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• . :,. (. 245 Park Avenue New York, New York 10017 March 21, 1978 DEAR STOCKHOLDER: The 1978 Annual Meeting of stockholders will be heid on Wednesday, May 3, 1978 at 10:00 a.m. ~n the Grand Ba]lrt~orn of The Waldorf-Astoria, Park Avem~e at 500~ Street, New York City. You ale invited to attend the meeting to consider personally the business described in the following nolice of meeting and proxy statement. At the meeting there will he a report to the ~tocldaolders on the progrcss of the Cmnpany during the past year. A discussion period will also u&e place during which stockholders will have an opportunity to discuss matters o~ interest concerning the Company. A feature of these Annual Meetings has been the atteudanee in pers~.~ of many stockholders, some with large holdings and some with small hold- ings. This has been most welcome. It is important to ensure that your shares be represented at the meeting whether or not you plan personally to attend. We urge you promptly to complete, date and return your proxy in the enclosed postpaid retl~rn envelope provided for that purpose. Sincerely yours, ROBERT K, HEIMANN Chairman o[ the Board and Chic[ Executive Officer

I ,. cP, /,0 2~5 Park Avenue New York, New York 10017 NOTICE OF MEETING March 21, ]978 The Annl~al Meetblg of slockholders of American Brands, Inc. wi[[ be held in lhe Grand Ballroom cf The Waldorf-Astoria, Park Avenue at 50111 Slrcet, New York City, at 10 o'clock h~ tile forenoon (Eastern Daylight Saving Timc) ~rt Wc&lcsday, May 3, ]9T8, f'or the ftdlowh~g purposes: A. To elect dlreetors. B. To consider and vote on: (1) A proposal (designated Proposal 1 arid set forth iuthe follow- ing proxy statement), approved by the Board of Directors, to elect Coopers & Lybrand independent attclitors for Ihc Company for the year 1978; and (2) A ploposal (designated Proposal 2 and set f`orfl~ in lhf~ folh~wing proxy statement) relating to any new stock option plan, expected to be made by four stockholdcrs. C. To transact s/lch other business as may properly come before the meeting. The stock transfer books will not be closed but holders of Comi~on Stock, 86.00 Convertiblo Preferred Slock and $1.70 Ctmverlible Preferred Stock, to be enlilled to vele, must be holders of" retard at the close of business on Mardl 5, 1978. C. F. MATULA, JR., Secretary

PROXY STATEMENT The Cnmpany's principal e×ccuti~e efSces a e eta e at 215 Park X~enue. N~w ~,uk, New York 10017 TMs prexy statement and accompanying proxy are first be ng en or g 'e , ~ ~k tiders on or ah.,ut March 21. 1978. The aectnnpanylng ilrl/xy is soIic{ted hir the l~lanagenlent It nlay be i.e~oked h! l~t~tten noti/e gketl te the ~erelalw ,if lhe r¢leeting at ally time belore hdlng xoted Proxies hi this tn~m. properly executeth duly returned to Ihe 5fanagenlent and not revoked, wi]l be ~oted for lhe eleelior, of dlrcctors l unless a~thorlty therefor i~ l~ithbeldL ori the nunthcred Prepesals de cribed in this proxy stateme/lt (ptovicled that. as to Prc~posal 2, it is presented to the meeting! and in accordance with ally specifications made as pruvided in flue proxy The Managemettt is :lot aware at tile date hereof of any matter proposed to be presented at th~s meeting other than the elect~on of directors and Proposah l and 2. If any ether matler is properly presented, the pe~seus named in ~he enclosed form of proxy ~+'i11 ha~e d~scretlonary authority to vote thereon according to their best judgment. Presence at Ihe rneeffng doe~ not of itself revoke the prexy. The ~mly securities of the E~m~pany entitled to be v~ted ate shares of Common Stock. $6.00 Convertible Preferred S~ock and SETfl Convertible Preferred Stock. Holders of Common Stock and SI~0O Convertthle Preferred Stock are entitled to one vote per ~hare and holders of $h70 Converlible Preferred Stock are entitlecl to r, ne-fifth of a vote per share. There "*ere 2fi,Gg0,1fi0 shares ef Commrm St¢,ck. 320,95o shares ~l $fi.0C Convertible Pleferred Stock ~nd f ,46g,963 ~hares of $].70 Conver tlbIe Preferred Stock outstanding at )¢Iareh 6, 1978. ELECTION OF DIRECTORS The Board of Directors consists of seventeen members who are elex tecl to hold ehqee until the next Annual "~Ieet~ng or mxtil their successors are duly elected and quatified. If no contrary thdieation