Tobacco Documents Online

R1 EXHIBIT E ARTICLE XII. INCENTIVE COMPENSATION FOR OFFICERS AND KEY PERSONNEL.* SECTION 1. Incentive Compensation Amount: (a) As soon as reasonably may be after the end of the calendar year 1960, and of each calendar year of the Company's existence thereafter, the Treasurer shall submit to the Board of Directors a certificate (which certificate shall be endorsed with the approval of the independent Auditors of the Company) certifying the Incentive Compensation Amount for such calendar year. Such Incentive Compensation Amount shall be the total amount resulting from application to the Net Operating Income for such calendar year of the following percentages: 3% of the first $50,000,000 of such Net Operating Income; 4% of such Net Operating Income in excess of $50,000,000 but not in excess of $53,000,000; 5% of such Net Operating Income in excess of $53,000,000 but not in excess of $58,000,000; 6% of such Net Operating Income in excess of $58,000,000. (b) Notwithstanding the provisions of Sec. 1(a) above, no Incentive Compensation Amount shall be deemed to have been earned, and no incentive compensation shall be paid, for any calendar year unless (i) a cash dividend shall have been declared and paid on the Common Stock of the Company in such year and (ii) the above-mentioned certificate of the Treasurer for such calendar year shall certify that the Net Operating Income for such calendar year exceeded 12% of the Net Worth for such calendar year. SECTION 2. Determination of Allotments: (a) The Board of Directors shall for each calendar year cause to be allotted to each of the following officers and key personnel an amount equal to the percentage of the Incentive Compensation Amount for such calendar year set opposite the description of his position below: The President of the Company .................................................... 10% of such Incentive Compensation Amount; The Executive Vice President of the Company if there shall be only one Executive Vice President in oti'ice ........................ 8% of such Incentive Compensation Amount; Each of not more than five other Vice Presidents of the Com- pany, except as stated below .................................................. 6% of such Incentive Compensation Amount; Such other officers and key personnel of the Lorillard Com- panies, including officers and key personnel who are members of the Board of Directors, and in such amounts as the Board may determine ..............................................................:.......... 52% of such Incentive Compensation Amount but not in excess of 4% to any one person. (b) The President shall have the duty of recommending to the Board of Directors to what officers and key personnel other than the President and Vice Presidents, and in what amounts, the portion of the Incentive Compensation Amount that may be allotted to such persons shall be allotted to them. The Board, as to officers and key personnel who may be members of the Board, shall in no event make allot- ments to such members of amounts in excess of those recommended_by the President. The President shall have the duty of recommending to the Board of Directors to what officers and key personnel other than the President and the Vice Presidents and other members of the Board of Directors who are not officers * The amendments of the Plan in respect of which stockholder approval is sought are identified by underscoring matter to be deleted and italicizing matter to be added. EE-1

entitled to receive stated percentages of the Incentive Compensation Amount under Sec. 2 (a), and in what amounts, the portion of the Incentive Compensation Amount that may be allotted to such persons shall be allotted to them. The portion of the Incentive Compensation Amount which may be allotted to each member of the Board other than the officers entitled to receive stated percentages of the Incentive Compensation Amount under Sec. 2(a) shall be recommended by the Committee, after consultation with the President, to the Board of Directors. The Board of Directors, as to officers and key personnel who may be such members of the Board, shall in no event make allotments to such members of amounts in excess of those recommended by the Committee. (c) If any President or any Vice President shall have served as such for less than the full calendar year, the allotment to such person shall bear the same proportion to the full amount due such officer as the time so served bears to the full calendar year. (d) If, for all or any part of a calendar year, (i) there shall not be any Executive Vice President in office, then there may be allotted to a sixth Vice President or (ii) there shall be more than one Execu- tive Vice President in office, then there may be allotted to each of six Vice Presidents, including the Executive Vice Presidents, an amount equal to 6% of the Incentive Compensation Amount for such calendar year, if such condition shall have existed for the full calendar year, or, if such condition shall not have existed for the full calendar year, a sum which shall bear the same proportion to such amount as the time during which such condition shall have existed shall bear to the full calendar year. (e) If, for any reason, the full amounts hereinabove provided for in respect of the President and the Vice Presidents shall for any year not be allotted to them, then any amount not so allotted to the President and the Vice Presidents shall be added to