Stilo International plc. - ss. 74(1)

IN THE MATTER OF

THE SECURITIES ACT,

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

AND

IN THE MATTER OF

STILO INTERNATIONAL plc

RULING

(Subsection 74(1))

UPON the application of Stilo International plc ("Stilo"), to the Ontario Securities Commission (the "Commission") for a ruling pursuant to Section 74(1) of the Act that certain first trades of shares of ordinary stock of Stilo to be distributed in connection with the Offer (defined below) shall not be subject to section 53 of the Act, subject to certain conditions;

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

AND UPON Stilo having represented to the Commission as follows:

1. Stilo is a corporation incorporated under the laws of England and Wales and is subject to the reporting requirements of the securities legislation of England and Wales.

2. The ordinary shares of Stilo (the "Stilo Shares") are publicly quoted on the Alternative Investment Market ("AIM") regulated by the London Stock Exchange plc and trade under the symbol "STL".

3. Stilo is not a reporting issuer under the Act and does not intend to become a reporting issuer under the Act.

4. The authorized capital of Stilo consists of 54,000,000 ordinary shares of 10 pence each, of which 42,040,000 Stilo Shares are issued and outstanding and held by approximately 728 Stilo shareholders as of March 19, 2001.

5. To the best of Stilo's knowledge, none of the holders of Stilo Shares is resident in Ontario.

6. OmniMark Technologies Corporation ("OmniMark") is a corporation incorporated under the Business Corporations Act (Ontario).

7. OmniMark is not a reporting issuer under the Act and does not intend to become a reporting issuer under the Act.

8. The authorized capital of OmniMark as of April 2, 2001, consist of an unlimited number of common shares (the "OmniMark Shares"), of which approximately 4,617,850 OmniMark Shares (on a diluted basis) are issued and outstanding (the "Outstanding OmniMark Shares"). The Outstanding OmniMark Shares also include those OmniMark Shares that will be issued and outstanding based on the exercise of any and all outstanding OmniMark warrants as of the closing of the transaction in regard to the Offer (described below).

9. Of the approximately 4,617,850 outstanding OmniMark Shares held by 48 shareholders of OmniMark, 4,589,950 or 99.39% of the OmniMark Shares are owned by 41 shareholders resident in Ontario and the remaining 0.61% are owned by various minority holders resident outside of Ontario.

10. Stilo seeks to make an offer to purchase all of the issued and outstanding OmniMark Shares, whereby the majority of holders of OmniMark Shares would receive in exchange for their OmniMark Shares a combination of cash and ordinary shares of Stilo issued from treasury (the "Exchanged Shares") and the balance of OmniMark shareholders (being minority holders thereof) shall receive all cash (collectively the "Offer").

11. The purchase price under the Offer is a maximum of Cdn$7,500,000 ("Purchase Price") and shall be satisfied on the date of closing as follows: (a) Cdn$1,300,000 in cash; (b) Exchanged Shares having a value of Cdn$1,700,000 (the "Initial Stilo Share Issuance"); and (c) the balance (the "Earn Out") by way of a non-interest bearing promissory note payable in cash and Exchanged Shares, in accordance with an Adjustment Schedule (defined below).

12. The exercise price of the Exchanged Shares shall be the weighted average closing price on AIM per Stilo Share for the period of twenty (20) consecutive trading days immediately preceding the second trading day prior to the closing date or otherwise as described in the Offer (the "Weighted Average Stilo Share Price").

13. The Earn Out is based on sales revenue of OmniMark for the year ended April 30, 2002 as follows: (a) if sales revenue of OmniMark is equal to or in excess of Cdn$5,000,000, the additional cash consideration would be Cdn$1,200,000 and that number of Exchanged Shares having a value of Cdn$3,300,000; (b) if sales revenue of OmniMark is in excess of Cdn$4,000,000, but less than Cdn$4,999,999, the additional cash consideration would be a minimum of Cdn$300,000 and a maximum of approximately Cdn$1,200,000 and that number of Exchanged Shares having a minimum value of Cdn$1,500,000 and a maximum value of approximately Cdn$3,300,000; (c) if sales revenue of OmniMark is in excess of Cdn$3,000,000, but less than Cdn$3,999,999, the additional cash consideration would be a minimum of Cdn$3,000,000 and a maximum of approximately Cdn$3,300,000 and that number of Exchanged Shares having a maximum value of approximately Cdn$1,500,000 (collectively the "Adjustment Schedule").

