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American is sis9 informed tlmt associates of the fDIlowing individuals owned benefioially, as ul Septem- ber 30, 1953, securities of American and Cigarette as indicated: James R. Coon, 83 shares of Cigarette Preferred Stock; Preston L. Fowler, 120 shares of American Corn,non Stock; Paul M. f~[aln~, 85 ahal"es of Cigarette Common Stock; tliram R. Eanmcr, 39 sharcs of Amcxican Common Stocl~; and A. Le, Roy Janson, 24 shares of Americas Common Stock and 10 ?hares of Cigarette Common Stock. RECOgI~IENDATIONS OF THE BOARDS OF DIRECTORS The Board~ of Directors of American and Cigarette, a~tcr careful consideration, conceded at rebec- five meetings held on October I6, I953, that ~he merger ~uld be advamageo~s to the respective Constlt~e~t Companies and their ~tockholders. Of the twelve members o~ the Board o~ Directors of Cigarelte, six are also members of the Board o~ Di~cto~s of Amerlcan. Ciga~¢~e stockholders will halo as stockholders o~ the Survlv~g Company a direct interest in the as~ct~, includi~ ~af inventories and plants, and in the business of Amebean which has a much larger capi~l and has for almost ~ty years consi~eatIy e~oycd a favorable earnings and dividend record a~ one of the leading corporations in the tobacco indus~T. Also the shares of Amebean which are listed on the New Yock Stock Exchange a~d are actively dealt in enjoy a much broader market ~an do the shares of Cig~re~le ~]lloh a~o ~ot listed on any exchange. The Pre- ~e~Ted Stock o£ American as the Surviving Company will h~ve ~our votes per share whereas wi~h respect to most corporate matters the Pre£erred Stock o~ Cigarelte ha~ no voting rights. American stockholder? will share in the full gene's of Cigar~tto's operations. The merger ~vi~ aLqo make possible the ellraln~t~on o~ r~mn~" duplications in the operations o~ the two companies as separate entities. At present PALL MALL Cigarcttes and LUCKT STRIKE Cigarettes, alLhough manufactured in the same p]~n~s and stored in the same warehouses, must be shipped to customers 1ruder separ~e bl]ls of lading, notwith~andhlg such s]gpments ~re to the same eustomem. Separate records must he maintained and each company billed separately ~or warehouse and shipping expenses. It i~ not possible to take advantago of certain mlnimthn ¢a~ex rates ~ecause o~ Ihese separate ~h~meats. Cn~tomers must either su~¢r the inconx,enience of dealing with two compadies ~han ordering PALL MALL and LUCKY STRIKE Cigarotte~, or, ff as daily happens~ they combine oeders for both cigarettes in on~ order~ the company rece/vlng the order ~u~t transcribe a~d tr~nsmiE a portion thereof to the o~¢r company. Similar di~cul~ arises whea, as happens practically dai~ c~stomers combine remittan~s ~or PALL N/ALL and LUCKY STRIKE Cigarettes in one check. Because at present it is neoessary to maintain separate accounts receivab]e and s~parate credit departmen% with respeot to the same customers~ greater latitude unavoidably results than would be the ca~e if the customers' credit was eontro]~cl by one comFany. There is also conslder~Ie dl~plicatien in m~intalning