the amount that otherwise would have been allotted to other officers and key personnel so that for each year the entire Incentive Compensation Amount shall be allotted to officers and key personnel under this By-Law. (f) The term "President," as used in Sec. 2 of this Article, refers to the chief executive officer of the Company and if, for any calendar year or part thereof, the chief executive officer shall be the Chair- man of the Board of Directors, then, with respect to such calendar year or part, (i) the Chairman shall receive the percentage of the Incentive Compensation Amount provided for the President in Sec. 2(a) above, (ii) the President shall receive the percentage of the Incentive Compensation Amount provided for the Executive Vice President in Sec. 2(a) above, and (iii), consistently with the foregoing clauses (i) and (ii), as used in this Sec. 2, (A) the term "President" shall be deemed to refer to the Chairman; (B) the term "Executive Vice President" shall be deemed to refer to the President; and (C) the term "Vice Presidents" shall be deemed to include the Executive Vice President, or Executive Vice Presidents, if any, and, except as used in Sec. 2(a) above, the President, and the term "Vice President" shall be deemed to include any Executive Vice President and, except as used in Sec. 2(d) above, the President. (g) Anything herein to the contrary notwithstanding, after the amounts to be allotted with respect to any calendar year under the foregoing provisions of this Sec. 2 have been determined for all Participants without reference to this Sec. 2(g), the Contingent Allotment for such year, if any, which, but for this Sec. 2(g), would have been made to -each Participant who at any time during such year was a member of the Board of Directors of the Company or a Vice President, Executive Vice President, President, or Chairman o f the Board o f Directors, shall be reduced by a sum equal to the amount apportioned to such Participant for such year under the Profit Sharing Plan of P. Lorillard Company. If and to the extent that the amount apportioned to such a Participant for such year under such Profit Sharing Plan shall exceed the Contingent Allotment which, but for this Sec. 2(g), would have been made to such Participant, the Current Allotment for such year which, but for this Sec. 2(g), would have been made to such Participant shall be reduced by the lesser of the difference and the amount of the Current Allotment. SECTION 3. Contingent Compensation Group: The Contingent Compensation Group for any calendar year shall consist of such of the Participants for such calendar year as shall be determined according to rules and regulations of general application established by the Committee as in effect on November 15 of such calendar year. The allotment made to each of the persons in the Contingent Compensation Group with respect to any calendar year shall be EE-2

divided into two parts, consisting of the Current Allotment and the Contingent Allotment. Each such division shall be made pursuant to a formula of general application established by the Committee and communicated to the Board of Directors as a part of the above-mentioned rules and regulations. Such formula shall provide that the first Five thousand dollars ($5,000) of the allotment to each Participant shall be paid as a Current Allotment and that, of the allotment in excess of Five thousand dollars ($5,000), not more than seventy-five per centum (75%) nor less than twenty-five per centum (25%) shall be paid as a Current Allotment. The Committee may at any time or from time to time amend its rules and regulations, including such formula, provided that any such amendment shall have been communicated to the Board of Directors prior to November 15 of the calendar year for which such amendment is to take effect. SECTION 4. Payment of Allotments Other Than Contingent Allotments: Subject to the provisions of Sec. 3, allotments to all Participants, other than those in the Contingent Compensation Group, and Current Allotments to Participants in the Contingent Compensation Group, shall be paid in full in cash as soon as practicable after such allotments shall have been made. SECTION 5. Payment of Contingent Allotments: (a) Subject to the provisions set forth in Secs. 5(b) and 5(c) below, (i) payment of the total amount of all Contingent Allotments made to a Participant shall be made to him, or, in case of his death prior to the commencement of payments on account of such total amount, to his Beneficiary, in equal monthly installments in cash without interest commencing on January 1 of the year following the year in which such Participant shall cease, by reason of death or otherwise, to be an employee of the Lorillard Companies, or as soon as practicable thereafter. The number of such installments shall be 180 plus, if such payments shall commence prior to age 65, a number equal to the number of months between the commencement of payments and attainment of age 65, provided, however, that the number of installments shall in no event exceed 240. In the case of the death of a Participant after the commencement of payments to him on account of the total amount of the Contingent Allotments made to him, the then remaining unpaid portion thereof shall continue to be paid in installments, at such times and in such manner as if such Participant were living, to the Beneficiary of such Participant. (ii) Anything hereinabove in Sec. 5(a) (i) provided to the_ contrary notwithstanding, the number of equal installments in which each Contingent Allotment for the calendar year 1964 and each calendar year thereafter shall be paid shall be, three (3), the first of,which shall be paid on March 1 of the second calendar year next following the calendar year for which the Contingent Allotment shall have been made, with the remaining two installments to be paid on March 1 of each succeeding calendar year until the full amount of the Contingent Allotment shall have been paid. (a) Subject to the provisions set forth in 5(c), 5(d) and 5(f) below, each Contingent Allotment for the calendar year 1967 and any calendar year thereafter shall be payable, in whole in one, or in part in both, of the following alternatives as the Committee, either in or without consultation with Participants, shall annually approve: Alternative 1. In three equal annual installments, in cash without interest, the first of which shall be paid on March 1 of the second calendar year next following the calendar year for which the Contingent Allotment shall have been made, with the remaining two installments to be paid on March I of each of the two succeeding calendar years; provided, however, that no such annual installment shall be in an amount less than One thousand dollars ($1,000) except for any installment required to pay the full balance hereunder. Alternative 2. In the case of a Contingent Allotment of Five thousand dollars ($5,000) or more, in equal monthly installments, in cash without interest, commencing on January 1 of the year following the year in which the Participant shall cease, by reason of death or otherwise, to be an employee of the Lorillard Companies, or as soon as practicable thereafter, but in no event earlier than the first day of the seventh calendar month following the date on which the EE-3

Participant shall so cease to be an employee. The number of such installments shall be 120 plus, if such payments shall commence prior to age 65 due to termination of employment for any reason other than death, a number equal to the number of months between the commence- ment of payments and the end of the month in which the Participant shall attain age 65, provided, however, that the number of installments shall in no event exceed 180. (b) In case of the death of a Participant before full payment of any Contingent Allotment or Contingent Allotments made to him, the unpaid portion or portions thereof shall be paid or continue to be paid to the Beneficiary of such Participant at such time or times and in such manner as if such Participant were living. (b) (c) With respect to the total amount of Contingent Allotments, or the then remaining unpaid portion thereof, which shall be payable to any Participant who shall at that time no longer be an employee of the Lorillard Companies or to the Beneficiary of any Participant, but in no other case, the Committee shall possess absolute discretion to accelerate the time of payment of such total amount, or remaining unpaid portion thereof, as the case may be, to any extent that, in its absolute discretion, it shall deem equitable or desirable under the circumstances. (c) (d) Payment of each Contingent Allotment to a Participant in the Contingent Compensation Group or to his Beneficiary shall be subject to the following provisions: (i) If such Participant shall cease to be an employee of the Lorillard Companies within a period of three years following the close of the calendar year for which a Contingent Allotment shall have been made to him, such Contingent Allotment and the Company's obligation in respect thereof shall be reduced to the amount resulting from multiplication of such Contingent Allotment by a fraction, the numerator of which shall be the number of full quarter-years during which he shall have been an •employee of the Lorillard Companies following the close of the calendar year for which such Contingent Allotment shall have been made, and the denominator of which shall be twelve. No reduction in such Contingent Allotment or the Company's obligation in respect thereof shall be made, however, if such termination of employment shall have resulted from death, disability or retirement (including early retirement) under the Employees' Retirement Plan of t_he Company retirement plan o¢ any of the Lorillard Companies of which such Participant shall then be a member or shall occur under circumstances deemed by the Committee, in its sole discretion, not to be contrary to the interests of the Company. (ii) If such Participant, following the date on which he shall cease to be an employee of the Lorillard Companies, shall, upon reasonable written notice from an officer of the Company and upon payment or agreement by the Company to reimburse his travel and o7her reasonable out-of- pocket disbursements, if any, fail at reasonable times to undertake such assignments, or to furnish to the Company such advice, assistance, cooperation, information and data (including, without limitation, in the form o¢ testimony, depositions, affidavits or the like) with respect to any and all matters on which such Participant was working during his employ- ment by the Company, or with respect to which he might reasonably be expected to have knowledge or competence as a result of such employment, for the. purpose of any litigation or proceeding to which any of the Lorilland Companies may be a party, or for any other proper purpose, as the Company may reasonably request, the Company's obligation to make any further payment on account of the total amount of the Contingent Allotments to such Participant shall forthwith terminate, but the Participant shall not be obligated to repay any sum theretofore paid him by the Company on account of the Contingent Allotments made to him; provided, however, (A ) that in calling upon the Participant for such advice and assistance, the Company shall take fairly into consideration his age, health, residence, other employment, if any, and personal circumstances at the time and the Contingent Allotment or Contingent Allotments which he shall be receiving, (B) that at all times when performing such assignments or rendering such advice and assistance, such Participant shall be subject to the control and direction of the Board of Directors of the EE-4

