Tobacco Documents Online

J NOTICE OF SPECIAL ~EETING Flemington, 1N. J., October 26, 1953 IWOTmE IS HEREBy ¢~N that a Special Meeting of the Preferred and Common Stocldlolders of TaE AMEmCAN TOBACCO COMPA~X will be held at No. 34 Court Street, F]eming~on, New Jersey, at onc-thi*~y o'dock in the afternoon (Eastern Standard Time) on Wednesday, December 2, 1953, ~er the foHowlng purposes: (1) to vo~e for the adoption or rejecdnn of an Agreement of Merger entered into oll and dated October 16~ 1953 between the Company and its dlrectors and American Cigarette and Cigar Company, a corporation of the State of New Jersey, and is directors, merging said American Cigarette and Cigar Company into the Company and prescribing the terms am] conditions of said merger and the mode of canTibg the same into elIect, a copy of whibh Agreement of ~IeTger is attached as Exhibit 1 to ibc following Proxy Statemeat; (2) to transact such other business as may properly come before the meeting. The Preferred and Common Stock transfer hooks ~dll not be closed, b.~ holders o£ Preferred Stock a=d Common Stock to l~ mltifl~d to vote must be holders of record at the close of business on Octobsr 28, 1953. JorrN W. H~U~LON, Secretary

PROXY STATEMENT SOLICITATION OF PROXIES AND OU~rSTANDING VOTING SHARES This statement is furnished in connection with the sollcltatlo~ by the managemeat of The American Tobacco Company (herelna:Eter sometimes called American) of proxies to he used at the Special Meeting of Stoekhoiders to be held on December 2, 1953, and at any adjournment thereof. 0~l/y stockholders of record as of the close of huslness on October 28, 1953 will be entiOed to notice of and to vote at such meeting. The management know~ of no business whffih will he presented to the meeting other than voting on the adoption or rejection of the proposed Agreement of Merger, hereinafter deseribeth If any other matters are presented properly to the meeting ~or action, it is intended that the persons named in the proxies will vote thereon according to their best judgment. Any person g~ving a proxy may revoke it by notice in writing given to the Secretary of American at any time prior to the exercise thereof, hut if not so revoked the proxy will be voted and, if a choice be specified with respect to the merger proposal, will be voted ill accordance with snell speeifieatinn. If no choice is specified the proxy authorizes a vote in favor of the adoption of such merger proposal and will be voted accordingly. Attendance at the meeting does not setT¢ to revoke the proxy. The outstandhig numher of each class of voting securities of American is: Preferred 526,997 shares; Common 6,454,I10 sh~res. In voting on the adoption or rejeofion of the proposed _agreement of Merger each share of Preferred Stock and each share of Common Stock entities the holder thereof to one vol~. (Section I4:12-3 of the Revised Statutes of the State of New Jersey provides that ~n voting on the adop~on or rejection of a proposed Agreement of Merger eaelt share of capital stock entities the holder to one vote.) PROPOSED ME]tGER The purpose of the Special Meeth~g is to consider and take action on an Agreement of Merger (herein- after called the Merger Agreement) which provides for the merger of American Cigarette and Cigar Corn. party, a New ~ersey corporation (hereinafter sometimes ealied Cigarette), into Amerlean as the corporation smadvthg the merger. Cigarette and American ax'e hereinaRer collectively referred to as the Constituent Companies. American, as such stttTiving corporation, is hereinafter sometimes referred to as the Surviving Company. A copy o; the Merger Agreement is attached hereto as F~xhthlt 1, to which reference is hereby made for a complete statement o~ the provisions thereof. The Merger Agreement provides that the Smwivlng Company shall have an authorized eapllaI stock consisting of 10,0O0,000 shares o~ Common Stock~ par vaino $25 per shar% and gzg),10g shares of Pre- ferred Stock, par value $100 per share. Tills is the same as the present authorized eapltal stock of American. The S tuTiving Compa~y ~fill retain the present name of American, to wit: The Amerinan Tobacco Company. The only changes which the Merger A~q'eement would effect in the Agreement amt Act of Merger and Consolidation, dated September 9, 190~1~ as heretofore amended, eonstitatil~g the certificate o; incorporation of American, are with respect to the