Document:

Execution
Copy

 

PLEDGE
AGREEMENT

 

DATED
FEBRUARY 12, 2013

 

between

 

VGR HOLDING LLC

 

and

 

U.S. BANK NATIONAL ASSOCIATION

 

as Collateral
Agent

 

    	 

    	 

    

 

CONTENTS

 

	Clause	 	 	Page
	 	 	 	 
	1.	INTERPRETATION	1
	 	 	 	 
	 	1.1	Definitions	1
	 	1.2	Construction	2
	 	 	 	 
	2.	SECURED LIABILITIES	3
	 	 	 	 
	 	2.1	Secured Liabilities	3
	 	2.2	Specification of Secured Liabilities	4
	 	 	 	 
	3.	CREATION OF PLEDGE AND SECURITY	4
	 	 	 	 
	 	3.1	Security interest	4
	 	3.2	General	4
	 	 	 	 
	4.	PERFECTION AND FURTHER ASSURANCES	5
	 	 	 	 
	 	4.1	General perfection	5
	 	4.2	Delivery of certificates	5
	 	4.3	Filing of financing statements	6
	 	4.4	Communication with Issuers	6
	 	4.5	Further assurances	6
	 	 	 	 
	5.	REPRESENTATIONS AND WARRANTIES	7
	 	 	 	 
	 	5.1	Representations and warranties	7
	 	5.2	The Pledgor	7
	 	5.3	The Pledged Collateral	7
	 	5.4	No liability	8
	 	5.5	Consideration and solvency	9
	 	5.6	Times for making representations and warranties	9
	 	 	 	 
	6.	UNDERTAKINGS	10
	 	 	 	 
	 	6.1	Undertakings	10
	 	6.2	The Pledgor	10
	 	6.3	The Pledged Collateral	10
	 	6.4	Notices	12
	 	 	 	 
	7.	WHEN SECURITY BECOMES ENFORCEABLE	12
	 	 	 	 
	8.	ENFORCEMENT OF SECURITY	12

 

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	 	8.1	Events of Default	13
	 	8.2	General	13
	 	8.3	Dividend and voting rights	14
	 	8.4	Collateral Agent’s rights upon default	15
	 	8.5	No Marshaling	16
	 	 	 	 
	9.	APPLICATION OF PROCEEDS	16
	 	 	 	 
	10.	EXPENSES AND INDEMNITY	16
	 	 	 	 
	11.	EVIDENCE AND CALCULATIONS	17
	 	 	 	 
	12.	CHANGES TO THE PARTIES	18
	 	 	 	 
	 	12.1	Pledgor	18
	 	12.2	Collateral Agent	18
	 	12.3	Successors and assigns	18
	 	 	 	 
	13.	MISCELLANEOUS	18
	 	 	 	 
	 	13.1	Amendments and waivers	18
	 	13.2	Waivers and remedies cumulative	18
	 	13.3	Counterparts	18
	 	 	 	 
	14.	SEVERABILITY	18
	 	 	 	 
	15.	RELEASE	19
	 	 	 	 
	16.	NOTICES	19
	 	 	 	 
	 	16.1	Notices	19
	 	16.2	Contact Details	19
	 	16.3	Effectiveness	19
	 	 	 	 
	17.	GOVERNING LAW	20
	 	 	 	 
	18.	ENFORCEMENT	20
	 	 	 	 
	 	18.1	Jurisdiction	20
	 	18.2	Service of process	21
	 	18.3	Complete agreement	21
	 	18.4	Waiver of Jury Trial	21

 

SCHEDULE 1: Pledged Equity Interests

 

SIGNATORIES

 

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THIS AGREEMENT (this Agreement) is dated February
12, 2013

 

BETWEEN:

 

1.          VGR HOLDING LLC, a Delaware limited liability company,
as pledgor (the Pledgor); and

 

2.          U.S. BANK NATIONAL ASSOCIATION, as collateral agent
for the Noteholders under the Indenture described below (in this capacity, the Collateral Agent).

 

BACKGROUND:

 

The Pledgor enters into this Agreement in connection with the
Indenture dated February 12, 2013 (the Indenture) by and among Vector Group Ltd. (Vector Group), the Guarantors party
thereto and U.S. Bank National Association, as the trustee (the Trustee) under the Indenture. Pursuant to the Indenture,
Vector Group is issuing Notes and Pledgor is guaranteeing the Notes as provided in the Indenture. Pledgor now wishes to secure
its obligations under the Indenture by entering into this Agreement.

 

IT IS AGREED as follows:

 

		1.	INTERPRETATION

 

		1.1	Definitions

 

In this Agreement:

 

Event of Default means an event specified as
such in Clause 8.1 (Events of Default).

 

Finance Documents means the Indenture, all
Notes issued from time to time under the Indenture, the Purchase Agreement, the Registration Rights Agreement, this Agreement and
all other pledges, security agreements, control agreements and all other agreements and documents entered into the connection with
the transactions contemplated by the Indenture.

 

Guarantors means the Pledgor and
the other guarantors under the Indenture.

 

Issuer means each of Liggett Group and Vector
Tobacco.

 

Lien means any security interest, lien, mortgage,
pledge, encumbrance, charge, assignment, hypothecation, adverse claim, claim, or restriction on assignment, transfer or pledge
or any other arrangement having the effect of conferring security.

 

Liggett Group means Liggett Group
LLC, a Delaware limited liability company.

 

Note means any note issued from time to time
under the Indenture, including any exchange note.

 

Noteholder means any person which
from time to time is the holder of a Note.

 

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Obligors means Vector Group, the
Pledgor and the other Guarantors.

 

Person means any individual,
partnership, limited liability company, joint venture, corporation, trust, unincorporated organization, government or any department
or agency thereof or any entity similar to any of the foregoing.

 

Pledged Collateral means:

 

		(a)	the Pledged Equity Interests;

 

		(b)	all additional shares, securities, and interests in either Issuer, and all warrants, rights, and options to purchase or receive
shares, securities, or interests in either Issuer, in which the Pledgor at any time has or obtains any interest; and

 

		(c)	all dividends, interest, revenues, income, distributions, and proceeds of any kind, whether cash, instruments, securities,
or other property, received by or distributable to the Pledgor in respect of, or in exchange for, the Pledged Equity Interests
or any other Pledged Collateral.

 

Pledged Equity Interests means all equity interests
in the Issuers, which equity interests are described in Schedule I (Pledged Equity Interests) to this Agreement.

 

Secured Liabilities means each liability and
obligation specified in Clause 2 (Secured Liabilities).

 

Security means any security interest created
by this Agreement.

 

Security Period means the period beginning
on the date of this Agreement and ending on the date on which all the Secured Liabilities have been indefeasibly, unconditionally
and irrevocably paid and discharged in full. The Security Period will be extended to take into account any extension or reinstatement
of this Agreement under Clause 3.2(b) (General). Furthermore, if the Noteholders holding a majority in aggregate principal
amount of the then outstanding Notes consider that an amount paid to the Collateral Agent or a Noteholder under a Finance Document
is capable of being avoided or otherwise set aside on the bankruptcy, liquidation, insolvency or administration of the payer or
otherwise then that amount will not be considered to have been irrevocably paid for the purposes of this Agreement.

 

UCC means the Uniform Commercial Code as in
effect from time to time in the State of New York.

 

Vector Tobacco means Vector Tobacco
Inc., a Virginia corporation.

 

		1.2	Construction

 

		(a)	Any term defined in the UCC and not defined in this Agreement has the meaning given to that term in the UCC.

 

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		(b)	Any term defined in the Indenture and not defined in this Agreement or the UCC has the meaning given to that term in the Indenture.

 

		(c)	No reference to proceeds in this Agreement authorizes any sale, transfer or other disposition of Collateral by the Pledgor.

 

		(d)	In this Agreement, unless the contrary intention appears, a reference to:

 

		(i)	an amendment includes a supplement, novation, restatement or re-enactment and amended will be construed accordingly;

 

		(ii)	Clause, a Subclause or a Schedule is a reference to a Clause or Subclause of, or a Schedule to, this Agreement;

 

		(iii)	a law is a reference to that law as amended or re-enacted and to any successor law;

 

		(iv)	an agreement is a reference to that agreement as amended;

 

		(v)	fraudulent transfer law means any applicable U.S. Bankruptcy Law or state fraudulent transfer or conveyance statute,
and the related case law;

 

		(vi)	law includes any law, statute, regulation, regulatory requirement, rule, ordinance, ruling, decision, treaty, directive,
order, guideline, regulation, policy, writ, judgment, injunction or request of any court or other governmental, inter-governmental
or supranational body, officer or official, fiscal or monetary authority, or other ministry or public entity (and their interpretation,
administration and application), whether or not having the force of law; and

 

		(e)	In this Agreement:

 

		(i)	includes and including are not limiting;

 

		(ii)	or is not exclusive; and

 

		(iii)	the headings are for convenience only, do not constitute part of this Agreement and are not to be used in construing it.

 

		2.	SECURED LIABILITIES

 

		2.1	Secured Liabilities

 

Each obligation and liability whether:

 

		(a)	present or future, actual, contingent or unliquidated; or

 

		(b)	owed jointly or severally (or in any other capacity whatsoever),

 

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of the Pledgor to any Noteholder under or in connection
with each Finance Document is a Secured Liability.

 

		2.2	Specification of Secured Liabilities

 

The Secured Liabilities include any liability or obligation
for:

 

		(a)	repayment of the principal of any Note;

 

		(b)	payment of interest and any other amount payable under the Finance Documents;

 

		(c)	payment and performance of all other obligations and liabilities of any Obligor under the Finance Documents;

 

		(d)	payment of any amount owed under any amendment, modification, renewal, extension or novation of any of the above obligations;
and

 

		(e)	payment of an amount which arises after a petition is filed by, or against, any Obligor under the US Bankruptcy Code of 1978
even if the obligations do not accrue because of the automatic stay under Section 362 of the US Bankruptcy Code of 1978 or otherwise.

 

		3.	CREATION OF PLEDGE AND SECURITY

 

		3.1	Security interest

 

As security for the prompt and complete payment and
performance of the Secured Liabilities when due (whether due because of stated maturity, acceleration, mandatory prepayment, or
otherwise) and to induce the Noteholders to purchase the Notes, the Pledgor pledges to the Collateral Agent for the benefit of
the Noteholders, and grants to the Collateral Agent for the benefit of the Noteholders a continuing security interest in, the Pledged
Collateral.

 

		3.2	General

 

		(a)	All the Security created under this Agreement:

 

		(i)	is continuing security for the irrevocable and indefeasible payment in full of the Secured Liabilities, regardless of any intermediate
payment or discharge in whole or in part;

 

		(ii)	is in addition to, and not in any way prejudiced by, any other security now or subsequently held by the Collateral Agent.

 

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		(b)	If, at any time for any reason (including the bankruptcy, insolvency, receivership, reorganization, dissolution or liquidation
of any Obligor or the appointment of any receiver, intervenor or conservator of, or agent or similar official for, any Obligor
or any of their respective properties), any payment received by the Collateral Agent or any Noteholder in respect of the Secured
Liabilities is rescinded or avoided or must otherwise be restored or returned by the Collateral Agent or any Noteholder, that payment
will not be considered to have been made for purposes of this Agreement, and this Agreement will continue to be effective or will
be reinstated, if necessary, as if that payment had not been made.

 

		(c)	This Agreement is enforceable against the Pledgor to the maximum extent permitted by the fraudulent transfer laws.

 

		4.	PERFECTION ANd FURTHER ASSURANCES

 

		4.1	General perfection

 

The Pledgor must take, at its own expense, promptly,
and in any event within any applicable time limit:

 

		(a)	whatever action is necessary or reasonably desirable; and

 

		(b)	any action which the Collateral Agent may reasonably require,

 

to ensure that this Security is as of the date of
this Agreement, and will continue to be until the end of the Security Period, a validly created, attached, enforceable and perfected
first priority continuing security interest in the Pledged Collateral, in all relevant jurisdictions, securing payment and performance
of the Secured Liabilities.

 

This includes the giving of any notice, order or direction,
the making of any filing or registration, the passing of any resolution and the execution and delivery of any documents or agreements
which the Collateral Agent may require.

 

		4.2	Delivery of certificates

 

		(a)	The Pledgor represents and warrants that it has delivered to the Collateral Agent (or as directed by the Collateral Agent)
in the State of New York all original certificates and instruments evidencing or representing the Pledged Equity Interests existing
on the date of this Agreement.

 

		(b)	The Pledgor must deliver to the Collateral Agent (or as directed by the Collateral Agent) in the State of New York, promptly
upon receipt, all original certificates and instruments evidencing or representing any Pledged Collateral arising or acquired by
the Pledgor after the date of this Agreement.

 

		(c)	All Pledged Collateral delivered under this Agreement will be either:

 

		(i)	duly endorsed and in suitable form for transfer by delivery; or

 

		(ii)	accompanied by undated instruments of transfer endorsed in blank, as directed by the Collateral Agent, and in form and substance
reasonably satisfactory to the Collateral Agent.

 

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		(d)	Until the end of the Security Period, the Collateral Agent will hold (directly or through an agent) all certificates, instruments,
and stock powers delivered to it.

 

		(e)	At any time and from time to time, the Collateral Agent will have the right to exchange certificates or instruments evidencing
or representing Pledged Collateral for certificates or instruments of smaller or larger denominations.

 

		4.3	Filing of financing statements

 

		(a)	The Pledgor authorizes the Collateral Agent to prepare and file, at the Pledgor’s expense:

 

		(i)	financing statements describing the Pledged Collateral;

 

		(ii)	continuation statements; and

 

		(iii)	any amendment in respect of those statements.

 

		(b)	Promptly after filing an initial financing statement in respect of the Pledged Collateral, the Pledgor must provide the Collateral
Agent with an official report from the Secretary of State of the State of Delaware indicating that the Collateral Agent’s
security interest in the Pledged Collateral is prior to all other security interests or other interests reflected in the report.

 

		4.4	Communication with Issuers

 

The Pledgor authorizes the Collateral Agent at any
time and from time to time to communicate with the Issuers with regard to any matter relating to any Pledged Collateral.

 

		4.5	Further assurances

 

		(a)	The Pledgor must take, at its own expense, promptly, and in any event within any applicable time limit, whatever action may
reasonably be required under the Indenture or this Agreement for:

 

		(i)	creating, attaching, perfecting and protecting, and maintaining the priority of, any security interest intended to be created
by this Agreement;

 

		(ii)	facilitating the enforcement of this Security or the exercise of any right, power or discretion exercisable by the Collateral
Agent or any of its delegates or sub-delegates in respect of any of the Pledged Collateral;

 

		(iii)	obtaining possession and control of any Pledged Collateral; and

 

		(iv)	facilitating the assignment or transfer of any rights and/or obligations of the Collateral Agent or any Noteholder under this
Agreement.

 

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This includes the execution and delivery of any transfer,
assignment or other agreement or document, whether to the Collateral Agent or its nominee, which the Collateral Agent may require.

