UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required] For the fiscal year ended December 31, 1995 Commission file number 1-9076

AMERICAN BRANDS, INC. ------(Exact name of registrant as specified in its charter) DELAWARE 13-3295276 ------(State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1700 East Putnam Avenue, Old Greenwich, Connecticut 06870-0811 ------(Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 698-5000

Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------Common Stock, par value $3.125 per share New York Stock Exchange, Inc. $2.67 Convertible Preferred Stock, without par value New York Stock Exchange, Inc. 9% Notes Due 1999 New York Stock Exchange, Inc. 8 5/8% Debentures Due 2021 New York Stock Exchange, Inc. 8 1/2% Notes Due 2003 New York Stock Exchange, Inc. 7 7/8% Debentures Due 2023 New York Stock Exchange, Inc. 7 1/2% Notes Due 1999 New York Stock Exchange, Inc. Preferred Share Purchase Rights New York Stock Exchange, Inc. Securities registered pursuant to Section 12(g) of the Act: None ------Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes(X) No( )

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

The aggregate market value of Registrant's voting stock held by non-affiliates of Registrant, at February 15, 1996, was $8,239,823,207. The number of shares outstanding of Registrant's Common Stock, par value $3.125 per share, at March 18, 1996, was 177,388,692.

DOCUMENTS INCORPORATED BY REFERENCE

(1) Certain information contained in the Annual Report to Stockholders of Registrant for the fiscal year ended December 31, 1995 is incorporated by reference into Part I, Part II and Part IV hereof.

(2) Certain information contained in the Proxy Statement for the Annual Meeting of Stockholders of Registrant to be held on May 1, 1996 is incorporated by reference into Part III hereof.

PART I

Item 1. Business.

(a) General development of business.

Registrant is a holding company with subsidiaries engaged in various businesses. Subsidiaries of Registrant are engaged in the manufacture and sale of cigarettes, cigars and smoking tobaccos, principally in the United Kingdom ("U.K."), distilled spirits, various types of hardware and home improvement products, office products, supplies and accessories and golf and leisure products.

Registrant was incorporated under the laws of Delaware in 1985 and until 1986 conducted no business. Prior to 1986, the businesses of Registrant's subsidiaries were conducted by American Brands, Inc., a New Jersey corporation organized in 1904 ("American New Jersey"), and its subsidiaries. American New Jersey was merged into The American Tobacco Company on December 31, 1985, and the shares of the principal first-tier subsidiaries formerly held by American New Jersey were transferred to Registrant. In addition, Registrant assumed all liabilities and obligations in respect of the public debt securities of American New Jersey outstanding immediately prior to the merger. Unless the context otherwise indicates, references herein to American Brands, Inc. and to Registrant for all periods prior to January 1, 1986 are to American New Jersey.

As a holding company, Registrant is a legal entity separate and distinct from its subsidiaries. Accordingly, the right of Registrant, and thus the right of Registrant's creditors (including holders of its debt securities and other obligations) and stockholders, to participate in any distribution of the assets or earnings of any subsidiary is subject to the claims of creditors of the subsidiary, except to the extent that claims of Registrant itself as a creditor of such subsidiary may be recognized, in which event Registrant's claims may in certain circumstances be subordinate to certain claims of others. In addition, as a holding company, a principal source of Registrant's unconsolidated revenues and funds is dividends and other payments from its subsidiaries. Registrant's principal subsidiaries currently are not limited by long-term debt or other agreements in their abilities to pay cash dividends or to make other distributions with respect to their capital stock or other payments to Registrant.

In recent years Registrant has been engaged in a strategy seeking to enhance the operations of its subsidiaries in certain major businesses. Pursuant to such strategy Registrant has made acquisitions in the distilled spirits business, the office products business and the hardware and home improvement products business, and, in January 1996, acquired all the outstanding capital stock of Cobra Golf Incorporated, a leader in golf clubs, for an aggregate cost of approximately $715 million in cash, including fees and expenses. These acquisitions were financed at least in part by debt or debt securities convertible into Common Stock. In addition, Registrant has been making dispositions of businesses considered to be nonstrategic to its long-term operations. Since January 1, 1994, these dispositions have included the sale of American Franklin Company, Registrant's life insurance business, to American General Corporation for $1.17 billion on January 31, 1995, the sale of The American Tobacco Company ("ATCO"), Registrant's domestic tobacco subsidiary, to Brown & Williamson

Tobacco Corporation, a subsidiary of B.A.T Industries p.l.c., for $1 billion on December 22, 1994, and the sale of Dollond & Aitchison Group PLC, a subsidiary of Gallaher Limited ("Gallaher"), for total consideration of $146 million on July 12, 1994. Registrant has also disposed of a number of other nonstrategic businesses and product lines, including U.K.-based Forbuoys (retail distribution) and Prestige (housewares), both subsidiaries of Gallaher Limited. The sale of Prestige was completed on May 2, 1995. The sale of the retail distribution group was completed on July 24, 1995.

Registrant continues to pursue this strategy and in furtherance thereof explores other possible acquisitions in fields related to its major businesses. Registrant also cannot exclude the possibility of acquisitions in other fields or further dispositions. Although no assurance can be given as to whether or when any acquisitions or dispositions will be consummated, if agreement with respect to any acquisitions were to be reached, Registrant might finance such acquisitions by issuance of additional debt or equity securities. The additional debt from any acquisitions, if consummated, would increase Registrant's debt-to-equity ratio and such debt or equity securities might, at least in the near term, have a dilutive effect on earnings per share. Registrant also continues to consider other corporate strategies intended to enhance stockholder value. It cannot be predicted whether or when any such strategies might be implemented or what the financial effect thereof might be upon Registrant's debt or equity securities.

Cautionary Statement

Except for the historical information contained in this Annual Report on Form 10-K, certain statements herein, including without limitation, certain matters discussed in Part I, Item 1 -- Business and Item 3 -- Legal Proceedings and in Part II, Item 7 -- Management's Discussion and Analysis of Financial Condition and Results of Operations, are forward looking statements that involve a number of risks and uncertainties. Actual results could differ materially from such forward looking statements depending upon such risks and uncertainties including, but not limited to, the following: general economic conditions, foreign exchange rate fluctuations, competitive product and pricing pressures, the impact of excise tax increases with respect to international tobacco and distilled spirits, regulatory developments, the uncertainties of litigation, as well as other risks and uncertainties detailed from time to time in Registrant's Securities and Exchange Commission filings.

(b) Financial information about industry segments.

See "Information on Business Segments" in the Notes to Consolidated Financial Statements contained in the 1995 Annual Report to Stockholders of Registrant, which information is incorporated herein by reference.

(c) Narrative description of business.

The following is a description of the business of the subsidiaries of Registrant in the industry segments of International Tobacco, Distilled Spirits, Hardware and Home Improvement Products, Office Products and Golf and Leisure Products. For financial information about the above industry segments, see "Information on Business Segments" in the Notes to Consolidated Financial Statements contained in the 1995 Annual 2

Report to Stockholders of Registrant, which information is incorporated herein by reference.

International Tobacco

Gallaher is engaged primarily in the manufacture of tobacco products in the U.K. and the Republic of Ireland and sells these products principally in the European Community and the former Soviet Union. Its sales of tobacco products are the largest in the U.K., where Gallaher's share of consumer sales of cigarettes was 39.2% in 1995 compared with 39.7% in 1994 and 40.6% in 1993. For 1995, Gallaher held approximately 40% of the cigarette market (measured by sales to the trade) in the U.K., compared with approximately 38.8% and 41.7% for 1994 and 1993, respectively. Total unit sales of cigarettes to retail outlets and wholesalers in that country by foreign and domestic manufacturers decreased by 8.8% in 1995, and by 3.8% in 1994, and increased by 1.9% in 1993. Gallaher's total unit sales of cigarettes to retail outlets and wholesalers decreased by 5.8% in 1995 and by 10.4% in 1994, and increased by 2.3% in 1993. Year to year comparisons are distorted by changes in the timing of the U.K. budget. It is estimated that consumer sales declined about 2%, 3% and 5.5% in 1995, 1994 and 1993, respectively. It is likely that consumer sales will decline in 1996. The percentage of Gallaher's total cigarette unit sales derived from export markets was approximately 21.2%, 21.5% and 12.5%, in 1995, 1994 and 1993, respectively. In 1993 export sales reflected a partial year's shipments of Benson and Hedges to Europe and lower shipments of other cigarette products to the former Soviet Union. Gallaher's principal export markets in 1995 were Greece, France, Germany and the former Soviet Union.

Gallaher's principal cigarette brands in the U.K. are Benson and Hedges Special Filter, Silk Cut, Berkeley Superkings, Benson and Hedges Superkings, Kensitas Club and Mayfair. Rights to some of these brands in various other countries are claimed by others. Gallaher also markets other tobacco products, among which are Hamlet cigars, Condor and Benson and Hedges Mellow Virginia smoking tobaccos and Old Holborn roll-your-own cigarette tobacco. Sales are made to retail outlets and wholesalers.

On June 30, 1993, ATCO, a former subsidiary of Registrant, acquired the Benson and Hedges cigarette trademark in Europe (other than the U.K. and Republic of Ireland, where Gallaher already owned the trademark) in exchange for the assignment of the Lucky Strike and Pall Mall overseas cigarette trademarks, $107.2 million in cash and contingent future payments based on volumes. Immediately following the acquisition, Gallaher entered into an exclusive trademark license agreement with ATCO pursuant to which Gallaher manufactures and sells Benson and Hedges products in tax- paid European markets (other than the U.K. and the Republic of Ireland) and pays a royalty based on volumes. In May 1994, the above described Benson and Hedges trademark rights acquired by ATCO and related license agreement were transferred from ATCO to another subsidiary of Registrant.

Gallaher's principal competitors in the U.K. are Imperial Tobacco and Rothmans, the latter also distributing Philip Morris brands, and there is also competition from imported brands, which include those of R.J. Reynolds. Gallaher competes on the basis of the quality of its products and price and its responsiveness to consumer preferences. 3

Gallaher buys its leaf tobacco from foreign sources, including the United States. In accordance with industry practice, large inventories of leaf tobacco are maintained by Gallaher. Sufficient inventories of finished product are maintained by Gallaher to respond promptly to orders.

There has been social and political unrest in Northern Ireland for many years. Notwithstanding this situation, there has been no consequential damage to Gallaher's manufacturing facilities there.

Increases in the U.K. excise duties on tobacco products in recent years have resulted in increases in the price of a typical pack of cigarettes as follows:

Effective Amount of Date Increase ------March 16, 1993 10 pence November 30, 1993 11 pence November 29, 1994 10 pence January 1, 1995 6 pence November 28, 1995 15 pence

It is believed that the continuing impact of price increases, principally due to substantial excise tax increases in recent years, has led to an overall reduction in unit sales, greater price competition and increased trading down by consumers to lower priced brands. In addition, the U.K. Chancellor, in his November 1993 budget announcement, indicated that he intends to increase tobacco duties on average by at least 3% a year in excess of the inflation rate in future budgets. The effect of any further excise duty increases cannot be determined, but such increases and any new duties or taxes, if enacted, will likely add to the overall industry declines and the shift to lower priced brands.

A new agreement took effect in January 1995 between representatives of the U.K. tobacco industry and the United Kingdom Health Ministers with respect to tobacco products and advertising and promotion. Among other things, the agreement provides for limitations on expenditures on cigarette brand poster advertisements, and for the removal of external cigarette advertising signs at retail premises by the end of 1996. Specified warning statements are required to be printed on cigarette packages and to appear in advertisements. Regulations promulgated in the U.K. in 1991 and 1993 to implement Council Directives of the European Community require that all tobacco product packaging bear the warning statement "Tobacco Seriously Damages Health", together with additional warning statements, with cigarette packaging also carrying an indication of tar and nicotine yield. In addition, the Independent Television Commission Code of Advertising Standards and Practice of December 1990, implementing a Council Directive of the European Community, prohibits, effective October 1991, the advertising of all tobacco products on television in the U.K. Television and radio advertising of cigarettes has been prohibited in the U.K. for many years. Also, a Council Directive of the European Community has been proposed by the Commission of the European Community to provide for a total ban on tobacco advertising and sponsorship throughout the European Community and to restrict the use of tobacco brand names on non-tobacco products. In February 1992 the European Parliament, an advisory body, approved such a total ban. Any such Council Directive, even though 4

approved by the European Parliament and the Commission, must be adopted by the Council of Ministers of the member states of the Community by a qualified majority of the member states prior to becoming effective and may be adopted so as to be binding or non-binding on individual member states.

A Council Directive of the European Community adopted in May 1990 required that the tar yield of cigarettes marketed in the European Community should not be greater than 15 milligrams per cigarette after December 31, 1992, and 12 milligrams per cigarette after December 31, 1997. None of Gallaher's cigarette brands has had a tar yield in excess of 15 milligrams per cigarette since December 31, 1992.

Effective January 1, 1993, the European Community, in accordance with the Single European Act, removed constraints on quantities of tobacco products for personal consumption that may be purchased duty-paid in one member state and carried to another without payment of additional duty. This action has resulted in increased competition in the market for tobacco products in the U.K. and in other member states and caused a shift in sales of tobacco products brands, particularly roll-your-own cigarette tobacco, from certain member states, such as the U.K., to other member states in which prices of those brands are lower, mainly as a result of excise taxes.

On July 18, 1989 the Council of Ministers enacted a non-binding Council Resolution, as part of its on-going "Europe Against Cancer" program, inviting member states to introduce legislation that would ban smoking in most public places. In addition, the U.K. and various other member states have adopted legislation or non-binding guidelines that restrict smoking in public places.

It is not possible to predict whether additional legislation, directives, regulations or action will be enacted, promulgated or taken in or by the U.K. or the European Community or the nature of any such legislation, directives, regulations or action, nor is it possible to predict the effect any such legislation, directives, regulations or action may have on the industry generally or on Gallaher.

Gallaher's subsidiary, Gallaher (Dublin) Limited ("Dublin"), manufactures and sells tobacco products in the Republic of Ireland. Dublin has the leading position with approximately 41% of the cigarette market (measured by sales to the trade) in 1995, compared with approximately 40% and 38% for 1994 and 1993, respectively. Dublin's principal cigarette brands are Benson and Hedges Special Filter and Silk Cut.

See Item 3, "Legal Proceedings".

For a description of the distilled spirits business of a subsidiary of Gallaher, see "Distilled Spirits".

Distilled Spirits

JBB Worldwide, Inc. ("JBB Worldwide") is a holding company for certain subsidiaries in the Distilled Spirits business. Subsidiaries include Jim Beam Brands Co. ("Beam") and Alberta Distillers Limited ("Alberta"), which produces a line of distilled spirits, including Windsor Canadian Supreme Whisky, in Canada. Fortune Brands Pty. Ltd., a subsidiary of Beam, markets and distributes Beam's products as well as several brands under agency agreements in Australia. 5

Beam and its predecessors have been distillers of Bourbon whiskey since 1795. Beam, together with other JBB Worldwide subsidiaries, currently produces, or imports, and markets a broad line of distilled spirits, including Bourbon and other whiskeys, cordials, gin, vodka, rum, tequila and cognac.

Beam's nine leading brand names are Jim Beam Bourbon, Windsor Canadian Supreme Whisky, Lord Calvert Canadian Whisky, DeKuyper cordials, Gilbey's gin, Gilbey's vodka, Kamchatka vodka, Wolfschmidt vodka and Kessler American Blended Whiskey. Principal Bourbon brand names are Jim Beam, the largest-selling Bourbon whiskey in the U.S. and in the world, Old Grand-Dad, the largest-selling Bonded Bourbon in the U.S. and in the world, Booker's, a super-premium Bourbon whiskey, Old Taylor, Old Crow and Jim Beam & Cola, which combines Bourbon with a cola soft drink. DeKuyper is the top-selling domestically-produced cordial line in the U.S. Beam also produces Chateaux and Leroux cordials, Beam's 8-Star Blend and Calvert Extra blended whiskeys, Dark Eyes vodka and Calvert Gin, and imports, in bottle or in bulk, Canada House Canadian Whisky, Banff Ice vodka, The Dalmore and The Claymore Scotch whiskies, Kamora coffee liqueur, After Shock cinnamon liqueur, Ronrico and Pusser's rums, El Tesoro and Chinaco tequilas and A. de Fussigny cognac.

Beam's leading brands are owned by Beam and other JBB Worldwide subsidiaries, except that DeKuyper cordials are produced and sold in the U.S. under a perpetual license and Gilbey's gin and Gilbey's vodka are produced and sold in the U.S. under a long-term license and the Kamchatka brand is claimed by another entity in California.

Beam's products are bottled in the U.S. and are sold through various distributors and, in the 18 "control" states (and one county) which have established government control of the purchase and distribution of alcoholic beverages, through state (or county, as the case may be) liquor authorities. Beam products are also bottled in eight foreign countries. Beam's international volume, which accounted for approximately 25% and 23% of its total unit sales in 1995 and 1994, respectively, is exported to over 80 foreign markets for sale through distributors and brokers.

The U.S. market for beverage alcohol has in recent years demanded an increasingly broad variety of products. Demand for distilled spirits, particularly for Bourbon and other whiskeys, generally has declined, resulting in increased price competition as competitors vie for market share. It is estimated that unit sales of distilled spirits (which do not include bulk sales) in the U.S. declined by approximately 2-3% in each of the years 1995, 1994 and 1993. Total unit sales by Beam in the U.S. decreased by 2%, 5.7% and 4.6% in 1995, 1994 and 1993, respectively. Total unit sales by Beam, including export sales, increased by 0.3% in 1995 and decreased by 2.4% and 1.7% in 1994 and 1993, respectively. In 1995 and 1994, Bourbon accounted for approximately 27% and 26% and other whiskeys for approximately 26% and 27% of Beam's total unit sales in the U.S., respectively.

The distilled spirits business is highly competitive, with many brands sold in the consumer market. Registrant believes there are approximately ten major competitors worldwide and many smaller distillers and bottlers. Registrant also believes that, based on units and sales value, Beam, with six million-case-selling brands worldwide, is the second 6

or third largest producer and marketer of distilled spirits in the U.S. and is among the ten major competitors worldwide. Beam competes on the basis of the quality and price of its products and its responsiveness to consumer preferences.

Raw materials for the production, storage and aging of Beam's and Alberta's products are principally corn, rye, barley malt and white oak barrels and are readily available from a number of sources, except that white oak barrels are available from only two major sources, one of which is owned by a competitor of Beam. Because whiskeys are aged for various periods, generally from four to eight years, Beam and Alberta maintain, in accordance with industry practice, substantial inventories of bulk whiskey in warehouse facilities. In addition, whiskey production is generally scheduled to meet demand four to eight years into the future, and production schedules are adjusted from time to time to bring inventories into balance with estimated future demand.

The production, storage, transportation, distribution and sale of Beam's and Alberta's products are subject to regulation by federal, state and local authorities. Various local jurisdictions prohibit or restrict the sale of distilled spirits in whole or in part.

In the U.S., Canada and many other countries, distilled spirits are subject to excise taxes and/or customs duties. State, local and other governmental authorities in such countries also impose taxes on distilled spirits. On January 1, 1991, the U.S. federal excise tax on distilled spirits was increased by one dollar per proof gallon, and proposals were made in 1994 to increase the federal excise tax on distilled spirits to help offset the cost of the Clinton Administration's health care proposals. In addition, there are proposals pending to increase or impose new distilled spirits taxes in various jurisdictions. It is believed that the federal excise tax increase in 1991 contributed to the decline in distilled spirits unit sales for the industry, including Beam. The effect of any future excise tax increases cannot be determined, but it is possible that any future tax increases would have an adverse effect on unit sales and increase existing competitive pressures.

The Alcoholic Beverage Labeling Act of 1988 and regulations promulgated thereunder by the Bureau of Alcohol, Tobacco and Firearms of the Department of the Treasury (the "Bureau") require that containers of alcoholic beverages bottled on or after November 18, 1989 for sale or distribution in the U.S. or for sale, distribution or shipment to members of the United States Armed Forces abroad bear the statement: "GOVERNMENT WARNING: (1) According to the Surgeon General, women should not drink alcoholic beverages during pregnancy because of the risk of birth defects. (2) Consumption of alcoholic beverages impairs your ability to drive a car or operate machinery, and may cause health problems." The Alcoholic Beverage Labeling Act of 1988 and the regulations prohibit any other requirement of a statement relating to alcoholic beverages and health on any beverage alcohol container or package containing such a container. If the Secretary of the Treasury, after appropriate investigation and consultation with the Surgeon General, finds available scientific information justifying a change in, addition to or deletion of all or part of the required statement, he is required to report such information to the United States Congress together with specific recommendations with respect thereto. On March 8, 1991, the Bureau issued a request for information to "enable the agency to determine whether the wording . . . should be 7

amended." Registrant understands that the Bureau has recommended that the current warning statements are sufficient and has reported its findings to the United States Congress. It is not possible to state whether any legislation or additional regulations or action imposing additional labeling or other warning statement requirements will be enacted, promulgated or taken in the U.S. or export markets served by Beam, nor is it possible to predict the effect, if any, that the existing labeling requirement or any additional labeling or other warning statement requirements may have on the industry generally or on Beam.

The Whyte & Mackay Group PLC ("Whyte & Mackay"), a subsidiary of Gallaher, has its origins as a distiller of Scotch whisky in 1844. During the fourth quarter of 1993, Whyte & Mackay completed the acquisition of Invergordon Distillers Group PLC ("Invergordon"), another distiller, blender and marketer of Scotch whisky. Whyte & Mackay produces, bottles, markets and sells blended and single malt Scotch whiskies, markets and sells vodka and sells Scotch whisky in bulk. The principal brand names are Whyte & Mackay Special Reserve, The Claymore, The Dalmore, Cluny, Mackinlay, Isle of Jura and Bruichladdich Scotch whiskies, Glayva Scotch whisky liqueur and Vladivar vodka. Whyte & Mackay believes that in 1993, its shares of the U.K. Scotch whisky and vodka markets were approximately 14% and 11%, respectively, and in both 1995 and 1994, its shares were approximately 25% of the U.K. whisky market, reflecting the inclusion of Invergordon, and 10% of the U.K. vodka market. Whyte & Mackay's products are sold in the U.K. through its own sales force and outside the U.K. through independent distributors.

It is estimated that total case sales of Scotch whisky in the U.K. decreased by approximately 7% and 1% in 1995 and 1994, respectively, and increased by 5% in 1993. Worldwide Scotch whisky sales increased by approximately 2%, 4% and 7% in 1995, 1994 and 1993, respectively. Whyte & Mackay's total case sales of Scotch whisky in the U.K. decreased by approximately 3% in 1995 and increased by 38% and 20% in 1994 and 1993, respectively. Whyte & Mackay's total case sales of Scotch whisky worldwide (including shipments of bulk whisky exported for bottling) increased by approximately 4%, 68% and 24% in 1995, 1994 and 1993, respectively. During 1995, 81% of Whyte & Mackay's total case sales (including shipments of bulk whisky exported for bottling) were derived from Scotch whisky and 45% of Whyte & Mackay's total Scotch whisky case sales (including shipments of bulk whisky exported for bottling) were made in the U.K.

Blended Scotch whiskies are composed of a variety of grain and malt whiskies blended to provide a consistent product. The industry is therefore dependent on a high level of trading of whiskies between whisky companies. Whyte & Mackay owns seven malt whisky distilleries and one grain whisky distillery in the Highland region of Scotland, whose products are used in the production of Whyte & Mackay's blended whiskies and for trading purposes. Production is also bottled as malt whiskies and as a single grain whisky from individual distilleries.

In early 1995, Whyte & Mackay discontinued production at three of its seven malt whisky distilleries - Tamnavulin, Tullibardine and Bruichladdich - for a prolonged period. The single malt whiskies from these three distilleries will continue to be available for sale as there are sufficient inventories to meet several years' requirements. These distilleries will also continue to provide warehousing facilities. 8

Whyte & Mackay imports and markets in the U.K. a number of brands, including Jim Beam Bourbon, under agency arrangements. In the U.S., Beam is an importer and distributor of Whyte & Mackay's brands.

The United Kingdom Finance Acts, 1993 and 1994 did not provide for any increase in the excise duties on distilled spirits. The Finance Act, 1995 provided for an increase in the excise duties on distilled spirits equivalent to 26 pence on the price of a typical 700 milliliter bottle of Scotch whisky. The U.K. budget introduced on November 28, 1995 provided for a decrease in the excise duties on distilled spirits with the result that the price of a typical 700 milliliter bottle of Scotch whisky decreased by 27 pence. Although the effect of the recent duty changes cannot yet be determined, it is possible that any future tax increases would have an adverse effect on unit sales and increase existing competitive pricing pressures.

Hardware and Home Improvement Products

MasterBrand Industries, Inc. ("MasterBrand") is a holding company for subsidiaries in the Hardware and Home Improvement Products business. Subsidiaries include Moen Incorporated ("Moen"), Master Lock Company ("Master Lock"), Aristokraft, Inc. ("Aristokraft") and Waterloo Industries, Inc. ("Waterloo").

Moen manufactures and packages single- and two-handle faucets, sinks and plumbing accessories and parts and a wide variety of plumbing supply and repair products in the U.S. and East Asia. Faucets are sold under a variety of trade names, including Moen, Moentrol, Touch Control, One-Touch, Riser, Monticello, Concentrix, Chateau, Legend, Pulsation and Sani-Stream, and other products are sold under the Moen, Chicago Specialty, Dearborn Brass, Wrightway, Anchor Brass and Hoov-R-Line brand names. Composite kitchen sinks are sold under the Moenstone brand name. Some of the plumbing parts and repair products are purchased from other manufacturers. Products are sold principally in the U.S. and also in Canada, East Asia and Mexico. Sales are made through Moen's own sales force and independent manufacturers' representatives primarily to wholesalers, mass merchandisers and home centers and also to industrial distributors, repackagers and original equipment manufacturers.

Legislation has been introduced in the U.S. Congress that would, if enacted, endorse a voluntary industry standard that establishes maximum allowable leachate levels of certain substances, including lead from plumbing fittings and pumps, and which would require the EPA to evaluate the effectiveness of the standard within twelve months of enactment. Legislation that was introduced previously in the Congress and is expected to be introduced in the current session of the Congress would, if enacted, require a reduction in the lead content of plumbing fittings and pumps used for drinking water, if an appropriate maximum leachate standard for lead is not voluntarily adopted. In September 1994, the EPA endorsed a voluntary standard that establishes maximum leachate levels of those substances, including lead from new plumbing fittings and fixtures. It is not possible to predict whether federal, state or local legislation, regulations or action will be enacted, promulgated or taken or the nature of any such legislation, regulations or action, nor is it possible to predict the effect any such legislation, regulations or action may have on the industry generally or on Moen. 9

Master Lock manufactures key-controlled and combination padlocks, chain and cable locks, bicycle locks, built-in locker locks and other specialty security devices, and also manufactures door lock sets and door hardware. Sales of products designed for consumer use are made to wholesale distributors and to hardware and other retail outlets, while sales of lock systems are made to industrial and institutional users, original equipment manufacturers and retail outlets. Most sales are brokered through independent manufacturers' representatives, primarily in the U.S. and Canada.

Aristokraft manufactures kitchen cabinets and bathroom vanities. Stock and semi-custom cabinets are sold under the brand names of Aristokraft and Decora, respectively. Sales under the Aristokraft brand name are made in the U.S. primarily through stocking distributors for resale to kitchen and bath specialty dealers, lumber and building material dealers, remodelers and builders. Decora products are sold primarily to kitchen and bath specialty dealers and regional home centers.

Waterloo is the world's leading manufacturer of tool storage products, consisting primarily of high quality steel tool boxes, tool chests, workbenches and related products manufactured for private label sale by one of the largest national retailers in the U.S. Similar products are sold under the Waterloo and All American brand names to specialty industrial and automotive dealers, mass merchandisers, home centers and hardware stores. Waterloo also manufactures hospital carts and storage units and sells such products to institutional users.

Office Products

ACCO World Corporation ("ACCO") and its subsidiaries are engaged worldwide in designing, developing, manufacturing and marketing a wide variety of traditional and computer-related office products and supplies, time management products, presentation aids, workstation furniture and accessories. Products are manufactured by subsidiaries, joint ventures and licensees of ACCO, or manufactured to such subsidiaries' specification, throughout the world, principally in the U.S., Canada, Western Europe and Australia.

ACCO USA, Inc., a subsidiary of ACCO, manufactures binders, fasteners, paper clips, punches, staples, stapling equipment and storage products, as well as computer binders, supplies and accessories, in the U.S. ACCO Canada Inc., a subsidiary of ACCO, manufactures and distributes a similar range of office products in Canada. Principal brands include ACCO products, Swingline staples and stapling equipment, Wilson Jones binders and columnar pads and Perma Products corrugated board storage products. Products are sold throughout the U.S. and Canada by their respective sales forces to office products wholesalers, retailers, dealers and mass merchandisers.

Subsidiaries of ACCO Europe PLC, a subsidiary of ACCO, manufacture and distribute a wide range of office supplies and machines and storage and retrieval filing systems. Their products are sold primarily in the U.K., Ireland, Western Europe and Australia through their own sales forces and distributors.

Day-Timers, Inc., a subsidiary of ACCO, manufactures personal organizers and planners in the U.S. and is estimated by management to be 10

the leading direct marketer of time management aids in North America. Products are sold in the U.S. by Day-Timers, and in Canada, Australia and Europe by subsidiaries, through direct mail advertising and catalogs to consumers and businesses. In addition, products are sold through ACCO USA, Inc. to retailers and mass merchandisers. A subsidiary also conducts time management seminars for personnel of corporations, as well as other entities throughout the U.S., Canada, Australia and Europe. Another subsidiary markets, principally in the U.S., art and craft supplies primarily to schools.

Kensington Microware Limited, a subsidiary of ACCO, designs, develops and markets a range of computer accessories and supplies. In 1995, Silicon Sports and STATX lines of computer accessories and cleaning products were acquired.

Golf and Leisure Products

Acushnet Company ("Acushnet") is comprised of the Titleist and Foot-Joy Worldwide Division, the Acushnet Golf Division and Cobra Golf Incorporated ("Cobra"). The Titleist and Foot-Joy Worldwide Division is a leading manufacturer and distributor of golf balls, golf shoes, golf clubs, and golf gloves. Other products include bags, carts, dress and athletic shoes as well as socks and accessories. Acushnet's leading brands are Titleist and Pinnacle golf balls, DCI and Bulls Eye golf clubs, Classics and DryJoys golf shoes and Sta-Sof and Weather-Sof golf gloves. Acushnet products are sold primarily to golf pro shops throughout the U.S. by the Titleist and Foot-Joy Worldwide sales force and to sporting goods stores and mass merchants through the Acushnet Golf Division. Sales are made in the U.K., Canada, Germany, Austria, Denmark, France, Sweden and The Netherlands through subsidiaries, in Japan through a majority-owned joint venture, in Ireland through a branch of a U.K. subsidiary and outside these areas through distributors or agents.

Cobra is a leading manufacturer and distributor of high quality golf clubs, with emphasis on oversized graphite shafted golf clubs marketed and sold under the King Cobra brand name. Other Cobra products include specialty golf clubs, such as Baffler utility woods and a line of King Cobra Mallet and Tricep putters, golf bags, golf accessories and a line of imported men's and women's golf and resort clothing. Cobra's products are sold to on-course golf pro shops and selected off-course specialty stores throughout the U.S. by independent sales representatives. Cobra markets its products internationally through subsidiaries in the U.K., continental Europe and Japan; through exclusive licensees and distributors in Australia and Canada and outside these areas through distributors.

Other Matters

Employees

Registrant and its subsidiaries had, as of December 31, 1995, the following number of employees, a substantial number of whom were covered by collective bargaining agreements with various unions: 11

Registrant and subsidiaries excluding Gallaher: ------Distilled Spirits 1,540 Hardware and Home Improvement Products 8,610 Office Products 8,230 Golf and Leisure Products 3,540 Corporate Headquarters 200 ------22,120 ------Gallaher Limited: ------Tobacco Products 3,920 Distilled Spirits 1,010 ------4,930 ------Total 27,050 ======

In addition, Cobra, acquired in January 1996, had about 860 employees at December 31, 1995, none of whom were covered by collective bargaining agreements.

Environmental matters

Registrant and its subsidiaries are subject to federal, state and local laws and regulations concerning the discharge of materials into the environment and the handling, disposal and clean-up of waste materials and otherwise relating to the protection of the environment. While it is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that Registrant's subsidiaries may undertake in the future, in the opinion of management of Registrant, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material adverse effect upon the capital expenditures, financial condition, results of operations or competitive position of Registrant and its subsidiaries.

(d) Financial information about foreign and domestic operations and export sales.

Registrant's subsidiaries operate in the United States, Europe (principally the U.K.) and other areas (principally Canada and Australia). See the table captioned "Information on Business Segments" contained in the 1995 Annual Report to Stockholders of Registrant, which table is incorporated herein by reference. As is disclosed in such table, Registrant has sizable investments in, and derives substantial income from, Europe (principally the U.K.), and, therefore, changes in the value of foreign currencies (principally sterling) can have a material effect on Registrant's financial statements when translated into U.S. dollars. 12

Item 2. Properties.

Registrant leases its principal executive offices in Old Greenwich, Connecticut. The following is a description of properties of Registrant's subsidiaries.

International Tobacco

The principal properties of Gallaher and its subsidiaries include Gallaher's head office in Weybridge, Surrey, England, a distribution facility in Crewe, Cheshire, England, office and warehouse facilities in Northolt, Middlesex, England, a factory in Ballymena, Northern Ireland for the manufacture of cigarettes and smoking tobaccos, a factory in Hyde, England for the manufacture of cigarettes and a factory in Cardiff, Wales for the manufacture of cigars. Each of these properties is owned by Gallaher or one of its subsidiaries. The principal properties of Gallaher and its subsidiaries also include a factory in Dublin, Republic of Ireland, owned and operated by Gallaher (Dublin) Limited, for the manufacture of cigarettes and smoking tobaccos. Gallaher also has a research laboratory in the Northern Ireland factory complex. For a description of properties of a subsidiary of Gallaher, see "Distilled Spirits".

Distilled Spirits

Beam leases its executive offices in Deerfield, Illinois. Other subsidiaries of JBB Worldwide lease offices in Burnaby, British Columbia and Gordon, New South Wales. Subsidiaries of JBB Worldwide own and operate four bottling plants, three distilleries and approximately 90 warehouses for the aging of bulk whiskies, and lease and operate 16 regional sales offices and several warehouses for the storage of promotional material, all located in the U.S., Australia and Canada. Beam also owns and operates approximately 70 U.S. bonded warehouses. Whyte & Mackay leases its head office in Glasgow, Scotland and owns and operates seven malt distilleries, one grain distillery and three blending and bottling plants in Scotland.

Hardware and Home Improvement Products

MasterBrand leases its executive offices in Deerfield, Illinois and a subsidiary, Moen, owns its executive offices in North Olmsted, Ohio. Principal properties of subsidiaries of MasterBrand include nineteen plants, three distribution centers and one warehouse owned and operated in the U.S. A 50%-owned joint venture in Taiwan owns and operates one plant and a 60%-owned joint venture in China owns and operates one plant. In addition, subsidiaries of MasterBrand lease and operate three plants and four warehouses in the U.S. and ten distribution centers, of which seven are in the U.S. and one is in each of Canada, Japan and Mexico.

Office Products

ACCO leases its executive offices in Deerfield, Illinois. Principal properties of subsidiaries of ACCO include seven plants owned and operated in the U.S., seven in the U.K., and one in each of France, Germany, Italy, Australia, The Netherlands, the Republic of Ireland and Mexico. In addition, subsidiaries of ACCO lease and operate thirteen facilities in the U.S., three in the U.K., four in Canada, two in Australia and one in each of France, Germany, Italy and Mexico. Of these leased facilities, (i) three in the U.S., two in the U.K., two in Canada and one 13

in each of Australia and Germany, are combined manufacturing and distribution facilities, (ii) eight in the U.S., two in Canada and one in each of the U.K., Italy, Australia, France and Mexico are distribution facilities and (iii) two in the U.S. are manufacturing facilities.

Golf and Leisure Products

Acushnet owns a combined executive office and research and development facility and a distribution center in Fairhaven, Massachusetts. In addition, it owns and operates five plants and a test facility, all located in the U.S. Acushnet also leases two warehouses, two manufacturing facilities, a test facility, a retail store, and two research and development facilities, all located in the U.S. Acushnet also leases an office in Taiwan. A subsidiary of Acushnet leases two combined sales office and warehouse facilities in Canada. Other Acushnet subsidiaries own and operate a plant and a warehouse in England, lease a sales office and warehouse in each of Germany, France and Sweden and lease a sales office in each of Austria, Denmark, The Netherlands and the Republic of Ireland. Acushnet's majority-owned joint venture in Japan leases two sales offices and a warehouse facility there. Acushnet's majority-owned joint ventures in Thailand lease and operate two plants there. Acushnet's minority-owned joint venture in China leases and operates one plant. Cobra leases a combined executive office and distribution center, a combined administrative and assembly facility, a combined warehouse and distribution center and a graphite shaft production facility all located in Carlsbad, California. Principal properties of subsidiaries of Cobra are leased and include one combined sales and distribution and assembly facility in France, one combined sales and distribution office in the U.K. and one combined sales and administrative facility in Japan.

Registrant and its subsidiaries are of the opinion that their properties are suitable to their respective businesses and have productive capacities adequate to the needs of such businesses.

Item 3. Legal Proceedings.

(a) (i) Registrant's former subsidiary, The American Tobacco Company ("ATCO"), and other leading tobacco manufacturers have been sued by parties seeking damages for cancer and other ailments claimed to have resulted from tobacco use and by certain asbestos manufacturers seeking unspecified amounts in indemnity or contribution in third-party actions against all or most of the major domestic tobacco manufacturers. Although there was a jury award which was overturned on appeal against a tobacco manufacturer in one case, there has been no actual recovery of damages to date in any such action against the tobacco manufacturers. The smallest of the five major domestic cigarette manufacturers has announced a settlement of certain tobacco related claims. The other four major domestic cigarette manufacturers have continued to vigorously defend these lawsuits. Registrant has been named as a defendant in some of the cases brought against ATCO and is currently named as a defendant in four of these cases, one of which is brought by an individual alleging health ailments caused by the inhalation of environmental tobacco smoke (Dunn, described below); two of which are brought by the attorneys general of West Virginia (McGraw, described below) and Florida (State of Florida, described below), respectively, seeking unspecified compensatory and punitive damages and various forms of equitable relief, including restitution of the expenditures by the state for the cost of medical care provided by the 14

state to its citizens for numerous diseases allegedly caused by cigarettes and other tobacco products; and one of which is an alleged class action on behalf of all members of the class allegedly addicted to cigarettes through the manipulation of nicotine levels (Castano, described below).

The following sets forth the principal parties to the above-described four pending proceedings in which Registrant is currently named as a defendant, the court in which such proceedings are pending and the date such proceedings were instituted against Registrant: Castano v. The American Tobacco Company, Inc., et al., United States District Court for the Eastern District of Louisiana, March 29, 1994; Dunn v. RJR Nabisco Holdings Corporation, et al., Superior Court State of Indiana, County of Delaware, August 23, 1993; McGraw v. The American Tobacco Company, et al., Circuit Court of Kanawha County, State of West Virginia, November 1, 1994; and State of Florida v. The American Tobacco Company, et al., Circuit Court of Palm Beach County, State of Florida, March 5, 1995.

