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1700 East Putnam Avenue Old Greenwich, Connecticut 06870 March 11, 1994 DEAR STOCKHOLDER: The 1994 Annual Meeting of stockholders will be held on Tuesday, May 3, 1994 at 10:00 a.m. at the Stamford Center for the Arts, Atlantic Street and Tresser Boulevard, Stamford, Connecticut. You are invited to attend the meeting to consider personally the business described in the following notice of meeting and proxy statement. At the meeting, there will be a report to the stockholders on the progress of the Company during the past year. A discussion period will also take place during which stockholders will have an opportunity to discuss matters of interest concerning the Company. A feature of these Annual Meetings has been the attendance in person of many stockholders, some with large holdings and some with small holdings. This has been most welcome. It is important to ensure that your shares be represented at the meeting whether or not you personally plan to attend. We urge you to promptly complete, date and return your proxy in the enclosed postpaid return envelope provided for that purpose. Sincerely yours, William J. Alley Chai~an of the Board and Chief Executive Officer

NOTICE OF MEETING March 11, 1994 The Annual Meeting of stockholders of American Brands, Inc. will be held at the Stamford Center for the Arts, Atlantic Street and Tresser Boulevard, Stamford, Connecticut, at 10 o'clock in the forenoon (Eastern Daylight Time) on Tuesday, May 3, 1994, for the following purposes: A. To elect four directors for a term expiring at the 1997 Annual Meeting or until their successors have been duly elected and qualified; B. To consider and vote on the election of Coopers & Lybrand as independent accountants of the Company for the year 1994; C. To consider and vote on amendments to the Company's 1990 Long-Term Incentive Plan; D. To consider and vote on an amendment to the Company's 1986 Stock Option Plan; E. To consider and vote on amendments to the Company's annual executive incentive compensation program set forth in Article XII of the By-laws; F. To consider and vote on amendments to the Company's Profit-Sharing Plan; G. To consider and vote on five stockholder proposals set forth in the accompanying Proxy Statement, if such proposals are brought before the meeting; and H. To transact such other business as may properly come before the meeting. The stock transfer books will not be closed, but holders of Common Stock and $2.67 Convertible Preferred S~ock, to be entitled to vote, must be holders of record at the close of business on March 4, 1994. Louis F. Fernous, Jr. Vice President and Secretary

PROXY STATEMENT The Company's principal executive offices are located at 1700 East Putnam Avenue, Old Greenwich, Connecticut 06870. This Proxy Statement and accompanying proxy are first being sent or given to stockholders on or about March 11, 1994. -- The accompanying proxy is solicited by the Board of Directors. It may be revoked at any time before being voted by written notice given to the secretary of the meeting or by the delivery of a later- dated proxy. Proxies properly executed, duly returned to the Company and not revoked, will be voted for the election of directors (except to the extent that authority therefor is withheld) and on the other Items described in this Proxy Statement in accordance with the instructions in the proxy. The Board of Directors is not aware at the date hereof of any other matter proposed to be presented at this meeting, and does not believe that any matter may be properly presented other than the election of directors and Items 2 through 11. If any other matter is properly presented, the persons named in the enclosed form of proxy will have discretionary authority to vote thereon according to their best judgment. Presence at the meeting does not of itself revoke the proxy. VOTING The only securities of the Company entitled to be voted are shares of Common Stock and $2.67 Convertible Preferred Stock and only holders of record at the close of business on March 4, 1994 are entitled to vote. Holders of Common Stock are entitled to one vote per share and holders of $2.67 Convertible Preferred Stock are entitled to three-tenths of a vote per share. There were 201,811,463 shares of Common Stock and 550,522 shares of $2.67 Convertible Preferred Stock outstanding at March 4, !994. The affirmative vote of shares representing a majority in voting power of the shares of the Company's Common Stock and $2.67 Convertible Preferred Stock, voted together as one class, present in person or represented by proxy and entitled to vote at the meeting, a quorum being present, is necessary for the adoption of each of Items 2 through 11. Directors shall be elected by a plurality of votes cast. Proxies marked as abstentions, or to withhold a vote from a nominee as a director in the case of the election of directors, will have the effect of a negative vote. Broker non-votes (where a nominee holding shares for a beneficial owner has not received voting instructions from the beneficial owner with respect to a particular matter and such nominee does not possess or choose to exercise his discretionary authority with respect thereto) will be considered as present at the meeting but not entitled to vote with respect to the particular matter and will therefore have no effect on the vote. As a matter of policy, stockholder proxies, ballots and tabulations that identify individual stockholders are kept secret and access thereto is limited to the independent Inspectors of Election and certain employees of the Company who must acknowledge their responsibility to comply with such policy. Item 1 ELECTION OF DIRECTORS The Board of Directors currently consists of 12 members. The Company's Certificate of Incorporation provides for the classification of the Board of Directors into three classes, as nearly equal in number as possible, with staggered terms of office and provides that upon the expiration of the term of office for a class of directors, nominees for such class shall be elected for a term Of three years or until their successors are duly elected and qualified. At this meeting, four nominees for director are to be elected as Class II directors. The nominees are Mr. Anderson, Dr. Ewers,

