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P. LORILLARD COMPANY Notice of Annual Meeting of Stockholders TO BE HELD APRIL 8, 1958 To the Stockholders of P. Lorillard Company: NOTICE is hereby given that the Annual Meeting of the Stockholders of P. LoRiLLARD COMPANY, a New Jersey corporation, will be held at the Biltmore Hotel, Madison Avenue and 43rd Street, New York, N. Y., at eleven o'clock in the forenoon of April 8, 1958, for the following: (1) The election of thirteen (13) directors to hold office until the next Annual Meeting of Stockholders or until their successors are elected and qualified; ~ (2) To consider and vote upon a proposed amendment to Article XII of the By-laws tu ' of the Company relating to incentive compensation which is described in the ,H3 annexed Proxy Statement; - (3) To consider and vote upon a proposed restricted stock option plan, certain ' options heretofore granted, and a waiver of preemptive rights incidental thereto, all as described in the annexed Proxy Statement; and (4) The transaction of such other business as may properly come before said meeting and any adjournment or adjournments thereof. The stock transfer books will not be closed, but only stockholders of record at the close of business on February 20, 1958, will be entitled to vote, notwithstanding any transfer of any stock on the books of the Company after such record date. ANNA F. WOESSNER, Secretary. Jersey City, N. J. February 28, 1958 If unable to be present at the meeting, please sign the enclosed Proxy and return it in the accompanying envelope so that the meeting may be properly held.

Proxy Statement RIGHT TO REVOKE PROXY ANY sTOCxxoLDM giving the proxy enclosed with this statement has the power to revoke the proxy at any time prior to the exercise thereof. Your attention is called to the provision of New Jersey law providing that the attendance at the meeting of a stockholder who may have theretofore given a proxy shall not have the effect of revoking the proxy unless the stockholder so attending shall in writing so notify the secretary of the meeting at any time prior to the voting of the proxy. Unless the persons named in the proxy are prevented by circumstances beyond their con- trol from acting, the proxy will be voted at the said meeting and at any adjourn- ment or adjournments thereof in the manner specified therein. BY WHOM AND THE MANNER IN WHICH THE PROXY IS BEING SOLICITED The proxy is solicited by and on behalf of the management of P. LORILLARD CoM- PANY. The expense of the solicitation of proxies for this meeting, including the ' cost of mailing, will be borne by the Company. In addition to the use of the mails, the Company may request persons holding stock in their name or custody, or in the name of nominees, to send proxy material ' to their principals and request authority for the execution of the proxies and will reimburse such person for their expense in so doing at a total estimated cost of about Three Thousand Dollars ($3,000). To the extent necessary in order to assure sufficient representation at the meeting, officers and regular employees of the Company and others regularly retained by the Company, at no additional compensation, will request the return of proxies personally, by telephone or telegram. The extent to which this will be necessary depends entirely on how promptly proxies are received, and stock- holders are urged to send in their proxies without delay. The management has no knowledge or information that any other person will specially engage any employees to solicit proxies. 2

VOTING SECURITIES OUTSTANDING The outstanding number of each class of voting securities of the Company and the number of votes to which each class is entitled are as follows : Common Stock Preferred Stock Total Number of Shares_-___ 2,852,854 98,000 2,950,854 Number of Votes 2,852,854 98,000 2,950,854 Only stockholders of record at the close of business on February 20, 1958, will be entitled to vote. ELECTION OF DIRECTORS At this Annual Meeting, thirteen (13) directors are to be elected, who shall hold office until the next following Annual Meeting of Stockholders or until their succes- sors are duly elected and qualified. It is the intention of the persons named in the enclosed form of proxy to vote such proxy for the election of the nominees named below. If any of the nominees named below is not a candidate for election as a director at the meeting-an event which the management does not anticipate-the proxies will be voted for a substitute nominee and the other nominees named below. Approximate amount of each class of Name of Year securities of the cor¢oration when Company beneficially Principal in which such grsf owned directly or Name of Occu¢atsox or occu¢ation is eJected indirectly as of Nominee Em¢loyment carried on Director 7anuary 27, 1958 Lewis Gruber President P. Lorillard Company 1946 3,000 shares of Irvin H. Peak Executive P. Lorillard Company 1948 Common Stock 2,500 shares of Vice President Common Stock and Director of Leaf - Harold F. Temple Activities Vice President P. Lorillard Company 1943* 1,450 shares of and Director Common Stock -0 of Sales ~ Harris B. Parmele Vice President P. Lorillard Company 1950 800 shares of v and Director Common Stock Oo of Research W O+ except for period January 16 * Has served continuously since 1950 to April 28 1953. -Q , , , , O+ 3

