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Proxy Statement I This proxy statement is furnished! ini connection with the solicitation by man- agement of ' proxies for use at the Annual Meeting of Stockholders of P. lLoriillard Company: to be held on April 12, 1966, . A proxy may be revoked by the stockholder notifying the Secretary in vvriting prior to the voting of the proxy. The Company will bear the cost of the solicitation of' proxies, including, the charges andi expenses of' brokerage firms and' others for forwarding solicitation material to beneficiali owners of stock., In addition to the use of the mails, proxies may be solicilt'ed by personal interview, by telephone or by telegraph.. The Company has 6;668,354' shares of' Common Stock and 98,000: shares of' Preferred Stock issued. Each: stockholder is entitled to one vote for each share of Common Stock and Preferred Stock registered in hi's name at the close of business on February 21, 1966. ELECTION OFmI!RECTORS Fifteen directors are to be elected,, to serve untill the next Annual Meeting and' untiill their successors are duly elected and qualified. It is, the intention of the persons namedl in the enclosed form of proxy to vote for the election of' the nominees named bel'ow: If any of the nominees namedl below iis not a candidate for 2 8930119'91

election as a director at the meeting-an event whieh the management does not anticipate-the proxies will be voted for a substitute nominee and the other nominees named bel'ow: NaeM1e~af ~~ womiaee, Name o f ' Year orgamisatwn ml'un. Prirripal'iw.mAtitbrnck. rst accupatian or occapat{on is e ected employment carriedaa director A'pprasirerate amount of.each clarr of' securities of the Contpawyy beneficially omned'directly or indirectly at of' Jaerary 25,1966 J. Edgar Bennett President P. Lorillard Company 1960' 11,247 shares of' John J. Darby Comptroller P. Lorillardi Company 1964, Common Stock(3) (4). 3,661 shares of George O. Davies Executive Vice P. Lorillardi Company 1955 Common Stock(3). 22;573 shares of Melvin E. Dawliey President President and Lord & Taylor- 1950 Common St'oc&(3) (4) 1,126 shares of Henry E. Erickson. Lewis Gruber Chief Executive Officer Vice President, Leaf Consultant d6partment stores P. LorilIardl Company P. Lorillard Company 1961 1946 Common Stock 1,712 shares of Common Stock (4) 14;392' shares ofl Common Stock(1) (3) Donald A. Henderson Vice President„ Finance Twentieth Century-Fox Film Corporation 1946 . 656 shares of Common Stock William A. Jordan Peter G. Levathes Robert Meyer William D. Okerson Vice President, Sales Vice President, Adverti'sing, President Vice P'resident, Manufacturing P. Lorillard Company P. Lorillard Company Heintz van Landewyck s:a.r.l'.-tobacco, products P. LoriIlard Company 1963 1966 1965 1964, 1,745 shares of Common Stock (J) 200 shares of Common, Stock 400 shares of Common Stock 826 shares of' Common Stock (4'), T . Harold X.,Schreder President Distributors Group, 1956' 224 shares of ~ Incorporated. Common iStock Q:7 -investment bankers and' O ~ Group Securities, Inc. -mutual fund C O 3

