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P. LORILLARD COMPANY Notice of Annual Meeting of Stockholders TO BE HELD APRIL 2, 1963 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 Albert Hall, Americana Hotel, 52nd Street and Seventh Avenue, New York, N. Y., at 2:00 o'clock in the afternoon of April 2, 1963, 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) Consideration of and voting upon a proposal to adopt a Stock Purchase, Option and Incentive Plan as described in the annexed Proxy Statement to be incorpo- rated as a new Article XV 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 14, 1963, 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 21, 1963 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. NOTE : Stockholders attending the meeting are requested to enter the Americana Hotel by the 52nd Street entrance, which leads directly to Albert Hall.

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 control from acting, the proxy will be voted at the said meeting and at any adjournment 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 COMPANY. 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 Ten Thousand Dollars ($10,000). 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 stockholders 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 Preferred Stock Stock Total Number of Shares_____ 6,574,548 98,000 6,672,548 Number of Votes___-6,574,548 98,000 6,672,548 Only stockholders of record at the close of business on February 14, 1963, 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 successors 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. ame of Nominee rincipal Occu¢at:on or Em¢loyment Name of corporation in which such occas¢ation is carried on Year when frst elected Director Approximate amount of each class of securities of the Com¢any bene cially owned direct y or indirectly as of January 10, 1963 Lewis Gruber Chairman of the P. Lorillard Company 1946 22,000 shares of Board Common Stock(1) (4) Morgan J. Cramer President and P. Lorillard Company 1958 5,476 shares of Chief Executive Common Stock(2) (4) J. Edgar Bennett Officer Vice President P. Lorillard Company 1960 7,800 shares of and Assistant Common Stock (4) George O. Davies to President Vice President P. Lorillard Company 1955 11,000 shares of and Director Common Stock (4) Manuel Yellen of Finance Vice President P. Lorillard Company 1956 17,437 shares of and Director Common Stock(3) (4) of Sales 3

ame of Nominee Harris B. Parmele rinci¢al Occupat:on or Employment Vice President Name of coryoration in which such occupation is carried on P. Lorillard Company Year when frst e ected Director 1950 Approximate amount of each class of seeurities of the Company benefieially owned direetty, or indirectly as of January 10, 1963 11,400 shares of Henry E. Erickson and Director of Research Vice President P. Lorillard Company 1961 Common Stock (4) 712 shares of Albert L. Dion and Director of Leaf Activities General Sales P. Lorillard Company 1961 Common Stock 1,300 shares of F. Gladden Searle Manager Industrialist 1943 Common Stock(4) 2,000 shares of Donald A. Henderson Vice-President, Twentieth Century-Fox 1946 Common Stock 656 shares of Melvin E. Dawley Finance President and Film Corp. Lord & Taylor- 1950 Common Stock 1,126 shares of Harold X. Schreder Director Executive Department Stores Distributors Group, 1956 Common Stock 224 shares of arold E. Stassen Vice President ttorney Inc.-Investment Bankers and Group Securities, Inc. -Mutual Fund Stassen, Kephart, 963 Common Stock ,050 shares of Sarkis & Scullin Common Stock (1) Includes 7,400 shares held in trusts. (2) Includes 2,100 shares held in a trust. (3) Includes 337 shares held as custodian for his children. (4) Does not include shares held in escrow for release in instalments over a ten-year period following termination of employment (see page 6). The number of shares to be released annually during such period is as follows: Lewis Gruber, 699; Morgan J. Cramer, 73; J. Edgar Bennett, 25; George 0. Davies, 357; Manuel Yellen, 357; Harris B. Parmele, 375; and Albert L. Dion, 17. 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 14 of the Securities and Exchange Commission except Harold E. Stassen who, during the last five years, has been a partner in the law firm of Messrs. Stassen, Kephart, Sarkis & Scullin, Philadelphia, Pennsylvania, which firm has acted as Special Counsel to the Company in international matters. 4

