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IAUCO, DAVID CondenseltTM MISSISSIPPI TOBACO LITIGATIO} Page 41 1 A. The Camel campaign. 2 Q. Any others? 3 A. Premier. And I have a general knowledge 4 of all of our recent advertising campaigns. 5 MR. MeDERMO'FI': Let me interject here, to 6 same extent, we must of necessity be reactive to the 7 extent that the plaintiffs challenge specific 8 campaigns or marketing practices or promotional 9 practices. We may call upon Mr. lauco and others to 10 opine and defend what was done. To some extent, the I I scope of our response and his testimony depends upon 12 tbe scope of the attack. 13 MS. FLOWERS: I can certainly appreciate Page 1 A. As I recall, it was -- the plaintiffs had 2 called me to testify. I don't know what the legal 3 term is for that. 4 MR. McDERMOTT: ~ me intellect here 5 that while some general discussion on this topic may 6 well be appropriate, to the extent that when you get 7 into Mr. Iauco's conversation with counsel, whether s inside or outside, that raises a host of different 9 issues. So I would ask that counsel opposite be 10 sensitive to that. And, Mr. lauco, if your answer 1 ! might entail privileged communications, we can 12 interrupt and discuss it. 13 MS. FLOWERS: I can certainly understand 14 that. 15 Q. Did you produce any specific 16 advertisements in conjunction with this case? 17 MR. McDERMOTT: Did he personally? 18 MS. FLOWERS: Did counsel for tbe 14 that and l'mjust trying to get at who, what, wbere, 15 when, and how. 16 MR. MCDERMOTT: I understand. 17 BY MS. FLOWERS: 18 Q. Do you know generally what ~D' asked you 19 defendants produce any specific advertisements in 20 conjunction with the documents produced? 21 MR. McDERMOTT: well, the document 22 production issue is a little bit complicated, as you 23 probably know. We have tendered the Minnesota 24 Depository and Index. We've produced the Minnesota 25 Selected -- Page 42 1 MS. FLOWERS: Wait. I'm sorry. Maybe 2 We're misenmmunicating. I meant in conjunction with 3 this deposition. 4 MR. McDERMOTT: In conjunction with this 19 to do initially? Perhaps that's too far along. 20 A. Who asked me -- 21 Q. Let's forget the Keuper ease for a 22 IP.~nute. Let's go to say -- when was the next time 23 you were approached by lawyers, internal or external, 24 to act as an expert witness? 25 A. I believe it was the Mangini case. Page 44 1 Q. Do you recall generally what you were 2 asked to do in that regard? 3 A. I think that there was a question as to 4 what the makeup of the company was regarding that 5 deposition? No, we hqve not. 6 BY MS~ FLOWERS: 7 Q. When was the first time you were 8 contacted by R, J, Reynolds' lawyers to testify in 9 any case? A. It was for the Keuper case and I don't II recall when that was. '92, '91, I don't -- I don't 12 remember. 13 Q. Do you remember who spoke with you about 5 case, some kind of jurisdictional issue, and I was 6 asked to testify as to how we went about getting 7 approval for marketing campaigns and that kind of 8 thing. 9 Q. What about for the Conner ease? When was 10 the first time you were approached for that one? 11 A. I just don't remember. 12 Q. And for the State of Mississippi case 13 that we're berc about today, do you recall when you 14 the possibility of testifying? 15 A. In that ease? 16 Q. Yes. 17 A. No, I don't recall who did. 18 Q. Do you recall whether it was an internal 19 R.J. Reynolds counsel or an outside law firm? 20 A. I believe it was probably -- I don't 21 know. 22 MR. McDERMOTT: If you don't know. 23 THE WITNESS: ~ don't know. 24 BY MS. FLOWERS: 25 Q. Do you recall what you were asked to do? 14 were first approached to be an expert witness in this 15 case? A. (Shaking he~d.) Several months ago. 17 Q. Do you recall who approached you? 18 A. No, I don't. 19 Q. Is there no one in particular you have 20 been working with on this case in preparing for your 21 expert testimony? 22 A. I've worked with outside counsel. 23 Q. Could you identify these outside counsel 24 for me? 25 A. Mr. McDermott, Mr. Beach. A. WILLIAM ROBERTS, JR. & ASSOCIATES 1-800~743-DEPO Page 41 - Page 44