warehouse inventories, tax, payroll, mail and other depaxtment~ and in recording and depositing remittanee~ ~rom e~tomers, writing and slgding check% banking alTangements, stock transfers and dividend disbursing. Most, if not all, of these duplications would be eliminated by the mozgex. In fixing the bases ~f con~ezslon in the "~erger A~reement as here~nabove set forth ~nder the caption "Capitalization of Constituent Companies and Basis of Conve~ion on ~erger", consideration was given, w~t]~ respect to both companies~ primarily t~ p~t and pre~enL ea~n/ng~ and f~mre pro~ects. In addltion~ consideration was also given to marhat ~alues of shares so far as ascertainable, hook values, dividends, capita| funds, developments Ln the cLgarette i~tdustr~ a~td o~her factors deemed relevant, ineled~g those mentioned hereinahove under this caption. 11

TAX-~FILEE NATUT~E OF THE MERGER It ~ t/~e op~n~on of co~nseI for the ConstiL~cnt Companie~ ~al, v~r t~e Internal Rovenue Code now ~n e~Tect, the merger will constit~t~ a ta×-~e reorganization ~nd that nci~er ~aln nor loss for Federal Income Tax pu~oses wiH be r~al~zed by reason of th~ me~er by e~cr of th~ Const~ont C~mpanies or by t~e ho~d¢~ o~ Co~mon ~ock or Preferred Stock o~ either ~ the C~nstitttent C~mpanie~, except in the e~se of sto~khoIders who m~y dissent and Le paint the market vahte of their stock ~ appro~ appraisal proceedings. RIGHTS OF DISSENTING STOCKIIOLDER$ Any stoc]dlO]der o~ Amp'lean wi~hi~ to take advantage of the apprai~aI ~to o~ New J'~rsey (Sect~on~ ]~:I2-6 ~n~t 14:I2-7 of the Revised St~t~s o£ t~e Stat~ of ~c~- Jer~) must (a) g~ writ~cn ~otlce to ~¢rlca~ o~ ~s dissent at any ~mc p~or to the ~ote on the mer~cr at t~e Spe~L -Vleetlng ~ Stockholders o~ Amcrlcan referred to herein, and (~) either noL vo~e on th~ merger or vote ~ga~t ~e merger at ~ach Specla] _V~cetlng. Se~tlon 14:12~7 of the Revlsed Stat~te~ o£ the StaLe of ~ew J'er~y provides, in connection ~ mcr~r of corporation, that ~y stoc~older n~t voting Lu ~avor of the Agreement of Mer~r m~y dissent £rom such A~reement ~t any time prior to the vote on ~uch m~g~r by glvln/~ th~ corpora~on in ~]lic~ he is a ~o~k/~old~r wrlt~cn notice o~ d~sent; at any time wi~iu thirty days after ~he a~optlon and ~]ing o~ t~e Agreeme~ of Merger ~uch ~]i~n~g ~ckh~der by action in the Sup~rlor Court m~y ap~y for the appointment o~ three dlsintereste~ appraisers to ~ppr~is~ t]~e £tt~I m~et v~tt~ o~/~ stock ~ithout re~rd ~o ~y ~ree~ation or appreclat~on thereof" in ¢onscqucnce of the merger. $~id Section I4:12-7 a~d Set,on 1~:I2-6 ~r~er pro~de ~t the ~ard of the appraisers, or the majority of them, ~h~ c~nfirm~d by the Court, ~all be final ~nd concluslw on aH p~. I~ the awar~ confi~i~n by ~ch Court the ~m~unt of the ~ard sh~11 l~e a judgment against such eo~'por~io~ a~ may be c~]ected as ot~r j~gmcnt~ i~ ~ch Court are by law collectlble. On re~elv~ng such payment such s~ckho~d~r must transfer hls stoc~ to the ~urvlvlng corpora~on t~ be dlspo~ed ~ by ~ directors the~o~ or to ~ retaln~d ~or ~e b~n~fit oJ" ~le r~m~inln~ stccl~o~ders. Thv Cou~t may dlrect t]~e d~s~en~i~ ~tockholc~ex to ~n~t his certificate