REMUNERATION AND OTHER TRANSACTIONS WITH DIRECTORS AND NOMINEES FOR THE FISCAL YEAR ENDED DECEMBER 31, 1962 The following table sets forth all direct remuneration paid by the Company and its subsidiaries for the fiscal year ended December 31, 1962, 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. 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) Carrent Incentive Name Salary Compensation (4) (5) Estimated Ca¢aciti¢s elnnual Retire- in Which ment Benekt Remuneration at Normal Re- Was Received tirement Date(a) Lewis Gruber_-__ $ 75,000.00 $ 44,625.65 Chairman of the Board-____._ _ $19,431 Morgan J. Cramer----------- 65,833.34 53,871.33 President _ 20,526 J. Edgar Bennett--------- __ 35,000.00 45,573.07 Vice President____ 21,264 George 0. Davies_____- 40,000.00 37,607.47 Vice President_ 17,027 Manuel Yellen._._ 40,000.00 37,605.07 Vice President._-_____ . 20,892 Harris B. Parmele----- __-__ 40,000.00 37,175.47 Vice President___ 22,011 Henry E. Erickson__________ 23,000.00 20,000.00 Director of Leaf Activities_ 19,033 Albert L. 25,000.00 17,332.40 General Sales Manager------- - 14,886 George W. Davidson (b) 30,000.00 20,000.00 Executive Vice President- Officers and directors as a group_- 62,391.65 (c) 07,896.46 Federal Tin and Paper Products, Inc------ __ (b) (a) In each case, the estimate assumes continued employment until normal retirement date at the salary rate in effect December 31, 1962, and with the same current incentive compensation as that for 1962, and election of a joint and survivor annuity providing benefits to the survivor also. For the contingent awards of incentive compensation payable during each of the ten years (fifteen years in the case of contingent awards for 1960 and subsequent years) after termination of employment, see page 6. (b) Effective December 31, 1962, George W. Davidson resigned as a director of the Com- pany, as Executive Vice President of its subsidiary, Federal Tin and Paper Products, Inc., and as a full time employee of such subsidiary and was retained to perform consulting and advisory services for such subsidiary for the year 1963 in return for compensation at the rate of approxi- mately $19,000 per year. Mr. Davidson has made an election whereby he will receive under the Employees' Retirement Plan $8,397.84 annually until his death and thereafter his wife, if she shall survive him, will receive $4,198.92 annually until her death. (c) Does not include premium of $1,966.37 paid by the Company for an insurance policy on the life of F. Gladden Searle following reduction from $37,000 to $18,500 of group term coverage of Mr. Searle upon attainment of age seventy. 5

Contingent awards of incentive compensation under Article XII of the By-laws are payable (subject to prescribed conditions) in equal monthly instalments over a period of ten years (fifteen years in the case of contingent awards for 1960 and subsequent years) following the close of the year in which employment by the Company terminates. The respective amounts of contingent awards of incentive compensation for 1962 for the directors and officers referred to in the above table, contingently payable to them during each of the fifteen years after termination of employment and constituting, in each case, one-fifteenth of the contingently pay- able part of the incentive compensation award for such year (column a), and the total respective instalments contingently payable to them during each of the ten years (column b) and each of the fifteen years (column c) after termination of employment as a result of all contingent awards for years prior to 1962, consti- tuting, respectively, one-tenth and one-fifteenth of the total of all such awards, are : (a) (b) (c) J. Edgar Bennett._____________ $ 3,902.23 $ 372.34 $ 5,215.42 Morgan J. Cramer------------------ 5,795.65 1,761.10 9,373.84 George W. Davidson___________ 333.33 1,500.00 588.83 George 0. Davies-------------- __ ~ 3,902.23 4,185.22 8,951.52 Albert L. Dion--------- _ ~ 283.33 403.37 633.33 Henry E. Erickson.------ _---- ____~ 333.33 - - Lewis Gruber ___----- _------- __-- _ 6,947.95 7,412.45 13,110.61 Harris B. Parmele___________ 3,902.23 4,182.85 8,951.52 Manuel Yellen ___ 3,902.23 4,186.06 8,951.52 Directors and officers as a group 29,619.17 26,685.25 56,531.25 The amounts in column (b) above (except those for Mr. Erickson) reflect a reduction as the result of payment of fully earned contingent awards for 1959 and prior years in shares of the Company's Common Stock, which were trans- ferred by the Company on January 24, 1962 and placed in escrow to be released, over a ten-year period following termination of employment, subject to com- pliance with the non-competition and other continuing conditions to the receipt of contingent awards set forth in the Company's incentive compensation plan. The number of shares to be released annually over such ten-year period to each person referred to in the above table is shown in footnote 4 on page 4. As required by the terms of such transfer and reflected in the remuneration table on page 5, 6

