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3 6 IN THr., U?:ITF.D :'TATl?S DISTRICT COURT FOR T}i.~ DI:~iFtICT OF OF.::.GON CIVIL NO. 70-86 PACIFIC T0''1CCO CORP., an Oreron Corporation, dba PACIFIC '1'UuACCO COMiPANY, D iti f epos on o : Plaintiff, ( vs. ~ D. ~-'. GROUT 1'f3:-' T03ACC0 COMI'I:IIY, INC., a Delaware Corporation, et al Defendants. w 10 11 12 13 14 15 16 17 18 19 20 21 23 24 25 The deDositior_ of. D. ti•'. Grout wss taken in Room 217. of the Do%-mtowrier i41otor Inn, l•linston-&S~alem, North Carolina, cor~r~encin~.~- at 12:30 P.. 113. on the 2nd day of February, 1y7'! . APP.e:.'iRANC3 ;S For the Plaintiff: ROGER TILBURY, Esq. of the law firm of Tilbury and Kane, 1110 Standard. Plaza, PortXemd, Oregon, 97204. For the Defendants: l-I.%}: CROI-iiv, JR. , Esq. , Reynolds Tobacco Company, 401 P:ain utree;t, ?:'inston-Sale.i, ?~;ortt: Carolina, 27102. TI'_OtuAS P. GitIi:SS, Eac., of the w aw firm of Davis, Pclk & WardEil, 1 Chase Manhattan Plaza,. P?ew York, N. Y. DCNALD W. DicLt,'I:~N, Esq., of the law firm of Cake Jaurcf;v.y, Hardy, Buttler & i+icEwen, 1408 Standard Plaza, Portland,Oregon, 97204. D.ANII:L-J. 0'NLILL, Esq. of the law firm of Chadbourne, Ps.rk, WL.iteaide & ~-.olff, 25 3roadway,. New York, N. Y. 10004. J. -7-dward Switzer, Jr.,_Official Court Reporter. GRAHAM ERLACHER &.ASSOCIATES , OFFICIAL COURT REPORTERS ASHE DRIVE WINSTON.SALEM. N. C. PNOHE: 763•0686

0 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 ~dI~ SS I N D E X EXAMINATION BY PAGE D. W. Grout Mr. Tilbury 4, .43 Mr. Crohn 40 Mr. Griess 42 E X HIB I T S ... ... .~ _ , IDENTIFIED Plaintiffes 4 24 Plaintiff's 5 28 GRAHAM ERLACHER & ASSOCIATES C•FFICIAU COUNT RIPrjRTERS ASHE DRIVE WINSTON.SALEM,N.C. PHONE:765.0536

, 0 2 3 4 5 6 7 8 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 .11 STIPULATION By consent of Counsel for the Plaintiff.and the Defendant, the deposition of D. W. GROUT was taken by J. Edward Switzer, Jr., Notary Public, at the Downtowner ;lSotor Inn, : oom 217, .Jinston-Salem, North Carolina, commen cinz at 10:00 o'clock A. M., on Tuesday, February 2, 19'j1. A11 formalities with reference to notice of time and place and purpose of taking the deposition were expressly waived. Formalities with reference to sealing and filing the deposition were waived, and it is stipulated that the original transcript, upon being duly certified by the undersigned Court Reporter, will be filed with the U. S. District Court Clerk, District of Oregon. It is further stipulated that all objections to quections and motions to strike answers need not be made at the time of the taking of the testicony, but may be made at the tir:e the tEstinony or any part thereof is offered in evidence. GRAHAM ERLACHER & ASSOCIATES OfrICIAL COVRT REPORTERS ASHE DRIVE WINSTON.SALEM,N.C. PHONE: 7EiS.O6P.6

X 0 0 2 3 5 6 7 8 9 10 ii 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4lHEREUPON, D. w. GROUT having been duly sworn, testified as tbllowss EXAML~IATION BY MR. TILBURY Q Would you state your name please? A Donald Wesley Grout. Q Where do you live, Mr. Grout? A Winston-: alem, Q How long have you lived here? A Eleven years. Q Prior to that time, where did you live? A Denver, Colorado. Q How long in Denver, and where else have-you lived? A Up unti 1959, in Denver, the only two locations, U r-ee -cy except for B^Colorado for about nine months. Q What is your educational background? A No formal education other than the Advanced Management Program at Harvard Business School. Q You are employed by the Reynolds Company, are you? A Reynolds Tobacco, yes. Q In what capacity? A Asalatant National Sales 1y. anager. Q How long have you been an Assistant National Sale Manager? A Since 1967, April. GRAHAM ERLACHER & ASSOCIATES Olf1CIAL COURT REPORTERS ASHE DRIVE ' WINSTON-SALEM.N.C. PNCir+E: 765•0636

.7 0 0 0 2 3 4 5 6 7 9 10 11 12 13 14 15 16 17 ls 19 20 21 22 23 24 25 Q What other positions have you occupied with Reynolds? - A Zone Sales Manager, in two different zones west coast and southpast. I spent some time handling the national military market for the eompany; about a year in the advertising department with the company; assistant Division i-.anager in Denver; a salesman. Q In all, how many years with Reynolds? A Eighteen this month. Q In 1967, what position did you occupy with the company? A Western Zone Sales Manager up until April of 167; after that, I was promoted to.Assistant National Manager. Q Did you reside in Winston-Salem? In 1967? Sale s A Yes. Q Had you, in connection with your work, been in Oregon from time to time? A Yes. Q Let'n say, during the last five years, how many times have you been in Oregon? A I would have to check the r ecords to be exact on that. Five years - I just couldn't say. Q Once a year, something like that? A I couldn't aay that either. GRAHAM ERLACHER & ASSOCIATES Ofi'ICIAL COURT REPORTERS ASHE DRIVE WINSTONSALEM.N.C. P.4ONE 765•OG3G ~.-w..~--~ ..~.....•c,.:..