o~ stock to ~ Cler|~ of t~le Cn~rt ~or noratlon ~crc~n o~ the pe~ency of tile a~prai~al proceedings and ~ t]~e ~t~ckh~lder fai~ to comply ~vi~ ~uch dlrect~a the Court m~y disn~s the proce~i~. Any stockholder o~ CJ~rettB ~hln~ to ~Ice advant~go o£ ~v app~alsa] statut~ o1" ~ew J'~rs~y, prior to the vote on the mer~er ~ ~ Special Meeting of sto~ho~ers o~ C~rette to be held for the purpose o~ voting t]~reon and (]~) either not vote on file merge~r or vo~ a~ain~t ~e merger at ~uch Special Meeting o~ ~ockho~ers of Cigarette. RESTRICTIONS ON DIVIDENDS OF AI~IERICAN In the indenture dated J'anu~ry ~, 1948, r~htlng to American's T~en~ Year 3% I)e~ntur~ ~B Jan~a~ 1, I968, American ha~ co~ena~ed ±~t it ~i]I n~t declar~ ~ny divldends (vth~r ~n ~t~ ~I~v~den~s ) o~ an~ c]~s ~ ~ts ~oc~ or make any paymen~ on account of th~ p~_rchase~ r~dem~t~on~ or ~ther retirement of ~ny shares ~f ~uch st~ck, ~r mal~ ~ny distribution in respect thereof, if the effect of ~uch paym~ts or cash ~r~butlo~ wi~| ~ to ~eee~ the s~m o£ $15,000,000 plus (~r m~m~ in the ease of ~ deScit) ~h~ 12

consolidated net income of American and its consolidated subsidiaries subsequent to Janua~'y 1, 1948, subject to the right of American to declare or pay dividends on its preferred stock at any time outstanding, but all such dividends on its preferred stock after December 31, 1947, shall be included in all subsecluent computations m~der such dividend restriction, and subject also to the right of American to retire thare~ of any cIass of stock by exchange got el" out of the proceeds of the substantially concurrent sale of other classes of stock. For the purpose of such restriction, dividends in property of American shall be incIuded at the book value of such property. At June 30, 1953, approx!mately $88,400,000 of retained earnings was free of this restriction. FI~U~CL~L STATEMENTS There are annexed hereto, as Exhibit 2: ~naneial statements of American and its consolidated sub- sidiaries; and as Exhibit 3: financifil statemen~ of Cigarette. Ft~rther financial statements of American and of Americ~m and its consolidated subsidiaries, including Cigarette, arc on file in the attire o~ the SecL~rilles and Exchange Commission at Washington, D. C. and at the office of the New York Stock Exchange. h ~4 V EFFECTS OF MERGER ON CAPITAL A~D SURPLUS OF SU~VIVII~G COMPANY If the proposed merger had been effected as of June 50, 1953, then, on such date, the outstanding capital stock of American, as the Surviving Company, weald consist of 527,831 shares of Preferred Stock having an ag~egate par value of $52,783,100 znd 6,512,310 shares of Common Stock having an aggrcgale par value of $162,807,750. The paid-in surplus x~ould amount to $46,173,346 ; the increase o£ $2,878,905 over the amount shown by the consolidated belance sheet of Amerinan in Exhibit 2 represents thv excess of then approximate market values of shares of American to be received by stockhofilers of Cigarette over the par value thershL Retained earinngs of American and its consolidated subsidiaries, as shown in Exhibit 2, would not he changed. Tke excess of the market value, on the ¢ffeetlve date of the Merger, of shares of American received by s'tockho] ders of Cigarette over the minority interest o~ such sLockhalders, based ~pon the balance sheet o~ Cigarette at December 31, 1953, wilt be added to the intan~blc a~set account of the Surviving Company. Such excess based on ma~ val~es and minority interest at June 30, 1953, amounted to $3,200,112. ~, i; TRANSPORTATION TO FLEMINGTON Flemthgton, N. J., is reached by the Lehigh Valley Ra/lroad. The present train schedule, which is s~bjeet to chmtge and choLdd be confirmed, is as follows: Leave Pennsglvania Station (33rd Street and SeveathAvcnuc, l~ewYorLN. Y.) lO:55A.M. ArriveFlemingtonJmlction12:03P.M. LeaveFIemington Junction 5:25 P.M. An'ire Pez~xsylvania Stafinn 6:40 P.M. Amerlcan will procure transportation from New York *o Flemlngton by railroad and rettun by railroad or, if e.xpressly reque~ed, re~rn by bus, at Company expense for any stockholder of record desirous of attending the meetlvg, on his notifying the Secretary in w~iting prior to November 27, 1953, that he wishes such transportation obtained. If yo~t do not plan to attm~d, you are urgently recpaested to execute the enclosed proxy and mail it to the Company promptlb/. 13

EXPENSES OF SOLICITATION The cxl~enses of preparLug, assembling~ printing and mailing fl~¢ ~o~ra of pr~=cy, notice of meeting and proxy stat~mellt w~lI be paid by American. In addition to the solicitation o~ proxles~ ~ne~can w~H x-eque ~ persons who hold stock in their name or ~ustody or in the name ~f nom~ees ~ others, to fol~'ard copes o~ suc~ mater~aI to thc;s~ persolm for whom they hoM stoc~ o~ American and to retest authorlty ~or the e~,:eeut~on of t~ proxies, Aracrican may reimburse such persons fox" their ou~o~-pocket expens~ and clerical charges in co,me cr0on therewlth~ which oxpcn~¢s a~ estiznate¢t to be abo~t ~4,000. To the ext~nt necessary in order ~o a~sure su~clent repr~- seatatlon at the meeting, o~cers and some regtdar ~nployees of American and approximately six employees o~ PhiI~ G. Cameron Company w~II request the return o~ l~roxles by telephone, telegram or in person, at an estimated cost of abo~ ~14,000. The amom~t of the expense to be ~orne by Amebean will depend upon the volume of shares ~pre~ented hy the proxies rccclv~ promptly in response ~o the Notice o~ Meeting. I~ proxies are not received promptly, it raay b~ necessary ;or An~erican to send tdegr@ic solic~atlon to those ~tocF~olders who have not responded. The e~xpez~se o~ such t~eg~aphie soIicltatio~ wotJd be about $2,500. Stoo~ders Mio do not in~ to he present at the _~Ice~i~g are tLrgcd to se~ in their Proxies without delay. Prompt response is help£uI, and your cooperation will be appreciaLed. October 16, 1953 14

/ EXBIBIT I AGREEMENT OF MERGER h~tween THE AMERICAN TOBACCO COMPANY (a Ne,~ Jersey COrl~Oration) a~d tire Directors t~tereof an~ ~-MERICAN CIGARETTE )JfD CIGAR CO~PA~ (a l"~ew Jersey corporation) a~t t~¢ Directors tllexe<s~ Foe the merger of American Cigarutte and Cigar Company into The Amerlcan Tolmcco Contpa~y~ p~wsvant to Ch~p~er 1~ of Title 14 of the Revised 5taLutes of the State o{ New J~sey.