 

		(b)	The Pledgor irrevocably constitutes and appoints the Collateral Agent, with full power of substitution, as the Pledgor’s
true and lawful attorney-in-fact, in the Pledgor’s name or in the Collateral Agent’s name or otherwise, and at the
Pledgor’s expense, to take any of the actions referred to in paragraph (a) above without notice to or the consent of the
Pledgor. This power of attorney is a power coupled with an interest and cannot be revoked. The Pledgor ratifies and confirms all
actions taken by the Collateral Agent or its agents under this power of attorney.

 

		5.	REPRESENTATIONS AND WARRANTIES

 

		5.1	Representations and warranties

 

The representations and warranties set out in this
Clause are made by the Pledgor to the Collateral Agent and each Noteholder.

 

		5.2	The Pledgor

 

		(a)	It is organized under the laws of the State of Delaware.

 

		(b)	Its exact legal name, as it appears in the public records of its jurisdiction of incorporation or organization, is VGR Holding
LLC. It has not changed its name, whether by amendment of its organizational documents, reorganization, merger or otherwise, since
its date of formation, December 7, 2005.

 

		(c)	Its organizational identification number, as issued by its jurisdiction of organization is 3097262.

 

		(d)	It keeps at its address indicated in Clause 17 (Notices) its corporate records and all records, documents and instruments
constituting, relating to or evidencing Pledged Collateral, except for the Pledged Collateral delivered to the Collateral Agent
in compliance with Clause 4.2 (Delivery of certificates).

 

		5.3	The Pledged Collateral

 

		(a)	Liggett Group keeps at its address at 100 Maple Lane, Mebane, North Carolina 27302 and Vector Tobacco keeps at its address
at 3800 Paramount Parkway, Suite 250, PO Box 2010, Morrisville, NC 27560 its corporate records, stock ledger and all records, documents
and instruments relating to or evidencing the Pledged Collateral.

 

		(b)	The Pledged Equity Interests have been duly authorized and are validly issued, fully-paid and non-assessable.

 

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		(c)	The Pledged Equity Interests constitute all of the issued and outstanding equity or ownership interests in the Issuers, and
there are no other equity or ownership interests in the Issuers, options or rights to acquire or subscribe for any such interests,
or securities or instruments convertible into or exchangeable or exercisable for any such interests.

 

		(d)	The Pledged Equity Interests are “securities” under Article 8 of the UCC and are represented by certificates, all
of which have been delivered to the Collateral Agent.

 

		(e)	Except as permitted under the Indenture:

 

		(i)	it is the sole legal and beneficial owner of, and has the power to transfer and grant a security interest in the Pledged Equity
Interests and all other Pledged Collateral now in existence;

 

		(ii)	none of the Pledged Collateral is subject to any Lien other than the Collateral Agent’s security interest;

 

		(iii)	it has not agreed or committed to sell, assign, pledge, transfer, license, lease or encumber any of the Pledged Collateral,
or granted any option, warrant, or right with respect to any of the Pledged Collateral; and

 

		(iv)	no effective mortgage, deed of trust, financing statement, security agreement or other instrument similar in effect is on file
or of record with respect to any Pledged Collateral, except for those that create, perfect or evidence the Collateral Agent’s
security interest.

 

		(f)	No litigation, arbitration or administrative proceedings are current or pending or, to its knowledge, threatened, involving
or affecting the Pledged Collateral, and none of the Pledged Collateral is subject to any order, writ, injunction, execution or
attachment.

 

		(g)	None of the Pledged Collateral constitutes “margin stock” within the meaning of Regulation U or X issued by the
Board of Governors of the United States Federal Reserve System.

 

		5.4	No liability

 

		(a)	Its rights, interests, liabilities and obligations under contractual obligations that constitute part of the Pledged Collateral
are not affected by this Agreement or the exercise by the Collateral Agent of its rights under this Agreement;

 

		(b)	neither the Collateral Agent nor any Noteholder, unless it expressly agrees in writing, will have any liabilities or obligations
under any contractual obligation that constitutes part of the Pledged Collateral as a result of this Agreement, the exercise by
the Collateral Agent of its rights under this Agreement or otherwise; and

 

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		(c)	neither the Collateral Agent nor any Noteholder has or will have any obligation to collect upon or enforce any contractual
obligation or claim that constitutes part of the Pledged Collateral, or to take any other action with respect to the Pledged Collateral.

 

		5.5	Consideration and solvency

 

		(a)	Terms used in this Subclause have the meanings given to them in, and must be construed in accordance with, the fraudulent transfer
laws.

 

		(b)	It will receive valuable direct and indirect benefits as a result of the transactions financed by the issuance of the Notes
and these benefits constitute “reasonably equivalent value” and “fair consideration” as those terms are
used in the fraudulent transfer laws.

 

		(c)	To the best of its knowledge, the Collateral Agent and the Noteholders have acted in good faith in connection with the transactions
contemplated by this Agreement.

 

		(d)	The sum of its debts (including its obligations under this Agreement) is less than the value of its property (calculated at
the lesser of fair valuation and present fair saleable value).

 

		(e)	Its capital is not unreasonably small to conduct its business as currently conducted or as proposed to be conducted.

 

		(f)	It has not incurred, does not intend to incur and does not believe it will incur debts beyond its ability to pay as they mature.

 

		(g)	It has not made a transfer or incurred an obligation under this Agreement with the intent to hinder, delay or defraud any of
its present or future creditors.

 

		5.6	Times for making representations and warranties

 

		(a)	The representations and warranties set out in this Agreement (including in this Clause) are made on the date of this Agreement.

 

		(b)	Unless a representation and warranty is expressed to be given at a specific date, all representations and warranties under
this Agreement are deemed to be repeated by the Pledgor on the date of each issuance of Notes with reference to the facts and circumstances
then existing.

 

		(c)	When representations and warranties are repeated, they are applied to the circumstances existing at the time of repetition.

 

		(d)	The representations and warranties of the Pledgor contained in this Agreement or made by the Pledgor in any certificate, notice
or report delivered under this Agreement will survive each issuance of Notes and any transfer or assignment of any Note.

 

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		6.	UNDERTAKINGS

 

		6.1	Undertakings

 

The Pledgor agrees to be bound by the covenants set
out in this Clause.

 

		6.2	The Pledgor

 

		(a)	The Pledgor must preserve its corporate existence and except as permitted by the Indenture will not, in one transaction or
a series of related transactions, merge into or consolidate with any other entity, or sell all or substantially all of its assets.

 

		(b)	The Pledgor must not change the jurisdiction of its organization without providing the Collateral Agent with at least 30 days’
prior written notice.

 

		(c)	The Pledgor must not change its name without providing the Collateral Agent with at least 30 days’ prior written notice.

 

		(d)	The Pledgor must keep at its address indicated in Clause 17 (Notices) its corporate records and all records, documents
and instruments constituting, relating to or evidencing Pledged Collateral, except for the Pledged Collateral delivered to the
Collateral Agent in compliance with Clause 4.2 (Delivery of certificates).

 

		(e)	The Pledgor permits the Collateral Agent and its agents and representatives, during normal business hours and upon reasonable
notice, to inspect the Pledged Collateral, to examine and make copies of and abstracts from the records referred to in paragraph
(d) above, and to discuss matters relating to the Pledged Collateral directly with the Pledgor’s officers and employees.

 

		(f)	At the Collateral Agent’s request, the Pledgor must provide the Collateral Agent with any information concerning the
Collateral that the Collateral Agent may reasonably request.

 

		6.3	The Pledged Collateral

 

		(a)	The Pledgor will cause the Issuers to keep and maintain, at their respective addresses indicated in Clause 5.3(a) (The
Pledged Collateral) their respective corporate records and all records, documents and instruments constituting, relating to, or
evidencing Pledged Collateral. The Pledgor agrees to cause the Issuers to permit the Collateral Agent and its agents and representatives
during normal business hours and upon reasonable notice, to examine and make copies of and abstracts from the records and stock
ledgers and to discuss matters relating to the Issuers and its records directly with the Issuers’ officers and employees.

 

		(b)	Except as expressly permitted by the Indenture or this Agreement, the Pledgor:

 

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		(i)	must maintain sole legal and beneficial ownership of the Pledged Collateral;

 

		(ii)	must not permit any Pledged Collateral to be subject to any Lien other than the Collateral Agent’s security interest
and must at all times warrant and defend the Collateral Agent’s security interest in the Pledged Collateral against all other
Liens and claimants;

 

		(iii)	must not sell, assign, transfer, pledge, license, lease or encumber, or grant any option, warrant, or right with respect to,
any of the Pledged Collateral, or agree or contract to do any of the foregoing;

 

		(iv)	must not waive, amend or terminate, in whole or in part, any accessory or ancillary right or other right in respect of any
Pledged Collateral; and

 

		(v)	must not take any action which would result in a reduction in the value of any Pledged Collateral.

 

		(c)	The Pledgor must pay when due (and in any case before any penalties are assessed or any Lien is imposed on any Pledged Collateral)
all taxes, assessments and charges imposed on or in respect of Pledged Collateral and all claims against the Pledged Collateral.

 

		(d)	In any suit, legal action, arbitration or other proceeding involving the Pledged Collateral or the Collateral Agent’s
security interest, the Pledgor must take all lawful action to avoid impairment of the Collateral Agent’s security interest
or the Collateral Agent’s rights under this Agreement or the imposition of a Lien (other than Permitted Liens (as defined
in the Indenture)) on any of the Pledged Collateral.

 

		(e)	The Pledgor will not permit either Issuer to cancel or change the terms of the Pledged Equity Interests, or authorize, create
or issue any additional shares of capital stock or ownership interests in either Issuer; provided that the Pledgor may convert
Vector Tobacco from a corporation to a limited liability company so long as (1) the Issuer gives the Collateral Agent at least
30 days prior written notice of such conversion, (2) the resulting limited liability company is formed under the laws of a State
in the United States, (3) the limited liability company or operating agreement of the resulting limited liability company expressly
provides that all equity interests in such resulting limited liability company are “securities” under Article 8 of
the UCC and are represented by certificates, (4) contemporaneously with such conversion the Issuer delivers to the Collateral Agent
in New York certificates representing all membership or other equity or ownership interests in the converted entity, together with
stock powers or the equivalent executed by the Issuer in blank and in form and substance satisfactory to the Collateral Agent,
(5) the Issuer agrees, in documentation satisfactory to the Collateral Agent, that such equity interests are subject to the Collateral
Agent’s security interest and to the terms of this Agreement, (6) an appropriate financing statement or amendment to the
existing financing statement is promptly filed in the appropriate office or offices, so as to perfect and/or continue to perfect
the Collateral Agent’s security interest and (7) the Issuer must have delivered to the Collateral Agent a legal opinion,
from outside counsel satisfactory to the Collateral Agent and in form and substance satisfactory to the Collateral Agent, that
the Collateral Agent has a perfected first-priority security interest in such new equity interests. The Pledgor will ensure that
at all times the operating agreement of Liggett Group provides that all equity interests in Liggett Group are “securities”
under Article 8 of the UCC and are represented by certificates. The Pledgor will not effect or permit any change of control of
either Issuer.

 

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		(f)	The Pledgor will take no action, and will not permit either Issuer to take any action, that could cause any of the Pledged
Collateral to constitute “margin stock” within the meaning of Regulation U or X issued by the Board of Governors of
the United States Federal Reserve System.

 

		6.4	Notices

 

		(a)	The Pledgor must give the Collateral Agent prompt notice of the occurrence of any of the following events:

 

		(i)	any pending or threatened claim, suit, legal action, arbitration or other proceeding involving or affecting the Pledgor, either
Issuer or any Pledged Collateral which could reasonably be expected to impair the Collateral Agent’s security interest or,
the Collateral Agent’s rights under this Agreement or result in the imposition of a Lien (other than a Permitted Lien (as
defined in the Indenture)) on any Pledged Collateral; or

 

		(ii)	any representation or warranty contained in this Agreement is or becomes untrue, incorrect or incomplete in any material respect.

 

		(b)	Each notice delivered under this Clause, must include:

 

		(i)	reasonable details about the event; and

 

		(ii)	the Pledgor’s proposed course of action.

 

Delivery of a notice under this Clause does not affect
the Pledgor’s obligations to comply with any other term of this Agreement.

 

		7.	WHEN SECURITY BECOMES ENFORCEABLE

 

This Security may be enforced by the Collateral Agent
at any time after an Event of Default has occurred.

 

		8.	ENFORCEMENT OF SECURITY

 

    	12

    	 

    

 

 

		8.1	Events of Default

 

Each of the events set out in this Subclause is an
Event of Default.

 

		(a)	The Pledgor does not comply with Clause 6.3(b) (The Pledged Collateral);

 

		(b)	The Pledgor does not comply with any other term of this Agreement unless the non-compliance:

 

		(i)	is capable of remedy; and

 

		(ii)	is remedied within 14 days of the Collateral Agent giving notice to the Pledgor;

 

		(c)	a representation or warranty made or repeated in this Agreement is untrue or incorrect in any material aspect when made or
deemed to be repeated;

 

		(d)	any attachment, execution or levy is made in respect of any material part of the Pledged Collateral; or

 

		(e)	an “Event of Default” (as that term is defined in the Indenture) occurs.

 

		8.2	General

 

		(a)	After this Security has become enforceable, the Collateral Agent may immediately, in its absolute discretion, exercise any
right under:

 

		(i)	applicable law; or

 

		(ii)	this Agreement,

 

to enforce all or any part of the Security in respect
of any Pledged Collateral in any manner or order it sees fit.

 

		(b)	This includes:

 

		(i)	any rights and remedies available to the Collateral Agent under applicable law and under the UCC (whether or not the UCC applies
to the affected Pledged Collateral and regardless of whether or not the UCC is the law of the jurisdiction where the rights or
remedies are asserted) as if those rights and remedies were set forth in this Agreement in full;

 

		(ii)	transferring or assigning to, or registering in the name of, the Collateral Agent or its nominees any of the Pledged Collateral;

 

		(iii)	exercising any voting, consent, management and other rights relating to any Pledged Collateral;

 

		(iv)	performing or complying with any contractual obligation that constitutes part of the Pledged Collateral;

 

    	13

    	 

    

 

		(v)	receiving, endorsing, negotiating, executing and delivering or collecting upon any check, draft, note, acceptance, instrument,
document, contract, agreement, receipt, release, bill of lading, invoice, endorsement, assignment, bill of sale, deed, security,
share certificate, stock power, proxy, or instrument of conveyance or transfer constituting or relating to any Pledged Collateral;

 

		(vi)	asserting, instituting, filing, defending, settling, compromising, adjusting, discounting or releasing any suit, action, claim,
counterclaim, right of set-off or other right or interest relating to any Pledged Collateral;

 

		(vii)	executing and delivering acquittances, receipts and releases in respect of Pledged Collateral; and

 

		(viii)	exercising any other right or remedy available to the Collateral Agent under the other Finance Documents or any other agreement
between the parties.