nmather of Directors of tlm Surviving Company, the registered o~ce of the Surviving Company in New Jersey and the Transfer Agem and Regiz~ar o2 stock oi the Surviving Company. The New Jersey Revised Statutes provide that the merger agreement shall prescribe the number, names and post office addresses of the Ptrst directors and officers of the sure,lying corporation and that they shall bold o~ce until their successors are chosen or appointed either according to law or the by-laws of the corporation. These statutes al~o provide that every corporation shall have power to adopt by-laws fixing and altering the number of its directors. The Merger Agreement glees the number, ~amos and post 2

. • [ . orifice addresses of the first directors and o~eers of the Surviving Company in compliance with these statutory requirements. The Agreement of 1904 provided that the nurnber of directors shau2d be twenty-elght. For ~nany years the By-Laws of American have FLxed the number of directors at seventeem The ~VIergar Agreement provides that the first dlrecturs immediataly upon the taking effect of the Merger Agreement shall be nineteen in number and thereafter such number as shall he fixed from time to time in the By-Laws of the Surviving Com- pany, as provided by the New Jersey statuteS. The I904 Agreement also nstned the Tryster Agent and Registrar of _Mnerican's stock at that time. The transfer agant thus named is no longer in existence. The Merger Agreement provides that the Transfer Agent and Registrar of the stock of the Surviving Company shall be the perso2ts or corporations designated as s~rch from ~ime to time by resolutio~x of the Board of Directors of the Surviving Company. The ~ergar Agreement recites the correct principal and registered ohqee of the Sm~'ivlug Company and the Agent in sharga thereof which differs fi:om the ofi~ee and agent referred to in the 191)6 Agaeement. The I904 Agreement also provided that Preferred Stock provided for therein could be issued only for the redemption and rellremenL at par of debts that by the 1904 eonso21datinn bet~ame debts of American or at par for cash ~o be used in such redemption. The i~¢exgar Agreement pro- rides for the conversion of Preferred Stock of Cigarette (exclndi*~g any slrares held by Cigarette or owned by American) lute Preferred Stock of the Suzwlving Company. The Merger Agreement also provides that the By-Laws of Ameldean as they shaU eal~t on the effective data of the merger shall be the By-La;~s of the Smwivlug Company until allered~ amended or repealed as therein provided. Upo** the merger becoming effective the Sm',Aving Compmty will have 6,512,310 shares of Common Stock of the par value of $25 per share issued and ontstanding and 3,487,690 shares of authorized hut unissued Common Stock of the par vahle of $25 per share and 527,831 shares of Preferred Stock o~ the par value of $100 per share issued and outstanding and I2,275 shares of authorized but unissued Preferred Stock of the par value of $100 per shere. There arc no present plans for the issuance of any such suthorized but unissued shares• VOTE B~QU~ TO CARRY OUT THE MERGER If the Merger Agreement is adopted at this Special ivleetlag by the votes of the holders of at Ieast two- thirds of all the capital stock~ ke., Common and Prelurred, of American entitled to vote at s~tch meeting, and at the Special Meetlug of stockholders of Cigaret~ hereinafter referred to, by the votes of the holders of at least two-thlrds of all the capital stock~ Le., Common and Pl~elerred, of Cigarette entitled to vote at sush meeting, the merger will become el~ectine upon the filing o~ the Merger Agreement in the manner provided by the laws c~f New ~ersey. When the l~ferger Agreement becomes effccfve the separate existence of Cigarette wiH cease except insof~tr as the same shall continue by statute or may be requisite for carrying out the purposes of the _Vfergar Agreement and Amerlcan as the Surviving Comp~my will succeed to all the rights and property and be subject to all of the debts, re~rietluns, liabilities and duties of Cigarette. • A special meegng o~ stockholder~ of Cigarette will be held ~or the purpose of considering and taking action on the Merger Agreement on December 4, 195g~ American is the owner and holder of 188,225 shares of the Common Stock, par value $70 per shere~ of CigaretLe ou~ of ~95,500 shares (exclltsine of 4~500 shares held in the Treasury of Cigarette) of such Common Stock o~sta*lding or approximately 96% of the outstanding Cormuon Stock of Ggarette; American is the o~vzer and holder of 3,230 shares of the Preferred Stock, par value $100 per share, of Cigarette out of 3,989 sh~res o~ such Preferred Stock out. ~andlng or approxlmatcly 81% of the ot~tstandlng Preferred Stock o~ Cigarette• Americau~ as owner and kalder of such shares of Common and Preferred Stock of Cigarette, reserves the right eldl~r to rofraln ~om voting such shares in favor of the adoption of the Merger Agreement or to vote suck shares against