Reference is made to the description of Arnold v. American Brands, Inc., et al., United States District Court for the District of Rhode Island, in paragraph (a) of Part II, Item 1, "Legal Proceedings", of Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1995. On September 14, 1995, Registrant was dismissed by stipulation as a defendant in such case.

Registrant's counsel have advised that, in their opinion, on the basis of their investigations generally with respect to suits and claims of this character, Registrant has meritorious defenses to the above-mentioned actions and threatened actions. The actions will be vigorously contested.

It has been reported that certain groups of attorneys, and attorneys general of various states, are interested in promoting product liability and other suits against the tobacco manufacturers. It has also been reported that other claims against the tobacco manufacturers may be made seeking damages for alleged injuries claimed to have resulted from exposure to tobacco smoking of others. It has also been reported that civil and criminal investigations of tobacco manufacturers are pending before certain prosecutorial and other authorities.

On December 22, 1994, Registrant sold ATCO to Brown & Williamson Tobacco Corporation, a wholly-owned subsidiary of B.A.T Industries p.l.c. Brown & Williamson Tobacco Corporation and ATCO have agreed to indemnify Registrant against claims arising from smoking and health and fire safe cigarette matters relating to the tobacco business of ATCO.

(ii)(A) Dean v. Gallaher Limited is an action commenced in the High Court of Justice in Northern Ireland in which plaintiff seeks unspecified damages including lost income for a peripheral vascular disease called "Buerger's disease" allegedly related to cigarette smoking. In March 1988, plaintiff obtained Legal Aid to proceed up to the point of trial. He served his Writ of Summons in August 1988 and his Statement of Claim in August 1989. Plaintiff filed an Amended Statement of Claim on October 6, 1993. Gallaher subsequently filed a motion to strike from the Amended Statement of Claim a predecessor to Gallaher, Hergall (1981) Limited (In Liquidation) ("Hergall"), named as a second defendant in the action. The motion was granted on March 9, 1994. In a separate action, plaintiff served a Writ of Summons on Hergall on December 1, 1993 and a Statement of Claim against Hergall on February 22, 1994. Thereafter, 15

plaintiff's lawyers also purported to re-amend the Statement of Claim against Gallaher. On March 11, 1994, Gallaher and Hergall filed applications to strike certain parts of plaintiff's Statements of Claim in both actions as irrelevant. These applications were denied by the High Court on May 31, 1994, with leave to appeal. Gallaher's and Hergall's appeal of this decision was heard in December, 1994, and refused by a unanimous panel of the Court of Appeal. Thereafter, Gallaher and Hergall filed a petition for leave to appeal with the House of Lords on March 17, 1995, which was unanimously refused by order of the Appeal Committee on May 18, 1995. On December 8, 1995, Gallaher and Hergall served their defenses in these actions. At a hearing on February 9, 1996, plaintiff consented to Gallaher's and Hergall's summons for a trial limited to the preliminary issue of whether Mr. Dean has Buerger's disease or any other form of peripheral vascular disease. At a hearing on March 8, 1996, the preliminary issue was scheduled for trial on October 14, 1996.

(B) On January 31, 1995, the English Legal Aid Board granted limited legal aid certificates to approximately 200 claimants seeking to bring proceedings against tobacco manufacturers for the harm they have allegedly suffered through smoking cigarettes. This is the first time that English legal aid has been granted to support a significant number of claims of this type. These applications were first filed with the Newcastle Legal Aid Board in England in the summer of 1992, and were originally denied on September 2, 1992. Thereafter, applicants successfully petitioned for judicial review of that decision, and on June 24, 1994, the High Court ruled that the Legal Aid Board had applied inconsistent procedural standards in refusing applicants' legal aid, and ordered that the applications be remanded for reconsideration. The Legal Aid Board began considering the remanded applications on December 22, 1994, and announced its decision on January 31, 1995. On October 31, 1995, a group of tobacco manufacturers submitted further supplementary representations to the Legal Aid Board in opposition to claimants' request for full legal aid certification.

(C) In Brennan v. Gallaher Limited, pending in the High Court of Justice in Northern Ireland, plaintiff, a former employee of Gallaher, seeks unspecified damages for Buerger's disease allegedly caused by "the provision of cigarettes for the plaintiff" in connection with the "employment of the plaintiff" by Gallaher. Plaintiff served her Writ of Summons in October 1990, but no Statement of Claim has been received to date. On March 22, 1994, plaintiff served a summons seeking leave to substitute Hergall as the named defendant in the action. This motion was granted on March 24, 1995. On November 28, 1995, plaintiff filed an Amended Writ of Summons naming Hergall as the proper defendant.

(D) Havelin v. Imperial Tobacco Limited, et al., is an action commenced in the Court of Session in Scotland in which plaintiff seeks the expenses of the action and 100,000 pounds sterling (and 8% per annum interest) for Buerger's disease allegedly caused by cigarette smoking. The pursuer lodged his Summons and Condescendence on May 26, 1995. Prior to filing this action, the pursuer applied to the Scottish Legal Aid Board for legal aid to fund his claims. Gallaher submitted representations in opposition, and the pursuer's application was denied on or about June 14, 1995. Thereafter, the pursuer filed an application for review of this decision, which was refused on November 13, 1995. 16

(E) Burnett v. Gallaher Limited, pending in the Court of Session in Scotland, was commenced by service of a Summons and Condescendence on or about July 14, 1995. The pursuer seeks to recover the expenses of the action and 100,000 pounds sterling (and 8% per annum interest) for heart disease allegedly caused by cigarette smoking. The pursuer applied to the Scottish Legal Aid Board for civil legal aid to pursue this action on or about July 17, 1995. Gallaher received notification of this application on July 19, 1995, and submitted representations in opposition on July 31, 1995. This action has been stayed, on the pursuer's motion, pending review of the pursuer's legal aid application by the Scottish Legal Aid Board.

(F) On October 9, 1995, Gallaher received a demand letter from solicitors in Strabane, Northern Ireland, acting for Mary Shiels (as the personal representative of Brian Shiels, deceased) requesting "adequate compensation" based on allegations that Mr. Shiels developed "Buerger's disease and/or premature onset arteriosclerosis" and died on October 28, 1992, from smoking cigarettes manufactured by Gallaher. Mrs. Shiels obtained a limited award of legal aid for purposes of issuing a Writ of Summons, and has made an application for full legal aid to prosecute this action. A Writ of Summons was issued on October 24, 1995, seeking damages "by reason of the negligence of the Defendants ... in and about the manufacture and supply to the deceased of cigarettes." Plaintiff must serve the Writ of Summons within twelve months. On November 17, 1995, Gallaher submitted representations in opposition to plaintiff's application for full legal aid, which is now pending consideration.

(G) In February 1996, Gallaher received a letter from a firm of solicitors in Scotland acting on behalf of Joseph Waddell. The letter states that Mr. Waddell has instructed his solicitors to file a lawsuit against Gallaher in connection with injuries that he claims to have suffered as a result of smoking cigarettes manufactured by Gallaher. To date, Gallaher is not aware of any suit against it by Mr. Waddell.

(H) Registrant's counsel have advised that, in their opinion, on the basis of their investigations generally with respect to suits and claims of this character, Gallaher has meritorious defenses to these actions and claims, and they will be vigorously contested.

(b) It is not possible to predict the outcome of the pending litigation, but management believes that there are meritorious defenses to the pending actions and that the pending actions will not have a material adverse effect upon the results of operations, cash flow or financial condition of the Registrant. See the note captioned "Pending Litigation" in the Notes to Consolidated Financial Statements contained in the 1995 Annual Report to Stockholders of Registrant, which note is incorporated herein by reference.

Item 4. Submission of Matters to a Vote of Security Holders.

None. 17

Item 4a. Executive Officers of the Registrant.

The name, present positions and offices with Registrant, principal occupations during the past five years and age of each of Registrant's present executive officers are as follows:

Present positions and offices with Registrant and principal occupations Name during the past five years Age ------Thomas C. Hays Chairman of the Board and Chief Executive 60 Officer of Registrant since January 1995; President and Chief Operating Officer of Registrant prior thereto

John T. Ludes President and Chief Operating Officer of 59 Registrant since January 1995; Group Vice President of Registrant, President and Chief Executive Officer of Acushnet prior thereto

Dudley L. Bauerlein, Jr. Senior Vice President and Chief Financial 49 Officer of Registrant since January 1995; Vice President and Treasurer of Registrant prior thereto

Gilbert L. Klemann, II Senior Vice President and General Counsel 45 of Registrant since 1991; Vice President and Associate General Counsel of Registrant during 1991

Charles H. McGill Senior Vice President -- Corporate 54 Development of Registrant since January 1996; Vice President -- Corporate Development of Registrant during 1995; Corporate Vice President -- Acquisitions of The Dun & Bradstreet Corporation prior thereto

Steven C. Mendenhall Senior Vice President and Chief 47 Administrative Officer of Registrant since January 1995; Vice President and Chief Administrative Officer of Registrant from 1993 through 1994; Vice President -- Human Resources of Registrant prior thereto

Robert L. Plancher Senior Vice President and Chief Accounting 64 Officer of Registrant

Robert J. Rukeyser Senior Vice President -- Corporate Affairs 53 of Registrant

Craig P. Omtvedt Vice President -- Deputy Controller and 46 Chief Internal Auditor of Registrant since January 1996; Deputy Controller and Chief Internal Auditor of Registrant during 1995; 18

Deputy Controller of Registrant from 1992 through 1994; Director of Audit of Registrant prior thereto

Mr. Peter M. Wilson, who has been a member of the Executive Committee of the Board of Directors of Registrant and Chairman and Chief Executive of Gallaher since February 1, 1994, is deemed to be an executive officer of Registrant for the purposes of this Item 4a. Mr. Wilson was Deputy Chairman of Gallaher and Chairman and Chief Executive of Gallaher Tobacco Limited prior thereto. His age is 54.

In the case of each of the above-listed executive officers, the occupation or occupations given were his principal occupation and employment during the period or periods indicated. None of such executive officers is related to any other such executive officer. None was selected pursuant to any arrangement or understanding between him and any other person. All executive officers are elected annually.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

See the information in the tables captioned "Quarterly Common Stock Dividend Payments" and "Quarterly Composite Common Stock Prices" and the discussion relating thereto contained in the 1995 Annual Report to Stockholders of Registrant, which information and discussion are incorporated herein by reference. On March 18, 1996, there were 56,084 record holders of Registrant's Common Stock, par value $3.125 per share.

Item 6. Selected Financial Data.

See the information for 1991 through 1995 in the table captioned "Eleven-Year Consolidated Selected Financial Data" contained in the 1995 Annual Report to Stockholders of Registrant, which information is incorporated herein by reference.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

See the discussion and analysis under the captions "Results of Operations" and "Financial Condition" contained in the 1995 Annual Report to Stockholders of Registrant, which discussion and analysis are incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data.

See the information in the Consolidated Balance Sheet, Consolidated Statement of Income, Consolidated Statement of Cash Flows, Consolidated Statement of Common Stockholders' Equity, Notes to Consolidated Financial Statements and Report of Independent Accountants contained in the 1995 Annual Report to Stockholders of Registrant, which information is incorporated herein by reference. For unaudited selected quarterly financial data, see the table captioned "Quarterly Financial Data" contained in the 1995 Annual Report to Stockholders of Registrant, which table is incorporated herein by reference. 19

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

PART III

Item 10. Directors and Executive Officers of Registrant.

See the information under the caption "Election of Directors" contained in the Proxy Statement for the Annual Meeting of Stockholders of Registrant to be held on May 1, 1996, which information is incorporated herein by reference. See also the information with respect to executive officers of Registrant under Item 4a of Part I hereof, which information is incorporated herein by reference.

Item 11. Executive Compensation.

See the information up to but not including the subcaption "Report of the Compensation and Stock Option Committee on Executive Compensation" under the caption "Executive Compensation" contained in the Proxy Statement for the Annual Meeting of Stockholders of Registrant to be held on May 1, 1996, which information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

See the information in the table and notes related thereto and in the second to last paragraph under the caption "Election of Directors" and the information under the caption "Certain Information Regarding Security Holdings" contained in the Proxy Statement for the Annual Meeting of Stockholders of Registrant to be held on May 1, 1996, which information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions.

See the information in the last paragraph under the caption "Compensation Committee Interlocks and Insider Participation" contained in the Proxy Statement for the Annual Meeting of Stockholders of Registrant to be held on May 1, 1996, which information is incorporated herein by reference.

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a) Financial Statements, Financial Statement Schedules and Exhibits. 20

(1) Financial Statements (all financial statements listed below are of Registrant and its consolidated subsidiaries)

Consolidated Balance Sheet as of December 31, 1995 and 1994 contained in the 1995 Annual Report to Stockholders of Registrant is incorporated herein by reference.

Consolidated Statement of Income for the years ended December 31, 1995, 1994 and 1993 contained in the 1995 Annual Report to Stockholders of Registrant is incorporated herein by reference.

Consolidated Statement of Cash Flows for the years ended December 31, 1995, 1994 and 1993 contained in the 1995 Annual Report to Stockholders of Registrant is incorporated herein by reference.

Consolidated Statement of Common Stockholders' Equity for the years ended December 31, 1995, 1994 and 1993 contained in the 1995 Annual Report to Stockholders of Registrant is incorporated herein by reference.

Notes to Consolidated Financial Statements contained in the 1995 Annual Report to Stockholders of Registrant are incorporated herein by reference.

Report of Independent Accountants contained in the 1995 Annual Report to Stockholders of Registrant is incorporated herein by reference.

(2) Financial Statement Schedules

See Index to Financial Statement Schedule of Registrant and subsidiaries at page F-1, which Index is incorporated herein by reference.

(3) Exhibits

3(i). Certificate of Incorporation of Registrant as in effect on the date hereof is incorporated herein by reference to Exhibit 3a2 to the Quarterly Report on Form 10-Q of Registrant dated May 14, 1990.

3(ii)(a).Amendment to By-laws of Registrant adopted effective February 27, 1996.

3(ii)(b).By-laws of Registrant as in effect on the date hereof.

10a1. Article XII ("Incentive Compensation") of the By-laws of Registrant is incorporated herein by reference to Exhibit 3(ii)(b) hereof.*

10b1. 1986 Stock Option Plan of American Brands, Inc. and amendments thereto is incorporated herein by reference to Exhibit 10b2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1992.* 21

10b2. Amendment to 1986 Stock Option Plan of American Brands, Inc. constituting Exhibit 10b1 hereto is incorporated herein by reference to Exhibit 10b to the Quarterly Report on Form 10-Q of Registrant dated November 11, 1993.*

10b3. Amendment to 1986 Stock Option Plan of American Brands, Inc. constituting Exhibits 10b1 and 10b2 hereto is incorporated herein by reference to Exhibit 10b to the Quarterly Report on Form 10-Q of Registrant dated August 11, 1994.*

10b4. 1990 Long-Term Incentive Plan of American Brands, Inc. (As Amended and Restated as of January 1, 1994) is incorporated herein by reference to Exhibit 10a to the Quarterly Report on Form 10-Q of Registrant dated August 11, 1994.*

10c1. Amended Supplemental Plan of American Brands, Inc.*

10c2. Trust Agreement, made as of the 2nd day of January, 1991, among Registrant, The Chase Manhattan Bank (National Association) ("Chase"), et al. establishing a trust in favor of Gilbert L. Klemann, II for purposes of paying amounts under the Amended Supplemental Plan constituting Exhibit 10c1 hereto.*

10c3. Amendment made as of the 1st day of November, 1993 to Trust Agreement constituting Exhibit 10c2 hereto.*

10c4. Amendment made as of the 1st day of January, 1995, to the Trust Agreement constituting Exhibits 10c2 and 10c3 hereto.*

10c5. Schedule identifying substantially identical agreements to the Trust Agreement and the Amendments thereto constituting Exhibits 10c2, 10c3 and 10c4 hereto, respectively, in favor of Thomas C. Hays, John T. Ludes, Robert L. Plancher, Robert J. Rukeyser, Steven C. Mendenhall, Dudley L. Bauerlein, Jr. and Charles H. McGill.*

10c6. Trust Agreement, made as of the 1st day of November, 1993, among Gilbert L. Klemann, II, Registrant and Chase establishing a grantor trust in favor of Gilbert L. Klemann, II for purposes of paying amounts under the Amended Supplemental Plan constituting Exhibit 10c1 hereto.*

10c7. Schedule identifying substantially identical agreements to the Trust Agreement constituting Exhibit 10c6 hereto in favor of Thomas C. Hays, John T. Ludes, Robert L. Plancher, Robert J. Rukeyser, Steven C. Mendenhall and Dudley L. Bauerlein, Jr.*

10d1. Resolutions of the Board of Directors of Registrant adopted on October 28, 1986 and July 26, 1988 adopting and amending a retirement plan for directors of Registrant who are not officers or employees of Registrant or a subsidiary thereof are incorporated herein by reference to Exhibit 10e1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1991.* 22

10d2. Resolutions of the Board of Directors of Registrant adopted on July 26, 1994 amending the resolutions constituting Exhibit 10d1 hereto is incorporated herein by reference to Exhibit 10e2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10e1. Retirement Agreement, made as of January 1, 1995, between Registrant and Thomas C. Hays is incorporated herein by reference to Exhibit 10f1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10f1. Gallaher Limited Executive Incentive Plan adopted on October 20, 1994 is incorporated herein by reference to Exhibit 10g1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10f2. Trust Deed dated March 24, 1983 between Gallaher Limited ("Gallaher") and Gallaher Pensions Limited, and amendments thereto, providing supplemental retirement benefits to certain executives of Gallaher are incorporated herein by reference to Exhibits 10g2 and 10g3 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1989.*

10f3. Trust Deed dated June 3, 1992 further amending Exhibit 10f2 hereto is incorporated herein by reference to Exhibit 10g3 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1992.*

10f4. Trust Deed dated January 24, 1994 further amending Exhibits 10f2 and 10f3 hereto is incorporated herein by reference to Exhibit 10g4 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1993.*

10f5. Trust Deed dated April 8, 1994 further amending Exhibits 10f2, 10f3 and 10f4 hereto.*

10g1. Jim Beam Brands Co. Senior Executive and Key Manager Incentive Plan is incorporated herein by reference to Exhibit 10m4 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1991.*

10g2. Jim Beam Brands Co. Amended Excess Benefit Plan is incorporated herein by reference to Exhibit 10j2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10g3. Trust Agreement, made as of December 24, 1991, among Jim Beam Brands Co. ("Beam"), Chase and Hewitt Associates, establishing a trust in favor of Barry M. Berish for purposes of paying amounts under the Amended Excess Benefit Plan constituting Exhibit 10g2 hereto is incorporated herein by reference to Exhibit 10m3 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1991.*

10g4. Amendment made as of the 17th day of November, 1993 to Trust Agreement constituting Exhibit 10g3 hereto is incorporated herein by reference to Exhibit 10k4 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1993.* 23

10g5. Trust Agreement, made as of the 15th day of December, 1993, among Barry M. Berish, Beam and Chase establishing a grantor trust in favor of Barry M. Berish for purposes of paying amounts under the Amended Excess Benefit Plan constituting Exhibit 10g2 hereto is incorporated herein by reference to Exhibit 10k5 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1993.*

10h1. Resolution of the Board of Directors of Registrant adopted on December 11, 1985 with respect to retirement and health benefits provided to William J. Alley is incorporated herein by reference to Exhibit 10e2 to the Registration Statement on Form 8-B of Registrant dated January 27, 1986.*

10i1. Resolution of the Board of Directors of Registrant adopted on November 27, 1990 with respect to retirement and health benefits provided to Gilbert L. Klemann, II is incorporated herein by reference to Exhibit 10p1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1991.*

10j1. Service Agreement dated November 9, 1994 between Gallaher and Peter M. Wilson is incorporated herein by reference to Exhibit 10n1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10j2. Letter dated September 20, 1991 from Gallaher in respect of retirement benefits provided to Peter M. Wilson is incorporated herein by reference to Exhibit 10o2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1993.*

10j3. Letter dated March 15, 1994 amending Exhibit 10j2 hereto is incorporated herein by reference to Exhibit 10o3 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1993.*

10k1. Letter dated January 23, 1996 from Registrant with respect to deferred payment of fees to Eugene R. Anderson.*

10k2. Letter dated August 11, 1995 from Registrant with respect to deferred payment of fees to Gordon R. Lohman is incorporated herein by reference to Exhibit 10b to the Quarterly Report on Form 10-Q of Registrant dated November 9, 1995.*

10l1. Agreement dated January 2, 1991 between Registrant and Gilbert L. Klemann, II is incorporated herein by reference to Exhibit 10s1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1992.*

10l2. Amendment dated November 28, 1994 to the Agreement constituting Exhibit 10l1 hereto is incorporated herein by reference to Exhibit 10r2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.* 24

10l3. Schedule identifying substantially identical agreements to the Agreement and the Amendment thereto constituting Exhibits 10l1 and 10l2 hereto, respectively, entered into by Registrant with Thomas C. Hays, John T. Ludes, Robert L. Plancher, Robert J. Rukeyser, Steven C. Mendenhall, Dudley L. Bauerlein, Jr., and Charles H. McGill.*

10m1. Trust Agreement, made as of the 2nd day of January, 1991, among Registrant, Chase, et al. establishing a trust in favor of Gilbert L. Klemann, II for purposes of paying amounts under the Agreement constituting Exhibits 10l1 and 10l2 hereto is incorporated herein by reference to Exhibit 10s1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10m2. Amendment made as of the 1st day of November, 1993 to Trust Agreement constituting Exhibit 10m1 hereto is incorporated herein by reference to Exhibit 10s2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10m3. Schedule identifying substantially identical agreements to the Trust Agreement and Amendment thereto constituting Exhibits 10m1 and 10m2 hereto, respectively, in favor of Thomas C. Hays, John T. Ludes, Robert L. Plancher, Robert J. Rukeyser, Steven C. Mendenhall and Dudley L. Bauerlein, Jr.*

10n1. Agreement dated as of March 1, 1988 and amendments thereto between Registrant and Thomas C. Hays are incorporated herein by reference to Exhibit 10v1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1992.*

10n2. Amendment effective as of January 1, 1995 to the Agreement constituting Exhibit 10n1 hereto is incorporated herein by reference to Exhibit 10t2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10n3. Amendment effective as of January 1, 1995 to the Agreement and Amendment thereto constituting Exhibits 10n1 and 10n2 hereto, respectively, is incorporated herein by reference to Exhibit 10t3 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10o1. Agreement dated as of January 2, 1991 between Registrant and Gilbert L. Klemann, II and amendment thereto is incorporated herein by reference to Exhibit 10y1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1991.*

10o2. Agreement dated as of October 28, 1991 amending the Agreement constituting Exhibit 10o1 hereto is incorporated herein by reference to Exhibit 10w2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1992.*

10o3. Amendment effective as of January 1, 1995 to the Agreement and Amendment thereto constituting Exhibits 10o1 and 10o2 hereto, respectively, is incorporated herein by reference to Exhibit 10u3 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.* 25

10o4. Schedule identifying substantially identical agreements to the Agreement and Amendments thereto constituting Exhibits 10o1, 10o2 and 10o3 hereto entered into by Registrant with John T. Ludes, Robert L. Plancher, Robert J. Rukeyser, Steven C. Mendenhall and Dudley L. Bauerlein, Jr.*

10p1. Agreement dated February 24, 1995 between Registrant and Charles H. McGill is incorporated herein by reference to Exhibit 10w1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.* l0q1. Agreement dated as of February 1, 1990 between Beam and Barry M. Berish is incorporated herein by reference to Exhibit 10pp1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1990.* l0r1. Rights Agreement dated as of December 13, 1987 between Registrant and First Chicago Trust Company of New York, as Rights Agent, and amendments thereto is incorporated herein by reference to Exhibit 10aa1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1992.*

11. Statement setting forth net income for computation of earnings per Common share, primary and fully diluted, and statement setting forth computation of weighted average number of Common shares outstanding on a fully diluted basis.

12. Statement re computation of ratio of earnings to fixed charges.

13. 1995 Annual Report to Stockholders of Registrant.

21. Subsidiaries of Registrant.

23(i)a. Consent of Independent Accountants, Coopers & Lybrand L.L.P.

23(i)b. Consent of Counsel, Chadbourne & Parke LLP.

24. Powers of Attorney relating to execution of this Annual Report on Form 10-K.

27. Financial Data Schedule (Article 5).

* Indicates that exhibit is a management contract or compensatory plan or arrangement.

In lieu of filing certain instruments with respect to long-term debt of the kind described in Item 601(b)(4) of Regulation S-K, Registrant agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request.

(b) Reports on Form 8-K.

Registrant filed a Current Report on Form 8-K, dated October 23, 1995, in respect of Registrant's press release dated October 23, 1995 announcing Registrant's financial results for the three-month and nine-month periods ended September 30, 1995 (Items 5 and 7(c)). 26

Registrant filed a Current Report on Form 8-K, dated January 18, 1996, in respect of Registrant's press release dated January 17, 1996 announcing that Registrant will redeem its 7-5/8% Eurodollar Convertible Debentures Due 2001 and its 9-1/8% Debentures Due 2016 in March 1996 (Items 5 and 7(c)).

Registrant filed a Current Report on Form 8-K, dated January 22, 1996, in respect of Registrant's press release dated January 22, 1996 announcing Registrant's financial results for the three-month and twelve-month periods ended December 31, 1995 (Items 5 and 7(c)).

Registrant filed a Current Report on Form 8-K, dated January 29, 1996, announcing that Registrant's acquisition of Cobra Golf Incorporated was completed on January 29, 1996 (Items 5 and 7(c)). 27

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AMERICAN BRANDS, INC. (Registrant)

By Thomas C. Hays Thomas C. Hays Chairman of the Board and Date: March 29, 1996 Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of Registrant and in the capacities and on the dates indicated.

Thomas C. Hays Thomas C. Hays, Chairman of the Board and Chief Executive Officer (principal executive officer) and Director Date: March 29, 1996

John T. Ludes* John T. Ludes, President and Chief Operating Officer and Director Date: March 29, 1996

Dudley L. Bauerlein, Jr. Dudley L. Bauerlein, Jr., Senior Vice President and Chief Financial Officer (principal financial officer) Date: March 29, 1996

Robert L. Plancher Robert L. Plancher, Senior Vice President and Chief Accounting Officer (principal accounting officer) Date: March 29, 1996 28

William J. Alley* William J. Alley, Director Date: March 29, 1996

Eugene R. Anderson* Eugene R. Anderson, Director Date: March 29, 1996

Patricia O. Ewers* Patricia O. Ewers, Director Date: March 29, 1996

John W. Johnstone, Jr.* John W. Johnstone, Jr., Director Date: March 29, 1996

Wendell J. Kelley* Wendell J. Kelley, Director Date: March 29, 1996

Sidney Kirschner* Sidney Kirschner, Director Date: March 29, 1996

Gordon R. Lohman* Gordon R. Lohman, Director Date: March 29, 1996

Charles H. Pistor, Jr.* Charles H. Pistor, Jr., Director Date: March 29, 1996

Anne M. Tatlock* Anne M. Tatlock, Director Date: March 29, 1996

Peter M. Wilson* Peter M. Wilson, Director Date: March 29, 1996

*By A. Robert Colby A. Robert Colby, Attorney-in-Fact 29

INDEX TO FINANCIAL STATEMENT SCHEDULE

Pages ----- AMERICAN BRANDS, INC. AND SUBSIDIARIES

Report of Independent Accountants F-2

Schedule ------II Valuation and qualifying accounts For the years ended December 31, 1995, 1994 and 1993 F-3

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of American Brands, Inc.:

Our report on the consolidated financial statements of American Brands, Inc. and Subsidiaries has been incorporated by reference in this Form 10-K from the 1995 Annual Report to Stockholders of American Brands, Inc. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in the index on page F-1 of this Form 10-K.

In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.

COOPERS & LYBRAND L.L.P.

1301 Avenue of the Americas New York, New York February 1, 1996

F-2

AMERICAN BRANDS, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 1995, 1994 and 1993 (In millions) ------Col. A Col. B Col. C Col. D Col. E ------Additions ------Charged Balance Balance at to Costs at End Beginning and of Description of Period Expenses Deductions Period ------1995: Allowance for cash discounts $ 5.3 $42.8 $42.6 (1) $ 5.5 Allowance for returns 12.6 98.3 95.3 (1) 15.6 Allowance for doubtful accounts 34.1 7.2 15.2 (2) 26.1 ------$52.0 $148.3 $153.1 $47.2 ======1994: Allowance for cash discounts $ 6.3 $ 93.0 $ 92.7 (1) $ 5.3 1.3 (3) Allowance for returns 21.9 90.9 93.2 (1) 12.6 7.0 (3) Allowance for doubtful accounts 34.3 11.3 (0.9)(4) 34.1 9.5 (2) 2.9 (3) ------$62.5 $195.2 $205.7 $52.0 ======1993: Allowance for cash discounts $ 7.9 $ 87.3 $ 88.9 (1) $ 6.3 Allowance for returns 17.3 150.6 146.0 (1) 21.9 Allowance for doubtful accounts 34.8 11.7 11.7 (2) 34.3 0.5 (4) ------$60.0 $249.6 $247.1 $62.5 ======

(1) Cash discounts and returns allowed customers. (2) Doubtful accounts written off, net of recoveries. (3) Balance at disposal date of subsidiaries. (4) Effect of changes in foreign exchange rates.

F-3

EXHIBIT INDEX

3(i). Certificate of Incorporation of Registrant as in effect on the date hereof is incorporated herein by reference to Exhibit 3a2 to the Quarterly Report on Form 10-Q of Registrant dated May 14, 1990.

3(ii)(a).Amendment to By-laws of Registrant adopted effective February 27, 1996.

3(ii)(b).By-laws of Registrant as in effect on the date hereof.

10a1. Article XII ("Incentive Compensation") of the By-laws of Registrant is incorporated herein by reference to Exhibit 3(ii)(b) hereof.*

10b1. 1986 Stock Option Plan of American Brands, Inc. and amendments thereto is incorporated herein by reference to Exhibit 10b2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1992.*

10b2. Amendment to 1986 Stock Option Plan of American Brands, Inc. constituting Exhibit 10b1 hereto is incorporated herein by reference to Exhibit 10b to the Quarterly Report on Form 10-Q of Registrant dated November 11, 1993.*

10b3. Amendment to 1986 Stock Option Plan of American Brands, Inc. constituting Exhibits 10b1 and 10b2 hereto is incorporated herein by reference to Exhibit 10b to the Quarterly Report on Form 10-Q of Registrant dated August 11, 1994.*

10b4. 1990 Long-Term Incentive Plan of American Brands, Inc. (As Amended and Restated as of January 1, 1994) is incorporated herein by reference to Exhibit 10a to the Quarterly Report on Form 10-Q of Registrant dated August 11, 1994.*

10c1. Amended Supplemental Plan of American Brands, Inc.*

10c2. Trust Agreement, made as of the 2nd day of January, 1991, among Registrant, The Chase Manhattan Bank (National Association) ("Chase"), et al. establishing a trust in favor of Gilbert L. Klemann, II for purposes of paying amounts under the Amended Supplemental Plan constituting Exhibit 10c1 hereto.*

10c3. Amendment made as of the 1st day of November, 1993 to Trust Agreement constituting Exhibit 10c2 hereto.*

10c4. Amendment made as of the 1st day of January, 1995, to the Trust Agreement constituting Exhibits 10c2 and 10c3 hereto.*

10c5. Schedule identifying substantially identical agreements to the Trust Agreement and the Amendments thereto constituting Exhibits 10c2, 10c3 and 10c4 hereto, respectively, in favor of Thomas C. Hays, John T. Ludes, Robert L. Plancher, Robert J. Rukeyser, Steven C. Mendenhall, Dudley L. Bauerlein, Jr. and Charles H. McGill.*

10c6. Trust Agreement, made as of the 1st day of November, 1993, among Gilbert L. Klemann, II, Registrant and Chase establishing a grantor trust in favor of Gilbert L. Klemann, II for purposes of paying amounts under the Amended Supplemental Plan constituting Exhibit 10c1 hereto.*

10c7. Schedule identifying substantially identical agreements to the Trust Agreement constituting Exhibit 10c6 hereto in favor of Thomas C. Hays, John T. Ludes, Robert L. Plancher, Robert J. Rukeyser, Steven C. Mendenhall and Dudley L. Bauerlein, Jr.*

10d1. Resolutions of the Board of Directors of Registrant adopted on October 28, 1986 and July 26, 1988 adopting and amending a retirement plan for directors of Registrant who are not officers or employees of Registrant or a subsidiary thereof are incorporated herein by reference to Exhibit 10e1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1991.*

10d2. Resolutions of the Board of Directors of Registrant adopted on July 26, 1994 amending the resolutions constituting Exhibit 10d1 hereto is incorporated herein by reference to Exhibit 10e2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10e1. Retirement Agreement, made as of January 1, 1995, between Registrant and Thomas C. Hays is incorporated herein by reference to Exhibit 10f1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10f1. Gallaher Limited Executive Incentive Plan adopted on October 20, 1994 is incorporated herein by reference to Exhibit 10g1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10f2. Trust Deed dated March 24, 1983 between Gallaher Limited ("Gallaher") and Gallaher Pensions Limited, and amendments thereto, providing supplemental retirement benefits to certain executives of Gallaher are incorporated herein by reference to Exhibits 10g2 and 10g3 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1989.*

10f3. Trust Deed dated June 3, 1992 further amending Exhibit 10f2 hereto is incorporated herein by reference to Exhibit 10g3 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1992.*

10f4. Trust Deed dated January 24, 1994 further amending Exhibits 10f2 and 10f3 hereto is incorporated herein by reference to Exhibit 10g4 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1993.*

10f5. Trust Deed dated April 8, 1994 further amending Exhibits 10f2, 10f3 and 10f4 hereto.*

10g1. Jim Beam Brands Co. Senior Executive and Key Manager Incentive Plan is incorporated herein by reference to Exhibit 10m4 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1991.*

10g2. Jim Beam Brands Co. Amended Excess Benefit Plan is incorporated herein by reference to Exhibit 10j2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10g3. Trust Agreement, made as of December 24, 1991, among Jim Beam Brands Co. ("Beam"), Chase and Hewitt Associates, establishing a trust in favor of Barry M. Berish for purposes of paying amounts under the Amended Excess Benefit Plan constituting Exhibit 10g2 hereto is incorporated herein by reference to Exhibit 10m3 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1991.*

10g4. Amendment made as of the 17th day of November, 1993 to Trust Agreement constituting Exhibit 10g3 hereto is incorporated herein by reference to Exhibit 10k4 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1993.*

10g5. Trust Agreement, made as of the 15th day of December, 1993, among Barry M. Berish, Beam and Chase establishing a grantor trust in favor of Barry M. Berish for purposes of paying amounts under the Amended Excess Benefit Plan constituting Exhibit 10g2 hereto is incorporated herein by reference to Exhibit 10k5 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1993.*

10h1. Resolution of the Board of Directors of Registrant adopted on December 11, 1985 with respect to retirement and health benefits provided to William J. Alley is incorporated herein by reference to Exhibit 10e2 to the Registration Statement on Form 8-B of Registrant dated January 27, 1986.*

10i1. Resolution of the Board of Directors of Registrant adopted on November 27, 1990 with respect to retirement and health benefits provided to Gilbert L. Klemann, II is incorporated herein by reference to Exhibit 10p1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1991.*

10j1. Service Agreement dated November 9, 1994 between Gallaher and Peter M. Wilson is incorporated herein by reference to Exhibit 10n1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10j2. Letter dated September 20, 1991 from Gallaher in respect of retirement benefits provided to Peter M. Wilson is incorporated herein by reference to Exhibit 10o2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1993.*

10j3. Letter dated March 15, 1994 amending Exhibit 10j2 hereto is incorporated herein by reference to Exhibit 10o3 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1993.*

10k1. Letter dated January 23, 1996 from Registrant with respect to deferred payment of fees to Eugene R. Anderson.*

10k2. Letter dated August 11, 1995 from Registrant with respect to deferred payment of fees to Gordon R. Lohman is incorporated herein by reference to Exhibit 10b to the Quarterly Report on Form 10-Q of Registrant dated November 9, 1995.*

10l1. Agreement dated January 2, 1991 between Registrant and Gilbert L. Klemann, II is incorporated herein by reference to Exhibit 10s1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1992.*

10l2. Amendment dated November 28, 1994 to the Agreement constituting Exhibit 10l1 hereto is incorporated herein by reference to Exhibit 10r2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10l3. Schedule identifying substantially identical agreements to the Agreement and the Amendment thereto constituting Exhibits 10l1 and 10l2 hereto, respectively, entered into by Registrant with Thomas C. Hays, John T. Ludes, Robert L. Plancher, Robert J. Rukeyser, Steven C. Mendenhall, Dudley L. Bauerlein, Jr., and Charles H. McGill.*

10m1. Trust Agreement, made as of the 2nd day of January, 1991, among Registrant, Chase, et al. establishing a trust in favor of Gilbert L. Klemann, II for purposes of paying amounts under the Agreement constituting Exhibits 10l1 and 10l2 hereto is incorporated herein by reference to Exhibit 10s1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10m2. Amendment made as of the 1st day of November, 1993 to Trust Agreement constituting Exhibit 10m1 hereto is incorporated herein by reference to Exhibit 10s2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10m3. Schedule identifying substantially identical agreements to the Trust Agreement and Amendment thereto constituting Exhibits 10m1 and 10m2 hereto, respectively, in favor of Thomas C. Hays, John T. Ludes, Robert L. Plancher, Robert J. Rukeyser, Steven C. Mendenhall and Dudley L. Bauerlein, Jr.*

10n1. Agreement dated as of March 1, 1988 and amendments thereto between Registrant and Thomas C. Hays are incorporated herein by reference to Exhibit 10v1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1992.*

10n2. Amendment effective as of January 1, 1995 to the Agreement constituting Exhibit 10n1 hereto is incorporated herein by reference to Exhibit 10t2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10n3. Amendment effective as of January 1, 1995 to the Agreement and Amendment thereto constituting Exhibits 10n1 and 10n2 hereto, respectively, is incorporated herein by reference to Exhibit 10t3 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10o1. Agreement dated as of January 2, 1991 between Registrant and Gilbert L. Klemann, II and amendment thereto is incorporated herein by reference to Exhibit 10y1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1991.*

10o2. Agreement dated as of October 28, 1991 amending the Agreement constituting Exhibit 10o1 hereto is incorporated herein by reference to Exhibit 10w2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1992.*

10o3. Amendment effective as of January 1, 1995 to the Agreement and Amendment thereto constituting Exhibits 10o1 and 10o2 hereto, respectively, is incorporated herein by reference to Exhibit 10u3 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.*

10o4. Schedule identifying substantially identical agreements to the Agreement and Amendments thereto constituting Exhibits 10o1, 10o2 and 10o3 hereto entered into by Registrant with John T. Ludes, Robert L. Plancher, Robert J. Rukeyser, Steven C. Mendenhall and Dudley L. Bauerlein, Jr.*

10p1. Agreement dated February 24, 1995 between Registrant and Charles H. McGill is incorporated herein by reference to Exhibit 10w1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994.* l0q1. Agreement dated as of February 1, 1990 between Beam and Barry M. Berish is incorporated herein by reference to Exhibit 10pp1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1990.* l0r1. Rights Agreement dated as of December 13, 1987 between Registrant and First Chicago Trust Company of New York, as Rights Agent, and amendments thereto is incorporated herein by reference to Exhibit 10aa1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1992.*

11. Statement setting forth net income for computation of earnings per Common share, primary and fully diluted, and statement setting forth computation of weighted average number of Common shares outstanding on a fully diluted basis.