3 5 6 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q I understand from the last witness that you were in Oregon in March of 1967? A Yes. Q Why did you happen to be there at that particular time? A A regular business trip, primarily to look at personnel for promotion. Q Okay; haw long had you been out of the home offic on this particular trip? Before you reached Portland.. A I came in from Winston-Salem. Q You flew direct to Portland from Winston-Salem? A Yes. Q All right; did your visit have to do with C ancer cigarettes in any way; was that your reason for going? A No. Q In whole or in part? A No. Q VI'hat was your primary reason for this trip? A To work with, primarily, Mr. Iieeseti and Mr. S. E Marion,. to determine their potential for promotion. Q How long were you away from your home office on thi© trip? A It was one week. Q Did you go any place else besides Portland? A I was in the Portland area; I didn't go out of GRAHAM ERLACHER & ASSOCIATES OiFICIAL COURT REPORTERS ASHE DRIVE WINSTON.SALEM.N C. PHONE: 766.3636 - ~ 0 N O C

0 3 5 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that division, letts say. Q And then you returned to, directly, I take it, from the Portland division back to your home base in Winsto - Salem? A Yes. _ Q Had you any prior knowledge of Cancer cigarettes before you made this trip in March of 1967? A Only from reading something about it in a weekly national magazine. I don 't rel/ ember the name of the rraga wine . Q Could it have been Readers Digest? A yez. P`"le. Q Or was it a weekly magazine? A I think it was Time or BusineDs `neek, or somethin like that, in the business section; in fact, I didn't really relate it to what area it was being marketed in. Q Had you discussed or had anyone discussed Cancer cigarettes with you before you made this trip in March of 1967? A No. Q Uren you reached the Portland area, when did the subject of Cancer cigarettes first arise on this trip that you descr:.bed? A I would say to the best of my memory, it was the day I worked with Frank Kecseti; I think that was on a GRAHAM ERLACHER & ASSOCIATESOfflCl,kl COVkT REPORTCRs ASHE ORIVE WINSTON•SALE.M. N.C. PH-iNE 765-OG36 ,

0 O 0 2 3 5 6 7 8 9 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Friday$ the 17th. Q Now who brought the subject up? A I believe Frank did, in our discussion of what's aoing on in Portland, and the general trade conditions, and so forth. Q What did he say? About that? A ivgll, he mentioned the fact that the brand i$ in the area, and after questioning about the brand, naturally, he mentioned the owners of the Bel-Air Pharmacy were the people behind the brand, that were marketing the brand. Q How did he put it; how did he describe Cancer cigarettes to you; did he say that it was any kind of threat to the cigarette industry, or hor: did he put it? A I don't remember. Q Was this the first call that you made that day? A No, it was not t.ie first call. Q Can you recall wY,ere else you went? A No. Q In a general way can you r ecall, any types of accounts, -werc:_ tr,ey just distributors, or retailers? A To the best of my memory, I can't recall; they were general trade calls, if I rememberright, reviewing the wales::,en's reports; we had the report in hand and we were going into calls that he h ad made prior, previously, to :.eej GRAHAM ERLACHCR & ASSOCIATES O«iCI4L COURT RF.PORTEHS AsMr nRIVE WINSTON S.1LEM. N C. P.+Or.I 7G5-•.)ai36

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 how effective he was, and how productive he was in his work; and I don't remember the type of callsj just the general trad3, you might say./ Q k'aa the Bel-Air Pharmacy one that i4r. Kee3eti would ca.ll on, or did call on periodically in connection with his wor;~c as aale::man? A No, he was not a salesrnan; he -was an Assistant Division Rana ;cr at the time. Q 0'.cay; was this tize sort of call that he would nave made nor:lally, or ,vas this an unusual thin3? a, A Tie ,all :.as in the aalesman 's assignAnent, and t~r. Kecseti, in revie.~in; the aalesman 's work or working wlth the salea:nan, would have called on the Bel-Air F',aar:Zacy, yeS. Q ,:aN your reason to go to the Bel-Air Pharmacy related in any way to the subject of Cancer cigarettes? In w"noLe or in part? A ;;y reason was, yes. Q has that your sole reason for going there? A Y Q ~'.:s this an unusual thinG for you to go to a retail store ;:ith so~iabody like :1r. Y•ecseti? A :.o, not wnusual at all. Q 1i1l riC.l:t; :rhat time of day did you reach the :tcre: GRAHAM ERL&CHER & ASSOCIATES OliIIIAL COURT REPORTERS ASHE DRIVE WiNSTON-SALEM. N C. P.OtiE765063G i 9

2V 1 2 3 4 5 6 7 8 9 10 it 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A I don't remember. I don't know whether it :ras before or after lunch. q Can you describe what happened when you got there' A V;ell, I remember tellin , Frank that we would not take a salesman's bal; in, you know, that way we would not make a regular type call out of it; it ,aas a fact-finding call for me; I wanted to ask the clerk, or whoever was there in charge, the manager, and so forth, questions about Cancer Cigarettes; so we walked in without the usual pro- cedure in making a call. iie forfeited that in the fact- findi.-- mission that I was on, so to speak. At the time, we wayked in and introduced ourselves as being with the fieynolds Tobacco Company, and looked at the Cancer C ibarett on display, on our pacitage fixturej'; and talked to this one gentl :;..5an, I don 't remember his nane; can 't remember what he looked like. q Can you describe him at all? A He was big - fairly good size in ~ t~t re ~.A G~ . q Was he dre_ :sed in any particular ;;ay? A No; I don ft remember whether he had on a pharr,a- eeutical smocl', or not. Arid I aslceu hin questions about the Cancer ci.garattt brand. 4~ How did you put it? A I asl",od hii-,i how j,t ,;a; s211ing. q ',;ha t did he say? GRAHAM ERLACHER & ASSOCIATES OFFL.IAL COURT REPORTERS ASHE DRIVE WINSTON-SALE:M. N. C. P..onr 7F:S-Ob3G s

0 3 6 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 11• A He mentioned about a mail order activity that he had been receiving requests mostly, and he was mailing the b rand into other states; and hementioned the fact that it was kind of a fad, he made light of it, in fact. He mentioned something to the effect that "someday I might be a big cigarette manufacturer", or something like that; it was a very congenial conversation. Q l;hat else was said by you or Mr. Kecseti or this gentleman? A He asked me who I was and what my title was, and I, at that ti.me, uave him my business card, and took anothd, look at the display over there, the cartons on display, an we left. . Q Did he ksk you at any time if you v:ere from ;iinston-Salem? . Eefore you introduced yourself? A I don't remember that. Q How were they displayed? A I believer there were two or three cartons dis- j played on our package fixture. ThIzre was the type of pack- a;e fixture that holds packages in the carton - you tear the top off the carton and lay it up at an angle on the shelves. Q You recall only the single ii3dividual,who was. evidently working at the store, talking with you or did ~~o,a talk then with anyone else? Y - GRAHAM ERLACHER & ASSOCIATES OFFICIAL COURT REPORTERS . ASHE DRIVE WINSTON-SALEM, N. C. PHOr:E: 765-0636 r