 

		8.3	Dividend and voting rights

 

		(a)	So long as payment of the Secured Liabilities has not been accelerated (whether automatically or otherwise), the Pledgor will
be entitled to exercise all voting and other consensual rights with respect to the Pledged Collateral for any purpose not inconsistent
with the terms of the Finance Documents and to receive and retain all dividends and other payments in respect of the Pledged Collateral
to the extent permitted by the Finance Documents.

 

		(b)	Upon the acceleration of the payment of the Secured Liabilities (whether automatically or otherwise), all rights of the Pledgor
to exercise voting and other consensual rights with respect to the Pledged Collateral and to receive dividends and other payments
in respect of the Pledged Collateral will cease, and all these rights will immediately become vested solely in the Collateral Agent
or its nominees, and the Pledgor grants the Collateral Agent or its nominees the Pledgor’s irrevocable and unconditional
proxy for this purpose. After the acceleration of the payment of the Secured Liabilities (whether automatically or otherwise),
any dividends and other payments in respect of the Pledged Collateral received by the Pledgor will be held in trust for the Collateral
Agent, and the Pledgor will keep all such amounts separate and apart from all other funds and property so as to be capable of identification
as the property of the Collateral Agent and will deliver these amounts at such time as the Collateral Agent may request to the
Collateral Agent in the identical form received, properly endorsed or assigned if required to enable the Collateral Agent to complete
collection.

 

    	14

    	 

    

 

		8.4	Collateral Agent’s rights upon default

 

		(a)	The Pledgor irrevocably constitutes and appoints the Collateral Agent, with full power of substitution, as the Pledgor’s
true and lawful attorney-in-fact, in the Pledgor’s name or in the Collateral Agent’s name or otherwise, and at the
Pledgor’s expense, to take any of the actions authorized by this Agreement or permitted under applicable law upon the occurrence
and during the continuation of an Event of Default, without notice to or the consent of the Pledgor. This power of attorney is
a power coupled with an interest and cannot be revoked. The Pledgor ratifies and confirms all actions taken by the Collateral Agent
or its agents under this power of attorney.

 

		(b)	The Pledgor agrees that 10 days notice shall constitute reasonable notice in connection with any sale, transfer or other disposition
of Pledged Collateral.

 

		(c)	The Collateral Agent may comply with any applicable state or federal law requirements in connection with a disposition of Pledged
Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of Pledged Collateral.

 

		(d)	The grant to the Collateral Agent under this Agreement of any right, power or remedy does not impose upon the Collateral Agent
any duty to exercise that right, power or remedy. The Collateral Agent will have no obligation to take any steps to preserve any
claim or other right against any person or with respect to any Pledged Collateral.

 

		(e)	The Pledgor bears the risk of loss, damage, diminution in value, or destruction of the Pledged Collateral.

 

		(f)	The Collateral Agent will have no responsibility for any act or omission of any courier, bailee, broker, bank, investment bank
or any other person chosen by it with reasonable care.

 

		(g)	The Collateral Agent makes no express or implied representations or warranties with respect to any Pledged Collateral or other
property released to the Pledgor or its successors and assigns.

 

		(h)	The Pledgor agrees that the Collateral Agent will have met its duty of care under applicable law if it holds, maintains and
disposes of Pledged Collateral in the same manner that it holds, maintains and disposes of property for its own account.

 

		(i)	Except as set forth in this Clause or as required under applicable law, the Collateral Agent will have no duties or obligations
under this Agreement or otherwise with respect to the Pledged Collateral.

 

		(j)	The sale, transfer or other disposition under this Agreement of any right, title, or interest of the Pledgor in any item of
Pledged Collateral will:

 

		(i)	operate to divest the Pledgor permanently and all persons claiming under or through the Pledgor of that right, title, or interest,
and

 

		(ii)	be a perpetual bar, both at law and in equity, to any claims by the Pledgor or any person claiming under or through the Pledgor
with respect to that item of Pledged Collateral.

 

    	15

    	 

    

 

		8.5	No Marshaling

 

		(a)	The Collateral Agent need not, and the Pledgor irrevocably waives and agrees that it will not invoke or assert any law requiring
the Collateral Agent to:

 

		(i)	attempt to satisfy the Secured Liabilities by collecting them from any other person liable for them; or

 

		(ii)	marshal any security or guarantee securing payment or performance of the Secured Liabilities or any particular asset of the
Pledgor.

 

		(b)	The Collateral Agent may release, modify or waive any collateral or guarantee provided by any other person to secure any of
the Secured Liabilities, without affecting the Collateral Agent’s rights against the Pledgor.

 

		9.	APPLICATION OF PROCEEDS

 

Any moneys received in connection with the Pledged
Collateral by the Collateral Agent after this Security has become enforceable must be applied in the following order of priority:

 

		(a)	first, in or towards payment of or provision for all costs and expenses incurred by the Collateral Agent in connection
with the enforcement of this Security;

 

		(b)	second, in or towards payment of, or provision for, the Secured Liabilities; and

 

		(c)	third, in payment of the surplus (if any) to the Pledgor or any other Person entitled to it under applicable law.

 

This Clause is subject to the payment of any claims
having priority over this Security under mandatory provisions of applicable law. This Clause does not prejudice the right of any
Noteholder to recover any shortfall from the Pledgor.

 

		10.	EXPENSES AND INDEMNITY

 

		(a)	The Pledgor must pay promptly on demand to the Collateral Agent all costs and expenses incurred by the Collateral Agent, any
Noteholder, attorney, manager, delegate, sub-delegate, agent or other Person appointed by the Collateral Agent under this Agreement
for the purpose of enforcing its rights under this Agreement. This includes:

 

		(i)	costs of foreclosure and of any transfer, disposition or sale of Pledged Collateral;

 

		(ii)	costs of maintaining or preserving the Pledged Collateral or assembling it or preparing it for transfer, disposition or sale;

 

    	16

    	 

    

 

		(iii)	costs of obtaining money damages; and

 

		(iv)	fees and expenses of attorneys employed by the Collateral Agent for any purpose related to this Agreement or the Secured Liabilities,
including consultation, preparation and negotiation of any amendment or restructuring, drafting documents, sending notices or instituting,
prosecuting or defending litigation or arbitration.

 

		(b)	The Pledgor must indemnify and keep indemnified the Collateral Agent, the Noteholders and their respective affiliates, directors,
officers, representatives and agents from and against all claims, liabilities, obligations, losses, damages, penalties, judgments,
costs and expenses of any kind (including attorney’s fees and expenses) which may be imposed on, incurred by or asserted
against any of them by any Person (including any Noteholder) in any way relating to or arising out of:

 

		(i)	this Agreement;

 

		(ii)	the Pledged Collateral;

 

		(iii)	the Collateral Agent’s security interest in the Pledged Collateral;

 

		(iv)	any Event of Default;

 

		(v)	any action taken or omitted by the Collateral Agent under this Agreement or any exercise or enforcement of rights or remedies
under this Agreement; or

 

		(vi)	any transfer sale or other disposition of or any realization on Pledged Collateral.

 

		(c)	The Pledgor will not be liable to an indemnified party to the extent any liability results from that indemnified party’s
gross negligence or willful misconduct. Payment by an indemnified party will not be a condition precedent to the obligations of
the Pledgor under this indemnity.

 

		(d)	This Clause survives the initial issuance of the Notes, the repayment of the Notes, any novation, transfer or assignment of
the Notes and the termination of this Agreement.

 

		11.	EVIDENCE AND CALCULATIONS

 

In the absence of manifest error, the records of the
Collateral Agent are conclusive evidence of the existence and the amount of the Secured Liabilities.

 

    	17

    	 

    

 

		12.	CHANGES TO THE PARTIES

 

		12.1	Pledgor

 

The Pledgor may not assign, delegate or transfer any
of its rights or obligations under this Agreement without the consent of the Collateral Agent, and any purported assignment, delegation
or transfer in violation of this provision shall be void and of no effect.

 

		12.2	Collateral Agent

 

The Collateral Agent may
assign or transfer its rights and obligations under this Agreement in the manner permitted under the Indenture.

 

		12.3	Successors and assigns

 

This Agreement shall be binding on and inure to the
benefit of the respective successors and permitted assigns of the Pledgor and the Collateral Agent.

 

		13.	MISCELLANEOUS

 

		13.1	Amendments and waivers

 

Any term of this Agreement may be amended or waived
only by the written agreement of the Pledgor and the Collateral Agent.

 

		13.2	Waivers and remedies cumulative

 

		(a)	The rights and remedies of the Collateral Agent under this Agreement:

 

		(i)	may be exercised as often as necessary;

 

		(ii)	are cumulative and not exclusive of its rights under applicable law; and

 

		(iii)	may be waived only in writing and specifically.

 

		(b)	Delay in exercising, or non-exercise, of any right or remedy under this Agreement is not a waiver of that right or remedy.

 

		13.3	Counterparts

 

This Agreement may be executed in counterparts, and
this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.

 

		14.	SEVERABILITY

 

If any term of this Agreement is or becomes illegal,
invalid or unenforceable in any jurisdiction, that will not affect:

 

    	18

    	 

    

 

		(a)	the legality, validity or enforceability in that jurisdiction of any other term of this Agreement; or

 

		(b)	the legality, validity or enforceability in any other jurisdiction of that or any other term of this Agreement.

 

		15.	RELEASE

 

At the end of the Security Period, the Collateral
Agent must, at the request and cost of the Pledgor, take whatever action is necessary to release the Pledged Collateral from this
Security.

 

		16.	NOTICES

 

		16.1	Notices

 

Any communication in connection with this Agreement
must be given in writing and, unless otherwise stated, must be given in person or by fax.

 

		16.2	Contact Details

 

		(a)	The contact details of the Pledgor for this purpose are:

		Address:	100 S.E. Second Street, 32nd Floor

			Miami, FL 33131

		Fax:	(305) 579-8016

		Attention:	Marc N. Bell

 

		(b)	The contact details of the Collateral Agent for this purpose are:

		Address:	U.S. Bank National Association

			Global Corporate Trust Services

			60 Livingston Avenue

			EP-MN-WS3C

			St. Paul, MN 55107-2292

		Fax:	(651) 466-7430

		Attention:	Joshua A. Hahn

 

		(c)	Either party may change its contact details by giving five Business Days’ notice to the other party.

 

		(d)	Where a party nominates a particular department or officer to receive a communication, a communication will not be effective
if it fails to specify that department or officer.

 

		16.3	Effectiveness

 

		(a)	Except as provided below, any communication in connection with this Agreement will be deemed to be given as follows:

 

    	19

    	 

    

 

		(i)	if delivered in person, at the time of delivery;

 

		(ii)	if by fax, when sent with confirmation of transmission.

 

		(b)	A communication given under this Clause but received on a non-working day or after business hours on a working day in the place
of receipt will only be deemed to be given on the next working day in that place.

 

		17.	GOVERNING LAW

 

This Agreement, the relationship between the Pledgor,
the Collateral Agent and the Noteholders and any claim or dispute (whether sounding in contract, tort, statute or otherwise) relating
to this Agreement or that relationship shall be governed by and construed in accordance with law of the State of New York including
section 5-1401 of the New York General Obligations Law but excluding any other conflict of law rules that would lead to the application
of the law of another jurisdiction. If the law of a jurisdiction other than New York is, under section 1-105(2) of the UCC, mandatorily
applicable to the perfection, priority or enforcement of any security interest granted under this Agreement in respect of any part
of the Pledged Collateral, that other law shall apply solely to the matters of perfection, priority or enforcement to which it
is mandatorily applicable.

 

		18.	ENFORCEMENT

 

		18.1	Jurisdiction

 

		(a)	Each of the Parties agrees that any New York State court or Federal court sitting in the City and County of New York has jurisdiction
to settle any disputes and any judgment, order or award in connection with this Agreement and accordingly submits to the jurisdiction
of those courts.

 

		(b)	Each of the Parties:

 

		(i)	waives objection to the New York State and Federal courts on grounds of personal jurisdiction, inconvenient forum or otherwise
as regards proceedings in connection with this Agreement; and

 

		(ii)	agrees that a judgment or order of a New York State or Federal court in connection with this Agreement is conclusive and binding
on it and may be enforced against it in the courts of any other jurisdiction.

 

		(c)	Nothing in this Clause limits the right of the Collateral Agent or any Noteholder to bring proceedings against the Pledgor
in connection with this Agreement:

 

		(i)	in any other court of competent jurisdiction; or

 

		(ii)	concurrently in more than one jurisdiction.

 

    	20

    	 

    

 

		18.2	Service of process

 

		(a)	The Pledgor irrevocably appoints The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware
19801 as its agent for service of process in relation to any proceedings before any courts located in the State of New York in
connection with this Agreement;

 

		(b)	The Pledgor agrees to maintain an agent for service of process in the State of New York until the end of the Security Period.

 

		(c)	The Pledgor agrees that failure by a process agent to notify the Pledgor of the process will not invalidate the proceedings
concerned.

 

		(d)	The Pledgor consents to the service of process relating to any proceedings by a notice given in accordance with Clause 16
(Notices).

 

		(e)	If the appointment of any person mentioned in paragraph (a) above ceases to be effective, the Pledgor must immediately appoint
a further person in the State of New York to accept service of process on its behalf in the State of New York and, if the Pledgor
does not appoint a process agent within 15 days, the Pledgor authorizes the Collateral Agent to appoint a process agent for the
Pledgor.

 

		18.3	Complete agreement

 

This Agreement and the other Finance Documents contain
the complete agreement between the parties on the matters to which they relate and supersede all prior commitments, agreements
and understandings, whether written or oral, on those matters.

 

		18.4	Waiver of Jury Trial

 

THE PLEDGOR AND THE COLLATERAL AGENT (FOR ITSELF AND
ON BEHALF OF THE NOTEHOLDERS) WAIVE ANY RIGHTS THEY MAY HAVE TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED ON OR ARISING
FROM THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. In the event of litigation, this Agreement may be filed
as a written consent to a trial by the court.

 

The undersigned, intending to be legally bound, have executed
and delivered this Agreement on the date stated at the beginning of this Agreement.

 

    	21

    	 

    

  

SCHEDULE 1

 

PLEDGED EQUITY INTERESTS

 

	Name	 	Certificate No.	 	No. of Shares/
 % of Membership 

Interests
	LIGGETT GROUP LLC 	 	1	 	100% of membership interests
	 	 	 	 	 
	VECTOR TOBACCO INC. 	 	1	 	100 shares

 

 

    	 

    	 

    

  

SIGNATORIES

 

IN WITNESS WHEREOF, the Pledgor has
cause this Pledge Agreement to be executed and delivered by its duly authorized officer as of the day and year first above written.

