CCFAF Z 620086F
1 51 05 !!AT I 1,T) r;
TELI@iSC MTL
MONTREAL NOVEMBER 5. 1 981
TELE,x NO. 37
ATTENT I CX4 mR PAT SHEEHY
-----------------------
DEAR PAT:
IN ANTICIPATION OF OUR MEETING NEXT WEEK. I AM TAKWG THE LIBERTY
OF SENDING YOU A MEMORANDum PREPARED BY PURDY CRAWFORD. THE
MEMORANDUM BRIEFLY OUTLINES THE POSITION WE ARE IN AM WILL BE THE
BASIS FOR DISCUSSIONS WITH YOU CONCERNING OUR PROPOSAL TO FIRA.
ICEE RE L Y.
/1@1
.UL PARE
1-CEMC-RAhCUM
RE B.A.T, IKASCO AND FIRA
-------------------------
THE PURPOSE OF THIS MEMORANDU.M IS TO BRIEFLY OUTLIINEE THE PRESENT
SITUATION CONCERNING IMASCO WITH REFERENCE TO ITS ENIDEAVOURS TO
OBTAIN A FAVOURABLE FIRA STATUS OPINION FROM THE MIMSTERY OF
INDUSTRY, TRADE AND COAvERCE (I 'MINISTER' 1) AND TO IDUTLIW, FOR
PURPOSES OF DISCUSSION WITH B.A.T, A PROPOSAL WHICH IMIGHT BE MADE
TO THE MINISTER WHILN COULD POSSIBLY ENABLE IMASCO TO OBTAIN A
FAVOURABLE FIRA STATUS OPINION. THE MEMORANDUM THEN. AMONG OTHER
THINGS, DISCUSSES VARIOUS A0JJSTME-NTS TO AND REFINEWENTS RELATING TO
THE PROPOSAL
(1-IrASCO LIMITED (;"IMASC011) BELIEVES THAT IT HAS ESTABLISHES TO THE
ISFACTICN OF THS MINISTER TH4T, NOTWITHSTANDING U4E FACT THAT
B.A.T INDUSTRIES LIMITED ('B.-A.Tl) M-INS OR CONTROLS 49.8 PER CENT
THE VOTING SHARES OF IMASCO THE RELATIONSHIP BETWEEN B.A.T AND
SCO HAS BEEN AND CONTINUES TO BE ONE WHERE IMASCO PROVIDES APPRO-
,AIATE INFOR%,%TION TO AND HAS CONSULTATIONS WITH B.A.T SO THAT IMASE
CAN RECFEIVE THE SEW-FIT
CF TX; ADVICE A14D ExPERIENCE OF BAT, IT BEING RECOGNIZED
HOWEVER THAT THE ULTIMATE DECISION--.%%KIk1Go AUTHORITY IN IMASCO,
INCLUDING DECI Si ON'S AS TO THE SELECT I ON OF DI RECTORS. I S WI TM THE
BOARD OF' DIRECTORS OF IMASCO AND ITS SENIOR MANAGEMENT
NOTWITHSTANDING THE FOREGOING THE MINISTER HAS INDIC3LTED THAT HE
WOULD HAVE 0 1 FF I CULTY I N FURN I SH I NG AN OP I N I ON TO. I WkSCO "ER
SUBSE CT I O1'J 4 QOF THE FORE I GN I NVE STME NT RE V I EW Acir ( I F I R ACT
iHAT I-MASCO IS NOT A NONL- ELIGIBLE PERSON IN THAT. BECAUSE (X-- THE
AFOREMENTIONED VOT114G SHARE OWNERSHIP, BAT HAS THE MJER TO CONTROL
IKASCO CD
CD
-4
co
BAT Industries document for Province of British Columbia 13 April 1999

IMASCO HAS SOME REASON TO BELIEVE THAT A PROPOSAL ALONG THE FOLLOdING
LINES MIGHT ULTIMATELY LEAD TO I MASCO RECEIVING A FAVOLRABLE FIRA
STATUS OPINION FROM THE MINISTER:
1. THE SENIOR SHAREHOLDER WOULD OBLIGE ITSELF (BY A VOTING TRUST
OR OTHER LEGALLY BINDING ARRANGEMENT) Tb GIVE THE RIGHT TO
THE OUTSIDE ( NONL- Ex ELIGIBLE CANADIAN DIRECTORS OF
I MASCO TO VOTE ITS SHARES IN THEIR DISCRETION. THIS RIGHT
WOULD EY I ST wITHOUT -!UAL I AND WOULD ONLY TERMINATE IF:
A) THE MINISTER REFUSED TO ISSLE A RENEWAL OPINION (MINISTERIAL
OP I ARE ONLY VALID FOR TWO YEARS AND HAVE TO BE RENEWED
FOR SUCCESSIVE TWO YEAR PERIODS) IN CIRCUMSTANCES WHERE THERE
HAD BEEN NO CHANGE IN THE MATERIAL FACTS RELEVANT TO HIS
OPINION AND THE SENIOR SHAREHOLDER AND OTHERS INVOLVED IN
THE OBLIGATIONS OUTLINED HEREIN WERE NOT t-N BREACH OF SUCH
OBLIGATIONS, OR
8) IN ALL OTHER CIRCUMSTANCES AMR THE EXP I PAT I ON OF TWO
YEARS FROM NOTICE GIVEN TO THE MINISTER BY THE SENIOR SHARE
HOLDER. I MASCO I FIRA STATUS OPINION WOULD TERMINATE UPON
RECEIPT OF SUCH NOT I CE BY THE MINISTER
2. M;J'T+*444-+444444444
HE RELAT I ONSH I P SET.-IEEN SAT AND I MASCO WOULDCONT I I NUEE TO 13E
ONE WHERE IMASCO PROVIDES APPROPRIATE I NF OR;-% TO ON TO AND HAS
CONSULTATIONS WITH BAT SO THAT IMASCO CAN RECEIVE THE BEISEEFIT
OF THE ADVICE AND EXPERIENCE OF SAT. IT WOULD BE AGREED.
HOWEVER. THAT THE ULTIMATE DECISION-MAKING AUTHOR I TY IN 1;4ASCO,
INCLUDING DECISIONS AS TO THE SELECTION OF DIRECTORS, WOULD BE
WITH THE BOARD OF DIRECTORS OF 11-ASCO ?s
POSSIBLE VARIATIONS TO THE PROPOSAL
---- - -----------------------------
I THERE WOULD BE LITTLE UTILITY IN NOT INCLLOING ALL OF SAT
I-MASCO SHARES IN THE ARRANGEMENT. A SUFF I NUMBER OF
SHARES WOULD HAVE TO BE INCLUDED TO PERMIT THE: OUTSIDE DIRECTORS
TO CLEARLY OUTVOTE SAT AND TO SATISFY THE MINFSTER
THAT IN ANY PROXY FIGHT BETWEEN THE OUTSIDE 0 PRECTORS AND BAT
THE OUTSIDE DIRECTORS WOULD PREVAIL
8) IT SHOULD BE POSSIBLE TO PROVIDE THAT THE OUTSIDE DIRECTORS
WOULD NOT, WITHOUT THE AGREEMENT OF SAT, EXERCISE ANY OF THE
VOTING RIGHTS REFERRED TO IN PARAGRAPH NUMBERED I ABOVE IN ANY
MANNER WHICH WOULD REDUCE SATO TOTAL VOTE AM PARTICIPATING
E)UITY BELOW 40 PER CENT
C.) CONSIDERATION COULD BE GIVEN TO INCLUDING A PROVISION WHICH WOULD
GIVE BAT THE RIGHT TO TER' Ml NAT THE ARRANGEW" IMMEDIATELY IN
LIEU OF, OR IN ADDITION TO, THE TWO YEAR NOTICE PROVISION
REFERRED TO IN PARAGRAPH I (8) ABOVE. SUCH A MIGHT wOULD BE
REGARDED HOST NEGATIVELY BY THE MINISTER. IT PEI GHT BE POSSIBLE C=)
TO PROVIDE THAT IF SUCH A RIGHT WE RE Ex --RC I SED ALL OF I MASCD I
ACIU[SITIONS WITHIN THE T1.-jO PREVIOUS YEARS WOULD BECOME CD
PEVIEWASLE BUT 1UERY IF THIS wOULD SATISFY THE MINISTER -4
REFINVCENTS TO THE SOLUTION
------------------------
BAT Industries document for Province of British Columbia 13 April 1999

IN THIS COME CT I ON:
A) IT WOULD PROBABLY BE NECESSARY TO PROVIDE THAT THERE WOULD BE
AT ALL TIMES NOT LESS THAN SAY FOUR OUTSIDE DIRECTORS OR ONE-
THIRD OF THE BOARD
8) THE OUTSIDE DIRECTORS, AFTER CONSULTING WITH BAT AND T@E OTHER
DIRECTORS OF IMASCO. WOULD, IN THE EVENT OF A DISAGREEMENT.