Company or an officer or officers appointed for that purpose solely for the result to be accom- plished by any such assignment and not as to the details and means by which such result is to be accomplished, and (C) that nothing in the Plan or in any agreement executed pursuant thereto is intended to or shall constitute such Participant an employee or representative of the Company in any capacity while receiving such Contingent Allotments. (ii) (iii) If such Participant, following the date on which he shall cease to be an employee of the Lorillard Companies, shall engage or be employed, whether as owner, stockholder, partner, officer, employee or otherwise, in any occupation connected with the manufacture or distribution of products in competition with any of the Lorillard Companies at any time after the expiration of a period of thirty days after the mailing to him of written notice by the Secretary of the Company to refrain from doing so, or if such Participant shall, at any time following the date on which he shall cease to be an employee of the Lorillard Companies, (A) disclose to unauthorized persons information relative to the business of the Lorillard Companies which he shall have reason to believe is confidential or (B) otherwise act, or conduct himself, in a manner which he shall have reason to believe is inimical or contrary to the best interests of the Lorillard Companies, the Company's obligation to make any further payment on account of the total amount of the Contingent Allot- ments to such Participant shall forthwith terminate, but the foregoing provisions shall not obligate such Participant to repay any sum theretofore paid him by the Company,on account of the Con- tingent Allotments made to him. Ownership as an investor of not more than five per cent (5% ) of the outstanding shares of the stock of any company listed on a national securities exchange or having at least one hundred (100) shareholders shall not in itself constitute a violation of the terms of the foregoing provisions, regardless of the nature of the business of such company. (iii) (iv) If any Participant shall attempt to assign his rights under the Plan in violation of the provisions of Sec. 7 below, the Company's obligation to make any further payment to such Par- ticipant or his Beneficiary shall forthwith terminate. If any Beneficiary shall attempt so to assign his rights, the Company's obligation to make any further payment to such Beneficiary shall forth- with terminate. (iv) (v) The determination as to whether an event has occurred resulting in a termination or reduction of the Company's obligation in accordance with the foregoing provisions of this Sec. 5 shall be made by the Committee in its absolute discretion and the decision of the Committee with respect thereto shall be conclusive. Any provision of the Plan to the contrary notwithstanding, the deter- mination as to whether an event has occurred resulting in a termination or reduction of the Company's obligation in accordance with the foregoing provisions of this Sec. 5 shall be made by the Committee in its discretion, reasonably exercised, and such determination of the Committee with respect thereto shall be conclusive. (d) (e) In case an event shall have occurred which shall have terminated or reduced the Com- pany's obligation to pay all or any part of the total amount of the Contingent Allotments to such Partici- pant, the amount represented by the resulting decrease in the Company's obligation shall not be available for allotment under the Plan. (f) The Board of Directors, on recommendation of the Committee but not otherwise, may, at any time or from time to time, according to rules and regulations of general application established by the Committee, provide for the method of payment, in whole or in part; of Contingent Allotments for any calendar year or years, including unpaid Contingent Allotments awarded for any prior calendar year or years under the Plan as at any time in effect. Such payment (i) may be made by (A) the issuance or transfer of securities or other property, including common stock or other securities of the Company or of a regulated investment company or companies, subject to restrictions and requirements to assure compliance with the conditions set forth in Sec. 5(d) and elsewhere in the Plan and such other restrictions and requirements as the Board of Directors shall prescribe, upon recom- mendation of the Committee, or (B) an undertaking to issue or transfer such securities or other EE-5 NO 1~ 'IQ OD -p 0 ~ V