IAUCO, DAVID Condens~ItTM MISSISSIPPI TOBACO LITIGATIO 5 6 ? 8 9 10 II 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. COLINGO: NO~ ttle. 2 THE WITNF_~S: KJm. 3 MR. McDERMO"~: Bicksenstein. 4 THE WITNESS: Thank you. BY ~. FLOWEKS: Page 45 Q. Have you had meetings with one or all or any of these counsel in preparation for your expert ~stimony in th~ State of Mississippi? A. ¥~so Q. Can you tell me approximately how many times you've had meetings with these counselors? Page 4 l Q. Is this fairly typical at Reynolds? 2 A. It has become. 3 Q. Do you know how many lawsuits are 4 currently pending against R. J. Reynolds alleging 5 injury duc to cigaretm smoking? 6 A. No. 7 Q. Are you familiar with the allegations 8 that the State of Mississippi has made in this case? 9 A. Somewhat. 10 Q. Have you read the complaint? I 1 A. Yes. A. I think three times. Q. And wl~ was this? A. Over the past -- I think, it's been over the past two or three weeks. Q. How long typically have the meetings lasted? A. Seems like the first two lasted two or 12 Q. Have you read the answer of R. J. 13 Reynolds? 14 A. I don't remember. I've lead s~veral of 15 these complaints and several answers and I can't 16 recall if I've read specifically Mississippi's 17 answer. IS Q. Do you know whether R. J. Reynolds 19 carries product liability insurance? Q. Are you given any additional compensation by R. J. Reynolds for this service? A. No. Q. How much are you charging the State today for your testimony? MR. McDERMOTT: I'm sorry. What's that 20 A. I don't know. 21 Q. Have you ever received any inquiry from 22 R JR accountants or executives regarding this lawsuit 23 for your company's annual statements, annual reports? 24 MR. McDERMOTT: I'm sorry, Would you 25 repeat that question? Page 1 question? 2 BY MS. FLOWERS: 3 Q. How much are you charging today for your 4 testimony? 5 A. Today? 6 Q. Yes. 7 A. I don't charge anything for my testimony. 8 Q. You're not going to bill the State for 9 your testimony. 10 MR. COLINGO: Under the ease management 11 order is what she's talking about. 12 MR. McDERMOTT: YeS, Mr. lauce is not 13 involved in that. We have not made a determination 14 at this point. We'll confer with you later. The 15 witness is not going to play a hand in that. 16 MS. FLOWERS: I See. 17 Q. So when you've testified in the past for 18 R.J. Reynolds, they haven't given you any extra 19 compensation for your testimony? 20 A. NO. 21 Q. Is it considered pan of your job 22 description to testify on various matters before 23 courts and depositions and the l'~e? 24 A. It's not part of my job description. 25 It's part of my job responsibility. Page 48 l BY MS. FLOWERS: 2 Q. Certainly. Have you ever received any 3 inquiry from KIR executives or aecoontants regarding 4 this lawsuit for the company's annual statements or 5 reports? 6 A. No. 7 Q. Have you received any inquiry from R JR 8 accountants or executives regarding any reporting 9 requirements to the SEC, the Securities and Exchange 10 Commission? I l A. No. Can I take a short break and just 12 run to the rest room? 13 MS. FLOWERS: Certainly. 14 (A recess transpired.) 15 BY MS. PLOWERS: 16 Q. Mr. Iauco, are there any lawyers involved 17 with the marketing decisions made by R. J. Reynolds? 18 A. Yes. 19 Q. Can you tell me a little bit about that 20 involvement? 121 A. Yes, Whenever we develop marketing :22 programs, part of our normal review process involves !22~ our law department reviewing advertising or promotional programs to ensure that we're in full 125 compliance with the law. A. WILLIAM ROBERTS, JR. & ASSOCIATES 1-800-743-DEPO Page 45 - Page 48

IAUCO, DAVID CondenseltTM Page 49 1 Q. Have you ever known anyone who's died of 2 a smoking-related disease?. 2 3 MR. McDERMOIT: Are you asking for 3 4 whether he knows people personally? 4 5 MS. FLOWERS: uh-huh. 5 e THE WITNESS: I know people personally 6 7 that have died of diseases that are - have been 7 S associated with smoking. 9 BY MS. FLOWERS: 9 10 Q. Have you ever had any friends or family 10 II members die from a smoking-related disease? I l 12 A. Again, I know -- I have friends and 12 13 family members that have died of diseases that are 13 14 associated with smoking. 14 15 Q. How about exyworkers? How about 15 16 co-workers at P.dR? 16 17 A. ] know people that ] have worked with IS that have died of diseases that are associated with 18 19 smoking, 19 20 Q. Have you ever been asked to render any 20 21 opinions on non-PUg campaigns? By that I mean 21 22 campaigns of the other cigarette companies. 22 23 A. NO. 23 24 Q. Do you consider yourself as having any 24 25 expertise in the marketing campaigns of the other tobacco companies7 2 A. ] have general expertise. 3 Q. And what is the basis of that? 4 A. My knowledge of the category and 5 knowledge of marketing in gene~'al. 6 Q. Have you reviewed any of the marketing Page 50 MISSISSIPPI TOBACO LITIGATIO" Page 5 Q. Do you any expertise in pharmacology? A. Q. Do you have any expertise in toxicology? A~ No. Q, Do you have any expertise in pa~ology? A. No. Q. Do you have any expertise in epidcmiology? A. No. Q. Do you have any expertise in psychology? A. No. Q. Any expertise in adolescent psychology? A, No. Q. Do you have any expertise in economics? A. Yes. Q. Could you explain what that expertise is, please? A. Just general expertise. Some schooling as a part of my graduate schooling. Q. In the marketing management? A. ] would not hold -- yes. I would not hold myself out to be an expert cconomist~ but I've had courses in economics. Q. I didn't notice anything in your expert disclosure that directly related to economics. But Page 52 do you anticipate giving any opinions on economics in conjunction with this case? A. No, I don't anticipate that. Q Do you have any expertise in ethics? A. No. Q. Am I correct, were you born in 1951 ? 