is made, proxies in the aecornFan)ing form are to he voted for the nominees naltted below or, in the event an)" such nominee is not a candidate or is unable to ser~e as a director at the time of the election Iwhirh is not now expected), Ior at~y nominee who shall be designated by the Board J Directoz~ to fill such v~cancy. The nominees named below are members of the present Board and have served as directors of the Company for the periods commencing in the years set after tilelr respective name~. There are set forth below opposite the name of each nomlnee il) under the headlng ~'Cen~non ', the shares o~ Come,on Sto~k of the Company beneficially nwncd threcfly ar indlrel'd> hy the nominee on Fcbeuary 10, 1978. plus the number iif any) of shares of zneh C~mmon Sleek held on December 31, 1977 by the Trustee of the Profil.Sha~ing Plan of the Company attrihutahle to voluntary deposits made through p~yroll deductloI~ that is equivalent as of thai date to his undivided proportionate heneheia[ thterest in all such shares, and [2) under the heading 'Common attributabh" to profit sharing", the number ilf any) of shares of such Common Stock hem on December 31, 1977 by the Trustee ~f the Pr~fit-Sharing Plaa ¢~f the Company attrlhut~]e to profit sharing that is equivalent as of that date to his undivided proportionale beneficial interest in all such shares. The information as to ~euril> holdlngs is based on infonnatlon recelved by the Company from the nominees, ~rom the ProfibSharJng Plan CelnlnRtee and from the Trustee. year first Ill Nam~ Hyland J. Barnes John H. Behr~ John P. Clark Boone Gross~ Robert K. Heimann* Edward J. Jenning~, Jr. Positions and o~ces wilh Compan~ elected Con~raon or ~ther ]arktcipa~ c~= cupat ion director (a/ (h) President and Chief Executive O~eer, Master Lock 197b 5,353 Compaxty Retired (formerly Chairman of the Board and Chief 1975 5,000 -- Executive Otficer, Swinglhae Inc.) Preside.t and Chief Executive O~cer, Wilson Jones 1978 100 Company Retired (fomerly P~esldent, The Gillette Company) 1965 1,500 -- Chairman of the Board and Chief Executive Officer. 1963 12A.90 497. American Brands, Inc., and Chairman and Chief Executive Officer, The American Tohaeca Company divlslnn President and Chiet Executive Offmer, Stmshlne 1977 l,SflC* Biscuit% Inc. 2 (2) Co~on attrihalableto p~ofitsharing

puaRions and office ,~ widl Company Nam~ or olher prh~cipal oecupan~nl 3"it inins B Lougee, 1I President and Chief Operating O~]eer The American g Tobacco Company division Charle~ A. 31shos" Vice-Preslden~Finanee, American Brands, fat. B~aroe J. Sebramnt* Exectttlve Vice-President and Chief Administrative Officer, American Brands, Inc., and Chairman, Pmaerican Cigar division Chairman, Callaher Limited A. W. Hume Et ewar t-~{oor~ Richard H. htinnette William Swordt Ru~ssil P. Trultt John F. Walrath* Francis X. Whelan Assistant to the Chairman of the hoard, American Brands, Inc. Managing Director, Wm S~ord & Co. Inearporated, Investment Bankers Executive VieePresldent, The ¸American Tobacco Company division, and Viee-Presldent--?C[anufa¢- ture and Leaf, American Cigar division President and Chief Operating O~cer, Amerlcan Brands, Inc. ExecuBve Viee-Presidenb The American Tobacco Company division Edward W. WhBtemore Vice.Pre~ident--hubsldlary Administration, American Brands, Inc., and President and Chief Executive Officer, SwingBne Inc. George H. Woodard* Chairman. Welling & Woodard, Inc., Management Consultam~ + Member of Audit Committee of the Company's Board of Directors. • Member of Executive Committee of the Company's Board of Directors. (2) Year first (t) Common electod Common attrlb~tab]eto director (a) (b) pro~t~haring 1977 1,000 621 1967 5,200 2.232 1968 5.760 2, i29 193o 251 1972 760 827 1976 100 1974 1.801 665 1973 5,464 1.036 1970 6,056 2.134 1977 1,000 -- 1964 i~200 a r The numbers of shares attributable to voluntary deposits included in the numbers shown in Column (1) are as f,~llows: Robert K. Hehnann, 1,250; George J Schrarnm, 206; Russell P. Truitt. 301; John F. WaDatk. 