! AGREEMENT OR ~ERGEE AGREEMENT made and entered into this 16th day of October, 1953, by and between TIrE /lxtm~zcAie TOBACCO C0~eA~', a co~porati0n of the State of New ~e~say (hereinafter some- thnes called '~Ametfican"), and the Directors thereof, parties of the hrst part, and A~EmICAbr CI~A~ETTZ A~ CICA~ CO~A'~V, a corporation of the Sta~e of N~w Jersey (hereina£ter ~ometlme~ called "Cigarette"), and the Directors thereof, parties of file ~econd p~rt, said two corporations behig heralna~ter collectively called th~ '~onsfituent Companies"; W~F~ZAS, the prlnc~pal a~d registered o~¢e of _Ame~icom i~ ~e State of lqew Jersey'is at -No. 117 1Vialn S~reet, in the Borough of Meraln~on, ~n ~he County ot Hunte~don, l~ew Jersey, and George lZnowles Large la the Agent there~n, in cbarge thereo~, ~nd upoz whom proces~ against ~ald corporation m.~y be served wllhia s~d Sta~e; and WII~s, the prlllcipal and registered office of Cigsxet~e in the ~te of New ~ersay is at ~o. I~Y .%'Ialn StreeS iu tbe Borough o~ Flemin~ton, in the ¸County of H~nterdon, New Jersey, aa~d Get~r~e I(uowle~ Large ~ tht Ag'er~t there{u, in al~a~ge the~e~, ~d uloo~ ~hom p~e~ against said corporation may be ~erved within said State; and W~EREAS, the authorized Capital Stock of American consists o~ 10,O0O,O00 shares of Common Stock, par valu~ $25 per share, of which 6,454,110 ~hares are issued and ou~standlng and 540,106 shares of Preferred ~tock, par value $100 per sh~r¢, o~ which 526,997 shares are issued and WI~RR~AS, the authorized Capital Stock of Cigarette consists of 500,000 shares of Coramoa Stc~l~, p~r ~a~u~ ~0 p~ share, o~ which 200,0~3 ~haxe~ ~e ~u~d ~ud ~utst~dlag, i~cIu~u~ 4,500 8hares beId in its Treasur~ and also including I~,225 share~s owned by American and 3,989 sha~e~ o~ Preferred Stock, par vaIue $100 pe~ share, of which 3,989 share~ are issued and outstandlng~ ffieludln~ 3~230 shares owned by &meri~a; and WEER~As, the aboYe-mentloned corporatiotls are organized for tJ~a purpose of carrying" o~. \¥~E~s, the Boards of Directors of said corporations dee;n it to the heneht and advantage of th~ Cou~tit~ent C~rapa~s ~d their st~ul~h~lde~s xtud~r ~re~et~tly ~xisting ci~cum~ta~c~ t~ enter into tiffs 2kg~eeme~t of ~erger under and pursuan~ to the provls~o~s of Chapte~ 12 o~ Title 14 of tll~ Revised Statutes of New Jersey and #.¢ts supplementa~ thereto or ~mendatory thereof, \ Now, TK~E~'oms~ in consideration of tile premises and mutual agreements, provis~otls~ cove- nants and graots herein contained, it ia hereby agreed by and between the parties hereto, and in accordance with said Acts of the Legislature of the $~te o¢ I~ew ~ersey. that said Cigarette shalj be and the same hereby is merged into said 2kmerlCan, and said American does hereby lnerg~ into i~salf said Cigarette. And the parties h~reto by these p~'ese~ts agree to arid p~cscribe th~ terms and conditions of said lnerger atld the mode of earI~rhlg the same into efl:~ct, which terms and conditions and mod~ of ca~eying the same into effect the said partla~ hereto do mutually ~nd severally eovena~lt to observe, keep and perform, tha~ is to say: 1

ARTICLE I The Ame1"{ean Tobacco Company, hlto whlek CigaretLe is hereby mer~'ed~ as aforesaid, shall he the corporation con[hl~ing after the merger and the narae of the corporation shall be and remain the same• (SMd corporation shall hereinafter ~omefimes be referred to as the "StlrvfvinK Company"). AR'PICLE II The m~mber of the first Directors of the Sm~,ivlng Company shall be nineteen (19) and thereafter dle number of D~rect0rs shall be the number fixed from time to t~me i~ ffie By-Laws of the Surviving Company. The **ames and post-office addresses of the first Directors of the Zurvivlng Company who sh~]I hold office ~ntll their suecessor~ are chosen or