 

Pledgor

 

VGR HOLDING LLC

 

	By:	/s/ J. Bryant Kirkland III	 
	 	 	 
	Name:	J. Bryant Kirkland III	 
	 	 	 
	Title:	Vice President, Treasurer and Chief Financial Officer

 

(Signature Page
to Pledge Agreement)

 

    	 

    	 

    

 

Collateral Agent

 

U.S. BANK NATIONAL ASSOCIATION, as Collateral Agent

 

	By:	/s/ Joshua A. Hahn	 
	 	 	 
	Name:	Joshua A. Hahn	 
	 	 	 
	Title:	Assistant Vice President	 

 

(Signature Page
to Pledge Agreement)Execution
Copy

 

SECURITY AGREEMENT

 

DATED FEBRUARY 12, 2013

 

between

 

VECTOR TOBACCO INC.

 

and

 

U.S. BANK NATIONAL ASSOCIATION

 

as Collateral Agent

 

    	 

    	 

    

 

CONTENTS

 

	Clause	 	Page
	 	 	 
	1.	Interpretation	1
	2.	Secured liabilities	5
	3.	Creation of security	6
	4.	Perfection and further assurances	7
	5.	Representations and warranties	9
	6.	Undertakings	12
	7.	When security becomes enforceable	16
	8.	Enforcement of security	16
	9.	Application of proceeds	19
	10.	Expenses and indemnity	20
	11.	Evidence and calculations	21
	12.	Changes to the parties	21
	13.	Miscellaneous	21
	14.	Severability	22
	15.	Release	22
	16.	Notices	22
	17.	Governing law	23
	18.	Enforcement	23
	 	 	 
	 	SCHEDULE
    1 Commercial Tort Claims	26
	 	SCHEDULE
    2 INTELLECTUAL PROPERTY	27
	 	SIGNATORIES	30
	 	EXHIBIT 1 Form of Patent Security Agreement	32
	 	EXHIBIT 2 Form of Trademark Security Agreement	43
	 	EXHIBIT 3 Form of Copyright Security Agreement	53

 

    	i

    	 

    

 

 

THIS AGREEMENT is dated February
12, 2013

 

BETWEEN:

 

		(1)	VECTOR TOBACCO INC., a Virginia corporation, as grantor (the Grantor); and

 

		(2)	U.S. BANK NATIONAL ASSOCIATION, as collateral agent for the Noteholders under the Indenture
described below (in this capacity, the Collateral Agent).

 

BACKGROUND:

 

The Grantor enters into this Agreement
in connection with the Indenture dated February 12, 2013 (the Indenture) by and among Vector Group Ltd. (Vector Group),
the Guarantors party thereto and U.S. Bank National Association, as trustee (the Trustee) under the Indenture. Pursuant
to the Indenture, Vector Group is issuing Notes and the Grantor is guaranteeing the Notes as provided in the Indenture. The Grantor
now wishes to secure its obligations under the Indenture by entering into this Agreement.

 

IT IS AGREED as follows:

 

		1.	Interpretation

 

		1.1	Definitions

 

In this Agreement:

 

Affiliate
means, with respect to a specified Person, any Person that, directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, the specified Person.

 

The term Collateral means
all personal property, wherever located, in which the Grantor now has or later acquires any right, title or interest, including
all:

 

		(a)	accounts;

 

		(b)	goods (including equipment, inventory and fixtures);

 

		(c)	health-care-insurance receivables;

 

		(d)	instruments (including promissory notes);

 

		(e)	documents;

 

		(f)	letter-of-credit rights;

 

		(g)	general intangibles (including payment intangibles and software);

 

		(h)	the commercial tort claims described in Schedule 1 (Commercial Tort Claims);

 

    	1

    	 

    

 

		(i)	supporting obligations;

 

		(j)	Intellectual Property;

 

and to the extent not listed
above as original Collateral, proceeds and products of, and accessions to, each of the above assets. The term Collateral
excludes (i) any property, right or interest in which a security interest may not be granted under applicable law, (ii) any
equity interest of the Grantor in any Affiliate of the Grantor, (iii) any equipment to the extent a grant of a security interest
in such equipment would be precluded by or require a consent under the terms and conditions of any existing or future purchase
money or other financing of such equipment permitted under the terms of the Indenture, (iv) any intent-to-use trademark application
prior to the filing of a “Statement of Use” or “Amendment to Allege Use” with respect thereto, to the extent,
if any, that, and solely during the period, if any, in which, the grant of a security interest therein would impair the validity
or enforceability of such intent-to-use trademark application under applicable federal law, (v) any aircraf, aircraft engines or
motor vehicles, (vi) any deposit accounts, (vii) any cash and (viii) any investment property.

 

Copyright
Licenses shall mean any and all agreements, licenses and covenants providing for the granting of any right in or to Copyrights
or otherwise providing for a covenant not to sue (whether the Grantor is licensee or licensor thereunder) including, without limitation,
each agreement referred to in Schedule 2 under the heading “Copyright Licenses” (as such schedule may be amended
or supplemented from time to time).

 

Copyrights
shall mean all United States copyrights (including Community designs), including but not limited to copyrights in software and
all rights in and to databases, and all Mask Works (as defined under 17 U.S.C. 901 of the U.S. Copyright Act), whether registered
or unregistered, moral rights, reversionary interests, termination rights, and, with respect to any and all of the foregoing: (a)
all registrations and applications therefor including, without limitation, the registrations and applications required to be listed
in Schedule 2 under the heading “Copyrights” (as such schedule may be amended or supplemented from time to time),
(b) all extensions and renewals thereof, (c) all rights to sue for past, present and future infringements thereof, and (d) all
proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages and proceeds of
suit.

 

Event of
Default means an event specified as such in Clause 8.1 (Events of Default).

 

Finance
Documents means the Indenture, all Notes issued from time to time under the Indenture, the Purchase Agreement, the Registration
Rights Agreement, this Agreement and all other pledges, security agreements, control agreements and all other agreements and documents
entered into the connection with the transactions contemplated by the Indenture.

 

Guarantors
means the Grantor and the other guarantors under the Indenture.

 

    	2

    	 

    

 

Intellectual
Property shall mean, collectively, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks,
the Trademark Licenses, the Trade Secrets, and the Trade Secret Licenses.

 

Intellectual
Property Licenses shall mean, collectively, the Copyright Licenses, Patent Licenses, Trademark Licenses and Trade Secret Licenses.

 

Lien means any security
interest, lien, mortgage, pledge, encumbrance, charge, assignment, hypothecation, adverse claim, claim, or restriction on assignment,
transfer or pledge or any other arrangement having the effect of conferring security.

 

Note means any note issued
from time to time under the Indenture, including any exchange note.

 

Noteholder means
any Person which from time to time is the holder of a Note.

 

Obligors means
Vector Group and the Guarantors.

 

Patent Licenses
shall mean all agreements, licenses and covenants providing for the granting of any right in or to Patents or otherwise providing
for a covenant not to sue (whether the Grantor is licensee or licensor thereunder) including, without limitation, each agreement
referred to in Schedule 2 under the heading “Patent Licenses” (as such schedule may be amended or supplemented
from time to time).

 

Patents
shall mean all United States patents and certificates of invention, or similar industrial property rights, and applications for
any of the foregoing, including, but not limited to: (a) each patent and patent application required to be listed in Schedule
2 hereto under the heading “Patents” (as such schedule may be amended or supplemented from time to time), (b) all
reissues, divisions, continuations, continuations-in-part, extensions, renewals, and reexaminations thereof, (c) all inventions
and improvements described therein, (d) all rights to sue for past, present and future infringements thereof, (e) all licenses,
claims, damages, and proceeds of suit arising therefrom, and (f) all proceeds of the foregoing, including, without limitation,
licenses, royalties, income, payments, claims, damages, and proceeds of suit.

 

Person
means any individual, partnership, limited liability company, joint venture, corporation, trust, unincorporated organization, government
or any department or agency thereof or any entity similar to any of the foregoing.

 

Secured Liabilities means
each liability and obligation specified in Clause 2 (Secured Liabilities).

 

Security means any security
interest created by this Agreement.

 

    	3

    	 

    

 

Security Period means
the period beginning on the date of this Agreement and ending on the date on which all the Secured Liabilities have been indefeasibly,
unconditionally and irrevocably paid and discharged in full. The Security Period will be extended to take into account any extension
or reinstatement of this Agreement under Clause 3.2(b) (General). Furthermore, if the Noteholders holding a majority in
aggregate principal amount of the then outstanding Notes consider that an amount paid to the Collateral Agent or a Noteholder under
a Finance Document is capable of being avoided or otherwise set aside on the bankruptcy, liquidation, insolvency or administration
of the payer or otherwise then that amount will not be considered to have been irrevocably paid for the purposes of this Agreement.

 

Trademark
Licenses shall mean any and all agreements, licenses and covenants providing for the granting of any right in or to Trademarks
or otherwise providing for a covenant not to sue or permitting co-existence (whether the Grantor is licensee or licensor thereunder)
including, without limitation, each agreement required to be listed in Schedule 2 under the heading “Trademark Licenses”
(as such schedule may be amended or supplemented from time to time).

 

Trademarks
shall mean all United States trademarks, trade names, corporate names, company names, business names, fictitious business names,
Internet domain names, service marks, certification marks, collective marks, logos, other source or business identifiers, designs
and general intangibles of a like nature, all registrations and applications for any of the foregoing including, but not limited
to: (a) the registrations and applications referred to in Schedule 2 under the heading “Trademarks” (as such
schedule may be amended or supplemented from time to time), (b) all extensions or renewals of any of the foregoing, (c) all of
the goodwill of the business connected with the use of and symbolized by the foregoing, (d) the right to sue for past, present
and future infringement or dilution of any of the foregoing or for any injury to goodwill, and (e) all proceeds of the foregoing,
including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit.

 

Trade Secret
Licenses shall mean any and all agreements providing for the granting of any right in or to Trade Secrets (whether the Grantor
is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 2 under the heading
“Trade Secret Licenses” (as such schedule may be amended or supplemented from time to time).

 

Trade Secrets
shall mean all trade secrets and all other confidential or proprietary information and know-how whether or not such Trade Secret
has been reduced to a writing or other tangible form, including all documents and things embodying, incorporating, or referring
in any way to such Trade Secret, including but not limited to: (a) the right to sue for past, present and future misappropriation
or other violation of any Trade Secret, and (b) all proceeds of the foregoing, including, without limitation, licenses, royalties,
income, payments, claims, damages, and proceeds of suit.

 

UCC means the Uniform
Commercial Code as in effect from time to time in the State of New York.

 

    	4

    	 

    

 

 

		1.2	Construction

 

		(a)	Any term defined in the UCC and not defined in this Agreement has the meaning given to that term
in the UCC.

 

		(b)	Any term defined in the Indenture and not defined in this Agreement or the UCC has the meaning
given to that term in the Indenture.

 

		(c)	No reference to proceeds in this Agreement authorizes any sale, transfer or other disposition
of Collateral by the Grantor.

 

		(d)	In this Agreement, unless the contrary intention appears, a reference to:

 

		(i)	an amendment includes a supplement, novation, restatement or re-enactment and amended
will be construed accordingly;

 

		(ii)	a Clause, a Subclause, an Exhibit or a Schedule is a reference to a Clause or Subclause of, or
an Exhibit or Schedule to, this Agreement;

 

		(iii)	a law is a reference to that law as amended or re-enacted and to any successor law;

 

		(iv)	an agreement is a reference to that agreement as amended;

 

		(v)	fraudulent transfer law means any applicable U.S. Bankruptcy Law or state fraudulent transfer
or conveyance statute, and the related case law; and

 

		(vi)	law includes any law, statute, regulation, regulatory requirement, rule, ordinance, ruling,
decision, treaty, directive, order, guideline, regulation, policy, writ, judgment, injunction or request of any court or other
governmental, inter-governmental or supranational body, officer or official, fiscal or monetary authority, or other ministry or
public entity (and their interpretation, administration and application), whether or not having the force of law.

 

		(e)	In this Agreement:

 

		(i)	includes and including are not limiting;

 

		(ii)	or is not exclusive; and

 

		(iii)	the headings are for convenience only, do not constitute part of this Agreement and are not to
be used in construing it.

 

		2.	Secured liabilities

 

		2.1	Secured Liabilities

 

Each obligation and liability
whether:

 

    	5

    	 

    

 

		(a)	present or future, actual, contingent or unliquidated; or

 

		(b)	owed jointly or severally (or in any other capacity whatsoever),

 

of the Grantor to any Noteholder
under or in connection with each Finance Document is a Secured Liability.

 

		2.2	Specification of Secured Liabilities

 

The Secured Liabilities include
any liability or obligation for:

 

		(a)	repayment of the principal of any Note;

 

		(b)	payment of interest and any other amount payable under the Financing Documents;

 

		(c)	payment and performance of all other obligations and liabilities of any Obligor under the Finance
Documents;

 

		(d)	payment of any amount owed under any amendment, modification, renewal, extension or novation of
any of the above obligations; and

 

		(e)	payment of an amount which arises after a petition is filed by, or against, any Obligor under the
US Bankruptcy Code of 1978 even if the obligations do not accrue because of the automatic stay under Section 362 of the US Bankruptcy
Code of 1978 or otherwise.

 

		3.	Creation of security

 

		3.1	Security Interest

 

As security for the prompt and
complete payment and performance of the Secured Liabilities when due (whether due because of stated maturity, acceleration, mandatory
prepayment, or otherwise) and to induce the Noteholders to purchase the Notes, the Grantor grants to the Collateral Agent for the
benefit of the Noteholders a continuing security interest in the Collateral.

 

		3.2	General

 

		(a)	All the Security created under this Agreement:

 

		(i)	is continuing security for the irrevocable and indefeasible payment in full of the Secured Liabilities,
regardless of any intermediate payment or discharge in whole or in part;

 

		(ii)	is in addition to, and not in any way prejudiced by, any other security now or subsequently held
by the Collateral Agent.

 

    	6

    	 

    

 

		(b)	If, at any time for any reason (including the bankruptcy, insolvency, receivership, reorganization,
dissolution or liquidation of any Obligor or the appointment of any receiver, intervenor or conservator of, or agent or similar
official for, any Obligor or any of their respective properties), any payment received by the Collateral Agent or any Noteholder
in respect of the Secured Liabilities is rescinded or avoided or must otherwise be restored or returned by the Collateral Agent
or any Noteholder, that payment will not be considered to have been made for purposes of this Agreement, and this Agreement will
continue to be effective or will be reinstated, if necessary, as if that payment had not been made.

 

		(c)	This Agreement is enforceable against the Grantor to the maximum extent permitted by the fraudulent
transfer laws.

 

		4.	Perfection and further assurances

 

		4.1	General perfection

 

The Grantor must take, at its
own expense, promptly, and in any event within any applicable time limit:

 

		(a)	whatever action is necessary or reasonably desirable; and

 

		(b)	any action which the Collateral Agent may reasonably require,

 

to ensure that this Security
is as of the date Notes are first issued under the Indenture, and will continue to be until the end of the Security Period, a validly
created, attached, enforceable and perfected first priority continuing security interest in the Collateral, in all relevant jurisdictions,
securing payment and performance of the Secured Liabilities.

 

This includes the giving of any
notice, order or direction, the making of any filing or registration, the passing of any resolution and the execution and delivery
of any documents or agreements which the Collateral Agent may require.