462,: and Francis X, Whelan, 556. rh) The numbers shown in C~dumn I l/ do not invade 100 shares of Commun Stock owned by the wife of Mr, Barnes and 1 share ~>f Common Stock held by Mr, Clark as guardian for his minor child. In each case the nominee disclaims that ~ is the beneficial owner of sucl~ shares. lohn P. Clark has been President and Chief Executive O~cer of Wilson Jones Company since January 1976 when it became a htst tier sahsithary of the Company. tie was Executive Vice Preddent of the Wilson Jones Division of <win.dine Inc. prior thereto, bit. Clank became a director of the Company on January 1, 1978. 3isginius B. Lougee, lII has been President and Chief Operating Officer of The American Tobacco Company di~isi,m since January 1. 1978. He was Executive Vice President of The American Tobacco Company division com- mencing June 1977. Vice President Research and Development commensing May 1976, Research and Development Director eonuneneing June 1973 and Deputy Research and D~velopment Director prior thereto. -Mr. Lnugee became a director of the Cempany on November 1, 1977. Except as set furth above, none of the nominees is a director of any outside business corporation, except bD Wondard, who is a director of K. W. Tunnell Company, Inc. and Mr. Sword, who is a director of GAP Corporation, 3father.utica. inn, United Penn Corporation. United Penn Bank, Nassau Broadcasting Co., Sword Irwin & Co. Incor- porated, Kepner-Tregoe, lnc,, Roadway Express, Inc., }nundation Managers Incorporated and Corporate Contributions, Inn, 3

REMUNERATION AND OTHER TRANSACTIONS There is set forth in Colunm (1) ~f the following tabulation, on an accrual basis, all dlrc~t remuneration paid by the C~m~pany and its subsidi~dc~ t~ the 0dlo~ing pers~ms f~r services in all capacities while d~rectnrs or (~fficers 01 the Con/[)any ffiJring its [~ts~ Iisoal } ~lr: eat:h 0~r~etor 1if the (](imp~tly w]mse a~gregate direct remuneration ~xce~d~d $40,000, and each of the three highest pald ffi0cers of the Compavy whase aggr~gate dir~:t remuneration exceeded that amoutR; and ai[ directors and (~[Imers ~d the C(~mp:my as a group. [he t977 pt~ffit s~are2, ~)f tl~c inffividnai$ payable to the Trustee under the Progt.Shar h/g B[ans of Lllo Company and a subsidiai y are stated ia Column 12 ~ and the contingent p(Ji Li,m o1 each such individual's incentive compensation for that year is stated in Column (3), Estimated annual retire ment he~efts to ~e same indivlduals at normal retirement date ander exlsting re~rcment plans are stated in CoIunm (1), except as otherwise stah~d in note (d) below. {2) (3) (4) (1) Deferred [ncemlve Estimated Direct prertt share compensati,nl annual Name of individual Capacities itl whlch ~umuneratmn payab[~ to cuutlrlgcn tly retirement or identity of group remuneration was received paid {a) Irustee (b} pa!able (e) benefit /d) Hy[and J. Barnes(e) President and Chief Executive S 180,062 $ -- $ $22,500 ($16,461) Ol~cer, Master Lock Company John H. BeEr (e) (f) Chairman 01 the Board and Chief 49,435 -- -- 45,067 Executive Officer, Swlngllac Inc; Director, American Brands, Inc. and Acme Visible Records, Inc. William R. Controller, American Brands, Inc. 87,500 4,554 27,500 23,615 Degenhardt (e) (g) Robert K. Heimann(e) Chairman cd tke Board and Chief 391,160 -- 191360 75,000 (54,870) Executive Officer~ American Brands, Inc., and Pr~ident, The American Tobacco Company division Senior Vice.President and General Counsel American Brands, Inc., and Vffie.Presidpnt a~6 General Counsel, The American Tobacco Company division President and Chief Executive Officer, Sunshine Bi~uits, Inc. Chairman of the Board and Chief Executive ONeer, James B, Beam Distilling Co. Vice Pr~+sMant Finance, American Brands, Inc. Executive \ ffie-Presldent and Chle~ Administrative Officer, American Brands, Inc. Chairman: Ga3aher Limited, and Consultant to American Brands+ Inc. Assistant to the Chairman of the Board, American Brands, Ine Vicc-Presid.nt Manufacture and Leaf. ]be American Tobacco Ct*mpany division: Exscutive Vice-President, The American Tobacco Company di,Aslon 4 Cyril F. Het~ke(e) (h) 179,167 6,?.74 62,500 42,252 Edward J, Jennlngs, Jr.(1) Everett Kovler (e) (j) Charles A. Mehos(e) George J, Scbcamm(e) A. W Hume Stewart Moore(e) (k) Richard H, Stinnette Russell P. 'I'r ultt (e) f02=667 -- -- 37,500 (27,435) 216.901 24,535 -- 21,770 179,375 0,656 62,500 60,603 (44,337) 190,625 10,281 66,250 67,771 (49,581) 277,478 -- -- 32,515 (23,738) 67,703 3,456 15.250 17,226 (12,002) 96,833 5,072 31d)00 35.483 (26,605~