ACT BY MAJORITY VOTE. IN THE EVENT OF A TIE VOTE THE OUTSIDE
DIRECTOR uitTH THE MOST SERVICE AS A DIRECTOR OF I MASCO WOULD
HAVE A SECOND OR CASTING VOTE
C) IT MIGHT BE ADVISABLE'TO PROVIDE FOR A MORE SPSCIFIC PROCEDURE
AS TO THE )AA NNE IN WHICH NEW OUTSIDE DIRECTORS ARE SELECTED.
THE PROCEDURE OUTLINED IN 8) wOULD APPLY FOR DIRECTORS WHO ARE
ELECTED AT SHAREHOLDERS MEETINGS. PERHAPS THE SAME PROCEDURE
SHOULD BE FOLLOWED FOR DIRECTORS WHO ARE APPOINTED BETWEEN
MEETINGS OF SHAREHOLDEIS
POSSIBLE FURTHER COIRAI TWNTS
--------------------- ------
THE BOARD OF DIRECTORS OF IMASCO WOULD BE MDE LIP OF NOT
LE55 THAN 80 PER CENT ELIGIBLE PERSONS UNDER THE FIR ACT.
THE CHIEF EXECUTIVE OFFICER OF IMASCO WOULD BE AN ELIGIBLE
PERSON UNDER THE FIR ACT
- BAT WOULD NOT HAVE ANY NO ON THE BOARD OF DIRECTORS OF
I MASCO. (IT MIGHT BE POSSIBLE TO PROVIDE FUR A BAT NOMINEE
IF THIS WAS CONSIDERED NE =- SSARY FOR EWITYACCOUNTING
ES OR OTHE ;v ISE)
PURPOSE
- [MASCO"S HEAD OkF- I CE (AND EXECUTIVE OFFICE, IF DIFFERENT)
WOULD AT ALL TIMES BE LOCATED IN CANADA
- NOT LESS THAN THREE-@UARTERS OF ALL MEETINGS OF THE BOARD
OF DIRECTORS AND OF THE EXECUTIVE COKMITTEE OF THE BOARD OF
I MS= WOULD BE HELD IN CANADA
THE SENIOR SHAREHOLDER WOULD NOT INCREASE 17M V07E IN I MASCO
AND EVERY REASONABLE EFFORT WOULD BE MADE BY I MASCO
(IN LINE WITH EARLIER UNDERTAKINGS TO FIRM 'TO REDUCE THE
,8
SENIOR SHAREHOLDER' S VOTE TO 40 PER CENT SY -JI-IE END OF 10 3
I I MPLEMENT AT I ON
------------
IF BAT SHOULD BE AGREEABLE TO A PROPOSAL ALONG THE LINES DISCUS-
SED ABOVE IT IS PROPOSED TO ADVISE THE MINISTER OF THE PROPOSAL
AND OF T;Z@r SENIOR SHAREHOLDER'S AGREEMENT IN PIZHNCIPLE THEREWITH.
THE MINISTER WOULD THEN BE ASKED FOR HIS APPROVAL IN PRINCIPLE
TO THE ISSUANCE OF A FAVOURABLE PI RA OPINION BASED THEREON.
IF SUCH APPRO@AL 15 FORTHCOMING IT IS PROPOSED IIHA-r THE Pr wouLo
Be DISCUSSIONS WITH FIRA OFFICIALS OR OTHER PERSONS DESIGNATED
BY THE MINISTER AS TO HOW SUCH A PROPOSAL MIG97 BE LEGALLY
IMPLEMENTED. AFTER THIS. APPROPRIATE DOCUMENTAXION COULD BE
DRAFTED. SETTLED WITH BAT. AND SUBMITTED FOR FSWAL APPROVAL TO CD
THE MINISTER AND FIRA OFFICIALS --&
CD
AAENID
-ND
BAT Industries document for Province of British Columbia 13 April 1999