12. Statement re computation of ratio of earnings to fixed charges.

13. 1995 Annual Report to Stockholders of Registrant.

21. Subsidiaries of Registrant.

23(i)a. Consent of Independent Accountants, Coopers & Lybrand L.L.P.

23(i)b. Consent of Counsel, Chadbourne & Parke LLP.

24. Powers of Attorney relating to execution of this Annual Report on Form 10-K.

27. Financial Data Schedule (Article 5).

* Indicates that exhibit is a management contract or compensatory plan or arrangement.

EXHIBIT 3(ii)a ------

AMERICAN BRANDS, INC.

BY-LAW AMENDMENT

ADOPTED ON FEBRUARY 27, 1996

EFFECTIVE FEBRUARY 27, 1996

Article I, Section 1 was amended to read in its entirety as follows:

Section 1. The number of directors constituting the entire Board of Directors of the Company shall be fixed at twelve. The number of the directors may be altered by amendment of these By-laws, which amendment may be adopted at any regular or special meeting of the Board of Directors by the affirmative vote of at least two-thirds of all the directors then in office.

EXHIBIT 3(ii)b ------

BY-LAWS of AMERICAN BRANDS, INC. (As Amended) ARTICLE I Directors

Section 1. The number of directors constituting the entire Board of Directors of the Company shall be fixed at twelve. The number of the directors may be altered by amendment of these By-laws, which amendment may be adopted at any regular or special meeting of the Board of Directors by the affirmative vote of at least two-thirds of all the directors then in office.

Section 2. Each director shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Any director of the Company may resign at any time upon written notice to the Company. Except as otherwise provided for, or fixed by, or pursuant to the provisions of Article IV of the Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the

2-27-96

2 BY-LAWS ------

Common Stock, newly created directorships resulting from any increase in the number of directors or any vacancy on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled solely by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director.

Section 3. In order to qualify to hold office as a director of the Company, a person must hold at least one share of stock of the Company.

Section 4. The directors may hold their meetings and have an office and keep the books of the Company in Old Greenwich, Connecticut, or elsewhere outside of the State of Delaware.

Section 5. The Board of Directors, by resolution adopted by a majority of the entire Board, may appoint from among its members an Executive Committee which shall have at least three members. To the extent provided in such resolution, such committee shall have and may exercise all the powers and authority of the Board, including the power to authorize the seal of the Company to be affixed to all papers that require it, except that such

10-30-90

BY-LAWS 3 ------committee shall not have such power and authority in reference to

(1) amending the Certificate of Incorporation (except that such committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Company or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Company or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series);

(2) adopting an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware;

(3) recommending to the stockholders any action that requires stockholders' approval;

1-1-86

4 BY-LAWS ------

(4) making, amending or repealing any By-law of the Company;

(5) electing or appointing any director, or removing any officer or director;

(6) amending or repealing any resolution theretofore adopted by the Board of Directors;

(7) fixing compensation of the directors for serving on the Board of Directors or on any committee; or

(8) unless the resolution shall expressly so provide, declaring a dividend, authorizing the issuance of stock or adopting a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware.

Actions taken at a meeting of such committee shall be reported to the Board of Directors at its next meeting following such committee meeting; except that, when the meeting of the Board is held within two days after the committee meeting, such report shall be made to the Board at either its first or second meeting following such committee meeting.

1-1-86

BY-LAWS 5 ------

ARTICLE II

Meetings of Stockholders

Section l. The annual meeting of the stockholders of the Company for the election of directors, and such other business as may properly come before the meeting, shall be held at such place as may from time to time be designated by the directors, on the first Wednesday of May, at ten o'clock in the forenoon, or at such other hour as the directors may designate, or on such other day and at such hour as the directors may designate. If the day fixed for the meeting is a legal holiday, the meeting shall be held at the same hour on the next business day which is not a legal holiday.

Section 2. Special meetings of the stockholders, to be held at such place as may from time to time be designated by the directors, may be called only by the Chairman of the Board, the President or the Board of Directors, by resolution adopted by a majority of the entire Board, for such purposes as shall be specified in the call.

Section 3. Except as otherwise provided by law, due notice of each annual meeting of the stockholders shall be given by a written or printed notice signed by the Secretary

10-30-90

6 BY-LAWS ------or an Assistant Secretary of the Company and mailed, postage prepaid, at least ten days prior to such meeting to each stockholder of record entitled to vote thereat appearing on the books of the Company at the address given thereon.

Due notice of each special meeting shall be given also in the manner above provided. The notice shall state the object of the special meeting, and no other business shall be transacted at such meeting.

Section 4. The holders of a majority in voting power of the outstanding shares of capital stock entitled to vote, present in person or represented by proxy, shall constitute a quorum at a meeting of stockholders. Except as otherwise required by law or the Certificate of Incorporation, the affirmative vote of shares representing a majority in voting power of the shares present in person or represented by proxy at a meeting at which a quorum is present and entitled to vote on the subject matter shall be the act of the stockholders, and except that directors shall be elected by a plurality of votes cast at an election. The stockholders present at a duly convened meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

10-30-90

BY-LAWS 7 ------

Section 5. Each meeting of the stockholders, whether annual or special, shall be presided over by the Chairman of the Board if present, and if he is not present by the President if present. If neither officer specified in the preceding sentence is present, the meeting shall be presided over by the person designated in writing by the Chairman of the Board, or if the Chairman of the Board has made no designation, by the person designated by the President, or if the President has made no designation, by the person designated by the Board of Directors. If neither officer specified in the first sentence of this section is present, and no one designated by the Chairman of the Board or the President or the Board of Directors is present, the meeting may elect any stockholder of record who is entitled to vote for directors, or any person present holding a proxy for such a stockholder, to preside. The Secretary of the Company (or in his absence any Assistant Secretary) shall be the Secretary of any such meeting; in the absence of the Secretary and Assistant Secretaries, any person may be elected by the meeting to act as Secretary of the meeting.

Section 6. Any voting proxy given by a stockholder must be in writing, executed by the stockholder, or, in lieu thereof, to the extent permitted by law, may be transmitted in a telegram, cablegram or other means of

10-30-90

8 BY-LAWS ------electronic transmission setting forth or submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. A copy, facsimile transmission or other reliable reproduction of a written or electronically-transmitted proxy authorized by this Section 6 may be substituted for or used in lieu of the original writing or electronic transmission to the extent permitted by law.

Section 7. Any previously scheduled annual or special meeting of stockholders may, by resolution of the Board of Directors, be postponed upon public announcement made prior to the date previously scheduled for such meeting of stockholders. For purposes of this Article II, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Company with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended. The person presiding over any meeting of stockholders, or a majority of the voting power of the shares entitled to vote, present in person or represented by proxy, even if less than a quorum, may adjourn the meeting from time to time. No notice of the time and

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BY-LAWS 9 ------place of adjourned meetings need be given except as required by law.

Section 8. The directors shall appoint one or more inspectors of election and of the vote at any time prior to the date of any meeting of stockholders at which an election is to be held or a vote is to be taken. In the event any inspector so appointed is absent from such meeting or for any other reason fails to act as such at the meeting, the person presiding pursuant to these By-laws may appoint a substitute who shall have all the powers and duties of such inspector. The inspector or inspectors so appointed shall act at such meeting, make such reports thereof and take such other action as shall be provided by law and as may be directed by the person presiding over the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability.

Section 9. The directors may, at any time prior to any annual or special meeting of the stockholders, adopt an order of business for such meeting which shall be the order of business to be followed at such meeting. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at

10-30-90

10 BY-LAWS ------such meeting shall be announced at such meeting by the person presiding over such meeting.

Section l0. At any meeting of stockholders a stock vote shall be taken on any resolution or other matter presented to the meeting for action if so ordered by the person presiding over the meeting or on the demand of any stockholder of record entitled to vote at the meeting or any person present holding a proxy for such a stockholder. Such order or demand for a stock vote may be made either before or after a vote has been taken on such resolution or other matter in a manner other than by stock vote and before or after the result of the vote taken otherwise than by stock vote has been announced. The result of a stock vote taken in accordance with this By-law shall supersede the result of any vote previously taken in any manner other than by stock vote.

Section 11. (A) Nominations of persons for election to the Board of Directors of the Company may be made as provided in the Certificate of Incorporation. The proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders (1) pursuant to the Company's notice of meeting, (2) by or at the direction of the Board of Directors or (3) by any stockholder of the Company who was a stockholder of record at the time of giving of the notice provided for

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BY-LAWS 11 ------in this Section 11, who is entitled to vote thereon at the meeting and who complies with the notice procedures set forth in this Section 11.

(B) For business (other than the nomination of persons for election to the Board of Directors) to be properly brought before an annual meeting by a stockholder pursuant to clause (3) of paragraph (A) of this Section 11, the stockholder must have given timely notice thereof in writing to the Secretary of the Company. To be timely, a stockholder's notice shall be delivered, either by personal delivery or by United States mail, postage prepaid, to the Secretary not later than one hundred twenty (120) days in advance of such meeting. Such stockholder's notice shall set forth (1) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made and (2) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made (a) the name and address of such stockholder, as they appear on the Company's books, and of such beneficial owner and (b) the class and number of shares of the Company which are owned beneficially and of record by such stockholder and such beneficial owner.

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12 BY-LAWS ------

(C) The person presiding over an annual meeting of stockholders shall have the power and duty to determine whether any business proposed by any stockholder to be brought before the meeting was made in accordance with the procedures set forth in this Section 11 and, if any proposed business is not in compliance with this Section 11, to declare that such defective proposal shall be disregarded.

(D) In addition to the foregoing provisions of this Section 11, a stockholder shall comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 11. Nothing in this Section 11 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Company's proxy statement pursuant to Rule l4a-8 under such Act.

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BY-LAWS 13 ------

ARTICLE III

Meetings of Directors

Section 1. Regular meetings of the Board of Directors shall be held at the office of the Company in Old Greenwich, Connecticut, or at such other place as may from time to time be designated by the directors, the Chairman of the Board or the President, at ten o'clock in the forenoon on the last Tuesday of each month other than March, May, June, August and December and at three o'clock in the afternoon on the day on which the annual meeting of stockholders is held. If any such day shall be a holiday, the meeting scheduled for that day shall be held on the next business day. Special meetings may be held as determined by the Board of Directors, and may be called by the Chairman of the Board at any time and shall be called by him on the request of three directors, or, if the Chairman of the Board fails to call such meeting when so requested, the same may be called by any three directors.

Section 2. No notice need be given of regular meetings of the directors, except that at least one day's notice shall be given of any place other than the office of the Company in Old Greenwich, Connecticut at which any

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14 BY-LAWS ------such meeting is to be held, but such notice need not be given to any director who signs a written waiver of notice before or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except when the director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

Section 3. At any meeting six directors shall constitute a quorum unless otherwise provided for in these By-laws or in the Certificate of Incorporation or in any applicable statute, but in no case less than one-third of all the directors then in office.

Section 4. Members of the Board of Directors or of any Committee thereof may participate in meetings of the Board of Directors or of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting.

Section 5. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or of such committee,

1-1-86

BY-LAWS 15 ------as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board of Directors or of such committee.

ARTICLE IV

Officers

Section 1. The Board of Directors shall annually choose from amongst its members a Chairman of the Board. The Board shall also annually choose a President, an Executive Vice President (if any), one or more Senior Vice Presidents (if any), a principal financial officer, such other Vice Presidents (if any) as it shall determine, a Secretary, a Treasurer and a Controller, who need not be directors.

Section 2. The Board of Directors may elect other officers and define their powers and duties.

Section 3. Any two offices not inconsistent with each other may be held by the same person.

Section 4. All officers elected by the Board of Directors shall hold office, subject to removal by the Board, until their successors are chosen and qualified. The affirmative vote of at least two-thirds of all of the directors

1-31-95

16 BY-LAWS ------then in office shall be required to remove or reduce the salary of any officer elected by the Board of Directors.

Section 5. All agents and employees shall be appointed and may be removed by the Chairman of the Board, subject to the control of the Board of Directors.

Section 6. Vacancies among officers of the Company shall be filled as, and to the extent that, the Board of Directors shall determine by vote of a majority of the directors present at any regular or special meeting at which not less than a majority of all the directors then in office are present.

Section 7. The Chairman of the Board shall be the Chief Executive Officer of the Company and shall have general direction of its business affairs, subject, however, to the control of the Board of Directors. He shall, if present, preside at all meetings of the Board of Directors and shall perform such other duties and have such responsibilities as the Board may from time to time determine.

Section 8. At the request of the Chairman of the Board, or in case of his absence or disability, the President shall perform the duties of the Chairman of the Board, subject to the control of the Board of Directors, and the President shall have such other powers and

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BY-LAWS 17 ------perform such other duties as shall at any time be delegated to him by the Board of Directors. The Executive Vice President (if any) and the Senior Vice Presidents (if any) and such other Vice Presidents as shall have been chosen shall have such powers and perform such duties as shall at any time be delegated to them by the Board of Directors.

Section 9. The Secretary shall give the requisite notice of meetings of stockholders and directors and shall record the proceedings of such meetings, shall have the custody of the seal of the Company and shall affix it or cause it to be affixed to such instruments as require the seal and attest it and, besides his powers and duties prescribed by law, shall have such other powers and perform such other duties as shall at any time be required of him by the Board of Directors.

Section 10. The Assistant Secretaries shall assist the Secretary in the discharge of his duties and shall have such powers and perform such other duties as shall at any time be delegated to them by the Board of Directors, and in the absence or disability of the Secretary, shall perform the duties of his office, subject to the control of the Board.

Section 11. The Treasurer shall have charge of the funds and securities of the Company and shall have such

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18 BY-LAWS ------powers and perform such duties as shall at any time be delegated to him by the Board of Directors.

Section 12. The Assistant Treasurers shall assist the Treasurer in the discharge of his duties and shall have such powers and perform such other duties as shall at any time be delegated to them by the Board of Directors, and in the absence or disability of the Treasurer, shall perform the duties of his office subject to the control of the Board.

Section 13. Any other officer, agent or employee of the Company may be required to give such security for the faithful performance of his duties as shall be determined by the Board of Directors, who shall also determine the custody of any security given.

ARTICLE V

Salaries

Section 1. The salaries of all officers elected by the Board of Directors who hold offices of a rank of Vice President or above shall be fixed by the Compensation and Stock Option Committee.

Section 2. Salaries of all other officers elected by the Board and all other agents and employees shall be fixed by or in the manner determined by the Board.

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BY-LAWS 19 ------

Section 3. The Board of Directors, by the affirmative vote of a majority of directors in office and irrespective of any personal interest of any directors, shall have authority to establish reasonable compensation of directors for services to the Company as directors, officers or otherwise, except that the Compensation and Stock Option Committee, by the affirmative vote of a majority of Committee members in office and irrespective of any personal interest of any Committee members or other directors, shall have authority to establish such compensation of directors who also are officers elected by the Board and hold offices of a rank of Vice President or above.

ARTICLE VI

Seal

Section 1. The Seal of the Company shall be in such form as the Board of Directors may from time to time prescribe and it may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

ARTICLE VII

Signatures on Commercial Instruments and Contracts

Section 1. All checks or bank drafts shall be signed

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20 BY-LAWS ------by any two of the following named officers: Chairman of the Board, President, the principal financial officer, the principal accounting officer, any Vice President, Secretary, any Assistant Secretary, Treasurer, any Assistant Treasurer, Controller, any Assistant Controller; and in such other manner as the Board of Directors may from time to time designate.

Section 2. All notes or other obligations or contracts shall be signed by the Chairman of the Board, the President, the principal financial officer, the principal accounting officer, or any Vice President and also by one of the following officers: the Secretary, an Assistant Secretary, the Treasurer, an Assistant Treasurer, the Controller, or an Assistant Controller (provided that no individual shall sign the same instrument in two capacities), or shall be signed by the Chairman of the Board, the President, the principal financial officer, the principal accounting officer, or any Vice President, with the corporate seal or a facsimile thereof affixed thereto or imprinted thereon, attested by the Secretary or an Assistant Secretary; or such notes, obligations or contracts shall be signed in such manner and by one or more of such officers or other persons on behalf of the Company as the Board of Directors may from time to time authorize or direct. When and as authorized or directed by the Board of Directors, the signatures of such officers or

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BY-LAWS 21 ------other persons or any of them signing on behalf of the Company may be facsimiles.

ARTICLE VIII

Capital Stock

Section 1. Certificates of the capital stock of the Company shall be issued for shares duly numbered and registered in the order of their issue, and shall be in the form the directors shall prescribe.

Section 2. The capital stock shall be transferable on the transfer books of the Company, subject to these By-laws, by the owner in person, or by attorney or legal representative, written evidence of whose authority shall be filed with the Company.

Section 3. No transfer of capital stock can be required except upon surrender and cancellation of the certificate representing the same.

Section 4. The Board of Directors may at any time, in its discretion, appoint one or more transfer agents or registrars of the shares of stock of the Company and terminate the appointment of any transfer agent or registrar. The Board of Directors may also designate the Company to perform such functions alone or in conjunction with one or more other transfer agents or registrars.

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22 BY-LAWS ------

Section 5. (A) For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or for the purpose of determining stockholders entitled to receive payment of any dividend or allotment of any right, or for the purpose of any other action, the Board of Directors may fix, in advance, a date as the record date for any such determination of stockholders. Such date shall be not more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action.

(B) When a determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders has been made as provided in this Section 5, such determination shall apply to any adjournment thereof, unless the Board of Directors fixes a new record date under this Section 5 for the adjourned meeting.

ARTICLE IX

Committee on Conflicts of Interests

Section 1. The Board of Directors, by resolution adopted by a majority of the entire Board, shall appoint a Committee on Conflicts of Interests which shall have at

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BY-LAWS 23 ------least three members. To the extent provided by resolution of the Board, such committee shall have the power to interpret, administer and apply the policies of the Company as established by the Board from time to time with respect to conflicts of interests.

ARTICLE X

Dividends

Section 1. Dividends on the Preferred Stock and the Common Stock of the Company may be declared by the Board of Directors, at any regular or special meeting, as provided by law and the Certificate of Incorporation.

ARTICLE XI

Amendments

Section 1. The Board of Directors shall, except as otherwise provided in these By-laws or the Certificate of Incorporation, have the power to alter, amend or repeal these By-laws at any meeting by the affirmative vote of two-thirds of the directors then in office, provided notice of the proposed alteration, amendment or repeal be given in writing to each of the directors, and provided also that

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24 BY-LAWS ------no alteration, amendment or repeal of a specification in any section of these By-laws of a stated fraction of directors as the minimum number whose presence or vote is requisite for action under such section may be made without the presence or vote or both, as the case may be, of the minimum number so specified.

ARTICLE XII

Incentive Compensation

Section 1. (A) As soon as practicable after the end of the year 1994 and of each year thereafter, if a cash dividend on the Common Stock shall have been paid in such year, there shall be made available for allotment, as hereinafter provided, an amount equal to one-half of 1% of adjusted income from continuing operations (as defined in Section 5 hereof).

(B) Of such amount made available for allotment under this Article, 18% shall be allotted to the person or persons who during such year held the office of Chairman of the Board, subject to reduction of any person's share as permitted by Section 3(A) hereof, as incentive compensation, in addition to the fixed salary of such person or persons for such year. If

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BY-LAWS 25 ------such office shall have been vacant at any time during the year, the amount to be allotted to the incumbent or incumbents of such office for such year shall be reduced proportionately. If such office shall have had more than one incumbent during the year, the amount to be allotted in respect of such office shall be divided among the different incumbents in the proportion of their respective periods of incumbency during the year. Nothing herein contained shall give any incumbent of such office any right to claim to continue therein, or any other right except as herein specifically expressed.

(C) Of such amount made available for allotment under this Article, the amount not allottable pursuant to Section 1(B) hereof by reason of a vacancy at any time during such year in the office of the Chairman of the Board shall be available for allotment to other key employees, as provided in Section 2 hereof, in addition to the fixed salary of each of such persons for such year.

Section 2. (A) The amount available for allotment pursuant to this Section 2 for each year shall be allotted among the members of a Management Group consisting of all persons elected to the office of Vice President of the Company or any office senior thereto (except the

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26 BY-LAWS ------

Chairman of the Board and any officer covered by an incentive compensation plan of any subsidiary of the Company). A person who during part of such year has held an office in the Management Group shall participate in such allotment on a proportional basis reflecting the portion of the year during which he holds such office. A person who during part of such year has held the office of Chairman of the Board shall be included in the Management Group for the portion of the year during which he held an office in the Management Group and did not hold the office of Chairman of the Board, and the allotment to such person as a member of the Management Group shall be in addition to the allotment to which he is entitled under Section 1(B) hereof.

(B) Within 60 days after receipt from the independent accountants of the certificate to be furnished pursuant to Section 6 hereof showing the amount made available for allotment under this Article, the amount to be allotted pursuant to this Section 2 shall then be allottable among the members of such Management Group as follows:

(1) Of such amount made available for allotment under this Article, 30% shall be allotted to all members of such Group pro rata, subject to reduction of any member's share as permitted by Section 3(A) hereof, according to the proportion

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BY-LAWS 27 ------

which the fixed salary of each member of said Group for periods of membership during such year bears to the total of such fixed salaries of all members of the Group for such periods. For purposes of this allotment, (a) the fixed salary of each member of said Group whose compensation is not subject to the limitation on deductibility under Section 162(m) of the Internal Revenue Code, as amended, or any successor provision (the "Section 162(m) Limitation") for such year shall be at a rate equal to the highest fixed salary rate of such member during any period of membership in said Group during such year and (b) the fixed salary of each member of said Group whose compensation is subject to the Section 162(m) Limitation for such year shall be at the rate in effect at the beginning of such year, or if later the beginning of such member's first period of membership in the Group during such year.

(2) So much of the remaining amount made available for allotment under this Article as the Committee (as defined in Section 3(C) of this Article) determines, in its sole discretion, shall be allotted among the members of such Management Group to such individuals in said Group, and in such amounts as to individuals as the Committee, in its sole discretion, shall determine, except as otherwise provided in Section 2(D) hereof.

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28 BY-LAWS ------

(C) In addition to the foregoing, there shall also be allottable to such Management Group within the 60-day period specified in Section 2(B) hereof any amount which is not allotted in such year to the Chairman of the Board pursuant to Section 1(B) hereof by reason of vacancy at any time during such year in such office. Except as otherwise provided in Section 2(D) hereof, so much of such additional amount as the Committee determines, in its sole discretion, shall be allotted among the members of such Management Group to such individuals in said Group, and in such amounts as to individuals, as the Committee, in its sole discretion, shall determine.

(D) In any case where a Chairman of the Board is a person to whom an allotment may be made as a member of such Management Group pursuant to paragraph (2) of Section 2(B) hereof or pursuant to both said paragraph (2) and Section 2(C) hereof, there shall be allotted to him within the 60-day period specified in Section 2(B) hereof (subject to reduction as permitted by Section 3(A) hereof), from the total of the amount allottable among the members of the Management Group by the Committee under said paragraph (2) and of any additional amount so allottable under said Section 2(C), a sum which shall be the same percentage (adjusted proportionately on the basis of the period of the year for which the allotment

5-3-94

BY-LAWS 29 ------is being made in which he was a member of the Management Group but did not hold the office of Chairman of the Board) of such total as the allotment made to him for the next preceding year under said paragraph (2) and said Section 2(C) was of the total amount allottable for such preceding year under said paragraph (2) and said Section 2(C).

Section 3. (A) The Committee shall have authority to reduce the amount of any allotment to the Chairman of the Board pursuant to Section 1(B) hereof or the amount of any allotment to a member of the Management Group pursuant to Section 2 (B)(1) or Section 2(D) hereof if and to the extent that the Committee deems it appropriate. No part of any such reduction in any allotment shall be available for allotment to any other person under this Article.

(B) No part of the amount made available for allotment under this Article as shall not have been allotted, under Sections 1 and 2 hereof, within such 60-day period, for any year may be carried forward for subsequent allotment.

(C) As used in this Article the word "Committee" shall mean the Compensation and Stock Option Committee. All decisions of the Committee pursuant to the provisions of this Article shall be binding and conclusive on all interested parties.

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30 BY-LAWS ------

Section 4. Payment to the Chairman of the Board of the amounts payable to him under Section 1(B) hereof, and to each of the allottees of the Management Group of the amount of his total allotment under Sections 2(B), 2(C) and 2(D) hereof, with respect to any year shall be made in cash as soon as practicable.

Section 5. For the purpose of this Article, the term "adjusted income from continuing operations" for any year is defined as the income from continuing operations, before income taxes, as reflected in the consolidated financial statements set forth in the annual report for such year of the Company to the stockholders, but adjusted by the independent accountants who have audited the Company's consolidated financial statements to (i) exclude the deduction for Article XII incentive compensation, (ii) exclude unrealized gains and losses on securities, and adjust realized gains and losses on trading securities to reflect cost, (iii) exclude restructuring charges or credits, and charges for impaired assets other than those sold in the ordinary course of business, (iv) include the results of operations for such year from businesses classified as "discontinued operations" prior to the disposition dates, and (v) to the extent not adjusted pursuant to items (ii), (iii) or (iv) above, exclude gains or losses included in continuing operations resulting from

5-3-94

BY-LAWS 31 ------the sale or writedown of intangible assets, land or buildings, investments in business units and securities resulting from the sale of business units.

Section 6. At the time of rendering their report with respect to the financial statements of the Company and its consolidated subsidiaries for any year, such independent accountants shall also furnish to the Company their written certificate stating the amount of the "adjusted income from continuing operations" for such year as defined in Section 5(A) hereof, the amount made available for allotment under this Article for such year, and the amounts thereof to be allotted to the Chairman of the Board, and the amount thereof available for allotment to the Management Group, which certificate as to the amounts available and payable hereunder shall be binding and conclusive on all interested parties, and no one claiming hereunder shall have a right to question the same, or to any examination of the books or accounts of the Company or subsidiaries.

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32 BY-LAWS ------

Section 7. This Article may be repealed only by the action of the stockholders of the Company, and not by the directors. Upon the unanimous recommendation of the Committee, this Article may be amended or modified by the directors in accordance with Article XI, except that, without the approval of the stockholders of the Company, no such amendment or modification shall be made which increases the amount made available for allotment as specified in Section 1(A) hereof or increases to higher than 18% of such amount the amount to be allotted hereunder to the Chairman of the Board.

ARTICLE XIII

Indemnification

Section 1. (A) Each person (an "indemnitee") who was or is made or threatened to be made a party to or was or is involved (as a witness or otherwise) in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she or a person of whom

5-3-94

BY-LAWS 33 ------he or she is the legal representative was or is a director, officer or employee of the Company or was or is serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding was or is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Company to the fullest extent permitted by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees and retainers therefor, judgments, fines, excise taxes or penalties under the Employee Retirement Income Security Act of 1974, as amended, and amounts paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to

10-30-90

34 BY-LAWS ------the benefit of his or her heirs, executors and administrators; provided, however, that except as provided in Section 3 of this Article XIII with respect to proceedings seeking to enforce rights to indemnification, the Company shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Company.

(B) The right to indemnification conferred in this Article XIII is and shall be a contract right. The right to indemnification conferred in this Article XIII shall include the right to be paid by the Company the expenses (including attorneys' fees and retainers therefor) reasonably incurred in connection with any such proceeding in advance of its final disposition, such advances to be paid by the Company within 20 days after the receipt by the Company of a statement or statements from the indemnitee requesting such advance or advances from time to time; provided, however, that if the General Corporation Law of the State of Delaware requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without

10-30-90

BY-LAWS 35 ------limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Company of an undertaking by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Article XIII or otherwise.

Section 2. (A) To obtain indemnification under this Article XIII, an indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to the indemnitee and is reasonably necessary to determine whether and to what extent the indemnitee is entitled to indemnification. Upon written request by an indemnitee for indemnification pursuant to the first sentence of this Section 2(A), a determination, if required by applicable law, with respect to the indemnitee's entitlement thereto shall be made as follows: (1) if requested by the indemnitee, by Independent Counsel (as hereinafter defined), or (2) if no request is made by the indemnitee for a determination by Independent Counsel, (a) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined), or (b) if a quorum of the Board of Directors consisting of Disinterested Directors is not

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36 BY-LAWS ------obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the indemnitee, or (c) by the stockholders of the Company. In the event the determination of entitlement to indemnification is to be made by Independent Counsel at the request of the indemnitee, the Independent Counsel shall be selected by the indemnitee unless the indemnitee shall request that such selection be made by the Board of Directors, in which event the Independent Counsel shall be selected by the Board of Directors. If it is so determined that the indemnitee is entitled to indemnification, payment to the indemnitee shall be made within 10 days after such determination.

(B) In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall presume that the indemnitee is entitled to indemnification under this Article XIII, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.

Section 3. (A) If a claim under Section 1 of this Article XIII is not paid in full by the Company within

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BY-LAWS 37 ------

30 days after a written claim pursuant to Section 2(A) of this Article XIII has been received by the Company, or if an advance is not made within 20 days after a request therefor pursuant to Section 1(B) of this Article XIII has been received by the Company, the indemnitee may at any time thereafter bring suit (or, at the indemnitee's option, an arbitration proceeding before a single arbitrator pursuant to the rules of the American Arbitration Association) against the Company to recover the unpaid amount of the claim or the advance and, if successful in whole or in part, the indemnitee shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such suit or proceeding (other than a suit or proceeding brought to enforce a claim for expenses incurred in connection with any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Company) that the indemnitee has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the Company to indemnify the indemnitee for the amount claimed or that such indemnification otherwise is not permitted under the General Corporation Law of the State of Delaware, but the burden of proving such defense shall be on the Company.

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38 BY-LAWS ------

(B) Neither the failure of the Company (including its Board of Directors, Independent Counsel or stockholders) to have made a determination prior to the commencement of such action that indemnification of the indemnitee is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Company (including its Board of Directors, Independent Counsel or stockholders) that the indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the indemnitee has not met the applicable standard of conduct.

(C) If a determination shall have been made pursuant to Section 2(A) of this Article XIII that the indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to paragraph (A) of this Section 3.

(D) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to paragraph (A) of this Section 3 that the procedures and presumptions of this Article XIII are not valid, binding and enforceable and shall stipulate in any

10-30-90

BY-LAWS 39 ------such court or before any such arbitrator that the Company is bound by all the provisions of this Article XIII.

Section 4. The right to indemnification and the payment of expenses incurred in connection with a proceeding in advance of its final disposition conferred in this Article XIII shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-laws, agreement, vote of stockholders or Disinterested Directors or otherwise.

Section 5. The Company may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Company or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. To the extent that the Company maintains any policy or policies providing such insurance, each such director, officer or employee, and each such agent to which rights to indemnification have been granted as provided in Section 6 of this Article XIII, shall be covered by such policy or policies in accordance with its or their terms to the

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40 BY-LAWS ------maximum extent of the coverage thereunder for any such director, officer, employee or agent.

Section 6. The Company may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the Company the expenses incurred in connection with any proceeding in advance of its final disposition, to any agent of the Company to the fullest extent of the provisions of this Article XIII with respect to the indemnification and advancement of expenses of directors, officers and employees of the Company.

Section 7. If any provision or provisions of this Article XIII shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (A) the validity, legality and enforceability of the remaining provisions of this Article XIII (including without limitation, each portion of any Section of this Article XIII containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (B) to the fullest extent possible, the provisions of this Article XIII (including, without limitation, each portion of any Section of this Article XIII containing any such provision held to be invalid, illegal or unenforceable) shall be

10-30-90

BY-LAWS 41 ------construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

Section 8. For purposes of this Article XIII:

(A) "Disinterested Director" means a director of the Company who is not and was not a party to the matter in respect of which indemnification is sought by the indemnitee.

(B) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (1) the Company or the indemnitee in any matter material to either such party, or (2) any other party to the matter giving rise to a claim for indemnification. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or the indemnitee in an action to determine the indemnitee's rights under this Article XIII.

Section 9. Any notice, request or other communication required or permitted to be given to the Company under this Article XIII shall be in writing and either

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42 BY-LAWS ------delivered in person or sent by telecopy, telex, telegram or certified or registered mail, postage prepaid, return receipt requested, to the Secretary of the Company and shall be effective only upon receipt by the Secretary.

EXHIBIT 10c1 (Working Copy as of January 1, 1996)

AMERICAN BRANDS, INC. SUPPLEMENTAL PLAN

Section 1. PURPOSE. This Supplemental Plan is established in order to induce employees of outstanding ability to join or continue in the employ of the Company and to increase their efforts for its welfare by providing them with supplemental benefits that cannot be provided by the Company's tax qualified defined benefit and defined contribution plans as a result of Internal Revenue Code limitations.

Section 2. DEFINITIONS. As used in this Plan, the following words shall have the following meanings:

(a) "Actual Earnings" means all earnings of an employee in any Plan Year for Qualifying Employment including overtime and extra shift pay, holiday and vacation pay, amounts paid for periods of approved absence, back pay which has been either awarded or agreed to by the Company, earnings elected to be deferred by the Employee as tax deferred contributions under the Company's Profit-Sharing Plan, supplemental tax deferred amounts under this Plan, or as contributions under a plan established pursuant to Section 125 of the Internal Revenue Code, and all compensation under the Management Incentive Plan and Article XII of the By-laws of American paid during such Plan Year, but excluding (1) Worker's Compensation payments, (2) amounts paid by the Company for insurance, retirement or other benefits and bonuses, and (3) contributions to or allocations under any profit-sharing plan and benefits under this Plan or other benefits. The Actual Earnings of an employee covered under a disability income plan of the Company shall be deemed to continue as provided in the Retirement Plan.

(b) "Affiliated Employment" means employment by any corporation which, at the time of such employment, is or was an affiliate of the Company or the Prior Company, or thereafter becomes or became an affiliate of the Company or the Prior Company. "Affiliated Plan" means a defined benefit pension plan by which an employee of the Company had been covered during Affiliated Employment.

(c) "Allocation" means the sum of the Company contribution, tax deferred contribution elected by a Profit-Sharing Plan member and the related matching contribution allocated to the accounts of a Profit-Sharing Plan member under the Profit-Sharing Plan for a Plan Year, but shall not include any tax deferred contribution to the Profit-Sharing Plan elected by a Profit-Sharing Plan member for any Plan Year in excess of $7,000 (or such greater amount permitted for such Plan Year in accordance with regulations promulgated by the Secretary of the Treasury or his delegate with respect to arrangements qualified under Section 401(k) of the Internal Revenue Code).

(d) "Average Actual Earnings" means the total Actual Earnings of an employee in the five consecutive Plan Years of Qualifying Employment that provide the highest aggregate of Actual Earnings, divided by five. If an employee's consecutive Plan Years of Qualifying Employment within such period are less than five, "Average Actual Earnings" means his total Actual Earnings during the five Plan Years (or fewer) of Qualifying Employment that provide the highest aggregate of Actual Earnings, divided by the number of such Plan Years of Qualifying Employment and fractions thereof.

(e) "Committee" means the Corporate Employee Benefits Committee of the Company.

(f) "Company" means American Brands, Inc., a Delaware corporation, its successors and assigns. "Prior Company" means American Brands, Inc., a New Jersey corporation organized under an Agreement of Consolidation in 1904.

(g) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

(h) "Executive Participant" means an employee of the Company who is within the category of a select group of management or highly compensated employees as referred to in Sections 201(a)(2), 301(a)(3) and 401(a)(1) of ERISA and who either holds or held the office of a Vice President of the Company or any office senior thereto or, during the current Plan Year or a prior Plan Year, was covered under Article XII of the Company's By-laws or the Company's Management Incentive Plan or any successor programs and is in pay grade M009 or a higher pay grade.

(i) "415 Limitations" means the Retirement Plan and Profit-Sharing Plan provisions adopted pursuant to Section 415 of the Internal Revenue Code to limit (i) annual Retirement Plan benefits pursuant to Section 415(b) thereof, (ii) annual additions to the Profit-Sharing Plan pursuant to Section 415(c) thereof and (iii) the aggregate of annual Retirement Plan benefits and additions to the Profit-Sharing Plan pursuant to Section 415(e) thereof.

(j) "401(a)(17) Limitations" means the Retirement Plan and Profit-Sharing Plan provisions adopted pursuant to Section 401(a)(17) of the Internal Revenue Code to limit compensation considered for purposes of computing Retirement Plan benefits and Profit-Sharing Plan contributions to $150,000 (or such greater amount permitted for such year in accordance with regulations promulgated by the Secretary of the Treasury or his delegate).

(k) "404(l) Limitation" means the limitation imposed by Section 404(l) of the Internal Revenue Code on the maximum tax deductible contribution to the Profit-Sharing Plan.

(l) "Grantor Trust" means a trust for the benefit of an Executive Participant established pursuant to Section 6 to provide for the payment of benefits under this Plan.

(m) "Highly Compensated Employee" means an employee or former employee of the Company who comes within the definition of a highly compensated employee set forth in Section 414(q) of the Internal Revenue Code (or any successor provision) for any Plan Year.

(n) "Normal Retirement Date" means the last day of the calendar month in which a person's 65th birthday occurs.

(o) "Qualifying Employment" means the sum of Service and Affiliated Employment.

(p) "Plan Year" means the calendar year.

(q) "Profit-Sharing Plan" means the Defined Contribution Plan of American Brands, Inc. and Participating Operating Companies, as amended from time to time.

(r) "Retirement Plan" means the Retirement Plan for Employees and Former Employees of American Brands, Inc., as amended from time to time.

(s) "Segregated Account" means an account established with a bank or other financial institution approved by the Company, or other form of segregated account approved by the Company, established pursuant to Section 6 by or for the benefit of an Executive Participant to provide for the payment of benefits under this Plan.

(t) "Service" means employment by the Company or the Prior Company.

(u) "Surviving Spouse" means the surviving husband or wife of an employee of the Company who has been married to the employee throughout the one-year period ending on the date of the death of such employee.

(v) "Tax Deferred Contributions" means salary reduction contributions elected to be made to the Profit-Sharing Plan pursuant to Section 401(k) of the Internal Revenue Code.

Section 3. SUPPLEMENTAL RETIREMENT BENEFITS. (a) Each person who was at any time a Highly Compensated Employee and to whom benefits become payable under the Retirement Plan shall be paid a supplemental annual retirement benefit under this Plan equal in amount to the difference between (i) the benefit paid under the Retirement Plan and the Affiliated Plans and (ii) the benefit that would be payable if the 401(a)(17) Limitations and the 415 Limitations were not contained therein; provided, however, that for purposes of computing the amount of benefit under this Plan, years of Qualifying Employment shall not exceed 35. If such a Highly Compensated Employee's Surviving Spouse is entitled to a pre-retirement spouse's benefit under the Retirement Plan and subject to Section 6, the Surviving Spouse shall be paid a benefit hereunder equal to the difference between (i) the spouse's benefit payable under the Retirement Plan and the Affiliated Plans and (ii) the spouse's benefit that would be payable if the 401(a)(17) Limitations and the 415 Limitations were not contained therein.

