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ATTENTION: IAR. PAT SHEEHY
RE: TExT OF LETTER SENT TO THE HONOURABLE HERB GRAY, MINISTER
_)OC.
. INDUSTRY, TRADE AND COMMERCE CANADA ON NOVEMBER 20, 1981
r111 ---------- ----------------------------------------------- --------
OEAR MR. GRAY:
AS YOU ARE Al-/ARE, ON DECEMBER 22, 10,81 I MASCO SUBMITTED AN APPLI-
CAT I CAq TO YOU FOR AN OPINION LAZER SUBSECTION 40) OF THE FOREIGN
INVESTMENT REVIEW ACT ('FIR ACT') THAT I MASCO IS NOT A NON-
ELIGIBLE PERSON.
I AA BELIEVES THAT IT HAS ESTABLISHED THAT, NOTWITHSTANDING
THE FACT THAT B.A.T_ INDUSTRIES LIMITED (THE 'SENIOR SHAREHOLDER')
NNS OR CONTROLS 49.8 PER CENT OF THE VOTING SHARES OF I HA SCO,
THE RELATIONSHIP BETWEEN THE SENIOR SHAREHOLDER AND I MASCO HAS
BEEN AND CONTINUES TO BE ONE WHERE IKASC0 PROVIDES APPROPRIATE
INFORMATION TO AND HAS CONSULTATIONS WITH THE SENIOR SHAREHOLDER
SO THAT I MASCO CAN RECEIVE THE BENEFIT OF THE ADVICE AND EXPE-
RIENCE OF THE SENIOR SHAREHOLDER, IT BEING RECOGNIZED
HOWEVER THAT THE ULTIMATE DECISION-MAKING AUTHORITY IN I HA SCO,
-)INCLUDING DECISIONS AS TO THE SELECTION OF DIRECTORS, IS WITH THE
'BOARD OF DIRECTORS OF I MASCO AND ITS SENIOR MANAGEMENT.
NOTWITHSTANDING THE FOREGOING, YOU 114DICATED AT OUR MEETING ON
SEPTEMBER 18 LAST THAT YOU WOULD HAVE DIFFICULTY IN FURNISHING
/"'N OP I N I ON TO I MASCO UNDER SUBSECT I ON 40 ) OF THE F I R ACT -THAT
IS NOT A NON-ELIGIBLE PERSON IN THAT, BECAUSE OFTHE AFORE-
NENT I ONED VOTING SHARE OM,E THE SENIOR SHAREHOLDER HAS THE
POWER TO CONTROL I MASCO.
AS A RESULT OF THE FOREGOING I MASCO HAS HAD DISCUSSIONS wITHITS
BOARD OF DIRECTORS AND SENIOR SHAREHOLDER-WITH A VIEW TO FINDING
A SOLUTION TO THE PROBLEM. AS A RESULT, WITH THE APPROVAL OF ITS
BOARD 07 DIRECTORS AND ITS SENIOR SHAREHOLDER, I MASCO MAKES THE
FOLLOWING PROPOSAL WITH A VIEW TO RESOLVING THE PROBLEM:
(A) THE SENIOR SHAREHOLDER WOULD LEGALLY-BIND ITSELF TO GIVE THE
RIGHT TO THE CANADIAN NON- EX DIRECTORS OF I.MASCO TO VOTE
ITS SHARES AT THEIR DISCRETION. SUBJECT TO THE COMMENTS WHICH
FOLLOW. THERE WOULD BE NO TIME LIMIT ON TH15 RIGHT-TO SO VOTE OK -4
THE'SENIOR SHAREHOLDER I SHARES. THIS RIGHT WOULD EXIST FROM 11%4
THE DATE OF A FAVOURA13LE MINISTERIAL OPINION. THE CURRENT C)
CANADIAN NON-EXECLri I VE DIRECTORS OF I MASCO ARE MR. JOHN COLEMAN, %.O
MR. PURDY CRAWFORD, MR. PETER KILBURN AND MR, JEAN RICHER.
EA Z-i A RE 0 1 ST I hJGU I SHED CANAU I AN NAT I ONALS I N THE I R 01N R I GHT.
A 5HORT BIOGRAPHY OF EACH PERSON 15 ATTACHED AS APOEND IX 'Al.
BAT Industries document for Province of British Columbia 13 April 1999

in@ U Siu @-uTE %'-UULL) ti-i I i,.A Tc I1 HE fit IN I 5 i'r t- 1-@ I
ni5 &-@INIOW Ok P@-rUS D TO iSSLb- A H@--bE'K%L ODINIOW IN
TkvaS llriERL TriEkE HAD bEEEN NO SIGI-%iFICANT CHA14GE 114 THE
.44,T--r;JIAL FACTS -UPO14 whICH THE FAVOURABLE MINISTERIAL OPINION
r4AU BLEW B&GED.
THE SENIOk SRAREHOLDER 1-%'0ULD RETA114 THE POwER TO wITHDRAW
THE RIGHT GIVEN TO THE CANADIAN NOK-EXECUTIVE DIRECTORS TO No
VOTE ITS SHARES BY NOTICE IN 'VRITING TO THE MINISTER 114 THE EVENT
OF DEVELOPMENTS WHICH MIGHT IN A SIGNIFICANT WAY ADVERSELY 16 I. t4 00
AFCECT THE SENIOR SHAREHOLDER'S INTERESTS. of kg Ctw,
(0) IN THE EVENT OF WITHDRAINAL OF THESE ARRANGEIVIENTS, IMASCO w D
OUL
1*4EDIATELY CEASE TO REGARD ITSELF AS AN ELIGIBLE PERSON AND
WOULD SUBHIT ALL FUTURE AC)UISITIONS OF CANADIAN COMPANIES AND
NEw BUS114ESS VE1,,TURES TO THE MINISTER FOR APPROVAL. MOREOVER,
ANY AC!UISITIOI,4 MADE OR UNRELATED BUSINESS C044ENCED DURING THE
TWO YEAR PERIOD PRIOR TO ANY WITHDRAWAL BY THE SENIOR SHAREHOL ER
'WOULD BECOME SUBJECT TO REVIEW BY THE MINISTER.