the a~lopfion o:E the Merger Agreement at such special meeting of stockholders of Cigarette, i{, in the opinion o~ the Bo~d of DirecLors of Am~rlean, the merger, at the tlme of suck special meeting of ~tock- holders of Cigsrettc. is impracticable or inadvisable under then exi~tlug circumstances and con~tions. If and when the merger shall bare become effective, American intends to mail to its stockholders a notice to such effect within ten days/olluwing the effectlve date of the merger. CAPITALIZATION OF CONSTIT~'ENT cogIP.~N'IES AND nASIS OF CONVERgION O1~ MERGER As of September 80,1953 (a) Amezlcan had an authorized capltal stock consisting of 10,000,000 shares of Common Stock, par wlue $25 par share, of which 6,454,110 shal~es wer~ issued slul outstanding, and 540,106 shares of 6% Ctmmlatine Preferred Stock, par value $100 per share, o~ which 526:997 shares were issued and outstanding; and (b) Cigarette had an authorized capital stock consi~ng nf 500,000 shares of Colnmon Stuck, par value $70 per share, of which 195,500 shares wore issued and outstanding (exclusive o~ 4,500 ~arcs h'cld in the Treasury of CAgarette}, of which 188,225 share~ were owned by American, and 3,989 shares of 6% Cumulative Pxeferred Stock, par vaine 8100 per sham, of wltick 8,989 shares were issued and oul~landing of wltick 3,230 shares were owned by Americam The Merger Agrcement provides that when the merger becomes e~ective: (a) each share of Common Stock, par vahe $70 per share, of Cigarette outstanding on the efl:ectlve date o~ the merger, ~11 ha converted into eight (8) share~ of Common Stock, par value $25 per shal-e, of the Stuwlxing Company, e~cept that the. 4,500 shares o~ said Common Stock of Cigsrette held in its Treasm'y and the 188,225 shares of said Common Stock o:~ Cigarette o~ed by American ~11 not be converted into Common Stock of the Surviving Company but will cease to e:dst, and each share of 6% Cmalulatlve Preferred Stock, par vshe $i00 per share, of Cigarette outstanding on the efl'ectine date of the merger, will be converted into one and on~-tenth (l-1/I0) shares of 6% Cumulative Preferred Stock, par value $100 per share, of the Smedv~ng Company, except that the 3,230 shares of said Pr~thrred Stock o~ Cigarerle owned by AmericalL will not be converted into 6 % Cumalatlee Preferred Stock of the Survi~ng Company but will cease to exist; (b) each share of Common Stock, par value $25 per share, of Amerlcar~ outstanding on th~ e~ect fee date of the merger will continue to be one share of Common Stock, par value $25 per share, ef the Surviving Company, and each share of 6% CumuIative Preferred Stock, par value $100 per share, o~ Amcrican, outstanding on the e~ectine date of the merger will contlut~e to be on~ share of 6% Cumulative Prefe~ed Stock, par value $]00 per share, of the Surd~ng Cmapany. SCRIP CERTIFICATES FOR FRACTIONAL SHARES In ulI cases where Shares o~ Pr~erred Stock ~ the Sulking Company to be received by a holder of Preferred Stock of Ciga~ shall consist of a fraction o~ a share, a Scrip C~rtific~ ~II ha issued to represent s~ck fe~ctional interest. Such Scrip Certificates wilI, when combined with similar Scrip CerJha~tes aggregating one or more f~ shares, ha exchan~a~ for a period o~ two years from the ~lIcctive dale o~ th~ merger for full shares ~ Prelated Stock o~ the Surviving Company. Holders o~ Scrip CerL~ficates ~ll hava no vo~ ri~ht~ or rights to dlv~dends or other distr~doas. Reference is made to Article VI(e) of the Merger Agreement (Exhibit 1) for a fuller description of the [clmas and provisions of such Scrip Certificates. 4