ame of Nominee George O. Davies rincipal Occupation or Employment Vice President, Name of corporation in which such occupation is carried on P. Lorillard Company Year when (~rst elected Director 1955 Approximate amount of each class of securities of the Company beneficially owned directly or indirectly as of January 27, 1958 500 shares of anuel Yellen Treasurer and Director of Finance Vice President . Lorillard Company 956 Common Stock 700 shares of eorge A. Hoffmann and Director of Advertising and Marketing Director of . Lorillard Company 957 Common Stock 1000 shares of George W. Davidson Manufacturing Vice President Federal Tin Company 1957 &mmon Stock 500 shares of Herbert A. Kent Consultant P. Lorillard Company 1939** Common Stock 3,000 shares of F. Gladden Searle Industrialist 1943 Common Stock 800 shares of Donald A. Henderson Treasurer Twentieth Century-Fox 1946 Common Stock 328 shares of Melvin E. Dawley Vice President, Film Corp. Lord & Taylor- 1950 Common Stock 500 shares of arold X. Schreder Director and General Merchandise Manager Executive Department Store istributors Group, 956 Common Stock 00 shares of Vice President Inc.-Investment Common Stock Executive Vice President Bankers Group Securities, Inc. -Mutual Fund ** Has served continuously since, except for period September 1, 1955, to December 19, 1956. Each of the nominees named above is now a director of the Company and they, collectively, comprise the entire membership of the Board. Each of such nominees was elected to his present office by a vote of security holders at a meeting for which proxies were solicited under Regulation X-14 of the Securities and Exchange Com- mission except George W. Davidson, who, for more than five years prior to his election as a director on August 21, 1957, had served Federal Tin Company, the Company's subsidiary, in various capacities, including director, General Manager and Vice President. 4 -0 ~ v 00 w ~ 0 ~

REMUNERATION OF ALL DIRECTORS AND NOMINEES FOR THE FISCAL YEAR ENDED DECEMBER 31, 1957 The following table sets forth all direct remuneration paid by the Company and its subsidiary for the fiscal year ended December 31, 1957, to (1) each person who was a director of the Company at any time during such year and whose aggregate remuneration for such year exceeded $30,000 ;(2) each person who was one of the three highest paid officers of the Company during such year and whose aggregate remuneration for such year exceeded $30,000; and (3) all persons, as a group, who were directors or officers of the Company at any time during such year : Amount of Incentive Capacities in Which Compensation Remuneration Name Salary Paid Currently Was Received Lewis Gruber $ 60,000.00 $ 48,896.95 President Iivin H. Peak 45,000.00 43,117.56 Executive Vice Presi- dent Harris B. Parmele 36,000.00 37,338.17 Vice President Harold F. Temple 36,000.00 37,338.17 Vice President Manuel Yellen 32,000.00 37,338.17 Vice President George 0. Davies 29,416.66 36,856.55 Vice President and Treasurer George A. Hoffmann 24,650.00 30,617.56 Director of Manufacturing George W. Davidson 21,500.00 12,000.00 Vice President- Federal Tin Com- pany Frederick M. Walson 20,000.00 16,250.00 Director of Purchasing Officers and Directors as a group 471,966.50 375,782.52 The following table sets forth, for each person named above, (a) all pension or retirement benefits proposed to be paid to such person under the Employees' Retire- ment Plan of the Company in the event of retirement at normal retirement date, directly or indirectly, and (b) all benefits proposed to be paid to such person or his beneficiaries (subject to prescribed conditions) for a period of ten years following 5