A"
(E) THE RELATIONSHIP BET%vEEN THE SENIOR SHAREHOLDER AM IMASCAW61LL
CCNTINUE TO BE 014E WHERE IMASCO PROVIDES APPROPRIATE INFORAATION
TO AND HAS CONSULTATION WITH THE SENIOR SHAREHOLDER SO THAT
IMASCO CAN RECEIVE THE BENEFIT OF THE ADVICE AND EXPERIENCE
CF THE SENIOR SHAREHOLDER. IT WOULD BE AGREED, HOWEVER. THAT
THE ULTIMATE DECISION MAK114G AUTHORITY IN IMASCO, INCLUDING
DECISIONS AS TO THE SELECTION OF DIRECTORS. WOULD BE EXCLUSIVELY
WITH THE BOAPD OF DIRECTORS OF UVASCO.
(F) A PROCEDURE WILL BE ESTABLISHED PROVIDING FOR MINIMUM NU4BERS
OF NOi,,@-EXECUTIVE DIRECTORS, THE iVIETHOD OF THEIR SELECTION AM
THE PROCEDURE FOR EVERCISING THEIR RIGHT TO VOTE THE SHARES
OF THE SENIOR SHAREHOLDER.
(G) THE SENIOR SHAREHOLDER WOULD NOT INCREASE ITS INTEREST 114
IMASCO AND EVERY REASOIIABLE EFFORT WOULD BE MADE BY 11MASCO ( 11
LIP',E WITH EARLIER FIRA UNDERTAKINGS) TO REDUCE THE SENIOR
SHAREHOLDER'S INTEREST TO 40 PER CENT. IN THIS CONNECTION IT
WOULD BE PROPOSED THAT AT THE NEXT ANNUAL GENERAL MEET114G OF
iHAREHOLDERS THE CHARTER OF IMASCO WOULD BE AMENDED TO PROVIDE
FOR A VAXI-'4UM LIMIT ON THE NU48ER OF SHARES WHICH MAY BE ISSUED
BY THE DIRECTORS WITHOUT THE FURTHER APPROVAL OF A SHAREHOLOERfS
I-FEETING. THE MAXIMU-1 WILL BE CALCULATED SO THAT THE SENIOR
SHAREHOLDER'S INTEREST WOULD NOT FALL BELD.-I 40 PER CENT.
(H) NOT LESS THAN 80 PER CENT OF THE BOARD OF DIRECTORS OF IMASCO WO
WOULD BE CANADIANS. THIS PERCENTAGE IS ACTUALLY LESS T+iAN HAS
BEEN THE CASE OVER THE PAST 40 YEARS BUT HAS BEEN SELEeTED TO
ENAaLE 114DIVIDUALS -ASSOCIATED wITH HARDEE'S FOOD SYSTEMS,
IKC., OUR RECENT U.S. ACqUISITION, TO PARTICIPATE ON THE BOARD.
I IMA5015 CHIEF EXECUTIVE OFFICER WIOULD ALWAYS BE A CANADIAN.
EJ) THE SENIOR SHAREHOLDER WOULD NOT HAVE ANY. NOmINEES ON THE BOARD
OF DIRECTORS OF IAASCO. THIS CONTINUES INTO THE INDEFINITE
FUTURE A SITUATION WHICH HAS EYISTED FOR MORE THAN 33 YEARS.
(K) I-AASCOIS HEAD OFFICE AND EXECUTIVE OFFICE WOUCD AT ALL TIMES BE
LOCATED IN CANADA, TIHESE OFFICES HAVE BEEN LOCATED IN MOWTR-AL
SINCE TRHE CO.--PANY'S INCEPTION.
CD
(L) NOT LESS THAN THREE )UART-AS OF ALL MEETINGS OF THE BOARD
r
OF DIRECTORS AND OF THE EXECUTIVE CO.AIAITTEE OF THE BOARD OF
II-IASCO -vOULD BE HELD IN CANADA. IT HAS BEEN OUR PRACTICE
TO HOLD ALL SU(>i '*-ETINGS 114 CANADA BUT AGAIN, IN RECOGNITION
Cc' THE AC)UISITION OF HARDEES, WE WOULD LIKE TO RETAIN SO-VIE
FLEXIBILITY I-N THIS AREA.
I TZI CT T hir-
BAT Industries document for Province of British Columbia 13 April 1999

I TRUST THAT THE FOREGOING PROPOSAL WILL SERVE AS A BASIS, WHEN
APPROPRIATELY DO CUAE NT ED. FOR THE ISSUANCE OF A FAVOJRABLE FIRA
STATUS OPINION TO I MASCO,
I AM OTHER REPRESENTATIVES OF I MASCO ARE AVAILABLE TO MEET WITH
YOU OR YOUR OFFICIALS AT YOUR CONVENIENCE TO DISCUSS THIS MATTER.
SINCERELY,
PAUL PARE
1 5 'A AI
0
BAT Industries document for Province of British Columbia 13 April 1999