".:..:. E DESCRIPTION OF CO~IMON AND PREFERRED STOCKS OF AMERICAN Article IV¸ of the Agmemem and Act of Merller and Consolidation, dated September 9, 1904, heretofore amended, is as follo~s: "AI~TICLE IV. The cayllM stock of the sa~d merged corporation is $304~010,500. Five Hundred Fo~, "Pnous~d One Hundred and Six (540,106) abates sh~ll be Freferred Stock of the p~x value of $100 each. Ten Milllon (10,000,000) shares shall h~ Common Stock of the par value of $25 each. The rights o~ th~ holders of the said Prethrre~l Stock and Common Stock, rc~ccfiveIyj shall be as follows: The hald~rs o~ th~ Preferred Stock shall be en~tlec[ to ~our votes for each share n~ ~ p~x value of $100 h~Id by the~, and the ~Iders of the Conm~¢n lltock shal: b~ e~tilled to one vote for ~h share o~ the par ~u~ oJ $25 hekI by them. The holders of the Preferred 5rock thaU be emitlcd to recei~re out of the ~urplus or out o~ the net pro~, anH the merged corporallon ~haI[ be bound to pay thereon aJ and when de~htecI by the Board of ][~reeL~rs, a thvi~end a~ the rat~ of~ ~u~ ne~r exeeed~ng~ $1~ per cent~ per annuxn~ v~mulative :from ~nd after the £rs~ day of OctoBer, 190~, payahl~ yearIy, haI~ 7¢oxly, or quarterly, before any ~vldend shall ~e se~ apart or paid on the Common St~ck~ provlded~ however, that when all accrued dlv~den~ o~ the Preferred Stock h~ve been ~id, the Ditec~o~ ~lm]]~ i~ m their judgm0nt the s~v~:u~ or the net proth~ after dedu~tin~ the amount o~ ~vi~enc~s to accrue on th~ Pralerted Stock ~luring the curren~ yea~ shall be s~cient for ~uch purpos¢~ have power in theis ~iscret~on to c~e~isro an~ pay a d~alden~, or dislden~, on the Common St~ck. In ease of liquidallon~ or di~o]utlon, or distribution of asset! of the ~Jd me~ge~ corpornfion, the halder~ of Preferred Stock s~ml~ be pai~ the par amount of their Preferred thare~ and th~ amom~t ~ dlviSench aec~amlate~ and uupakl he'ore any emo~mt thall b~ payable er pai~ to the hal~ers of the Cotmnon 5rock; th~ ~ahmce o~ th~ asscL~ of said merged corporal:on shall he dlvMed ratably among the hald~r~ of the Common Stock, share ~d share alike.': The Allrcement of 190~ as l~e~e[~fore amended~ contains ~o prov~s{~ls regarding p~e-empt~ve or subscription r~gh~s. In the opinion of Counsel f~r Amexican the holders of Common Stock ha~e pre- emptive rights and the ho:ders of Preferred Stock do not have pre-emptive rlgh~ with respect to th~ authorized and unissued shares nf Common Stock. Reference is also made to the caption "Restrlc~ons on Divlde~ds of Americnn" below. RANGE OF ~ECURITY PRIC~S The h~ and low s~:e~ p~ce~ ~f th~ C~mm~n ~d P'ze~e~ed S~h~ ~ Amexlca~ on the New ¥~k Stock Exehen~ for each of the eight consecutive quarterly t~crlods, the ~ast o~ which ended on September 30, 1953, compiled from The CoTnn:erc:al & Financial Chro~cle, and the h~ ~nd low b:d prices of the Commou ~d Preferred Sleeks o~ (~arct~c ~ the over-th~-counter market for each o~ the ~ame perlod~ a~ compiled from The ~National Daily Quam~ion Service, E~stem Stock Division, puMJshed by The National Quotation Bureau, I~¢. were as follow~: C~ga~tte New Yo:k Stock ~xch~tge Sale~ prices Owr ~he-Co acter Bid P~e~,s Quar t~r]y Com~D~ Sto~k pre~er~d ~tock Cor~mo~ St~ck F~ei~ed Sleek pe~iod~ Ended High Low l~ ~ Iligh L~w I~h L~w De~embex 51, I951 ...... 651/¢~ 59~/z 138~ 1281/~ 215 205 -- -- March 31~ 1952 ........... 55 57 I38~ ]29~ 220 210 125 125"* June 50, 1~52 .............. 587/s ~ 138~(1 132~ 215 215 I35 135*~ S~ptemher 30, 1952 58 55~/~ I86~/~ 131 215 215 132 I2g*~ Dccember Bl~ 1952 ...... fi57/a 55~/$ 1397/a 132 220 220 130 130 March 31, 1955 ............ 74~ 55 13,~/~ 183 250 250 -- -- J~e 30, 1953 .............. 74 683~ ]35~/~ 1301/~ 265* 250 130 125 S0pteraber 50, 1953... 77~/~ 7gsA 138~/~ 132~'~ 275 265 J27 127 *~ During the quarter eDded ~rc~ 31, 1952, there ~a~ one offering quoit:on @ 1~, du~ing thc quarter ~ded June 30, 1952, ther~ ~'a~ one o~rlag quolatiou @ 130 and d~rlng the quarter ~ndell September 30, 1952, ~here wa~ one o~rlng quotation @ :.30. Tim above bids for the Commol~ and Preferred Stocks of Cigare~ arc merely namlnal quotations and do not ncce~arily represent prlcee at ~hlch trtmsaction~ have taken place, The offerings o£ Cigarettz 5 as