appointed aeeording to tfie By-Laws of the SurvPeing Company are as follows : iq~trnes Orpheus D, Baxalys Alfred F. Bowden Richard J. Boylan Douglas W. Brasfiear Thomas P. Connors James R. Coon foh~ A. Crowe ~ohn S. Dowd A. Gordon Findlay Prestml L. Fowler Charles Ganshow Paul M. Hahn IIiram R. Hanmer Edmund A, Harvey Harry L. Hilyard ~ohn R. Hutchings, Jr, A. LeRoy Jansen VIilIiam ~. Ogsbnry James F. Striekland Post-office Addresses III Fifth Avenue New York 3, New York llf Fifth Avenue New York 3~ New York III Fifth Avenue New York 3, New York P. O. Box 6-P Richmond 16, Virg{n{a 1II Fifth Avenne New York 3, New York Ill Fifth Avenue New York d, New York 11I Fi~th AvenlIe New York 3, New York P. O. Box 808 Lonisville 1, I~entucky 111 Fifth Avenue New York 3, New York IIi ~ifth Avenue New Yolk 3, New York 111 F~¢th Aven~e New York 3~ New York 111 Fifth Avenue New York 3, New York P. O. Box 4178 Richlnond 24, Virginia 111 Vifth Avenue New York 3, New York 11I Fifth Avenue New York 3, New York a°ettigrew & BlaekweH ~treets Durham, North Carolina llf F{fth Avenue New !ror]c 3, New York Pettlgrew & giackwelI Streets Durham, North Carolina Pettigrew & BiaekweR Streets DurhanL Nu~th Caro]bla

The ~rst officers of the Survi~[ng Company shall be fourteen (14) ia number and shal] be a President, five (5) V{ce Presidents, one of whom shall also be the Comptroller, a Secretary, a Treasure~, ~tt Audita~ two Aaalstant Auditor~, ~.u As~t~ut Sear~t~ry, ~tL ~%b.~t qfrea~t~er and an Assistant to the Preslden% and their nara~s and post-office addresses are as follows : Paul z~f. H~lm Richard J. Boylan ~ames R. Coon 7okn A. Crowe Preston L. Fowl~i" Edm~nd A. ~arvey Itarry L. H~lyard A. LeRoy Janson Alfred tl Bowdea Jolm W. I-Lanloa 7. lYe~ley DaIe Edward D. Flaherty I~rededek W. Ke~ny ~osepk R. Waterhouse President Vice President Vice President ~nd Comptroller Vice President Vice President Vic~ President Treasurer Auditor Assistant to the Freside~t Secretary Assistant Auditor Assistant Auditor A~i~tant Se~elary As$1$fa~t Treasurer paint-alice Ad,~ a~e.~ 111 [Fifth Avenue New York 3, New York 111 F{fth Avenue New York 3, New York . 111 Fi{th Avemie New York 3, New York II1 Fifth Avenue New Yo~k 3, -~$env York ll1 Fifth Avenue New York 3, New York III [FHth Avenue New York 3~ New York ll/ ~'ifth Avenue New York 3~ New York lll Fifth Avenue New York S, New York Ill Fifth Avelme New York 3, New York ~fl F{fth Avent~e New York 3, New York III Fifth Avenue New York 3~ N~xv York lll Fifth Avenue New York 3, New York 111 Filth Avenue New York 3, New %fork 111 Fi{eh Avenue New York 3, New Yolk ARTICLE III The total authorized Capital Stock o~ the Surviv{ng Company is and shall be te~ miIIion (10~(K]O,000) shares of Common Stock of ~he paz waIue of $25 per ~hare and five hundred forty thousand one hundred sfix (340,i06) ~hares of Preferred Stock of the par ~lue of ~100 per ska~e. 2['he Transfer Agent aud the Re,strut of the stock of the S~rviv~ng Company sh~lI be the i parsons or eorporatioils des~guated as such from t{m¢ to thlle by resoIt~tlon Of the ~oard of Directors, ARTICLE IV The Agreement and Act of Me~'g'er and Consolidation of American, dated September 9, 1904, pn!'suant ~o which Amerlc~n was created, gs such Agreement of Sep~enlbet' 9~ 1904 has heretofore beet* ~rsended, slla[], upon the date on wh{ch th~ merg-¢r becomes effectlvd under the laws of the ~t~te o1 New Jersey, be deet~ed ~o be amended ft~r~her by th~s Agreement nsofal~ ~ slleh A~'ee Ille~t O~ ~e~)tenxber 9, 1904, ~ her~tofc3;~ arae~.ded, is i~%on~st~n~ %v~th any p~o~d$1oll o{ thls A~reemc~t ARTICLE V The By Laws of ~he Surviving Compgny skmll be the By~Law~ of ArnerJea~ as those shall exist oa the effective date of the tn~rger until ~ltered, amended or ~epe~letl as ~herein provided.

