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P. LORILLARD COMPANY Notice of Annual Meeting of Stockholders TO BE HELD APRIL 5, 1960 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 11:00 o'clock in the forenoon of April 5, 1960, 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 program formulated by the Board of Directors for submission to stockholders to improve the Company's Employees' Retire- ment Plan and reduce incentive compensation under Article XII of the By-laws ; and (3) 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 17, 1960, will be entitled to vote, notwithstanding any transfer of any stock on the books of the Company after such record date. Jersey City, N. J. February 26, 1960 ANNA F. WOESSNER, Secretary. 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 STOCKHOLDER 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 adj ourn- 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 persons for their expense in so doing at a total estimated cost of about Five Thousand Dollars ($5,000). 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__ 6,564,048 98,000 6,662,048 Number of Votes 6,564,048 98,000 6,662,048 Only stockholders of record at the close of business on February 17, 1960, 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 corporation when Company beneficially Princif al in which such first owned directly or indirectly as of Name of Occupatzon or occupation is elected Nominee Employment carried on Director lanuary 15, 1960 Lewis Gruber Chairman of P. Lorillard Company 1946 22,000 shares of the Board and Common Stock Harold F. Temple Chief Executive Officer President P. Lorillard Company 1943* 12,900 shares of George O. Davies Vice President, P. Lorillard Company 1955 Common Stock 11,000 shares of Treasurer and Common Stock Manuel Yellen Director of Finance Vice President P. Lorillard Company 1956 17,102 shares of and Director Common Stock of Sales * Has served continuously since, except for period January 16, 1950, to April 28, 1953. 3

Name of Nominee Principal Occupation or Employment Name of corporation in which such occupation is carried on dpproximate amount of each class of Year securities of the when Company beneficially first owned directly or elected indirectly as of Director 7anuary 15, 1960 Harris B. Parmele Vice President P. Lorillard Company 1950 J. Edgar Bennett and Director of Research Director of P. Lorillard Company 1960 Morgan J. Cramer Manufacturing Director of Export P. Lorillard Company 1958 George W. Davidson and Government Operations Executive Federal Tin Company 1957 Herbert A. Kent Vice President Consultant P. Lorillard Company 1939* S l i li t I d t 1943 ear e F. Gladden r a s n us Donald A. Henderson Treasurer and Twentieth Century-Fox 1946 Melvin E. Dawley Secretary President and Film Corp. Lord & Taylor- 1950 Harold X. Schreder Director Executive Department Stores Distributors Group, 1956 Vice President Inc.-Investment Bankers and Group Securities, Inc. -Mutual Fund 11,600 shares of Common Stock 5,800 shares of Common Stock 2,476 shares of Common Stock 6,000 shares of Common Stock 6,750 shares of Common Stock 2,000 shares of Common Stock 656 shares of Common Stock 1,126 shares of Common Stock 224 shares of Common Stock * 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, collectively, such nominees 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 Commission except J. Edgar Bennett, who, for more than the last five years, had served the Company as Assistant Director of Manufacturing. 4

REMUNERATION AND OTHER TRANSACTIONS WITH DIRECTORS AND NOMINEES FOR THE FISCAL YEAR ENDED DECEMBER 31, 1959 The following table sets forth all direct remuneration paid by the Company and its subsidiaries for the fiscal year ended December 31, 1959, 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 aggre- gate 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. Estimated annual retirement benefits to the same persons at normal retirement date under the Employees' Retirement Plan as now in effect are set forth in column (5) of the table. (1) (2) (3) (4) (5) Name Salary Capacities Current {n Which Incentive Remuneration Compensation Was Received Estsmated Annual Retire- ment Bene t at Normal e- tirement Datc(a) Lewis Gruber 75,000 100,769.42 Chairman of the Board 10,740 Harold F. Temple 60,000 84,615.54 President 14,692 George O. Davies 40,000 68,461.65 Vice President and Treasurer 10,180 Manuel Yellen 40,000 68,461.65 Vice President 12,909 Harris B. Parmele 39,000 68,461.65 Vice President 9,140 George A. Hoffmann 38,000 68,461.65 Vice President 4,840 Morgan J. Cramer 22,000 44,230.82 Director of Export and Government Operations 6,354 George W. Davidson 25,500 25,000.00 Executive Vice President -Federal Tin Company 7,895 Officers and directors 521,216 675,962.38 as a group (a) In each case, the estimate assumes continued employment at the salary rate in effect December 31, 1959, until normal retirement date. For the contingent awards of incentive com- pensation payable during each of the ten years after termination of employment, see page 6. For proposed amendments to the Employees' Retirement Plan, see pp. 7 et seq. ~ r-• •.1 The contingent awards of incentive compensation under Article XII of the By-laws since 1954 (the first year for which contingent awards were made) are oa G3 ~ 5 m j