 

		4.2	Filing of financing statements

 

		(a)	The Grantor authorizes the Collateral Agent to prepare and file, at such Grantor’s expense:

 

		(i)	financing statements describing the Collateral;

 

		(ii)	continuation statements; and

 

		(iii)	any amendment in respect of those statements.

 

		(b)	Promptly after filing an initial financing statement in respect of the Collateral, the Grantor
must provide the Collateral Agent with an official report from the Secretary of State of the Commonwealth of Virginia indicating
that the Collateral Agent’s security interest in the Collateral provided by the Grantor is prior to all other security interests
or other interests reflected in the report, other than Permitted Liens (as defined in the Indenture).

 

    	7

    	 

    

 

		4.3	Intellectual Property Recording
Requirements

 

		(a)	In the case of any Collateral consisting of U.S. Patents and Patent
Licenses in respect of U.S. Patents for which the Grantor is the licensee, the Grantor shall execute and deliver to the Collateral
Agent a Patent Security Agreement in substantially the form of Exhibit 1 hereto (or a supplement thereto) covering all such
Patents and Patent Licenses in appropriate form for recordation with the U.S. Patent and Trademark Office with respect to
the security interest of the Collateral Agent.

 

		(b)	In the case of any Collateral consisting of U.S. Trademarks and
Trademark Licenses in respect of U.S. Trademarks for which the Grantor is the licensee, the Grantor shall execute and deliver to
the Collateral Agent a Trademark Security Agreement in substantially the form of Exhibit 2 hereto (or a supplement thereto)
covering all such Trademarks and Trademark Licenses in appropriate form for recordation with the U.S. Patent and Trademark Office
with respect to the security interest of the Collateral Agent.

 

		(c)	In the case of any Collateral consisting of registered U.S. Copyrights and Copyright Licenses in
respect of U.S. Copyrights for which the Grantor is the licensee, the Grantor will execute and deliver to the Collateral Agent
a Copyright Security Agreement in substantially the form of Exhibit 3 hereto (or a supplement thereto) covering all such
Copyright and Copyright Licenses in appropriate form for recordation with the U.S. Copyright Office with respect to the security
interest of the Collateral Agent.

 

		4.4	Further assurances

 

		(a)	The Grantor must take, at its own expense, promptly, and in any event within any applicable time
limit, whatever action may reasonably be required under the Indenture or this Agreement for:

 

		(i)	creating, attaching, perfecting and protecting, and maintaining the priority of, any security interest
intended to be created by this Agreement;

 

		(ii)	facilitating the enforcement of this Security or the exercise of any right, power or discretion
exercisable by the Collateral Agent or any of its delegates or sub-delegates in respect of any Collateral; and

 

		(iii)	facilitating the assignment or transfer of any rights and/or obligations of the Collateral Agent
under this Agreement.

 

This includes the execution
and delivery of any transfer, assignment or other agreement or document, whether to the Collateral Agent or its nominee, which
the Collateral Agent may require.

 

    	8

    	 

    

  

		(b)	The Grantor irrevocably constitutes and appoints the Collateral Agent, with full power of substitution,
as the Grantor’s true and lawful attorney-in-fact, in the Grantor’s name or in the Collateral Agent’s name or
otherwise, and at the Grantor’s expense, to take any of the actions referred to in paragraph (a) above without notice to
or the consent of the Grantor. This power of attorney is a power coupled with an interest and cannot be revoked. The Grantor ratifies
and confirms all actions taken by the Collateral Agent or its agents under this power of attorney.

 

		5.	Representations and warranties

 

		5.1	Representations and warranties

 

The representations and warranties
set out in this Clause are made by the Grantor to the Collateral Agent and each Noteholder.

 

		5.2	The Grantor

 

		(a)	It is incorporated or organized under the laws of the state indicated in the preamble to this Agreement.

 

		(b)	Its exact legal name, as it appears in the public records of its jurisdiction of incorporation
or organization, is as stated in the preamble to this Agreement. It has not changed its name, whether by amendment of its organizational
documents, reorganization, merger or otherwise, since its date of incorporation, April 1, 2002.

 

		(c)	Its organizational identification number, as issued by its jurisdiction of incorporation is 0469701-7.

 

		(d)	It keeps at its address indicated in Clause 16 (Notices) its corporate records and all records,
documents and instruments constituting, relating to or evidencing Collateral.

 

		5.3	The Collateral

 

		(a)	Except as permitted under the Indenture:

 

		(i)	it is the sole legal and beneficial owner of, and has the power to transfer and grant a security
interest in, the Collateral;

 

		(ii)	none of the Collateral is subject to any Lien other than the Collateral Agent’s security
interest;

 

		(iii)	it has not agreed or committed to sell, assign, pledge, transfer, license, lease or encumber any
of the Collateral, or granted any option, warrant or right with respect to any of the Collateral; and

 

    	9

    	 

    

 

 

		(iv)	no effective mortgage, deed of trust, financing statement, security agreement or other instrument
similar in effect is on file or of record with respect to any Collateral, except for those that create, perfect or evidence the
Collateral Agent’s security interest.

 

		(b)	No litigation, arbitration or administrative proceedings are current or pending or, to its knowledge,
threatened, involving or affecting the Collateral, and none of the Collateral is subject to any order, writ, injunction, execution
or attachment.

 

		5.4	No liability

 

		(a)	Its rights, interests, liabilities and obligations under contractual obligations that constitute
part of the Collateral are not affected by this Agreement or the exercise by the Collateral Agent of its rights under this Agreement;

 

		(b)	Neither the Collateral Agent nor any Noteholder, unless it expressly agrees in writing, will have
any liabilities or obligations under any contractual obligation that constitutes part of the Collateral as a result of this Agreement,
the exercise by the Collateral Agent of its rights under this Agreement or otherwise; and

 

		(c)	Neither the Collateral Agent nor any Noteholder has or will have any obligation to collect upon
or enforce any contractual obligation or claim that constitutes part of the Collateral, or to take any other action with respect
to the Collateral.

 

		5.5	Consideration and solvency

 

		(a)	Terms used in this Clause have the meanings given to them in, and must be construed in accordance
with, the fraudulent transfer laws.

 

		(b)	It will receive valuable direct and indirect benefits as a result of the transactions financed
by the issuance of the Notes and these benefits constitute reasonably equivalent value and fair consideration.

 

		(c)	To the best of its knowledge, the Collateral Agent and the Noteholders have acted in good faith
in connection with the transactions contemplated by this Agreement.

 

		(d)	The sum of its debts (including its obligations under this Agreement) is less than the value of
its property (calculated at the lesser of fair valuation and present fair saleable value).

 

		(e)	Its capital is not unreasonably small to conduct its business as currently conducted or as proposed
to be conducted.

 

		(f)	It has not incurred, does not intend to incur and does not believe it will incur debts beyond its
ability to pay as they mature.

 

		(g)	It has not made a transfer or incurred an obligation under this Agreement with the intent to hinder,
delay or defraud any of its present or future creditors.

 

    	10

    	 

    

 

		5.6	Intellectual Property

 

		(a)	It is the sole and exclusive owner of the entire right, title, and interest in and to all Intellectual
Property listed on Schedule 2 (as such schedule may be amended or supplemented from time to time), and owns or has the valid
right to use and, where the Grantor does so, sublicense others to use, all other Intellectual Property used in or necessary to
conduct its business, free and clear of all Liens, claims, encumbrances and licenses, except for Permitted Liens (as defined in
the Indenture) and the licenses set forth on Schedule 2 (as such schedule may be amended or supplemented from time to time).

 

		(b)	All Intellectual Property is subsisting and has not been adjudged invalid or unenforceable, in
whole or in part, nor, in the case of Patents, is any of the Intellectual Property the subject of a reexamination proceeding, and
the Grantor has performed all acts and has paid all renewal, maintenance, and other fees and taxes required to maintain each and
every registration and application of Copyrights, Patents and Trademarks in full force and effect.

 

		(c)	All Intellectual Property is valid and enforceable; no holding, decision, ruling, or judgment has
been rendered in any action or proceeding before any court or administrative authority challenging the validity or scope of, the
Grantor’s right to register, or the Grantor’s rights to own or use, any Intellectual Property and no such action or
proceeding is pending or, to the best of the Grantor’s knowledge, threatened.

 

		(d)	All registrations and applications for Copyright registrations, Patents and Trademark registrations
are standing in the name of the Grantor, and none of the Trademarks, Patents, Copyrights or Trade Secrets has been licensed by
any Grantor to any Affiliate or third party, except as disclosed in Schedule 2 (as such schedule may be amended or supplemented
from time to time), and all exclusive Copyright Licenses have been properly recorded in the U.S. Copyright Office.

 

		(e)	The Grantor has not made a previous assignment, sale, transfer, exclusive license or agreement
constituting a present or future assignment, sale, transfer, exclusive license or agreement of any Intellectual Property that has
not been terminated or released.

 

		(f)	The Grantor has been using appropriate statutory notice of registration in connection with its
use of registered Trademarks, proper marking practices in connection with the use of Patents, and appropriate notice of copyright
in connection with the publication of Copyrights.

 

		(g)	The Grantor uses adequate standards of quality in the manufacture, distribution, and sale of all
products sold and in the provision of all services rendered under or in connection with all Trademark Collateral and has taken
all action necessary to insure that all licensees of the Trademark Collateral owned by the Grantor use such adequate standards
of quality.

 

    	11

    	 

    

 

 

		(h)	The conduct of such Grantor’s business does not infringe upon or misappropriate or otherwise
violate any trademark, patent, copyright, trade secret or other intellectual property right of any other Person; no claim has been
made that the use of any Intellectual Property owned or used by the Grantor (or any of its respective licensees) infringes upon,
misappropriates or otherwise violates the asserted rights of any other Person, and no demand that the Grantor enter into a license
or co-existence agreement has been made but not resolved.

 

		(i)	To the best of the Grantor’s knowledge, no other Person is infringing upon, misappropriating
or otherwise violating any rights in any Intellectual Property owned, licensed or used by the Grantor, or any of its respective
licensees.

 

		(j)	No settlement or consents, covenants not to sue, co-existence agreements, non-assertion assurances,
or releases have been entered into by the Grantor or binds the Grantor in a manner that could adversely affect the Grantor’s
rights to own, license or use any Intellectual Property.

 

		5.7	Times for making representations and warranties

 

		(a)	The representations and warranties set out in this Agreement (including in this Clause) are made
on the date of this Agreement.

 

		(b)	Unless a representation and warranty is expressed to be given at a specific date, all representations
and warranties under this Agreement are deemed to be repeated by the Grantor on the date of each issuance of Notes under the Indenture
with reference to the facts and circumstances then existing.

 

		(c)	When representations and warranties are repeated, they are applied to the circumstances existing
at the time of repetition.

 

		(d)	The representations and warranties of the Grantor contained in this Agreement or made by the Grantor
in any certificate, notice or report delivered under this Agreement will survive each issuance of Notes, the repayment of the Notes,
and any transfer or assignment of the Notes.

 

		6.	Undertakings

 

		6.1	Undertakings

 

The Grantor agrees to be bound
by the covenants set out in this Clause.

 

		6.2	The Grantor

 

		(a)	Except as permitted under the Indenture, the Grantor must preserve its corporate or limited liability
company existence and will not, except as permitted by the Indenture, in one transaction or a series of related transactions, merge
into or consolidate with any other entity, or sell all or substantially all of its assets.

 

    	12

    	 

    

 

 

		(b)	The Grantor may not change the jurisdiction of its incorporation or organization without providing
the Collateral Agent with at least 30 days’ prior written notice.

 

		(c)	The Grantor may not change its name without providing the Collateral Agent with at least 30 days’
prior written notice.

 

		(d)	The Grantor must keep at its address indicated in Clause 16 (Notices) its corporate records
and all records, documents and instruments constituting, relating to or evidencing Collateral.

 

		(e)	The Grantor will permit the Collateral Agent and its agents and representatives, during normal
business hours and upon reasonable notice, to inspect the Collateral, to examine and make copies of and abstracts from the records
referred to in paragraph (d) above, and to discuss matters relating to the Collateral directly with the Grantor’s officers
and employees.

 

		(f)	At the Collateral Agent’s request, the Grantor must provide the Collateral Agent with any
information concerning the Collateral that the Collateral Agent may reasonably request.

 

		6.3	The Collateral

 

		(a)	Except as expressly permitted by the Indenture or this Agreement, the Grantor:

 

		(i)	must maintain sole legal and beneficial ownership of the Collateral;

 

		(ii)	must not permit any Collateral to be subject to any Lien other than the Collateral Agent’s
security interest and must at all times warrant and defend the Collateral Agent’s security interest in the Collateral against
all other Liens and claimants;

 

		(iii)	must not sell, assign, transfer, pledge, license, lease or encumber, or grant any option, warrant,
or right with respect to, any of the Collateral, or agree or contract to do any of the foregoing;

 

		(iv)	must not waive, amend or terminate, in whole or in part, any material accessory or ancillary right
or other right in respect of any Collateral; and

 

		(v)	must not take any action which would result in a reduction in the value of any Collateral.

 

		(b)	The Grantor must pay when due (and in any case before any penalties are assessed or any Lien is
imposed on any Collateral) all taxes, assessments and charges imposed on or in respect of Collateral and all claims against the
Collateral, including claims for labor, materials and supplies.

 

    	13

    	 

    

 

 

		(c)	In any suit, legal action, arbitration or other proceeding involving the Collateral or the Collateral
Agent’s security interest, the Grantor must take all lawful action to avoid impairment of the Collateral Agent’s security
interest or the Collateral Agent’s rights under this Agreement or the imposition of a Lien (other than Permitted Liens (as
defined in the Indenture)) on any Collateral.

 

		6.4	Intellectual Property

 

		(a)	It shall not do any act or omit to do any act whereby any of the Intellectual Property which is
material to the business of the Grantor or which is of material value may lapse, or become abandoned, dedicated to the public,
or unenforceable, or which would adversely affect the validity, grant, or enforceability of the security interest granted therein.

 

		(b)	It shall not, with respect to any Trademarks, cease the use of any of such Trademarks or fail to
maintain the level of the quality of products sold and services rendered under any of such Trademark at a level at least substantially
consistent with the quality of such products and services as of the date hereof, and the Grantor shall take all steps necessary
to insure that licensees of such Trademarks use such consistent standards of quality.

 

		(c)	It shall, within thirty (30) days of the creation or acquisition or exclusive license of any Copyrightable
work which is material to the business of the Grantor or otherwise of material value, apply to register the Copyright and, in the
case of an exclusive Copyright License, record such license, in the United States Copyright Office.

 

		(d)	It shall promptly notify the Collateral Agent if it knows or has reason to know that any item of
Intellectual Property material to its business may become (i) abandoned or dedicated to the public or placed in the public domain,
(ii) invalid or unenforceable, (iii) subject to any adverse determination or development (including the institution of proceedings)
in any action or proceeding in the United States Patent and Trademark Office, the United States Copyright Office, any state registry,
any foreign counterpart of the foregoing, or any court or (iv) be the subject of any reversion or termination rights.