12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A He is the only one I can remember. Q Did you buy any of the cigarettes or did he give you any of them? A I vaguely remember buying a couple or three packs to bring back to Winston-Salem - this is normal for a new item on the market. Q How much did you pay for them? A I believe it was around fifty cents. Q You did bring them back to Winston-Salem? A Yes. Q What happened to them after they reached Winston- Salem? A I sent them to our marketing ansi research depart- ment. Q Who in particular there? A Just to the marketing a-ad research department j I don't know what the channel was they took after that. Q Do you know what they did with them? A I don 't know what they did with them, no. Q Do you. have .ar.alyzinS ciGarcttes? A Yes. a laboratory here, I aasume, for Q aas it, in any way, referred to the laboratory? A I assume it was - well, I didn 't get a report on it myself; I assumed that they were referred to the GRAHAM ERLACHER & ASSOCIATES OFi1CIAL COURT REPORTERS ASHE DRIVE WINSTON-SALEM. N. C. PHONE:765-0636

ti 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 research laboratory for analyzing. Q Is this sort of a customary procedure for any new cigarettes? A It is standard, yes, sir. Q Have you told us everything you recall, Mr. Grou~ about that conversation? A Yes, sir. Q Where else did you go after you left the 8e1.-Air Pharmacy? A Well, we went over tocall on the Empire Flhoiesale rlra jr, e Company or Tobacco Company; I forget the exact tAtle. I Q Had you known any of the people there? A I beg your pardon? Q Had you known any of the people there before you called on them? At Znpire. A No. Q What was your reason for going there? A 1,:ell, the reason you just mentioned - I-didn 't know the account - it's a direct account of ours, and I make it a practice to get to know our direct customers and to check our stock and to see how hic buuiness was on our brznd s, and to see, to follow up and to see how C ancer C igar4ttes were selling. Q So part of the reason to talk to Empire related to C. ancer C igarettes? GRAHAM ERLACHER & ASSOCIATES OF/#ClAl COURT REPORTERS ASHE DRIVE WINSTON-SALEM. N. C. PHONE 7GS-O636 0

A Part of the reason, ye$. Q Did.somebody tell you, or did the gentleman that 3 you had the conversation with at Bel-Air mention that FLmpire was distributing cancer cigarettes? A 0 Mr. Kecseti mentioned that he thought that they 0 6 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 were distributing cancer cigarettes. 0 The man that you talked to at Bel-Air did not mention Empire as a possible account? A No. Q Okay; you went directly, I take it, from Bel- Air to Empire? A Yes. Q And who did you talk to at Empire? A I really forget the man's name; it was Mr. Herbst, or soraething like that. Q Can you describe him? A He was bi g, and a very congenial fellow. Q ;oIhat age about? A I would say in his fiftiea. Q All right; would you tell us about that conver- sation please? A rto 11, I don 't renembar whether we met the man conin ; into the wholesale houoe or not or encountered him di.ectly; I:motiv Frank talked to someone to get permission for us to check our merchandise and our stock in his house. GRAHAM ERLACHER & ASSOCIATES , OFFICIAL COURT RlPORTCRS ASHE DRIVE WINSTONSALEM. N. C. PHONe, 766•0636

15 1 2 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Trfiich we did. Q You mean by "Frank" - Mr. Kecseti? A Mr. Kecseti. And in checking our stock, we notic about, less than a half a case of cancer cigarettes in a stock bin, and before leaving, we walked up and encountered the owner or the manager there, Mr. Herbst, I guess he is, in conversation, formal procedure, how his business is, talked to him about the stock level, about our products, and so on. d Q Now, where was the cancer cigarettes, near the front or back some distance? A I don ft remember. Q Wel.l, 1ah.at was your conversation relating to cancer cirarettes; what did he say and what did you say? And what did .-1r. XECzeti say? A I asked him how it was selling, what kind of repeat orders he was receiving on them, and why he was handling them, that brand, and tried to get as much infor- mation about the brand as I could. Q lahat did he say? A I can 't remember word for word, but in general, the theme of our conversation was that they were not sellin well, no repeat orders; it was a fad, and that he Just got them Juct to acco.=.odate a few customers. 0, Did he say how long he would keep them in stock? GRAHAM ERLA=HER & ASSOCIATES OiFtC1AL COURT RErORTF.KS ASHE DRIVE VJINSTONSALEM. N. C. PNONE: 765-0636

3 6 10 11 12 13 ~ 14 15 16 17 18 19 20 21 22 23 24 © 25 A No, he didn't: Q Did anyone indicate that it was not in the best interest of the tobacco industry to have cigarettes with this name Cancer attached? A I did. Q And to whorn did you say this? A To him. Q How did you say it? A In a very diplomatic way; we talked about industr, Lir14 1,. <t,ick•o 17- business conditions,-zxxL=unspa`,n movements, cigarettes ~ and health :novementa, and probleras, and I related to him how I could not understand how he would - I don't remember exactly - I was trying to get across to him the point that he had so much at stake here in having all this business in pre-sold items, advLrtised items, pre-advertised items, and certainly the CancerCigarettas were not complimentary to the standard cigarette items that he was selling, which was the backbone of his business. Q All right; do you recall what else he said? A 1:0 . , Q Did t•ir. Kec aeti make any remarks? A Not that I remember. Q :;r. Herbst, in response to that? A Wo didntt argue; he didn't arSue with me at all; he said that what I said, he agreed with Me, and that was about the extent of the conversation. GRAHAM ERLACHER & ASSOCIATES OF'FICIAL COU4i REPOFtTERS ASHE DRIVE WINSTON-SALEM. N. C. PHONE!765•0636 ys

x 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q Was there anyone else present during this con- versation? , ......,,,y.,,.. . A No. Q From Empire, where did you go? \ A I don't remember. /Q You were in the Portland area how long in all? A tdoncby through Friday. Q Can you recall, in general terms if not specific teri7s, the types of calls that you would have.made during the balance of the week? A The balance of the week - that was on Friday, and I left on Friday. Q Oh, you left on Friday; okayj well, was this to- ward the end of your time in Portland? A I don't recall whether we made calls after; if we took off after calling on Znpira or notj I just don't r eraeraber. Q Had you made calls on other retailers before 6oin, to Bel-Air, either on that day or on the preceding days? A Oh, yes, yes. Q This, I ta;;e it, then was not the first day that you were in Portland on this occasion; by that, I mean I:arch 17, 1g67, the day you went to Bel-Air, you had been in Portland on more than one day? GRAHAM ERLACHER & ASSOCIATES Ofi1CIAL COVRT REPORTERS ASHE DRIVE WINSTON-SALEM. N. C. PNONE: 765•0636 1 . .. ......_... N...... w... .....+..•.r,....e.. .. . .n....r~..w.... .