(2) (3) (4) {11 Deferred Incentive F~txnaated Direct profit sh~r~, compensa~iea anng,~ ~tme el i~di~idu~tl Cap~cili~ irt which remuneration payable to c~ntlngenl[y ieli~menl or idenlitT of group r~munoration was eeoelved paid (a~ l rustec !bl pa~abXe I~l benefil (d) JobnF. Walrath PrealdentandChiefOperatlng $ 255,000 $13,856 $115,0~0 $18,272 ($13,368) Omcer, American Brands, Inc. Francis X. Whelan Exeentivc Vice~President, 127,500 6,775 40,000 47,065 (34,433) "1 be Amcrican Tobacco Company division Edward W. Prealdent and Cider Operating 111,756 -- -- 38,299 (28,019) Whittemore (e) (i) OAcer, Swingline inc.; President and Chief Executive O~icer, Swingline Inc. George H. Woodard Director and Consultant to 45,000 -- -- American Brands, inc. Richard B. Young(e) (g) P~ealdent and ChAr Executive 127,775 -- -- 71,117 (52,029) OAcer, Acushnet Company; Chairman of the Board and Chief Executive O~ccr, Acushnet Company 26 directors and o~[cers as a group $2,879,691 $90,976 $640,660 -- (a) Incltldes, except as to Messrs. Barne~, Behr, Jennlngs, Kovler, Slewart.Moorel Wbitlemore. Woodard and Young, who were not participants theraln, the one-half of incentive ¢orapensation for 1977 under Arli~:le Xff of the By-Laws that has been paid. As to each of Messrs. Barnes, Bchr, Jennings, Kovler, Stewart ~vloore, Whittmnore arid Young, thclttde~ his portion of incenlive compensation for 1977 under the executAe incentive plan for the sahsithary of which he was tha principal executive o~cer. See also note (c) below. ih) Amounts chown in CoIumn (2) are the dollar value~ as of Dt~:eazber 31, 1977 of the Profit-Sharing PAn "uni~" constituting the profit shares for 1977 of the participants nantcd. Mr. ||¢ilnann received re profit share for 1977 due to the Iimitalions ~f the Employee l~elirement Incoazc Security Act of 1974. As of December 31, 1977, Plan balances (other than balances attribulable to volualary deposits made through payroll deductions) repr~scnled by the "anlts" star thng to the credit of such named participants, including the markcl value otz that date of the numbers of ~l~arc~ ~! Corranon St~ch ~f the Company held by the Traste~ Qf the Pr~hl Sharing Plans of American Brand~, |nc. and Jame~ B. Beam Di~thling Co. eqal~.alont on thai date to that undi~dcd proportionate interests in the total number of ~uch shares then held by the Trustee at~ributable to proth sharing, but excluding their profit shares for 1977 Ipayablc to the Trustee in 197~), were a~ fodow~: Wil~iam R. Degenhaedt, $129,0~9; R~hert K Heimaa~, $5C,~,54~; Cyril F. Hetsko, $325,230; Everett Kovler, $325,836; Charle~ A. Mebos, $223,842; G~orge J. Schramrn, $252,522; Richard H. Sti~nettA $79,094; Ru~eil P. T~aitt, $66,894; John F. Walra~h, $117,138; Francis X. Whdan, $211,446; and directors and o~¢¢r~ as a group, $2,873,077. fn addition, under the ProfibSharing Plan ~f The Andrew Jergens Company Mr. Walra~h's Plan balance a~ December 31. 1977 was $6~,26L ~c~ Amounts chewn represenl the one-half of incentive eompon~atfon for 1977 under Article XII a~ amended in 1970 that is contingently payable t~ partlalpants on December I5, 19~8. From I957 through 1.969, Article XfI provided that a portion of iaccatlve eempensation for each year of participalion be contingendy payable to each partialpar~t in equal annual in~tallments folIow~ng terminati~n of errlpAyment by the Company. The respecl~ve annual install- men~s in respect of suc}~ do~erred contingent portions accrued ~or all years n~ participation, 50 payabl~ for pcrlod~ of three years in each instance, are as ~lIows: William R. Degenhardt, $2,390; Robert K. Halrnann, $57,236; CyrlI F. Hetsko~ $22,709; Charles A. Mehas, $6,908; George J. Schramm. ~7,880; l~ichard H. Stlnnctte, $88; Francis X. Whelan, $5,643; and dirvctors and oAcer~ as a g~oup, $126,569. Fd) A~ 1o ~Iessrs. Behr~ De~enhardl, He~sk~ and Kovler, alnouILt in Calnmn f~l.~ i~ actual annaal retirement benefit, at early retirement date for ~le~r~. Degenh~trd~ and Ko~ler. at n~rlnal retirement date for .~lr+ Bchr and at deferred retiremen~ date for Mr. |fetsko. The bene~t~ for Messrs. Degenbardt, H~tsko and Kovler reflect the elcctlon of certain surAvorshlp benefits. As to all other persons, f~rst figure A a~ount rct3ectthg assumed election of stralgb~ lif~ annuity and figure in parentheses ~s r~duced amount rel~ectlng an assumpl~on that the ~nlpAyee elects a join!