property in the future, together with a sum or sums equal to dividends and other income earned thereon' from the date of such undertaking until the date or dates of payment or (ii) may be made in cash measured by the value of such securities or other property or of a portfolio comprised of either securities or other property or both, together with dividends and other income earned thereon from the date that such measure has been established until the date or dates of payment. SECTION 6. Administration of the Plan: (a) The Plan shall be administered by the Committee, which shall have power to construe and interpret the Plan and to adopt rules and regulations for its administration. (b) The Committee shall consist of such number of the Board, but not less than three (3), as shall be appointed by the Board and who shall serve at the pleasure of the Board. Subject to the immediately preceding sentence, the membership of the Committee may be increased, changed or reduced from time to time by the Board. None of the members of the Committee shall be eligible to be awarded an allotment, contingent or otherwise, at any time when he shall be a member of the Com- mittee or with respect to any calendar year in which he shall have served as a member of the Committee and no person shall be designated, or continue to serve, as a member of the Committee unless, at the time of such designation and service, he shall be a "disinterested person" within the meaning of Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934 (or any suc- cessor provision at such time in effect). All expenses of administering the Plan, including reasonable compensation to the members of the Committee, shall be borne by the Company. (c) The Committee shall conduct its business and hold meetings as determined by it from time to time and any action taken by the Committee at meetings duly called shall require the affirmative vote of at least a majority of its members. The Committee shall adopt and may amend its own rules of procedure and shall keep an accurate and complete record of its proceedings. SECTION 7. Certain Provisions Relating to Participation: (a) No Participant nor any person claiming under or through him nor any other person shall have any right or interest, whether vested or otherwise, in the Plan or its continuance or in or to the payment of any allotment under the Plan, contingent or otherwise, unless and until all the terms, conditions and the provisions of the Plan that affect such allotment and its payment shall have been fu11y complied with as specifically provided in the Plan and the rules and regulations of the Committee thereunder. No rights under the Plan, contingent or otherwise, shall be assignable or subject to any encumbrance, pledge or charge of any nature, except that a Participant may, under such rules and regulations as the Com- mittee may establish, designate a Beneficiary to receive his award or any unpaid portion thereof and except as may be specifically provided in connection with transfers of securities or other property in payment of Contingent Allotments. (b) Nothing contained in the Plan shall require the Company to segregate or earmark any cash or other property, and no Participant or Beneficiary shall have any interest in any fund or specific property. Any securities or other property held or acquired by the Company specifically for use under the Plan or otherwise shall, unless and until transferred in accordance with the terms and conditions of the Plan, be and at all times remain the property of the Company, irrespective of whether such securities or other property are entered in a special account for the purpose of the Plan and such securities or other property shall at all times be and remain available for any corporate purpose. (c) Neither the adoption of the Plan nor its operation shall in any way affect the right and power of the Lorillard Companies to dismiss or otherwise terminate the employment of any officer or other employee at any time for any reason. (d) By accepting any benefits under the Plan, each Participant and each person claiming under or through him shall be conclusively deemed to have evidenced his acceptance and ratification of, and consent to, the provisions of the Plan and any action or decision taken or made under the Plan by the Company, the Board of Directors and the Committee. EE-6

SECTION 8. General Provisions: (a) Anything herein to the contrary notwithstanding, the certificate of the Treasurer with respect to the Incentive Compensation Amount for a calendar year, when endorsed with the approval of the independent Auditors of the Company, shall be in all respects final and conclusive on the Company, its Board of Directors and stockholders, the Committee, the Participants and their Beneficiaries and all others claiming under the Plan or otherwise, as to the correctness of the computations under Sec. 1 for such calendar year, and shall remain final and conclusive for the purpose of the Incentive Compensation Amount for such calendar year irrespective of any subsequent happening or subse- quently discovered miscalculation or error and irrespective of the results of any subsequent audit or review by the Commissioner of Internal Revenue or by any other agency or tribunal affecting any item entering into Net Operating Income or Net Worth. (b) Any action taken or decision made by the Company, the Board of Directors, or the Com- mittee arising out of or in connection with the construction, administration, interpretation or effect of the Plan, or of any rules and regulations adopted thereunder, shall