ARTICLE VI Tim manner of converting the Capital Stock of the Constltue~lt Companies into the Capital Stock of the Surviving Company shall be as follows: (a) Each share of Common Stock, par value $70 per share, of Cigarette which shall be issued and outstanding on the effective date of the merger (excluding any shares then hMd in the Treasury of Cigarette and excluding ~ny shares then o~ed by American, which shares shall cease to exist and the certificates representing such shares shall be canceled) shall be converted into e~ght (8) shares of Common Stock, par value $25 per share, of the Surviving Company and each share of Preferred Stock, par value $100 per share, of Cigarette which shall be issued and outstanding on the effective date of the merger (excluifing any shares then held in the Treasury of Ci~rette and excluding any shares then owned by American, which shares shall cease to exist and the certificates representing such shares shall be canceled) shag be converted into one and one-tenth (I-1/10) shares of Preferred Stock, par value $100 per share, of the Surviving Company; and (b) Each share of Common Stock of American, par vMue $25 per share, isstled and outstanding on the effective date of the merger shall continue to be one share of Common Stock, par value $25 per share, of the Surviving Company and each share of Preferred Stock o~ American, par value $100 per share, issued and outstanding on ~he effective date of the merger shMl continue to be one share of Preferred Stock, par value Sf0D per share, of the Sure,riga Company; and (c) After the effective date of the merger each holder of an outstanding certificate or certificates representing shares of Common Stock, par value $70 per share, of Cigarette shall surrender the same to the Surviving Company and such holder shall be entlffed upon such surrender to receive in exchange thereLor a certificate or certificates representing eight (8) shares of Conlmon Stock, par value $25 per share, o£ the Surviving Company for each share of Conmion Stock of Cigarette so surrendered. Until so surrendered, each outstanding certificate which, prior to the effective date of the merger, represented sfi~res of Common Stock, par value $70 per share, of Cigarette, shall be deemed for alI corporate purposes, other than voting and the payment of dividends or other distributions, to evidence tim ownership of the shares of Common Stoek~ par value $25 per share, of the Surviving Company into which such shares hayb been so converted. Unless and until any such outstanding certificates shall be so surrendered, the holders thereof shall have no voting rights in respect thereof and no dividend or other distribution payable to the holders of record of Common Stock of the Surviving Company as of any date subsequent to the effective date of the merger shall be paid to the holders of such outstanding certificates, but upon such surrender of any stzck outstanding certificate or certificates there shall be paid %0 the record holder of the certificate or certificates for Common Stock of the Surviving Company issued in exchange therefor the amount of dividends or other distributions which theretofore became payable wffh respect to the number of shares of Common Stock of the Surviving Company represented by the certificate or certificates so issued in exelmnge. (d) After the effective date of the merger each holder of an outstanding certificate or certificates representing shares of Preferred Stock, par value $100 per share, of Cigarette shall surrender the same to the Surviving Company and such holder shall be entitled upon such surrender to receive in exchange therefor (subject to the provisions of subdivision (e) hereof ~xdth respect to fractional shares) a certificate or certificates representing one and one- tenth (l-1/I0) shares of Preferred Stock~ par value $100 per share, of the Surifiving Company for each share of Preferred Stock of C~garette so surrendered. Until so surrendered, each out- standing certkficate which, prior to the effective date of the merger, represented shares of Pre- ferred Stock, par value $I00 per share, of Ciga~et to, shall be deemed for all corporate purposes, other than voting and the payment of dividends or other distributions, to evidence the ownership of the shares of Preferred Stock, par value $i00 per share, of the Surviving Company into which such shares have been so converted. Unless and until any such