and survivor annuity for a spouse of the same age as the employee on a uniform actuarial he~is. Both figures are as of normal retirement dale. (el Also officer of athliated company or companies. (f) Retired from Swingline lnc, effective February 23, 1977. (g) f~esig.ed as a director effective De~ember 31. 1977. (h) Retired effeelive October 31, 1977. (i) Became a director on March 1, 1977. Retired effective D~emher 31, 1977. ik) Ga]laher Limhed has entered into an agreement with Mr. Stewart-Moore which provides, among other things, for Mr. Stewart-Moore's employment by Ga[laher at an annual ~alary of £!0,0(/2 and for Gal]aher to rclmburie him for all reasonable expends incurred by him in the performance o[ hi~ duties u[lder the agreement. The agreement is terminable by either party upon two year~' Ii~tlce aztd by Gallaher upon ~b~ter nuliee in certaln circumstance8. Where any informatinn in this proxy statement ~ to remuneralion or other transactions is called ~or with regard to persons holding specified po$1tion~ or relatinnship$, thformation i$ not included for any portion of the requisite periods during whleh ~ueh persons did not kold any ~aeh po~tiinn$ or relatlonships. At the Annual Meeting ia 1967, the steckholders adopted a Stock Option Plan under which options could be granted to key empl~yeeJ o~ the Company and ils subsldiarles for not more than 600,090 5heres of Common Stock of the Company, The optiort price per share could not be les~ thar~ the fair market value of the Common Stock at the date the option wa~ granted An option is not exereisabth until its holder has remained in the employ ~f the Compar~y or a .~ubsidlary for ,~ne year from date of grant~ unless otherwk',e pr~cribed by the Board ~f Directors. An option ~sually terminates five /ears after the date of grant. No optini~s could be granLed aiter Jant~a:7 28, 1977, bul optlor* pzeviou~[y granted may extend beyond that date. The Plan is administered by the Board of Director~, The ~ollowlng tabulatlo~ show~ a~ to the dlrector5 and othcers o~ the Company named above, and as t~ all directors and o~icers of the Company as a group, ( [ ) for the period from inception of the Plan to the date hereof (a) the number o[ share~ caI~ed for by optlon~ granted, ib) the a~erage option priee per shar~, th) the number of shares purchased by exercise ~{ ~pti~ns, (d) the aggregate purchasc pri~:e of such sh~lres ~nd (e) the aggregate marke~ v~/ue of such ~hares oI~ the dates of purchase, and 12) the number atLd average price per ~here of share~ subject to uttexerc~sed options heId a~ of February 10, 1978. Opti~n~ gr ~nled Optio~ ~x~[¢i~ed Options hdd Average Aggregate A~er~g¢ l~'ameo~indlvidual price Aggregate marketvalue price oridentltyotgroup Shares ~ershare Shares price whenexerc~sed 5ha~s pershare Hyland J. Barnes lo£tlo $4al.839 -- $ $ -- 7,750 ~e38 887 John H. Behr 10¸000 4128t 3,000 10687500 133,125.0", 1.00~ 38.250 William R Degenhardt 7L~0(J 39.158 2,000 73¸312¸50 92.I5013,q ~.750 38.567 ~.ober I K, ]~rraan~ 2B {~0£ ,%q. ~%37 10,930 3~3,730 00 389,625,~0 5¸500 ~9682 Cyri] F. Helsko 9,600 3~ 095 5¸000 163¸500.00 215,800¸00 -- Edward J. Jennings, Jr. ~,0~30 39¸375 1.~00 59A87,50 65.325.00 37A0~ Everelt Ko~]er 150~0 38625 7,000 231,9~0.