H 2 3 4 5 6 7 8 9 10 11 12 13 ~ 14 15 16 17 18 19 20 21 22 23 24 25 A I:vas in Portland all that week. Q All that week; okay. A Monday through Friday. MR. GRIESS i And this was Friday. Q (By Mr. Tilbury) All right; in a general way, what r:ind of things did you do from t4onday to Thursday? A I worked with salesmen, calling on retail outlet~; }}'~rtriC.7 r;on I worked with Kecseti; worked with Stu r:ar-Iano, S. E. Mar filoJP7'S calling on retail outlets; looking over MM1"no-4s office operations, and so forth. Q All rigilt, tiYas anything said at any of these calls, in any of these conversations was anything said relating to Cancer Cigarettes? With anybody? A With anybody; not that I remember. Q When you got bacit: to -- let me firSt ask about another distributor, did you call on Bernstein Brothers in March of 19u7? A I don't remember whether I did or not. Q How about ca].ls in the city of Vancouver; did you go across the state line into Washington? A I don't remember. Q You don 't recall whether you had met anyone from the H.S. S:nith Company? A I don't remember. Was this the only occasion that you have called GRAHAM ERLACHCR & ASSOCIATES O«jL1AL COURT REPORTERf ' ASHC DRIVE WINSTON-15ALEM. N. C. . PMC.~t. 765•OG36

X 0 0 3 10 i1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 19 on E.mpire Tobacco Company, as far as you know? A This is the first and last time I've ever called on them. Q Whan you got back to Winston-Salem, did you repor anything with relation to Cancer Cigarettes to anybody in the organization? A Ye3. Q To whom? A To Mr. Judge. Q SJhat did you say? A I don't remember; this was in the form of a standard trip report that everyone travelling out of Winston-Salem, sales executive staff, writes up, about the week's business and trade conditions, the personnel, recommendations, and so forth. It was in the body of this report - I don't even remember how many paragraphs, or how few. Q Besides the memorandum, or whatever this thing was, did you have oral conversations with Mr. Judge, or with anybody else? A I don't remember that. Q Have you had conversations at any other time, leaving out your attorneys, on the subject of Cancer Cigarettes, with anyone within the the Reynolds organizatio ? A No. GRAHAM ERLACHER & ASSOCIATES Oirl(.IAL COURT RlPORTERS ASHE DRIVE W I NSTON -SALEM. N. C. PH-NE. 765 •0636

1 2 3 .4 5 6 7 8 9 10 it 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q Or outnide the Reynolds OrganizationZ We are leaving out attorneys for the time being. A No. Me{rl' or7 Q Have you tal.ced to Mr. Marian about the 3ubject 111r~rro? of Cancer Cigarettes, S. E. V:rl-an? A • Yes. Q Aside from what you've described. Have you said anything else, or has he said anything to you? i?~C~ r i ~~rl A Well, I talked to :•:ariasi about the Cancer Cig- arettes before leaving Portland; I talked to him about our call at x:apire, he ti:aa the division r:.anager, and we L' ~,1s" 14 diviAions e~naclltid- with the responsible party for thats before leaving, and it was a routine discussion about my week's work there, and so forth. r1t41 ;-, v„ Q Did .dr. .'-i.='~zn report to you in that conversation that he might have had, or any activities that any dis- tributor or ,jobber might have undertaken with relation to Cancer ci-arettes? A Not that week, no. Q Did he at a subsequent time? A YLs, he called me on the tclephone, that was in ;:ay, I believe; I believe my Meaorandum on the subject is dated a:ay 30, and he reported to me that the FEI, an FBI Acent had called on this 3obber and had asked him questions about whether anyone from Reynolds had told him not to sell GRAHAM ERLACHER & ASSOCIATES OFFICIAL COURT Ri PORTERS ASHE DRIVE WINSTON-SALEM. N. C. PHONE.765.0636

0 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Cancer Cigarettes; and,you know, he was reporting this incident, or this information, to ne. Q Was the jobber the H. S. Smith 14holesale Company? A That's right. Q Did he say anything else about it? A It's in my memorandum; he mentioned the jobber indicated, or whoever he was talking to at H. S. Smith, indicated that the agent wasn't too concerned, didn't ahow too much interest, and that was about it. Q Did you give any instructions to any of the gales men in the Portl.an d area with relation to what could be don or should be done on the Cancer Cigarettes questions? A Not to the sale3men, no. Q To anybody? A Yes. Q To whom? 0 14 riOr1 Q lrlnat d id you say? A I told him to keep his salesmen out of the Bel- Air Pharmacy Store, and not to discuss Cancer Cigarettes with any consu^:ars or retailers. Q V'hy did you do that? A 2lumber one,-to which point? Q t1e11, .rhy did you give these instructions which you d^scribe? GRAHAM ERLACHER & ASSOCIATES OFFILIAL COURT REPORTERS ASHE DRIVE WINSTON S.1LFM. N. C. 765 0636

1 2 3 ~ 41 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 ~ 25 Sq ~FS~Ii:~~~ A Well, I did not want our salesmen calling on the Bel-Air Pharmacy because I did not want him to become engaged in a conversation with the owner of this pharmacy about Cancer Cigarettes; I didn't see how it could do us any goods or the proprietor. Q So structions? far as you know, did they follow your in- A As far as I know, yes, sir. Q Is there a Mr. Prouty, or was a Mr. Prouty, P-r-o-u-t-y-, working for your organization? A I don't remember; I'd have to check on that. (A noon recess was taken at this time) Q (By TIr. Tilbury) Mr. Grout, I think you might like to see thiaj I believe that you prepared a atemoran- dum on May 30, 1967, to I4r. Judge, dealing with some of the thinga that you have already discussed with us this r^orning; do you recall that memorandum? A Yes. Q And I believe you indicated for us earlier, that the time of your visit to Portland was on March 17, 1967? A That's the day I left, yes. Q All right; I believe you said your visit to Bel-Air Pharmacy was toward the end of that Eveek; on Frida ? A It wa s on Friday, ye II. Q And you came back ha,-e on Saturday? GRAHAM ERLACHER & ASSOCIATES OFFICIAL COURT REPORTERS ASHE DRIVE WINSTON•SALEM,N.C. PNONEt 765.0636

0 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q - Friday night. Okay; now the memorandum is dated, as you notice, May 30, 1907. A Right• Q First, there are some initials and some comments or whatever they are, at the top of that memorandum; can you tell me what those were? A Yes, the initials - you are talking about the handwritten initials? Q Right• A That stands for rir. H. C. Roeraer. Q Who is he please? A He is our Chief Legal Counml at the present time. Q Did you have occasion to talk to him about it? A No. Q How did it happen to be refvrred to Mr. Roemer? A Mr. Judge marked it to Mr. Roemer as a matter of information, I assume. Q A couple of other things underneath that, those initials, I'm not sure what they are; tell me what j . i they are, please, sir. A "Ann "- Ann was IYUr. Judge 's secretary,. and "CC" for file. Q All right; did you send copies of the memorandum to anyone else except for 2,2r. Judge? GRAHAM ERLACHER & ASSOCIATES OiI1C1AL COUkT REPDRTEB! , ASHE DRIVE WINSTON•SALEM. N. C. PMONE:765•0636