Mr. Johnstone and Mr. Kelley. The four Class III and four Class I directors have one year and two years, respectively, remaining on their terms of office. If no contrary indication is made, proxies in the accompanying form are to be voted for such nominees or, in the event any such nominee is not a candidate or is unable to serve as a director at the time of the election (which is not now expected), for any nominee who shall be designated by the Board of Directors to fill such vacancy, unless the _Board of Directors shall determine to reduce the number of directors pursuant .to .the By-laws. All nominees are members of the present Board. All nominees and all current Class I and Class III directors were elected by the stockholders, except that Dr. Patricia O. Ewers was elected by the Board of Directors as a Class II director effective October 29, 1991 and Mr. Peter M. Wilson was elected by the Board of Directors as a Class III director effective February 1, 1994. There are set forth below opposite the names of the nominees and Class I and Class III directors their present positions and offices with the Company and their principal occupations during the past five years, their ages and the year first elected a director of the Company. There are also set forth below opposite their names under the heading "Shares of Common Stock beneficially owned", the shares of Common Stock of the Company beneficially owned by them on February 4, 1994 (except, as stated in Note (c) below, beneficial ownership is disclaimed as to certain shares), including shares of Common Stock (if any) of which they had the fight on such date to acquire beneficial ownership pursuant to the exercise on or before April 5, 1994 of options granted by the Company, plus the number (if any) of shares of Common Stock held on December B 1, 1995 by the Trustee of the Profit- Sharing Plan of the Company attributable to Company contributions and to employee pre-tax contributions made through payroll deductions that is equivalent as of that date to their undivided proportionate beneficial interests in all such shares. Beneficial ownership information is also provided below for the executive officers listed in the Summary Compensation Table on page 8. In addition, Mr. Anthony D. Househam, an executive officer listed in the Summary Compensation Table, had such beneficial ownership of 1~4,166 shares of Common Stock on February 4, 1994. In no instance does the security ownership of any of the nominees or other directors or executive officers listed below equal or exceed one percent of the outstanding shares of Common Stock of the Company. The information as to security holdings is based on information received by the Company from the nominees and other directors and executive officers, from the Corporate Employee Benefits Committee of the Company and from the Trustee.

Present positions and offices with the Company and principal occupations during Name the past five years Age Year first elected director NOMINEES FOR DIRECTOR--CLASS II--TERM EXPIRING 1997 Eugene R. Anderson* Partner, Anderson Kill Olick & Oshinsky, P.C. (law firm) 66 1980 Patricia O. Ewers President, Pace University since 1990; Vice President, Dean of Faculties; DePaul University prior thereto 58 1991 John W. Johnstone, Jr. Chairman, President and Chief Executive Officer of Olin Corporation (chemical, metal and defense-related products) 61 1989 Wendell J. Kelley Retired since 1991; Chairman and Chief Executive Officer of Illinois Power Company from 1989 to 1991 ; Chairman, President and Chief Executive Officer of Illinois Power Company prior thereto 67 1988 Shares of Common Stock beneficially owned (a)(b)(c) 8,800 5OO 1,200 2,800 William J. Alley* Arnold Henson* CLASS III DIRECTORS~TERM EXPIRING 1995 Chairman of the Board and Chief Executive Officer of American Brands, Inc. 64 1979 Executive Vice President and Chief Financial Officer of American Brands, Inc. 62 1981 796,605 295,588 3