Common and Preferred Stocks listed in the notes to the above table were the ordy offerings wMeh appeared in the records duchag the eight quarters listed. As indicated, no bld~ appeared in the record for the Preferred Stock daring the last quarter of 1951 or the first quarter of 1953. BUSINESS AND PROPERTY OF AMERICAN CIGARETTE AND CIGAR COMPACTS Cigarette, wbich was incorporated in New Jersey in 1901, sol/s PALL MALL Famous Cigarettes. The PALL MALL brand together with the business and good will therein was leased by Cigarette ~om American in ¸1936 for a period to expire with the year 2030 at an annual rental of $52,000. The PALL MALL brand is manufactured by American at throe factories located at Durham, IN. C., Louisville, Ky., and Ricbmond~ Va~ and sold to Cigaretle under an agreement tern~inablo by either pa~y on one year's notice. This agreement provides that the price for the PAI~ h4ALL Cigarettez manufoetured thereunder is the sum of the cost of manmfacture (wifich includes the cost of the manufacturnd product and e~':penses incurred in the storage and shipment or delivery thereof calculated in aecordence with ganeraIly accepted principles of accounting followed by American), plus interest on the cost of leaf tobacco used in the mantffacture of such cigarettes (calculated by multiplying American's averag~ intere~ expense by its average leaf duration for the preeedlng year) ph~s a fixed amount pex thousand cigarettes representle~g gross profit to American. The price paid under the agreement by Cigarette to Amecicml fo~ PALL blALL Cigarettes manufactured for and sold to Cigarette by American during the year 1952 was $309,459,091 of wblch $301,702,388 represented the cost of the manufacturnd product and expenses incurred in the storsga and shipment or delivery thereo~, $5,033,426 ~epresented interest charge ~or the tobacco leaf carried in inventoxy for thv contract and $2,723,277 repxesented gross profit to American. In 1932 certain real and personal propertD plants, cigar brands, trade-marks, buslne~s and the good will thereof, o~wled by Cigarette were leased to American for a tetTn expiring with th~ year 2030 at an annaaI rental of $1,800,000 pins taxes assessed upon the ~ased property, insurance and other charges constltutmg additional rental. Under an agreement with American entered into in 1936 and eontinttlng ~om year to year subject to termthatlon on 30 days' notice, Cigarette is the exclusive agent in the United States of America and all its possessions for the sa~ of all clear Havana cigars manufactured by or for American. Payments by American under this agaeemcnt amounted to $696,588 for the year i952. Cigarette doe~ not o~3a any plants (except cigar plants leased to American under the ~ase referred to above) or tchacco leaf stocks. Cigarette owns an inventory of pALL MALL Cigarettes which are stored principally in public warehouses. Cigarette has investments in seeurisie~ (notes and stocks) of Cuban Tobacco Company Inc. and stocks of subsidiaries of C~han Tobacco Company Inc. Cuban Tobacco Company Inc. has various subsldinsies winch owtt real estate and fitrm lands in Cuba and are engaged in the tobacco business, ineind2ng the buying, superv~cing the g~owing by sharecroppers, wsrchousing, processing and stemming of tohaeco~, oald the manufacture of cigars and clgarettcs in Havana, Cuba. A subsidiary of Cuban Tobaccu Company the. also owns a manufacturing plant in Trenton, New J'er sey: where sigars are manufactured. BUSI3~SS AND PROPERTY OF THE AYt~a~,ICAN TOBACCO COMPANY Amerlea~ was incorporated in New dex~cy by the Agreement and Act of Merger and Consolidation, dated September 9, 1904, referred to above trader the caption "Proposed Merger". American and it8 subsidiaries are engaged in the business of manufacturing and selling cigarettes, cigars and smoking and 6

chewing tobaccos. ThenetsalesofAmericanandsuchofltssubsidiarlesasareinclndsdinitseonsolidated financial statements herewith were $1,065~738,454 in 1952 (including Federal revenue stamps of $520,420,025 agixed to the preducls), made up of 95.01 ~ Cigarettes, 3.45 ~o Cigars, and L54 % Tobaccos and Miscellaneous. The principal product of American is LUCKY STRIKE Cigarettes. The second principal product is PALL MALL Cigarettes manmfactured by American for Cigarat¢ under arrangements desccibed under the preceding caption. HERBERT TAREYTON Cigarettes are American's third principal product. A downward trend in the sale of LUCKY STRIKE Cigarettes which began in 1949 has c~ntlnned to date. Sales of PALL MALL and HERBERT TAREYTON Cigaxetles have increased during the past seven years at rates far above the ind~ttT average. Combined sales of LUCKY STRIKE, PALL MALL and HEKBERT TAREYTON Cigarettes place American in the position of America's leading manufacturer of cigarettes. The cigarettes manufactured by Ameriem, are principally for domestic consumption