current incentive compensation for 1962 was in each case reduced by the dividends received on such shares during 1962. All of the remuneration set forth was received by, or contingently payable to, 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 June 20, 1962, on the recomnlendation of the Committee on Stock Option Plan, to the following directors and ofTicers : Morgan J. Cramer, 7,000 shares; J. Edgar Bennett, 3,000 shares; Henry E. Erickson, 3,000 shares; Albert L. Dion, 2,000 shares; and all directors and officers as a group, 21,000 shares. In the case of each option, the option price was $43.50 per share, which was in excess of 95% of the mean of $45.75 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 10 years, subj ect to earlier termination upon death or severance of employment. Subject to• specified exceptions, 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. On December 19, 1962, when the mean between the highest and lowest selling prices of the Company's Common Stock on the New York Stock Exchange was $41.69, Henry E. Erickson exercised an option granted on September 18, 1959, to purchase 400 shares at $39.50 per share. During 1962, officers and directors as a group, including Mr. Erickson, exercised options to purchase 1,600 shares, all (other than that of Mr. Erickson) having been exercised during the first quarter of 1962, when the price range per share on the New York Stock Exchange was $63.75-$55. Proposed Stock Purchase, Option and Incentive Plan. The Board of Directors has formulated and directed the submission to stock- holders of a Stock Purchase, Option and Incentive Plan under which shares of the Company's Common Stock could be offered to employees at a price of not less than 100% of the market value of such shares at the time of offer. The employees who could participate include officers and directors who are employees, subject to the 7

limitations set forth hereafter. Such Plan would constitute a new Article XV of the By-laws. Only 5,000 shares remain available under the Restricted Stock Option Plan formulated by the Board of Directors in 1957 and approved by the stockholders in 1958 (hereinafter called the 1957 Plan). The Stock Purchase, Option and Incentive Plan (hereinafter called the 1963 Plan) would enable employees in a position to make substantial contributions to the Company's success, including those entering the Company's employ and those coming up through the ranks, to acquire stock of the Company. The 1963 Plan authorizes stock purchase, stock option and other arrangements from time to time authorized by the Board of Directors as set forth in the Plan, a copy of which is annexed as Exhibit A, to which reference is made for the full text. Shares of Common Stock may either be subscribed for or be issued to employees, with payment being made over a period of time by payroll deduction or otherwise, subject to the requirement that the purchase price of each share shall be not less than the market value of the share, as determined by the Board of Directors in the reasonable exercise of its discretion, at the time subscribed for or issued, whichever shall first occur. In addition, a down payment of not less than 10% of the full purchase price or the par value of the share, which- ever is higher, must be paid before the stock is issued. On shares issued prior to full payment, interest of at least 2% per annum on the unpaid balance would be charged; on shares issued only after full payment, the employee would be entitled to interest credits of not more than 3% per annum and could rescind the purchase subscription at any time prior to issuance. The full purchase price must be paid within five years from the date of subscription or issue, but the Board of Directors may extend the period for up to an additional five years. On termination of employment, payment must be made no later than three months thereafter unless termination took place as the result of death, disability or retire- ment, in any of which events payment must be made not later than one year thereafter. With respect to options granted under the 1963 Plan, the terms would differ from those in the 1957 Plan as follows : (1) Under the 1963 Plan, the option price must not be less than 100% of the fair market value of the shares subject to option, as determined by 8