Name Howard C. Humphrey Peter M. Wilson* Present positions and offices with the Company and principal occupations during the past five years Vice President--Life Insurance of American Brands, Inc. since 1989; Chairman of the Board, President and Chief Executive Officer of The Franklin Life Insurance Company (life insurance), a subsidiary of American Brands, Inc., since 1992; Chairman of the Board and Chief Executive Officer of The Franklin Life Insurance Company from 1990 to 1992; Chairman of the Board, President and Chief Executive Officer of The Franklin Life Insurance Company prior thereto Chairman and Chief Executive of Gallaher Limited (tobacco products, distilled spirits, optics, retail distribution and housewares), a subsidiary of American Brands, Inc., since February 1994; Deputy Chairman of Gallaher Limited from 1989 to 1994; Chairman and Chief Executive of Gallaher Tobacco Limited (tobacco products), a subsidiary of Gallaher Limited, since 1987 Year first elected Age director Shares of Common Stock beneficiaHy owned (a)(b)(c) 60 1987 93,586 52 1994 98,600 Thomas C. Hays* CLASS I DIRECTORS---TERM EXPIRING 1996 President and Chief 58 1981 Operating Officer of American Brands, Inc. 380,358

Name __Sidney Kirschner Gordon R. Lohman Presen! positions and offices with the Company and principal occupations during the past five years President and Chief Executive Officer of Northside Hospital, Inc. since 1992; Chairman of the Board, President and Chief Executive Officer of National Service Industries, Inc. (lighting equipment, textile rentals and specialty chemicals) from 1991 to 1992; President and Chief Executive Officer of National Service Industries, Inc. prior thereto President and Chief Executive Officer of AMSTED Industries Incorporated (products for the railroad, construction and building markets) since 1990; President and Chief Operating Officer of AMSTED Industries Incorporated prior thereto Shares of Common Stock Year first beneficially elected owned Age director (a)(b)(c) 59 1991 1,100 59 1990 1,000 Charles H. Pistor, Jr. Vice Chair of Southern Methodist University since 1991; Chairman and Chief Executive Officer of NorthPark National Bank prior thereto 63 1985 3,200 *Member of Executive Committee of the Company's Board of Directors. (a) The numbers of shares attributable to Company contributions under the Profit-Sharing Plan of the Company included in the numbers shown above are as follows: William J. Alley, 4,571; Thomas C. Hays, 6,551; and Arnold Henson, 17,021. The numbers of shares attributable to employee pre-tax contributions under such Plan included in the numbers shown above are: William J. Alley, 459; Thomas C. Hays, 500; and Arnold Henson, 756. (b) The numbers of shares of which the nominees and Class I and Class III directors and Mr. Househam had the right to acquire beneficial ownership pursuant to the exercise on or before April 5, 1994 of options granted by the Company included in the numbers shown above are as follows: William J. Alley, 656,650; Thomas C. Hays, 288,050; Arnold Henson, 165,600; Anthony D. Househam, 120,200; Howard C. Humphrey, 58,000; and Peter M. Wilson, 98,100. Inclusion of such shares does not constitute an admission by any nominee, director or executive officer that 5