® 0 2 3 5 6 8 9 10 il 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A He was the only one I sent it to. Q Could you tell me why the memorandum was prepare on i-Zay 30, 1967, whereas your visit was in March, or was there an earlier memorandum? A There was a telephone conversation with S. E. Marion. . . Q All right• A And I was a little late in preparing the mernoran dum after the 26th, I don't recall why; it waa, probably because I was up to my neck in work, or something like that, you Rnow. Q All right; now, you prepared no memorandum following your visit in March,17th, I believe it is, 1967? A Only in the routine manner of reporting on my trip, as I mentioned before, in my trip report. Q You did; that'a right•* All ribhtj now, you notice that on the next page, the page 2 of this exhibit -- by the way, can you identify this for us for the record? A Yes. Q Is that your memorandum? A Yes. - (The document above-referred I to was marked for identificat Q There is a notation there that starts with the GRAHAM ERLACHER & ASSOCIATES O«/C/AL COURT REPOR7ER. ASHE DRIVE WINSTON•SALEM. N. C. PMONC: 76S -0636 ion

1 2 3 4 5 6 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 word "Although", and it continues through the sentence - "Although I took special effort in not telling this jobber that he should not sell the cigarette, I did point out to him in a diplomatic manner the negative aspects of his distributing thia brand to his customers." Can you tell m what you referred to by "negative aspects of his distri- butir:- this brand "? ~ A Well, for his own personal - looking at it from his business d;andpoint, the many customers that all of the tobacco companies have,anour brands,ourr pre-sold brands, is his business, that any customers that he would cause to stop smoking because of the distribution of the Cancer Cigarette would ultimately affect his volume, because the consumars would not be buying the standard cigarette brands -lb e from the retail outlets, and he supplies to outlets. Q Is that what you said? A This was the thing that I was talking to him about. Q Do you recall the exact words that you used? A r1o. Q Did you indicate to him at any time that - this would be ~ir. Mcrbst, would it, of Ilnpire Tobacco Company? A YeZ, sir. Q Did you indicate to him that if he continued to handle the sale of Cancer Cigarettes, that his supply GRAHAM ERLACHER & ASSOCIATES O/Fv,:iAt COURt REPORTERS ASHE DRIVE WINSTON•SALEM. N.C. P.ior+E: 765•0636

26 1 2 3 4 5 6 7 8 10 11 12 13 14 15 16 17 1s 19 20 21 22 23 24 25 of products from Reynolds would not continue? A Absolutely not. Q Or that any of his allowances would be curtailed or modified in any way? A We have no allowances. Q Well, I believe you mentioned an introductory allowance for a new product? A Well, on a new product - I didn't mention that. Don't know , but we do have an introductory, it's standard industry knoviledge, that we do havo an introductory allowance on our new brand, yes, per caae. Q Did you indicate to Mr. Herbst that anything of this nature would be withdrawn from him? A None at all. Q With the exception of the introductory allowance, was there any other type of allowance or payment or con- sidoration that would be given to Mr. Herbst or a distri- butor in the same category as Mr. Herbat? A Could I say that I believe you are going off in .the wrong tangent here. Q Anythin;; you like, ! i A That involves a wide, a very wide areas.well, I 3uwt don't know how to answer the question to tell you thel I truth; I did not mention to Mr. Herbst that we would quit selling him cigarettes on a direct basis; I did not nentiory, GRAHAM ERLACHER & ASSOCIATES Of'FIC/AL COURT REPORT[RS ASHE DRIVE WINSTON-SALEM. N. C. PMONL. 765•0636

3 anything about any of our allowances, that we would take this away from him if we had an allowanee at the time. None of that, no. Q What kind of allowances are there, if any? This introductory allowance when a now product hits the 6I market? PM. CROa1•t: You are spQakin„ #e a jobber like hSr. Herbst? 10 11 12 13 15 16 17 18 19 20 21 22 23 24 25 MR. TILx3URY: Yes, sir j tY:ank you.. THE WIT.~SS: Any allowance that is ever given to any direct account has been given to all direct accoun!ts. The only one I can think of would be on a new brand introduction, and this is for what we call a distribu- tion allowance for his work in distributing a new item for us. Q (Bby Mr. Tilbury) Do you give them an advertising allowance, for example? A ?do, he can call it what he wants, but it 's a distribution allowance. Q That's only on new products? A Yes, sir. Q I have here - about R. A. Messere -;4-e-s-s-e-r-e I believe it is. . A ?dassere. Messere; that's where I got the name, that little GRAHAM ERLACHER a ASSOCIATES . O«IC/AL COURT REPORTERS ASHE ORIVE WINSTON-SAIEM:N.C• PHOHE:765•0636

zn i 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17. 18 19 20 21 22 23 24 25 memorandum. MR..CRO.1iN: Do you have that dated? THE WITZdrSSt --- ,1969, Riverside, California division. Q (By ~Ir. Tilbury) Did you see a copy of that meraorandum which has now been marited Plaintiff 's Exhibit No. 5? (The document above-referred to was marked Plaintiff 's Exhibit 110- 5 for identi- rication. ) Q A No, I have not seen this before. Are you acquainted with this gentleman personall~ Yes, sir. '.Did you confer with him on occasion? A He is no longer with the company; he resigned laat month, I believe it was. Q t4ro your ealesmen generally alerted to pick up anythin ; that they nay have encountered with relation to Cancer Cigarettes, is that why he made the report? A Could I give you some background information on this form of reporting? Q Yos, sir. A This is, as I say, an extract from rZr. Messere ts daily report; this is what we call a right-hand corner comment, which is standard for reporting every day; every GRAHAM ERLACHER & ASSOCIATES OiI1ClAl CnURT REPORTERS ASHE DRIVE WINSTON-SALEM. N. C. PHONE: 765• 0636 ?

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2i 22 S 23 24 25 one of our field sales personnel fills out this right hand corner, and they report to us anything regarding corapetiti~ activity, or merchandising suggestions, or ideas; and this is an extract from that daily report; and it is common, anything unusual or different about competitive activity. MR. CROHJs I don 't think that Mr. Grout answered your question, the precise question that you put to him. If you'd like to ask it again, I would like to have him answer the precise question that-you put to him. : Q (By Mr. Tilbury) Did you instruct any salesmen, or do you know anyone who did instruct any of the salesmen to report anything that they encountered with regard ta Cancer Cigarettes? A As a matter of formality, in the Portland area especially, because this is where they were first marketed jlt~l r-"o,I I asked F.^rian to keep us infor;r+ed on this item, yes, he was the division manager. Q While you were in Portland during the week, which ircluded the 17th of March, did you have meetings during that time with Mr. .2-larion? A Yes. Q And during that time, did the subject of Cancer Cigarettos arise? A Not that I recall. GRAHAM ERLACHER & ASSOCIATES Oir/(;IAl COURT RErORTERS ASHE ORtVE WINSTON•SALEM. N. C. PHONE: 765.0636

ju 1 2 3 4 5 6 7 •8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q Did you have other meetings during that week? A On the 17th I talked to him about this. Q I believe you indicated that; did you have meetings with other sales personnel during the week in which the subject of Cancer Cigarettes came up in an y way? A No. Q Are you acquainted with Mr. McGee at the Brown & jdillianson Tobacco Company? A No. Q Do you know of any company which manufactures private brand cigarettes in the United States? A No, I would have to research it; I don't know specifically of a company. Q Would the Bernstein Company be your largest dis- tributor in the Portland area? A That's what I was told by Mr. Marion, the divisio manager of that area. Q I believe you indicated that you had no contact with them in any way - with anybody with the Bernstein Company? A Not that I recall - I don't remember calling him, no, sir. Q ~ /Ve1II Are you acqudnted with Mr. Campf? A No• Q What was the reaction of your company, Reynolds, GRAHAM ERLACHCR & ASSOCIATES OfiIC1At. COURT REPORTERS ASHE DRIVE WINSTON•SALEM, N. C. PNONE:765•0636 xo