and are reid mainly through jobbers and to some e~ent direct to chain stores and other large retdii outlets. The brands of cigars manuinctured by American were leased to it under a inng-texTn lease with Cigarette entered into in 1932, referred to above under the preceding capfinm The prineipsI brands new being manufactured are EL ROI-TAN mode principally from domestic tobaccos, and A~NTONIO y CLEOPATRA~ mode entirely ~rom Havana tobaccos. American also manufactures HALF & t~4ALF and BULL DURHA~R Smoking Tobaccos and a number of other croaking, plug, twist, cigarette and cigar brands. American Suppliers, Incorporated, a wholly-owned subsidiary, purchases domestic leaf tobacco supplyhig to American tlm major portion of its tobacco requirements. Tobaccos for the manufacture of cigarettes, smoking and chewing tubaezos are purchased mainly on suedes markets and from dealers and govennnent agencies; cigar tobacco is purchased direct from growers and from deahira. This sub- sidiary also realties, stores and stems tobacco, raaintains warehouses for handling and storing of leaf tobacco at strategic points as reIated to the manufacturing plants and growing areas, and normally "has on hmdi a ve~T substaaBal inventory of leaf tobacco. Golden Belt Manufacturing Company~ a 94.07% owned subsidiary, manufactures cotton hags, principally used for ~e packaging of tobacco, and supplies American's requirements of bags ~or its brand BULL DURHAI~I~ mauufactures tobacco shade cloth used to cover the fields on which Connecticut Valley sbed~-grown clgar wrapper tubacco is gro~n; supplies a substantial portion of the requirements for such cloth of The [-latheway-Steane Corporation; and also manufactures labels for tobacco and cigarette packages. The Hatheway-Steane Corporation, a wholly-owned subsidiary, grows, so~s, packs and cures domestic cigar leaf tubae¢o, almost all of which is so2d to Amexieam The American Tobacco Company of the Orient, Inc., a wholly-owned subsidiary, buys, sorts and packs tobacco in the Near East known as Turhish types ~or shipment to American. J. Win & Sons, Limlted~ a wholIy-owned Englsh subsidla*7, manu- factures and sells cigarettes under the brands KENSITAS and BAR ONE. The properties uf Americnn and its subsidiaries ,ttilize d in the handllng mid manwiaeture of tobacco, generally speaking, are employed in eidier the buying, redrying, storing or stemming of leaf tobacco, or in the manufacture (including prefabrication) of the tobacco products for the market. The chief centers at which the manufact~ing operations are conducted by American are the fotrr at which it manufactures cigarettes which incinde facilities for conditioning and stemming tobacco. These axe in or near BJcinnond, ¥irglnia~ Durham and Reidsville, Nozeh CareEns and Louisville, K~ntucky. The plants in Richmond, Virginia, include a cigarette factory- and a smoking tobacco ~acto~T, redsy- ing, stemming and research facilities and storages fQr tobacco and supplies. The plants at Dtulam, Nori]~ Caralfim, include cigarette and smoking tobacco factories, redsying and stemming facilities and storages 7

~or tobacco and supplies. At Reids~ilie, North Carolina, there are a cigarette factory, redrylng and stemming facilities and storages for tobacco and supplies. The plants at LoulsviHe, Kentucky, ~rlelude cigarette and chewing tobacco faelories and facilities ~or redrylng and stemming and storages ~or tobacco and supplies. The principal cigar pIants o$ Amarlean are loeatnd at Charleston, South Carolina, Louisville, Kentucky, A~hley, Philaddphia, Scranton and Wilkes-Barre, Pennsylvania. Niost of the cigar making maddne~ is leased from the mantffacmrer. The plants at CharIeston, Louls'dlle and PhihdeIpbia are 1cased from Cigarette. The plant~ at Ashley, Scranton and Wilkes-Barre are Ieased from others. EIGARE'i~E PRICES Since January 1,1948, the llst price to eustomer~ of the principal brands of cigarettes sold by American and Cigarette have been as follows: List F~c~s er Thousand Ci szet~es Subiect to 10% T~acle mad 2% Ca~ Di~eotm~ (Ldude~ F~deral Excise Tax) pALL MALL mad LUCKY STRIKE 5TERBE8~T TAREYTON To July 29, 19~....L ................................................................................. $7.38 $7.38 To July 28, 1950 ........................................................................................ 7.78 7.78 To November 1, 1951 ............................................................................... 