(b) Each Executive Participant who at any time held the office of Vice President of the Company, or any office senior thereto, shall retire hereunder at the date of his termination of employment and be paid a supplemental annual retirement benefit under this Plan equal to 52 1/2% of the Executive Participant's Average Actual Earnings reduced (i) for an Executive Participant who retires prior to Normal Retirement Date with less than 35 years of Qualifying Employment by 1 1/2% of Average Actual Earnings for each year and fraction thereof that the Executive Participant's retirement date precedes Normal Retirement Date and further reduced (ii) by benefits payable under the Retirement Plan, the Affiliated Plans and the defined benefit pension plans of any other prior employer and supplemental retirement benefits payable under paragraphs (a) and (d) of this Section 3. If a pre-retirement spouse's benefit is payable under the Retirement Plan to the Surviving Spouse of an Executive Participant who at any time before death held the office of Vice President of the Company, or any office senior thereto, or if an Executive Participant who held such office dies before supplemental retirement benefits commence with a Surviving Spouse eligible for a spouse's benefit under the Retirement Plan, the Surviving Spouse shall be paid a benefit hereunder, subject to Section 6, equal to the difference between (i) the spouse's benefit payable under the Retirement Plan and the Affiliated Plans and (ii) the spouse's benefit that would have been payable if the Participant's benefit had been calculated in accordance with the formula set forth in the first sentence of this paragraph (b) of this Section 3 (prior to any reduction for calculating the spouse's benefit).

(c) Subject to Section 6, the supplemental retirement benefits provided by this Plan shall be paid to the Executive Participant or Highly Compensated Employee (or to any beneficiary designated by him in accordance with the Retirement Plan, or to his Surviving Spouse if eligible for a spouse's benefit under the Retirement Plan) concurrently with the payment of the benefits payable under the Retirement Plan and in a form permitted thereby. In the event the supplemental retirement benefit commences prior to Normal Retirement Date or is payable in a form other than an annuity for the life of the former employee only, the supplemental retirement benefit shall be adjusted to the same extent as under the Retirement Plan. The Committee may, however, direct that the supplemental retirement benefit payable with respect to a former employee be paid as an actuarially equivalent single sum payment (and shall direct that any supplemental retirement benefit with a present value of less than $3,500 shall be paid as an actuarially equivalent single sum payment), provided that (except for a distribution to pay taxes as provided in Section 5 and except as provided in Section 6) no such payment may be made prior to termination of Qualifying Employment or prior to the date that benefits may become payable under the Retirement Plan. In determining actuarial equivalency of a single sum payment in cash, there shall be used 120% of the applicable monthly immediate annuity purchase interest rate which would be used by the Pension Benefit Guaranty Corporation for the purpose of determining the present value of a single sum distribution on plan termination and the mortality table used at the time under the Retirement Plan for funding purposes.

(d) Each Executive Participant shall be paid a supplemental annual retirement benefit under this Plan equal in amount to the difference between (i) the benefit paid under the Retirement Plan and (ii) the benefit that would have been payable under the Retirement Plan if the Executive Participant had accrued a benefit thereunder for his full period of Service (not in excess of 35 years). If a pre-retirement spouse's benefit is payable under the Retirement Plan to the Surviving Spouse of an Executive Participant, or if an Executive Participant dies before the benefits payable hereunder commence with a Surviving Spouse eligible for a spouse's benefit under the Retirement Plan, the Surviving Spouse shall be paid a benefit hereunder, subject to Section 6, equal to the difference between (i) the spouse's benefit payable under the Retirement Plan and (ii) the spouse's benefit that would have been payable if the Participant's benefit had been calculated in accordance with the formula set forth in the first sentence of this paragraph (d) of this Section 3 (prior to any reduction for calculating the spouse's benefit). The benefit provided by this paragraph (d) of this Section 3 shall be forfeitable if the Participant's Retirement Plan benefit is forfeitable.

Section 4. SUPPLEMENTAL PROFIT-SHARING BENEFITS. (a) In the event that the Allocation under the Profit-Sharing Plan is limited by the 401(a)(17) Limitations and the 415 Limitations for 1987 or any subsequent Plan Year for a Highly Compensated Employee, the Highly Compensated Employee shall receive a supplemental profit-sharing award under this Plan for such Plan Year equal to the difference between (i) the Allocation actually made to the Highly Compensated Employee and (ii) the Allocation that would have been made to the Profit-Sharing Plan for such Plan Year if the 401(a)(17) Limitations and the 415 Limitations were not contained therein. In addition, in the event the contribution to the Profit-Sharing Plan for any Plan Year is limited by the 404(l) Limitation, each Highly Compensated Employee shall receive a supplemental profit-sharing award under this Plan for such Plan Year equal to the difference between (i) the Allocation actually made to the Highly Compensated Employee and (ii) the Allocation that would have been made to the Profit-Sharing Plan for such Plan Year for such Highly Compensated Employee if the contribution to the Profit-Sharing Plan was not limited by the 404(l) Limitation.

(b) Except as provided in Section 6, the award for any Plan Year shall be made as of the first day of the following year and shall be deemed to be thereafter invested in an interest bearing investment selected by the Trusts Investment Committee (or successor committee) of the Company. The amount of a Highly Compensated Employee's or Executive Participant's supplemental profit-sharing benefits under this Plan shall be the aggregate amount of such awards together with any deemed investment gain thereon and less any deemed investment loss.

(c) Supplemental profit-sharing awards and deemed investment gain thereon shall be fully vested and nonforfeitable.

(d) Supplemental profit-sharing plan benefits shall be paid by a single sum payment as soon as practicable following termination of Qualifying Employment, subject to Section 6.

(e) Subject to Section 6, a Highly Compensated Employee may designate a beneficiary to receive the unpaid portion of his supplemental profit-sharing benefits in the event of his death. The designation shall be made in a writing filed with the Committee on a form approved by it signed by the Highly Compensated Employee. If no effective designation of beneficiary shall be on file with the Committee when supplemental profit-sharing benefits would otherwise be distributable to a beneficiary, then such benefits shall be distributed to the spouse of the Highly Compensated Employee or, if there is no spouse, to the executor of the will or the administrator of his estate or, if no such executor or administrator shall be appointed within six months after his death, the Committee shall direct that distribution be made, in such shares as the Committee shall determine, to the child, parent or other blood relative of such Highly Compensated Employee or to such other person or persons as the Committee may determine.

Section 5. FUNDING. Benefits under this Plan shall not initially be funded in order that the Plan may be exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA. The Committee shall maintain records of supplemental profit-sharing awards and supplemental tax deferred amounts and related Company matching awards pursuant to Section 7 and the assumed investment thereof and records for the calculation of supplemental retirement benefits. The Company may, however, segregate assets which are intended to be a source for payment of benefits hereunder for Executive Participants. In the event benefits are hereafter determined to be taxable for Executive Participants prior to actual receipt thereof and subject to Section 6, a payment shall be made to such Executive Participants in an amount sufficient to pay such taxes notwithstanding that the Executive Participant may not then have terminated Qualifying Employment or that the payment is being made prior to the date that benefits would otherwise be paid under the Retirement Plan. Amounts so paid shall then be used as an offset to the supplemental retirement and profit-sharing benefits, if any, thereafter payable which shall also be paid in an actuarially equivalent lump sum (calculated as set forth in Section 3(d)) promptly upon the later of termination of Qualifying Employment or attainment of age 55.

Section 6. GRANTOR TRUSTS AND SEGREGATED ACCOUNTS. Notwithstanding Section 5 of this Plan, the Company may provide for the establishment of Grantor Trusts and Segregated Accounts by or for the benefit of individual Executive Participants to provide for the payment of benefits (other than supplemental tax deferred amounts and related Company matching awards pursuant to Section 7) under this Plan, consistent with the following provisions:

(a) The Trustee of the Grantor Trusts shall be a bank or trust company approved by the Company and established under the laws of the United States or a state within the United States and having either total assets of at least $15 billion or trust assets of at least $25 billion. Each Grantor Trust shall be established pursuant to a trust agreement having terms and provisions approved by the Company and consistent with this Section. The Grantor Trust shall be solely for the purpose of providing benefits under the Plan with respect to the Executive Participant, and neither the Company nor any creditors of the Company shall have any interest in the assets of the Grantor Trust. The Company shall be the administrator of the Grantor Trust, and shall have such powers as are granted by the trust agreement.

(b) The Company shall pay the fees and expenses of the Trustee and all the expenses for the management and administration of each Grantor Trust and Segregated Account for all periods prior to the Executive Participant's termination of employment, and for a period of sixty (60) days thereafter and for any further period as may be authorized by the Company, and shall indemnify the Executive Participant against any liability or cost in respect thereof, including any tax liabilities or costs.

(c) Each Segregated Account shall be a savings or other type of account approved by the Company established with a bank or trust company approved by the Company and established under the laws of the United States or a state within the United States and having either total assets of at least $15 billion or trust assets of at least $25 billion, or other form of segregated account with such a bank or trust company or other financial institution approved by the Company, in each case with such terms and provisions as are approved by the Company and consistent with this Section.

(d) The Company may from time to time make contributions to either the Grantor Trust, or Segregated Account if directed by an Executive Participant, in amounts which when added to the existing balances in the Executive Participant's Grantor Trust and Segregated Account will be approximately equal to the present value of the after tax equivalent of the Executive Participant's accrued benefits under Sections 3 and 4.

(e) As promptly as practicable after the Executive Participant's termination of employment, whether by retirement, death or otherwise, the Company may make a final contribution to the Executive Participant's Grantor Trust, or Segregated Account if directed by the Executive Participant, in an amount which when added to the existing balances in the Executive Participant's Grantor Trust and Segregated Account, will be equal to (i) the sum of the present value of the after tax equivalent of (A) if the termination of employment is not by reason of the death of the Executive Participant, the Executive Participant's benefit under Section 3, or if the termination of employment is by reason of the death of the Executive Participant, the Executive Participant's benefit under Section 3 immediately prior to his death and (B) the Executive Participant's supplemental profit-sharing benefit under Section 4, offset by (ii) any amounts previously actually withdrawn by the Executive Participant from his Grantor Trust or Segregated Account and income which would have been earned thereon, calculated as provided in paragraph (k) of this Section 6.

(f) Amounts in a Grantor Trust or Segregated Account shall be invested separately as to amounts representing the Executive Participant's supplemental retirement benefit under Section 3 and the Executive Participant's supplemental profit-sharing benefit under Section 4. Supplemental retirement benefit amounts invested in a Grantor Trust shall be invested solely in the Chase Manhattan Fixed Income Fund to the extent practicable and otherwise in the Chase Manhattan Personal Trust Market Rate Account. Supplemental profit-sharing benefit amounts invested in a Grantor Trust shall be invested in one or more of (i) the Vista U.S. Government Income Fund, (ii) the Vista Balanced Fund, (iii) the Chase Manhattan Personal Trust Market Rate Account or (iv) the Chase Manhattan Equity Income Fund, in such portions as are elected by the Executive Participant on a written election form approved by and filed with the Committee, all to the extent practicable and otherwise in the Chase Manhattan Personal Trust Market Rate Account. The Executive Participant may change such election at any time by filing a new written election form with the Committee. The Committee shall promptly notify the Trustee as to any such elections or changes therein. Supplemental retirement benefit amounts and supplemental profit-sharing benefit amounts invested in a Segregated Account shall be invested solely in the Chase Manhattan Personal Trust Market Rate Account. In lieu of the calculation of investment gain or loss on supplemental profit-sharing awards prescribed by Section 4(b), an Executive Participant's profit-sharing benefit under Section 4 shall include the actual investment gain or loss on supplemental profit-sharing benefit amounts invested in accordance with this paragraph (f).

(g) The Executive Participant may designate a beneficiary to receive amounts held in his Grantor Trust in the event of his death. The designation shall be made in a writing filed with the Committee on a form approved by it and signed by the Executive Participant. The Committee shall notify the Trustee as to any such designation or changes therein. The provisions of Section 3(a), (b), (c) and (d) and Section 4(e), providing for the payment of benefits to the Surviving Spouse of the Executive Participant, or other person designated by the Executive Participant or the Committee, in the event of the death of the Executive Participant, shall not apply to amounts in the Executive Participant's Grantor Trust or Segregated Account.

(h) The Company shall make payments to the Executive Participant (or his beneficiary) from time to time in the approximate amounts required to compensate the Executive Participant (or his beneficiary) for additional federal, state and local taxes on income resulting from the inclusion in the Executive Participant's or beneficiary's taxable income of contributions to the Executive Participant's Grantor Trust and Segregated Account, the final payment pursuant to paragraph (e) of this Section 6, and the income of the Grantor Trust and Segregated Account for periods prior to termination of employment (including amounts paid by the Company pursuant to paragraphs (b) and (e)) of this Section 6.

(i) An Executive Participant may elect to transfer all or any portion of the funds in his Grantor Trust to his Segregated Account, or to transfer all or any portion of the funds in his Segregated Account to his Grantor Trust, upon written notice of not less than sixty (60) days to the Company and the Trustee and the financial institution with which the Segregated Account is established.

(j) An Executive Participant may withdraw all or any portion of the funds in his Grantor Trust or Segregated Account at any time upon not less than sixty (60) days' written notice to the Company and to the Trustee, or the financial institution with which the Segregated Account is established, as the case may be.

(k) Benefits payable to an Executive Participant or Surviving Spouse or other beneficiary under Sections 3 and 4 shall be offset by the pre-tax equivalent of amounts in the Executive Participant's Grantor Trust and Segregated Account at the time of the Executive Participant's termination of employment, including any final contribution or payment pursuant to paragraph (e) of this Section 6, and by the present value of the pre-tax equivalent of any amounts withdrawn by the Executive Participant from his Grantor Trust or Segregated Account, plus the amounts of income which would have been earned on such withdrawn amounts from the time of withdrawal until the time of termination of employment, calculated by applying an earnings rate equal to the after-tax equivalent of 120% of the applicable monthly immediate annuity purchase interest rate which would be used by the Pension Benefit Guaranty Corporation from time to time during such periods for the purpose of determining the present value of a single sum distribution on plan termination.

(l) The Grantor Trust shall terminate upon the expiration of sixty (60) days following the termination of employment of the Executive Participant, unless continued by agreement between the Executive Participant and the Trustee.

(m) Upon the making of the final contribution or other payment pursuant to paragraph (e) of this Section 6, and the payment pursuant to paragraph (h) of this Section 6 in respect of additional taxes resulting from such final contribution or payment, the Company shall have no further liability for benefits otherwise payable under Sections 3 and 4 to the Executive Participant or his Surviving Spouse, estate or other beneficiaries.

(n) The provisions of this Section 6 shall supersede the provisions of any other Section of this Plan to the extent such other provisions might be considered to conflict with the provisions of this Section 6.

SECTION 7. SUPPLEMENTAL TAX DEFERRED AMOUNTS AND RELATED COMPANY MATCHING AWARDS. (a) A Highly Compensated Employee who is a participant in the Profit-Sharing Plan and whose Tax Deferred Contributions are limited by the 40l(a)(17) Limitations may elect that the Company reduce his compensation and credit him with a supplemental tax deferred amount under this Plan for any Plan Year equal to the difference between (i) an amount up to the maximum Tax Deferred Contribution that the Highly Compensated Employee could have elected to be made to the Profit-Sharing Plan but for the 40l(a)(17) Limitations and (ii) the maximum Tax Deferred Contribution that the Highly Compensated Employee could have elected to be made to the Profit-Sharing Plan with his compensation subject to the 40l(a)(17) Limitations; provided that the sum of the Tax Deferred Contributions to the Profit-Sharing Plan and the supplemental tax deferred amount credited under this Plan for a Highly Compensated Employee for any Plan Year shall not exceed the limitation set forth in Section 402(g) of the Internal Revenue Code, or any successor provision, for such Plan Year.

(b) A Highly Compensated Employee who is credited with a supplemental tax deferred amount under Section 7(a) shall also be credited with a related Company matching award equal to 50% of his supplemental tax deferred amount for any Plan Year.

(c) An election by a Highly Compensated Employee pursuant to paragraph (a) must be made by filing a form approved by the Committee with the Committee no later than the beginning of the Plan Year for which the election is to be effective specifying the amount of the supplemental tax deferred amount elected; provided that if a Highly Compensated Employee does not become eligible to elect Tax Deferred Contributions to the Profit-Sharing Plan until after the first day of a Plan Year, the Highly Compensated Employee may file his election pursuant to paragraph (a) for such Plan Year with the Committee no later than the effective date of the Highly Compensated Employee's eligibility to make Tax Deferred Contributions. An election pursuant to this paragraph will continue in effect for subsequent Plan Years unless changed by the Highly Compensated Employee by filing a form approved by the Committee with the Committee prior to the beginning of the Plan Year for which such change is to be effective. The election shall be irrevocable for any Plan Year.

(d) The supplemental tax deferred amounts and Company matching awards pursuant to this Section 7 shall be deemed to have been made as of the first day of the Plan Year for which the election made pursuant to paragraph (c) is effective and shall be deemed to be thereafter invested in an interest bearing investment selected by the Trusts Investment Committee (or successor committee) of the Company. The amount of a Highly Compensated Employee's supplemental tax deferred amounts and related Company matching award benefits under this Plan shall be the aggregate amount of such awards together with any deemed investment gain thereon and less any deemed investment loss.

(e) Supplemental tax deferred amounts and related Company matching awards under this Plan and deemed investment gain thereon shall be fully vested and nonforfeitable.

(f) Benefits under this Section 7 shall be paid by a single sum cash payment as soon as practicable following termination of Qualifying Employment.

(g) A Highly Compensated Employee may designate a beneficiary to receive the unpaid portion of his supplemental tax deferred contribution amounts and related Company matching award benefits in the event of his death. The designation shall be made in a writing filed with the Committee on a form approved by it and signed by the Highly Compensated Employee. If no effective designation of beneficiary shall be on file with the Committee when benefits under this Section 7 would otherwise be distributable to a beneficiary, then such benefits shall be distributed to the spouse of the Highly Compensated Employee or if there is no spouse, to the executor of the will or the administrator of his estate or, if no such executor or administrator shall be appointed within six months after his death, the Committee shall direct that distribution be made, in such shares as the Committee shall determine, to the child, parent or other blood relative of such Highly Compensated Employee or to such other person or persons as the Committee may determine.

Section 8. ADMINISTRATION. This Plan shall be administered by the Committee. All decisions and interpretations of the Committee shall be conclusive and binding on the Company and Highly Compensated Employees and Executive Participants. The Plan may be amended or terminated by the Board of Directors of the Company at any time; provided, however, that no such amendment or termination shall deprive any Highly Compensated Employee or Executive Participant of supplemental retirement or profit-sharing plan benefits accrued to the date of such amendment or termination or modify the last two sentences of Section 5 in a manner adverse to any Executive Participant; and provided further, however, that the Plan shall not be amended without approval of the stockholders of the Company if such amendment would materially increase the cost of the Plan to the Company.

Section 9. NONASSIGNABILITY. Subject to Section 6, no Highly Compensated Employee or Executive Participant shall have the right to assign, pledge or otherwise dispose of any benefits payable to him hereunder nor shall any benefit hereunder be subject to garnishment, attachment, transfer by operation of law, or any legal process.

EXHIBIT 10c2

AMERICAN BRANDS, INC. TRUST AGREEMENT

THIS AGREEMENT, made as of the second day of January, 1991, among AMERICAN BRANDS, INC., a Delaware corporation (the "Company"), THE CHASE MANHATTAN BANK (National Association), incorporated under the laws of the United States of America (the "Trustee") and HEWITT ASSOCIATES, a partnership formed under the laws of Illinois (the "Trustee's Contractor").

W I T N E S S E T H :

WHEREAS, the Company expects to incur certain unfunded retirement income liability to or with respect to GILBERT L. KLEMANN, II (the "Executive") pursuant to the terms of the Company's Supplemental Retirement Plan (including the supplemental profit-sharing provisions therein) (herein referred to as the "Plan"); and

WHEREAS, the Board of Directors of the Company on November 27, 1990 adopted resolutions providing for retirement benefits to the Executive (such retirement benefits being herein referred to as the "Retirement Arrangement"); and

WHEREAS, the Company desires to provide additional assurance to the Executive and his surviving spouse, if any, beneficiaries or estate under the Plan (collectively, the "Beneficiaries") that their unfunded rights under the Plan

and the Retirement Arrangement will in the future be met or substantially met by application of the procedures set forth herein; and

WHEREAS, the Company wishes to establish a trust with respect to the Executive in order to provide a source of payments as such payments are required under the terms of the Plan and the Retirement Arrangement;

NOW, THEREFORE, in consideration of the premises and mutual and independent promises herein, the parties hereto covenant and agree as follows:

ARTICLE I

1.1 The Company hereby establishes with the Trustee a Trust consisting of such sums of money and such property acceptable to the Trustee as shall from time to time be paid or delivered to the Trustee and the earnings and profits thereon. All such money and property, all investments made therewith and proceeds thereof, less the payments or other distributions which, at the time of reference, shall have been made by the Trustee, as authorized herein, are referred to herein as the "Fund" and shall be held by the Trustee, IN TRUST, in accordance with the provisions of this Agreement.

1.2 The Trustee shall hold, manage, invest and otherwise administer the Fund pursuant to the terms of this Agreement. The Trustee shall be responsible only for contributions actually received by it hereunder and shall have no responsibility for the correctness of the amount thereof. Upon the establishment of this Trust, and from time to time thereafter, the Company shall contribute to the Trust such amount in cash as the Company shall determine to be appropriate to provide a source of the payments required under the terms of the Plan and the Retirement Arrangement. It is contemplated that the initial contribution by the Company shall be in an amount not less than (i) the present value of the aggregate maximum benefits that would be due to the Executive or his Beneficiaries as of such date under the retirement provisions of the Plan and the Retirement Arrangement and (ii) the amount to which the Executive or his Beneficiaries would be entitled under the supplemental profit-sharing provisions of the Plan. It is further contemplated that the Company will make additional contributions to the Trust upon the furnishing to the Trustee's Contractor of the annual updated benefit information specified in Section 3.3 in amounts such that the amount of the Fund at such time is not less than the amounts set forth in (i) and (ii) of the preceding sentence. However, the amounts and timing of all such contributions

shall be at the discretion of the Company, and the Company shall have no obligation to make such contributions in any specific amount or at any specific time.

1.3 The Company shall certify to the Trustee, the Trustee's Contractor and the Executive at the time of each contribution to the Fund the amount of such contribution being made in respect of the Executive. The Fund shall be revalued by the Trustee semiannually as of the last business day of each June and December at current market values, as determined by the Trustee, which shall promptly deliver a copy of such semiannual valuation to the Trustee's Contractor. The Trustee's Contractor shall deliver to the Company and the Executive or Beneficiary of the Executive the semiannual statement of the Fund reflecting such revised valuation.

ARTICLE II

2.1 Notwithstanding any provision in this Agreement to the contrary, if at any time while the Trust is still in existence the Company becomes insolvent (as defined herein), the Trustee shall upon written notice thereof suspend the payment of all benefits from the Fund and shall thereafter hold the Fund in suspense until it receives a court order directing the disposition of the Fund; provided, however, the Trustee may deduct or continue to deduct its

fees and expenses and other expenses of the Trust, including taxes and the Trustee's Contractor's fees and expenses, pending the receipt of such court order. The Company shall be considered to be insolvent if (a) it is unable to pay its debts as they fall due or (b) bankruptcy or insolvency proceedings are initiated by its creditors or the Company or any third party under the Bankruptcy Act of the United States or the bankruptcy laws of any state alleging that the Company is insolvent or bankrupt. By its approval and execution of this Agreement, the Company represents and agrees that its Board of Directors and Chief Executive Officer, as from time to time acting, shall have the responsibility to give to the Trustee prompt written notice of any event of the Company's insolvency and the Trustee shall be entitled to rely thereon to the exclusion of all directions or claims to pay benefits thereafter made. Absent such notice, the Trustee shall have no responsibility for determining whether the Company has become insolvent. If after an event of insolvency, the Company later becomes solvent without the entry of a court order concerning the disposition of the Fund, the Company shall by written notice so inform the Trustee and the Trustee shall thereupon resume all its duties and responsibilities under this Agreement without regard to this Section 2.1 until and unless the Company again becomes insolvent as such term is defined herein. If the Trustee has suspended payments

pursuant to this Section 2.1 and thereafter resumes payments pursuant to a court order or notice from the Company as set forth in the preceding sentence, any benefits payable with respect to the Executive that have not been paid during the period of suspension shall then immediately be paid together with interest thereon calculated on the basis of the return earned during such period of suspension by The Chase Market Rate Account (or similar investment vehicle of The Chase Manhattan Bank if The Chase Market Rate Account is changed).

2.2 The Company represents and agrees that the Trust established under this Agreement does not fund and is not intended to fund the Plan, the Retirement Arrangement, or any other employee benefit plan or program of the Company. Such Trust is and is intended to be a depository arrangement with the Trustee for the setting aside of cash and other assets of the Company for the meeting of part or all of its future obligations to the Executive and his Beneficiaries under the Plan and the Retirement Arrangement. Contributions by the Company to this Trust shall be in respect of only the Executive. The purpose of this Trust is to provide a fund from which benefits may be payable under the Plan and the Retirement Arrangement and as to which the Executive and his Beneficiaries may, by exercising the procedures set forth herein, have access to some or all of their benefits as such become due without having the payment of such benefits

subject to the administrative control of the Company unless the Company becomes insolvent as defined in Section 2.1. The Company further represents that the Plan is a deferred compensation plan for a select group of management and highly compensated employees and as such is exempt from the application of the Employee Retirement Income Security Act of 1974 ("ERISA") except for the disclosure requirements applicable to such plan for which the Company bears full responsibility as to compliance. The Company further represents that the Plan is not qualified under Section 401 of the United States Internal Revenue Code and therefore is not subject to any of the Code requirements applicable to tax-qualified plans.

ARTICLE III

3.1 By its acceptance of this Trust the Trustee hereby agrees to the designation by the Company of Hewitt Associates as the contractor of the Trustee ("Trustee's Contractor") under this Agreement. It is herein recognized that said Trustee's Contractor is also acting as the independent consulting actuary of the Company with respect to the Plan and that the Trustee shall have no responsibility hereunder for the continued retention of Hewitt Associates, or any responsibility assigned to the Trustee's Contractor or its performance thereof so long as said firm continues to be

the Company's independent consulting actuary. In the event the Company replaces or no longer uses said firm as its independent consulting actuary, the Trustee in its sole discretion may, but need not, designate a new Trustee's Contractor or may continue to use the same Trustee's Contractor; or in the event said firm does not accept its designation as Trustee's Contractor or accepts said designation and subsequently resigns, the Trustee shall designate the Trustee's Contractor or a new Trustee's Contractor; provided, however, any Trustee's Contractor appointed by the Trustee shall be independent of the Company. A Trustee's Contractor appointed by the Trustee must be a national actuarial consulting firm or a "Big 6" accounting firm or other national accounting firm. In the event any such firm refuses to act as the Trustee's Contractor, the Trustee shall appoint as the Trustee's Contractor a law firm of at least l00 lawyers. The Company shall pay to the Trustee's Contractor all fees and expenses of the Trustee's Contractor and shall indemnify and hold the Trustee harmless for any actions or omissions of said Trustee's Contractor and shall indemnify and hold the Trustee's Contractor harmless for any actions or omissions of the Trustee. Such fees and expenses shall be a charge on the Fund and shall constitute a lien in favor of the Trustee's Contractor until paid by the Company. The Trustee's

Contractor shall be paid for its services at rates comparable to the rates the Trustee's Contractor charges for comparable services to its other clients.

3.2 Except for the records dealing solely with the Fund and its investment, which shall be maintained by the Trustee, the Trustee's Contractor shall maintain all the Executive's records contemplated by this Agreement, including records of the Executive's compensation and benefits from the Company, the amount of his benefits accrued under the Plan and the Retirement Arrangement, the Executive's Beneficiary designation, the Company's contributions to the Fund and such other records as may be necessary for determining the amount payable to the Executive or his Beneficiary under the Plan and the Retirement Arrangement. All such records shall be made available promptly upon the request of the Trustee, the Executive or his Beneficiary or the Company. The Trustee's Contractor shall also prepare and distribute the Executive's annual estimated benefit statements specified in Section 3.3 and shall be responsible for information with respect to payments to the Executive and his Beneficiaries and shall perform such other duties and responsibilities as the Company or the Trustee determines is necessary or advisable to achieve the objectives of this Agreement.

3.3 Upon the establishment of this Trust or as soon thereafter as practicable, the Company shall furnish to

the Trustee's Contractor all the information necessary in order for the Trustee's Contractor to determine the benefits payable to or with respect to the Executive including any benefits payable after the Executive's death and the recipient of same and the amount of any applicable federal, state or local withholding taxes with respect thereto. The Company shall regularly, at least annually by March 3l of each year, furnish revised updated information to the Trustee's Contractor. Based on the foregoing information the Trustee's Contractor shall prepare an annual estimated benefits statement in respect of the Executive and shall furnish a copy of same to the Executive or his Beneficiary and to the Company by no later than May 15 of each year. In the event the Company refuses or neglects to provide updated Executive information, as contemplated herein, the Trustee's Contractor shall be entitled to rely upon information furnished to it by the Executive.

3.4 Upon the direction of the Company or upon the application of the Executive or Beneficiary of a deceased Executive by submission of a Payment Demand Notice in the form attached hereto as Schedule A, a copy of which shall be delivered by the Trustee's Contractor to the Company, the Trustee's Contractor shall prepare and deliver to the Trustee within thirty days of receipt of such direction or application a certification to the Trustee that the

Executive's benefits under the Plan and the Retirement Arrangement have become payable, and shall deliver a copy of such certification to the Company and to the Executive or Beneficiary. In preparing such certification, the Trustee's Contractor shall obtain updated information from the Company for calculating benefits under the Plan and the Retirement Arrangement. In the event the Company refuses or neglects to provide updated information, the Trustee's Contractor shall be entitled to rely upon information furnished to it by the Executive. Such certification shall include the amount of such benefits, including benefits referred to in Section 11.8, the manner of payment and the name, address and social security number of the recipient. No later than five days after the receipt of such certification from the Trustee's Contractor and appropriate federal, state and local tax withholding information provided by the Company, the Trustee shall commence cash distributions from the Fund in accordance therewith to the person or persons so indicated and shall distribute to the Company for remittance to the appropriate taxing authority the amounts of any taxes required to be withheld, and the Trustee's Contractor shall charge the Fund therefor. The Company shall have full responsibility for the proper remittance of all withholding taxes to the appropriate taxing authority and shall furnish the Executive or his Beneficiary, the Trustee's Contractor and the Trustee with

the appropriate tax information form reporting the amounts of such distributions and any withholding taxes. The certification by the Trustee's Contractor shall also be updated annually upon receipt by the Trustee's Contractor of updated benefit information from the Company (or the Executive in the event of the failure of the Company to provide such information) and the annual updated certification shall be delivered to the Company and the Executive or his Beneficiary. The benefits payable in respect of the updated certificate shall be adjusted to the extent, if any, set forth in the certificate.

3.5 Upon the payment of all Company liabilities under the Plan and the Retirement Arrangement to the Executive and Beneficiaries, the Trustee's Contractor shall prepare a certification to the Trustee, the Executive or his Beneficiary and to the Company, and the Trustee shall thereupon hold or distribute the Fund in accordance with the written instructions of the Company. At no time prior to the Company's insolvency, as defined in Section 2.1, or the payment of all liabilities of the Company under the Plan and the Retirement Arrangement in respect of the Executive and his Beneficiaries shall any part of the Fund revert to the Company. The Trustee and the Trustee's Contractor shall have no responsibility for determining whether the Executive or his Beneficiary has died and shall be entitled to rely upon

information furnished by the Company or, in the absence of such information from the Company, from the Beneficiary.

3.6 Nothing provided in this Agreement shall relieve the Company of its liabilities to pay the benefits provided under the Plan and the Retirement Arrangement except to the extent such liabilities are met by application of Fund assets. The Company, therefore, agrees that all income, deductions and credits of the Fund belong to it as owner for income tax purposes and will be included on the Company's income tax returns.

ARTICLE IV

4.1 The Company shall provide the Trustee's Contractor with a complete copy of the Plan and the Retirement Arrangement and all amendments thereto and of the resolutions of the Board of Directors of the Company approving the Plan and the Retirement Arrangement and all amendments thereto, promptly upon their adoption. After the execution of this Agreement, the Company shall promptly file with the Trustee and the Trustee's Contractor a certified list of the names and specimen signatures of the officers of the Company and any delegee authorized to act for it. The Company shall promptly notify the Trustee and the Trustee's Contractor of the addition or deletion of any person's name to or from such list, respectively. Until receipt by the

Trustee or the Trustee's Contractor of notice that any person is no longer authorized so to act, the Trustee or the Trustee's Contractor may continue to rely on the authority of the person. All certifications, notices and directions by any such person or persons to the Trustee or the Trustee's Contractor shall be in writing signed by such person or persons. The Trustee and the Trustee's Contractor may rely on any such certification, notice or direction purporting to have been signed by or on behalf of such person or persons that the Trustee or the Trustee's Contractor believes to have been signed thereby. The Trustee and the Trustee's Contractor may rely on any certification, notice or direction of the Company that the Trustee or the Trustee's Contractor believes to have been signed by a duly authorized officer or agent of the Company. The Trustee and the Trustee's Contractor shall have no responsibility for acting or not acting in reliance upon any notification believed by the Trustee or the Trustee's Contractor to have been so signed by a duly authorized officer or agent of the Company. The Company shall be responsible for keeping accurate books and records with respect to the Executive, his compensation and his rights and interests in the Fund under the Plan and the Retirement Arrangement.

4.2 The Company shall indemnify and hold harmless the Trustee for any liability or expenses, including without

limitation advances for or prompt reimbursement of reasonable fees and expenses of counsel and other agents retained by it, incurred by the Trustee with respect to holding, managing, investing or otherwise administering the Fund, other than by its negligence or willful misconduct.

4.3 The Company shall indemnify and hold harmless the Trustee's Contractor for any liability or expenses, including without limitation advances for or prompt reimbursement of reasonable fees and expenses of counsel and other agents retained by it, incurred by the Trustee's Contractor with respect to keeping the records for the Executive's benefit calculations, reporting thereon to the Executive, certifying benefit information to the Trustee, determining the status of the Fund and benefits hereunder and otherwise carrying out its obligations under this Agreement, other than those resulting from the Trustee's Contractor's negligence or willful misconduct.

ARTICLE V

5.1 The Trustee shall not be liable in discharging its duties hereunder, including without limitation its duty to invest and reinvest the Fund, if it acts in good faith and in accordance with the terms of this Agreement and any applicable federal or state laws, rules or regulations.

5.2 The Trustee is hereby appointed as the investment manager of the Fund. In the event that the

Trustee cannot serve as investment manager of the Fund, the Trustee shall then select Pacific Investment Management Company as investment manager; provided that if Pacific Investment Management Company is unwilling or unable to act as investment manager, the Trustee shall select J.P. Morgan Investment Management Inc. as investment manager. The investment manager shall invest the assets of the Fund solely in liquid short-term debt instruments which are (a) direct obligations of the United States (but limited to maturities which do not exceed one year from date of purchase), (b) securities guaranteed as to principal and interest by the United States (but limited to maturities which do not exceed six months from date of purchase), (c) certificates of deposit of banks, including The Chase Manhattan Bank, having total assets of at least $15 billion and having a certificate of deposit or commercial paper rating of A-1 from Standard & Poor's Corporation or P-1 from Moody's Investment Services, Inc. (but limited to maturities of less than 100 days from date of purchase), (d) commercial paper having a rating of A-1 from Standard and Poor's Corporation or P-1 from Moody's Investment Services, Inc. (but limited to maturities of less than 100 days from date of purchase) or (e) any money market vehicle of similar quality managed by the Trustee. Subject to such investment restrictions, the Trustee shall have the power and right:

(a) To receive and hold all contributions made to it by the Company; (b) To invest and reinvest all or any portion of the Fund collectively through the medium of any common, collective or commingled trust fund that may be established and maintained by the Trustee, subject to the instrument or instruments establishing such trust fund or funds and with the terms of such instrument or instruments, as from time to time amended, being incorporated into this Agreement to the extent of the equitable share of the Fund in any such common, collective or commingled trust fund; (c) To participate in and use a book-entry system for the deposit and transfer of securities; (d) To sell or exchange any property held by it at public or private sale, for cash or on credit, to grant and exercise options for the purchase or exchange thereof, to exercise all conversion or subscription rights pertaining to any such property and to enter into any covenant or agreement to purchase any property in the future; (e) To participate in any plan of reorganization, consolidation, merger, combination, liquidation or other similar plan relating to property held by it and to consent to or oppose any such plan or any action

thereunder or any contract, lease, mortgage, purchase, sale or other action by any person; (f) To deposit any property held by it with any protective, reorganization or similar committee, to delegate discretionary power thereto, and to pay part of the expenses and compensation thereof and any assessments levied with respect to any such property so deposited; (g) To extend the time of payment of any obligation held by it; (h) To hold uninvested any moneys received by it, without liability for interest thereon, until such moneys shall be invested, reinvested or disbursed; (i) To exercise all voting or other rights with respect to any property held by it and to grant proxies, discretionary or otherwise; (j) For the purposes of the Trust, to borrow money from others, including The Chase Manhattan Bank, to issue its promissory note or notes therefor, and to secure the repayment thereof by pledging any property held by it; (k) To furnish the Company, the Trustee's Contractor and the Executive or his Beneficiaries with such information as may be needed for tax or other purposes;

(l) To employ suitable agents and counsel, who may be counsel to the Company or the Trustee, including, without limitation, Hewitt Associates and Coopers & Lybrand, and to pay their reasonable expenses and compensation from the Fund to the extent not paid by the Company; (m) To cause any property held by it to be registered and held in the name of one or more nominees, with or without the addition of words indicating that such securities are held in a fiduciary capacity, and to hold securities in bearer form; (n) To settle, compromise or submit to arbitration any claims, debts or damages due or owing to or from the Trust, respectively, to commence or defend suits or legal proceedings to protect any interest of the Trust, and to represent the Trust in all suits or legal proceedings in any court or before any other body or tribunal; provided, however, that the Trustee shall not be required to take any such action unless it shall have been indemnified by the Company to its reasonable satisfaction against liability or expenses it might incur therefrom; (o) To organize under the laws of any state a corporation or trust for the purpose of acquiring and holding title to any property which it is authorized to

acquire hereunder and to exercise with respect thereto any or all of the powers set forth herein; and (p) Generally, to do all acts, whether or not expressly authorized, that the Trustee may deem necessary or desirable for the protection of the Fund.

5.3 No person dealing with the Trustee shall be under any obligation to see to the proper application of any money paid or property delivered to the Trustee or to inquire into the Trustee's authority as to any transaction. The Trustee's Contractor's obligations are limited solely to those explicitly set forth herein and the Trustee's Contractor shall have no responsibility, authority or control, direct or indirect, over the maintenance or investment of the Fund and shall have no obligation in respect of the Trustee or the Trustee's compliance with the Trustee's Contractor's certifications to the Trustee.

5.4 The Trustee shall distribute cash from the Fund in accordance with Article III hereof. The Trustee may make any distribution required hereunder by mailing its check for the specified amount to the person to whom such distribution or payment is to be made, at such address as may be specified pursuant to Section ll.7, or if no such address shall have been so furnished, to such person in care of the Company, or (if so directed by the recipient) by crediting the account of such person or by

transferring funds to such person's account by bank or wire transfer.