2 the introduction of Cancer Cigarettes; was there a reaatio~ I and if so, what? , . A There was no reaction that I was informed of. 5 6 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 No reaction. Q You personally felt though that it was bad for the industry, true? A. Personally, yee. Q Do you know of any sales that your company lost to Cancer Cigarettes? A No. Q Are you acquainted with the Briki Tobacco Compan ? A No. Q Do you personally attend conventions at which ot4er representatives of tobacco companies are present? A Yes. Q And what conventions do you attend? NAT D NAMA A Well, all the national, -HAT-D. NANA; some state conventions; it varies, depending on how I- my time availability. Q Have you had any dealings with the Stefano Brothers, Z.rua 13rothers, United States Tobacco Company, the Baleon Tobacco Co;npE.ny, Tijuana, I believe, or the Basel Mendez Tobacco Company of Hialeah, Florida? A No. Q Are your cigarettes sold to vending machine GRAHAM ERLACHER & ASSOCIATES OFFICIAL CO4RT REPORTERS ASHE DRIVE WINSTON-SALEM, N. C. PNONE:765-0636

0 2 3 4 5 6 7 8 '10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 ® 25 32 operators in the pacific northwest at the same prices, identical prices that are charged by other major tobacco companies? A Are you talking about a- under a direct account? Q. A company that has vending machines. A If it is not a direct account, I don't know what price a vendor will buy his cigarettes for. We have no control over that; if he is a direct account, he is buying Se/li"i the cigarettes for the same price as we are sendift it to other direct accounts. Q Vlell, my question evidently wasn 't clear; it relates to w hether or not Reynolds sells ita products to proprietors of vending machines at the same price that is charaed by other tobacco companies, like Brotivn & Willia.nson and Leggett & Wers, American Tobacco, and so on A Well, sir, the proprietor of a vending machine could be this man in the motel lobby; he owns the vending machine possibly, and we - well, you know, where he buys his cigarettes, he's not buying direct from Reynolds Tobacco Company, that is my point, I don't know what price a vending operator would buy his cigarettes for; he would buy theA from a jobber, a direct account of ours; if he's a direct vending account, he's buying them for the same ;rice that we charge a direct 3obber. Q Well, all right,well let's take a direct vending p roprietor, where you do make direct sales. GRAHAM ERLACHER & ASSOCIATES Orf1C1AL COURT REPORTERi ASHE DRIVE W/NSTON•SALEM. N. C. PMONE: 765-0636 0

0 i 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 1$ 19 20 21 22 23 24 25 33 A Okay. Q Does he buy from the R. J. Reynolds Company for the same price that the same individual would buy from other major tobacco companies? A I don't know; I don't know; we have no knowledge of what our competitors sell this man for anything that they have going. Q Has your company taken any steps which are in opposition to anything that has been done by the Tobacco Institute, so far as youknow? MB.- 0'PdEILL: I object to the form of the question. MR. GRIESS:' I join in the objection. .THE 'dITaESS: I don't understand the question. 6~ (By Mr. Tilbury) All right; if it's not clear -- do you know any instance where your company has opposed the policy of the Tobacco Institute? „ A I have no ;iR. 0'NEILL: I object to the form of the questio Q (By i-ir. Tilbury) Are.you a member of any formal associations - The Cigar r'.anufacturing Association of America, The T;ational Association of Tobacco Distributors, The Loaf Tobacco Exporters Association, The Retail Tobacco Dealers of America, The Pipe and Tobacco Counsel, the Tobacco Merchants Association of the United States, The 0 0 GRAHAM ERLACHER & ASSOCIATES OIFICIAI. COURT REPORTERS ASHE DRIVE WINSTONSAIEM, N. C. , PHOaE.765•0636

0 2 3 4 5 6 7 8 9 10 1i 12 13 ~ 14 15 16 17 18 19 20 21 22 23 24 ~ 25 Tobacco Tax Counsel, The Tobacco Association of the United States, or Tobacco Associates? A We are a member of some of those organizations, yes• Q Which ones,please? A If you want to start reading them off again, I'll say yea or nay. MR. CROHN: I believe the question was put to I~ir. Wade. MR. TILBURY: I didn't get them all. MR. CROHN: I think the question waa what organi- zations are you a member of; Mr. Wade is an officer of the company and has more intimate knowledge of this question than PZr. Qrout; it may be that Nir. Grout has attended organizations which the company is not a member of. He may not have this knowledge, but certainly let'him answer it to the best of his abilitf I think it would be a lot clearer if you would just take it one at a time. Q (By Mr. Tilbury) All right, if you don't mind my asking you, of your knowledge -- A Just take them, and I'll say whether or not we are members r r Q That will suffice. Which ones? A I don't remember the list; itts a long list. GRAHAM ERLACHER & ASSOCIATES O/I/CNl COURT RErORTERf ASHE DRIVE WINS'ON-SALEM. N C. P-OP.E: 765-0636

35 0 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q Cigar r?anutacturera Association of America? A No. Q National Association of Tobacco Distributors? A Yes. MR. CROM I hate to interrupt, but I'm not clear what these answers are directed to. Is it membership or attending a function of these organi- zations? MR. McE'r r1: I think it is clear he will answer as to those he attended. I4R. GRIESS: Mr. Crohn is right; why don't you specif'y, if you answer yes, whether it is that Rey- nolds was a member or-that Reynolds just attends; do you understand? TIM WITNESS: Yes, to the best-of my knowledge. I'll say that we do attend the NATD. Q(By Mr. Tilbury) Do you personally attend it?. A Yes. Q How often would you attend? A I have attended every one in the past seven year Q Are there other representatives from other major tobacco companies there? A Yes. Q Tobacco Exporters Association? A I don't know about that one. GRAHAM ERLACHER & ASSOCIATES O«ICIAI COURT REPOR7ERS ASHE DRIVE WINSTON-SALEM. N. C. PHOwE: 765-0635 0

