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P. LORILLARD COMPANY February 29, 1968 To the Stockholders of P. Lorillard Company: The Board of Directors has voted to submit to the stockholders at the Annual Meeting on April 9, 1968, a proposal for changing the legal domicile of the Company from New Jersey to Delaware and in connection therewith to change its capital structure and to change its name to "Lorillard Corpo- ration". This will all be accomplished by means of a merger of the Company into a wholly-owned subsidiary of the Company incorporated under the laws of Delaware. This move will not involve any change in the management or business of the Company. There are enclosed herewith a notice of the meet- ing and a Proxy Statement which discusses the reasons for the proposal, and a proxy for your use is enclosed in the envelope affixed to the outside of the envelope in which you received this material. In addition to the proposal for moving to Delaware, stockholders will vote on a proposal to authorize and approve stock option grants, but only with respect to the number of shares of Common Stock heretofore authorized by the stockholders, under a new 1967 Stock Option Plan, and a proposal to approve-amendments to the incentive compensation plan of the Company. We hope that you will give all of these recommendations immediate consideration and return your favorable proxy promptly. Directors will, of course, be elected at this meeting for the coming year. The separate proposals of two stockholders for cumulative voting, which management opposes, will also be voted upon. The principal effects of the merger, the reasons for it and the advantages which management believes it will offer are as follows : (1) The state of incorporation will be changed from New Jersey to Delaware. This move will subject the Company to the corporation laws of Delaware which the Board of Directors, after thorough study and consultation with counsel, believes to be modern, flexible and more certain because of its extensive body of corporation law developed by its experienced judiciary. The Company will thus join the ranks of thou- sands of corporations which are now incorporated in Delaware, including nearly one-half of the 100 largest industrial corporations in America. In short, the Board of Directors agrees with the viewpoint of many other companies which have decided in recent years that Delaware offers a superior "corporate climate".

(2) A new class of Preferred Stock consisting of 2,000,000 shares will be authorized, which may be issued in series from time to time by authority of the Board of Directors, and the authorized Common Stock will be increased from 10,000,000 to 20,000,000 shares. Management believes that such increases in the Company's authorized shares are necessary if the Company is to be in a position to meet the challenges posed by present economic and financial conditions and to realize the Company's potential for growth. As and when the Board of Directors may find it advisable and in the best interests of the Company, the new Preferred Stock as well as the Common Stock could be issued in connec- tion with the acquisition of other companies or business properties as well as in connection with financing or for other corporate purposes. In this connection, the pre-emptive rights of holders of Common Stock will be preserved as to future sales of Common Stock for cash (with a limited exception for employee benefit purposes ) but, in the interest of greater flexibility, will not apply to any other securities. (3) The outstanding 7% Preferred Stock will be converted into a new issue of 6%% Subordinated Debentures through the issuance of $140 principal amount of Debentures for each share of outstanding 7% Preferred Stock. Since interest on the new Debentures will be tax deduct- ible by the Company while dividends on the 7% Preferred Stock are not, there will be an annual cash saving to the Company, and, as a result, net income applicable to the Common Stock will be increased. The $140 principal amount of Debentures per share of 7% Preferred Stock exceeds recent market prices of the 7% Preferred Stock on the New York Stock Exchange. Closing prices ranged from $111.50 to $117.50 per share dur- ing the first two calendar weeks of January, 1968, and the closing price was $120 on January 16, 1968, the day prior to the day on which the Board of Directors took action to approve the merger proposal. The annual interest on the new Debentures will be equivalent to $9.275 per share of 7% Preferred Stock, which represents an increase of 32.5% over the pre- ferred dividend rate of $7 per share. Even though a capital gains tax will, in many cases, be payable by them, we believe this proposal should be attractive to the holders of 7% Preferred Stock. (4) The name of the Company will be changed from P. Lorillard Company to Lorillard Corporation, a more easily remembered corporate name. The outstanding certificates representing Common Stock will not have to be exchanged for new certificates but will represent the same number of shares of Common Stock of the Delaware Company without any action by the holders thereof. Holders of 7% Preferred Stock will be advised after the Annual Meeting as to the method of exchanging their certificates for the new Debentures. Favorable votes of the holders of at least two-thirds of the outstanding Common Stock, voting separately as a class, two-thirds of the outstanding

7% Preferred Stock, voting separately as a class, and two-thirds of the out- standing Common Stock and 7% Preferred Stock, voting together as a class, are required to approve the Agreement of Merger. Any failure by a stock- holder to sign and return his or her proxy-unless, of course, present at the meeting and voting for the proposal-is equivalent to a vote against the proposal. Therefore, you are urged to sign and return the accompanying proxy, irrespective of the size of your holdings, so that you may be sure that your shares will be represented. We strongly recommend that- you vote in favor of the merger and other management proposals, whether you are a holder of Common Stock or 7% Preferred Stock, or both. Sincerely yours, Chairman of the Board President