#3 286¸2511.00 2 000 4~ ~75 Charles A. N[ehoa 11,750 39.257 5,000 173,812¸50 205,062¸50 3 000 ~AJ.875 George ,r. Seh~amm 13,0{)0 39¸3,29 5,~00 ]87,9~750 211.125¸00 3100{I 40875 ~iehard I|. Stinrlet te 6,000 40.763 700 26¸300¸00 32,5~) KI 3,300 38~67 J~llssell P Truitt 6,500 40.76{) -- m -- ~5~20 38~75 John F. W~rath 13,0~O 4~ 1~89 3.5130 136,250.~13 15~,75~00 2,0~3 g?~75 ~'rancis X Whelan 11,750 37.863 5,000 171,937.50 20~,75~L00 !,[)00 4f) 219 Edward W. Whlttemor¢ 8,~O0 40.457 L000 35.625,00 41,475.00 5,000 39 ~4~ Richard B. Young 5,000 39.675 3,(;00 116,625.00 139,500 O0 2,00~) 40.875 All directt~rs and o~cers as a ~oup ~80,30t) $.~8.757 116,200 $3.96~ 550.00 $4,772,668.75 ( a ) 66,900 $3g. ~0 (a) Aggregate market value at March 6, 1978 was $5,199,950. 6

The following tabulsdun sitows as to the directors and offieerB of the Company named above and all directors and officers of the Company as a g~'ottp, who exerffised options during tip peridd from January 1, 1877 to the date h~re~t, i~l the Number of ~ares p~,ehes~d by exerclse of nVllona during that Period, ~b) the aggregate purchese prier of such sh~tres and (c) the aggregate market value of ouch shares on the dates of ]purchase. No options were granted during that period. Aggregate I~am¢ of india idual Aggregate market value or identity of group Shtxe~ Pri~ , when exerciged Wtillam R. Degenhardt .............................. 500 $ 21,843.75 $ 23,312.50 Edward J. Jennlags, Jr ............................... 1,400 59,487.50 65,325.00 Evelett Kovler ..................................... 1,000 38,250.00 45,000.00 Charles A. ~t~ehos ................................... 1,000 38,250.00 41,000.OO George J. Schramm ................................. 1,400 53.550.00 60,725.08 l{iehard H. SIinnette ................................ 200 7,175.00 !),O~K~.0f) John F. Walrath .................................... 3,500 Y36,250.~ 152,750.00 Richard I¢. Young .................................. 5,000 116,625.{)0 139,500.00 All direeture ~ud oSlcers as a group ................... lg,4oO $571,543.75 $648,150.88 Proposal d ELECTION OF INDEPENDENT AUD1TOBS The Mansgement recommends th~ election by the stockholders of Cooper| ~ Lybrand as independent auditors f'or the CotniJarty {ar the year 1978. In line with this recommendation the Management intends ta introduce at the forth coming Annual Meeting the following resolution (designated herein as Proposal 1): R~SOLVEO. that Coopers & Lyhradd be and they are hereby elected independent auditors Jot the Company /or the year i978. ]n accordance with the Company's practice, a member of the firm will attend the Annual Meeting with tile .ppollunlly to make a statement if be desires to do ~o and wl]l respond to quesllot~ that may be e~ked by stockholders. • The ffil]rmadva w~te of a majority of the votes cast by the holders of Common Stock, $6.00 Convertible Preferred Stack and 81.70 Convertible Prelerled Stock voting thereon is necessary for the adoption of Proposal I The Managrmen~ recommettd~ that you vote FOR Proposal 1. Proposal 2 RESOLUTION ON STOCK OPTIOI~S PROPOSED BY FOUR STOCKHOLDERS The Company is informed that Lewis D. Gilbert, a recard hobler of 500 chares of Common Stock, whose eddr~.'