0 0 2 3 4 5 6 7 8 9 10 11 12 13 . 14 15 16 17 18 19 20 21 22 23 24 25 Q Retail Tobacco Dealers of America? A. We do attend that, yes. Q Are you members? A - I'm not sure. - Q Are there representatives from other major tobacco cor.:paniea there? A Yes. Q The Pipe and Tobacco Counsel? A Yes, we do contribute to that Counsel. Q Do you attend their meetings? A No, I don't attend their meetings. Q Pipe and Tobacco Counsel? A That's the one I just referred to. Q Pardon me; Tobacco Merchants Association of the United States? A To my knowledge, we don't at-tend. Q Tobacco Tax Counsel. A I don't personally attend•this organization's meetings; I don't know whether we are a member or not. Q Tobacco Association of the United States? A I don't kr.ow. Q Tobacco Associates? A I don't know. Q Do you know of anyone in your organization who has knowledge concerning the subject of Cancer Cigarettes GRAHAM ERLACHER & ASSOCIATES OifICIAL COURf RCPORT[RS ASHE DRIVE WINSTON•SALEM, N. C. PNOHE: 765 0636 36

i 2 3 X 4 5 6 . 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that you have not already identified for us? A No. Q Are you acquainted with Pau1 Fries of Impact Distributors? A No• Q Is your company - you have identified their .position in the domestic market - is your company also the largest exporters; I'll ask it again - is your company the largest exporter of cigarettes from the United States? A I have nothing to do with the exporting of cigarettes; I'm not in that department; I couldn't say• Q The original answers to the interrogatories were given by Reynolds and dated September 14, 19?0, and they were more recently amended on January 21, 1971, to include a certain statements that had been made by Mr. Bersos to John Smith - do you know why that was not known earlier? A I don't know what you are talking about, sir; I have no idea of what you are talking about. Q Well, okay. A I know Mr. Bersos, I know him, but I have no idea what you a re relating the question to, or anytiiing about the question. Q Well, the original question had asked to identifZ all officers, agents, or employees who had any kind of discussions concerning Cancer Filter Cigarettes, and in thl GRAHAM ERLACHER & ASSOCIATES OFFICtAL COURT REPORlERS ASHE DRIVE . WINSTON•SALEM. N. C. P.0r;E. 765•0636

38 5 10 11 16 17 18 19 20 21 22 23 24 25 original answer3, which were given,-I4r. BersosI name was not included; it has recently been included, and my questi n is do you know why that time lag occurred? A I did not discuss this matter-with Mr. Bersos and he is no longer with the company; I never have dis- cussed this matter with him. MR. i4cE':JEN s I'm afraid this witness is not going to enlighten you on that subject. Q (By ~Ir. Tilbury) You have, in Plaintiff ' s Echibi No. 4, a reference to - I'll show you what I mean - starti g with the words "I took" - at the bottom of page one, Plaintiff's Exhibit No. 4, a memo from you dated May 30, 1967, in which you say, "Nor did I discuss our feelings about the adverse publicity that this cigarette has caused in the Portland area toward the tobacco'industry"; could -you tell me what publicity you had reference to? . A Well,-,-the fact that the name "Cancer" is not very complimentary'towards the tobacco industry, the cigarette industry, with the health and smoking controvers involved. Q Okay; do you know of any particular purpose that was generated, that you had in mind when you used that ph.„aze, "Adverse publicity"? A The fact that the cigarette was being marketed was publicity enough, with the name Cancer on the pack. GRAMAM ERLACMER 6 ASSOCIATES O/IICIAL COURT REPORTER. ASHE DRIVE . WINSTON.SALEM.N.C. r.otiC: 766-0696

39 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1 15 16 17 18 19 20 21 22 23 24 2S Q Is that what you had in mind -'that's all I'm asking? A Yes. Q Did you go to Eugene, or any other spot except the im.mediate Portland area when you were there? A No. Q Did you go to Tacoma or Seattle?. A No. Q Have you made trips to either of those two areas in recent years at all, from 1967 on to the present time? A I believe. Q time? Seattle, but it was much later, it was in 168, Did you call on the Payless Drugstores,.at that. Not that I recall; I don't remember. In a general sense, who did you call on? In It would be a typical business trip, calling on all retail outlets and wholesalers, and so forth, all that Q Did Cancer Cigarettea enter into that meeting in any way at any time? A No• 14R. TILBURY: 01cay. GRAHAM ERLACHER & ASSOCIATES OrIICIAI COURT RErORTE/lf ASHE DRIVE WINSTON-tALEM• N. C. PHONE 765•0636

I 2 3 4 5 6 7 8 9 1o it 12 • 13 14 15 16 17 is 19 20 .21 22 23 24 25 40 EXAMINATION BY I•iR. CROHN Q Mr. (trout, at the noon hour, I asked you to when Camel Filters were introduced into the national market, did I not? A Ycs. Q Could you tell me when Camel Filters were introduced nationally in the United States by Reynolds? A Max, I got that information and I left it on my desk. MR. (3RIBSS: Do you want to call THE WITPtESS : Ye s, let me ca2l; they put it on my desk and I forgot it - I don't want to foul things up and hit the wrong dates. (Discussion off the record) TIE 1r'ITIdESS: We had two markets involved in that; you want national introduction date? Q (By tir. Crohn) Yes. A CaMal Filters - August, 1966. Q Would that include the area of Portland, Oregon? A Yes. Q You mentioned that you went out to Oregon to ,..~ I)ln,•I' V ., . as: ess ilr. 1::wrizn and Kecseti for pro:aotion;following your visit to Portland in :iarch of 1967, were Mr. Kecseti and ~ } ~:! r• ~`u r! Mr. Rar--ianm promoted? A Yes• Q Can you tell us when and to what position they GRAHAM ERLACHER 6 ASSOCIATES . OiriC1AL COURT REPORTERS • ASHE DRIVE WINSTON-SALEM. N. C. PnOHC:765•0636

41 0 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 were promoted to approximately, if you recall? A The latter part of 167, tdr. Narion was promoted to Assistant Regional Sales Manager, West Los Angeles R3gion, at that time. Mr. Keoseti was promoted to Divisio Mana,-er of the Portland Division. Q You stated that prior to coming to Portland, you read something about Cancer Filter Cigarettes in a nationa magazine. At the time that you read of Cancer Cigarettes in that national magazine, were you aware 'of the area in which it was being marketed, or the individual company that was marketing it? A N Q When did you first learn where it was being marketed? A :3hen I worked with Mr. Kecseti in Portland, Q That was March 17th? A Yes, sir. Q A question was put to you whether there were any instructions rade by yau to your sales force with respect to reporting Cancer Filter Cigarettes distribution, and I S believe youf replf that you left instructions in the Portland area, Were there any instructions given by you, o to your kno;aledGe, were any instructions given by anyone in the corapany°s management regarding the reporting of Cancer Cigarettes anywhere else in the country? GRAHAM ERLACHER & ASSOCIATES OFFICIAL COURT REPORTERS ASHE DRIVE WINSTON•SALEM.N.C. PHOnE.765-0696 >"

