Consolidated Stone Industries Inc. - ss. 74

UPON the application (the "Application") of Consolidated Stone Industries Inc. ("Consolidated") to the Ontario Securities Commission (the "Commission") for a ruling pursuant to subsection 74(1) of the Act that the proposed issuance of an aggregate of 6,036,512 common shares ("Common Shares") in the capital of Consolidated to the Ontario Creditors (as hereinafter defined) is not subject to section 25 and section 53 of the Act;

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

AND UPON Consolidated having represented to the Commission that:

1. Consolidated was incorporated under the laws of the Province of British Columbia on May 16, 1980.

2. Consolidated's principal business is the development and operation of marble and limestone quarries and the processing of dimensional stone into marble and limestone tiles and slabs for the construction industry.

3. The authorized capital of Consolidated consists of 50,000,000 Common Shares, of which 4,334,478 Common Shares are issued and outstanding before giving effect to the share issuance contemplated herein.

4. Consolidated is not a reporting issuer under the Act.

5. The outstanding Common Shares are listed and posted for trading on the Canadian Venture Exchange (the "CDNX").

6. Consolidated's financial position required it to make a proposal (the "Proposal") to its creditors under the Bankruptcy and Insolvency Act (Canada) on August 4, 2000 in order to satisfy outstanding trade debts. The Proposal provided, in part, for all claims of Consolidated's ordinary unsecured creditors (the "Creditors") to be satisfied by way of two streams: (1) those with proven claims equal to or less than $500 or those who have agreed to limit their proven claims to such amount to be paid in cash; and (2) those with proven claims greater than $500 and who have not agreed to limit their proven claims (the "Share Creditors"). Under the Proposal, the claims of the Share Creditors are to be satisfied by the issuance of 6.5 Common Shares for each one dollar of proven claim.

7. Consolidated received court approval of the Proposal from the Ontario Superior Court of Justice, In Bankruptcy on October 19, 2000, having already received approval by the requisite majority of the Creditors, as required under the Bankruptcy and Insolvency Act (Canada).

8. The CDNX has approved the issuance of an aggregate of 7,296,245 Common Shares to the Share Creditors (the "Proposal Shares") in order to satisfy the share stream of the Proposal. The Proposal Shares will retire creditor claims in the aggregate amount of $1,239,547.86 at an effective price of $0.1538 per Common Share. The Proposal provided for payment to be made to the Creditors under both streams on February 5, 2001. The Proposal Shares are being held on behalf of the Creditors by PricewaterhouseCoopers Inc., it its capacity as trustee in bankruptcy (the "Trustee").

9. The share-for-debt transaction contemplated by the Proposal is exempt from the prospectus and registration requirements under the Securities Act (British Columbia); however, no such exemption exists under the Act. A total of 46 of the Share Creditors are residents in, or otherwise subject to the securities laws of, the Province of Ontario (the "Ontario Creditors"), and as such are governed by the provisions of the Act.

10. The issuance of the Proposal Shares to the Ontario Creditors will represent 49.84% of the issued and outstanding Common Shares following the issuance of such shares.

11. The most recent closing price of the outstanding Common Shares on the CDNX as of February 5, 2001, the day the share-for-debt transaction under the Proposal was effected, was $0.08.

12. Of the Ontario Creditors, 44 or 95.6% are at arm's length to Consolidated, while 2 or 4.4% (the "Non-arm's Length Ontario Creditors") are non-arm's length to Consolidated, by reason of the percentage of the Proposal Shares they will individually receive. Furthermore, the amounts owing to the Ontario Creditors are bona fide debts of Consolidated. It should be noted that one such bona fide debt is a receivable purchased from a supplier of Consolidated by one of the Ontario Creditors for which the CDNX, in keeping with its policy on debts purchased by insiders and their associates, only allows a share-for-debt settlement based upon the amount paid for the debt rather than its face value. Such being the case, the Ontario Creditor will take a reduced number of Proposal Shares for that particular bona fide debt.

13. The CDNX has accepted for filing and approved the listing of the Proposal Shares to be issued to the Share Creditors under the Proposal.

14. Consolidated and the Creditors, including the Ontario Creditors, are bound by the provisions of the Proposal as approved by the Ontario Superior Court of Justice, In Bankruptcy. Consolidated does not have available cash to satisfy the claims of the Ontario Creditors. The issuance of the Proposal Shares is the only means available to Consolidated to accommodate the claims of the Share Creditors, including the Ontario Creditors, under the Proposal.

15. Consolidated's bankruptcy protection proceedings will be discontinued following the distribution of the Proposal Shares and the cash repayment to the Creditors by the Trustee.

16. For the fiscal year ended May 31, 2000, Consolidated had a deficit of $14,952,958, and for the quarter ended August 31, 2000, Consolidated had a deficit of $14,924,683 (inclusive of the opening period deficit).

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 issuance by Consolidated of the Proposal Shares to the Ontario Creditors is not subject to section 25 and section 53 of the Act, provided that:

(a) prior to the issuance of the Proposal Shares, Consolidated provides to each of the Ontario Creditors a copy of this Ruling, together with a statement that as a consequence of this Ruling, certain protections, rights and remedies provided by the Act, including statutory rights of rescission and/or damages, will not be available in respect of the Proposal Shares issued to them pursuant to this Ruling and that certain restrictions are imposed on the disposition of the Proposal Shares;

(b) the first trade in the Proposal Shares acquired pursuant to this Ruling by an Ontario Creditor, other than a Non-arm's Length Ontario Creditor, shall be a distribution unless such first trade is made in accordance with the provisions of subsection 72(5) of the Act except that, for these purposes, it shall not be necessary to satisfy the requirements in clause 72(5)(a) that Consolidated not be in default of any requirement of the Act or the regulations if the Ontario Creditor selling is not in a special relationship with Consolidated, or, if the Ontario Creditor is in a special relationship with Consolidated, the Ontario Creditor has reasonable grounds to believe that the Consolidated is not in default under the Act or the regulations, where, for these purposes, "special relationship" shall have the same meaning as in Commission Rule 14-501 Definitions, as if such Proposal Shares had been acquired by such Ontario Creditor pursuant to an exemption referred to in subsection 72(5) of the Act; and

(c) the first trade in the Proposal Shares made by a Non-arm's Length Ontario Creditor shall be a distribution unless such first trade is made in accordance with the provisions of subsection 72(4) of the Act except that, for these purposes, it shall not be necessary to satisfy the requirements in clause 72(4)(a) that Consolidated not be in default of any requirement of the Act or the regulations if the Non-arm's Length Ontario Creditor selling is not in a special relationship with Consolidated, or, if the Non-arm's Length Ontario Creditor is in a special relationship with Consolidated, the Non-arm's Length Ontario Creditor has reasonable grounds to believe that the Consolidated is not in default under the Act or the regulations, where, for these purposes, "special relationship" shall have the same meaning as in Commission Rule 14-501 Definitions, as if such Proposal Shares had been acquired by such Non-arm's Length Ontario Creditor pursuant to an exemption referred to in subsection 72(4) of the Act.

March 27, 2001.

Howard I. Wetston, R. Stephen Paddon