5.5 If at any time there is no person authorized to act under this Agreement on behalf of the Company, the Board of Directors or the Compensation and Stock Option Committee of the Company shall have the authority to act hereunder.

ARTICLE VI

6.1 The Company shall pay any federal, state or local taxes on the Fund, or any part thereof, and on the income therefrom.

6.2 The Company shall pay to the Trustee its reasonable expenses for the management and administration of the Fund, including without limitation advances for or prompt reimbursement of reasonable expenses of counsel and other agents employed by the Trustee, and reasonable compensation for its services as Trustee hereunder, the amount of which shall be agreed upon from time to time by the Company and the Trustee in writing; provided, however, that if the Trustee forwards an amended fee schedule to the Company requesting its agreement thereto and the Company fails to object thereto within thirty (30) days of its receipt, the amended fee schedule shall be deemed to be agreed upon by the Company and the Trustee. Such expenses and compensation shall be a

charge on the Fund and shall constitute a lien in favor of the Trustee until paid by the Company. In the event that such expenses and compensation of the Trustee, and any fees and expenses of the Trustee's Contractor as provided in Section 3.1, under this Trust and under similar Trusts established by the Company in respect of other Executives of the Company are to be satisfied out of assets of any or all of the several Funds under all such Trusts, such satisfaction shall be in proportion to the assets of each Fund.

ARTICLE VII

7.1 The Trustee shall maintain records with respect to the Fund that show all its receipts and disbursements hereunder. The records of the Trustee with respect to the Fund shall be open to inspection by the Company or its representatives, and the Trustee's Contractor, at all reasonable times during normal business hours of the Trustee and may be audited not more frequently than once each fiscal year by an independent certified public accountant engaged by the Company; provided, however, the Trustee shall be entitled to additional compensation from the Company in respect of audits or auditors' requests which the Trustee determines to exceed the ordinary course of the usual scope of such examinations of its records.

7.2 Within a reasonable time after the close of each fiscal year of the Company (or, in the Trustee's discretion, at more frequent intervals), or of any termination of the duties of the Trustee hereunder, the Trustee shall prepare and deliver to the Company and the Trustee's Contractor a statement of transactions reflecting its acts and transactions as Trustee during such fiscal year, portion thereof or during such period from the close of the last fiscal year or last statement period to the termination of the Trustee's duties, respectively, including a statement of the then current value of the Fund. Any such statement shall be deemed an account stated and accepted and approved by the Company, and the Trustee shall be relieved and discharged, as if such account had been settled and allowed by a judgment or decree of a court of competent jurisdiction, unless protested by written notice to the Trustee within sixty (60) days of receipt thereof by the Company.

The Trustee shall have the right to apply at any time to a court of competent jurisdiction for judicial settlement of any account of the Trustee not previously settled as herein provided or for the determination of any question of construction or for instructions. In any such action or proceeding it shall be necessary to join as parties only the Trustee and the Company (although the Trustee may also join such other parties as it may deem appropriate), and

any judgment or decree entered therein shall be conclusive.

ARTICLE VIII

8.1 The Trustee may resign at any time by delivering written notice thereof to the Company; provided, however, that no such resignation shall take effect until the earlier of (i) sixty (60) days from the date of delivery of such notice to the Company or (ii) the appointment of a successor trustee.

8.2 The Trustee may be removed at any time by the Company, pursuant to a resolution of the Board of Directors of the Company or its Compensation and Stock Option Committee, upon delivery to the Trustee of a certified copy of such resolution and sixty (60) days' written notice of (i) such removal and (ii) the appointment of a successor trustee, unless such notice period is waived in whole or in part by the Trustee.

8.3 Upon the resignation or removal of the Trustee, a successor trustee shall be appointed by the Company. Such successor trustee shall be a bank or trust company established under the laws of the United States or a state within the United States and having either total assets of at least $15 billion or trust assets of at least $25 billion. Such appointment shall take effect upon the delivery to the Trustee of (a) a written appointment of such

successor trustee, duly executed, by the Company and (b) a written acceptance by such successor trustee, duly executed thereby. Any successor trustee shall have all the rights, powers and duties granted the Trustee hereunder.

8.4 If, within sixty (60) days of the delivery of the Trustee's written notice of resignation, a successor trustee shall not have been appointed, the Trustee shall apply to any court of competent jurisdiction for the appointment of a successor trustee.

8.5 Upon the resignation or removal of the Trustee and the appointment of a successor trustee, and after the acceptance and approval of its account, the Trustee shall transfer and deliver the Fund to such successor trustee. Under no circumstances shall the Trustee transfer or deliver the Fund to any successor trustee which is not a bank or trust company having either total assets of at least $15 billion or trust assets of at least $25 billion.

ARTICLE IX

9.1 The Trust established pursuant to this Agreement may not be terminated by the Company prior to the payment of all liabilities with respect to the Executive and his Beneficiaries. Upon receipt by the Company and the Executive or his Beneficiaries of a written certification from the Trustee's Contractor that all liabilities have been

paid with respect to the Executive or his Beneficiaries under the Plan and the Retirement Arrangement, the Company pursuant to a resolution of its Board of Directors or Compensation and Stock Option Committee may terminate the Trust upon delivery to the Trustee and the Executive or his Beneficiaries of (a) a certified copy of such resolution, (b) an original certification of the Trustee's Contractor that all such liabilities have been paid and (c) a written instrument of termination duly executed and acknowledged in the same form as this Agreement.

9.2 Upon the termination of the Trust in accordance with Section 9.1, the Trustee shall, after the acceptance and approval of its account, distribute any remaining portion of the Fund to the Company. Upon completing such distribution, the Trustee shall be relieved and discharged. The powers of the Trustee shall continue as long as any part of the Fund remains in its possession.

ARTICLE X

10.1 This Agreement may be amended, in whole or in part, at any time and from time to time, by the Company with the written consent of the Executive (or the Executive's Beneficiary in the event of the death or incapacity of the Executive) and the Trustee. Any such amendment by the Company shall be pursuant to a resolution of the Board of

Directors or its Compensation and Stock Option Committee by delivery to the Trustee of a certified copy of such resolution and a written instrument duly executed and acknowledged by the Company and the Executive (or the Executive's Beneficiary in the event of the death or incapacity of the Executive) in the same form as this Agreement.

ARTICLE XI

11.1 This Agreement shall be construed and interpreted under, and the Trust hereby created shall be governed by, the laws of the State of New York insofar as such laws do not contravene any applicable federal laws, rules or regulations.

11.2 Neither the gender nor the number (singular or plural) of any word shall be construed to exclude another gender or number when a different gender or number would be appropriate.

11.3 No right or interest of the Executive or his Beneficiary under the Plan, under the Retirement Arrangement or in the Fund shall be transferable or assignable or shall be subject to alienation, anticipation or encumbrance, and no right or interest of the Executive or Beneficiary in the Plan, in the Retirement Arrangement or in the Fund shall be subject to any garnishment, attachment or execution.

Notwithstanding the foregoing, the Fund shall at all times remain subject to claims of creditors of the Company in the event the Company becomes insolvent as provided in Section 2.1.

11.4 The Company agrees that by the establishment of this Trust it hereby foregoes any judicial review of certifications by the Trustee's Contractor as to the benefits payable to any persons hereunder. If a dispute arises as to the amounts or timing of any such benefits or the persons entitled thereto under this Agreement, the Company agrees that such dispute shall be resolved by binding arbitration proceedings initiated in accordance with the rules of the American Arbitration Association and that the results of such proceedings shall be conclusive and shall not be subject to judicial review. It is expressly understood that pending the resolution of any such dispute, payment of benefits shall be made and continued by the Trustee in accordance with the certification of the Trustee's Contractor and that the Trustee and the Trustee's Contractor shall have no liability with respect to such payments. The Company also agrees to pay the entire cost of any arbitration or legal proceeding with respect to the Fund initiated by the Company, the Trustee or the Executive or his Beneficiary in the event the Executive is deceased, including the legal fees of the Trustee or the Executive or his Beneficiary, regardless of

the outcome of such proceeding and until so paid the expenses thereof shall be a charge on and lien against the Fund.

11.5 This Agreement shall be binding upon and inure to the benefit of any successor to the Company or its business as the result of merger, consolidation, reorganization, transfer of assets or otherwise and any subsequent successor thereto. In the event of any such merger, consolidation, reorganization, transfer of assets or other similar transaction, the successor to the Company or its business or any subsequent successor thereto shall promptly notify the Trustee in writing of its successorship and furnish the Trustee and the Trustee's Contractor with the information specified in Section 4.1 of this Agreement. In no event shall any such transaction described herein suspend or delay the rights of the Executive or his Beneficiary in the event the Executive is deceased to receive benefits hereunder.

11.6 This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which shall together constitute only one Agreement.

11.7 All notices and other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when actually delivered to the respective addresses set forth below:

Company: American Brands, Inc. 1700 East Putnam Avenue Old Greenwich, CT 06870-08ll Attn: Secretary

Trustee: The Chase Manhattan Bank 1211 Avenue of the Americas New York, New York 10036 Attn: Trusts and Estates Management Division, 34th Floor

Trustee's Hewitt Associates Contractor: 40 Highland Avenue Rowayton, Connecticut 06853 Attn: Michael Jones

Executive: Gilbert L. Klemann, II 25 Hope Farm Road Greenwich, Connecticut 06830 or at such other address as such person may specify in writing by notice as set forth above to the other persons listed above.

11.8 As and to the extent provided under the Plan and the Retirement Arrangement, in the event the Executive or his Beneficiary is determined to be taxable on any amount in the Fund prior to the time of actual receipt thereof, a distribution shall be made by the Trustee, as directed by the Trustee's Contractor, to the Executive or his Beneficiary in an amount sufficient to pay such tax. An amount in the Fund shall be determined to be taxable upon the receipt of: (a) a final determination by the United States Internal Revenue Service or state or local taxing authority which is not appealed to the courts; (b) a final determination by a court of competent jurisdiction; or (c) an opinion of Chadbourne &

Parke, addressed to the Company, the Trustee and the Executive or his Beneficiary, that amounts in the Fund are taxable to the Executive or a Beneficiary prior to actual receipt thereof. The amount to be distributed shall be the amounts of tax as determined by such taxing authority or court, or as calculated by Chadbourne & Parke in connection with its opinion, as the case may be. Any distributions from the Fund to the Executive or his Beneficiary under this Section 11.8 shall be applied in accordance with the Plan as an offset to the benefits, if any, thereafter payable under the Plan and the Retirement Arrangement.

IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed this second day of January, 1991.

Attest: AMERICAN BRANDS, INC.

Louis F. Fernous, Jr. R.L. Austin Secretary By------Robert L. Austin Senior Vice President and Chief Administrative Officer

Attest: THE CHASE MANHATTAN BANK

Joshua G. G. Mellon William P. Barbeosch Joshua G. G. Mellon By------Assistant Treasurer Vice President

Witness: HEWITT ASSOCIATES

Margaret A. Sisson Michael B. Jones By------

STATE OF CONNECTICUT ) : ss.: Old Greenwich COUNTY OF FAIRFIELD )

Personally appeared Robert L. Austin, Senior Vice President and Chief Administrative Officer of AMERICAN BRANDS, INC., signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such Senior Vice President and Chief Administrative Officer and the free act and deed of said Corporation, before me.

Christine P. Burns ------Notary Public

STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK )

Personally appeared William P. Barbeosch, Vice President of THE CHASE MANHATTAN BANK, signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such Vice President and the free act and deed of said Company, before me.

Digna Rosa ------Notary Public

STATE OF CONNECTICUT ) : ss.: COUNTY OF FAIRFIELD )

Personally appeared Michael B. Jones, Partner of HEWITT ASSOCIATES, signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such Partner and the free act and deed of said HEWITT ASSOCIATES, before me.

Margaret A. Sisson ------Notary Public

Schedule A

Hewitt Associates 40 Highland Avenue Rowayton, Connecticut 06853

Attn: Michael Jones

PAYMENT DEMAND NOTICE

NAME OF EXECUTIVE: GILBERT L. KLEMANN, II

ADDRESS: 25 Hope Farm Road Greenwich, Connecticut 06830

PHONE: (203) 869-0835

The undersigned hereby demands payment of the amount to which he is entitled under the Plan and the Retirement Arrangement pursuant to the Trust Agreement dated as of January 2, 1991 among AMERICAN BRANDS, INC., THE CHASE MANHATTAN BANK and HEWITT ASSOCIATES.

------GILBERT L. KLEMANN, II

EXHIBIT 10c3

AMENDMENT TO TRUST AGREEMENT

This AMENDMENT, made as of the 1st day of November, 1993, among AMERICAN BRANDS, INC., a Delaware corporation (the "Company"), THE CHASE MANHATTAN BANK (National Association), incorporated under the laws of the United States of America (the "Trustee") and HEWITT ASSOCIATES, a partnership formed under the laws of Illinois ("Hewitt")

W I T N E S S E T H :

WHEREAS, the Company and the Trustee have entered into a Trust Agreement for the purpose of establishing a trust in order to provide a source of benefits under the terms of the Company's Supplemental Retirement Plan for the benefit of Gilbert L. Klemann, II and Hewitt is designated as Trustee's Contractor thereunder; and

WHEREAS, the Trust Agreement sets forth the permitted investments of the assets held thereunder and it is desired to change the permitted investments;

NOW, THEREFORE, in consideration of the premises, the parties agree that the third sentence of Section 5.2 of the Trust Agreement is hereby amended to read as follows:

"The investment manager shall invest the assets of the Fund solely in The Chase Manhattan Bank Fixed Income Fund to the extent practicable and otherwise in The Chase Manhattan Bank Personal Trust Market Rate Account."

IN WITNESS WHEREOF, the parties have caused this AMENDMENT to be duly executed as of the day and year first written above.

AMERICAN BRANDS, INC.

Attest:

Theresa B. Fealey Steven C. Mendenhall ------By------Assistant Secretary Steven C. Mendenhall Vice President and Chief Administrative Officer

THE CHASE MANHATTAN BANK

Attest:

Mark W. Moore William P. Barbeosch ------By------Mark W. Moore William P. Barbeosch Assistant Treasurer Vice President

HEWITT ASSOCIATES

Witness:

Barbara L. Checkin C.L. Connolly III ------By------

I hereby consent to the foregoing AMENDMENT.

Witness:

Dianne L. Ebner Gilbert L. Klemann, II ------Gilbert L. Klemann, II

STATE OF CONNECTICUT ) : ss.: Old Greenwich, CT-November 9, 1993 COUNTY OF FAIRFIELD )

Personally appeared Steven C. Mendenhall, Vice President and Chief Administrative Officer of AMERICAN BRANDS, INC., signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such Vice President and Chief Administrative Officer and the free act and deed of said Corporation, before me.

Louis F. Fernous, Jr. ------Notary Public

STATE OF NEW YORK ) : ss.: New York, NY-November 24, 1993 COUNTY OF NEW YORK )

Personally appeared William P. Barbeosch, Vice President of THE CHASE MANHATTAN BANK, signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such Vice President and the free act and deed of said Company, before me.

Kamla Jaipal ------Notary Public

STATE OF CONNECTICUT) : ss.: Old Greenwich, CT-November 10, 1993 COUNTY OF FAIRFIELD )

Personally appeared Gilbert L. Klemann, II, signer of the foregoing instrument, and acknowledged the same to be his free act and deed, before me.

Dianne L. Ebner ------Notary Public

STATE OF ILLINOIS ) : ss. Lincolnshire, IL -November 19, 1993 COUNTY OF LAKE )

Personally appeared C.L. Connolly, III, Partner of HEWITT ASSOCIATES, signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such Partner and the free act and deed of said Partnership before me.

Gail K. Nelson ------Notary Public

EXHIBIT 10c4

AMENDMENT TO TRUST AGREEMENT

THIS AMENDMENT, made as of the 1st day of January, 1995, among AMERICAN BRANDS, INC., a Delaware corporation (the "Company"), THE CHASE MANHATTAN BANK (National Association), incorporated under the laws of the United States of America (the "Trustee") and HEWITT ASSOCIATES LLC, a limited liability company formed under the laws of Illinois ("Hewitt").

W I T N E S S E T H : ------

WHEREAS, the Company and the Trustee have entered into a Trust Agreement made as of January 2, 1991, as amended (the "Trust Agreement") for the purpose of establishing a trust in order to provide a source of benefits under the terms of the Company's Supplemental Retirement Plan (the "Plan") for the benefit of GILBERT L. KLEMANN, II (the "Executive") and Hewitt is designated as Trustee's Contractor thereunder; and

WHEREAS, the Plan has recently been amended to provide for supplemental tax deferred amounts and related Company matching awards; and

WHEREAS, the parties desire to amend the Trust Agreement in order to clarify that the trust might be used as a source of providing the supplemental tax deferred amounts and related Company matching awards under the Plan as well as the supplemental retirement and profit-sharing provisions thereunder;

NOW, THEREFORE, in consideration of the premises, the parties agree that the Trust Agreement is hereby amended so that the trust established thereby may be used as a source of providing benefits under the supplemental tax deferred and related Company matching award provisions of the Plan as well as the supplemental retirement and profit-sharing provisions therein and references to the Plan in the Trust Agreement shall be deemed to include references to the supplemental tax deferred and related Company matching award provisions thereof.

IN WITNESS WHEREOF, the parties have caused this AMENDMENT to be duly executed as of the day and year first written above.

AMERICAN BRANDS, INC. Attest:

Louis F. Fernous, Jr. Steven C. Mendenhall ------By------Steven C. Mendenhall Vice President and Chief Administrative Officer

THE CHASE MANHATTAN BANK Attest:

Carl P. Pierleoni Mark J. Altschuler ------By------Second Vice President Mark J. Altschuler Vice President

HEWITT ASSOCIATES LLC Attest:

Barbara C. Checkin C.L. Connolly III ------By------

I hereby consent to the foregoing AMENDMENT.

Witness:

[Signature illegible] Gilbert L. Klemann, II ------GILBERT L. KLEMANN, II

STATE OF CONNECTICUT ) : ss.: Old Greenwich, CT-12/19, 1994 COUNTY OF FAIRFIELD )

Personally appeared Steven C. Mendenhall, Vice President and Chief Administrative Officer of AMERICAN BRANDS, INC., signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such Vice President and Chief Administrative Officer and the free act and deed of said Corporation, before me.

Gail D. Morgan ------Notary Public

STATE OF NEW YORK ) : ss.: New York, NY-February 6, 1995 COUNTY OF NEW YORK )

Personally appeared Mark S. Altschuler, Vice President of THE CHASE MANHATTAN BANK, signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such Vice President and the free act and deed of said Company, before me.

Richard G. Friedman ------Notary Public

STATE OF ILLINOIS ) : ss.: Lincolnshire, IL-1/11, 1995 COUNTY OF LAKE )

Personally appeared C.L. Connolly, III, of HEWITT ASSOCIATES LLC, signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such principal and the free act and deed of said limited liability company, before me.

Barbara L. Stern ------Notary Public

STATE OF CONNECTICUT ) : ss.: Old Greenwich, CT-1/4, 1995 COUNTY OF FAIRFIELD )

Personally appeared GILBERT L. KLEMANN, II, signer of the foregoing instrument, and acknowledged the same to be his free act and deed, before me.

Dianne L. Ebner ------Notary Public

EXHIBIT 10c5

Schedule identifying substantially identical agreements, among American Brands, Inc. ("American") and The Chase Manhattan Bank (National Association), et al. establishing a trust in favor of each of the following persons, to the Trust Agreement and Amendments thereto constituting Exhibits 10c2, 10c3 and 10c4, respectively, to the Annual Report on Form 10-K of American for the Fiscal Year ended December 31, 1995 ------

Name ----

Thomas C. Hays John T. Ludes Robert L. Plancher Robert J. Rukeyser Steven C. Mendenhall Dudley L. Bauerlein, Jr. Charles H. McGill

EXHIBIT 10c6

AMERICAN BRANDS, INC. GILBERT L. KLEMANN, II

TRUST AGREEMENT

THIS AGREEMENT, made as of the 1st day of November, 1993, among GILBERT L. KLEMANN, II, AMERICAN BRANDS, INC., a Delaware corporation (the "Company"), and THE CHASE MANHATTAN BANK (National Association), incorporated under the laws of the United States of America (the "Trustee").

W I T N E S S E T H :

WHEREAS, the Company has incurred and expects to continue to incur certain retirement income liability to or with respect to GILBERT L. KLEMANN, II (the "Executive") pursuant to the terms of the Company's Supplemental Retirement Plan (including the supplemental profit-sharing provisions therein) (herein referred to as the "Plan"); and

WHEREAS, the Board of Directors of the Company on November 27, 1990 and the Compensation and Stock Option Committee of the Company on April 26, 1993 adopted resolutions providing for retirement benefits to the Executive (such retirement benefits being herein referred to as the "Retirement Arrangement"); and

WHEREAS, the Company desires to provide additional assurance to the Executive that his rights under the Plan and

the Retirement Arrangement will in the future be met or substantially met by application of the procedures set forth herein; and

WHEREAS, the Executive and the Company wish to establish with the Trustee a trust for the benefit of the Executive in order to provide a source of payments of the benefits payable to the Executive under the terms of the Plan and the Retirement Arrangement;

NOW, THEREFORE, in consideration of the premises and mutual and independent promises herein, the parties hereto covenant and agree as follows:

ARTICLE I

1.1 The Executive and the Company hereby establish with the Trustee a Trust consisting of such sums of money and such property acceptable to the Trustee as shall from time to time be paid or delivered to the Trustee by the Company and the earnings and profits thereon. All such money and property, all investments made therewith and proceeds thereof, less the payments or other distributions which, at the time of reference, shall have been made by the Trustee, as authorized herein, are referred to herein as the "Fund" and shall be held

by the Trustee, IN TRUST, in accordance with the provisions of this Agreement. The Trust shall be solely for the purpose of providing benefits under the Plan and the Retirement Arrangement with respect to the Executive, and neither the Company nor any creditors of the Company shall have any interest in the Fund.

1.2 The Trustee shall hold, manage, invest and otherwise administer the Fund pursuant to the terms of this Agreement. The Trustee shall be responsible only for contributions actually received by it hereunder and shall have no responsibility for the correctness of the amount thereof. Upon the establishment of this Trust, and from time to time thereafter, the Company may contribute to the Trust, unless otherwise directed by the Executive to make such contributions to a segregated account established with the Trustee or other bank, trust company or other financial institution by or for the benefit of the Executive pursuant to the Plan ("Segregated Account"), such amount in cash as the Company shall determine to be appropriate to provide a source of the payments required under the terms of the Plan and the Retirement Arrangement. Prior to the making of any contribution to the Trust, the Company shall have approved the establishment of a Segregated Account of the Executive, the terms and provisions thereof, and

the bank, trust company or other financial institution with which such Segregated Account may be established. The initial contribution by the Company shall be in an amount approximately equal to the present value of the after tax equivalent of the aggregate maximum benefits that would be due to the Executive as of such date under the retirement provisions of the Plan and the Retirement Arrangement and under the profit-sharing provisions of the Plan, or such lesser amount as the Company shall determine. Unless there has been a withdrawal by the Executive from the Trust as provided in Section 2.4, or from the Executive's Segregated Account, as to which the Compensation and Stock Option Committee of the Company has not determined otherwise, the Company will make additional annual contributions to the Trust or Segregated Account in amounts such that the amount of the Fund, together with the amount in the Executive's Segregated Account, at such time will be approximately equal to the present value of the after tax equivalent of the Executive's accrued benefits under the Plan and the Retirement Arrangement at that time, or in such lesser amounts as the Company shall determine. Unless the Trust has previously been terminated as a result of the Executive's actual or deemed withdrawal of all amounts in the Fund, as provided in Section 8.1, and in his Segregated Account, the Company also may make a final contribution to the

Trust as promptly as practicable after the Executive's termination of employment in an amount such that the amount of the Fund, together with the amount, if any, in the Executive's Segregated Account, except for any amounts which are attributable to amounts deemed withdrawn previously and the income earned thereon, will be equal to (i) the sum of the present value of the after tax equivalent of (x) the Executive's benefit under the supplemental retirement provisions of the Plan and the Retirement Arrangement or, if the termination of employment is by reason of the death of the Executive, the Executive's benefit under the supplemental retirement provisions of the Plan and the Retirement Arrangement immediately prior to his death and (y) the Executive's supplemental profit-sharing benefit under the Plan, reduced by (ii) the amounts of any actual withdrawals from the Fund or from the Executive's Segregated Account by the Executive as provided in Section 2.4 plus the income which would have been earned on such withdrawn amounts from the time of withdrawal to the time of the Executive's termination of employment, at a rate equal to the after tax equivalent of 120% of the applicable monthly immediate annuity interest purchase rate which would be used by the Pension Benefit Guaranty

Corporation from time to time during such period for the purpose of determining the present value of a single sum distribution on plan termination.

1.3 The Company shall certify to the Trustee and the Executive at the time of each contribution to the Fund the amount of such contribution being made in respect of the Executive's supplemental retirement benefit under the Plan and the Retirement Arrangement and the amount being made in respect of the Executive's supplemental profit-sharing benefit under the Plan. The Fund shall be revalued by the Trustee quarterly as of the last business day of each March, June, September and December, or at such other times as agreed to by the Company and the Trustee, at current market values, as determined by the Trustee, which shall deliver as soon as practicable a copy of such quarterly valuation to the Company and the Executive.

ARTICLE II

2.1 The Company shall act as Administrator of the Trust. Except for the records dealing solely with the Fund and its investment, which shall be maintained by the Trustee, the Company as Administrator shall maintain all the Executive's records contemplated by this Agreement, including records of

the Executive's compensation and benefits from the Company, the amount of his benefits accrued under the Plan and the Retirement Arrangement, the Company's contributions to the Fund, withdrawals from the Fund as provided in Section 2.4 or from the Executive's Segregated Account, the Executive's beneficiary designation and such other records as may be necessary for determining the amount payable to the Executive or his Surviving Spouse or other beneficiary under the Plan and the Retirement Arrangement. All such records shall be made available promptly upon the request of the Executive. In the event that the Executive's Segregated Account is not maintained with the Trustee, the Company shall give written notice to the Trustee as to the identity of the bank, trust company or other financial institution with which the Segregated Account is maintained. In such case, the Company also shall give notice to the Trustee in the event of a withdrawal by the Executive of any or all of the funds in his Segregated Account. Unless the Trust has previously been terminated as provided in Section 8.1, the Company shall give written notice to the Trustee of the Executive's termination of employment, and as to whether such termination is by reason of the death of the Executive. The Company as Administrator shall also prepare and distribute the Executive's annual estimated benefit statements specified in Section 2.2 and shall perform such other duties and

responsibilities in connection with the administration of the Trust as the Company or the Trustee determines is necessary or advisable to achieve the objectives of this Agreement.

2.2 The Company as Administrator shall prepare an annual estimated benefits statement in respect of the Executive and shall furnish a copy of same to the Executive by no later than May 15 of each year.

2.3 The Company shall have full responsibility for the proper remittance of all withholding taxes on contributions by the Company to the Trust to the appropriate taxing authority and shall furnish the Executive with the appropriate tax information form reporting the amounts of such contributions and any withholding taxes. The Trustee shall have the responsibility for the preparation and filing with the appropriate taxing authorities of all tax returns required to be filed for the Trust.

2.4 Subject to the next to the last sentence of Section 5.2, the Executive may withdraw all or any portion of the Fund, in cash or, to the extent practicable, in kind at any time upon written notice of not less than sixty (60) days to

the Company and the Trustee. Prior to any such withdrawal, the Trustee shall notify the Company in writing of such withdrawal and the amount thereof, and as to whether or not such withdrawal is a complete withdrawal of all amounts in the Fund. In the event of any withdrawal by the Executive from his Segregated Account, the Company shall promptly notify the Trustee in writing of such withdrawal and the amount thereof, and as to whether or not such withdrawal is a complete withdrawal of all amounts in the Segregated Account. In the event of any such withdrawal from the Fund, or from the Executive's Segregated Account, for purposes of Sections 1.2 and 8.1 the Executive shall be deemed to have made a complete withdrawal of all amounts in the Fund and in his Segregated Account, unless the Compensation and Stock Option Committee of the Company shall determine that the Executive shall not be deemed to have made such a complete withdrawal. The Company shall promptly notify the Trustee in writing of any such determination. Except as otherwise determined by the Compensation and Stock Option Committee of the Company, in the event of any such withdrawal from the Fund, or from the Executive's Segregated Account, no further contributions shall be made thereafter by the Company to the Trust until the Executive's termination of employment, at which time if the Trust has not previously been terminated as a result of the

Executive's actual or deemed withdrawal of all amounts in the Fund and in his Segregated Account a final contribution by the Company may be made as provided in Section 1.2.

2.5 The Executive may elect to transfer all or any portion of the Fund to his Segregated Account, in cash or, to the extent practicable, in kind, at any time upon written notice of not less than sixty (60) days to the Company and the Trustee and the financial institution with which the Segregated Account is established. The Executive also may elect to transfer funds, in cash, from his Segregated Account to the Trust upon written notice of not less than sixty (60) days to the Company and the Trustee, and funds so transferred shall be held by the Trustee as part of the Fund. Such transfers between the Fund and the Executive's Segregated Account shall not constitute withdrawals for purposes of Section 2.4.

2.6 The Executive may designate a beneficiary to receive all or any portion of the Fund in the event of his death. Such designation shall be in writing filed with the Company as Administrator on a form approved by it and signed by the Executive. The Company shall promptly notify the Trustee of any such beneficiary designation and any changes therein.

ARTICLE III

3.1 After the execution of this Agreement, the Company shall promptly file with the Trustee a certified list of the names and specimen signatures of the officers of the Company and any delegate authorized to act for it. The Company shall promptly notify the Trustee of the addition or deletion of any person's name to or from such list, respectively. Until receipt by the Trustee of notice that any person is no longer authorized so to act, the Trustee may continue to rely on the authority of the person. All certifications, notices and directions by any such person or persons to the Trustee shall be in writing signed by such person or persons. The Trustee may rely on any such certification, notice or direction purporting to have been signed by or on behalf of such person or persons that the Trustee believes to have been signed thereby. The Trustee may rely on any certification, notice or direction of the Company that the Trustee believes to have been signed by a duly authorized officer or agent of the Company. The Trustee shall have no responsibility for acting or not acting in reliance upon any notification believed by the Trustee to have been so signed by a duly authorized officer or agent of the Company. The Company shall be responsible for keeping accurate books and records with respect to the

Executive, his compensation and his rights and interests in the Fund under the Plan.

3.2 The Company shall indemnify and hold harmless the Trustee for any liability or expenses, including without limitation advances for or prompt reimbursement of reasonable fees and expenses of counsel and other agents retained by it, incurred by the Trustee with respect to holding, managing, investing or otherwise administering the Fund, other than by reason of its negligence or willful misconduct.

ARTICLE IV

4.1 The Trustee shall not be liable in discharging its duties hereunder, including without limitation its duty to invest and reinvest the Fund, if it acts in good faith and in accordance with the terms of this Agreement including, without limitation, the making of any investment directed by the Executive, the Company or an investment manager other than the Trustee, and any applicable federal or state laws, rules or regulations.

4.2 The Trustee is hereby appointed as the investment manager of the Fund. In the event that the Trustee cannot serve as investment manager of the Fund, the Trustee

shall then select Pacific Investment Management Company as investment manager; provided that if Pacific Investment Management Company is unwilling or unable to act as investment manager, the Trustee shall select J.P. Morgan Investment Management Inc. as investment manager. The investment manager shall invest the assets of the Fund separately as to amounts representing the Executive's supplemental retirement benefit under the Plan and amounts representing the Executive's supplemental profit-sharing benefit. Supplemental retirement benefit amounts shall be invested solely in the Chase Manhattan Fixed Income Fund to the extent practicable and otherwise in the Chase Manhattan Personal Trust Market Rate Account. Supplemental profit-sharing benefit amounts shall be invested in one or more of (i) the Vista U.S. Government Income Fund, (ii) the Vista Balanced Fund, (iii) the Chase Manhattan Personal Trust Market Rate Account or (iv) the Chase Manhattan Equity Income Fund, in such portions as are elected by the Executive by written election filed with the Company and notified to the Trustee by the Company, all to the extent practicable and otherwise in the Chase Manhattan Personal Trust Market Rate Account, and all without liability of the Trustee for such election. The Executive may change such election at any time by filing a new written election with the Company, which shall promptly notify the Trustee thereof, and all

without liability of the Trustee for such new election. Subject to such investment restrictions, the Trustee shall have the power and right:

(a) To receive and hold all contributions made to it by the Company;

(b) To invest and reinvest all or any portion of the Fund collectively through the medium of any common, collective, commingled trust or mutual fund that may be established and maintained by the Trustee or any affiliate thereof, subject to the instrument or instruments establishing such trust fund or funds and with the terms of such instrument or instruments, as from time to time amended, being incorporated into this Agreement to the extent of the equitable share of the Fund in any such common, collective, commingled trust or mutual fund;

(c) To participate in and use a book-entry system for the deposit and transfer of securities;

(d) To sell or exchange any property held by it at public or private sale, for cash or on credit, to grant and exercise options for the purchase or exchange thereof, to exercise all conversion or subscription rights pertaining to any such property and to enter into any covenant or agreement to purchase any property in the future;

(e) To participate in any plan of reorganization, consolidation, merger, combination, liquidation or other similar plan relating to property held by it and to consent to or oppose any such plan or any action thereunder or any contract, lease, mortgage, purchase, sale or other action by any person;

(f) To deposit any property held by it with any protective, reorganization or similar committee, to delegate discretionary power thereto, and to pay part of the expenses and compensation thereof and any assessments levied with respect to any such property so deposited;

(g) To extend the time of payment of any obligation held by it;

(h) To hold uninvested any moneys received by it, without liability for interest thereon, until such moneys shall be invested, reinvested or disbursed;

(i) To exercise all voting or other rights with respect to any property held by it and to grant proxies, discretionary or otherwise;

(j) For the purposes of the Trust, to borrow money from others, including The Chase Manhattan Bank (National Association), to issue its promissory note or notes therefor, and to secure the repayment thereof by pledging any property held by it;

(k) To furnish the Company and the Executive with such information as may be needed for tax or other purposes;

(l) To employ suitable agents and counsel, who may be counsel to the Company or the Trustee, and to pay their reasonable expenses and compensation from the Fund to the extent not paid by the Company;

(m) To cause any property held by it to be registered and held in the name of one or more nominees, with or without the addition of words indicating that such securities are held in a fiduciary capacity, and to hold securities in bearer form;

(n) To settle, compromise or submit to arbitration any claims, debts or damages due or owing to or from the Trust, respectively, to commence or defend suits or legal proceedings to protect any interest of the Trust, and to represent the Trust in all suits or legal proceedings in any court or before any other body or tribunal; provided, however, that the Trustee shall not be required to take any such action unless it shall have been indemnified by the Company to its reasonable satisfaction against liability or expenses it might incur therefrom;

(o) To organize under the laws of any state a corporation or trust for the purpose of acquiring and holding title to any property which it is authorized to acquire hereunder and to exercise with respect thereto any or all of the powers set forth herein; and

(p) Generally, to do all acts, whether or not expressly authorized, that the Trustee may deem necessary or desirable for the protection of the Fund.

4.3 No person dealing with the Trustee shall be under any obligation to see to the proper application of any money paid or property delivered to the Trustee or to inquire into the Trustee's authority as to any transaction.

4.4 The Trustee shall distribute cash or other assets from the Fund in accordance with Articles II and VIII hereof.

The Trustee may make any distribution required hereunder by mailing its check for the specified amount or, if distribution is to be made in kind, by making other appropriate distribution, to the person to whom such distribution or payment is to be made, at such address as may be specified pursuant to Section 10.5, or if no such address shall have been so furnished, to such person in care of the Company, or (if so

directed by the recipient) by crediting the account of such person or by transferring funds to such person's account by bank or wire transfer.

4.5 If at any time there is no person authorized to act under this Agreement on behalf of the Company, the Board of Directors of the Company or its Compensation and Stock Option Committee shall have the authority to act hereunder.

ARTICLE V

5.1 The Executive, or in the event of the Executive's death the Executive's personal representative, shall be responsible for the payment of any federal, state or local taxes on the Fund, or any part thereof, and on the income therefrom, subject to the Company's obligation under the Plan to reimburse the Executive in respect of such taxes.

5.2 For all periods prior to the Executive's termination of employment, and for a period of sixty (60) days thereafter and for any further period as may be authorized by the Company, the Company shall pay to the Trustee its reasonable expenses for the management and administration of the Fund, including without limitation advances for or prompt reimbursement of reasonable expenses of counsel and other

agents employed by the Trustee, and reasonable compensation for its services as Trustee hereunder, the amount of which shall be agreed upon from time to time by the Company and the Trustee in writing; provided, however, that if the Trustee forwards an amended fee schedule to the Company requesting its agreement thereto and the Company fails to object thereto within thirty (30) days of its receipt, the amended fee schedule shall be deemed to be agreed upon by the Company and the Trustee. Such expenses and compensation shall be a charge on the Fund and shall constitute a lien in favor of the Trustee until paid by the Company. The Company and the Executive acknowledge that the Trustee, or an affiliate thereof, will, in addition to the compensation provided by this Article 5.2, receive compensation with regard to the administration and investment of certain funds referred to in Article 4.2 hereof, and the Company and the Executive agree that the Trustee, or any affiliate thereof, shall receive such compensation in addition to the compensation provided by this Article 5.2.

ARTICLE VI

6.1 The Trustee shall maintain records with respect to the Fund that show all its receipts and disbursements hereunder. The records of the Trustee with respect to the Fund shall be open to inspection by the Company or its

representatives and by the Executive at all reasonable times during normal business hours of the Trustee and may be audited not more frequently than once each fiscal year by an independent certified public accountant engaged by the Company; provided, however, the Trustee shall be entitled to additional compensation from the Company in respect of audits or auditors' requests which the Trustee determines to exceed the ordinary course of the usual scope of such examinations of its records.

6.2 Within a reasonable time after the close of each fiscal year of the Company (or, in the Trustee's discretion, at more frequent intervals), or of any termination of the duties of the Trustee hereunder, the Trustee shall prepare and deliver to the Company and the Executive a statement of transactions reflecting its acts and transactions as Trustee during such fiscal year, portion thereof or during such period from the close of the last fiscal year or last statement period to the termination of the Trustee's duties, respectively, including a statement of the then current value of the Fund. Any such statement shall be deemed an account stated and accepted and approved by the Company and the Executive, and the Trustee shall be relieved and discharged, as if such account had been settled and allowed by a judgment or decree of a court of competent jurisdiction, unless protested by written notice to

the Trustee within sixty (60) days of receipt thereof by the Company or the Executive.

The Trustee shall have the right to apply at any time to a court of competent jurisdiction for judicial settlement of any account of the Trustee not previously settled as herein provided or for the determination of any question of construction or for instructions. In any such action or proceeding it shall be necessary to join as parties only the Trustee, the Company and the Executive (although the Trustee may also join such other parties as it may deem appropriate), and any judgment or decree entered therein shall be conclusive.

ARTICLE VII

7.1 The Trustee may resign at any time by delivering written notice thereof to the Company and the Executive; provided, however, that no such resignation shall take effect until the earlier of (i) sixty (60) days from the date of delivery of such notice to the Company and the Executive or (ii) the appointment of a successor trustee.