in each case payable (subject to prescribed conditions) in equal monthly instal- ments over a period of ten years following the close of the year in which employ- ment by the Company terminates. The respective amounts of contingent awards of incentive compensation for 1959 for the directors and officers referred to in the above table, contingently payable to them during each of the ten years after termination of employment and constituting, in each case, one-tenth of the con- tingently payable part of the incentive compensation award for such year, and, in parentheses, the total respective instalments contingently payable to them during each of the ten years after termination of employment as a result of all contingent awards for years prior to 1959, constituting one-tenth of the total of all such awards, are : Morgan J. Cramer---------------- - $ 5,269.24 ($ 1,375.00) George W. Davidson______________ $ 1,000.00 ($ 500.00) George O. Davies------------- __~- $12,538.49 ($ 15,243.09) Lewis Gruber $22,230.82 ($ 31,383.19) George A. Hofffmann---------- __ _- $12,538.49 ($ 9,201.38) Harris B. Parmele_____________-__-_ $12,538.49 ($ 16,430.12) Harold F. Temple------ - $17,384.66 ($ 15,729.68) Manuel Yellen ----- _- _________ $12,538.49 ($ 15,250.54) Directors and officers as a group__ $98,626.22 ($108,081.75) All of the remuneration set forth was received by the persons named in their capacities as officers or employees of the Company and its subsidiaries. In accordance with the provisions of the Company's Restricted Stock Option Plan approved by the stockholders at the Annual Meeting in 1958, options to purchase Common Stock were granted on September 18, 1959, on the recommen- dation of the Committee on Stock Option Plan, to the following directors and officers: Morgan J. Cramer, 3,000 shares; Lewis Gruber, 5,000 shares; Harold F. Temple, 5,000 shares; and all directors and officers as a group, 16,100 shares. In the case of each option, the option price was $39.50 per share, which was in excess of 95% of the mean of $41.5625 between the highest and lowest selling prices of the Common Stock on the New York Stock Exchange on the date of grant. The option term in each case is ten years, subject to earlier termination upon death or severance of employment. Subject to specified exceptions, any shares acquired on the exercise of the option are required to be held for two years after such exercise. Each optionee has agreed to serve the Company for a period of at least two years from the date of grant. 6

PROGRAM TO IMPROVE EMPLOYEES' RETIRE- MENT PLAN AND REDUCE INCENTIVE COMPENSATION The Company's retirement plan for salaried employees ("the pension plan") was adopted on March 13, 1945, and its pension benefits have not been improved since that date. Over a period of time, the Company has been considering amend- ments to the plan. Following a study by, and recommendations of, a committee of directors, none of whom is an employee eligible to benefit, the Board of Direc- tors has approved amendments as part of a program formulated for submission to stockholders. The program contemplates a simultaneous reduction in incentive compensation. (a) AMENDMENT OF EMPLOYEES' RETIREMENT PLAN Present Provisions All salaried employees (including officers and directors who are employees, but excluding directors who are not employees) are members of the pension plan upon completion of three years of service with the Company or its wholly-owned subsidiary, Federal Tin Company. The number of employees who were members of the plan at the end of 1959 was 870 and it is expected that, as a result of completion of three years of employment by employees at the Company's Greens- boro plant and of other factors, the number of members will increase during 1960 to a total of approximately 1,050, including eight directors and nine officers who are not directors. A member retiring at age 65 receives a retirement allowance equal to (a) for each year of creditable service prior to January 1, 1945, three-quarters of one per cent of the part of his annual salary rate on December 31, 1944, up to $3,000, plus one per cent of the part of such rate in excess of $3,000, and (b) three- quarters of one per cent of salary received during each year of creditable service after December 31, 1944, up to $3,000, plus one and one-half per cent of the part of such salary in excess of $3,000. A member may retire on a reduced retirement allowance at or after age 55 but only with the consent of the Company. No maxi- mum limit on pensions is specified beyond that resulting from the operation of the formula itself. 7