ame.of' nomiwee rinc~pal occrpatwnor employmentt Name of' Year orpanisationn tahen in which srck' first occrpationiuelected carned on ~~ director~ Approximate amoua0 of each class of' securities of the Compaxy.b-ficially, owned dsrectly, or indirectlyasof' lannary.2S'..1966 Harald E. Stassen Attorney Stassen,, &ephart4 1963' 1,050 shares of Sarkis & Kostos Common Stock Anna F: Woessner Secretary P. Lorillard Company 1965' 524~ shares of Manuel Yellen Chairman of' P. Il:orillard! Company 1956 Comman Stock(4) 29,011 shares of' the Boar&and i Common Stock (2)! (3)1(4) Chief Executive : Officer (1)~ Includes: 7y4,00 shares held in trusts. (2). Includes,337 shares held as custodian f'or his children and 2,950 shares held in trusts: (3), Includes shares held in escrow for release in instalments„ subject to compliance with pre- scribed' conditions, over ten and fifteen-year periods follawing, termination of employment. The numbers of shares to be released annually during,the ten-year periodland,,where appli- cable,,during the fifteen-year period, are, respectirrely,,as follows: J. Edgar Bennett„32land 174; John J. Darby, 43';, George 0. Davies, 437 and 246; Lewis Gruber,, 699; William A. Jardan, 29; 1Wlanuel,Yellen,, 437 and 246. (4) Includes shares of Common Stock purchased' on September 1, 1964, or, December 1,, 1965, under a stack purchase agreement providing for the immediate, sale and transfer of shares, with a down payment of $5 per share to be made forthwith; annual, instalments of approxi- mately ' 2% %a or 4% of principal to be paidl thereafter; the unpaidl balance,, secured by the shares as collateral, to be paid within five years;', an& simple interest' at 2VZ%'a or 4%& on the unpaid balance, with, a right of prepayment in full, but only' as to alli shares. The approximate amount of the purchase price remaining, unpaid'as of' February 1,, 1966 and', in parentheses, the largest amount, outstanding at any time during 1965 weree as follows: J. E. Bennett,,$1!9,004 ($20,000) ; G: 0. Davies, $134,000 ($;139,000) ;: H. E. Erickson, $19,000 ($206000) ; W. D., Okerson„ $19;000 ($20,000) ; A. F. Woessner, $20;000 ($20,000) ; and M. Yellen, $134,000 ($,139;000). All of' the nominees, except for Miss Woessner and Mr. Levathes, were elected as directors by the stoekholders. For' more than the last five years'. Miss Woessnerr has'served the Company as Corporate Secretary and Mr. Levathes servedI Twenti- eth Centlury-Fox Film Corporation in various capacities including Executive : Vice President and was thercafter' Executive ! Vice President of' the advertising firm~ of Clyne-Maxon Inc. 8930112011 4

REMUNERATION AND OTHER 'I'RANSACTIONS' WITPi. DIRECTOR'S A'ND' NOMINEES FOR' ThiE' FISCAL. YEAR ENDED DECEMBER 31, 1i9'65 Set forth below is the remuneration for the year 1965 for the persons there named and for directors and officers' of the Company as a group r .tpprcDate disect. ContiwpeNtrentNNe.atiant tornpensation Jar (incliidiNp'cNrreNt 1'965'' payablae in incentive annNalinstalments~ Capadties in which ~. campeNsation ! in 19!67;1'968 and ~. Na+Nraf: individnal~l remNneration~.raas~received' for1963): 1969~~if~, earned~owt J. E. BAnnett----_--__ President; andl Executive Vice Presi- dent,, Operations'---------- ------------------------ $ 105,132' $ 54;636 M. J. Cramer---------- President and Chief Executive Officer; and employee (1) ------ ------------------------ 95,064' 50,710 J. J. Darby------- ------- Comptroller---------------------------------------------- 41,912 10,000 G. 0. Daviea'_-_-------- Executive Vice P*esident, Finance_-_- 79,E117 45,747 EI. E. Erickson_-_----- Vice President, Leaf'--------- ------------------ 80,000 55,747 W. A. Jordan------------- Vice President, S'alcs,----- _---- ----.------------ 68,836 44,302 W. D. Okerson--------- Vice President, blanufacturing.-_-.-_--- 66,166 37,638 H. B. Parmele------------ Vice Presid'ent, Research(2) ------------------ 49,684 40,826 A F.,Woessner-------- Secretary ---------- -------- ------------------------------- 33;000 - M. Yellen --------- _----- Chairman of' the: Board I and Chief Ex- ecutive Of'icer; and Executive Vice President, Sales and Advertising_---- 100,648 65,409 Directors and officers as a group (35' in number, including, those named' above) "(3)I(4) 1 127,285 419;470, , , * Includes for this purpose all employees liaving'an, officer title.. (1) 1 On July 13, 1965, Mr. Cramer resigned as President and' Chief Executive Officer andd continued as an employee under an employment agreement dated September 15,, 1965{, in which he agreed that he would render until October 31, 1971, specific services in connection with tbee international' andl export business of' the Companyy, with, customary employment to be not less than,six months a year, at a salary of $50,000 per year eommencing,January 11, 1966~ (with, con- tinuation of his previous $;75;000 salary until that date), and' would thereafter render, without additional, consideration, such, consulting andI advisory services as the Company might reasonably request for a period notl exceeding five years.. (2) For the:period prior to Dr. Permele's death:oni September,27, 1965. (3) The Company has a two-year agreement terminating on November 30, 1966, with I41r. Gruber, who retired November 30, 1964, and whose retirement payments started as of I that date. Under such agreement, payments at the rate of $251000 per year' are bei'ng, made to 5 893110l"A.012