he is the beneficial owner of such shares. The numbers of shares of restricted stock granted under the Company's 1990 Long-Term Incentive Plan included in the numbers shown above are as follows: William J. Alley, 10,000; Thomas C. Hays, 5,000; Arnold Henson, 3,600; and Howard C. Humphrey, 2,000. (c) To the best of the Company's knowledge, each nominee and Class I and Cla~s Ill director and executive officer named above has sole voting and investment power with respect to shares shown after his name above, other than with respect to the shares listed in Note (b) above and except as follows: Mr. Hays shares voting and investment power as a co-trustee of various family trusts with respect to 8,800 shares and with respect to which he disclaims beneficial ownership; Mr. Humphrey's wife has sole voting and investment power with respect to 2,308 shares that she holds as to which shares Mr. Humphrey disclaims beneficial ownership; and Mr. Pistor shares voting and investment power with his wife with respect to 2,400 shares. The Trustee of the Profit- Sharing Plan has agreed to vote the shares it holds in the Trust in accordance with instructions received from members of the Plan and shares as to which instructions are not received are voted by the Trustee proportionally in the same manner as shares as to which the Trustee has received instructions. Eight meetings of the Company's Board of Directors were held during the Company's last fiscal year. Each director of the Company attended at least 75% of the aggregate of (i) all meetings of the Board of Directors and (ii) all meetings of committees of the Board of Directors of which he was a member, during the periods that he served during the Company's last fiscal year. In addition to the Executive Committee, the Board of Directors has an Audit Committee, a Compensation and Stock Option Committee and a Nominating Committee. The Audit Committee is comprised of Messrs. Anderson, Kirschner, Pistor and Dr. Ewers. Its functions include recommending annually to the Board of Directors a firm of independent accountants to audit the Company's financial statements and the scope of such firm's audit, reviewing reports and recommendations of the Company's independent accountants, reviewing the scope of all internal audits and reports and recommendations in connection therewith and reviewing nonaudit services provided by the Company's principal independent accountants. It held five meetings during the Company's last fiscal year. The Compensation and Stock Option Committee is comprised of Messrs. Anderson, Johnstone, Kelley and Pistor. It administers the Company's Stock Option Plans and 1990 Long-Term Incentive Plan, and its functions include the designation of key employees to whom stock options, stock appreciation rights, restricted stock, performance awards and other stock-based awards may be granted, and, within specified limits, the number of shares that may be granted to any such key employee. Its functions also include setting compensation for officers employed by the Company and holding the office of Vice President or a more senior office and the designation of those persons, in addition to the Chairman of the Board, who shall be entitled to participate in incentive compensation under Article XII of the By-laws and the allotment among such persons of the amount made available for allotment. It held seven meetings during the Company's last fiscal year. In addition, the Company has a Salary Committee comprised of Messrs. Alley, Hays and Henson and four additional executive officers. Its functions include the establishment of salary administration guidelines for the Company and its domestic subsidiaries, applicable to all employees other than officers of the Company whose salaries are required by the By-laws of the Company to be fixed by the Compensation and Stock Option Committee, and, in accordance with such guidelines, the approval of all salaries above a specified amount, and recommending to the Board of Directors compensation arrangements for nonmanagement directors. It held two meetings during the Company's last fiscal year. The Nominating Committee is comprised of Messrs. Anderson, Johnstone, Lohman and Pistor. Its functions include recommending persons for nomination for election as members of the Company's Board of Directors. The Nominating Committee held two meetings during the last fiscal year. Its functions also include recommending directors for membership on the Compensation and S~ock Option Committee. Stockholders wishing to recommend persons for consideration by the Nominating

Committee as nominees for election to the Company's Board of Directors can do so by writing to the Secretary of the Company at 1700 East Putnam Avenue, Old Greenwich, Connecticut 06870, giving each such person's name, biographical data and qualifications. Any such recommendation should be accompanied by a written statement from the person recommended of his consent to be named as a nominee and, if nominated and elected, to serve as a director. The Company's Certificate of --Incorporation also contains a procedure for stockholder nomination of directors." Mr. Alley is a director of CIPSCO Incorporated, Central Illinois Public Service Company and Rayonier Inc. Mr. Johnstone is a director of Phoenix Home Life Insurance Company; Mr. Kelley is a director of Magna Group, Inc.; Mr. Lohman is a director of CIPSCO Incorporated and Central Illinois Public Service Company; and Mr. Pistor is a director of AMR Corporation, Centex Corporation and Oryx Energy Company. For information with respect to the beneficial ownership of securities of the company by directors and executive officers as a group, see "Certain Information Regarding Security Holdings". During the last fiscal year, a subsidiary of the Company made purchases from Olin Corporation, of which Mr. Johnstone is Chairman, President and Chief Executive Officer and a director, in the amount of approximately $3,400,000. The transactions were made in the ordinary course of business and on terms no less favorable to the Company's subsidiary than would have prevailed in similar transactions with any other supplier. The Company's subsidiary intends to continue to make purchases from Olin Corporation during 1994 if it determines that it may do so on terms beneficial to it. Each director and officer of the Company who is subject to Section 16 of the Securities and Exchange Act of 1934 is required to report to the Securities and Exchange Commission by a specified date his or her beneficial ownership of or transactions in the Company's securities. Reports received by the Company indicate that all such directors and officers have filed all requisite reports with the Securities and Exchange Commission on a timely basis during or with respect to 1993, except that Mr. Hays was late in filing an amended Form 5 to report the transfer of shares between two family trusts of which he is a co-trustee, Mr. Househam was late in filing his Form 5 to report the exempt receipt of shares upon vesting of an award and Mr. Humphrey was late in filing an amended Form 5 to report two exempt exercises of stock appreciation rights.