lie within its absolute discretion and shall be conclusive and binding upon all Participants and all persons claiming under or through any Participant. (c) The Board of Directors and the Committee may rely upon any information supplied to them by any officer of the Company, or by the Company's independent Auditors, and may rely upon the advice of such Auditors or of counsel, in connection with the administration of the Plan, and shall be fully protected in relying upon such information and advice. (d) No member of the Board of Directors or of the Committee shall be liable for any act or failure to act of any other member' of such Board or Committee, as the case may be, or of any officer, agent or employee. (e) The fact that a member of the Board of Directors shall at the time be, or shall theretofore have been or thereafter may be, a Participant or person who has received or who is eligible to receive an allotment shall not disqualify him from taking part in and voting at any meeting as a director in favor of or against any amendment or repeal of the Plan, provided that such amendment or repeal shall provide no benefit for directors as such and provided further that such amendment or repeal shall be of general application. (f) There shall be deducted from all payments of allotments all taxes required to be withheld therefrom under the applicable laws or other regulations of any- governmental authority, whether Federal, state or local and whether domestic or foreign. Any provision of the Plan to the contrary notwithstanding, the Company may take such steps as it believes necessary or desirable to the end that the Company shall, as the result of payment to the Company by or on behalf of the Participant or amounts payable by the Company to the Participant or his Beneficiary or as the result of withholding, have sufficient funds to pay all taxes, if any, required or permitted by law to be withheld in respect of any allotments. (g) In the event of a change in the Company's fiscal year, this Plan shall apply, with appropriate pro rata adjustments, to any intermediate period not consisting of twelve months and shall then apply to each fiscal year following, and the term "calendar year" shall under such circumstances be deemed to refer to the Company's fiscal year. (h) Any communication under the Plan to the Board of Directors shall be deemed to have been delivered to the Board when delivered to the Secretary of the Company for transmission to the Board, irrespective of whether the Board shall then be in session. Any communication under the Plan to the Committee Shall be deemed to have been delivered to the Committee when delivered to its Secretary for transmission to the Committee, irrespective of whether the Committee shall then be in session. (i) Headings are given to the paragraphs of the Plan solely as a convenience to facilitate refer- ence; such headings shall not be deemed in any way material or relevant to the construction of the Plan or any provision thereof. ~ ~ EE-7 .~ oo 4 0 N 10

(j) The use of the masculine gender shall also include within its meaning the feminine. The use of the singular shall also include within its meaning the plural, and vice versa. (k) An allotment authorized by the Plan to an officer or key employee of a corporation which ig one of the Lorillard Companies (other than the Company), whether paid directly by such corporation from its own funds or paid by the Company and subsequently charged to such corporation, or paid by the Company but not charged to such corporation, shall be charged to the Incentive Compensation Amount for the year for which the allotment shall have been made. SECTION 9. Amendment or Repeal: (a) The Plan and this Section of the By-Laws may be amended or repealed by the stockholders of the Company or, if, as and when the Committee shall recommend, but not otherwise, by the Board of Directors, provided, however, that (i) only the stockholders of the Company may amend the provisions of the Plan so as (A) to increase for any calendar year the Incentive Compensation Amount for such year, or the percentages thereof that may be allotted to the President, the Executive Vice President, or other Vice Presidents; (B ) to change the provision, in Sec. 6(b ) of the Plan, that none of the members of the Committee shall be eligible to be awarded an allotment, contingent or otherwise, at any time when he shall be a member of the Committee or with respect to any calendar year in which he shall have served as a member of the Committee; or to change the provisions in Sec. 6(b) of the Plan with respect to eligibility and disinterest of the members of the Committee; or (C) to change the provisions of this Sec. 9; (ii) the provisions of the Plan as in effect on November 15 of any calendar year shall in all respects remain in effect with respect to any allotment, contingent or otherwise, made or to be made for such calendar year, notwithstanding the amendment or repeal of the Plan subsequent to November 15 of such calendar year by either the Board of Directors or stockholders; (b) The Directors shall at least once in every five years present this Article of the By-Laws to a Stockholders Meeting for such action as the stockholders care to take. SECTION 10. Effective Date of Amended Plan: This amended Plan shall take effect for the calendar year 1958 and shall apply to calendar years thereafter. SECTION 11. 