 

		(e)	It shall take all reasonable steps in the United States Patent and Trademark Office, the United
States Copyright Office to pursue any application and maintain any registration of each Trademark, Patent, and Copyright owned
by or exclusively licensed to the Grantor which is now or shall become included in the Intellectual Property including, but not
limited to, those items on Schedule 3 (as such may be amended or supplemented from time to time).

 

		(f)	It shall hereafter use best efforts so as not to permit the inclusion in any contract to which
it hereafter becomes a party of any provision that could or might in any way materially impair or prevent the creation of a security
interest in, or the assignment of, the Grantor’s rights and interests in any property included within the definitions of
any Intellectual Property acquired under such contracts.

 

    	14

    	 

    

 

 

		(g)	In the event that any Intellectual Property owned by or exclusively licensed to the Grantor is
infringed, misappropriated, or diluted by a third party, the Grantor shall promptly take all reasonable actions to stop such infringement,
misappropriation, or dilution and protect its rights in such Intellectual Property including, but not limited to, the initiation
of a suit for injunctive relief and to recover damages.

 

		(h)	It shall take all steps reasonably necessary to protect the secrecy of all Trade Secrets, including,
without limitation, entering into confidentiality agreements with employees and consultants and labeling and restricting access
to secret information and documents.

 

		(i)	It shall use proper statutory notice in connection with its use of any of the Intellectual Property.

 

		(j)	It shall continue to collect, at its own expense, all amounts due or to become due to the Grantor
in respect of the Intellectual Property or any portion thereof. In connection with such collections, the Grantor may take (and,
at the Collateral Agent’s reasonable direction, shall take) such action as the Grantor or the Collateral Agent may deem reasonably
necessary or advisable to enforce collection of such amounts. Notwithstanding the foregoing, the Collateral Agent shall have the
right at any time, to notify, or require the Grantor to notify, any obligors with respect to any such amounts of the existence
of the security interest created hereby.

 

		6.5	Notices

 

		(a)	The Grantor must give the Collateral Agent prompt notice of the occurrence of any of the following
events:

 

		(i)	any pending or threatened claim, suit, legal action, arbitration or other proceeding involving
or affecting the Grantor or any Collateral which could reasonably be expected to impair the Collateral Agent’s security interest
or the Collateral Agent’s rights under this Agreement or result in the imposition of a Lien (other than Permitted Liens (as
defined in the Indenture) on any Collateral;

 

		(ii)	any loss or damage to any material portion of the Collateral; or

 

		(iii)	any representation or warranty contained in this Agreement is or becomes untrue, incorrect or incomplete
in any material respect.

 

		(b)	Each notice delivered under this Clause, must include:

 

		(i)	reasonable details about the event; and

 

		(ii)	the Grantor’s proposed course of action.

 

    	15

    	 

    

 

 

Delivery of a notice under this
Clause does not affect the Grantor’s obligations to comply with any other term of this Agreement.

 

		7.	When security becomes enforceable

 

This Security may be enforced
by the Collateral Agent at any time after an Event of Default has occurred.

 

		8.	Enforcement of security

 

		8.1	Events of Default

 

Each of the events set out in
this Subclause is an Event of Default.

 

		(a)	The Grantor fails to comply with Clause 6.3(a) (The Collateral);

 

		(b)	The Grantor fails to comply with any other term of this Agreement or any Control Agreement unless
the non-compliance:

 

		(i)	is capable of remedy; and

 

		(ii)	is remedied within 14 days of the Collateral Agent giving notice to the Grantor;

 

		(c)	A representation or warranty made or repeated in this Agreement or any Control Agreement, is untrue
or incorrect in any material aspect when made or deemed to be repeated;

 

		(d)	Any attachment, execution or levy is made in respect of material part of the Collateral; or

 

		(e)	An “Event of Default” (as that term is defined in the Indenture) occurs.

 

		8.2	General

 

		(a)	After this Security has become enforceable, the Collateral Agent may immediately, in its absolute
discretion, exercise any right under:

 

		(i)	applicable law; or

 

		(ii)	this Agreement,

 

to enforce all or any part of
the Security in respect of any Collateral in any manner or order it sees fit.

 

		(b)	This includes:

 

    	16

    	 

    

 

		(i)	any rights and remedies available to the Collateral Agent under applicable law and under the UCC
(whether or not the UCC applies to the affected Collateral and regardless of whether or not the UCC is the law of the jurisdiction
where the rights or remedies are asserted) as if those rights and remedies were set forth in this Agreement in full;

 

		(ii)	transferring or assigning to, or registering in the name of, the Collateral Agent or its nominees
any of the Collateral;

 

		(iii)	exercising any consent and other rights relating to any Collateral;

 

		(iv)	performing or complying with any contractual obligation that constitutes part of the Collateral;

 

		(v)	receiving, endorsing, negotiating, executing and delivering or collecting upon any check, draft,
note, acceptance, account, instrument, document, letter of credit, contract, agreement, receipt, release, bill of lading, invoice,
endorsement, assignment, bill of sale, deed, security, share certificate, stock power, proxy, or instrument of conveyance or transfer
constituting or relating to any Collateral;

 

		(vi)	asserting, instituting, filing, defending, settling, compromising, adjusting, discounting or releasing
any suit, action, claim, counterclaim, right of set-off or other right or interest relating to any Collateral;

 

		(vii)	executing and delivering acquittances, receipts and releases in respect of Collateral; and

 

		(viii)	exercising any other right or remedy available to the Collateral Agent under the other Finance
Documents or any other agreement between the parties.

 

		8.3	Collections after an Event of Default

 

		(a)	If an Event of Default occurs and is continuing, the Grantor must hold all funds and other property
received or collected in respect of the Collateral in trust for the Collateral Agent, and must keep these funds and this other
property segregated from all other funds and property so as to be capable of identification.

 

		(b)	The Grantor must deliver those funds and that other property to the Collateral Agent in the identical
form received, properly endorsed or assigned when required to enable the Collateral Agent to complete collection.

 

		(c)	After the occurrence and during the continuation of an Event of Default, the Grantor may not settle,
compromise, adjust, discount or release any claim in respect of Collateral, and the Grantor may not accept any returns of merchandise
other than in the ordinary course of business.

 

    	17

    	 

    

  

		8.4	Collateral Agent’s rights upon default

 

		(a)	The Grantor irrevocably constitutes and appoints the Collateral Agent, with full power of substitution,
as the Grantor’s true and lawful attorney-in-fact, in the Grantor’s name or in the Collateral Agent’s name or
otherwise, and at the Grantor’s expense, to take any of the actions authorized by this Agreement or permitted under applicable
law upon the occurrence and during the continuation of an Event of Default, without notice to or the consent of the Grantor. This
power of attorney is a power coupled with an interest and cannot be revoked. The Grantor ratifies and confirms all actions taken
by the Collateral Agent or its agents under this power of attorney.

 

		(b)	The Grantor agrees that 10 days notice shall constitute reasonable notice in connection with any
sale, transfer or other disposition of Collateral.

 

		(c)	The Collateral Agent may comply with any applicable state or federal law requirements in connection
with a disposition of Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any
sale of Collateral.

 

		(d)	The grant to the Collateral Agent under this Agreement of any right, power or remedy does not impose
upon the Collateral Agent any duty to exercise that right, power or remedy. The Collateral Agent will have no obligation to take
any steps to preserve any claim or other right against any person or with respect to any Collateral.

 

		(e)	The Grantor bears the risk of loss, damage, diminution in value, or destruction of the Collateral.

 

		(f)	The Collateral Agent will have no responsibility for any act or omission of any courier, bailee,
broker, bank, investment bank or any other person chosen by it with reasonable care.

 

		(g)	The Collateral Agent makes no express or implied representations or warranties with respect to
any Collateral or other property released to the Grantor or its successors and assigns.

 

		(h)	The Grantor agrees that the Collateral Agent will have met its duty of care under applicable law
if it holds, maintains and disposes of Collateral in the same manner that it holds, maintains and disposes of property for its
own account.

 

		(i)	Except as set forth in this Clause or as required under applicable law, the Collateral Agent will
have no duties or obligations under this Agreement or otherwise with respect to the Collateral.

 

		(j)	The sale, transfer or other disposition under this Agreement of any right, title, or interest of
the Grantor in any item of Collateral will:

 

		(i)	operate to divest the Grantor permanently and all persons claiming under or through the Grantor
of that right, title, or interest, and

 

    	18

    	 

    

  

		(ii)	be a perpetual bar, both at law and in equity, to any claims by the Grantor or any person claiming
under or through the Grantor

 

with respect to that item of
Collateral.

 

		8.5	No marshaling

 

		(a)	The Collateral Agent need not, and the Grantor irrevocably waives and agrees that it will not invoke
or assert any law requiring the Collateral Agent to:

 

		(i)	attempt to satisfy the Secured Liabilities by collecting them from any other person liable for
them; or

 

		(ii)	marshal any security or guarantee securing payment or performance of the Secured Liabilities or
any particular asset of the Grantor.

 

		(b)	The Collateral Agent may release, modify or waive any collateral or guarantee provided by any other
person to secure any of the Secured Liabilities, without affecting the Collateral Agent’s rights against the Grantor.

 

		8.6	Grant of Intellectual Property License

 

For
the purpose of enabling the Collateral Agent, during the continuance of an Event of Default, to exercise rights and remedies under
this Clause 8 hereof at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies,
and for no other purpose, the Grantor hereby grants to the Collateral Agent, to the extent assignable, an irrevocable, non-exclusive
license to use, assign, license or sublicense any of the Intellectual Property now owned or hereafter acquired by the Grantor,
wherever the same may be located. Such license shall be subject, in the case of Trademarks, to sufficient rights to quality
control and inspection in favor of the Grantor to avoid the risk of invalidation of said Trademarks. Such
license shall include access to all media in which any of the licensed items may be recorded or stored and to all computer programs
used for the compilation or printout hereof.

 

		9.	Application
                                                                                                                                                          of
                                                                                                                                                          proceeds

 

Any moneys received in connection
with the Collateral by the Collateral Agent after this Security has become enforceable must be applied in the following order of
priority:

 

		(a)	first, in or towards payment of or provision for all costs and expenses incurred by the
Collateral Agent in connection with the enforcement of this Security;

 

		(b)	second, in or towards payment of, or provision for, the Secured Liabilities; and

 

		(c)	third, in payment of the surplus (if any) to the Grantor or any other Person entitled to
it under applicable law.

 

    	19

    	 

    

  

This Clause is subject to the
payment of any claims having priority over this Security under mandatory provisions of applicable law. This Clause does not prejudice
the right of any Noteholder to recover any shortfall from the Grantor.

 

		10.	Expenses
                                                                                                                                                           and
                                                                                                                                                           indemnity

 

		(a)	The Grantor must pay promptly on demand to the Collateral Agent all costs and expenses incurred
by the Collateral Agent, any Noteholder, attorney, manager, delegate, sub-delegate, agent or other person appointed by the Collateral
Agent under this Agreement for the purpose of enforcing its rights under this Agreement. This includes:

 

		(i)	costs of foreclosure and of any transfer, disposition or sale of Collateral;

 

		(ii)	costs of maintaining or preserving the Collateral or assembling it or preparing it for transfer,
disposition or sale;

 

		(iii)	costs of obtaining money damages; and

 

		(iv)	fees and expenses of attorneys employed by the Collateral Agent for any purpose related to this
Agreement or the Secured Liabilities, including consultation, preparation and negotiation of any amendment or restructuring, drafting
documents, sending notices or instituting, prosecuting or defending litigation or arbitration.

 

		(b)	The Grantor must indemnify and keep indemnified the Collateral Agent, the Noteholders and their
respective affiliates, directors, officers, representatives and agents from and against all claims, liabilities, obligations, losses,
damages, penalties, judgments, costs and expenses of any kind (including attorney’s fees and expenses) which may be imposed
on, incurred by or asserted against any of them by any person (including any Noteholder) in any way relating to or arising out
of:

 

		(i)	this Agreement;

 

		(ii)	the Collateral;

 

		(iii)	the Collateral Agent’s security interest in the Collateral;

 

		(iv)	any Event of Default;

 

		(v)	any action taken or omitted by the Collateral Agent under this Agreement or any exercise or enforcement
of rights or remedies under this Agreement; or

 

		(vi)	any transfer sale or other disposition of or any realization on Collateral.

 

    	20

    	 

    

  

		(c)	The Grantor will not be liable to an indemnified party to the extent any liability results from
that indemnified party’s gross negligence or willful misconduct. Payment by an indemnified party will not be a condition
precedent to the obligations of the Grantor under this indemnity.

 

		(d)	This Clause survives the issuance of the Notes, the repayment of the Notes, any transfer or assignment
of the Notes and the termination of this Agreement.

 

		11.	Evidence
                                                                                                                                                           and
                                                                                                                                                           calculations

 

In the absence of manifest error,
the records of the Collateral Agent are conclusive evidence of the existence and the amount of the Secured Liabilities.

 

		12.	Changes
                                                                                                                                                           to
                                                                                                                                                           the
                                                                                                                                                           parties

 

		12.1	Grantor

 

The Grantor may not assign, delegate
or transfer any of its rights or obligations under this Agreement without the consent of the Collateral Agent, and any purported
assignment, delegation or transfer in violation of this provision shall be void and of no effect.

 

		12.2	Collateral Agent

 

The
Collateral Agent may assign or transfer its rights and obligations under this Agreement in the manner permitted under the Indenture.

 

		12.3	Successors and assigns

 

This Agreement shall be binding
on and inure to the benefit of the respective successors and permitted assigns of the Grantor and the Collateral Agent.

 

		13.	Miscellaneous

 

		13.1	Amendments and waivers

 

Any term of this Agreement may
be amended or waived only by the written agreement of the Grantor and the Collateral Agent.

 

		13.2	Waivers and remedies cumulative

 

		(a)	The rights and remedies of the Collateral Agent under this Agreement:

 

		(i)	may be exercised as often as necessary;

 

		(ii)	are cumulative and not exclusive of its rights under applicable law; and

 

		(iii)	may be waived only in writing and specifically.

 

    	21

    	 

    

  

		(b)	Delay in exercising, or non-exercise, of any right or remedy under this Agreement is not a waiver
of that right or remedy.

 

		13.3	Counterparts

 

This Agreement may be executed
in counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.

 

		14.	Severability

 

If any term of this Agreement
is or becomes illegal, invalid or unenforceable in any jurisdiction, that will not affect:

 

		(a)	the legality, validity or enforceability in that jurisdiction of any other term of this Agreement;
or

 

		(b)	the legality, validity or enforceability in any other jurisdiction of that or any other term of
this Agreement.

 

		15.	Release

 

At the end of the Security Period,
the Collateral Agent must, at the request and cost of the Grantor, take whatever action is necessary to release the Collateral
from this Security in accordance with the terms of the Indenture.

 

		16.	Notices

 

		16.1	Notices

 

Any communication in connection
with this Agreement must be in writing and, unless otherwise stated, must be given in person or by fax.