7.2 The Trustee may be removed at any time by the Company, pursuant to a resolution of the Board of Directors of the Company or its Compensation and Stock Option Committee,

upon delivery to the Trustee of a certified copy of such resolution and sixty (60) days' written notice to the Trustee and the Executive of (i) such removal and (ii) the appointment of a successor trustee, unless such notice period is waived in whole or in part by the Trustee and the Executive.

7.3 Upon the resignation or removal of the Trustee, a successor trustee shall be appointed by the Company. Such successor trustee shall be a bank or trust company established under the laws of the United States or a state within the United States and having either total assets of at least $15 billion or trust assets of at least $25 billion. Such appointment shall take effect upon the delivery to the Trustee and the Executive of (a) a written appointment of such successor trustee, duly executed, by the Company and (b) a written acceptance by such successor trustee, duly executed thereby. Any successor trustee shall have all the rights, powers and duties granted the Trustee hereunder.

7.4 If, within sixty (60) days of the delivery of the Trustee's written notice of resignation, a successor trustee shall not have been appointed, the Trustee shall apply to any court of competent jurisdiction for the appointment of a successor trustee.

7.5 Upon the resignation or removal of the Trustee and the appointment of a successor trustee, and after the acceptance and approval of its account, the Trustee shall transfer and deliver the Fund to such successor trustee. Under no circumstances shall the Trustee transfer or deliver the Fund to any successor trustee which is not a bank or trust company having either total assets of at least $15 billion or trust assets of at least $25 billion.

ARTICLE VIII

8.1 The Trust established pursuant to this Agreement shall terminate upon the actual or deemed withdrawal by the Executive of all amounts in the Fund, as provided in Section 2.4, and in the Executive's Segregated Account. The Trust also shall terminate upon the expiration of sixty (60) days following the Executive's termination of employment (by retirement or otherwise), unless the Trustee and the Executive agree to continue the Trust thereafter upon such terms as they may agree, but in the event of such continuation the Company shall have no further obligations under this Agreement with respect to matters relating to such continuation, including expenses and compensation of the Trustee, as provided in Section 5.2, and indemnification of the Trustee as provided in Section 3.2.

8.2 Upon the termination of the Trust by reason of the death of the Executive, or by reason of the Executive's termination of employment other than by death if the Trust has not been continued by agreement between the Trustee and the Executive, the Trustee shall distribute the Fund as directed by the Executive or, in the absence of such direction, shall distribute all of the Fund to the Executive's Segregated Account, if any, or if there is no such Segregated Account to the Executive, or in the event of the Executive's death his personal representative, after deducting therefrom any amounts owing to the Trustee under this Agreement which have not been paid by the Company. Upon any termination of the Trust in accordance with Article VIII, the Trustee shall, after the acceptance and approval of its account, be relieved and discharged. The powers of the Trustee, including the right to receive compensation for services and payment of expenses, as provided in Section 5.2, shall continue as long as any part of the Fund remains in its possession.

ARTICLE IX

9.1 This Agreement may be amended, in whole or in part, at any time and from time to time, by the Company with the written consent of the Executive and the Trustee. Any such amendment by the Company shall be pursuant to a resolution of

the Board of Directors of the Company or its Compensation and Stock Option Committee by delivery to the Trustee of a certified copy of such resolution and a written instrument duly executed and acknowledged by the Company and the Executive in the same form as this Agreement.

ARTICLE X

10.1 This Agreement shall be construed and interpreted under, and the Trust hereby created shall be governed by, the laws of the State of New York insofar as such laws do not contravene any applicable federal laws, rules or regulations.

10.2 Neither the gender nor the number (singular or plural) of any word shall be construed to exclude another gender or number when a different gender or number would be appropriate.

10.3 This Agreement shall be binding upon and inure to the benefit of the Executive, his estate, personal representative, beneficiary, heirs and assigns. This Agreement also shall be binding upon and inure to the benefit of any successor to the Company or its business as the result of merger, consolidation, reorganization, transfer of assets or

otherwise and any subsequent successor thereto. In the event of any such merger, consolidation, reorganization, transfer of assets or other similar transaction, the successor to the Company or its business or any subsequent successor thereto shall promptly notify the Trustee in writing of its successorship and furnish the Trustee with the information specified in Section 3.1 of this Agreement. In no event shall any such transaction described herein suspend or delay the rights of the Executive to receive benefits hereunder.

10.4 This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which shall together constitute only one Agreement.

10.5 All notices and other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when actually delivered to the respective addresses set forth below:

Company: American Brands, Inc. 1700 East Putnam Avenue Old Greenwich, Connecticut 06870-0811 Attn: Senior Vice President and General Counsel

Trustee: The Chase Manhattan Bank, N.A. 1211 Avenue of the Americas New York, New York 10036 Attn: Trusts and Estates Services Division, 34th Floor

Executive: Gilbert L. Klemann, II, Esq. 25 Hope Farm Road Greenwich, Connecticut 06830

or at such other address as such person may specify in writing by notice as set forth above to the other persons listed above.

ARTICLE XI

11.1 In consideration of the establishment of the Fund, the Executive consents to the distribution from time to time of assets of the trust established pursuant to the Trust Agreement made as of the second day of January, 1991, among American Brands, Inc., The Chase Manhattan Bank (National Association) and Hewitt Associates established to provide a source of the Executive's benefits under the Plan, in amounts to be used for the making of contributions to the Trust or Segregated Account of the Executive as provided in Section 1.2, or the making of payments to the Executive (or beneficiary) pursuant to the Plan and the Retirement Arrangement.

IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed as of the 1st day of November, 1993.

Attest: AMERICAN BRANDS, INC.

Theresa B. Fealey Steven C. Mendenhall Assistant Secretary By------Steven C. Mendenhall Vice President and Chief Administrative Officer

Attest: THE CHASE MANHATTAN BANK

Mark W. Moore William P. Barbeosch Mark W. Moore By------Assistant Treasurer William P. Barbeosch Vice President

Witness: GILBERT L. KLEMANN, II

Dianne L. Ebner Gilbert L. Klemann, II ------

STATE OF CONNECTICUT ) : ss.: Old Greenwich, CT-November 9, 1993 COUNTY OF FAIRFIELD )

Personally appeared Steven C. Mendenhall, Vice President and Chief Administrative Officer of AMERICAN BRANDS, INC., signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such Vice President and Chief Administrative Officer and the free act and deed of said Corporation, before me.

Louis F. Fernous, Jr. ------Notary Public

STATE OF NEW YORK ) : ss.: New York, NY-November 24, 1993 COUNTY OF NEW YORK )

Personally appeared William P. Barbeosch, Vice President of THE CHASE MANHATTAN BANK, signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such Vice President and the free act and deed of said Company, before me.

Kamla Jaipal ------Notary Public

STATE OF CONNECTICUT ) : ss.: Old Greenwich, CT-November 10, 1993 COUNTY OF FAIRFIELD )

Personally appeared GILBERT L. KLEMANN, II, signer of the foregoing instrument, and acknowledged the same to be his free act and deed, before me.

Dianne L. Ebner ------Notary Public

EXHIBIT 10c7

Schedule identifying substantially identical agreements, among American Brands, Inc. ("American") and The Chase Manhattan Bank (National Association), et al. establishing a grantor trust in favor of each of the following persons, to the Trust Agreement constituting Exhibit 10c6 to the Annual Report on Form 10-K of American for the Fiscal Year ended December 31, 1995 ------

Name ----

Thomas C. Hays John T. Ludes Robert L. Plancher Robert J. Rukeyser Steven C. Mendenhall Dudley L. Bauerlein, Jr.

EXHIBIT 10f5

THIS DEED is made the 8th day of April 1994 ------

B E T W E E N:-

(1) GALLAHER LIMITED (the "Company"), registered in England under No.1501573; and

(2) GALLAHER PENSIONS LIMITED (the "Trustee"), registered in England under No.765844.

W H E R E A S:-

(A) This Deed is SUPPLEMENTAL (inter alia) to:-

(i) a trust deed (the "Definitive Deed") dated 24th March 1983 whereby the Company established THE GALLAHER S PENSION SCHEME (the "Scheme") and by which the rules of the Scheme (the "Rules") were adopted;

(ii) a deed of amendment and covenant dated 1st July 1986; and

(iii) nine deeds dated respectively 1st May 1984, 21st October 1985, 17th November 1986, 18th June 1987, 17th April 1989, 22nd May 1989, 24th October 1989, 3rd June 1992 and 24th January 1994 amending the Definitive Deed and the Rules.

(B) The Trustee is the sole trustee of the Scheme.

(C) By Clause 18 of the Definitive Deed (as amended by the deed dated 17th April 1989) the Company may, at any time and from time to time with the consent of the Trustee, by deed, alter, modify or add to any of the trusts, powers and provisions of the Definitive Deed and the Rules subject as provided in that Clause.

(D) The Company wishes to alter, modify or add to the Definitive Deed and the Rules as provided below and the Trustee (as evidenced by it being a party to this Deed) consents to those alterations, modifications and additions being made.

N O W THIS DEED P R O V I D E S that the Definitive Deed and the Rules are HEREBY ALTERED, MODIFIED or ADDED TO as follows:-

1. By replacing Clause 22 with the following:

"22. DISPOSAL OF LUMP SUM DEATH BENEFITS

(a) If a lump sum is payable in accordance with this Clause on the death of a Member, the Trustee may use any part (or the whole) of the lump sum to pay the Member's funeral expenses or to reimburse any person who has paid them. In either event, sub-Clause 22(b) shall then only apply to the balance (if any) of the lump sum.

(b) Subject to sub-Clauses 22(a) and 22(d) and save as otherwise provided the Trustee may pay or apply any lump sum payable on the death of a Member to or for the benefit of such one or more of the Named Class (as defined below) or to the estate of the deceased Member in such amounts, at such times and generally in such manner as the Trustee may from time to time decide. If, however, the whole of the lump sum is not so paid or applied within two years from the Relevant Date (as defined below), the Trustee shall pay the whole or such part of the lump sum remaining unpaid or unapplied to the estate of the Member. In this sub-Clause "Relevant Date" means, in relation to a Member who dies whilst in any employment with the Employer or whilst in receipt of a pension under the Scheme, the date of the Member's death and, in relation to any other Member, the date upon which the Trustee receives written notification of the Member's death.

In exercise of the foregoing power under this sub-Clause within the period of two years from the Relevant Date, the Trustee may pay or transfer the lump sum or any part of it to a trustee or trustees to be held independently upon trust for the benefit of such one or more of the Named Class at such age or time or respective ages or times and in such shares and either absolutely or for such period or respective periods and with such gifts over and with or subject to such discretionary trust powers and provisions and generally in such manner in all respects as the Trustee (having regard to the rule against perpetuities) thinks fit.

(c) In this Rule, "Named Class" means, in relation to a Member:

(i) any spouse of the Member;

(ii) any child, brother or sister of the Member or of his spouse;

(iii) any parent, ancestor, descendant or collateral relative of the Member or of his spouse;

(iv) any person who is shown, to the satisfaction of the Trustee, to have been when the Member dies wholly or in part dependent financially on the member or his spouse;

(v) any person who is shown, to the satisfaction of the Trustee, to be entitled to any interest in the Member's estate;

(vi) any person, charity, society or other body, association or company whose name and particulars the Member before his death notified the Trustee in writing as being a possible recipient of the lump sum or part of it; and

(vii) any person who is the spouse or descendant of any person referred to above.

Where: (A) "spouse" includes wife, husband, widow, widower and any former wife or husband and any person of the opposite sex to the Member with whom it is shown, to the satisfaction of the Trustee, that (although not married to the Member) the Member was living immediately prior to his death as husband and wife;

(B) "descendant" includes any persons claiming by reason of adoption;

(C) "ancestor, descendant or collateral relative" includes ancestors, descendants or collateral relatives of both the whole-blood and the half-blood; and

(D) "child" includes any step-child, step-grandchild, adopted child or illegitimate child.

(d) If a Member dies on or after his 75th birthday while in Service and is a Special Director (as defined in Rule 20) when he dies, then any lump sum payable on his death in accordance with this Clause shall be paid to his estate notwithstanding anything to the contrary in this Clause."

2. By replacing Rule 19(i) with the following:

"(i) If any individual (the "Protected Beneficiary") assigns or charges any present or future benefit arising under the Scheme or attempts or purports so to do or is sequestrated or adjudicated bankrupt or if any other act shall be done or event shall happen whereby such benefit, if belonging absolutely to the Protected Beneficiary, would be vested in or payable to or charged in favour of any other person, firm or company the Protected Beneficiary shall forfeit all rights to benefits under the Scheme. As from the date the Trustee receives notice of the act or the event causing such forfeiture, the Trustee shall hold the forfeited benefits with the power, if the Trustee thinks fit, to pay or to apply the benefits (or any part of them) to or for the benefit of all or any one or more the Protected Beneficiary, his spouse, his children and any person who is shown, to the satisfaction of the Trustee, to be dependent upon the Protected Beneficiary to a material extent as the Trustees from time to time decide. In no circumstances, however, shall any payment be made to a purported assignee or chargee."

I N W I T N E S S of which this Deed was duly executed the day and year first above written.

THE COMMON SEAL of GALLAHER ) LIMITED was affixed to this ) [SEAL] deed in the presence of:- )

[Signature illegible]

Director

B. Rudd

Secretary

THE COMMON SEAL of GALLAHER ) PENSIONS LIMITED was affixed ) [SEAL] to this deed in the ) presence of:- )

N.P. Bulpitt

Director

B. Rudd

Director

EXHIBIT 10k1

[Letterhead of American Brands, Inc.]

January 23, 1996

Eugene R. Anderson, Esq. Anderson Kill Olick & Oshinsky, P.C. 1251 Avenue of the Americas New York, New York 10020-1182

Dear Mr. Anderson:

Reference is made to the letter agreements dated July 31, 1984 and February 29, 1990 and your instructions to us in respect of the arrangement pursuant to which payment is deferred of fees to which you are or may become entitled as a director of American Brands, Inc. (the "Company"), including fees for service on any Committee of the Board of Directors of the Company. In order to reflect our existing understanding in a single document, your deferral arrangements are being set forth herein.

Commencing April 1, 1983, we have deferred paying to you any fees to which you have been entitled as a Director of the Company, including fees for service on any Committee of the Board of Directors of the Company, and pursuant to which we will continue to defer payment to you of any such fees to which you may be entitled in the future until the January next following the earlier of (i) the calendar year in which you cease to be a member of the Board of Directors of the Company, (ii) the calendar year of your death, or (iii) a Change in Control of the Company, as set forth below.

Interest on deferred fees will be paid at the time of payment of such fees. Interest will be accrued each quarter on deferred fees and interest already earned at the start of such quarter at a rate equal to the average rate of the final auction of the prior quarter for the sale of 13-week U.S. Government bills, rounded up to the next highest .05%. Interest will be calculated on the basis of actual days over a 360 day year and will be credited as of the end of each quarter.

Eugene R. Anderson, Esq. 2 January 23, 1996

In the event of a Change in Control of the Company within the meaning of this paragraph, deferred fees and any interest accrued thereon as provided above shall become immediately payable in full. For purposes of this paragraph, a "Change in Control" of the Company shall be deemed to have occurred if (A) any person (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on January 30, 1990) is or becomes the beneficial owner (as that term is used in Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder, as in effect on January 30, 1990) of stock of the Company entitled to cast more than 20% of the votes at the time entitled to be cast generally for the election of directors, (B) more than 50% of the members of the Board of Directors shall not be Continuing Directors (which term, as used herein, means the directors of the Company (1) who are members of the Board of Directors on January 30, 1990 or (2) who subsequently became directors of the Company and who were elected or designated to be candidates for election as nominees of the Board of Directors, or whose election or nomination for election by the Company's stockholders was otherwise approved, by a vote of a majority of the Continuing Directors then on the Board of Directors), (C) the Company shall be merged or consolidated with, or, in any transaction or series of transactions, substantially all of the business or assets of the Company shall be sold or otherwise acquired by, another corporation or entity and, as a result thereof, either (I) the stockholders of the Company immediately prior thereto shall not directly or indirectly have at least 50% or more of the combined voting power of the surviving, resulting or transferee corporation or entity immediately thereafter or (II) any person (as that term is used in Sections 13(d) and 14(d) of the Exchange Act, as in effect on January 30, 1990) is or becomes the beneficial owner (as that term is used in Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder, as in effect on January 30, 1990) of more than 20% of the combined voting power of the surviving resulting or transferee corporation or entity, or (D) any Change in Control of the Company shall have occurred of a nature that would be required to be reported in response to Item 1(a) of Form 8-K promulgated under the Exchange Act as in effect on January 30, 1990, regardless of whether the Company is at the time of such Change in Control subject to the reporting requirement thereof. Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred if an acquisition of stock that would otherwise constitute a Change in Control pursuant to clause (A) or (D) of the preceding sentence is made by the Company or a subsidiary thereof, by any corporation in a merger or consolidation that does not constitute a Change in Control pursuant to clause (C) of the preceding sentence or by any employee benefit plan (or related trust) sponsored or maintained by the Company or a subsidiary thereof.

Eugene R. Anderson, Esq. 3 January 23, 1996

Please confirm that the foregoing accurately expresses our existing agreement by signing the enclosed copy of this letter in the space indicated thereon and returning it to us.

Very truly yours,

Louis F. Fernous, Jr. ------Louis F. Fernous, Jr. Vice President and Secretary

Confirmed and agreed as of January 23, 1996:

Eugene R. Anderson ------Eugene R. Anderson

EXHIBIT 10l3

Schedule identifying substantially identical agreements, among American Brands, Inc. ("American") and each of the following persons, to the Agreement and the Amendment thereto constituting Exhibits 10l1 and 10l2, respectively, to the Annual Report on Form 10-K of American for the Fiscal Year ended December 31, 1995 ------

Name ----

Thomas C. Hays John T. Ludes Robert L. Plancher Robert J. Rukeyser Steven C. Mendenhall Dudley L. Bauerlein, Jr. Charles H. McGill

EXHIBIT 10m3

Schedule identifying substantially identical agreements, among American Brands, Inc. ("American") and The Chase Manhattan Bank (National Association), et al. establishing a trust in favor of each of the following persons, to the Trust Agreement and Amendment thereto constituting Exhibits 10ml and 10m2, respectively, to the Annual Report on Form 10-K of American for the Fiscal Year ended December 31, 1995 ------

Name ----

Thomas C. Hays John T. Ludes Robert L. Plancher Robert J. Rukeyser Steven C. Mendenhall Dudley L. Bauerlein, Jr.

EXHIBIT 10o4

Schedule identifying substantially identical agreements, among American Brands, Inc. ("American") and each of the following persons, to the Agreement and the Amendments thereto constituting Exhibits 10ol, 10o2 and 10o3, respectively, to the Annual Report on Form 10-K of American for the Fiscal Year ended December 31, 1995 ------

Name ----

John T. Ludes Robert L. Plancher Robert J. Rukeyser Steven C. Mendenhall Dudley L. Bauerlein, Jr.

EXHIBIT 11

AMERICAN BRANDS, INC.

Statement setting forth net income for computation of earnings per Common share - primary and fully diluted:

Years Ended December 31, ------1995 1994 1993 ------(In millions)

Income from continuing operations before extraordinary item and cumulative effect of accounting changes $543.1 $885.1 $541.2 Preferred stock dividend requirements 1.3 1.4 1.6 ------Income from continuing operations before extraordinary item and cumulative effect of accounting changes for computing earnings per Common share - Primary 541.8 883.7 539.6 (Loss) income from discontinued operations - (151.0) 127.0 Extraordinary Item (2.7) - - Cumulative effect of accounting changes - - (198.4) ------Net income for computing earnings per Common share - Primary 539.1 732.7 468.2

Interest and related expenses on Convertible debentures, net of income taxes 12.7 21.5 21.3 Convertible Preferred stock dividend requirements 1.3 1.4 1.6 ------Net Income for computing earnings per Common share - Fully diluted $553.1 $755.6 $491.1 ======

Statement setting forth computation of weighted average number of Common shares outstanding on a fully diluted basis:

Years Ended December 31, ------1995 1994 1993 ------(In millions, except per share amounts)

Weighted average number of Common shares outstanding during each year - Primary 186.9 201.6 201.8 Addition from assumed conversion as of the beginning of each year of the Convertible Preferred stock outstanding at the end of each year 1.9 2.1 2.3 Addition from assumed conversion of Convertible debentures 3.7 9.3 9.3 Other additions 3.3 0.7 0.3 ------Weighted average number of Common shares outstanding during each year on a Fully diluted basis 195.7 213.7 213.7 ======

EARNINGS PER COMMON SHARE Primary Income from continuing operations $2.90 $4.38 $2.67 (Loss) income from discontinued operations - (.75) .63 Extraordinary item (.01) - - Cumulative effect of accounting changes - - (.98) ------Net income $2.89 $3.63 $2.32 ======Fully diluted Income from continuing operations $2.84 $4.24 $2.63 (Loss) income from discontinued operations - (.71) .60 Extraordinary item (.01) - - Cumulative effect of accounting changes - - (.94) ------Net income $2.83 $3.53 $2.29 ======

-2-

EXHIBIT 12 AMERICAN BRANDS, INC.

Statement Re Computation of Ratio of Earnings to Fixed Charges (Dollar amounts in millions)

Years Ended December 31, ------1991 1992 1993 1994 1995 ------Continuing Operations ------

Earnings Available:

Income before provision for taxes on income and minority interest $1,107.0 $1,255.1 $ 878.9 $1,354.0 $ 895.3

Less: Excess of earnings over dividends of less than fifty percent owned companies 0.1 0.3 0.8 0.4 0.2

Capitalized interest 1.0 1.0 2.5 1.4 0.2 ------1,105.9 1,253.8 875.6 1,352.2 894.9 ------Fixed Charges:

Interest expense (including capitalized interest) and amortization of debt discount and expenses 276.6 283.4 258.7 224.9 170.4 Portion of rentals represent- ative of an interest factor 30.4 32.3 29.8 27.1 20.6 ------Total Fixed Charges 307.0 315.7 288.5 252.0 191.0 ------Total Earnings Available $1,412.9 $1,569.5 $1,164.1 $1,604.2 $1,085.9 ======

Ratio of Earnings to Fixed Charges 4.60 4.97 4.04 6.37 5.69 ======

EXHIBIT 13

Financial Section

CONTENTS

------Results of Operations 25 Financial Condition 32 Consolidated Balance Sheet 36 Consolidated Statement of Income 38 Consolidated Statement of Cash Flows 39 Consolidated Statement of Common Stockholders' Equity 40 Notes to Consolidated Financial Statements 41 Report of Independent Accountants 56 Report of Management 56 Information on Business Segments 57 Eleven-Year Consolidated Selected Financial Data 58 ------

24

RESULTS OF OPERATIONS American Brands, Inc. and Subsidiaries ------

Net Sales Operating Income ------(In millions) 1995 1994 1993 1995 1994 1993 ------

Ongoing operations International tobacco $6,436.1 $ 6,168.9 $ 5,940.0 $ 553.3 $ 517.2 $ 486.5 Distilled spirits 1,288.6 1,268.2 1,194.6 189.7 221.2 214.7 Hardware and home improvement products 1,306.8 1,270.6 1,119.5 178.3 176.5 155.5 Office products 1,206.1 1,049.7 977.2 84.5 74.5 63.2 Golf and leisure products 579.3 507.1 452.7 83.0 73.3 63.6 ------10,816.9 10,264.5 9,684.0 1,088.8 1,062.7 983.5 Domestic tobacco(1) -- 1,594.7 1,501.5 -- 247.6 169.2 Other businesses(1) 550.2 1,287.3 1,445.0 4.2 2.1 27.9 ------Total $11,367.1 $13,146.5 $12,630.5 $1,093.0 $1,312.4 $1,180.6 ------

(1) See page 43 for Dispositions.

------Consolidated

1995 Compared to 1994

Net sales and operating income from ongoing operations, which exclude domestic tobacco, life insurance and other businesses sold in 1995 and 1994 (see pages 43 and 44 for Dispositions and Discontinued Operations, respectively), increased 5% and 2%, respectively. Excluding the favorable effects of higher average foreign exchange rates of $197.2 million and $15.5 million, net sales and operating income from ongoing operations were up 3% and 1%, respectively. Net sales increased due to price increases (including international tobacco excise tax increases), new products and line extensions, partly offset by volume declines, principally in international tobacco. Operating income increased due to the higher sales, partly offset by increased operating expenses.

Consolidated net sales and operating income from continuing operations, which include domestic tobacco and other businesses sold, decreased 14% and 17%, respectively.

Corporate administrative expenses increased $6.3 million (9%) on higher stock appreciation rights expense and an unfavorable comparison to last year's reversal of accruals, notably for a headquarters workforce reduction. These increases were partly offset by lower human resource related expenses in 1995.

Interest and related expenses decreased $52.3 million (25%) due to lower average borrowings. Higher interest income caused the favorable change in other (income) expenses, net. Both changes reflected the use of proceeds from the disposition of The American Tobacco Company and the Franklin life insurance business.

The net gain on disposal of businesses in 1995 reflected a $20 million reversal of the estimated loss recorded in 1994 in connection with the disposal of nonstrategic businesses. 1994 reflected a $577.9 million pretax gain on the sale of domestic tobacco, partly offset by a $245 million pretax loss on the expected sale of nonstrategic businesses.

The effective income tax rate of 39.2% increased from 34.5% last year, principally as a result of the lower effective income tax rate on last year's net gain on disposal of businesses and lower reversals of tax provisions no longer required this year.

Income from continuing operations before extraordinary item was $543.1 million, or $2.90 per Common share, compared with $885.1 million, or $4.38 per share, last year. The decrease was largely due to last year's $267 million, or $1.32 per share, net gain on disposal of businesses as well as the absence of The American Tobacco Company's results of operations, partly offset by this year's $20 million provision reversal for disposal of businesses.

The extraordinary item resulted from a charge of $2.7 million ($4.1 million pretax), or one cent per share, for the extinguishment of debt resulting from holders of the Company's 5-3/4% Eurodollar Convertible Debentures, Due 2005, exercising their right to "put" the debentures.

25

Results of Operations (continued)

------

Net income of $540.4 million, or $2.89 per Common share, compared with $734.1 million, or $3.63 per share, last year, which included a loss of $151 million, or 75 cents per share, from discontinued life insurance operations. The Company, through share repurchases and the extinguishment of the 5-3/4% Eurodollar Convertible Debentures, reduced outstanding fully diluted shares by 30 million, or more than 14% in 1995. Lower average Common shares outstanding in 1995 benefited earnings per share by 21 cents and fully diluted earnings per share by 24 cents.

The Company's 1996 goal is for continued profit growth from its operating companies, although distilled spirits and international tobacco continue to contend with highly competitive environments and growth in hardware and home improvement is somewhat dependent on the U.S. housing market. In January 1996, the Company acquired Cobra Golf Incorporated ("Cobra"), a manufacturer of premium golf clubs. The addition of Cobra will benefit golf and leisure sales and operating income in 1996.

On January 17, 1996, the Company announced that it will redeem in March 1996 the 7-5/8% Eurodollar Convertible Debentures, Due 2001 and 9-1/8% Debentures, Due 2016. The Company expects that ongoing interest expense will be reduced and the redemption of the 7-5/8% Eurodollar Convertible Debentures will, in addition, reduce the number of fully diluted shares by 2.8 million. In connection with the redemptions, an "extraordinary item" charge of approximately $10 million, or 6 cents per Common share, will be recorded in the first quarter of 1996. The redemption of the 7-5/8% Eurodollar Convertible Debentures, along with anticipated ongoing share repurchases, could reduce fully diluted shares by more than 5 million, or 3%, during 1996. In addition, the Company will consider further share repurchases depending on market conditions and investment needs and opportunities.

The Company derived 45% of its operating income in 1994 from Europe, primarily the United Kingdom. In 1995 the proportion increased to 55%, due to the absence of businesses sold. As a result, fluctuations in foreign currencies, principally sterling, will increase the volatility of dollar results in future periods.

The Company currently uses forward foreign exchange contracts solely to offset the impact of changes in foreign exchange rates on known transactions or balances denominated in foreign currencies. See pages 34, 42 and 52 for additional information on Financial Instruments.

For a description of certain pending litigation, see page 55. As stated therein, it is not possible to predict the outcome of such litigation, but management believes that there are meritorious defenses to the pending actions and that the pending actions will not have a material adverse effect upon the results of operations, cash flow or financial condition of the Company.

The Company is involved in proceedings concerning the discharge of materials into the environment and the handling, disposal and clean-up of waste materials and otherwise relating to the protection of the environment. As of February 1, 1996, various subsidiaries of the Company had been designated as potentially responsible parties under "Superfund" or similar state laws with respect to 42 sites. While it is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that the Company's subsidiaries may undertake in the future, in the opinion of management, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material adverse effect upon the results of operations, cash flow or financial condition of the Company.

26

1994 Compared to 1993

Net sales and operating income from ongoing operations (which exclude domestic tobacco, life insurance and other businesses sold) increased 6% and 8%, respectively. Translation of foreign currencies at higher average exchange rates favorably affected net sales and operating income by $186.8 million and $20.8 million, respectively. Excluding the effect of foreign exchange, net sales from ongoing operations would have been up 4% on price increases (including international tobacco excise tax increases), new products and inclusion of Invergordon for a full year, partly offset by an unfavorable product mix in international tobacco. Operating income from ongoing operations, excluding the effect of foreign exchange and restructuring charges in 1993, would have been up 4% on increases in all business segments.

Consolidated net sales and operating income from continuing operations (which includes domestic tobacco and other businesses sold) rose 4% and 11%, respectively.

Interest and related expenses decreased $15.5 million (7%) on lower average borrowings.

The net gain on disposal of businesses reflected a $577.9 million pretax gain on the sale of domestic tobacco, partly offset by $245 million non-cash pretax loss on the expected sale of a number of nonstrategic businesses and product lines, including U.K.-based Prestige and Forbuoys.

The effective income tax rate of 34.5% decreased from 38.2% in 1993 principally as a result of a low effective rate on the net gain on disposal of businesses in 1994 and the proportionately lower impact of nondeductible goodwill on higher income, partly offset by the lower reversal of tax provisions no longer required in 1994.

Earnings per Common share from continuing operations of $4.38, compared with $2.67 in 1993, was up $1.71, or 64%, reflecting a $1.32 net gain on the disposal of businesses.

The loss from discontinued operations in 1994 of $151 million, or 75 cents per share, compared with income from discontinued operations in 1993 of $127 million, or 63 cents per share.

Net income of $734.1 million, or $3.63 per share, compared with $469.8 million, or $2.32 per share in 1993, which reflected a non-cash charge of $198.4 million, or 98 cents per share, due to adoption of FAS Statements No. 106, 112 and 115 as described on page 41.

------International Tobacco

1995 Compared to 1994

Net sales in sterling were up 2%, principally on price increases resulting from higher U.K. tobacco taxes and manufacturers' price increases in April 1995 and 1994. The effect of these price increases was partly offset by a 5.8% U.K. cigarette unit sales decline, which was affected by changes in trade buying patterns related to the U.K. budget announcements at the end of 1994 and 1995. Gallaher's worldwide cigarette unit sales were down 5.3%. Operating income in sterling increased 4% on higher sales, partly offset by higher operating expenses, including increased advertising and promotional costs on U.K. support for Benson and Hedges Special Filter. In dollars, net sales and operating income increased 4% and 7%, respectively, reflecting translation at higher average foreign exchange rates.

Continuing the trend of tax increases in recent years, the U.K. budget announcement in November 1995 resulted in a 15 pence increase in the tax on a typical pack of cigarettes. The U.K. budget announced in November 1994 resulted in a 10 pence increase in the tax on a typical pack of cigarettes. A supplemental budget announcement in December 1994 resulted in a further increase of 6 pence in the tax on a typical pack of cigarettes effective January 1, 1995. The U.K. budgets announced in March and November 1993 resulted in an increase in the tax on a typical pack of cigarettes of 10 pence and 11 pence, respectively. The continuing impact of price increases, principally due to substantial excise tax increases in recent years, has reduced annual industry volumes, led to greater price competition and accelerated trading down by consumers to lower

27

Results of Operations (continued) ------priced brands, resulting in pressures on margins. These changes are particularly affecting Gallaher, the majority of whose sales are in the premium sector.

Despite these factors, Gallaher maintained its position as the number one tobacco company in the U.K. Its estimated share of consumer sales was 39.2% in 1995, as compared with 39.7% in 1994. Consumer demand is estimated to have declined about 2% as compared with about 3% in 1994. The U.K. cigarette industry volume is estimated to have declined 8.8% as compared to Gallaher's 5.8% U.K. cigarette unit sales decline. Shipments were affected by changes in trade buying patterns related to the U.K. budget announcements at the end of 1994 and 1995. Gallaher's share of U.K. cigarette market shipments was estimated to be 40% for the year, as compared with 38.8% in 1994.

Voluntary agreements with the U.K. government have been entered into that restrict the marketing of tobacco products, and proposed legislation has been introduced in the U.K. and the European Community that might further restrict advertising, labeling, sponsorship and the use of tobacco products. It is possible that these and other restrictions, as well as any future tax increases, would have an adverse effect on unit sales and add to continuing industry declines.

1994 Compared to 1993

Net sales in sterling were up slightly on price increases, principally resulting from higher U.K. tobacco taxes, and a total cigarette volume increase of 0.6%, largely offset by an unfavorable product mix and a 10.9% total cigar volume decline. The total cigarette volume increase reflected export volume gains of 70.3% from a full year's shipments of Benson and Hedges to Europe and increased shipments to the former Soviet Union and a 6.8% Gallaher (Dublin) volume gain. The increase was largely offset by a 10.4% U.K. cigarette volume decline, primarily resulting from a change in the timing of the U.K. budget during 1993. This change resulted in two budget announcements in 1993, one in March and another in November, the latter drawing significant sales into the fourth quarter of 1993 from the first quarter of 1994. The effects of the U.K. cigarette volume decline were partly offset by manufacturers' price increases in August 1993 and April 1994.

Operating income in sterling increased 2%, primarily on price increases and the favorable comparison to 1993's workforce reduction provisions, partly offset by an unfavorable product mix and increased marketing costs associated with export expansion and support for Benson and Hedges Special Filter. On a comparable basis, excluding 1993 restructuring charges, operating income in sterling would have decreased 3%. In dollars, net sales and operating income as reported increased 4% and 6%, respectively, reflecting translation at higher average exchange rates.

28

------Distilled Spirits

1995 Compared to 1994

Worldwide net sales increased 2% and operating income decreased 14%. Excluding a restructuring charge in 1995 of $17.8 million and the nonrecurring benefits (including one-time bulk sales) at Whyte & Mackay in 1994, operating income would have increased 3%. The 1995 restructuring charge reflected a one-time charge principally in connection with a bottling plant closing, write-down of property, plant and equipment, and related employee termination costs on a 5% reduction in workforce.

Beam's net sales increased 2% on the introduction of After Shock cordial, higher international shipments, and price increases, partly offset by lower domestic shipments. Operating income increased 2% on the higher sales, partly offset by higher marketing expenses and increased costs of materials. The increased marketing expenses included costs to promote Jim Beam bourbon's 200th anniversary and the introduction of After Shock as well as higher international expenditures. International sales and operating income increased on higher shipments, principally in Australia and Germany.

U.S. distilled spirits consumption continued its long-term decline. With continuing heavy price competition, consumer rebates and increased costs of materials, margins may be under further pressure as the intense competitive situation may continue to limit future price increases.

Whyte & Mackay's net sales in sterling decreased 1% on unfavorable comparison to last year's benefit from one-time bulk sales, partly offset by the effects of the supplemental 1994 U.K. budget 26 pence tax increase on a typical bottle, effective January 1, 1995 and export volume increases in Scotch whisky. Operating income in sterling decreased 80%, principally due to a 1995 restructuring charge and an unfavorable comparison to last year's benefits from one-time bulk sales and other nonrecurring benefits. Intense price competition in Whyte & Mackay's U.K. business is expected to continue in 1996.

The November 1995 U.K. budget resulted in a 27 pence tax reduction on a typical bottle. The effect of this tax reduction cannot be determined at this time. The supplemental 1994 U.K. budget resulted in a 26 pence tax increase on a typical bottle effective January 1, 1995. The 1993 U.K. budgets did not result in a tax increase on distilled spirits. While it is impossible to predict any future U.K. and U.S. tax increases, as well as any restrictions on advertising, it is possible that any such increases or restrictions would have an adverse effect on unit sales and add to continuing industry declines.

1994 Compared to 1993

Worldwide net sales and operating income increased 6% and 3%, respectively.

Beam's net sales were down 3%, principally on lower domestic volume. Estimated depletions of Beam's major brands from distributors to retailers declined 3% in the U.S., in line with industry trends. Beam's international sales increased 25%. Total branded case sales were down 2.4% reflecting a 5.7% decline in domestic branded case sales tempered by a 14.8% increase in international branded case sales. Operating income increased 2% as a result of lower media advertising and increased international shipments at higher margins, largely offset by reduced domestic volume and margins and higher international selling costs related to market development.

Whyte & Mackay's net sales in sterling increased 38% on a total unit volume increase of 151.8% due to the inclusion of Invergordon, consolidated beginning December 1, 1993, and one-time bulk sales in 1994. Operating income in sterling increased 9% on inclusion of Invergordon for a full year and benefits from one-time bulk sales and other nonrecurring items in 1994, partly offset by widespread and intense competitive activity, primarily in Whyte & Mackay's U.K. branded business. Operating income in 1993 benefited from the application of the equity method to prior periods for Invergordon.

29

Results of Operations (continued) ------Hardware and Home Improvement Products

1995 Compared to 1994

Record net sales increased 3% on price increases, line extensions and new products, partly offset by volume declines. All four companies in the group achieved record sales. Operating income increased 1% as the sales increase and lower operating expenses were largely offset by increased raw material costs and effects of lower volume. All companies reported improved operating income, except Moen. Moen's decline reflected a downturn in its U.S. market, principally in the second and third quarters, higher raw material and marketing costs and the effects of difficult economic conditions in Taiwan and Canada.

1994 Compared to 1993

Record net sales increased 13% on new products and line extensions, price increases and volume gains. All four companies in the group achieved record sales. Moen was up on new products, volume gains and price increases; Aristokraft was up on line extensions and price increases; Master Lock was up on higher volume, new products and line extensions; and Waterloo was up principally on new products. Record operating income was up 14% with increases in each company. The increase reflected sales gains, partly offset by higher raw material costs at Aristokraft and higher marketing and other operating expenses at Moen.

------Office Products

1995 Compared to 1994

Record net sales increased 15% on new products and volume increases reflecting continued market share gains, higher average foreign exchange rates and limited price increases. Operating income was up 13%, principally in domestic businesses, reflecting the sales increase, partly offset by higher raw material costs which were not fully recovered by the price increases, and higher marketing and volume-related expenses.

1994 Compared to 1993

Record net sales increased 7% on new products and volume gains despite continuing pricing pressures. ACCO continued to increase penetration in the fastest growing distribution channels. Operating income increased 18% on the record net sales and improved margins, partly offset by increased operating expenses. The sales and operating income increases reflected improvements in both domestic and international businesses.

------Golf and Leisure Products

1995 Compared to 1994

Record net sales were up 14% on increased volume in all product lines, reflecting benefits from line extensions and new products. Record operating income increased 13% on record sales, partly offset by higher operating expenses, principally marketing and volume related expenses including costs related to European expansion. The addition of Cobra will benefit golf and leisure sales and operating income in 1996.