8.09 8.05 To February 26, 1953 .............................................................................. 8.5fi6~ 8.616" February 26, 1953 t~ date ........................................................................ 9.00 910 *Authorizcd by the Office of Price Stahl]Szation to cover inorease in Federal exchs~ tax from $3.50 per thousand cigarettes or 7¢ per package to $~.00 per thousand or 84 ]per package. EARNINGS OF CIGARETTE AND AMERICAIN The following data, fax the yearn 1948 to 1952, inclusive, have been prepared from financial state- ments which have been examined by £ndependent certified public accountants. The data for the years 194.8 to 1952, ineluslve, feinting to Cigarette, have been reviewed by Haskins & Sells and, relating to American, by Lybrand, Ro~ Bros. & Montgomery; the opinions of said firms appear iu Exhibits 3 and 2, respectively. Six Months ~nded June 30, I953 I952 I951 1859 19'~9 I94~ Net sale.~clgarette operations .................... $18%631,876 $ 333,$43,401 $286,863,408 $167,I90,619 $122,097,738 $ 97,208,089 Gross ¢0mmi~ions from cigar operatlonz, re0ataI trader indenture of lease dated IVIareh 01, 3902, dlvldend~ interest and other income ............... 1,437,387 2,918,890 2,757,557 2,766,742 2,720,055 2,711,184 Income before federal and other taxes on i~eome 14,918.206 I8,745~969 15,577,207 10,846,009 6,856,021 5,391,805 Net income ..................... 4,4~,205 5,601,969 5,032,107 5,274,609(I) 4,255,820 8,232,515 Earnings per common share (195,500 zharcs outstanding) ................ 22.65(2) 28.53 (2) 25.62(2) 26.85(2) 21.1~(2) 16AI(2) Divldends paid on com- mon ~toek per thare .... 8.00 18.00 16.00 14.00 I0.00 7.00 (1) See also nei credit of speeial items amounting to $772,705 included in Statement of Income for 1950 in Exhibit 3. (2) After deduction of dividends on Preferred $took of $11,967 in the six months cnd~d Juno 30, 1953, and of 823,934 ia each of the years 1940 through 1952. 8

AFIE P~ CA~ (CONSOLIDATED) $1x h{~atl~ cndexl June 30, I953 1952 I95] X950 19¢9 I948 Net saIes .......................... $524,780,491 $I,085~738~4~ $9d,2,559~05i $871,621,130 ~g58:gt]6,089 $$73fi66,917 Income before federal and other taxes on income 44,432~824 78~551,888 80,410,505 76,724,839 74,327,119 70,523,925 Net income .................... 17,075,117 34,058,963 83,109,669 41,782,716 45,675,L~4 43,912,204 Earnin~ per common share ............................ 2.48(1) 4.79(1) 5.57(1) 7.17(1) 7.90(1) ?..58(I) Dividends paid on com- mon dock per sha~e .... 2.50(2) &0O 4.00 4.00 4.00 8.75 Comnlon shares outstand ing at end of period .... 6,454,110 6,45~d10 5,378,425 4,878,425 5,378,425 5.378,425 (1) A~er deductlo= of dlvldpnds on Preferred Stock of $3,161,982 in e~ck oI the years I948 tlurov~h 1952 and of $1,580,991 in she six months ended June 30, 1953. (2) "l~ro reg~ar quarterly dividends of $.75 per share and a~ extra dfeid~nd of $I.00 per share paid March 2, 1953. DIRECTORS _4ND OFFICERS OF SURVIVING COMPANY UPON COlgSU~IMATION OF THE glERGER The 1V[erger Agreement provides that the Sarvlving Company ~all have 19 Director~ and names the following hldi~iduals as its first Dh'eetors: Orpheus D. BaxaIys Alfred F. Bowden Riohard J. Boylan Douglas W. Brashear Thomas P. Cormors James R. Coon John A. Crowe John H Dowd A. Gordorl Fhsdlay Preston L. Fowler Charles Ganshow Paul M. Hahn Hiram R. Hanmer Edmund A. Harvey lqarty L. Hflyar4 John R. Hulehlngs, Jr. A. LeRoy Jansen WiS~am JsL Ogshu~y James F. StMckland The Directors named above, with the exception of A. Gordon FindJay and Charles Ganshow, con- stitate the present Bosrd of Directors of American. A. Gordon Findlay has served American and its subsidiaries for a period of 21 years. He has fieen a Vice President and Director of Cignrette since 193~. During tfic past 5 pears, and ~o~ manF yea~s prdor thereto~ he has been in charge of sales and advertising of cigars fox Cigarette and its subsidiaries. Cbarles Ganshow fim~ served Azneriean and its subsidiaries for ~ pcriod of 42 yea~s. He has fieen a Vice President of Cigarette since 1950 and a Director since 1936, ha~ing served as Auditor ~rora 1936 to 1950. During tile past 5 )ears, and for many pears prior thereto, he has supervised the administration of all departments of Cigarette and its subsidla6es. Both Mr. Findlay and Mr. Ganshow have been of~c~ers and directors of'subsldiaries of Cigarette for many years.