outstanding certificates shale be so surrendered, the holders thereof shag have no voting right~ in respect thereof and no dividend or other distrlbutinn payable to the holders of record of Preferred Stock of the Surviving Company as of any date subsequent to the effective date of the merger shall he pald to the holders oi such outstanding certificates, hut upon sueil surrender of any such outstanding certificate or eertlgcates there shall he paid to the record holder of the certificate or cerrigcates for Preferred Stock of the Surviving Company issued in exchange there/or the amount of dividends or other distributions which theretofore became payable with respect to the number of shares of Preferred Stock of the SUrviving Company represented by the certificate or certificates so issued in exchange. (e) No iractionaI shares o{ stock chalI be issued by the Surviving Company in respect o~ stock of Cigarette, hut each holder of shares of Preferred Stoc~ of Cigarette entitled hereunder to receive a fraction of a share of Preferred Stock of the Surviving Company shall recede for each such fraction of a share a non-votin~ non-divifiend and non~dlstribution paying Scrip Certificate of the Survi~ng Company for the fraction of a share o{ Preferred Stock to which he is entitled: Each Scrip Cerft~ca~e wiU entitle the holder (incinding the Surviving Company if it shall have acquired the same) of such Scrip Certificate to receive, on surrender thereof within two years after the date on which the merger becomes effective, together with other Scrip Certificates of like tenor, representing in the aggregate rights in respect of one or more full shares of Prefarred Stock of the Surviving Company, certificates for shares of Preferred Stock of the Surviving Company equal to the number of full shares of Preferred Stock ~n respect of which such Scrip Certificates were ~ssued and the amount of dividends and other distr~but~ons theretofore declared in respect of such ~ull shares and new Scrip Certificates of a llke tenor for the remaining ~action of a ~hare, if any. AII such Scrip Certificates which are not ~urrendered within the time aforesaid shall be vold and of no effect whatsoever on and after a date whleh shall be two years after the date on winck the merger is et~ective (hereinafter referred to as the "expiration date") except that the holders thereof thall be entfitled to receive within two years and ten month~ a~ter the expitafion date their pro rata portion of the proceeds resulting from the sale of the full shares of Preferred Stock represented by the thereto/ore unsurrendared Scrip Certificates, together with their pro rata share of dividends and other distributions theretoforc declared in respect of such full shares upon surrender of such Scr~p Certificates; such srJe shall be made within one hundred eighty da)s after the expitation date (pubhcly or prlvately at then eurrentIy prevailing market prices) by the Surviving Company or the transfer agent of the shares with respect ~o which such Scrip Certificates were issued, as the agent for and on behalf of the holders of such Scrip Certificates, or, at the election of the Survinlng Company, may be made to the Surviving Company at a price equal to the average closing price of the stock on the 2qew York Stock Exchange for the twenty fuli business days immediately following the expftatlon date. Any proceeds resulting from such sale not claimed wkh~n such two year and ten month period shall he paid by the transfer agent to the Surviving Company and be held by the Surviving Company as part of its general funds free and clear of any claim of those previously enftfled thereto. The shares of stock of the Surviving Company represented by Scrip Certificates shall be issued upon the merger ' becoming effective and shalI be held and disposed of by the Surviving Company or, at its option, by ~n agent designated by it, as herein provided. ARTICLE VII Except insoinr as in this Agreement otherwise specifically set forth, or as p~ovified by statute, the corporate name~ purposes, power % objects, franchises, entity, existence, rights and organization "of American shall remain intact and be vested in the Surviving Company, and the corporate franchise, entity, existence and rlght~ of Cigaretta shali be continued in and merged into the Surviving Company~ and the Surviving Company shah [~e ~ully vested therewith, and upon the filing in the Office of the Secretary of State of New Jersey of this Ageeement, when adopted hy the stockholders of each Constituent Company as hereinafter provided, the organization and 5