 

		16.2	Contact details

 

		(a)	The contact details of the Grantors for this purpose are:
	 	 	 

	Vector Tobacco Inc.
	Address:	3800 Paramount Parkway
	 	Suite 250
	 	PO Box 2010
	 	Morrisville, NC 27560
	Fax:	(305) 579-8016
	Attention:	Marc N. Bell

 

    	22

    	 

    

 

		(b)	The contact details of the Collateral Agent for this purpose are:
	 	 	 

U.S.
Bank National Association

	Address:	Global Corporate Trust Services
	 	60 Livingston Avenue
	 	EP-MN-WS3C
	 	St. Paul, MN 55107-2292
	Fax:	(651) 495-7430
	Attention:	Joshua A. Hahn

 

		(c)	Either party may change its contact details by giving five Business Days’ notice to the other
party.

 

		(d)	Where a party nominates a particular department or officer to receive a communication, a communication
will not be effective if it fails to specify that department or officer.

 

		16.3	Effectiveness

 

		(a)	Except as provided below, any communication in connection with this Agreement will be deemed to
be given as follows:

 

		(i)	if delivered in person, at the time of delivery;

 

		(ii)	if by fax, when sent with confirmation of transmission.

 

		(b)	A communication given under this Clause but received on a non-working day or after business hours
in the place of receipt will only be deemed to be given on the next working day in that place.

 

		17.	Governing
                                                                                                                                                           law

 

This Agreement, the relationship
between the Grantor, the Collateral Agent and the Noteholders and any claim or dispute (whether sounding in contract, tort, statute
or otherwise) relating to this Agreement or that relationship shall be governed by and construed in accordance with law of the
State of New York including section 5-1401 of the New York General Obligations Law but excluding any other conflict of law rules
that would lead to the application of the law of another jurisdiction. If the law of a jurisdiction other than New York is, under
section 1-105(2) of the UCC, mandatorily applicable to the perfection, priority or enforcement of any security interest granted
under this Agreement in respect of any particular Collateral, that other law shall apply solely to the matters of perfection, priority
or enforcement to which it is mandatorily applicable.

 

		18.	Enforcement

 

		18.1	Jurisdiction

 

		(a)	Each of the Parties agrees that any New York State court or Federal court sitting in the City and
County of New York has jurisdiction to settle any disputes in connection with this Agreement and accordingly submits to the jurisdiction
of those courts.

 

    	23

    	 

    

  

		(b)	Each of the Parties:

 

		(i)	waives objection to the New York State and Federal courts on grounds of personal jurisdiction,
inconvenient forum or otherwise as regards proceedings in connection with this Agreement; and

 

		(ii)	agrees that a judgment or order of a New York State or Federal court in connection with this Agreement
is conclusive and binding on it and may be enforced against it in the courts of any other jurisdiction.

 

		(c)	Nothing in this Clause limits the right of the Collateral Agent or any Noteholder to bring proceedings
against the Grantor in connection with this Agreement:

 

		(i)	in any other court of competent jurisdiction; or

 

		(ii)	concurrently in more than one jurisdiction.

 

		18.2	Service of Process

 

		(a)	The Grantor irrevocably appoints CT Corporation System, 4701 Cox Rd., Suite 301 Glen Allen, VA
23060 as its agent for service of process in relation to proceedings before any courts located in the State of New York in connection
with this Agreement.

 

		(b)	The Grantor agrees to maintain an agent for service of process in the State of New York until the
end of the Security Period.

 

		(c)	The Grantor agrees that failure by a process agent to notify the Grantor of the process will not
invalidate the proceedings concerned.

 

		(d)	The Grantor consents to the service of process relating to any proceedings by a notice given in
accordance with Clause 16 (Notices) above.

 

		(e)	If the appointment of any person mentioned in paragraph (a) above ceases to be effective, the Grantor
must immediately appoint a further person in the State of New York to accept service of process on its behalf in the State of New
York, and, if the Grantor does not appoint a process agent within 15 days, the Grantor authorizes the Collateral Agent to appoint
a process agent for the Grantor.

 

		18.3	Complete Agreement

 

This Agreement and the other
Finance Documents contain the complete agreement between the parties on the matters to which they relate and supersede all prior
commitments, agreements and understandings, whether written or oral, on those matters.

 

    	24

    	 

    

  

		18.4	Waiver of Jury Trial

 

THE GRANTOR AND THE COLLATERAL
AGENT (FOR ITSELF AND ON BEHALF OF THE NOTEHOLDERS) WAIVE ANY RIGHTS THEY MAY HAVE TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED ON OR ARISING FROM THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.

 

The undersigned, intending to be legally
bound, have executed and delivered this Agreement on the date stated at the beginning of this Agreement.

 

    	25

    	 

    

 

SCHEDULE 1

Commercial Tort Claims

 

None.

 

    	26

    	 

    

 

SCHEDULE 2

INTELLECTUAL PROPERTY

 

Copyrights:

 

Registrations

  

	Title	 	Owner	 	
        Registration No.

        Registration Date

	Quest 1 cigarette packaging in blue.	 	Vector Tobacco Inc.	 	
        VA1390735

        12/22/05

 

Applications:

 

None.

 

Copyright Licenses:

 

None.

 

Patents:

 

Registrations

  

	Title	 	Country	 	
        Application

 No.

        Patent No.
	 	Date Filed on	 	
        Issue

        Date

	Method Of Making A Smoking Composition	 	USA	 	
        10/007724

        6,789,548
	 	Nov. 9, 2001	 	Sept. 14, 2004
	Method Of Making A Smoking Composition	 	USA	 	
        10/871863

        6,959,712
	 	June 18, 2004	 	Nov. 1, 2005
	Global Gene Expression Analysis Of Human Bronchial Epithelial Cells Exposed To Cigarette Smoke, Smoke Condensates, Or Components Thereof	 	USA	 	
        10/593596

        7,727,715
	 	Sept. 20, 2006	 	June 1, 2010
	Approaches to Identify Less Harmful Tobacco and Tobacco Products	 	USA	 	
        11/596088

        7,662,565
	 	Nov. 9, 2006	 	Feb. 16, 2010

 

Applications:

 

	Title	 	Country	 	Application

 No.	 	Date Filed on
	Global Gene Expression Analysis Of Human Bronchial Epithelial Cells Exposed To Cigarette Smoke, Smoke Condensates, Or Components Thereof	 	USA	 	12/770,668	 	April 29, 2010
	Reduced Risk Tobacco Products and Methods of Making Same	 	USA	 	11/913870	 	Nov. 8, 2007
	Reduced Risk Tobacco Products and Use Thereof	 	USA	 	12/711,974	 	Feb. 24, 2010

 

    	27

    	 

    

 

Patent Licenses:

 

None.

 

Trademarks:

 

Registrations

  

	
         

        Mark
	 	Owner	 	
        Appl. No.

        Filing Date
	 	
        Reg. No.

        Reg. Date

		 	Vector Tobacco Inc.	 	
        78/213138

        10-FEB-2003
	 	
        2849710

        01-JUN-2004

	 	 	 	 	 	 	 
		 	Vector Tobacco Inc.	 	
        78/213127

        10-FEB-2003
	 	
        2849709

        01-JUN-2004

	 	 	 	 	 	 	 
		 	Vector Tobacco Inc.	 	
        78/213122

        10-FEB-2003
	 	
        2849708

        01-JUN-2004

	 	 	 	 	 	 	 
		 	Vector Tobacco Inc.	 	
        78/195555

        17-DEC-2002
	 	
        2858950

        29-JUN-2004

	 	 	 	 	 	 	 
		 	Vector Tobacco Inc.	 	
        76/352487

        21-DEC-2001
	 	
        2748408

        05-AUG-2003

	 	 	 	 	 	 	 
		 	Vector Tobacco Inc.	 	
        74/395979

        27-MAY-1993
	 	
        1900069

        13-JUN-1995

	 	 	 	 	 	 	 
		 	Vector Tobacco Inc.	 	
        74/395982

        27-MAY-1993
	 	
        1863306

        15-NOV-1994

 

    	28

    	 

    

 

 

	Mark	 	Owner	 	
        Appl. No.

        Filing Date
	 	
        Reg. No.

        Reg. Date

	EAGLE 20’S	 	Vector Tobacco Inc.	 	
        73/065753

        14-OCT-1975
	 	
        1041041

        08-JUN-1976

	QUEST	 	Vector Tobacco Inc.	 	
        78/891393

        24-MAY-2006
	 	
        3307003

        09-OCT-2007

	QUEST 1	 	Vector Tobacco Inc.	 	78/181534 04-NOV-2002	 	2837372 27-APR-2004
	QUEST 2	 	Vector Tobacco Inc.	 	78/181570 04-NOV-2002	 	2837373 27-APR-2004
	QUEST 3	 	Vector Tobacco Inc.	 	78/181574 04-NOV-2002	 	2837374 27-APR-2004
	SILVER EAGLE	 	Vector Tobacco Inc.	 	78/632586 18-MAY-2005	 	3140520 05-SEP-2006

 

Applications:

 

	Mark	 	Owner	 	
        Appl. No.

        Filing Date
	 	 
	QUEST	 	Vector Tobacco Inc.	 	
        77873485

        11/16/2009
	 	 

 

 

Trademark Licenses:

 

None.

 

Trade Secret Licenses:

 

None.

 

    	29

    	 

    

 

SIGNATORIES

 

In
Witness Whereof, the Grantor has caused this Security Agreement to be duly executed by its duly authorized officer as of
the day and year first above written.

 

	Grantor
	 
	VECTOR TOBACCO INC.
	 	 
	By:	/s/ Francis G. Wall	 
	 	 	 
	Name:	Francis G. Wall	 
	 	 
	Title:	Vice President of Finance, Treasure and Chief Financial Officer

 

(Signature Page to Security Agreement
– Vector Tobacco Inc.) 

    	30

    	 

    

 

	Collateral Agent	 
	 	 
	U.S. BANK NATIONAL ASSOCIATION	 
	as Collateral Agent	 
	 	 	 
	By:	/s/ Joshua A. Hahn	 
	 	 	 
	Name:	Joshua A. Hahn	 
	 	 	 
	Title:	Assistant Vice President	 

 

(Signature Page to Security Agreement
– Vector Tobacco Inc.) 

    	31

    	 

    

 

EXHIBIT 1

 

Form of Patent Security Agreement

 

(see attached)

 

    	32

    	 

    

 

FORM OF

PATENT SECURITY AND PLEDGE AGREEMENT

 

This PATENT SECURITY
AND PLEDGE AGREEMENT, dated as of [            ], 2013 (as may
be amended, restated, supplemented or otherwise modified from time to time, this “Agreement”), is made by [      
], a [       ] corporation (the “Grantor”) in favor of U.S. Bank National Association, as collateral agent (in such
capacity, the “Collateral Agent”) for the Noteholders (as defined in the Security Agreement referred to below).

 

WHEREAS, the Grantor
has guaranteed the Notes issued under the Indenture, dated as of February 12, 2013 (as amended, supplemented, or otherwise modified
from time to time, the “Indenture”) among Vector Group Ltd. (the “Issuer”), the Grantor and
certain of the Issuer’s other direct and indirect subsidiaries and the Collateral Agent, in its capacity as trustee thereunder.

 

WHEREAS, it is a condition
precedent to the obligations of the Collateral Agent under the Indenture that the Grantor shall have executed and delivered that
certain Security Agreement, dated as of February 12, 2013, in favor of the Collateral Agent (as amended, supplemented, replaced
or otherwise modified from time to time, the “Security Agreement”).

 

WHEREAS, under the
terms of the Security Agreement, the Grantor has granted a security interest in certain Property, including, without limitation,
certain Intellectual Property of the Grantor to the Collateral Agent for the ratable benefit of the Noteholders, and have agreed
as a condition thereof to execute this Agreement for recording with the United States Patent and Trademark Office and other applicable
Governmental Authorities.

 

WHEREAS, this Agreement
is supplemental to the provisions contained in the Security Agreement and, in the event of an inconsistency among them, the Security
Agreement shall control over this Agreement.

 

NOW, THEREFORE, for
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor agrees as follows:

 

1.

DEFINITIONS.

 

1.1           Terms
Defined in the Security Agreement. All capitalized terms used in this Agreement and not otherwise defined herein shall have
the meanings assigned to them in the Security Agreement.

 

1.2           Certain
Defined Terms. As used in this Agreement, the following terms shall have the following meanings:

 

    	33

    	 

    

 

“Assignment
of Patents” has the meaning set forth in Section 2.2 herein.

 

“Patent
Collateral” has the meaning set forth in Section 2.1 herein.

 

“PTO”
means the United States Patent and Trademark Office.

 

1.3           Rules
of Construction. Unless otherwise provided herein, the rules of construction set forth in Section 1.2 of the Security
Agreement shall be applicable to this Agreement.

 

2.

grant
of SECURITY INTEREST.

 

2.1           Security
Interest. As collateral security for the payment and performance in full of all of the Secured Liabilities, each Grantor hereby
grants to the Collateral Agent, for the benefit of the Collateral Agent and the ratable benefit of the Noteholders, a continuing
security interest in and first priority lien on all of such Grantor’s rights, title and interests in all Patents and Patent
Licenses, including the Patents and Patent Licenses referred to on Schedule A hereto, in each case whether now or hereafter
existing or arising or in which such Grantor now has or hereafter owns, acquires or develops an interest and wherever located (collectively,
the “Patent Collateral”).

 

2.2           Assignment
of Patents upon Default. Each Grantor acknowledges that the Collateral Agent has the right, pursuant to the power of attorney
granted the Collateral Agent hereunder and under the Security Agreement, upon the occurrence and during the continuance of an Event
of Default, to execute on behalf of such Grantor an assignment of Patents and Patent Licenses that constitute Patent Collateral
in substantially the form of Exhibit 1 hereto (each an “Assignment of Patents”) for the sole purpose
of effecting the Collateral Agent’s exercise of its remedies under Section 8 of the Security Agreement. In furtherance of
the foregoing, each Grantor hereby authorizes the Collateral Agent to complete, execute and record with the PTO an Assignment of
Patents on behalf of such Grantor upon the occurrence and during the continuance of an Event of Default for the sole purpose of
effecting the Collateral Agent’s exercise of its remedies under Section 8 of the Security Agreement.

 

2.3           Conditional
Assignment. In addition to, and not by way of limitation of, the grant and pledge of the Patent Collateral provided in Section 2.1,
each Grantor grants, assigns, transfers, conveys and sets over to the Collateral Agent, for the benefit of the Noteholders, such
Grantor’s entire right, title and interest in and to the Patent Collateral; provided, that such grant, assignment,
transfer and conveyance shall be and become of force and effect only (a) in connection with the Collateral Agent’s exercise
of its rights and remedies in strict accordance with the terms of the Security Agreement, and (b) upon or after the occurrence
and during the continuance of an Event of Default and (c) either (i) upon the written demand of the Collateral Agent at any time
during such continuance or (ii) immediately and automatically (without notice or action of any kind by the Collateral Agent) upon
an Event of Default for which acceleration of the payment of the Notes is automatic under the Indenture or upon the sale or other
disposition of or foreclosure upon the Collateral pursuant to the Security Agreement and applicable law (including the transfer
or other disposition of the Collateral by any Grantor to the Collateral Agent or its nominee in lieu of foreclosure).