7 research plans for, say, some of the -- say, Philip $ Morris? 9 MR. McDERMOI"r: DO you mean in 10 preparation for his testimony here? 11 MS. FLOWERS: NO, | mean -- 12 MR. McDERMOTT: Or just ever, in the 13 course of his work? 14 MS. FLOWERS: - in his tenu~ at PUR. 15 THE WITNESS: I wouldn't be privy to 16 marketing research plans by our -- of our 17 competition. 18 BY MS. FLOWERS: 19 Q. Have you been privy to any information 2o from internal files of your competition? 21 A. Only what I've read in the press. 22 Q. Do you have any expertise in psychiatry? 23 A. ]~O. 24 Q. Do you have any expertise in history? 25 A. No. 7 A. 10 Q. 11 A. 13 there? 14 A. 15 Q. 16 A. 17 Q. 18 A. 19 Q. 20 A. 21 Q. 22 A. 23 Q. 24 A. 25 ~. That* s COITe~t. Where were you born? Syracuse, New York. Is that where you grew up? Yes. And did you attend elementary school Yes. Middle school? High school? Middle school and junior high school. Did you then move? I moved to Indianapolis. And thus Purdue? Yes. Are you married? Yes. How long have you been married? Twenty-one years. Do you smoke? A. WILLIAM ROBERTS, JR. & ASSOCIATES 1-800-743-DEPO Page 49 - Page 52

IAUCO, DAVID A. Yes. Q. Does your spouse smoke? A. Yes. Q. How old were you wl~n you started smoking? A. About 19. CondenseltTM MISSISSIPPI TOBACO LITIGATIO1, Page 52 Page 55 ff none of them am smoking. A. I'm sony? Q. I said you must bc doing sorac~adng fight if none of them arc smoking. MR. McDERMOTt: That not a question. It doesn't call for an answer. 7 8 9 10 II 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. Is that when you were in or rather at Purdue? A. Yes. Q. And your spouse, do you know how old she was when she began smoking? A. No, I don't. Q. So you both smoke Reynolds brands? 7 BY MS. PLOWERS: 8 Q. I want to talk for just a momcmt about 9 preparation specifically for this deposition. Can l0 you tell who you conferred with in getting ready to 11 come here today, if anyone? !12 A. ] think ] ah-cady did. 13 Q. So the meetings you described over the A. Absolutely. Q. Do you have any childivn? A. Yes. Q. What are their ages? A. They're all going to -- they all have 14 last tWO, thr~ weeks were in preparation for this 15 deposition? 16 A. Yes. 17 Q. Were you given at that time the documents 18 that we talked about earlier that were provided to birthdays in the next month, but right now they arc 20, 17 and 12. Q. Do any of them smoke? A. No. Q. Do you know your 12-ycar-old's shoe size? A. Is this a test? Q. (Nodding head.) Page 19 counsel for the State? 20 A. ] had some documents and others were 21 p~ovidcd. 22 Q. What's your current salary at R. J. 23 Reynolds? 24 NIP,. MoDERMO'I~r: I ob'~t. You don't ~d 25 to answer that question. That's not relevant to this Page 561 1 A. ] believe she wears a siz~ seven. 2 Q. She's a tall girl. How about yonr 17 3 year old? Do you know his or her shoc size? 4 A. He wears a size 12. 5 Q. Do you have any nicoes or nephews? 6 A. Yes. 7 Q. Have you ever had any discussions with S children about smoking? 9 A. Yes. 10 Q. Do you support the freedom to smoke? I l A. Among adults, yeS. 12 Q. How do you define an adult? 13 A. As it relates to smoking, age i 8 and 14 above. 15 Q. If the smoking age were lowered to say 16 age 15, would you market to that segment, 15, 16 and 17 177 18 A. You're talking about tbe legal age? 19 Q. Oh-huh. 20 A. Probably not. 21 Q. In your cxpericoce, is parental scolding 22 effective in preventing youth smoking? 23 A. ] don't know. I'm not an expert in 24 prevention of youth smoking. 25 Q. Well, you must bc doing something right 1 proceeding. We're not going to g~t into information 2 like that. He's not a retained expert. That's got 3 nothing to do with his expert testimony here. 4 MS. FLOWERS: I'm sure counsel is aware 5 that under the case management order, there has to be 6 a claim of attorney/client privilege or work product 7 prJvilagc to ins~'uct a witness not to answer. 8 MR. MCDERMOTT: NO. There's also -- 9 MS. PLOWERS: Arc you claiming some sort I0 of a privilege here? I 1 MR. McDERMOTT:. There's also harassment. 12 MS. FLOWERS: You're claiming that my 13 asking him how much his salary is is harassment? 14 MR. McDERMOTT: YOU're invading IS iodividual -- his personal privacy. 16 MS. FLOWERS: I asSUre you it wasn't 17 intended as harassment. 18 MR. MCDERMOTT: I don't think that has 19 any relevance to this lawsuit. If the judge 20 oven'ules my objection, we'll supply that 21 information; but for the time being, for today, we're 22 not going to supply any personal information on Mr. 23 laueo's compensation. He's not a retained expert. 24 He's not getting any*.hing in particular to testify in 25 this case. And his business arrangements with the A. WILLIAM ROBERTS, JR. & ASSOCIATES 1-800-743-DEPO Page 53 - Page 56