EXECUTIVE COMPENSATION There is set forth in the following table a summary of all compensation paid to, or earned by, the five most highly compensated executive officers during each of the Company's last three fiscal years: SUMMARY COMPENSATION TABLE Annual Compensation Long.Ter~ " Compensation Other Restricted Securities Annual Stock Underlying All Other Name and Principal Bonus (1) Compensation (2) Awards (3) Options/SARs Compensation Position Year Salary $ ($) ($) ($) (#) ($) William J. Alley Chairman of the Board and Chief Executive Officer of American Brands, Inc. Thomas C. Hays President and Chief Operating Officer of American Brands, Inc. Arnold Henson Executive Vice President and Chief Financial Officer of American Brands, Inc. Anthony D. Househam Chairman and Chief Executive of Gallaher Limited Howard C. Humphrey Chairman of the Board, President and Chief Executive Officer of The Franklin Life Insurance Company 1993 1,053,600 862,125 4,313,095 -0- 163,200 949,877(4) 1992 1,003,400 1,008,782 5,910 -0- 120,000 304,487(4) 1991 951,000 875,295 445,625 170,000 (1) 1993 655,800 394,158 2,122,937 -0- 81,600 503,403(4) 1992 624,600 506,630 2,955 -0- 60,000 169,063(4) 1991 592,000 450,738 222,813 85,000 1993 552,800 363,889 2,116,887 °0- 58,750 442,821(4) 1992 526,500 425,791 2,128 -0- 43,200 147,250(4) 1991 499,000 378,818 160,425 61,200 1993 535,716 362,343 4,728 -0- -0- -0- 1992 547,712 385,463 1,182 -0- 24,000 1,046,315(5) 1991 512,720 370,446 89,125 34,000 1993 331,255 250,697 1,119,801 °0- 86,500 4,497(4) 1992 315,600 234,333 1,182 -0- 24,000 4,364(4) 1991 300,000 190,698 89,125 34,000 Article XII of the By-laws of the Company provides for payment of incentive compensation to members of the Management Group (consisting of key employees, defined pursuant to Article XII). An amount equal to 1/2 of 1% of Net Income Before Taxes (as defined in Article XII) is made available for allotment annually if net income before taxes equals or exceeds 12% of net worth and a cash dividend has been paid on the Common Stock of the Company. Of the amount available for incentive compensation, 18% is allotted to the Chairman of the Board and the remainder is available to the Management Group on the following basis: 24 % of the total amount available is allotted by Article XII to the members of the Management Group in proportion to their fixed salaries, and the balance may be allotted to them by the Compensation and Stock Option Committee, entirely at its discretion as to amounts and individuals. Payments are made by distributing 50% of the amount payable in cash as soon as practicable and 50% in cash on the December 15 next following the close of the year for which the allotment was made. The deferred portion of the Article XII payment is contingent upon the employee not engaging in competitive employment prior to receipt of payment thereof. See Item 5, Approval of Amendments to Annual Executive Incentive Compensation Program. Mr. Househam participated in an incentive compensation plan for key employees of Gallaher Limited. Under such plan, an amount equal to 0.389% of consolidated profits before tax (as defined in such plan) is made available for allotment annually, provided that such profits before tax equal at least £27,000,000. Of the amount made available for incentive compensation, 18.5% is allotted to the Chairman of Gallaher Limited.