1 2 3 4 5 6 7 8 10 it 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A 110. Q I take it that instructions that were given were given only to the local division in Portland, is that correc A Yes, sir. Q You mentioned that you instructed your people in Portland to stay out of the Bel-Air Pharrsacy, and the question was asked whether that meant that Reynolds Pro- ducts would not be supplied at Bel-Air Pharmacy; I think that question was left a little bit up in the air; would you explain what you mean by Reynolds products not being supplied to Bel-Air Pharmacy, please? A I did not 1o7ow that; I didn't say anything about our products being supplied to Bel-Air Pharmacy; I just gave word to the management of that division to keep our salesmen from calling on Bel-Air Pharmacy. Q Would'that have any effect upon Bel-Air Pharmacy obtaining Reynolds Tobacco products? A None at all. No. Q S]here would Bel-Air Pharmacy obtain Reynolds Tobacco prod ucts? A From any of the direct accounts we havain the area therep that wanted to sell them. EXAI1I1NATION BY .4R. GRIESS MR. aRIESS: Do you mind me asking one question? You have testified to the various organizations to GRAHAM ERLACHER & ASSOCIATES O/sIC14L COURT REPORTERf ASHE DRIVE WINSTON-SALEM. N.C. Pr1ONE765•0636 42 ?

® 0 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 1s 23 24 2S which Reynold3 sent representatives; do you recall that? TIM WITNESS s Ye s. Q (By a-Ir. Griess) Now, to your knowledge, was the subject of Cancer Cigarettes discussed by Reynolds, or any of Reynolds' representatives at any of these various meetings? A No. MR. GRIESS: I don't think we have anything further. MR. tiicEaEtd: I have no questions. iy1R. OIhTEILL: No questions. F?CA~4IINATION BY I+IR. TILBURY Q Do you know the date when Vantage was introduced - in the northwest? A The date when Vantage was introduced? Q Yea, sir. A The national introduction date was November 3. Q Of what year? A This year - pardon me, 1970. Q Well, now, was that first test market in the Portland, 0regon area? Andff so, when? A Portland was one of our test market areas, yes. Q Do you know the date? A It was not a test market - we refer to this as a lead market introduction; we didn't want to test the 0 N 0 s GRAHAM ERLACHER 8 ASSOCIATES OffIC1AL COURT REpORTERS ASHE DRIVE WINSTON-SALEM, N. C. pNONL. . 765-0636 v ~ L•

0 2 3 4 5 , 6 7 8 9 10 11 12 13 14 . 15 16 17 18 19 20 21 22 23 24 `.+r 25 eigarette, because we knew we had a good cigarette, and we didn't have the supply, so we called it lead markets - Syracuse, Portland, and I don't have the exact date - approxirrately three months before national introduction. Q Have you had any contact with AI7 - American Machine and Foundry? A No. .Q At any time? A ldo, sir. Q Do you know whether or not Pacific Tobacco acquired its supply of Reynolds products from and through the Empire Tobacco Company; was that the source? A That was my understanding, yes. j Q That's all. (Off the record) °~ 1~iR. GRIESS: In the last question, Mr. Vrsh~ ~', had the reporter read it back from his recording; and it was whether Pacific Tobacco Company got its supplii of Reynolds products from Empire Tobacco Company; now did you understand that question when it was aaked? THE WIT2dESS: I misunderstood the question. MR. TILBURY: I was speaking of Bel-Air Pharmacy and Garden Home Pharmacy. THE WIT:1ESS: I know nothing about Garden Home 44 1 s GRAHAM ERLACHER & ASSOCIATES ~ 0% Of,f4C, AL COURT REPORTERf ~ ' ASHE DRIVE WINSTON-SALEM. N. C. PHOn[: 783-0636 Y~ Y` >

1 1 4 2 3 4 5 6 7 8 9 10 11 12 13 ~ 14 6 15 16 17 18 19 20 21 22 23 24 25 Pharmacy; but Bel-Air Pharmacy, I understand, did buy its Reynolds products from Empire Wholesale Company. 14R. aRIESS: Do you know whether Bel-Air dealt with any other jobbers or whole3alers with respect to tobacco products? T'riE WIVIIESS s I don't know . Y~iR. 4RIESS: I think that's clear enough now. MR. TILEtJRY: I'm sorry, I didn't realize that I asked in terms of Pacific Tobacco; I meant Bel-Air. tZR. .0 1NRIi,L s Put that on the record; I want to make sure we Cet that on thers. ( Fnd of Eacamination ) GRAHAM ERLACHER i ASSOCIATES OFfICIAL COURT REPORTERt . ASHE DRIVE . .WINSTON-SALEM. N C. PwONE.765.0636

0 0 3 4 5 6 7 8 9 10 il 12 13 14 0 15 16 21 22 23 24 25 THIS .IS TO CERTIFY THAT THE TESTIIdONY HEREIN GIVEN BY ME IS TRUE AND CORRECT TO THE BEST OF MY KNOWLEDGE A2iD BELIEF. - . Y~. a rout) Date GRAHAM ERLACHER & ASSOCIATES OFfICIAL COURT REPORTERS ASHE DRIVE WiNSTON-SALEM. N.C. PNOHE:765•0636 vv

3 ~ 6 10 11 12 13 0 14 15 16 17 18 19 20 21 22 23 24 25 CERTIFICATE STATE OF NORTH CAROLINA COUtti'TY OF FORSYTH 47 I, J. Edward Switzer, Jr., Notary Public, in and for the County of Forsyth, State of North Carolina, do hereby certify: That on the 2nd day of February, 1971, there appeared~ before me the foregoing witness in the above-entitled case That the said testimony was then taken at the time an place mentioned, beginning at 10:00 o'clock A.M. on Feb- ruary 2, 1971; That the said witness was sworn by me and examined to tell the truth, the whole truth, and nothing but the truth in said case; That the foregoing testimony was taken by me on stenomask and thereafter reduced to typewriting under my supervl3ion, and the foregoing forty-five (45) pages contain a full, true and correct transcription of all-the testimony of said witness; TM:.t the undersigned J. Edward Switzer, Jr., is not of kin or in an.y zvise associated with any of the parties t said cause of action or their counsel, and that I am not interested in the event thereof. IN tazT?IESS :11MOF, I have hereunto set by hand this /~ ~ day of i.arch, 1971. kiy Co4 miosion expires : February if3i 197v our er GRAHAM'ERLACHER a ASSOCIATES QFFICIAI CouRT RErORTERS ASHE ORIVE WINSTON-SAIEM.N.C. PHONE765-0636