the Board of Directors in the reasonable exercise of its discretion, whereas the 1957 Plan authorized options at a price as low as 85 o of fair market value, and all options granted under the 1957 Plan carried an option price of 95% of fair market value. (2) The 1957 Plan did not authorize, but did not specifically preclude, the reduction of the option price during the term of the option. The 1963 Plan specifically precludes renegotiation downward of the option price during the term of the option. This provision would not preclude appropriate adjustment of shares subject to any outstanding option or other right to purchase stock and in purchase price in the event of changes in capital or shares of capital stock or special distributions to stockholders. Moreover, the provision is not intended to preclude the grant of an additional option or options to an employee if, as the result of promotion, additional duties and responsibilities or other factors deemed sufficient by the Board of Directors, such additional option or options is warranted, notwithstanding that, as the result of a lower market value of the Common Stock, the option price under such additional option or options may be less than the option price under the prior option. However, the provision is intended to preclude the surrender of an option granted to an employee at a high option price, for the purpose of securing for him an option at a lower price and no such substitution would be permitted. (3) In the event of the exercise of an option subsequent to the death of an optionee, the 1963 Plan contains a new provision authorizing the Com- pany, in lieu of issuing shares, to repay the option price paid on such exer- cise and pay an amount equal to any excess of the fair market value on the date of exercise over the option price. In these circumstances, however, the shares would not again be available for use under the Plan. The 1963 Plan retains the provisions of the 1957 Plan precluding an employee, within two years after the date on which the option had been exercised by him with respect to any share, to make any sale or disposition of such a share, with exceptions similar to those in the 1957 Plan relating to termination of employ- ment, pledge or other circumstances deemed appropriate by the Committee here- ,;°' after referred to. ~r oa w °~ 9 cJ ~

1 I As under the 1957 Plan, the option term would be not more than ten years from the date of grant, with the option exercisable from the date of grant and provisions similar to those in the 1957 Plan relating to earlier termination in case of death or other termination of employment. The consideration furnished by the employee for any right to purchase stock, or options granted under the 1963 Plan, would include an agreement on the part of the employee to serve the Company for at least two years from the date of grant, except that, on recommendation of the Committee hereafter referred to, a period of not less than one year might be specified by the Board. The employees participating under the 1963 Plan and the amount and basis of participation, including terms and conditions not inconsistent with those set forth in the Plan, would be determined by the Board of Directors except that participation by a director could be determined only upon recommendation of a Committee of the Board of Directors no member of which would be eligible to participate. The Plan would be administered by such Committee, whose inter- pretations would in all respects be conclusive. The Company has at present a total of approximately 6,500 employees. No consideration has been given to how many would be offered the right to participate under the 1963 Plan, but it is at present contemplated that between 500 and 1,000 would be given an opportunity to partici- pate. Minimum salary criteria were not used in determining the persons to whom options were granted under the 1957 Plan nor is it intended to use such criteria in determining those who may participate under the 1963 Plan, but rate of compensa- tion may be one of the factors determining the extent of participation. The factors on which those who may participate will be determined are stated in the 1963 Plan as': position and responsibility in the organization, degree of influence on profits, present and potential contributions to the success of the Company, rate of compensation, length of service, age and other usual factors deemed by the Board of Directors pertinent to the determination of compensation, emoluments and incentives and to the accomplishment of the purposes of the Plan, subject to the individual and group maximums mentioned below. No consideration has been given as to whether an employee would be eligible under the 1963 Plan to receive both stock option and stock purchase rights or as to whether different criteria will be used to determine eligibility under the purchase and option programs. Nor has any consideration been given as to allocations pursuant to each of the alternate types of stock purchases or the circumstances under which each such type would be granted. 10 ,