IAUCO, DAVID ~ondeas~ltTM Page company a~ not relevant. MS. F1.OWERS: SO you're instructing him n~ot tO answer on the grounds of relevance? MR. McDERMO'~I': On th~ grounds of harassn~nt. MR. COLINGO: R may he also ~ade ~cr~. I~R. McDERMOTT: what we pay oux emp]oy~s 9 I0 II 12 13 14 15 16 17 MISSISSIPPI TOBACO LITIGATIO~ Page 5S we'll make that decision. Q. Do you have a confidentiality agreement with R. J. Reynolds? A. Yes. Q. Do you know what its terms are? A. ] don't recall. Q. Do you periodically renegotiate this agreement? is not anybody else's business. MS. FLOWERS: But what you pay your employees is a tratk secret? MR. COLINOO: That's right. MS. FLOWERS: That's inleresting. MR. COLINGO: R'S confidential. MS. FLOWERS: I think confidential is a little differem than trade secret. MR. COLINOO: well, don't argue with me. 9 A. No. 10 Q. Did you negotiate it at all? Did you ever negotiale it? 12 A. No. It was contingent. 13 Q. Do all employees have similar 14 confidentiality agreements? 15 A. ] don't know. 16 Q. Is smoking encouraged at R. J. Reynolds? 17 A. No. We're not going to answer the question. Go ahead and ask your questions. MS. FLOWERS: JuSt a'ying to understand on what basis you're instructing him not to answer. First, l heard harassment, then I heard relevance, then I heard trade secret. I think we've got them all in there and we can move on. MR. COLINOO: ff there's any more, we'll Page 58 I get the others in there. 2 MR. McDEKMOTT: P~h 17 of ~ c~ 3 man~t or~r, ~ ~ in~d ex~ptions m ~ 4 g~ral pro~sion ~m a ~s s~d answer all 5 q~sfions. ~o~ ex~ption ~la~ ~ pfi~legc and 6 ~a~ ~c~. However, ~ p~aph g~s on to say 7 ~at ~ deposition may ~ m~namd on ~ ~ounds 8 ~t it's ~nd~md in bad fM~ or in such a manner 9 m m um~onably annoy, ~b~s, oppress -- or 10 opp~ss ~ p~ or ~ deport. We t~e ~ 11 ~sition ~at inqu~ into ~at mawr is ~rsonal. 12 It's an inv~ion of ~rsonM pfiv~y. It's got 13 no~ng ~ do ~ ~s lawsuit. And you can go on 14 in ~rd~ ~ ~ c~ man~t or~r and 15 ~qu~ into o~r ma~ ~ ~ ~an ~mplem ~ 16 ~sifion. 17 ~. ~WERS: SO if I un~rsmnd yo~ ~sition ~fly, j~t so ~at I do, ~ pro~sion 12~ ~at you ~ insetting ~ not ~ answer on is ~ pro~sion of ~sm~t? 21 ~. MCDE~O~: T~t is ~t. We z2 ~ it's h~sm~t to inqu~ in~ ~s. It is 23 ~ss~. It is ~levant. 24 ~. ~RS: App~ia~ yo~ ~5 ~. ~ you'~ w~ng ~ bl~k ro~, 18 Q. Are non-smokers osU'acized? 19 A. No. 20 Q. Does R. J. Reynolds give away free 21 cigarettes to its employees? 22 A. Not generally. 23 Q. What do you mean by not generally? Are 24 they given away sometimes? 25 A. There arc free cigarettes available to Page 60 1 some employees at some times, but it is not a -- not :2 every employee has access to free cigarettes. 3 Q. Is it a matter of position? 4 A. It's a matter of availability and 5 position. At times, there are cigarettes that are 6 used for development purposes for -- and in that 7 case, the cigarettes are free; but not all employees 8 engage in development processes and, therefore, they 9 wouldn't have access to those free cigarettes. 10 Q. Are either Premier or Eclipse available 11 to R JR employees? 12 A. Eclipse is. 13 Q. Could you describe for me the work 14 atmosphere at R. J. Reynolds? Is it a pleasant place 15 to work? 16 A. Yes, I think so. 17 Q. Have good health insurance? 18 A. Yes. 19 Q. Arc there any non-smoker discounts in 20 your health plans? 21 A. Not that I know of. 22 Q. Are there any non-smoking areas at R JR? 23 A. Yes. 24 Q. Do you know where they arc? 25 A. 1 can't tell you specifically, but there A. WILLIAM ROBERTS, JR. & ASSOCIATES 1-800-743-DEPO Page 57 - Page 60

