareholder Exchange Rights, the Fund will grant to Exchangeco pursuant to the Shareholders' Agreement rights (the ''Exchangeco Exchange Rights'') to purchase from treasury that number of Units required by Exchangeco from time to time to fulfill its obligations under the Shareholder Exchange Rights. The purchase price for such Units shall be the market price of the Units to be purchased as at the date of exercise by the Shareholder of the Shareholder Exchange Rights which they are being issued in respect of and shall be satisfied by the issuance by Exchangeco to the Fund of unsecured subordinated notes (the "Exchangeco Notes") of Exchangeco with a principal amount equal to such market price. The issuance by the Fund of the Exchangeco Exchange Rights to Exchangeco will be qualified by the Prospectus.

14. OESC will be required, subject to applicable law, to purchase from Exchangeco for cancellation all Preference Shares acquired by Exchangeco from time to time pursuant to the exercise of the Shareholder Exchange Rights for an amount (the ''Preference Share Purchase Price'') equal to the market price of the Units exchanged by Exchangeco for such Preference Shares and the OESC will satisfy the purchase price by the issue to Exchangeco of additional Notes in a principal amount equal to the Preference Share Purchase Price.

15. Once all of the Shareholder Exchange Rights have been exercised and all of the Preference Shares have been purchased for cancellation, OESC and Exchangeco will amalgamate.

16. Pursuant to the terms of the Shareholders' Agreement, on the earlier of (i) March 31, 2016, (ii) the date of the termination of the employment or consulting arrangement with the Corporation of the Management Shareholder for any reason, (iii) the date of death of the Management Shareholder, and (iv) the date upon which the Management Shareholder becomes a non-resident of Canada within the meaning of the Income Tax Act (Canada), all of the Shareholder Exchange Rights held by such Management Shareholder relating to Class A Preference Shares which have not been exercised by such date shall be deemed to have been exercised.

17. Pursuant to the terms of the Shareholders' Agreement, on the earlier of: (i) January 1, 2004; (ii) the date of the death of the Non-Management Shareholder; and (iii) the date upon which the Non-Management Shareholder becomes a non-resident of Canada within the meaning of the Income Tax Act (Canada); all of the Shareholder Exchange Rights relating to Class B Preference Shares which have not been exercised by such date shall be deemed to have been exercised.

18. Pursuant to the terms and conditions attaching to the Preference Shares, the Class A Preference Shares are convertible at the option of the holder, at any time prior to January 1, 2004, into Class B Preference Shares on a one for one basis.

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

IT IS RULED pursuant to subsection 74(1) of the Act that the transfer from time to time by Exchangeco of Units acquired by Exchangeco from the Fund on the exercise of the Exchangeco Exchange Rights to the Shareholders pursuant to the exercise of the Shareholder Exchange Rights is not subject to the requirements of Section 25 of the Act.

April 20, 2001.

Paul M. Moore, R. Stephen Paddon