Mr. Gruber, for consulting services.. On retirement, Mr. Gruber commenced to receive contingent compensation awarded over a period l of' prior years consisting in 1965 ofl the release of' 350 of the escrowed shares ref'erred' to in note 3' on, page, 4 and $2,512' a monthl (4) In addition, the sum of' $39,300 was paid as compensation for legal services in inter- nationall matters to the law Orm, of Stassen, Kephart, Sarkis & Kostos, of which Haroldl E. Stassen is a partner. The foregoing, table reflects all current andl contingent awards for 1965 to officers and directors under the Company's incentive compensation plani The retirement benefits to which, employees,, including officers and directors, are entitled' are set forth in the table on page 7. Incentive compensation under the Company's incentive compensatiion plan for key personnel may be paidl currently andi as contingent awards. Contingent awards of incentive compensation for 11964 and subsequent years under an amend- ment to the plan referred to below are payable in three equal annual instalments, commencing with the second year following the year for which the awards are made, if' earned out by continued services and„ in the event of retirement or other approved termination of'emplo,ynment, if requirements as to non-competition and conduct not prejudicial to the Company are complied with. Contingent awards for years prior to 1964 were contingently payable following termination of employ- ment over a period! of fifteen years (ten years in the case of contingent awards for years prior to 1960). The amounts so contingently payable to the directors and officers referred to in the foregoing table during each of the fifteen years follbwing termination of'emplbylnent (and, in parentheses„where applicable, any additional amount payable during each of the ten years following, termination of employ- ment)i are as fol'lbws: d. E: Bennett, $4,682; M. J. Cramer, $8,693';, J. J. Darby,. $1,571 (ib500')', ; G. 0. Davies, $4,682; H. E. Ericksons $5,015; L. Gruber, $22,735 ($7,412) ;W. A. Jordan, $1,$35($,388')', ($388); W. D: Okerson, $250!; H.: B. Parmele, $4,682; M. SPelleny $4,682;, directors and officers as a group, $60,091' ($9,,176)1. Alll the remunerationi set forth was receivedl by, or is contingently payable to, the persons named in, their capacities as ofl'icers or employees of' the Company. The following table illlustrates the estimated normal annuall retirement allow- ances payable under the Employees' Retirement Plan of the Company upon, retire- 6 89'301a03

ment at age sixty-five to employees in the earnings classifica.tions and with the years of' service shown: Emptoyeers average annual earnings during the highest consecutive 10 5 th Total'annual benefits for ears of credited'serUice shown years of e preceding retirement 20 years y 25 years 30 years $ 25,000-__________-_- $ 6,980 $ 8,680 $10,370 35,000_____________- 9,980 12,430 14,870 50;000-------- -------- 14„480I 18,050 21,620 75,000-------- ____--------- 21,980 27,430 32,870 100;000------------- _------ __ 29,480i 36;800 44,120 125;000___--------------- _- 3'6y980 46,180, 50„000! On December 1, 1965, options to purchase the following, shares of Common Stock were granted: J. E'. Bennett, 7,500; J. J. Darby,,1,000; G. 0. Davies, 6,000; H. E. Erickson,, 3,000; W. A. Jordan, 5,000; W. D: Okerson,, 5,000; M. Yellen,. 10,000 andl officers and directors as a group, 47,600. In addition, a right to pur= chase was grantedl to and exercised by A. F. Woessner on such dat'e to purchase 500 shares under the stock purchase arrangement referred to belbw. In, the case of each option, the option priiee was $45 per share, which was not less than 100%a of the fair market value on the date of grant. The option term in each case is five years, subject to earlier termination upon death, severance of' employment or other events. Subject to specified exceptions, shares acquired on, the exercise of the option are required to be held for two years after such exercise. Each optilonee has agreed to serve the Company for a period of at least two years from the date of' grant. Under Article XV of the By-laws; the Company has a Stock Purchase, Option andl Incentive Plan, pursuant to which an offering of Common Stock was made by the Company on July 31, 1963; to, a totall of' 697, employees, including officers and directors, in each case at a purchase price of $44.75 per share which was 100 per cent of the fair market valtie on such d'at'e. Three forms of offering were used, namely, a, stock subscription arrangement, a stock purchase arrangement and a, stock option arrangement. 7 893012104'