IAUCO, DAVID Conde~seltTM 1 2 me non-smoking areas in ocr production, R&D 3 facilities and so on. 4 Q. So employees are allowed to smoke at 5 their desks? ~ don't go outside to smoke? 6 A. No. 7 Q. Have there ever been any complaints by S non-smokers about passive smoking exposure? 9 A. Not that I'm aware of. t0 Q. In your opinion, is passiw smoking II po~ntially hazardous? 12 A. Potentially7 13 Q. Uh-huh. 14 A. I don't really know. 15 Q. Have you ever conducted any research on 16 non-cigarette product marketing? I think we touched 17 on this earlier, but -- 18 A. Yes. 19 Q. -- I just want to clarify. 20 A. Yes. 21 Q. We talked about Kubcrnan. We talked 22 about Kubcrnan and -- 23 A. Yes, but you -- I'm sorry. Your qnestion 24 again? 25 Q. Have you conduced any market research on Page 61 are areas wl~re smoking would be dangerous and there MISSISSIPPI TOBACO LITIGATIO Page 6 I Q. What do you mean by full distribution? 2 A. We at~mptod toget disa'ibution in every 3 re~ai] outlet of significance in tbe tvst markets. 4 Q. That would include, for example, 5 convenience stores, supermarkets, drug s~ores? 6 A. (Nodding head.) 7 MR. McDERMOTT: A~swgr audibly. Answer 8 verbally. 9 THE VCI'IWESS: Yes. All outlets that sell 10 cigarettes, except for vending. We're not in II vending. 12 BY MS. FLOWERS: 13 Q. And when you describe lucrative trial 14 incentives, can you explain for mc what those were? IS A. We had promotions at retail. For 16 example, if you bought two packs, you would get two 17 fr~. I believe we had coupons that were also 18 available to adult smokers. 19 Q. It was marketed as the cleaner smoke; 2o isn't that correct? 21 A. Yes. 22 Q, What did you base that on? What did you 23 base that marketing claim on? 24 A. It was cleaner in a number of respects. 25 It had virtually no sidesUoeam smoke, smoke off the Page 62 I non-cigar¢~ consumer products? 2 A. Yes. I also worked on pipe tobaccos, 3 chewing tobaccos, little cigars. 4 Q. How about cookies or crackers or any of 5 the other products hhcre are made by R JR and Nabisco? 6 A. NO. 7 Q. Your Rule 26(B)(4) expert statement 8 states that you're going to testify about the Premier 9 cigarette; is that correct? l0 A. Yes. l I Q. Can you ell mc where th~ Premier 12 cigarette was available? 13 A. Yes. II was t~st marketed in two 14 markets, St. Louis and Phnenix, Arizona. IS Q. Do you recall the da~s? 16 A. August of ] 988 through March of 1989, on ~7 both. 18 Q. Was it aggmssively market~d? 19 A, 20 Q. Can you describe that marketing for me? 21 What made is aggressive? 22 A. We ran high profile advertising. We got 23 full distribution on Premier. We bad lucrative trial 24 incentives. We had a fairly significant program for 25 sampling IWemier among adult smokers. Page 64 l lit end, which meant that it left the air cleaner, 2 clearer. The smoke dissipated very rapidly and the 3 smoke had a composition that was simpler than the 4 composition of cigaretle smoke from cigarettes that 5 burn tobacco. 6 Q. Was it safe? 7 A. I don't know what you mean by safe. 8 Q. Do you know what I mean by less 9 biologically active? 10 A. Generally, I do. I l Q. Can you tell me what t/mr means to you? !12 A. It means, on some standardized t~sts that 13 measure biological activity based on exposure to !14 smoke, the smoke from Premier measured much lower 15 biological activity. I 16 Q. Lower than what? 17 A. Than tobacco-burning cigarettes. 18 Q. Was the Premier available to 19 Mississippians? 20 A. No, we never were able to make it 21 available in the State of Mississippi. 22 Q. Was it available to Floridians? 23 A. No. 24 Q. Where is the Eclipse cigarette currently 25 available? A. WILLIAM ROBERTS, JR. & ASSOCIATES 1-800-743-DEPO Page 61 - Page 64

IAUCO, DAVID CondenseltTM MISSISSIPPI TOBACO LITIGATIOI Page 65 { A. Chattanooga, Tennessee. 2 Q. That's it? 3 A. It's also available in Winston-Salem in 4 company outl~s. 5 Q. And internally at Reynolds? 6 A. Yes. Where cigarettes a~ sold on 7 company pre~nises. $ Q. When did you first bc~z~m~ aware that R~R 9 was developing this smokeless cigaret~? I0 A. Which smokeless cigarette? {I Q. Tha Premier. 112 A. Premier. It's not a smokeless cigarette. 13 Q. Wh~ did you first becon~ aware that ~14 was developing th/s cleaner cigar~tc, less 15 biologically ac~ve cigarette that eventually bccan~ 16 test markc~d as Pren~cr? 17 A. I had some awareness of it in the {$ n~d-'80s. 19 Q. Do you know when they began working on 20 it? Do you know when the research and development 21 depar~me~nt began working on it? 22 A. They began working on Premier per se, I 23 believe, in the early '80s, around 1981 or so. 24 Q. In your opinion, does a manufacturer have 25 a responsibility to know its product prior to Page 66. manufacCaring it - excuse me, marketing it? MR. McDERMOTT: I objoct to the extent you're calling for a legal conclusion. This witness Page 6 1 product. 2 Q. Test its product. 3 A. Test. 4 Q. Similar to what was done in the Premier 5 monograph site. 6 A. We did extensive testing on Premior. 7 Q. Did you have a responsibility to do so? 8 A. On Premier? 9 Q. Yes, to A. I think that we did a tremendous amount 11 of research on Premier, And to suggest that a 12 manufacturer do *hat amount of testing and evaluation 13 as a matter of course for every product that's J4 marketed, I don't think that that is necessary. 