~s is 1155 Park Avenue, New York, N.Y. 10028, add/or John J. Gilbert, a record bolder of 500 shares of Co,renan Stock, of the same address, add representing an additional family interest of 600 shares of Cownmn Stock, and/or John (2. Heneg, a record behler of 1,688 share~ of Common Stock, whose address is 5 East 93rd Street, New York, N.Y. 1802fl. and/or David Brown, a record heldet of 6 shares of Gammon Stock, whose address is 1869 85rd Street, Brookly~h N.Y. 11214~ intend to imrdduce at the Annum Meeting the following resolution (designated hereln as Propesal 2) : "RESOLVSn: The stoekhelders of American Brands, Inc., hereby request any new ttock option plans be made subject to the following Provisions: (a) Sheret to be opduned will he opduned in yearly thstailments; the right to purchase shares in eaah installment will not b¢ eumulatP~e and will expire to the extent not exercised ,hiring the applicable installmem period: (b) The aggregate purchase price of the shares covered by an option may not exceed 150% of an individual's annual cash compensation: (e) No options will he granted in any year to executives within ~8 months of their automatic retirement date: 7

It ~hall be a ne~.allxff {acI~r in ,~ra~iLili~, nc~ ~IJLi~ns i[ a~k f~Dti~L~:~: h:~ s~Id ~E~llq~ilL!d stoqk t~ l~a? off • loan, czlab]i~1~ optiu~1~ Io pi~k up z1~w oi~tio1~s; {e) Opllo~l pr]co be not Icss lhan IL~ p~r ~I~r~ ~t worki~ cal~il~L value: !f) There ~ha]L b~ ~, ~pcrfolnla~ ~har~s" ~J[~re~ to executives ~vit~1out cost: Each opllc,n¢c wi[J b~. r~Iulr~!d, at I~ ~I~c ~ ~x~rci~¢ o~ ar~ op~i,~11~ ~ cefti[~ in wri~:1~ LO t~e Company Illat a[ le.~sk 60~ of LJle :~ck tI1erelo~,re ai~lJ tile~1 bci~ i;~',]llir~!~[ I~ursllaiiI ~o optlott~ was anc~ is pur¢]lased, for iilv,~Imcn~ llu[l~c~, arid i}l~ COml~n! re~er~e:~ the r]~]iI t~ ~ a~ise a Jeg~nd ~o ~]i[~ ~¢;~ Lo b~ l~la~] ~n t]t~ ~:~rLii~cate~ i~u~ul aL Linl~ ~[ e~rc~ LO ~vid~rlce aliI~ in]pIern~nt • is ~[LificaLion: (~) Tha~ t1~re ~}la]~ b~ ~ n~axlmu~n number o[ optlor~s any o~ p~rson i~ a~lo~ed: {i) No options shall b~ ~ranted to o~tside d]rc¢Iors" ']'~ propos~r~ ~ the resoJuti~r, ha'~e furnished th~ foIIowin~ :-~sterr~ent se~lh1~ forth lhe re~ons advanced ]~y them in ~pport of their propo~ai~ "T~ p]ac~ ~f option p[ans~ the Unll [nce~liw PI~. ~-~¢h a~ ]]u~]in~t~n ]ndus~ri~s. H~'u[e~, C~nti~enLal C~, .~rz~lica~ C~n a~cl Kop]p~r~ u~ is mor~ ~qu]tab]e to shareholders, a~ it i-~ tied to ~ash dlvlde~d~, ~]w~ th~ ¢orpor~tlor~ a I~ benef~ a~d avoid~ dl]uLion, which option p]~ brln~, aboIl~ in ~h~reho]der eeju[ty. '~]~ you a~r~e, please r~ark your proxy ~c*r this reso]uli~aIl~ olllerwi~ J~ i~ aut~ra~Li~ll? ¢:a~t ~alnsL it,'~ Under lh~ term~ of the present $~o¢k Option P]~n no ac~c1~l~on~] st~ck options m~y be granted. The Board ~f Director~ b~lieve~ LI~.~ i~ any ~L~ck option pIan~ wer~ ~o Be ac~optec] i!l the f~LtLre it ~ou~]¢] wan~ ko cor~ider l~r,y maLLez'% ]nchldin~ $om~ o~ tile ~.t~r$ ~e:[erred I¢. in thc prop~] re~I111]on. However~ i~l the l]~ard'~ ~p]nion il ]~ ~ot wis~ Io impose ~x~¢~ r~Lri~tlon~ on the ~let~od o~ operalion of a ~Io~:~ option plan such as t}~ose propossd by ~ re~o]ution, "~'~ ]{mi~atlo~ ~e~ ~ort~ might d.