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0.°i:r33pm EDT 22-Aug-96 9alomon Brothers (Diana H. Temple (212) 783-6671) MO RN Tobacco -- Rogers Closing Statements, Excellent Defense ~ Tobacco -- Rogers Closing Statements, Excellent Defense 08/22/96 The Rogers case is expected to go to the jury today. We do not expect a decision until tomorrow because the jury has to answer 15 questions. They were told to bring suit cases, but we expect a decision before the weekend. We see a 40%-50% chance of a loss. Philip Morris could rally to $93 with a win, but drop to $80 with a loss. We did feel better about the case after Rogers testimony via deposition. Its interesting he got his wife to quit, while dating as he didn't like women smoking in public. Also, Yvonne Rogers quit smoking during each of her three pregnancies. If she could quit smoking at will, why couldn't he? The jury consist of five women and one man. Figure 1. Tobacco Companies-Valuation Comparison Code Price EPS P/E 1996E 1997E 1996E Philip Morris HOLD $86 $7.70 $8.65 11.1 RJR Nabisco HOLD 25 5/8 $2.50 $2.75 10.3 Loews BUY 75 98.35 fi0.10 9.0 B.A.T BUY 13 3/8 $1.62 $1.75 8.3 UST BUY 31 1/4 $2.40 $2.70 13.0 0 The plaintiff presented closing arguments. Going for strict liability -- incurred risk is not an issue in strict liability. Other choice is negligence -- plaintiff attorney wants strict liability. The plaintiff suggested $2 million number for damages. "The most precious gift is our children -- Rogers started smoking when he was a child". We hear about choice and professional responsibility -- when you're addicted free choice is impacted. Cigarettes are like cocaine but the manufacturers want people to use cigarette -- they understand the true risk. N O V ~ The industry denied lung cancer and addiction. Then they say Rogers incurred O ~ the risk of lung cancer and addiction because he knew that it does both. Its 0) an impossible slippery slope. V - There is no question this case meets criteria for strict liability. Keep in mind although the seller has exercised all reasonable care, all we ti4 _ • could do is not good enough if the product is bad. The industry trivialized the danger.

Other numbers to bear in mind for damages. Mr. Rogers medical expenses were i'77,miDb. He made about i27,000 a year. If he would have retired at 65 1424,000 -- age 70 $560,000. • ® 0 The defense was impressive, saying that Rogers knew about the dangers of smoking. The tobacco industry research committee foreed in 1964 pledged to assist in the research effort into all phase of tobacco use and health. $91 million was spent cumulatively. We haven't said cigarette smoke doesn't cause lung cancer. We said that it may, but it hasn't been scientifically been proven. On addiction, smoking was 10 years ago considered a habit. What difference does it make what you call it. Can you quit? Does it affect your free will? Rogers did quit. During his deposition he was questioned why he didn't quit or seek help in 1960s, he answered "he didn't want to quit." In 1930s legislative required teaching about effects of tobacco. J. Hoff testified about consumer awareness. 5ome examples, slang terms were referred to as coffin nails. In 1964, 81% of adults agreed smoking was harmful to health. RE94W First Call Corporation - all rights reserved. 617/345-2500 END OF NOTE ~