15 Q. So for some products, you don't think 16 that testing is necessary prior to marketing? 17 MR. McDERMOTT: I object. 18 MR. COLnqOO: That's not what he said. 19 MR. McDERMOTT: You're naJseharacterizing 20 the testimony. That's not what he said at all. 21 THE WITNESS: What I'm saying is that 22 Premier was a different kind of a cigarette and its 23 smoke was very different than the smoke of other 24 cigarettes. Its composition, how it was made, how it 25 worked was very different than other cigarettes. And Page 68 1 we decided to do a great deal of testing on that 2 cigarette to -- and by the way, we published all of 3 the testing that we did -- in order to demonsu'ate 4 is being offered for advertising and marketing 5 expertise, not for legal obligations or anything 6 else. You can answer the question if you want. 7 THE WITNESS: sounds like a legal term, $ responsibility. 9 BY MS. FLOWERS: tO Q. I Chink the legal term is duty, but can I1 you answer the question? 12 A. I don't know. {13 Q. Do you think the manufacturer has a 14 responsibility to know its product prior to 15 marketing? !16 MR. McDERMOTT: You're asking for his 17 personal views? !18 MS. FLOWERS: I'm asking for his opinion, 19 ffhe has one. 20 MR. MCDERMOTT: Well, again, he's not 21 being offered as an expert in anything outside of 22 advertising and marketing and l~¢micr. 23 BY MS. FLOWERS: 24 Q. Do you have an opinion? 125 A. I not sure what you mean by know your A. 4 how it was similar and how it was diffe~rnt from 5 tobacco-burning cigarettes. 6 BY MS. FLOWERS: 7 Q. So you feel you fulfilled your 8 responsibility with regard to Premier? 9 A. I didn't say anything about 10 responsibility. I was just characterizing why we did ~ ~ the testing that we did on Premier. 12 Q. Have you reviewed any of the reports, 13 publicly available reports on the health effects of 14 smoking your company's products? l 5 A. I've reviewed some. 16 Q. Any of the surgeon general's reports? 17 A. I've reviewed some of the surgeon 18 general's reports. Not in detail, not all of them. 19 Q. Are you familiar with any of the 20 estimates by the surgeon general regarding how many 21 Americans will die each year from using your 22 products? 23 A. I've seen the estimates. 24 Q. Did you appear on national television to 25 discuss Premier? WILLIAM ROBERTS, JR. & ASSOCIATES 1-800-.743-DEPO Page 65 - Page 68

IAUCO, DAVID CondcnseltTM Pag~ 6~ i A. I ~ink some of - some of ~hc interviews 2 ~t I gave ~d up on nafion~ mlcdsion. 3 Q. ~t ~s~c ~ you ~ you wc~ ~ 4 W ~u~? ~ do w~ ~f~d ~ar ~t ~~6~s 7 ~t had ~ ma~ a~ut ~ br~& ~ut ~ 9 Q. ~d ~ ~h~fi~s ~ yo~ ~0 ~w ~? II A. 12 ma~ a~ut ~cr ~at -- ~ng, for vx~plc, ~3 ~t ~ ~d so~w ~ ~m~d ~ ~liv~ ~4 c~k ~ ~d it would ~ ~d for &at p~o~. I~ ~t we ~ ~g ~ s~t ~at ~cr w~ ~ ~ly s~ ~d ~at -- &at ~ w~ ~ng m 17 m~kct ~cr to chil~. ~ ~ a few. ~m 18 ~ o~. ~9 Q. You ~o~d ~. Wo~d a ~ 20 ~v~ ~d~ ~ a b~ ~ng? 21 ~. McD~O~: I'm ~. Wo~d you 22 ~a~ ~ q~s~on? I ~ you ]o~ ~ abou~ 2~ ~ay ~ound ~ corr. Ms. ~RS: I ~ked ~ w~r ~ 2~ ~u~t a ~ ~livc~ ~ wo~d ~ a bad ~ng. MISSISSIPPI TOBACO LITIGATIO~ 1 2 3 4 5 6 7 9 10 II 12 13 14 15 16 17 18 19 20 21 22 23 24 Page 7( MR. McDERMOTt: with reference to cocaine or in general or -- MS. FLOWERS: In general. MR. McDERMO'I'f: Are you ~Lking about pharmaceuticals? Arc you talking about a hypodermic needle for a doctor to give you insulin? MS. FLOWERS: Let's talk about nicotine. Q. Would a nicotine delivery device bca bad thing or a good thing? A. It depends. What? I don't know. I can't answer that question, what's good or bad. For what purpose? Q. Perhaps to fulfill a need. MR. McDERMOTT: I object to the form of the question. That's awfully vagne. Good Lord. Page 71 l Q. Why was PAR opposed to FDA oversight of 2 l~'~nicr ? 3 A. Bccau,~ it would have rneant Premier being 4 removed from the market and not available for the 5 choice of adult smokers. 6 Q. You don't think it could have been licensed under tha FDA? A. I have no idea. I'm not a lawyer; but 9 the ]cga~ advice ~hat wc got is tha~ if it came under F~Ajudsdiction, it would not he available for II adult smokers to choose it. Q. Are you familiar with the design of fl~ 13 Premier? 14 A. Yes. 15 Q. And ~ Eclipse? 16 A. Yes. Q. Are they substantially similar? A. No. They're very different. 19 Q. Can you explain ~o mc how? 20 A. Well, Premier had a metal capsule inside 21 of it that was filled with alumina heads, upon which 22 sprayed -- died tobacco was applied. Tha heat 23 source, which was of a different composition than the haat source for Eclipse, was inserted into the metal 25 capsule. Around the metal capsule was tobacco. Page 72 l There was a different kind of a filter than is on the 2 Eclipse product. And there was also tobacco sheet 3 material that was used in Frcmicr. On Eclipse, there 4 is a heat source on the end. Heat that, again, is a 5 different composition than the Premier heat source. 