1994 Compared to 1993

Record net sales and operating income were up 12% and 15%, respectively. The increases primarily resulted from new golf balls and golf shoes and strong volume gains in all lines. The operating income gain was also impacted by increased marketing and other operating expenses.

30

Results of Operations (concluded) ------

Quarterly Financial Data unaudited

(In millions, except per share amounts) 1995 1st 2nd 3rd 4th ------

Continuing operations Net sales $2,792.5 $2,594.7 $2,895.3 $3,084.6 Gross profit 688.3 676.9 690.1 739.7 Operating income 262.2 238.3 278.4 314.1 Income from continuing operations 116.6 119.1 153.3 154.1 Extraordinary item -- (2.7) -- -- Net income 116.6 116.4 153.3 154.1 Earnings per Common share Primary Continuing operations $.60 $.63 $.82 $.85 Extraordinary item -- (.01) ------Net income $.60 $.62 $.82 $.85 ------Fully diluted Continuing operations $.59 $.62 $.80 $.83 Extraordinary item -- (.01) ------Net income $.59 $.61 $.80 $.83 ------

$1994 1st 2nd 3rd 4th ------

Continuing operations Net sales $3,000.9 $3,040.9 $3,354.6 $3,750.1 Gross profit 874.4 910.1 924.1 1,016.0 Operating income 290.9 296.6 310.7 414.2 Income from continuing operations 129.5 151.9 131.8 471.9 Income (loss) from discontinued operations 19.7 12.0 20.1 (202.8) Net income 149.2 163.9 151.9 269.1 Earnings per Common share Primary Continuing operations $.64 $.75 $.65 $2.34 Discontinued operations .10 .06 .10 (1.01) ------Net income $.74 $.81 $.75 $1.33 ------Fully diluted Continuing operations $.63 $.74 $.64 $2.23 Discontinued operations .09 .06 .09 (.95) ------Net income $.72 $.80 $.73 $1.28 ------

Income from continuing operations in the fourth quarter of 1994 includes a net gain of $267 million on the disposal of businesses, or $1.32 and $1.25 per Common share primary and fully diluted, respectively. See page 43 for Dispositions.

31

FINANCIAL CONDITION American Brands, Inc. and Subsidiaries ------Cash Flow

Net Cash Provided from Continuing Operating Activities

Net cash provided from continuing operating activities in 1995 of $591.6 million, as compared with $996.4 million in 1994, exceeded capital expenditures and dividends to stockholders by $6.1 million. The decrease was principally the result of the absence of American Tobacco's cash flow of $150 million, the unfavorable change in international tobacco resulting from the supplemental U.K. budget announcement in December 1994, and the payment of $29.4 million related to the "put" exercise premium on the 5-3/4% Eurodollar Convertible Debentures. This decrease was partly offset by lower interest expense and higher interest income from the use of proceeds from dispositions.

Net Cash Provided by Investing Activities

Net cash provided by investing activities in 1995 was $1.1 billion, as compared with $921.1 million in 1994. The increase was principally attributable to increased proceeds received from the disposition of operations in 1995, as compared to 1994.

Capital expenditures. Capital spending is focused on the operating companies becoming the lowest cost producers of the highest quality products. Capital expenditures in 1995 were $208 million, as compared with $201.4 million in 1994. This increase is principally attributable to higher expenditures in hardware and home improvement, distilled spirits and golf and leisure, partly offset by a reduction in expenditures due to the absence of businesses sold, as shown on page 55. Funds for 1996 capital expenditures, estimated at $225 million, are expected to be generated internally.

Dispositions. Proceeds from the disposition of the Franklin life insurance business and other nonstrategic businesses in 1995 were $1.3 billion, as compared to $1.1 billion in 1994.

On December 22, 1994, the Company sold American Tobacco for $1 billion. On July 12, 1994, Dollond & Aitchison, a U.K.-based subsidiary of Gallaher Limited, was sold for a total consideration of $146 million.

Acquisitions. In 1993, Whyte & Mackay purchased the remaining outstanding ordinary shares of Invergordon for $343.6 million. Also in 1993, the Benson and Hedges cigarette trademark in Europe was acquired.

In January 1996, Cobra was acquired for approximately $715 million, including fees and expenses. The acquisition was financed in the commercial paper market.

Net Cash Used by Financing Activities

Net cash used by financing activities in 1995 was $1.7 billion, as compared to $1.9 billion in 1994. The decrease resulted principally from lower debt repayments and lower aggregate cash dividends paid, partly offset by the purchase of 25 million shares of Common stock for the treasury.

------Dividends

Dividends paid per Common share in 1995 increased to $2.00 per share from $1.9925 per share in 1994. However, dividends paid to Common stockholders in 1995 decreased to $376.2 million from $401.7 million, reflecting lower shares outstanding during 1995.

Although the dividend payout ratio continues to be higher than it has been in the past, the ratio may be brought down over time with future growth in earnings per share.

32

------Financial Position

At December 31, 1995, total debt decreased $352.5 million to $1.9 billion. The decrease principally resulted from the maturity of the 5-1/4% Notes and the 12% Eurosterling Notes and extinguishment of $199.5 million of the 5-3/4% Eurodollar Convertible Debentures as holders exercised their right to "put" their debentures back to the Company.

The ratio of total debt to total capital increased to 32.5% at year end 1995, reflecting the purchase of Common stock for the treasury and lower debt levels. This ratio would have been approximately 40% had Cobra been acquired on December 31, 1995.

The Company announced that it will redeem on March 5, 1996 all $150 million of the 7-5/8% Eurodollar Convertible Debentures at a redemption price of 103.8125% of the principal amount plus accrued interest. The Company also announced that it will redeem on March 1, 1996 all $150 million of the 9-1/8% Debentures at a redemption price of 104.4375% of the principal amount plus accrued interest. The Company currently intends to redeem these debentures from existing resources, including refinancing in the capital markets. As a result of the Company's announcement to redeem these debentures, the outstanding principal amount of the debentures has been reclassified to current portion of long-term debt at December 31, 1995.

At December 31, 1995, the Company had $850 million of debt securities (including Medium Term Notes) available for sale under its shelf registration with the Securities and Exchange Commission.

At year end 1995, the Company had $4 billion of long-term credit facilities, substantially all of which remained unused. During the year, the Company extended the expiration dates of these credit facilities to September 1, 2000. In addition, the commitment fee was reduced to 0.15% per annum of the unused facility. The commitment fee is subject to increases up to a maximum of 0.25% per annum in the event the Company's long-term debt rating falls below specified levels. These facilities are available for general corporate purposes, including acquisitions and support for the Company's short-term borrowings in the commercial paper market. In addition, Gallaher had 150 million pounds sterling (approximately $233 million) in committed, short-term revolving credit agreements available for general corporate purposes, including acquisitions.

Management believes that the Company's internally generated funds, together with its access to global credit markets, are more than adequate to meet the Company's capital needs.

Working capital decreased to $752.7 million in 1995 from $1.6 billion in 1994, principally reflecting the use of proceeds from dispositions to fund authorized share purchases. Management believes that the 1995 level was adequate to support continued growth.

------Foreign Exchange

The Company has sizable investments in Europe, primarily the U.K. Therefore, changes in the value of foreign currencies, principally sterling, affect the Company's balance sheet and cash flow statements when translated into U.S. dollars. As a result of the sales of American Tobacco and Franklin, changes in the sterling exchange rate will have a greater effect on these statements.

33

Financial Condition (continued) ------Financial Instruments

The Company does not enter into financial instruments for trading or speculative purposes. Financial instruments, principally forward foreign exchange contracts, are used to reduce the impact of changes in foreign currency exchange rates with respect to short-term loans, dividends declared by foreign subsidiaries and a portion of the Company's investment in Gallaher. Interest rate swaps are used to reduce the impact of changes in interest rates. The counterparties are major financial institutions.

Although the Company's theoretical risk is the replacement cost at the then estimated fair value of these instruments, management believes that the risk of incurring losses is remote and that such losses, if any, would be immaterial.

The Company enters into forward foreign exchange contracts principally to hedge the currency fluctuations in transactions denominated in foreign currencies, principally short-term loans to Gallaher, thereby limiting the Company's risk that would otherwise result from changes in exchange rates. The periods of the forward foreign exchange contracts correspond to the periods of the hedged transactions. Gains and losses on forward foreign exchange contracts and the offsetting losses and gains on hedged transactions are reflected in the income statement. The Company also enters into forward foreign exchange contracts to hedge a portion of its investment in Gallaher. The gains and losses on these contracts effectively offset losses and gains on the portion of the investment being hedged, which are reflected in Common stockholders' equity.

At December 31, 1995, the Company had outstanding forward foreign exchange contracts to purchase $141 million and sell $346 million of various foreign currencies (principally sterling) with a weighted average maturity of 58 days. At December 31, 1994, the Company had outstanding forward foreign exchange contracts to purchase $24 million and sell $557 million of various foreign currencies (principally sterling), with a weighted average maturity of 13 days.

The Company enters into interest rate swap agreements to manage its exposure to interest rate changes. The swaps involve the exchange of fixed and variable interest rate payments without exchanging the notional principal amount. Payments or receipts on the agreements are recorded as adjustments to interest expense, and did not have a significant effect on interest expense for 1995, 1994 or 1993. At December 31, 1995 and 1994, the Company had outstanding interest rate swap agreements denominated in dollars and sterling, maturing at various dates through 1999, with aggregate notional principal amounts of $355.3 million and $406.6 million, respectively. See page 52 for additional information on Financial Instruments.

34

Financial Condition (concluded)

------Common Stockholders' Equity

Common stockholders' equity at year end 1995 decreased $758.7 million to $3.9 billion principally from the purchase of Common shares and dividends to stockholders, partly offset by net income.

Return on average Common stockholders' equity was 13% during 1995 as compared with 16.6% last year. 1994 benefited from the net gain on the disposal of businesses and their operating results in 1994, partly offset by the loss from discontinued operations.

In connection with the sale of American Tobacco and Franklin, the Board of Directors authorized the purchase of up to 20 million shares of Common stock, which was completed during the third quarter of 1995. Under an additional authorization, 5 million shares were purchased during the fourth quarter of 1995. In 1996, further share purchases will be considered, depending on market conditions and investment needs and opportunities.

At year end 1995, the Company had 51.4 million treasury shares, which exceeds the future requirements of shares deliverable upon conversions of outstanding preferred stock and debentures, the exercise of outstanding stock options and grants of other stock-based awards.

During the year, the Common stock traded within a range of $36.625 to $47.25. The Common stock generated a total return of 324.2%, or 15.5% compounded annually, over the ten-year period ended December 31, 1995.

Book value per Common share was $21.69 at year end.

------Quarterly Common Stock Dividend Payments

1995 1994 ------Payment Date Per Share Per Share ------March 1 $ .50 $ .4925 June 1 .50 .50 September 1 .50 .50 December 1 .50 .50 ------$2.00 $1.9925 ------

------Quarterly Composite Common Stock Prices

1995 1994 ------High Low High Low ------First 39-7/8 36-5/8 35-7/8 29-7/8 Second 42-1/8 37-1/2 34-3/4 29-3/8 Third 43-1/2 38-5/8 37-1/8 31-1/2 Fourth 47-1/4 40-3/8 38-3/8 32-7/8 ------

The Common stock is listed on the New York Stock Exchange, which is the principal market for this security. The high and low prices are as reported in the consolidated transaction reporting system.

35

CONSOLIDATED BALANCE SHEET American Brands, Inc. and Subsidiaries

December 31 (In millions, except per share amounts) 1995 1994 ------Assets

Current assets

Cash and cash equivalents $ 139.9 $ 110.1

Accounts receivable less allowances for discounts, doubtful accounts and returns, 1995 $47.2; 1994 $52 984.4 1,067.9

Inventories Leaf tobacco 148.1 132.2 Bulk whiskey 343.7 351.4 Other raw materials, supplies and work in process 271.6 266.8 Finished products 1,076.8 1,265.3 ------1,840.2 2,015.7

Net assets of discontinued operations -- 1,170.0

Other current assets 199.5 307.2 ------Total current assets 3,164.0 4,670.9 ------

Property, plant and equipment

Land and improvements 76.8 77.0 Buildings and improvements to leaseholds 524.0 558.7 Machinery and equipment 1,456.3 1,540.7 Construction in progress 76.2 52.3 ------2,133.3 2,228.7 Less accumulated depreciation 996.0 1,016.0 ------

Property, plant and equipment, net 1,137.3 1,212.7

Intangibles resulting from business acquisitions, net of cumulative amortization, 1995 $550.8; 1994 $512 3,305.2 3,549.1

Other assets 414.7 361.7 ------Total assets $8,021.2 $9,794.4 ------

See Notes to Consolidated Financial Statements.

36

December 31 1995 1994 ------

Liabilities and Stockholders' Equity

Current liabilities

Notes payable to banks $ 297.4 $ 77.3 Commercial paper -- 103.3 Accounts payable 301.9 471.4 Accrued excise and other taxes 826.8 1,082.1 Accrued expenses and other liabilities 571.8 856.2 Current portion of long-term debt 413.4 525.2 ------Total current liabilities 2,411.3 3,115.5 ------Long-term debt 1,154.6 1,512.1 Deferred income taxes 127.6 133.0 Postretirement and other liabilities 450.5 396.3 ------Total liabilities 4,144.0 5,156.9 ------

$2.67 Convertible Preferred stock, without par value, stated value $30.50 per share--redeemable at Company's option 14.1 15.7 ------Common stockholders' equity Common stock, par value $3.125 per share, 229.6 shares issued 717.4 717.4 Paid-in capital 171.6 174.6 Foreign currency adjustments (234.6) (249.0) Retained earnings 4,887.3 4,724.4 Treasury stock, at cost (1,678.6) (745.6) ------Total Common stockholders' equity 3,863.1 4,621.8 ------Total liabilities and stockholders' equity $8,021.2 $9,794.4 ------

37

CONSOLIDATED STATEMENT OF INCOME American Brands, Inc. and Subsidiaries

For years ended December 31 (In millions, except per share amounts) 1995 1994 1993 ------Net Sales $11,367.1 $13,146.5 $12,630.5 ------Cost of products sold 3,109.9 3,765.1 3,587.6 Excise taxes on products sold 5,462.2 5,656.8 5,413.9 ------8,572.1 9,421.9 9,001.5 ------Gross Profit 2,795.0 3,724.6 3,629.0 ------Advertising, selling and administrative expenses 1,589.1 2,315.9 2,315.2 Amortization of intangibles 95.1 96.3 92.4 Restructuring charges 17.8 -- 40.8 ------1,702.0 2,412.2 2,448.4 ------Operating Income 1,093.0 1,312.4 1,180.6 ------Interest and related expenses 159.8 212.1 227.6 Corporate administrative expenses 76.2 69.9 78.1 Other (income) expenses, net (16.8) 12.1 (0.5) ------219.2 294.1 305.2 ------873.8 1,018.3 875.4 Gain on disposal of businesses, net 20.0 332.9 ------Income From Continuing Operations Before Income Taxes 893.8 1,351.2 875.4 Income taxes 350.7 466.1 334.2 ------Income From Continuing Operations Before Extraordinary Item and Cumulative Effect of Accounting Changes 543.1 885.1 541.2 Income (loss) from discontinued operations -- (151.0) 127.0 Extraordinary item (2.7) -- -- Cumulative effect of accounting changes -- -- (198.4) ------Net Income $ 540.4 $ 734.1 $ 469.8 ------Earnings Per Common Share Primary Income from continuing operations $2.90 $4.38 $2.67 Income (loss) from discontinued operations -- (.75) .63 Extraordinary item (.01) -- -- Cumulative effect of accounting changes -- -- (.98) ------Net income $2.89 $3.63 $2.32 ------Fully diluted Income from continuing operations $2.84 $4.24 $2.63 Income (loss) from discontinued operations -- (.71) .60 Extraordinary item (.01) -- -- Cumulative effect of accounting changes -- -- (.94) ------Net income $2.83 $3.53 $2.29 ------Dividends Paid Per Common Share $2.00 $1.9925 $1.97 ------See Notes to Consolidated Financial Statements.

38

CONSOLIDATED STATEMENT OF CASH FLOWS American Brands, Inc. and Subsidiaries

For years ended December 31 (In millions) 1995 1994 1993 ------Operating Activities Net income $ 540.4 $ 734.1 $ 469.8 Loss (income) from discontinued operations -- 151.0 (127.0) Extraordinary item 2.7 -- -- Cumulative effect of accounting changes -- -- 198.4 Gain on disposals, net (20.0) (331.5) (28.3) Depreciation and amortization 257.5 314.4 293.9 Decrease in accounts receivable 33.6 168.4 40.1 Decrease (increase) in inventories 82.7 (425.5) (147.9) (Increase) decrease in other assets (47.7) (19.1) 15.1 (Decrease) increase in accrued excise and other taxes (229.0) 362.8 (179.7) (Decrease) increase in accounts payable, accrued expenses and other liabilities (174.5) 10.4 184.4 Increase in deferred income taxes 4.2 38.0 26.1 Other operating activities, net 141.7 (6.6) (76.6) ------Net cash provided from continuing operating activities 591.6 996.4 668.3 ------Investing Activities Additions to property, plant and equipment (208.0) (201.4) (243.4) Proceeds from the disposition of property, plant and equipment 17.7 21.1 19.3 Proceeds from the disposition of operations, net of cash 1,312.3 1,121.8 9.6 Acquisitions, net of cash acquired (24.1) (19.9) (456.7) Other investing activities, net (2.3) (0.5) 4.9 ------Net cash provided (used) by investing activities 1,095.6 921.1 (666.3) ------Financing Activities Increase (decrease) in short-term debt 100.0 (1,147.3) 296.9 Issuance of long-term debt 94.1 35.9 511.2 Repayment of long-term debt (523.2) (376.6) (387.3) Dividends to stockholders (377.5) (403.1) (399.1) Cash purchases of Common stock for treasury (988.4) (20.1) (57.9) Other financing activities, net 25.5 1.9 (4.8) ------Net cash used by financing activities (1,669.5) (1,909.3) (41.0) ------Effect of foreign exchange rate changes on cash 12.1 1.6 1.6 ------Cash provided by discontinued operations -- 37.8 45.1 ------Net increase in cash and cash equivalents $ 29.8 $ 47.6 $ 7.7 ------Cash and cash equivalents at beginning of year $110.1 $ 62.5 $54.8 Cash and cash equivalents at end of year $139.9 $110.1 $62.5 ------Cash paid during the year for Interest, net of capitalized amount $206.6 $226.1 $245.1 Income taxes $295.5 $354.2 $470.5 ------See Notes to Consolidated Financial Statements. 39

CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY American Brands, Inc. and Subsidiaries

Unrealized appreciation Foreign Treasury Common Paid-in (depreciation) currency Retained stock, (In millions) stock capital on investments adjustments earnings at cost ------

Balance at January 1, 1993 $717.4 $177.9 $10.5 $(260.9) $4,322.7 $(685.1) Net income ------469.8 -- Cash dividends ------(399.1) -- Translation adjustments ------(56.5) -- -- Net unrealized depreciation -- -- (5.2) ------Purchases ------(40.3) Conversion of securities and delivery of stock plan shares -- (4.6) ------7.7 ------Balance at December 31, 1993 717.4 173.3 5.3 (317.4) 4,393.4 (717.7) Net income ------734.1 -- Cash dividends ------(403.1) -- Translation adjustments ------68.4 -- -- Net unrealized depreciation -- -- (5.3) ------Purchases ------(32.5) Conversion of securities and delivery of stock plan shares -- 1.3 ------4.6 ------Balance at December 31, 1994 717.4 174.6 -- (249.0) 4,724.4 (745.6) Net income ------540.4 -- Cash dividends ------(377.5) -- Translation adjustments ------14.4 -- -- Purchases ------(981.1) Conversion of securities and delivery of stock plan shares -- (3.0) ------48.1 ------Balance at December 31, 1995 $717.4 $171.6 -- $(234.6) $4,887.3 $(1,678.6) ------

See Notes to Consolidated Financial Statements.

40

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS American Brands, Inc. and Subsidiaries

Significant Accounting Policies

Principles of Consolidation The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. Fiscal year ends of certain subsidiaries of Gallaher Limited ("Gallaher") and ACCO World Corporation are November 30 to facilitate year-end closing.

The consolidated financial statements are prepared in conformity with generally accepted accounting principles, which require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses for the reporting periods. Actual results for future periods could differ from those estimates.

Accounting Changes

On January 1, 1993, the Company adopted FAS Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and FAS Statement No. 112, "Employers' Accounting for Postemployment Benefits." On December 31, 1993, the Company adopted FAS Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This Statement related to the life insurance business, which was sold on January 31, 1995. The initial effects of adopting these statements were recorded as cumulative changes in accounting principles as follows:

FAS Statement No. (In millions, except ------per share amounts) 106 112 115 Total ------

Pretax charge (credit) $310.0 $15.0 $(4.1) $320.9 Income taxes 119.0 5.0 (1.5) 122.5 ------Net loss (income) $191.0 $10.0 $(2.6) $198.4 ------Earnings per Common share $.94 $.05 $(.01) $.98 ------

Cash and Cash Equivalents

Highly liquid investments with an original maturity of three months or less are included in cash and cash equivalents.

Inventories

Inventories are priced at the lower of cost (principally average and first-in, first-out and minor amounts at last-in, first-out) or market. In accordance with generally recognized trade practice, the leaf tobacco and bulk whiskey inventories are classified as current assets, although part of such inventories, due to the duration of aging processes, ordinarily will not be sold within one year.

Property, Plant and Equipment

Property, plant and equipment are carried at cost. Depreciation is provided, principally on a straight-line basis, over the estimated useful lives of the assets. Gains or losses resulting from dispositions are included in income. Betterments and renewals which improve and extend the life of an asset are capitalized; maintenance and repair costs are expensed.

Intangibles Resulting from Business Acquisitions

Intangibles resulting from business acquisitions, comprising cost in excess of net assets of businesses acquired, and brands and trademarks, are being amortized on a straight-line basis over 40 years, except for intangibles acquired prior to 1971, which are not being amortized because they are considered to have a continuing value over an indefinite period. The Company periodically evaluates the recoverability of intangibles resulting from business acquisitions and measures the amount of impairment, if any, by assessing current and future levels of income and cash flows as well as other factors, such as business trends and prospects and market and economic conditions.

Advertising Costs

Advertising costs, which amounted to $390.3 million in 1995, are principally charged to expense as incurred.

Income Taxes

Deferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjusted to reflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is established for any deferred tax asset for which realization is not likely.

41

Notes (continued)

------Deferred income taxes are not provided on undistributed earnings of foreign subsidiaries, aggregating approximately $1.4 billion at December 31, 1995, as such earnings are expected to be permanently reinvested in these companies.

Foreign Currency Translation

Foreign currency balance sheet accounts are translated into U.S. dollars at the rates of exchange at the balance sheet date. Income and expenses are translated at the average rates of exchange in effect during the year. The related translation adjustments are made directly to a separate component of Common stockholders' equity.

The Company has sizable investments in Europe, primarily the U.K. Therefore, changes in the value of foreign currencies, principally sterling, affect the Company's consolidated financial statements when translated into U.S. dollars.

Derivative Financial Instruments

Derivative financial instruments are utilized by the Company to reduce interest rate and foreign exchange risks. The Company has established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. The Company does not enter into financial instruments for trading or speculative purposes.

Gains and losses on forward foreign exchange contracts used to hedge the currency fluctuations on transactions denominated in foreign currencies and the offsetting losses and gains on hedged transactions are recorded in the "Other (income) expenses, net" caption in the income statement. Gains and losses on forward foreign exchange contracts used to hedge a portion of the Company's investment in Gallaher and the offsetting losses and gains on the portion of the investment being hedged are recorded in the "Foreign currency adjustments" caption in Common stockholders' equity.

Payments or receipts on interest rate swap agreements are recorded in the "Interest and related expenses" caption in the income statement.

Earnings Per Share

Earnings per Common share are based on the weighted average number of Common shares outstanding in each year and after preferred stock dividend requirements.

Fully diluted earnings per Common share assume that any convertible debentures and convertible preferred shares outstanding at the beginning of each year or at their date of issuance, if later, were converted at those dates, with related interest, preferred stock dividend requirements and outstanding Common shares adjusted accordingly. It also assumes that outstanding Common shares were increased by shares issuable upon exercise of those stock options for which market price exceeds exercise price, less shares which could have been purchased by the Company with related proceeds.

Recently Issued Accounting Standards

In March 1995, FAS Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" was issued, effective January 1, 1996. FAS No. 121 requires that in the event certain facts and circumstances indicate an asset may be impaired, an evaluation of recoverability must be performed to determine whether or not the carrying amount of the asset is required to be written down. The Company does not expect the adoption of this statement to have a material effect on its financial condition or results of operations.

In October 1995, FAS Statement No. 123, "Accounting for Stock-Based Compensation" was issued, effective January 1, 1996. The Company will continue to measure compensation costs for its employee stock compensation plans as prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees," as allowed under FAS No. 123.

42

Acquisitions

In 1991, Whyte & Mackay acquired 41.3% of the outstanding shares of Invergordon Distillers Group PLC ("Invergordon") for a cost, including fees and expenses, of $255.5 million, which was accounted for under the cost method. In December 1993, Whyte & Mackay completed its acquisition of Invergordon by purchasing the remaining 58.7% of the outstanding shares of Invergordon for a cost, including fees and expenses, of $343.6 million. The aggregate cost of Invergordon of $599.1 million exceeded the fair value of assets acquired by $492.9 million. Operations, including the effect of the application of the equity method to prior periods, were consolidated from December 1, 1993. Had operations been consolidated from January 1, 1993, they would not have materially affected 1993 results. In connection with the acquisition of Invergordon, liabilities amounting to $108.4 million were recorded at date of acquisition.

In June 1993, the Benson and Hedges cigarette trademark in Europe was acquired in exchange for assignment of the Lucky Strike and Pall Mall overseas cigarette trademarks and $107.2 million in cash, including expenses, and contingent future payments based on volumes. Results from the Benson and Hedges trademark were included in international tobacco from the date of acquisition. A pretax gain of $25.5 million was recognized in domestic tobacco as a result of the assignment of the Lucky Strike and Pall Mall trademarks. Certain of the contingent payments were guaranteed and, accordingly, their present value was included in the initial $183 million of intangibles that have been recorded. Any payments in excess of the guarantees will also be amortized over periods not to exceed 40 years.

In January 1996, Cobra Golf Incorporated ("Cobra"), a leader in golf clubs, was acquired for an aggregate cost of approximately $715 million in cash, including fees and expenses. Based on preliminary estimates, the cost exceeds the fair value of net assets acquired by approximately $650 million. Had operations been consolidated from January 1, 1995, they would not have materially affected 1995 results.

------Dispositions

On December 22, 1994, the Company sold The American Tobacco Company, its domestic tobacco business, for $1 billion in cash, before related expenses.

In the fourth quarter of 1994, the Company recorded a $245 million charge to income in connection with plans to dispose of a number of nonstrategic businesses and product lines, including U.K.-based Forbuoys (retail distribution) and Prestige (housewares), both subsidiaries of Gallaher. The sale of Prestige was completed on May 2, 1995. With the sale of the retail distribution operations on July 24, 1995, the Company completed the disposition of nonstrategic businesses and product lines. As a result, $20 million of the $245 million provision that was recorded in 1994 in connection with the dispositions was reversed in the third quarter of 1995.

The components of the gain on the disposal of businesses, net are as follows:

(In millions, except per 1995 1994 share amounts) ------Other Domestic Other Businesses Tobacco Businesses Total ------Pretax gain (loss) $20.0 $577.9 $(245.0) $332.9 Income taxes -- 69.6 (3.7) 65.9 ------Net income $20.0 $508.3 $(241.3) $267.0 ------Earnings per Common share $.10 $2.52 $(1.20) $1.32 ------

On July 12, 1994, the Company sold Dollond & Aitchison (optical), a subsidiary of Gallaher, for total consideration of $146 million, which approximated the carrying value of the company.

43

Notes (continued)

Discontinued Operations

In the fourth quarter of 1994, the Company entered into an agreement to sell its Franklin life insurance business for $1.17 billion in cash, before related expenses. The sale was completed on January 31, 1995.

The net assets and results of operations of Franklin were reclassified to separately identify them as discontinued operations.

Summarized data for Franklin, net of allocation of interest expense based on a normal debt to equity ratio for a life insurance company, was as follows:

Results of Operations

(In millions) 1994 1993 ------Revenues $951.8 $1,070.9 ------Income from operations Income before taxes $ 91.3 $200.7 Income taxes 35.5 73.7 ------Net income from operations 55.8 127.0 ------Loss on disposal of operations Income during the phase-out period, net of $4.2 million of income taxes 4.2 -- Loss on disposal (211.0) ------Net loss on disposal (206.8) ------Net income (loss) from discontinued operations $(151.0) $127.0 ------

Net Assets of Discontinued Operations

(In millions) 1994 ------Investments $6,268.8 Other assets 1,206.2 Policy reserves and claims (2,772.4) Investment-type contract deposits (2,897.3) Other liabilities (424.3) Write-down to estimated realized value (211.0) ------Net assets of discontinued operations $1,170.0 ------

Short-Term Borrowings and Credit Facilities

At December 31, 1995 and 1994, there were $297.4 million and $180.6 million of short- term borrowings outstanding, respectively, comprised of notes payable to banks and, at December 31, 1994, commercial paper. The weighted average interest rate on these borrowings was 6.5% and 6%, respectively.

At December 31, 1995, there was $17.8 million outstanding under committed bank credit agreements, which provide for unsecured borrowings of up to $286 million for general corporate purposes, including acquisitions. Fees of 0.10% per annum are paid.

In addition, the Company had uncommitted bank lines of credit which provide for unsecured borrowings for working capital of up to $497.4 million, of which $279.6 million was outstanding at year end.

For a description of the Company's use of financial instruments, see page 52.

44

Long-Term Debt

The components of long-term debt are as follows:

(In millions) 1995 1994 ------Revolving credit notes(a) $97.0 $32.5 Other notes(b) 251.3 274.0 5-3/4% Eurodollar Convertible Debentures, Due 2005(c) 0.5 200.0 7-5/8% Eurodollar Convertible Debentures, Due 2001(d) 150.0 150.0 Other Eurodollar Convertible Debentures(e) 24.8 40.7 8-1/2% Notes, Due 2003 200.0 200.0 5-1/4% Notes, Due 1995 -- 200.0 8-5/8% Debentures, Due 2021 150.0 150.0 9-1/8% Debentures, Due 2016(d) 150.0 150.0 7-7/8% Debentures, Due 2023 150.0 150.0 7-1/2% Notes, Due 1999 150.0 150.0 9% Notes, Due 1999 100.0 100.0 9-1/4% Eurosterling Notes, Due 1998 77.7 78.3 12% Eurosterling Notes, Due 1995 -- 62.6 12-1/2% Sterling Loan Stock, Due 2009 46.6 47.0 Miscellaneous 20.1 52.2 ------1,568.0 2,037.3 Less current portion 413.4 525.2 ------$1,154.6 $1,512.1 ------

(a) The Company maintains revolving credit agreements expiring in 2000 with various banks, which provide for unsecured borrowings of up to $4 billion including $1 billion in various Eurocurrencies. The interest rate is set at the time of each borrowing. A commitment fee of 0.15% per annum is paid. The commitment fee is subject to increases up to a maximum of 0.25% per annum in the event the Company's long-term debt rating falls below specified levels. Borrowings under these agreements may be made for general corporate purposes, including acquisitions and support for the Company's short-term borrowings in the commercial paper market.

(b) The Other notes have maturity dates ranging from one to six years, with a weighted average coupon of 8.5%.

(c) On April 11, 1995, holders of the 5-3/4% Eurodollar Convertible Debentures, Due 2005, exercised their right to "put" their debentures. See page 55 for Extraordinary Item.

(d) On March 5 and March 1, 1996, respectively, the Company will redeem the 7-5/8% Eurodollar Convertible Debentures, Due 2001, and the 9-1/8% Debentures, Due 2016. An extraordinary charge of approximately $10 million, or 6 cents per Common share, will be recorded in the first quarter of 1996.

(e) The Other Eurodollar Convertible Debentures include 7-3/4% Debentures, Due 2002, of $23.9 million and $39.6 million and 5-3/8% Debentures, Due 2003, of $0.9 million and $1.1 million, in 1995 and 1994, respectively. These debentures are convertible into Common shares based on conversion prices of $28.35 and $29 per share, respectively. During 1995, $15.7 million of the 7-3/4% Debentures were converted and 551,487 treasury shares were issued upon such conversions.

Estimated payments for maturing debt during the next five years are as follows: 1996, $413.4 million; 1997, $54.2 million; 1998, $170.1 million; 1999, $252.4 million; and 2000, $92.6 million.

45

Notes (continued)

$2.67 Convertible Preferred Stock--Redeemable at Company's Option

Shares of the $2.67 Convertible Preferred stock issued and outstanding at December 31, 1995, 1994 and 1993 were 461,008 shares, 516,186 shares and 561,286 shares, respectively. Reacquired, redeemed or converted authorized shares that are not outstanding are required to be retired or restored to the status of authorized but unissued shares of preferred stock without series designation. The holders of $2.67 Convertible Preferred stock are entitled to cumulative dividends, three-tenths of a vote per share (in certain events, to the exclusion of the Common shares), preference in liquidation over holders of Common stock of $30.50 per share plus accrued dividends and convert each share of such stock into 4.08 shares of Common stock. Authorized but unissued Common shares are reserved for issuance upon such conversions, but treasury shares may be and are delivered. During 1995, 1994 and 1993, 55,178 shares, 45,100 shares and 63,647 shares, respectively, were converted. The Company may redeem such Preferred stock at a price of $30.50 per share, plus accrued dividends.

A cash dividend of $2.67 per share in the aggregate amounts of $1.3 million, $1.4 million and $1.6 million was paid in each of the years ended December 31, 1995, 1994 and 1993, respectively.

Capital Stock

The Company has 750 million authorized shares of Common stock and 60 million authorized shares of preferred stock.

There were 178,130,371 Common shares outstanding at December 31, 1995.

The cash dividends paid on the Common stock for the years ended December 31, 1995, 1994 and 1993 aggregated $376.2 million, $401.7 million and $397.5 million, respectively.

Treasury shares purchased and received as consideration for stock options exercised amounted to 24,790,403 shares in 1995, 950,220 shares in 1994 and 1,159,262 shares in 1993. Treasury shares delivered in connection with exercise of stock options and grants of other stock awards and conversion of preferred stock and debentures amounted to 1,710,151 shares in 1995, 416,795 shares in 1994 and 326,494 shares in 1993. At December 31, 1995, there were 51,439,653 treasury shares.

Preferred Share Purchase Rights

Each outstanding share of Common stock also evidences one Preferred Share Purchase Right ("Right"). The Rights will generally become exercisable only in the event of an acquisition of or a tender offer for 10% or more of the Common stock. If exercisable, each Right is exercisable for 1/200th of a share of Series A Junior Participating Preferred Stock at an exercise price of $52.50. Also, upon an acquisition of 10% or more of the Common stock, or upon an acquisition of the Company or the transfer of 50% or more of its assets or earning power, each Right (other than Rights held by the 10% acquiror, if applicable), if exercisable, will generally be exercisable for common shares of the Company or the acquiring company, as the case may be, having a market value of twice the exercise price. In certain events, however, Rights may be exchanged by the Company for Common stock at a rate of one share per Right. The Rights may be redeemed at any time prior to an acquisition of 10% or more of the Common stock at a redemption price of $.005 per Right. Until a Right is exercised, the holder, as such, will have no voting, dividend or other rights as a stockholder of the Company. Unless either redeemed or exchanged, the Rights will expire on December 24, 1997.

All 1.4 million of the authorized Series A Preferred shares are reserved for issuance upon exercise of Rights, and at December 31, 1995, outstanding Rights were exercisable as described above in the aggregate for 890,652 of such shares.

46

Stock Plans

The 1990 Long-Term Incentive Plan, as amended, authorizes the granting to key employees of the Company and its subsidiaries of incentive and nonqualified stock options, stock appreciation rights, restricted stock, performance awards and other stock-based awards, any of which may be granted alone or in combination with other types of awards or dividend equivalents. Such grants may be made on or before December 31, 1999 for up to 12 million shares of the Common stock. The Company's Long-Term Incentive Plan for Key Employees of Subsidiaries also authorizes the granting to key employees of the Company's subsidiaries of similar types of awards other than stock options and stock appreciation rights, and one million shares have been reserved for issuance upon payment of any awards granted thereunder after December 31, 1990. Stock options and stock appreciation rights may no longer be granted under the Company's 1986 Stock Option Plan, but outstanding awards may continue to be exercised until their expiration dates.

Stock options under the Plans have exercise prices of fair market values at dates of grant. Options generally may not be exercised prior to one year or more than ten years from the date of grant. Stock appreciation rights, which may be granted in conjunction with option grants, permit the optionees to receive shares of Common stock, cash or a combination of shares and cash measured by the difference between the option exercise price and the fair market value of the Common stock at the time of exercise of such right.

Changes during the three years ended December 31, 1995 in shares under option were as follows:

Option Prices Shares ------Under option at January 1, 1993 $14.44 to $46.81 6,589,910 Options granted 33.75 to $34.25 2,358,600 Options exercised 14.44 to $33.91 (73,150) Options lapsed -- (96,300) ------Under option at December 31, 1993 $15.03 to $46.81 8,779,060 Options granted $34.13 to $35.13 2,562,200 Options exercised $15.77 to $34.59 (239,650) Options lapsed -- (953,880) Options cancelled -- (472,890) ------Under option at December 31, 1994 $15.03 to $46.81 9,674,840 Options granted $37.44 to $42.25 1,760,400 Options exercised $15.03 to $35.13 (869,030) Options lapsed -- (646,650) Under option at December 31, 1995 $21.25 to $46.81 9,919,560 ------

At December 31, 1995, options for 8,159,160 shares were exercisable.

At December 31, 1995, the restriction period had ended on the 16,320 restricted shares awarded under the 1990 Long-Term Incentive Plan, as amended. At December 31, 1995, performance awards were outstanding pursuant to which up to 68,837 shares, 68,837 shares, 90,750 shares, and 111,450 shares may be issued in 1996, 1997, 1998, and 1999, respectively, depending on the extent to which certain specified performance objectives are met. 112,994 shares, 14,135 shares and 9,048 shares were issued pursuant to performance awards during 1995, 1994 and 1993, respectively. The costs of restricted and deferred shares and performance awards are expensed over the restriction or performance period.

Shares available in connection with future awards under the Company's stock plans at January 1 and December 31, 1995 were 10.6 million and 8.9 million, respectively. Authorized but unissued shares are reserved for issuance in connection with awards, but treasury shares may be and are delivered.

47

Notes (continued)

Pension and Other Retiree Benefits

The Company has a number of pension plans covering substantially all employees. The plans provide for payment of retirement benefits, mainly commencing between the ages of 60 and 65, and also for payment of certain disability and severance benefits. After meeting certain qualifications, an employee acquires a vested right to future benefits. The benefits payable under the plans are generally determined on the basis of an employee's length of service and earnings. Annual contributions to the plans are sufficient to satisfy legal funding requirements.