Proposed Amendments The following is a brief summary of the proposed amendments to the pension plan : (1) No increase would be made in the present benefit rates but, instead of being applied on a career average basis, such rates would be applied to the highest average compensation received in any five consecutive years out of the last ten years of employment (the "average final pay" basis) and such average compen- sation would comprise the currently paid portion of incentive compensation awards and salary. The maximum pension that could be paid would be fixed at the rate of $30,000 a year. For creditable service after December 31, 1959, the lower rate of three-quarters of one per cent a year now applicable to the first $3,000 of salary would be applied to the first $4,800 of compensation, conforming to changes in social security coverage since the adoption of the plan fifteen years ago. (2) At the present time, an employee qualifies for membership in the pension plan only after the first three years of employment and, even after he becomes a member, the first three years of employment are not included in creditable service. The three-year period would be retained as necessary for qualification but, once having qualified, present and future employees would be entitled to credit for the first three years of service. (3) A benefit would be paid with respect to employees who should die after attaining age 55 while in the employ of the Company but prior to retirement, provided that, in each case, the employe had not less than fifteen years of credit- able service. Such benefit would be payable to the widow of the employe or, if he is not survived by a widow, to another person designated by him to receive the benefit. (4) Provision would be made for a retirement benefit payable commencing at age 65 for employees with not less than 20 years of service whose employment with the Company should terminate for any reason prior to that age but after age 50. If and when approved by stockholders and the ruling as to continued qualifica- tion hereinafter referred to has been received from the Internal Revenue Service, the foregoing amendments would become effective for the full calendar year 1960 and subsequent years. In the opinion of counsel, the favorable vote of a majority 8

in interest of the stockholders voting at the meeting is required for the adoption of the foregoing amendments and the proposed amendments to Article XII of the By-laws. The pension plan may be amended by the Board of Directors provided that no member, retired member or other person receiving a retirement allowance is thereby deprived of any benefits under the plan and provided that it is not thereby made possible for any of the assets of the plan to be used for or diverted to purposes other than for the exclusive benefit of members, retired members and their beneficiaries under the plan. It is intended, however, to submit to stock- holders any amendment which would increase the rate of maximum pensions except an increase as the result, for example, of rises in the cost of living or other factors which the Board of Directors should deem to make such an increase appropriate, in which case the rate of maximum pensions may be increased by the Board of Directors to not more than fifty per cent of average final compensation computed as stated above. The Company is applying to the Internal Revenue Service for a ruling that, if the proposed amendments of its pension plan should be approved by stockholders, the related trust would continue to qualify under Section 401 of the Internal Revenue Code, thus permitting the Company to continue to deduct for tax purposes its contributions to such trust, but has not yet received a ruling on such applica- tion. If necessary to obtain such a ruling, the Board of Directors of the Company may, under its general power of amendment, modify any or all of the proposed amendments and may substitute any other amendments. For each person named on page 5 of this proxy statement, estimated annual payments on retirement at normal retirement date, assuming in each case that such person shall remain in the Company's employ until retirement and at approximately the same compensation, but, after giving effect to the proposed program, would be increased to $30,000 or to an actuarially lower sum in the event of early retire- ment or of election of a joint and survivor option, except for Messrs. Cramer and Davidson whose amounts would be approximately $21,600 and $22,500, respectively. (b) REDUCTION IN INCENTIVE COMPENSATION Present Provisions Article XII of the By-laws of the Company relating to incentive compensation was adopted by the stockholders in its present form on April 8, 1958. Generally 9

speaking, it provides for an annual incentive compensation amount determined by 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. Incentive compensation for any year can be paid only if a cash dividend has been paid on the Company's Common Stock during such year and only if net operating income, as defined above, for such year exceeds 12% of net worth as defined in the By-law. The total incentive compensation amount is subject to distribution as follows : 10% to the Chairman, 8% to the President, 6% to each of not more than four Vice Presidents and 58 % to other officers and key personnel. At present the Company has a Chairman, a President and four Vice Presidents (the By-law officers). The aggregate number of officers, directors and employees (other than the By-law officers) who participate for any year is determined by the Board of Directors after the close of such year and, accordingly, it is not possible to state what the number thereof will be for 1960 or subsequent years. For the year 1959, seventeen officers and directors and 333 other employees participated in incentive compensation. Proposed Amendments As a part of the above-mentioned program, incentive compensation would be reduced, effective for the full calendar year 1960 and subsequent years, by raising from $12 million to $50 million the amount of net operating income to which the first 3% of the above formula would be applicable. The proposed new formula would thus be as follows : 3% on the first $50 million of net operating income, as defined above; 4% on the next $3 million; 5%o on the next $5 million; and 6% on amounts in excess of $58 million. Article XII would also be amended to provide that, unless otherwise directed by the committee administering the plan in the circumstances permitted by such Article XII, contingent awards for 1960 and subsequent years would be paid in 180 equal monthly instalments following termination of employment (or a greater number if such termination occurs prior to age 65) instead of in 120 such monthly instalments as at present. 10