14. Based on the forgoing, OmniMark Shareholders would receive the Initial Stilo Share Issuance assuming no Earn Out, being a minimum number of Exchanged Shares having a value of Cdn$1,700,000 (the "Minimum Exchanged Share Issuance") and up to a maximum number of Exchanged Shares having a value of Cdn$5,000,000 (being the sum of the Initial Stilo Share Issuance and the maximum number of Exchanged Shares issuable under the Earn Out, being those number of Exchanged Shares having a maximum value of Cdn$3,300,000) (the "Maximum Exchanged Share Issuance").

15. Upon completion of the Offer and based on a Minimum Exchanged Share Issuance, the number of issued and outstanding Stilo Shares would increase from 42,040,000 to approximately 44,754,215 (assuming for discussion purposes: (a) a Weighted Average Stilo Share Price of 28 pence per Stilo Share, which was the April 2, 2001, closing price of Stilo Shares on AIM; and (b) a United Kingdom to Canadian currency exchange rate of 0.4470 (2.2369) (the "Assumed Weighted Average Stilo Share Price"), and the number of shareholders of Stilo would increase from approximately 728 to approximately 734. Of such 44,754,215 Stilo Shares, 42,040,000 or 93.94% would be held by approximately 728 or 99.18% of Stilo shareholders resident outside of Canada, and approximately 2,714,215 or 6.06% of Stilo Shares would be held by six or 0.82% of Stilo shareholders resident in the Province of Ontario.

16. Upon completion of the Offer and based on a Maximum Exchanged Share Issuance, the number of issued and outstanding Stilo Shares would increase from 42,040,000 to approximately 49,944,888, and the number of shareholders of Stilo would increase from approxmately 728 to approximately 734. Of such 49,944,888 Stilo Shares, 42,040,000 or 84.17% would be held by approximately 728 or 99.18% of Stilo shareholders resident outside of Canada, and approximately 7,904,999 or 15.83% of Stilo Shares would be held by six or 0.82% of Stilo shareholders resident in the Province of Ontario. The calculations in this paragraph 16 are based on the Assumed Weighted Average Stilo Share Price.

17. The exchange of Stilo Shares for OmniMark Shares from Ontario OmniMark Shareholders is a "take-over bid" as defined in subsection 89(1) of the Act. The exchange is exempt from the requirements of sections 95 to 100 of the Act pursuant to paragraph 93(1)(d) of the Act.

18. The issuance of the Exchanged Shares is a distribution that is exempt from the prospectus requirements of Section 53 of the Act pursuant to paragraph 72(1)(j) and, therefore, the Exchanged Shares are a "restricted security" as defined under Rule 72-501 of the Commission.

19. The first trade of the Exchanged Shares would qualify for the exemption from the prospectus requirements of the Act pursuant to Rule 72-501 of the Commission, except for the fact that:

(a) the number of Stilo Shares held by Ontario residents immediately after the completion of the Offer may be more than 10% of the total number of outstanding Stilo Shares; and

(b) the first trade of the Exchanged Shares will be executed through AIM, rather than through one of the markets prescribed by Rule 72-501: (a) a stock exchange outside Ontario; (b) the Nasdaq Stock Market; (c) The Stock Exchange Automated Quotation System of the London Stock Exchange Limited; or (d) in the Eurobond Market, as regulated by the International Securities Market Association (collectively the "Permitted Exchanges/ Markets").

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

IT IS HEREBY RULED pursuant to section 74(1) of the Act that the first trade in Stilo Shares acquired under the Offer by former holders of OmniMark shares shall not be subject to section 53 of the Act, provided that:

(a) former holders of OmniMark Shares do not hold more than 16% of the outstanding Stilo Shares immediately after the closing of the Offer; and

(b) the first trade in the Exchanged Shares is executed through AIM or the Permitted Exchanges/Markets.

April 10, 2001.

Paul Moore, Robert W. Davis