U.S. Pension Plans

The components of net pension costs are as follows:

(In millions) 1995 1994 1993 ------Service cost $13.9 $24.3 $21.0 Interest cost 28.9 67.6 65.7 Actual return on plan assets (77.3) (48.8) (86.4) Net amortization and deferral 46.0 (23.9) 10.8 ------$11.5 $19.2 $11.1 ------

The funded status of the U.S. plans as of December 31 was as follows:

1995 1994 ------Assets Accumulated Assets Accumulated exceed benefits exceed benefits (In millions) accumulated exceed accumulated assets ------

Accumulated benefit obligation Vested $253.2 $102.4 $194.9 $87.3 Nonvested 10.5 1.8 8.0 1.9 ------$263.7 $104.2 $202.9 $89.2 ------Projected benefit obligation $313.2 $113.6 $246.7 $97.6 Fair value of plan assets, principally equity securities and corporate bonds 333.3 72.3 270.0 61.4 ------Excess (deficiency) of assets over projected benefit obligation 20.1 (41.3) 23.3 (36.2) Unrecognized net transition (gain) loss (9.1) 1.2 (10.8) 1.6 Unrecognized net loss from experience differences 14.5 21.3 10.4 11.7 Unrecognized prior service cost (0.2) 23.4 (1.1) 21.5 Adjustment needed to recognize minimum liability -- (35.0) -- (24.3) ------Prepaid pension cost (pension liability) $25.3 $(30.4) $21.8 $(25.7) ------Actuarial assumptions Discount rate 7.25% 7.25% 8.75% 8.75% ------Weighted average rate of compensation increase 4.2% 4.6% 5.2% 5.1% ------Expected long-term rate of return on plan assets 10.0% 10.0% 9.5% 9.5% ------

48

Non-U.S. Pension Plans

The components of net pension costs are as follows:

(In millions) 1995 1994 1993 ------Service cost $25.3 $38.8 $27.1 Interest cost 65.9 68.7 62.3 Actual return on plan assets (124.4) (61.0) (222.0) Net amortization and deferral 28.7 (32.7) 144.4 ------$(4.5) $13.8 $11.8 ------

The funded status (assets exceed accumulated benefits) of the non-U.S. plans as of December 31 was as follows:

(In millions) 1995 1994 ------Accumulated benefit obligation Vested $686.5 $670.6 Nonvested 3.2 3.7 ------$689.7 $674.3 ------Projected benefit obligation $784.4 $773.4 Fair value of plan assets, principally equity securities and corporate bonds 1,034.1 1,017.6 ------Excess of assets over projected benefit obligation(a) 249.7 244.2 Unrecognized net transition gain (18.3) (29.3) Unrecognized net gain from experience differences (43.7) (66.2) Unrecognized prior service cost 33.8 45.0 ------Prepaid pension cost $221.5 $193.7 ------Actuarial assumptions Weighted average discount rate 8.5% 9.0% ------Weighted average rate of compensation increase 7.0% 7.0% ------Expected long-term rate of return on plan assets 9.5% 9.5% ------

(a) The excess of assets over the projected benefit obligation, calculated under the valuation method mandated by FAS Statement No. 87, "Employers' Accounting for Pensions," arises principally in the U.K. Under current U.K. legislation, no part of this excess could be repaid to the Company from the U.K. plans.

Defined Contribution Plans

The Company sponsors a number of defined contribution plans. Contributions are determined under various formulas. Costs related to such plans amounted to $16.9 million, $26.2 million and $23.8 million in 1995, 1994 and 1993, respectively.

Other Retiree Benefits

The Company provides postretirement health care and life insurance benefits to certain employees and retirees in the United States and certain employee groups outside the United States. Most employees and retirees outside the United States are covered by government health care programs.

Effective January 1, 1993, the Company adopted FAS Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," for its retiree benefit plans. Under FAS No. 106, the Company is required to accrue the estimated cost of these benefits during employees' active service periods.

The Company elected to recognize the one-time transition obligation charge resulting from this change in accounting on the immediate recognition basis. The transition obligation at January 1, 1993 was $310 million, net of $41.3 million of liabilities previously recorded. The cumulative change in accounting principle, net of $119 million of deferred income taxes, was $191 million, or 94 cents per Common share.

The components of the postretirement benefit costs are as follows:

(In millions) 1995 1994 1993 ------Service cost $3.7 $8.1 $6.7 Interest cost 14.4 26.9 26.3 ------$18.1 $35.0 $33.0 ------

49

Notes (continued)

The status of the plans as of December 31 was as follows:

(In millions) 1995 1994 ------Accumulated postretirement benefit obligation Retirees $130.0 $122.1 Fully eligible active plan participants 16.5 18.1 Other active plan participants 52.9 36.0 ------199.4 176.2 Unrecognized prior service costs 3.1 3.0 Unrecognized net gain from experience differences -- 15.1 ------Accrued postretirement costs $202.5 $194.3 ------Assumed weighted average discount rate 7.7% 8.8% ------

The assumed health care cost trend rate used in measuring the health care portion of the postretirement benefit cost for 1996 is 11%, gradually declining to 6% by the year 2007 and remaining at that level thereafter. A 1% increase in the assumed health care cost trend rate for each year would increase the accumulated benefit obligation as of December 31, 1995 and postretirement benefit costs for 1995 by approximately 10% and 13%, respectively.

Postemployment Benefits

The Company provides certain postemployment benefits to former or inactive employees after employment but before retirement. Effective January 1, 1993, the Company adopted FAS Statement No. 112, "Employers' Accounting for Postemployment Benefits," which required a change from the cash basis to the accrual basis for these postemployment benefits. Accordingly, the cumulative effect of the accounting change as of January 1, 1993 of adopting FAS No. 112, net of $5 million of income taxes, was a charge of $10 million, or five cents per Common share.

Lease Commitments

Future minimum rental payments under noncancelable operating leases as of December 31, 1995 are as follows:

(In millions) ------1996 $ 44.9 1997 38.2 1998 32.3 1999 27.4 2000 23.8 Remainder 211.4 ------Total minimum rental payments 378.0 Less minimum rentals to be received under noncancelable subleases 36.3 ------$341.7 ------

Total rental expense for all operating leases (reduced by minor amounts from subleases) amounted to $58.5 million, $81.3 million and $88.7 million in 1995, 1994 and 1993, respectively.

50

Income Taxes

The components of income from continuing operations before income taxes are as follows:

(In millions) 1995 1994 1993 ------Domestic operations $236.7 $924.7 $295.1 Foreign operations 657.1 426.5 580.3 ------$893.8 $1,351.2 $875.4 ------

A reconciliation of income taxes at the 35% federal statutory income tax rate to income taxes as reported is as follows:

(In millions) 1995 1994 1993 ------Income taxes computed at federal statutory income tax rate $312.8 $472.9 $306.4 Other income taxes, net of federal tax benefit 12.9 22.3 19.7 Lower effective rate on disposal of businesses (7.0) (50.6) -- Goodwill not deductible for income tax purposes 27.9 28.4 28.3 Miscellaneous, including reversals of tax provisions no longer required 4.1 (6.9) (20.2) ------Income taxes as reported $350.7 $466.1 $334.2 ------

Income taxes are as follows:

(In millions) 1995 1994 1993 ------Currently payable Federal $129.0 $208.9 $120.4 Foreign 201.8 186.0 187.2 Other 16.5 26.2 0.4 Deferred Federal and other 3.0 39.8 39.3 Foreign 0.4 5.2 (13.1) ------$350.7 $466.1 $334.2 ------

The components of net deferred tax assets (liabilities) are as follows:

(In millions) 1995 1994 ------Current assets Compensation and benefits $14.2 $14.7 Other reserves 16.5 28.5 Product coupons 9.8 3.7 Capitalized interest-inventory 12.2 12.7 Restructuring 14.1 14.4 Interest 11.4 9.9 Accounts receivable 11.8 11.9 Miscellaneous 33.1 29.8 ------123.1 125.6 ------

Current liabilities Inventories (23.6) (25.4) Miscellaneous (14.6) (23.4) ------(38.2) (48.8) ------Deferred income taxes included in Other current assets 84.9 76.8 ------Noncurrent assets Compensation and benefits 21.9 16.2 Other retiree benefits 70.1 73.3 Other reserves 24.1 13.2 Foreign exchange 9.8 3.7 Miscellaneous 13.8 12.9 ------139.7 119.3 ------Noncurrent liabilities Depreciation (110.3) (115.5) Pensions (78.5) (70.5) Trademark amortization (55.2) (42.9) Miscellaneous (23.3) (23.4) ------(267.3) (252.3) ------Deferred income taxes (127.6) (133.0) ------Net deferred tax liability $(42.7) $ (56.2) ------

51

Notes (continued)

Financial Instruments

The Company does not enter into financial instruments for trading or speculative purposes. Financial instruments are used to reduce the impact of changes in foreign currency exchange rates and interest rates. The principal financial instruments used are forward foreign exchange contracts and interest rate swaps. The counterparties are major financial institutions. Although the Company's theoretical risk is the replacement cost at the then estimated fair value of these instruments, management believes that the risk of incurring losses is remote and that such losses, if any, would be immaterial.

The Company enters into forward foreign exchange contracts principally to hedge the currency fluctuations in transactions denominated in foreign currencies, principally short-term loans to Gallaher, thereby limiting the Company's risk that would otherwise result from changes in exchange rates. The periods of the forward foreign exchange contracts correspond to the periods of the hedged transactions. The Company also enters into forward foreign exchange contracts which are treated as a hedge of a portion of its investment in Gallaher.

At December 31, 1995, the Company had outstanding forward foreign exchange contracts to purchase $141 million and sell $346 million of various foreign currencies (principally sterling), with maturities ranging from January 2, 1996 to December 31, 1996, with a weighted average maturity of 58 days. At December 31, 1994, the Company had outstanding forward foreign exchange contracts to purchase $24 million and sell $557 million of various foreign currencies (principally sterling), with maturities ranging from January 3, 1995 to December 29, 1995, with a weighted average maturity of 13 days.

The estimated fair value of foreign currency contracts represents the amount required to enter into like contracts with similar remaining maturities based on quoted market prices. At December 31, 1995 and 1994, the difference between the contract amounts and fair values was immaterial.

The Company enters into interest rate swap agreements to manage its exposure to interest rate changes. The swaps involve the exchange of fixed and variable interest rate payments without exchanging the notional principal amount.

At December 31, 1995 and 1994, the Company had outstanding interest rate swap agreements denominated in dollars and sterling, maturing at various dates through 1999, with aggregate notional principal amounts of $277.6 million and $328.3 million, respectively. Under these agreements the Company receives a floating rate principally based on thirty day commercial paper rates, or a weighted average rate of 6.1% at December 31, 1995 and 1994, and pays a weighted average fixed interest rate of 7.4% and 7.7% for 1995 and 1994, respectively.

52

At December 31, 1995 and 1994, the Company also had outstanding interest rate swap agreements denominated in sterling, maturing in 1998, with aggregate notional principal amounts of $77.7 million and $78.3 million, respectively. Under these agreements, the Company receives a fixed interest rate of 6.7% and pays a floating interest rate based on the three month London Interbank Offered Rate (LIBOR), or a weighted average rate of 6.8% at December 31, 1995 and 6% at December 31, 1994, respectively.

The fair value of these interest rate swap agreements represents the estimated receipts or payments that would be made to terminate the agreements. At December 31, 1995, the Company would have paid $15.4 million and at December 31, 1994 would have received $2 million to terminate the agreements. The fair value is based on dealer quotes, considering current interest rates.

The estimated fair value of the Company's cash and cash equivalents, notes payable to banks and commercial paper, approximates the carrying amounts due principally to their short maturities.

The estimated fair value of the Company's $1,568 million and $2,037.3 million total long-term debt (including current portion) at December 31, 1995 and 1994 was approximately $1,687.8 million and $2,072.6 million, respectively. The fair value is determined from quoted market prices, where available, and from investment bankers using current interest rates considering credit ratings and the remaining terms to maturity.

Concentration of credit risk with respect to accounts receivables is limited because a large number of geographically diverse customers make up the subsidiaries' domestic and international customer base, thus spreading the credit risk.

Supplementary Profit and Loss Information

Supplementary profit and loss information is as follows:

(In millions) 1995 1994 1993 ------Federal and foreign excise taxes included in net sales International tobacco $4,976.5 $4,742.6 $4,548.0 Distilled spirits 485.7 488.9 505.0 Domestic tobacco -- 425.3 360.9 ------$5,462.2 $5,656.8 $5,413.9 ------Research and development expenses $31.8 $43.5 $39.7 ------

The 1995 restructuring charge of $17.8 million in distilled spirits reflected a one-time charge principally in connection with a bottling plant closing, write-down of property, plant and equipment, and related employee termination costs on a 5% reduction in workforce.

Corporate administrative expenses in 1993 included a $5 million provision for staff reduction at the corporate headquarters.

53

Notes (continued)

Information on Business Segments

The Company's subsidiaries operate principally in the following business segments:

International tobacco includes cigarettes and other tobacco products manufactured by Gallaher.

Distilled spirits includes products produced or imported by Jim Beam and Whyte & Mackay.

Hardware and home improvement products includes kitchen and bathroom faucets, plumbing supply and repair products manufactured, packaged or distributed by Moen, locks manufactured by Master Lock, kitchen cabinets and bathroom vanities manufactured by Aristokraft, and tool storage products manufactured by Waterloo.

Office products includes paper fastening, computer accessories, time management systems and other office products manufactured by ACCO World subsidiaries.

Golf and leisure products includes golf balls, shoes, gloves and clubs manufactured and marketed by Titleist and Foot-Joy Worldwide.

Domestic tobacco included cigarettes manufactured by American Tobacco, which was sold in December 1994.

Other businesses included optical (Dollond & Aitchison), sold in July 1994, rubber products, sold in December 1994, housewares (Prestige), sold in May 1995, and retail distribution (Forbuoys), sold in July 1995.

The Company's subsidiaries operate in the United States, Europe (principally the U.K.) and other areas (principally Canada and Australia).

Restructuring charges (credits), net are as follows:

(In millions) 1995 1994 1993 ------International tobacco -- -- $29.8 Distilled spirits $17.8 -- (15.8) Hardware and home improvement products -- -- 4.7 Office products -- -- 3.6 ------Ongoing operations 17.8 -- 22.3 Domestic tobacco -- -- 18.5 ------$17.8 -- $40.8 ------

Net sales and operating income for the years 1995, 1994 and 1993, and identifiable assets for the related year ends by business segments and by geographic areas, are shown on page 57.

Reconciliation of identifiable assets to consolidated total assets is as follows:

(In millions) 1995 1994 1993 ------Identifiable assets $7,845.9 $8,452.0 $9,029.3 Corporate 175.3 172.4 193.2 Net assets of discontinued operations -- 1,170.0 1,344.0 ------$8,021.2 $9,794.4 $10,566.5 ------

Depreciation is as follows:

(In millions) 1995 1994 1993 ------International tobacco $28.5 $41.1 $29.2 Distilled spirits 35.9 36.2 31.6 Hardware and home improvement products 35.2 34.4 30.7 Office products 35.8 36.7 35.4 Golf and leisure products 10.0 8.9 8.0 Corporate 2.9 2.7 2.8 ------Ongoing operations 148.3 160.0 137.7 Domestic tobacco -- 23.9 22.0 Other businesses 14.1 34.2 41.8 ------$162.4 $218.1 $201.5 ------

Notes (concluded)

Amortization of intangibles is as follows:

(In millions) 1995 1994 1993 ------International tobacco $5.1 $5.1 $2.3 Distilled spirits 34.4 33.9 32.2 Hardware and home improvement products 30.1 30.1 30.1 Office products 21.0 20.5 20.9 Golf and leisure products 1.2 1.1 1.0 ------Ongoing operations 91.8 90.7 86.5 Other businesses 3.3 5.6 5.9 ------$95.1 $96.3 $92.4 ------

Capital expenditures are as follows:

(In millions) 1995 1994 1993 ------International tobacco $32.4 $33.0 $43.1 Distilled spirits 39.5 34.3 29.8 Hardware and home improvement products 68.1 45.3 62.7 Office products 36.1 33.5 26.0 Golf and leisure products 20.6 15.5 12.1 Corporate 0.9 1.1 1.7 Ongoing operations 197.6 162.7 175.4 ------Domestic tobacco -- 10.8 21.8 Other businesses 10.4 27.9 46.2 ------$208.0 $201.4 $243.4 ------

Extraordinary Item

On April 11, 1995, holders of $199.5 million of the $200 million 5-3/4% Eurodollar Convertible Debentures, Due 2005, exercised their right to "put" their debentures at a price of 114.74%, plus accrued interest. This resulted in a total payment by the Company of $240.4 million, including premium and accrued interest, and reduced the number of fully diluted shares outstanding by 5.1 million. The extinguishment of debt resulted in a charge of $2.7 million ($4.1 million pretax), or one cent per share.

Pending Litigation

The Company and its subsidiaries are defendants in various lawsuits associated with their business and operations, including actions based upon allegations that human ailments have resulted from tobacco use. It is not possible to predict the outcome of the pending litigation, but management believes that there are meritorious defenses to the pending actions and that the pending actions will not have a material adverse effect upon the results of operations, cash flow or financial condition of the Company. These actions are being vigorously contested.

On December 22, 1994, the Company sold The American Tobacco Company subsidiary to Brown & Williamson Tobacco Corporation, a wholly-owned subsidiary of B.A.T Industries p.l.c. In connection with the sale, Brown & Williamson Tobacco Corporation and The American Tobacco Company agreed to indemnify the Company against claims arising from smoking and health and fire safe cigarette matters relating to the tobacco business of The American Tobacco Company.

Environmental

The Company is subject to laws and regulations relating to the protection of the environment. While it is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that the Company's subsidiaries may undertake in the future, in the opinion of management, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material adverse effect upon the results of operations, cash flow or financial condition of the Company.

55

American Brands, Inc. and Subsidiaries

Report of Independent Accountants

To the Board of Directors and Stockholders of American Brands, Inc.

We have audited the accompanying consolidated balance sheet of American Brands, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, cash flows and Common stockholders' equity for the years ended December 31, 1995, 1994 and 1993. These financial statements are the responsibility of the management of American Brands, Inc. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Brands, Inc. and Subsidiaries at December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for the years ended December 31, 1995, 1994 and 1993, in conformity with generally accepted accounting principles. As discussed in Notes to Consolidated Financial Statements, in 1993 the Company changed its methods of accounting for postretirement benefits other than pensions, postemployment benefits and certain investments in debt and equity securities.

1301 Avenue of the Americas COOPERS & LYBRAND L.L.P. New York, New York February 1, 1996

------

Report of Management

To the Stockholders of American Brands, Inc.

We have prepared the consolidated balance sheet of American Brands, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, cash flows and Common stockholders' equity for the years ended December 31, 1995, 1994 and 1993. The financial statements have been prepared in accordance with generally accepted accounting principles. Financial information elsewhere in the Annual Report is consistent with that in the financial statements.

The system of internal controls of the Company and its subsidiaries is designed to provide reasonable assurances that the financial records are adequate and can be relied upon to provide information for the preparation of financial statements and that established policies and procedures are carefully followed.

Independent accountants are elected annually by the stockholders of the Company to audit the financial statements. Coopers & Lybrand L.L.P., independent accountants, are currently engaged to perform such audit. Their audit is in accordance with generally accepted auditing standards and includes tests of transactions and selective tests of internal accounting controls.

The Audit Committee of the Board of Directors, consisting solely of outside directors, meets periodically with the independent accountants, internal auditors and management to review accounting, auditing, and financial reporting matters. The auditors have direct access to the Audit Committee.

Thomas C. Hays Chairman of the Board and Chief Executive Officer

Robert L. Plancher Senior Vice President and Chief Accounting Officer

56

INFORMATION ON BUSINESS SEGMENTS(1) American Brands, Inc. and Subsidiaries

(In millions) 1995 1994 1993 1992 1991 1990 ------Business Segments

Net sales International tobacco $6,436.1 $6,168.9 $5,940.0 $6,376.6 $6,373.7 $6,394.8 Distilled spirits 1,288.6 1,268.2 1,194.6 1,268.3 1,061.2 1,005.3 Hardware and home improvement products 1,306.8 1,270.6 1,119.5 1,014.8 902.3 632.6 Office products 1,206.1 1,049.7 977.2 1,003.5 982.3 1,024.6 Golf and leisure products 579.3 507.1 452.7 416.2 391.0 359.5 ------Ongoing operations 10,816.9 10,264.5 9,684.0 10,079.4 9,710.5 9,416.8 Domestic tobacco -- 1,594.7 1,501.5 1,780.3 1,726.4 1,596.6 Other businesses 550.2 1,287.3 1,445.0 1,798.4 1,756.5 1,962.0 ------$11,367.1 $13,146.5 $12,630.5 $13,658.1 $13,193.4 $12,975.4 ------Operating income International tobacco $553.3 $517.2 $486.5 $554.4 $528.4 $580.6 Distilled spirits 189.7 221.2 214.7 195.8 151.6 135.5 Hardware and home improvement products 178.3 176.5 155.5 159.0 141.5 78.1 Office products 84.5 74.5 63.2 58.1 37.7 87.2 Golf and leisure products 83.0 73.3 63.6 53.3 45.9 41.6 ------Ongoing operations 1,088.8 1,062.7 983.5 1,020.6 905.1 923.0 Domestic tobacco -- 247.6 169.2 536.1 540.8 506.8 Other businesses 4.2 2.1 27.9 33.0 33.1 32.3 ------$1,093.0 $1,312.4 $1,180.6 $1,589.7 $1,479.0 $1,462.1 ------Identifiable assets International tobacco $1,909.2 $1,893.2 $1,540.2 $1,251.0 $1,690.2 $1,733.6 Distilled spirits 2,176.7 2,208.1 2,229.7 1,830.9 1,947.4 1,295.2 Hardware and home improvement products 1,824.7 1,806.6 1,809.0 1,786.4 1,734.6 1,720.4 Office products 1,553.6 1,540.4 1,465.7 1,510.5 1,588.4 1,692.9 Golf and leisure products 381.7 336.2 308.9 264.0 240.6 248.4 ------Ongoing operations 7,845.9 7,784.5 7,353.5 6,642.8 7,201.2 6,690.5 Domestic tobacco -- -- 702.1 806.0 762.9 654.8 Other businesses -- 667.5 973.7 916.0 1,088.7 1,101.1 ------$7,845.9 $8,452.0 $9,029.3 $8,364.8 $9,052.8 $8,446.4 ------

Geographic Areas

Net sales United States $3,232.6 $4,676.4 $4,415.2 $4,591.2 $4,206.8 $3,880.9 Europe 7,724.0 8,073.9 7,881.8 8,740.9 8,736.3 8,948.6 Other countries 410.5 396.2 333.5 326.0 250.3 145.9 ------$11,367.1 $13,146.5 $12,630.5 $13,658.1 $13,193.4 $12,975.4 ------Operating income United States $425.7 $671.4 $558.1 $914.5 $843.8 $765.0 Europe 599.3 585.8 578.4 633.7 594.7 679.9 Other countries 68.0 55.2 44.1 41.5 40.5 17.2 ------$1,093.0 $1,312.4 $1,180.6 $1,589.7 $1,479.0 $1,462.1 ------

Identifiable assets

United States $4,539.9 $4,494.1 $5,043.7 $5,150.4 $5,030.2 $4,645.7 Europe 3,051.8 3,709.4 3,767.3 3,019.8 3,840.1 3,648.9 Other countries 254.2 248.5 218.3 194.6 182.5 151.8 ------$7,845.9 $8,452.0 $9,029.3 $8,364.8 $9,052.8 $8,446.4 ------

(1) See page 54 for further Information on Business Segments.

57

ELEVEN-YEAR CONSOLIDATED SELECTED FINANCIAL DATA(1) American Brands, Inc. and Subsidiaries

(In millions, except per share amounts and number of Common stockholders) 1995(2) 1994(2) 1993(2) ------Operating Data

Net sales $11,367.1 $13,146.5 $12,630.5 Gross profit 2,795.0 3,724.6 3,629.0 Depreciation and amortization 257.5 314.4 293.9 Operating income from continuing operations 1,093.0 1,312.4 1,180.6 Interest and related expenses 159.8 212.1 227.6 Income taxes 350.7 466.1 334.2 Income from continuing operations 543.1 885.1 541.2 Income (loss) from discontinued operations -- (151.0) 127.0 Extraordinary item (2.7) -- -- Cumulative effect of accounting changes -- -- (198.4) Net income 540.4 734.1(3) 469.8 Earnings per Common share Primary Continuing operations $2.90 $4.38(3) $2.67 Discontinued operations -- (.75) .63 Extraordinary item (.01) -- -- Cumulative effect of accounting changes -- -- (.98) ------Net income $2.89 $3.63 $2.32 ------

Fully diluted Continuing operations $2.84 $4.24(3) $2.63 Discontinued operations -- (.71) .60 Extraordinary item (.01) -- -- Cumulative effect of accounting changes -- -- (.94) ------Net income $2.83 $3.53 $2.29 ------

------Common Share Data

Dividends paid $376.2 $401.7 $397.5 Dividends paid per share $2.00 $1.9925 $1.97 Average number of shares outstanding 186.9 201.6 201.8 Book value per share $21.69 $22.97 $21.09 Number of stockholders, December 31(4) 56,769 60,611 63,537 ------Balance Sheet Data

Inventories $1,840.2 $2,015.7 $2,043.2 Current assets 3,164.0 4,670.9(5) 3,733.1 Working capital 752.7 1,555.4(5) 575.4 Property, plant and equipment, net 1,137.3 1,212.7 1,472.1 Intangibles, net 3,305.2 3,549.1 3,637.9 Net assets of discontinued operations -- -- 1,344.0 Total assets 8,021.2 9,794.4 10,566.5 Short-term debt 710.8 705.8 1,182.9 Long-term debt 1,154.6 1,512.1 2,492.4 Redeemable preferred stock ------Common stockholders' equity 3,863.1 4,621.8 4,254.3 Capital expenditures 208.0 201.4 243.4 ------

(1) See pages 24 through 35 of Financial Section. (2) See page 43 for Acquisitions and Dispositions. 1991 includes the acquisition in December by Jim Beam Brands Co. of certain distilled spirits trademarks. 1990 includes the acquisitions of The Moen Group, Inc. in August and Whyte & Mackay in February. 1988 includes the acquisition in February of Aristokraft, Waterloo Industries, Twentieth Century Companies, Day-Timers and Vogel Peterson. 1987 includes acquisitions in August of ACCO World Corporation and in May of National Distillers and Chemical Corporation's distilled spirits business.

58

1992 1991(2) 1990(2) 1989 1988(2) 1987(2) 1986 1985 ------

$13,658.1 $13,193.4 $12,975.4 $11,090.4 $11,056.6 $9,152.9 $7,252.9 $6,205.6 4,051.3 3,823.0 3,702.5 3,085.1 2,906.2 2,212.5 1,754.1 1,493.6 289.0 266.2 244.1 198.7 201.4 141.3 98.5 86.3 1,589.7 1,479.0 1,462.1 1,242.9 1,120.6 901.5 627.4 675.3 251.6 246.6 259.3 261.7 244.6 131.1 77.1 81.0 464.4 387.4 414.7 383.5 332.9 313.4 235.3 262.5 786.9 716.2 507.1 543.4 480.0 391.3 254.0 301.3 96.9 89.9 81.5 89.9 85.9 121.3 107.8 123.1 ------883.8 806.1 588.6(3) 633.3 565.9 512.6 361.8 424.4

$3.81 $3.47 $2.53(3) $2.79 $2.40 $1.71 $1.08 $1.29 .48 .44 .42 .48 .45 .54 .49 .56 ------$4.29 $3.91 $2.95 $3.27 $2.85 $2.25 $1.57 $1.85 ------

$3.69 $3.33 $2.43(3) $2.63 $2.29 $1.67 $1.07 $1.27 .44 .41 .37 .42 .40 .51 .47 .54 ------$4.13 $3.74 $2.80 $3.05 $2.69 $2.18 $1.54 $1.81 ------

$368.0 $323.7 $274.3 $238.0 $221.9 $232.4 $224.1 $214.9 $1.805 $1.5925 $1.405 $1.255 $1.13 $1.055 $1.019 $.975 204.0 202.6 194.5 189.2 193.4 220.3 219.7 220.4 $21.14 $20.42 $17.98 $15.21 $13.20 $13.24 $11.51 $10.82 63,929 66,950 69,378 72,404 77,106 83,004 86,477 94,862 ------

$1,810.2 $2,141.5 $2,043.8 $1,675.0 $1,815.9 $1,693.4 $1,264.4 $1,254.8 3,453.1 3,869.8 3,829.4 3,005.4 3,080.2 3,414.0 2,052.3 1,975.6 664.4 609.4 622.3 440.2 434.5 1,006.6 415.6 660.0 1,406.4 1,472.4 1,488.3 1,201.7 1,179.6 1,078.7 745.1 637.1 3,104.0 3,284.0 2,975.3 1,831.4 1,911.2 1,381.6 532.1 453.5 1,274.2 1,239.0 1,143.4 1,114.0 1,273.3 1,249.8 1,710.9 1,607.6 9,868.8 10,521.9 9,759.8 7,625.7 7,879.7 7,330.3 5,145.6 4,735.0 824.7 730.6 845.4 740.0 829.3 751.4 465.0 375.6 2,406.8 2,551.9 2,433.8 1,717.4 2,359.2 1,631.5 671.1 735.5 -- 130.1 131.9 135.6 137.5 137.5 137.5 137.5 4,282.5 4,163.3 3,602.0 2,912.4 2,466.4 2,915.3 2,529.1 2,369.2 285.7 232.0 293.1 253.8 226.7 181.7 199.2 133.2 ------

(3) Net income and primary and fully diluted earnings per Common share in 1994 include $267 million and $1.32 and $1.25, respectively, on the net gain on disposal of businesses (see page 43 for Dispositions) and in 1990 include $179.9 million and 93 cents and 83 cents, respectively, relating to a write-down of an investment. (4) On January 31, 1996, there were 56,547 Common stockholders of record, not necessarily reflecting beneficial ownership. (5) Includes $1,170 million of net assets of discontinued operations.

59

EXHIBIT 21

SUBSIDIARIES OF REGISTRANT

The following is a list of subsidiaries of Registrant as of the date hereof and the state or other jurisdiction of incorporation of each. Except as indicated below, each subsidiary does business under its own name. Indentations indicate that the voting securities of a subsidiary are wholly owned by the subsidiary immediately preceding the indentation, unless otherwise indicated.

The names of certain subsidiaries are omitted. Such subsidiaries would not, if considered in the aggregate as a single subsidiary, constitute a significant subsidiary within the meaning of Item 601(b)(21)(ii) of Regulation S-K.

State or Other Jurisdiction Subsidiary of Incorporation ------

ACCO World Corporation Delaware ACCO Canada Inc. Ontario, Canada Plymouth Tool & Stamping Limited Ontario, Canada ACCO Europe PLC England ACCO France S.A. France ACCO-Rexel Group Services PLC England ACCO UK Limited England Hetzel GmbH & Co. KG Germany Eastlight Limited England Marbig Rexel Pty. Limited Australia Office Products International Limited Australia ACCO-Rexel Limited 1 Republic of Ireland Don Gresswell Limited England ACCO USA, Inc. Delaware Day-Timers, Inc. Delaware Day-Timers of Canada, Ltd. Canada Day-Timers Pty. Limited Australia Sax Arts and Crafts, Inc. Delaware International Business Controls, B.V. 2 Netherlands ACCO Italia S.p.A. Italy Kensington Microware Limited Delaware

------1 66.67% owned by ACCO-Rexel Group Services PLC and 33.33% owned by ACCO World Corporation. 2 Does business in the Republic of Ireland through a branch named "ACCO Ireland."

State or Other Jurisdiction Subsidiary of Incorporation ------

Acushnet Company Delaware Acushnet Cayman Limited British West Indies Acushnet Lionscore Limited 3 British West Indies Acushnet Foreign Sales Corporation Barbados Acushnet International Inc. Delaware Acushnet Limited England Acushnet Canada Inc. Canada Acushnet GmbH Germany Acushnet-Danmark ApS Denmark Acushnet Osterreich GmbH Austria Acushnet France S.A. France Acushnet Sverige A.B. Sweden Acushnet Nederland B.V. Netherlands Titleist Japan, Inc. 4 Japan Acushnet Foot-Joy (Thailand) Limited 5 Thailand Cobra Golf Incorporated Delaware Cobra Golf Europe, S.A. France Cobra Golf Export, Inc. Barbados Cobra Golf-Japan Incorporated Delaware Cobra Golf U.K. England Titleist & Foot-Joy (Thailand) Limited 5 Thailand AmeriBrands Finance Canada Ltd. Ontario, Canada American Brands Finance Europe B.V. Netherlands American Brands International Corporation Delaware ATIC Group, Inc. Delaware Gallaher Limited England Benson & Hedges Limited England Gallaher (Dublin) Limited Republic of Ireland Gallaher Canarias S.A. Spain Gallaher Hellas S.A. Greece Gallaher International Limited England The Galleon Insurance Company Limited Isle of Man J. R. Freeman & Son Limited England

------3 40% owned by Acushnet Cayman Limited. 4 80% owned by Acushnet International Inc. 5 70% owned by Acushnet Company.

-2-

State or Other Jurisdiction Subsidiary of Incorporation ------

The Schooner Insurance Company Limited Isle of Man The Whyte & Mackay Group PLC Scotland JBB Worldwide, Inc. Delaware Jim Beam Brands Co. Delaware James B. Beam Distilling International Co., Inc. Barbados JBB Spirits (New York) Inc. New York Fortune Brands Pty. Limited 6 New South Wales, Australia Fortune Superannuation Pty. Limited New South Wales, Australia Alberta Distillers Limited Alberta, Canada Carrington Distillers Limited Ontario, Canada Featherstone & Co. Limited Ontario, Canada John de Kuyper & Son, Incorporated New York Wood Terminal Company Delaware MasterBrand Industries, Inc. Delaware Aristokraft, Inc. Delaware Master Lock Company Delaware Master Lock Europe, S.A. 7 France Moen Incorporated Delaware HCG-MOEN Corporation 8 Taiwan Moen, Inc. Ontario, Canada Moen Guangzhou Faucet Co., Ltd. 9 China Moen of Pennsylvania, Inc. Delaware Moen de Mexico, S.A. de C.V. Mexico Moen Japan K.K. Japan 21st Century Companies, Inc. Delaware Waterloo Industries, Inc. Delaware 1700 Insurance Company Ltd. Bermuda

------6 299,999 shares owned by Jim Beam Brands Co.; 1 share owned by James B. Beam Distilling International Co., Inc. 7 99.68% owned by Master Lock Company. 8 50% owned by Moen Incorporated. 9 60% owned by Moen Incorporated.

-3-

EXHIBIT 23(i)a

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference into (a) the Registration Statement on Form S-8 (Registration No. 33-64071) relating to the Defined Contribution Plan of American Brands, Inc. and Participating Operating Companies, the Registration Statement on Form S-8 (Registration No. 33-64075) relating to the MasterBrand Industries, Inc. Hourly Employee Savings Plan, the Registration Statement on Form S-8 (Registration No. 33-58865) relating to the 1990 Long-Term Incentive Plan of American Brands, Inc., and the prospectuses related thereto, and (b) the prospectuses related to the Registration Statements on Form S-3 (Registration Nos. 33-50832, 33-42397, 33-23039 and 33-3985) of American Brands, Inc. of:

(1) our report dated February 1, 1996, accompanying the consolidated financial statements of American Brands, Inc. and its subsidiaries as of December 31, 1995 and 1994, and for the years ended December 31, 1995, 1994 and 1993, incorporated by reference into this Annual Report on Form 10-K of American Brands, Inc., and

(2) our report dated February 1, 1996, accompanying the consolidated financial statement schedule of American Brands, Inc. and its subsidiaries, included in this Annual Report on Form 10-K.

We also consent to the references to our firm as experts in the prospectuses related to the Registration Statements on Form S-3 referred to above.

COOPERS & LYBRAND L.L.P.

1301 Avenue of the Americas New York, New York 10019 March 29, 1996

EXHIBIT 23(i)b

CONSENT OF COUNSEL

We consent to the incorporation by reference of our opinions contained in Item 3, "Legal Proceedings," of this Annual Report on Form 10-K of American Brands, Inc. into (a) the Registration Statement on Form S-8 (Registration No. 33-64071) relating to the Defined Contribution Plan of American Brands, Inc. and Participating Operating Companies, the Registration Statement on Form S-8 (Registration No. 33-64075) relating to the MasterBrand Industries, Inc. Hourly Employee Savings Plan, the Registration Statement on Form S-8 (Registration No. 33-58865) relating to the 1990 Long-Term Incentive Plan of American Brands, Inc., and the prospectuses related thereto, and (b) the prospectuses related to the Registration Statements on Form S-3 (Registration Nos. 33-50832, 33-42397, 33-23039 and 33-3985) of American Brands, Inc.

CHADBOURNE & PARKE LLP

30 Rockefeller Plaza New York, New York 10112 March 29, 1996

EXHIBIT 24

POWER OF ATTORNEY

The undersigned, acting in the capacity or capacities stated with their respective names below, hereby constitute and appoint GILBERT L. KLEMANN, II, EDWARD P. SMITH and A. ROBERT COLBY, and each of them severally, the attorneys-in-fact of the undersigned with full power to them and each of them to sign for and in the name of the undersigned in the capacities indicated below the Annual Report on Form 10-K of American Brands, Inc. for the fiscal year ended December 31, 1995, and any and all amendments thereto:

Signature Title Date

Thomas C. Hays ------Chairman of the Board February 26, 1996 Thomas C. Hays and Chief Executive Officer (principal executive officer) and Director

John T. Ludes ------President and Chief February 26, 1996 John T. Ludes Operating Officer and Director

Robert L. Plancher ------Senior Vice President February 26, 1996 Robert L. Plancher and Chief Accounting Officer (principal accounting officer)

Dudley L. Bauerlein, Jr. ------Senior Vice President February 26, 1996 Dudley L. Bauerlein, Jr. and Chief Financial Officer (principal financial officer)

William J. Alley ------Director February 26, 1996 William J. Alley

Eugene R. Anderson ------Director February 26, 1996 Eugene R. Anderson

Patricia O. Ewers ------Director February 27, 1996 Patricia O. Ewers

John W. Johnstone, Jr. ------Director February 26, 1996 John W. Johnstone, Jr.

Wendell J. Kelley ------Director February 26, 1996 Wendell J. Kelley

Sidney Kirschner ------Director February 26, 1996 Sidney Kirschner

Gordon R. Lohman ------Director February 26, 1996 Gordon R. Lohman

Charles H. Pistor, Jr. ------Director February 26, 1996 Charles H. Pistor, Jr.

Peter M. Wilson ------Director February 26, 1996 Peter M. Wilson

POWER OF ATTORNEY

The undersigned, acting in the capacity stated with her name below, hereby constitutes and appoints GILBERT L. KLEMANN, II, EDWARD P. SMITH and A. ROBERT COLBY, and each of them severally, her attorneys-in-fact with full power to them and each of them to sign for and in her name in the capacity indicated below the Annual Report on Form 10-K of American Brands, Inc. for the fiscal year ended December 31, 1995, and any and all amendments thereto:

Signature Title Date

Anne M. Tatlock ------Director February 27, 1996 Anne M. Tatlock

5

THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND RELATED STATEMENT OF INCOME AS OF DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.

1,000,000

12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 $ 140 0 1,031 47 1,840 3,164 2,133 996 8,021 $2,411 1,155 717 0 14 3,146 8,021 $11,367 11,367 3,110 3,110 5,462 7 160 894 351 543 0 (3) 0 540 $2.89 $2.83