The stock subscription arrangement calls for the issue of stock only wheni full payment for the stock has been made, requires no down payment, butt pre- scriibes authoriization of payroll deductions over a period endl'ng, in July, 1968, with interest credits to the emplbyee's account compounded semi-annually at the rate of' three per cent per annumi on amounts deduetedl from payroll. The employee has the right at any time until the stock is issued to rescind his purchase as t'oo all (but not as to part) of the shares subscribed for and' to the return of alll amounts so withheld plus interest credits: The employee has the right of prepay= ment„ but only in fulll and only on or after August 1, 1966: If' employment termi- nates prior to that date, the purchase is deemed rescinded. Under this arrange- ment, 407 emplbyees subscribedl for a total of 19,720 shares of the Company's Common Stock during 1964. The stock subscription arrangement was not made available to any oflicer, or director listed in the remuneration table, but 1185 shares were subscribed for by other officers as a group on August 3, 18' and 27, 1964. The market values of the Company's Common Stock, based upon the mean between the highest and lowest selling prices of the Company's Common Stock on the New York Stock Exchange oni such dates, were $44.06, $44.75 and $46.50, respectively.. The stock purchase arrangement provides for the immediate sale and transfer of shares, withiten per cent of the purchase price (but not less thani $5 per share) to be paid forthwith; annual instalments of approximately two and one-half per cent to be paid'thereaf'ter; the unpaid balance to be paid over a periodi endingg in July, 1968, with right of prepayment in, full but only as to all shares; and simple interest payable to the Company at two and one-half percent to be charged on the unpaidl balance of the purchase price. The employee is entitled to all di'vidends on the stock, such dividends being at a rate of approximately 5.6% based' upon a purchase price of $44.75' per share andi uponi the dividend rate currently paid on outstanding shares. The stock is heldi as collateral, subject to being returned to the Company if the purchase price is not paid before the end'i of the periodl in July, 1968, without refund of any payments made or release of shares equivalent to such payments, but with no further liability on the part of' the employee. If employment is terminated within two, years after the purchase agreement is made, the Company is entitled to repurchase all shares for the amounts paid by the employee exclusive of' interestl. Thirty-two employees agreed to purchase a total of 17,950 shares under this arrangement and such shares were alll soldl andi transferred: at a purchase price of $44.75 per share upon receipt by the Company of the 8 89:30!12015

required down payment of $5' per share. Each such stock purchase contract was executed under date of September 11, 11964, on which date the mean between the highest and lowest selling prices of the Company's Common Stock on the New York Stock Exchange was $47.31 per share. Included among the employees agreeing to purchase shares under the stock purchase arrangement were the follow- ing directors and officers referred to in the remuneration table: J. E. Bennett, 500 shares; M. J. Cramer, 1,500 shares; G. 0. Davies, 3,500i shares; H. E. Erickson, 500' shares;, W. D. Okerson, 500 shares; M. Yellen, 3,500 shares; directors and officers as a group, 11,400 shares. The stock option arrangement provides for ani option term of ten years or such shorter period, but not less than five years, as may be required to qualify the option for specifiedl tax treatment under the applicable provisions of the Internal Revenue Code, subject in any event to earlier terminationi upon death or severance of employment. Subject to specified exceptions, shares acquired' on the exercise of options are required to be held for two years after such exercise. Each optiionee must agree to serve the Company for a, periodl of at least two years from, the date of grant. LiJnder this arrangement options were granted as foll'ows :. J'. E. Bennett, 3',000'; M. J. Cramer, 4,000; J. J. Darby, 1,000; H. E. Erickson, 3,000; W. A. Jordan, 2,000; W. D. Okerson, 1,000; officers and directors as a group, 20,400 andi all employees, 35,400. The Company also has a Restricted Stock Optioni Plan which was approved at the annual meeting,of stockholders ini 1958 and which authorizedi the granting of options to purchase a maximum of 200,000 shares of Common Stock (after giving effect to the 2-for-1 stock split of 1959) to officers and key employees. In addition to the options referred to, above, options for the following, shares were granted under that plan during the last five years : J. E. Bennett, 3,000; ML J. Cramer, 7,000 ;, Ji. J. Darby, 1,000 ; H. E. Erickson, 3,000 ;W'. A. Jorda:n, 1,000; W. D.. Okerson, 2,000 and A. F. Woessner, 500 ; all officers and directors as a group,. 25;000 ; all employees, 45,300. There were no bonus, profit-sharing or other remunerationi or incentive plans, now in effect or in effect within the past five years, other than as stat'ed above. Mr. Robert Meyer, a director of the Company, is President of Heintz van. Landewyck s,a.r.L, a Luxembourg, tobacco manufacturer (hereinafter called 9 883012-06