6 It's followed by a roll of tobacco. There's no 7 capsule and there's a different kind of a filter. ~ Q. Do they both have the common 9 characteristic of not actually burning the tobacco? I0 A. There is sornc tobacco that is burned in l I Eclipse. It primarily hea~s the tobacco; whereas, in 12 Premier, the ~obacco was only heated. 13 Q. Do you know where PAR fh'st came up with 14 the idea of this revolutionary, if you will, 15 cigarette? BY MS. FLOWERS: Q. Can you answer it? A. No, I can't answer it. Q. Was PAR anxious to make Premier a success? MR. McDERMOTT: Is or was? THE WITNESS: We wanted Premier to he a success. We had spent a great deal of effort in developing it. BY MS. FLOWERS: 16 A. I think I mentioned that it was in the ,7 very early '80s. 18 Q. You've never seen any documentation that 19 indicated plans for such a cigarette perhaps earlier 20 on? 21 A. No, I've never seen documentation to that 22 effect. 23 Q. Were you provided any documents on the 24 Premier plan when it was being developed? :25 A. I worked on the Premier plan. A. W-ILLI/dVI ROBERTS, YR. & ASSOCIATES 1-800-743-DEPO Page 69 - Page 72

IAUCO, DAVID CondenseltTM MISSISSIPPI TOBACO LITIGATION 1 5 6 7 8 9 10 II 12 13 14 15 16 17 19 2O 21 22 23 24 25 Page 73 Q. On ~ ~ development of the cigarette itself or the marketing aspect? A. The marketing aspect. Also worked on the product when I assumed responsibility. Q. You have to know what kind of product you're marketing -- A. SUm. Q. -- before you can market it? When you Page 75 Q. You've testified that you're basically familiar with the Eclipse and the Premier and how tJ~y work, Does this look to you anything like either of those two cigarettes? MR, McDERMOTT: ~ me just object for just a moment. No foundation. You have not -- you're assuming some sort of relationship which is not in evidenc~ and which is not in fact correct. were hired in '75, at that time were you given any internal R JR documents to review on new products such as technologically different products than the ones we're discussing? A. No. Q. Were you provided access to any library that might have contained this ~pe of p6or research or development? MR. McDERMOTT: ObjeCt. Calls for speculation, Might have oontained. I'm not sure anybody would know what's in a library without looking ~ro~h everything in BY MS. PLOWERS: Q. Did you look through any libraries to see if there were any sort of new products like the ones we're discussing? A. No. Page 74 1 MS. FLOWERS: I'd like to mark as lauco 2 Exhibit 3 the 196g new business opportunities arising 3 from long-range research planning, tobacco and health 4 problem. 5 (EXH. 3, New Business Opportunities 6 Arising from Long-Range Research 7 Planning, Tobacco - Health Problem, was 8 marked for identification.) 9 BY MS. FLOWEgS: 10 Q. Have you ever seen this document before? ! 1 A. I'm sorry. You mentioned a date? 12 Q. Yes. It's 11/2/68. It's on the last 13 page. 14 A. 1968. 15 Q. My question was just whether you had ever 16 seen this document before? 17 A. No, I've never seen this before. 18 Q. If I could direct your attention, please, 19 to page 8, in which "preliminary, tentative product 20 models and prototypes" are discussed. And if you'll 21 look at it, Number 1 discusses the ~'ansitional 22 cigarette, ~he tobacco-burning cigarette, and Number 23 2, the l~ansifional, no tobacco cigarette. Could you 24 take a moment and review that, please? 25 A. Uh-huh. 9 You haven't established this witness' expertise in l0 anything-- I I MS. FLOWERS: Is this a formal objection? 12 MR. MCDERMOTT: YeS, ma'am. No 13 foundation. 14 BY MS. FLOWERS: 15 Q. Can you answer the question? 16 A. It does not appear to be similar to 17 Eclipse or Premier. 18 Q. There's nothing in Number 2 that's 19 similar to Eclipse or Premier? 20 MR. McDERMOTT: objection. That's not 21 his testimony. 22 MS. ~LOWERS: I think that's what he just 23 said. 24 Q. Can you go ahead and try to answer the 25 question? Page 76 1 MR. McDERMOTT: No. He said there -- 2 MR.. COLINC~O: Doesn't appear to be. 3 MR. McDERMOTT: He said it doesn't appear 4 to be similar. He did not say there's nothing. 5 BY MS. FLOWEI~S: 6 Q. Is there anything in Number 2 that is 7 similar to Eclipse or Premier? Let's take for 8 example the coal-ash simulated. Did Eclipse or 9 Premier have a simulated cold-ash? 10 A. I don't really know what simulated 11 cold-ash means. 12 Q. When you smoke a Premier -- excuse me, an 13 Eclipse, since you.can't get Premier anymore, does it 14 burn all the way down? 15 A. No. 16 Q. Does this appear to describe a similar 17 type of process? IS A. No, it does not. There's no pressurized 19 aerosol generator in Premier or Eclipse. There's no 20 control valve giving measured dosage activated by lip 21 pressure, drawing, et cetera. Premier and Eclipse do 22 produce nicotine flavor. There's -- I know the 23 water, the amount of water in the smoke is higher 24 than in tobacco-burning cigarettes, so I guess those 25 are -- there's some similarity there. A. WILLIAM ROBERTS, JR. & ASSOCIATES 1-800-743-DEPO Page 73 - Page 76