retirement or other termination of employment out of all incentive compensation to date under present Article XII of the By-laws of the Company, as described below under the caption "Proposal A: To Amend Incentive Compensation By-law". me Estimated Annual Benefits on Retirement under Employees' Retirement Plan(i) Present Estimated Annual Benefits on Retirement under Article XII of By-laws(f) Lewis Gruber $10,140.00 $10,248.08 Irvin H. Peak 8,667.00 9,944.71 Harris B. Parmele 8,780.00 4,549.06 Harold F. Temple 11,453.00 3,848.61 Manuel Yellen 10,569.00 3,369.47 George 0. Davies 7,990.00 3,362.02 George A. Hoffmann 4,532.00 1,561.76 George W. Davidson 7,333.00 Frederick M. Walson 7,005.00 745.71 Officers and Directors as a group 42,563.09 (1) In each case, the estimate assumes continued employment at salary rate in effect December 31, 1957, until normal retirement date. (2) Such estimate assumes continued employment and may increase under the operation of such Article XII, as now in effect or as amended in the manner described below, for future years but, subject to the conditions referred to in clause (b) above, cannot decrease. All of the remuneration set forth was received by the persons named in their' capacities as officers or employees of the Company and its subsidiary. PROPOSAL A: TO AMEND INCENTIVE COMPENSATION BY-LAW Article XII of the By-Laws of the Company, providing for incentive compen- sation for officers and key personnel, was adopted in 1948 and has been amended from time to time on a patchwork basis to meet specific problems. Following a study by, and on recommendation of, a Committee of directors, none of whom is entitled to receive incentive compensation, the Board of Directors has formulated 6

for submission to stockholders an amended Article XII (annexed hereto as Exhibit A) which, if approved, would become effective for the year 1958. If in effect for the year 1957, the proposed Article XII would have reduced incentive compensation by approximately $110,000. In its present form, Article XII provides, in substance, that in computing "incentive compensation income" there shall be deducted from consolidated net income before Federal income taxes the sum of 38% of such consolidated net income, dividends on the Preferred Stock and an amount equal to $1.20 per share on outstanding Common Stock. A total of ten per cent of "incentive compensation income" is subject to distribution as follows: 10% of such total to the President; 8% to the Executive Vice President; 6% to each of not more than four Vice Presi- dents ; and 58 % to other officers and key personnel. The proposed Article XII, in substance, would substitute a formula under which the "Incentive Compensation Amount" would be the total resulting from the application of the following percentages to net operating income (that is, con- solidated earnings before Federal taxes on income, incentive compensation awards and capital gains or losses ): 3% of the first $12 million ; 4% of the next $3 million ; 5% of the next $5 million; and 6% of any balance. No change would be made in the proportions in which officers and key personnel would share in the "Incentive Compensation Amount." Under proposed Article XII (Sections 1 and 2) incentive compensation for any year would be paid only if a cash dividend had been paid on the Company's Com- mon Stock during such year and net operating income, as defined above, for such year should exceed 12% of net worth, as defined in Section 11. Other material changes from the present Article XII are as follows : SECTIONS 3-8. Present Article XII authorizes the Board of Directors or a committee appointed by the Board to provide for contingent future payment of all or part of the incentive compensation awards. Sections 3-8 of the proposed Article XII would authorize a committee (composed of directors who are non-participants under such plan) to provide for contingent future payment of not more than 75% and not less than 25% of allotments above $5,000 to employees in a Contingent Compensation Group determined under rules and regulations adopted by the com- mittee. Contingent payments would be made, in cash without interest, over a ten-year period, commencing upon termination of employment. Since proposed Article XII might be amended, as hereinafter stated, by the Board of Directors on 7

the recommendation of the committee, the provision for payment of no interest might be changed in the future. The Board and the committee, however, do not have any present intention to make such change. Sections 3-8 would provide for a reduction in the Company's obligation in respect of such future payments in various contingencies, including leaving the Company's employ within a stated time or thereafter engaging in competitive activity. SECTION 9. Such Section would provide, in substance, that proposed Article XII might be amended by the stockholders or, upon recommendation of the com- mittee administering the plan, by the directors, except that only the stockholders would have power to amend the Article so as to increase incentive compensation for any year either in the aggregate or to any officer. Present Article XII provides that it may be amended only by the stockholders. Section 9(b) would retain the provision appearing in the present Article XII requiring resubmission of the Article to the stockholders once every five years. SECTION 10. Such Section would provide that proposed Article XII would take effect for the calendar year 1958 and would apply to calendar years there- after. SECTION 11. Such Section would contain defined terms required primarily by the inclusion in proposed Article XII of the formula described above and of the provisions for contingent future payment. The definition covering the computa- tion of the incentive compensation base would retain the provision of the present Article XII excluding capital gains and, in the interest of uniformity, would add a provision similarly excluding capital losses. Proposed Article XII would result in reduced incentive compensation for any year in which, with present capitalization, the net operating income (that is, con- solidated earnings before Federal taxes on income, incentive compensation awards and capital gains or losses) should exceed $13,800,000. For the year 1957, the amount of incentive compensation was $641,556.81 for officers and directors and $514,321.19 for other employees; if the proposed Article XII had been in effect for the year 1957, the amount of incentive compensation would have been $580,570.29 for officers and directors and $465,429.71 for other employees and the amount allotted to each of the persons listed in the foregoing remuneration table would have been reduced by approximately 10%. The formula set forth in the proposed Article XII is one believed by the Board of Directors to be equitable 8