HVL), all of the share capital of which: is owned by Mr. Meyer andl members of his family. P. Lorillard' International S.A., a wholly-owned subsidiary of the Company, and HVL each own a one-half interest in P'. Lorillard's.a.r.1., a Luxem- bourg corporation, which~ since April, 1964, has manufactured andl sold under lieense certain of the Company's brands for several of the Common Market countries. PROPOSAL T'O' CONCUR' IiN REDUCTION OF DEFERMENT PERIO'D, FOR CERTAIN INCENTIVE. COMPENSATION AWARDS Upon the recommendation of a committee of directors not eligible to par- ticipate in the Company's incentive compensation plan (Article XII of' the By- laws)'„ the Board of Directors amended the plan, so as to reduce the period of' deferment for a portion of awards made in 1965 andl subsequent years. In sub- stance, the amendment, described' more fully below, provides that, as a contingent award is earned out, it will become payable in annual instalments in succeeding years instead of being payable following termination of employment. The amendtnent involves no increase in incentive compensation. Explanation and' Lfject' of ' Change: Under the Company's incentive com- pensation plla.n;, a committee of non-participating dlirectors designates a Conr tingent Compensationi Group, with the awardlto each employee in the group being divided into a "Current Allotment" and a "Contingent All'otrnent."' The plan pro- vides that $5,000 of the total award, and not more than 75 ~o nor less than 25'% of the balance of the award, is to be a Current Allotment payable at the time of'f the award, wit'h: the remaindier, of' the totall allotment being, contingently payable: as a Contingent Allotment. Contingent Allotments must be earned out by con- tinued employment with the Company for three years after the incentive com- pensation awards are made unless termination of employment results from: death, disability or retirement (including early retirement) or under circumstances& deemed by the committee not to be contrary to the Company's int'erests. Heretofore, Contingent Allotments have been payable in, monthly instalments over a period of'years following termination of employment (ten years in the case. 10 89s1012'0'7

of awards for 1959 and prior years; fifteen years in the case of awards for 1960 and' subsequent years). This provision has been changed so as to make Contingent Alilotments payable in three annual instalments commencing with the second' year after t'he year for which the award has been made. The requirement that Con- tingent Allotments be earned outl by continued service remains unal't'ered. The change in the deferment period, which was made on the recommendation of'an independent consultant on, compensation matters, is in keeping, withi current industry trends for the reason, among others, that' amounts paid currently are today more of ani incentive to many employees than heretofore as the result of the reduction of tax rates made by the Revenue Act of 1964. The requirement of earning out, as heretofore stated;, has not been changed. Also, payments of Contingent Allotments following termination of employment continue to be conditional on the employee not engaging in competition with the Company or in conduct prejudicial to the Company. The acceleration in the pay- ment of def'erred' compensation, however, will result iin limiting this condition to the three-year earn-out period. On the other hand, under the Company's retire- ment plans each, retirement allbwance is conditioned on the employee not engaging, in any occupationi eonneeted! with, the manufacture or distribution of tobacco products which, is in competition with the Company, andl any employee who does so engage' may thus lose his ent'ire pension thereafter. Since incentive compensation received during, employment is countedI for the purpose of calculating, pensions, the acceleration in payment of deferred compen- sation will result in some increase in retirement benefits. The Company's inde- pend+ent actuary has estimated that the increase in suchi benefits will result in an increase in the Company's annual contribution to, the retirement plan from approximately $59,000 to approximately $Z3,000 per year after four years. Facts Concerning the Company's Incentive Compensation Plan: Article XII of the By-laws of the Company relating to incentive compensation, as heretofore amended, copies of which will be available at the Annual Meeting; provildes; in general, for an annual incentive compensation amount determined by application of the following, percentages to net operating income (that is, consolidated earn- ings before Federal taxes on income, incentive compensation awards and capital gains or losses)', : 3 fo of the first $50' million, 4 jo of the next $3 million, 5°Jo of the in 893012108