~ra~L ~r~ Lhs incentive wlue o~ ~he option and hi~¢]~ M~a~l~ent in its e~orts to ~eure ~d ~et~in k~y ~m~oyees o[ ~utstanc]i~ ability, T}l~ Col~ipany's p~'~snt sto¢~ option program wa~ ¢are[ul]y designed to b~ne~l the Co1~.pany by ~,¢oura~in~ key e~i~]oye¢~ t~ acclu]r~ ~. proprietary interest ]r~ I~ CoJ~,~ily:~ lulu~e, wiL~ p~o~s]o]~s that adec~uate[y Sa~e~atd ~o~k. ho]¢~0r interests, Addltlon~l reslri~klon~ ~uch a~ Ll~Ose proI~o~ed, i~ r~pec~ of any ~e~tur~ plan~ could work a~inst • ~t p~pos~. The Board of Dir~uL~u, through ]Is k~ow]ed~e ~f ~ana~emenr p~r~ormance, is ];I the b~st 10osition to allocate ~to~k o]ptlon8 ~o as Io ~btai~ lh~ ~a~esl a~vanta~e to t~e Company and its subsldlarle~, and it should ~ot ]~ hlndere~. by ri~i~ ]i~atlons. ~.¢¢ordln~y, t~ resolutlon should he rejecle.] as not ]n t]~e Besl in~r~ of r~e Compauy ~n~] its s~ock}~ol~er~+ .~. similar r~s~lullon wa~ o~erwhel~in~]y r~j~cLed by t]~ sZ~o]0.~r~ a~ th~ 196~ .&n~[ M~lln~ w~ ~ore tha~ 92~4'.~ of th~ vote~ wer~ c~ a~aln~l it, at th~ ]-969 A~al bI~tin~ ~e~ ~proxlmat~Ly 92.7% o~ the vol~ were ~a~t a~insl ik and a~a]~ at ~i~ ].970 .&~n~i ~eti~ when a.oproxi~ately 9~% of the vo~¢~ were ca~t a~aln~t it. The ~ri~l~ti~e vo~e of ~ Iris.jowlly o~ t]~ vc, L~ ca~t by lhe holcler~ o~ C.ornmon Stock, $~.OO Conveztible F~e[~zred S~ock and $3.,70 Convertlbie Pr~[~r~d S~o~k vot~ thereon i~ n~es~ary (or Lh~ ad~pt~orl ~[ ]Prop~sa] 2. T,~ M~agem~n~ recomm~n~ lha~ y~ ~o~ AGAINST Bropqsal 2. MISCELLANEOUS A copy of the Company's Rnnual report on Fo~nl ]OK 1o b~ fi|~ witl~ the Securities and /~change Con~mJss~t for It~ lasl fiseu| year~ ~nc]~ding I|te I~uancia] stalem~ts and schedu|¢s Ih~reLo~ ~LI be macle ava]]abl~ Io ~lockho|ders wilhout charge upon wrilten request to M~. 4~. F. Matula~ Ji%~ ~eerclary~ American Brauds, [nc.~ 245 Park Avcnue~ New York, N. Y. L0017. The Company w~l] furnish any ~xldl~its 1o Form 10-K to each slockho]d~r r¢l[~esting them upun p~ym~nl of a ~ o~ $.10 per pa~e ~o ~ov~r lhelr cosl. 8

promptly after the Annual Meeting stockholders will [~o mailed a return postcard on which they will be able to iladleate their de~ire to receive a copy of the summary of the meeting. The expense of the soli~:~l~th~n ~f proxi~s for this meotlng, including the cost of raa~l~ng, will be borne hy the i~lupany. In addition to mailing oopies ot this matori~l I~ ~tc~khold~rs, the Company will request persons who hold ~tcck ~11 ~helr name~ or ~ody ~r ~a the names of nomiaoes for others, to fr~rward copies o~ such materlal to those ~,~r~,~n~ ~r whc~ln they h~ld stock ot the Company and to request authority for the execution of the proxies. To the oxtoi;~ ileee~try in oltl~r to a$~tl~c ~l/~c~etll rc~res~n~tt~on a~ ~ho meetlla~ o~]~cors ~trtd ~omo l-~t/la~ ~rllpIoye~ o~ tk~ t~or~?aIl! will request the return ~f proxies by leleph~ao, telegram or ir~ person. [n addition, the Company h~s retained D F K~n~ ~- Co.. Inc. 20 hxchan~e Place, New Y~rk, Ne~ Y~rk 1000.5, t~ aid in the ~o]i~t~t~n ~f i~r~xles f,~r a fee, i:lc~l~t]in~ ~t~ exp~l-~es, e~imatotl ~t ~15,~)¢~0. The total exp~nso to he horne by lho Company will deoond ui/~n the wlurnc of ~ha~es reIIresented }JY the proxies received l~ronlptly ill respons~ I~ the notice o~ moethl~. I~ plox~os are nnt received pr,~r~pt/!~ ~t m~y h~ neoes-~ary for lho C~m~any to send telographlc ~olieilation to thu~e ~t~ckholders who have not resl~ded. Stockh~dders ~vh~ do not intend to be present at the meet~are txr.~ed to send ~n their proxies w~thottt delay. Prompt respo~lso ~s helpful, and your cooperation will be appreciated, M~rch 6, 1978.