to both stockholders and management, even though its application could, in certain circumstances which appear improbable, result in higher incentive compensation than under the present Article XII. The Company normally has a President, one Executive Vice President and four other Vice Presidents. Since the aggregate number of other officers and key personnel referred to in Section 2 of both the present Article XII and the proposed Article XII is to be determined by the Board of Directors, it is not possible to state such aggregate number for the year 1958. For the year 1957, the number of persons in that class was 241. The affirmative vote of two-thirds in interest of each class of stockholders voting at the meeting is required in order that the proposed amendment may be adopted. If proposed Article XII should not be adopted, present Article XII will remain in effect and payments will be made thereunder in accordance with its terms. PROPOSAL B: STOCK OPTIONS AND WAIVER OF PREEMPTIVE RIGHTS INCIDENTAL THERETO STOCK OPTION PLAN. In keeping with general practice throughout industry today, the Board of Directors of the Company has formulated a restricted stock option plan and directed its submission to the stockholders. The plan is annexed hereto as Exhibit B. The plan would reserve for use thereunder an aggregate of 100,000 shares of the Common Stock of the par value of $10 per share (approximately 3.5% of the shares of Common Stock outstanding). An employee would be eligible to be granted more than one option, but the number of shares covered by the option or options granted to any individual could not exceed 12,500 in the aggregate. The option price, which would be payable in full on exercise of the option, would be not less than 85% of the fair market value of the shares subject to option at the time of the grant, but not less than the par value thereof. It is the present intention of the Board of Directors to fix the option price at not less than 95% of fair market value at the time of grant. (In the options heretofore granted and referred to below, the option price was in each case more than 95% of the mean between the highest and lowest quoted selling prices on the New York Stock Exchange on the date of grant.) The plan would permit a lower option price solely in the interest of flexibility in special circumstances such as grants to lower paid employees. 9

The option term would be not more than ten years from the date of grant. However, an option would not be exercisable unless the holder was then an employee except that, on termination of employment otherwise than as the result of death, the option would be exercisable by the employee within three months after such termination and except that, if the employee should die while employed or within three months thereafter, the option would be exercisable within one year from the date of his death. Each optionee would be required to agree to serve the Company for at least . two years from the date of grant, except that, on recommendation of the stock option committee in an individual case deemed exceptional, a period of not less than one year might be specified by the Board. An employee would not be permitted, within two years after the date on which an option had been exercised by him with respect to any share, to make any sale or disposition of such share within the meaning of §421 (d) (4) of the Internal Revenue Code of 1954. But such prohibition would not prevent the sale or disposi- tion of such share following the death, retirement or other termination of the employment of such employee or the pledge or hypothecation at any time by such employee of such share, with the pledgee having the right to realize by sale or other- wise upon such share held as security for such pledge or hypothecation. Further- more, a committee (composed of directors who would be non-participants under the plan), would have power to relieve employees from this prohibition in cir- cumstances deemed by it in its sole discretion to be appropriate. Since the Company does not know what circumstances such committee might consider appropriate for such relief, this provision should not be considered a legally binding . commitment or representation that any stock would be held for a two-year period; the provision would be included to evidence the Company's desire that employees hold stock upon exercise of their options for at least two years. Evidence satisfactory to the Company would be required that an employee would acquire all option shares for investment and not with a view to distribution. Provision would be made for appropriate adjustment of option shares in the event of changes in the outstanding Common Stock of the Company because of stock dividends, recapitalizations, mergers, reorganizations and other events. An option would be subject to any listing, registration or qualification of shares and any consent or approval of any governmental regulatory body that the Board of Directors should determine to be necessary or desirable, and the Company 10