10. Definitions: Unless otherwise required by the context, the terms used in the Plan shall have the meaning ascribed to such terms in this Sec. 11. 10. BENEFICIARY: As applied to a particular Participant, such one or more persons or entities (including a trust), other than the Participant or his estate or his creditors or the creditors of his estate, or an entity in which any of the foregoing may have an interest, as shall be designated in a written document executed by such Participant in such form as shall be approved by the Committee and delivered to that Committee. Such designation may name one or more principal Beneficiaries and one or more contingent Beneficiaries, and may make provision for various contingencies, subject to such rules of general application as may be established by the Committee. Such designation may be changed, amended or revoked by such Participant at any time and from time to time by a similar written document. If, at the time when any amount on account of any one or more allotments to him shall become payable at or after the death of such Participant, there shall not be any such living person or any such entity in existence, named in a valid designation with respect to a Beneficiary on file with the Committee, the term "Beneficiary" shall mean such person or persons among his spouse and descendants as the EE-8

Committee, in its absolute discretion, shall designate, and, if such Participant shall leave no spouse or descendant, the term "Beneficiary" shall mean such person or persons among his relatives by blood or marriage as the Committee, in its absolute discretion, shall designate. In case, at the death of a Participant, there shall be more than one designation by such Participant on file with the Committee, the last designation filed shall control. As applied to a Participant, one or more persons or entities (including a trust or estate) designated at any time or from time to time by such Participant with the approval of the Committee. If, at the time when any amount on account of any one or more of his allotments shall become payable at or af ter the death of such Participant, there shall not be in existence any person or entity so designated, then the term "Beneficiary" shall mean the estate of such Participant. BOARD OF DIRECTORS OR BOARD: The Board of Directors of the Company. COMMITTEE: The committee appointed to administer the Plan pursuant to Sec. 6 above. COMPANY: P. Lorillard Company, a corporation organized and existing under the laws of the State of New Jersey. CONTINGENT ALLOTMENT: The portion of the allotment to any Participant in the Contingent Com- pensation Group contingently payable in the future pursuant to Secs. 3 and 5 of the Plan. CONTINGENT COMPENSATION GROUP: The group determined as provided in Sec. 3 of the Plan. CURRENT ALLOTMENT: The portion of the allotment to any Participant in the Contingent Com- pensation Group to be paid in cash pursuant to Sec. 4 of the Plan. INCENTIVE COMPENSATION AMOUNT: As applied to a particular calendar year, the amount, determined in the manner provided in Sec. 1 of the Plan, available for allotment as incentive compensation for such calendar year. LORILLARD COMPANIES: As applied to a particular calendar year, the Company and any other cor- poration the financial statements of which are consolidated with those of the Company for purposes of the Company's annual report to stockholders for such calendar year. NET OPERATING INCOME: As applied to a particular calendar year, the consolidated net earnings of the Lorillard Companies for such calendar year, as certified by the Company's independent Auditors for the purposes of the Company's annual report to stockholders for such calendar year, plus all amounts charged against such consolidated net earnings in respect of the following: A. Taxes of the United States and foreign governments (including, but without limitation thereto, excess profits taxes) based upon or measured, in whole or in part, by income of the Lorillard Companies but exclusive of state and territorial taxes and taxes imposed by political sub- divisions thereof; B. The Incentive Compensation Amount for such calendar year; and C. All items of capital or non-recurring loss or other extraordinary charge which, by reason of size, character or other factors, did not arise in the ordinary and usual course of business of the Lorillard Companies, including expenses properly attributable to such loss or charge; less, however, all amounts included in such consolidated net earnings in respect of items of capital gain, non-recurring profit or other extraordinary credit which, by reason of size, character or other factors, did not arise in the ordinary and usual course of business of the Lorillard Companies, after deducting expenses properly attributable to such gain, profit or credit. NET WORTH: As applied to a particular calendar year, the total capital stock, additional paid-in capital, and retained earnings, less any treasury stock, as shown by the consolidated balance sheet of the Lorillard Companies as of the end of the preceding calendar year, plus or minus an allowance for any change during such calendar year, based on the amount and time of such change, in capital stock, addi- tional paid-in capital, or retained earnings from newly issued or reacquired capital stock. PARTICIPANT: A person to whom an allotment shffil have been made under Sec. 2 of the Plan. PLAN: The amended incentive compensation plan set forth in this Article XII of the By-Laws of the Company. EE-9 -0 ~ ~ -p 0 N ~