IAUCO, DAVID Cond~nseltTM MISSISSIPPI TOBACO LITIGATIOt Page 77 1 I'm not su~ what they mean by simulated ~ cold-ash. There is -- tlgre are ~hes wi~ 3 tobaoco-buming cigaret~s and there's the appearance 4 of ash with Premier and Eclipse. But most of what l 5 sc¢ in this diagram relates to some kind of a process 6 lhat is very different than th~ process or ~ design 7 of P~mier or Eclipse. $ Q. Okay. Well, tim would you pkase look 9 at page 3 for m~? l0 MR. McDEILMOTT: Page 3? I l BY MS. FLOWERS: 12 Q. Three. In discussing this n~w product 13 that was being looked at in '68, under Task Number 1, 14 eliminate alleged health hazard - no inhalation of 15 products of combustion or organic mater. Is that 16 consistent with thv goals of Premier and Eclipse? 17 A. No. 18 Q. Premier didn't s~k to eliminate 19 combustion of tobacco? 20 A. That's not what this says. 21 Q. It says combustion of organic matter. 22 A. Organic matter. 23 Q. Is tobacco an organic matter? 24 A. Tobacco is, but so is carbon and we 25 combust c~rbon in P~mier and Eclipse. Page 78 l Q. Well, if you go back to page 8, they talk 2 about tobacco and non-tobacco. And if we had time, 3 wc could read the entire document and I think you'd 4 see that d~ey are talking about organic matter being 5 tobacco in this case. If you could assume that the 6 organic matter was tobacco -- 7 MR. McDERMO'I-/': I object. This is a 8 tlfirty-ycar old document drafted by somebody else 9 ~hat be hasn't seen before today and you want him to 10 assume a definition of what somebody 30 years ago 11 said. Organic matter is organic matter. And there 12 arc a lot of things besides tobacco that are organic 13 matter. I'm not going to ask him to assumc anyttfing, 14 and I don't think it's proper for you to either. 15 BY MS. FLOWERS: 16 Q. Can you answer the question? 17 A. And the question was? 18 Q. Under Task Number 1, no inhalation of products of combustion of organic matter. If we 20 assume ',hat that's tobacco, is that sh',nilar to 21 Premicr's goals? 22 MR. McDERMOTT: I object to ~ form of 23 the question. 24 BY MS. FLOWERS: 25 Q. Yo'a can answer. Page 7~ l A. I'm sorry. You're going to have to 2 repeat ttmt question again. If we assume, start with 3 that. 4 Q. That the organic matter referred to right 5 here is tobacco and the goal task is no inhalation of 6 products of combustion of organic matter. Is that 7 similar to what lhcmier tried to do? 8 MR. McDERMOTT: object to tl~ form of the 9 question. 10 THE WITNESS: Premier was based on the 11 concept of heating tobacco in order to provide 12 smoking pleasure and tha~, in that respect, it did 13 not combust the tobacco. So I suppose there's some 14 similarity. 15 BY MS. FLOWERS: 16 Q. Could you just look for me one more time J7 at page 9 under schedule? 18 A. (Complying.) 19 Q And I'm quoting from the document: 20 "C.omplcte preliminary planning and specification by 21 Januaryl, 1969." D0y0uhavcanyidcawhcthcrthis 22 goal was met? 23 A. I don't know that this was a goal. 24 Q. Do you have any knowledge about whether 25 this prototype described above was ever tried? Yes Page 80 J or no? 2 A. No, I have no knowlcdgc. 3 Q. I'm going to shift now for a minute. 4 Does P,2R engage in blind product testing? 5 A. Yes, we do. 6 Q. Is this done internally at the R&D 7 department? 8 A. No. It's done by the marketing research 9 department. 10 Q. Can you explain to me what is done? 11 A. Yes. We identify.adult smokers and 12 usually -- it's done different ways, but usually what J3 we do is provide cigarettes to adult smokers who wish 14 to participate in these tests on unbranded product. 15 That's wl~at it means by blind. They don't know wbach 16 brand these products, the cigarettes are. And they 17 try, typically, two packs of cigarettes and fill out 18 a ballot on answering various questions about how 19 they rate those cigarettes and questions about the 20 attributes of the cigarettes. Such as mild, strong, 21 harsh, mild, you know, different -- they rate it on 22 different bipolar scales. 23 Q. When you say unbranded product, does this 24 mean a new product or perhaps is it an existing 25 product - A. WILLIAM ROBERTS, JR. & ASSOCIATES 1-800-743-DEPO Page 77 - Page 80