The Merger Agreement also designates the following individmals as the first Officers of the Surviving Company: Paul M. Hahn, President Richard J. Boylan, Yiee President James R. Coon, Vice President and Comptxoller Joha Al Crowo, Vice President Prszton L. Fowler, Vise Preside~ Edmu~ A. Harray, Vice President Har~ L. I{ilyard, Treasurer A. LeRoy Janson, Auditor A~red F. Bo~en, A~istomt to the I~msldcnt John ~ H~alon, Secretary J. Wesley Dale, Assistant Auditor Edward D. Flah~rty, Assistmat Auditor Frederick W. Kecmy, Assls~at Secretary Joseph R. Watetho~se, A~istmat Treasurer INTEREST OF DIRECTORS AND OlrlrlCERS OF CONSTITUENT COMPA~'I~S ~nerlcan has been advised that no director or officor of Amerieat~ or of Cigarette and no associate of any such person has any substantial interest, direct or thdircet, in the proposed mesg~c other tha~ as an officeD director or ~ockholder in one or both of the Constituent Companies. The amount o£ Common Stock and Preferr~t Stock of AmericAn and Cigarette owned beneficially, directly or indlrecfl~, as of September 30, 1953 by the directors and offmers of each as fm-nlsbed by them is as follows: stock of AmoHeau Stook o~ Cigarette Name Orpheoz D. Baxalys George E. Bolivar Alfred F. Bowden Richard J. Boylaa Doughs W. Brashear Thorctas P. Cormors James R. Coon John A. Crowe Joha F. Dillon John S. Dowd A. Gordon Findlay Preston L Fowler Charles Gan~o~¢ Alan C. Garratt _~dber t Gold Paul M. Hahn John W. Hanlon Hiram IL Hanmer Edmund A~ Harvey Harry k Hilyard John P~ Hutchings, di-. A. LeRoy Ja~so~ John & La~g William H. Og~hnry Si&aey Schon James F. Stricldm~d H~dBcnefl~a~y O~ae¢ Commo~ preferred Director of Amedcan 1,061 62 Secretary o~ Cigarette Director and Assis~an~ to the President of 150 America= and Director of Cigarette Director and Vice Pre~ide~ of Araerloan2~2g0 450 20 Dh'e~or o~ ~sa~rlcan220 Director o~ ~aericma 174 Director, Vice Presiden~ and Comptroiler of 783 50 4me~ean Director and Vice President of American a~d 720 105 Director of Cigarette Auditor of Cigarette 36 Director of Amerlean 400 Director anil Vice President o{ Cigare~e 250 Director and Vise Pre~idcaat of American and 720 100 Director of Ciga~Jte Director and Vice President of Cigarette I01 Director of Cigarette 1 Director and Vice President o£ Cigarette 523 Director aad President of American mad 2,504 285 Director and President of Cigarette Sc~etary of American 32 Director o{ Araerleaa 144 Director and Vice President of American and 800 40 28 Director of Cigarette Direotor and Treasurer of Awa~rlcan and 350 Director o~ Cigarette Director of A~mrlcan 200 Dire~*tor and 4uditor of Araeriran 318 Director of Cigarette .5 Director of Axaericma 150 50 Director ~nd Treasurer of Cigarette 2 Director of Amerlcan 420 Common Preferred 10