 

    	34

    	 

    

 

2.4           Supplemental
to Security Agreement. Pursuant to the Security Agreement the Grantor has granted to the Collateral Agent, for the benefit
of the Noteholders, a continuing security interest in and first lien on the Collateral (including the Patent Collateral). The Security
Agreement, and all rights and interests of the Collateral Agent in and to the Collateral (including the Patent Collateral) thereunder,
are hereby ratified and confirmed in all respects. In no event shall this Agreement, the grant, assignment, transfer and conveyance
of the Patent Collateral hereunder, or the recordation of this Agreement (or any other document hereunder) with the PTO, adversely
affect or impair, in any way or to any extent, the Security Agreement, the security interest of the Collateral Agent in the Collateral
(including the Patent Collateral) pursuant to the Security Agreement, the attachment and perfection of such security interest under
the UCC (including the security interest in the Patent Collateral), or any present or future rights and interests of the Collateral
Agent in and to the Collateral under or in connection with the Security Agreement or the UCC. Any and all rights and interests
of the Collateral Agent in and to the Patent Collateral (and any and all obligations of the Grantors with respect to the Patent
Collateral) provided herein, or arising hereunder or in connection herewith, shall only supplement and be cumulative and in addition
to the rights and interests of the Collateral Agent (and the obligations of the Grantors) in, to or with respect to the Collateral
(including the Patent Collateral) provided in or arising under or in connection with the Security Agreement and shall not be in
derogation thereof.

 

3.

AFTER-ACQUIRED
PATENTS

 

3.1           After-acquired
Patents. If, after the execution of this Agreement and before the end of the Secured Period, any Grantor shall obtain any right,
title or interest in or to any new patentable inventions or become entitled to the benefit of any Patents or Patent Licenses for
any reissue, division, or continuation, of any Patent, the provisions of this Agreement shall automatically apply thereto and such
Grantor shall promptly provide to the Collateral Agent notice thereof in writing and execute and deliver to the Collateral Agent
such documents or instruments as the Collateral Agent may reasonably request further to implement, preserve or evidence the Collateral
Agent’s interest therein.

 

3.2           Amendment
to Schedule. The Grantor authorizes the Collateral Agent to modify this Agreement and the Assignments of Patents, without the
necessity of such Grantor’s further approval or signature, by amending Schedule A hereto and the Annex to each Assignment
of Patents to include any future or other Patents or Patent Licenses that become part of the Patent Collateral under Section 2
or Section 3.1.

 

    	35

    	 

    

 

4.

Governing
Law; CONSENT TO JURISDICTION.

 

This Agreement,
the relationship between the parties hereunder and any claim or dispute (whether sounding in contract, tort, statute or otherwise)
relating to this Agreement or that relationship shall be governed by and construed in accordance with law of the State of New York
including section 5-1401 of the New York General Obligations Law but excluding any other conflict of law rules that would lead
to the application of the law of another jurisdiction. If the law of a jurisdiction other than New York is, under section 1-105(2)
of the UCC, mandatorily applicable to the perfection, priority or enforcement of any security interest granted under this Agreement
in respect of any Patent Collateral, that other law shall apply solely to the matters of perfection, priority or enforcement to
which it is mandatorily applicable.

 

5.

miscellaneous.

 

5.1           Headings.
The headings of each section of this Agreement are for convenience only and shall not define or limit the provisions thereof. This
Agreement and all rights and obligations hereunder shall be binding upon the Grantor and its respective successors and assigns,
and shall inure to the benefit of the Collateral Agent, the other Noteholders and their respective successors and assigns. If any
term of this Agreement shall be held to be invalid, illegal or unenforceable, the validity of all other terms hereof shall in no
way be affected thereby, and this Agreement shall be construed and be enforceable as if such invalid, illegal or unenforceable
term had not been included herein. The Grantor acknowledges receipt of a copy of this Agreement.

 

5.2           Counterparts.
This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original,
but all such counterparts together shall constitute but one and the same instrument.

 

[Signatures begin on next page]

 

    	36

    	 

    

 

IN WITNESS WHEREOF,
this Patent Security and Pledge Agreement has been executed and delivered by its duly authorized officer as of the day and year
first above written.

 

	 	[	], as Grantor
	 	By:	 
	 	 	Name:
	 	 	Title:
	 	 	 
	 	U.S. Bank National Association,
    as Collateral Agent
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

    	37

    	 

    

 

Schedule A

to the Patent Security and Pledge Agreement

 

[To be completed by the Grantor]

 

Grantor: [___]

 

Issued U.S. Patents of Grantor

 

	Patent No.	 	Issue Date	 	Title
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

 

    	38

    	 

    

 

Schedule A

to the Patent Security and Pledge Agreement

 

Pending U.S. Patent Applications of Grantor

 

	Serial No.	 	Filing Date	 	Title
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

 

    	39

    	 

    

 

EXHIBIT 1

ASSIGNMENT OF PATENTS

 

WHEREAS, ____________________,
a ________________ organized and existing under the laws of the State of _________________, having a place of business at ________________
(the “Assignor”), has adopted and used and is using the patents (the “Patents”) identified
on the Annex hereto, and is the owner of such Patents; and

 

WHEREAS, U.S.
Bank National Association, having a place of business at 60 Livingston Avenue, EP-MN-WS3C, St. Paul, Minnesota 55107-2292 (the
“Assignee”), is desirous of acquiring the Patents;

 

WHEREAS, the
Assignor and the Assignee have entered into that certain Patent Collateral Security and Pledge Agreement, dated as of ____________
__, 20____ (as may be amended, Patent Collateral Agreement”). Capitalized terms used and not defined herein have the
meanings given such terms in the Patent Collateral Agreement;

 

NOW, THEREFORE,
for good and valuable consideration, receipt of which is hereby acknowledged, the Assignor does hereby assign, sell and transfer
unto the Assignee all right, title and interest in and to the Patents, together with (i) the Issued Patents and Patent Applications
identified on the Annex attached hereto and incorporated herein by reference, (ii) the goodwill of the business symbolized by and
associated with the Patents, and (iii) the right to sue and recover for, and the right to profits or damages due or accrued arising
out of or in connection with, any and all past, present or future infringements of or damage or injury to the Patents or such associated
goodwill.

 

This Assignment of
Patents is intended to and shall take effect at such time as the Assignee shall complete this instrument by signing its acceptance
of this Assignment of Patents below.

 

IN WITNESS WHEREOF,
the Assignor, by its duly authorized officer, has executed this assignment, , on this __ day of ________, 20__.

 

	 	[__________________________]
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

The foregoing assignment
of the Patents by the Assignor to the Assignee is hereby accepted as of the ___ day of ________, 20__.

 

    	40

    	 

    

 

	 	U.S. Bank National Association
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

	COMMONWEALTH OR STATE OF	 	)

                                 ) ss.

	COUNTY OF	 	 

 

On this the ___ day
of ______, 20__, before me appeared _________, the person who signed this instrument, who acknowledged that (s)he is the __________
of ___________________, and that being duly authorized (s)he signed such instrument as a free act on behalf of ___________________________.

 

	 	 
	 	Notary Public
	[Seal]	 
	 	My commission expires:

 

    	41

    	 

    

 

ANNEX

U.S. PATENT REGISTRATIONS AND APPLICATIONS

 

	Title	 	
        App. No.

        Filing Date
	 	
        Patent No.

        Issue Date
	 	Security Interest
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

 

    	42

    	 

    

 

EXHIBIT 2

 

Form of Trademark Security Agreement

 

(see attached)

 

    	43

    	 

    

 

FORM OF

TRADEMARK SECURITY AND PLEDGE AGREEMENT

 

This TRADEMARK SECURITY
AND PLEDGE AGREEMENT, dated as of [            ], 2013 (as may be amended,
restated, supplemented or otherwise modified from time to time, this “Agreement”), is made by [             ], a [          ]
corporation (the “Grantor”) in favor of U.S. Bank National Association, as collateral agent (in such capacity,
the “Collateral Agent”) for the Noteholders (as defined in the Security Agreement referred to below).

 

WHEREAS, the Grantor
has guaranteed the Notes issued under the Indenture, dated as of February 12, 2013 (as amended, supplemented, or otherwise modified
from time to time, the “Indenture”) among Vector Group Ltd. (the “Issuer”), the Grantor and
certain of the Issuer’s other direct and indirect subsidiaries and the Collateral Agent, in its capacity as trustee thereunder.

 

WHEREAS, it is a condition
precedent to the obligations of the Collateral Agent under the Indenture that the Grantor shall have executed and delivered that
certain Security Agreement, dated as of February 12, 2013, in favor of the Collateral Agent (as amended, supplemented, replaced
or otherwise modified from time to time, the “Security Agreement”).

 

WHEREAS, under the
terms of the Security Agreement, the Grantor has granted a security interest in certain Property, including, without limitation,
certain Intellectual Property of the Grantor to the Collateral Agent for the ratable benefit of the Noteholders, and have agreed
as a condition thereof to execute this Agreement for recording with the United States Patent and Trademark Office and other applicable
Governmental Authorities.

 

WHEREAS, this Agreement
is supplemental to the provisions contained in the Security Agreement and, in the event of an inconsistency among them, the Security
Agreement shall control over this Agreement.

 

NOW, THEREFORE, for
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor agrees as follows:

 

1. 

DEFINITIONS.

 

1.1           Terms
Defined in the Security Agreement. All capitalized terms used in this Agreement and not otherwise defined herein shall have
the meanings assigned to them in the Security Agreement.

 

1.2           Certain
Defined Terms. As used in this Agreement, the following terms shall have the following meanings:

 

    	44

    	 

    

 

“Assignment
of Marks” has the meaning set forth in Section 2.2 herein.

 

“PTO”
means the United States Patent and Trademark Office.

 

“Trademark
Collateral” has the meaning set forth in Section 2.1 herein.

 

1.3           Rules
of Construction. Unless otherwise provided herein, the rules of construction set forth in Section 1.2 of the Security
Agreement shall be applicable to this Agreement.

 

2.

grant
of SECURITY INTEREST.

 

2.1           Security
Interest. As collateral security for the payment and performance in full of all of the Secured Liabilities, the Grantor hereby
pledges and grants to the Collateral Agent, for the benefit of the Collateral Agent and the ratable benefit of the Noteholders,
a continuing security interest in and first priority lien on all of such Grantor’s rights, title and interests in all Trademarks,
Trademark Licenses, Trade Secrets and Trade Secret Licenses, including the Trademarks, Trademark Licenses and Trade Secret Licenses
referred to on Schedule A hereto (as such schedule may be amended or supplemented from time to time), in each case whether
now or hereafter existing or arising or in which such Grantor now has or hereafter owns, acquires or develops an interest and wherever
located (collectively, the “Trademark Collateral”).

 

2.2           Assignment
of Trademarks upon Default. The Grantor acknowledges that the Collateral Agent has the right, pursuant to the power of attorney
granted the Collateral Agent hereunder and under the Security Agreement, upon the occurrence and during the continuance of an Event
of Default, to execute on behalf of such Grantor an assignment of Trademarks that constitute Trademark Collateral in the form attached
as Annex 1 hereto (each an “Assignment of Trademarks”) for the sole purpose of effecting the Collateral
Agent’s exercise of its remedies under Section 8 of the Security Agreement. In furtherance of the foregoing, the Grantor
hereby authorizes the Collateral Agent to complete, execute and record with the PTO an Assignment of Trademarks on behalf of such
Grantor upon the occurrence and during the continuance of an Event of Default for the sole purpose of effecting the Collateral
Agent’s exercise of its remedies under Section 8 of the Security Agreement.

 

2.3           Conditional
Assignment. In addition to, and not by way of limitation of, the grant and pledge of the Trademark Collateral provided in Section 2.1,
the Grantor grants, assigns, transfers, conveys and sets over to the Collateral Agent, for the benefit of the Noteholders, such
Grantor’s entire right, title and interest in and to the Trademark Collateral; provided, that such grant, assignment,
transfer and conveyance shall be and become of force and effect only (a) in connection with the Collateral Agent’s exercise
of its rights and remedies in strict accordance with the terms of the Security Agreement, and (b) upon or after the occurrence
and during the continuance of an Event of Default and (c) either (i) upon the written demand of the Collateral Agent at any time
during such continuance or (ii) immediately and automatically (without notice or action of any kind by the Collateral Agent) upon
an Event of Default for which acceleration of the payment of the Notes is automatic under the Indenture or upon the sale or other
disposition of or foreclosure upon the Collateral pursuant to the Security Agreement and applicable law (including the transfer
or other disposition of the Collateral by the Grantor to the Collateral Agent or its nominee in lieu of foreclosure).

 

    	45

    	 

    

 

2.4           Supplemental
to Security Agreement. Pursuant to the Security Agreement the Grantor has granted to the Collateral Agent, for the benefit
of the Noteholders, a continuing security interest in and first lien on the Collateral (including the Trademark Collateral). The
Security Agreement, and all rights and interests of the Collateral Agent in and to the Collateral (including the Trademark Collateral)
thereunder, are hereby ratified and confirmed in all respects. In no event shall this Agreement, the grant, assignment, transfer
and conveyance of the Trademark Collateral hereunder, or the recordation of this Agreement (or any other document hereunder) with
the PTO, adversely affect or impair, in any way or to any extent, the Security Agreement, the security interest of the Collateral
Agent in the Collateral (including the Trademark Collateral) pursuant to the Security Agreement, the attachment and perfection
of such security interest under the UCC (including the security interest in the Trademark Collateral), or any present or future
rights and interests of the Collateral Agent in and to the Collateral under or in connection with the Security Agreement or the
UCC. Any and all rights and interests of the Collateral Agent in and to the Trademark Collateral (and any and all obligations of
the Grantor with respect to the Trademark Collateral) provided herein, or arising hereunder or in connection herewith, shall only
supplement and be cumulative and in addition to the rights and interests of the Collateral Agent (and the obligations of the Grantor)
in, to or with respect to the Collateral (including the Trademark Collateral) provided in or arising under or in connection with
the Security Agreement and shall not be in derogation thereof.

 

3.

AFTER-ACQUIRED
Trademarks

 

3.1           After-acquired
Trademarks. If, after the execution of the Agreement and before the end of the Security Period, the Grantor shall obtain any
right, title or interest in or to any other or new Trademarks, Trademark Licenses, Trade Secrets or Trade Secret Licenses or become
entitled to the benefit of any Trademarks, Trademark Licenses, Trade Secrets or Trade Secret Licenses, the provisions of this Agreement
shall automatically apply thereto and such Grantor shall promptly provide to the Collateral Agent notice thereof in writing and
execute and deliver to the Collateral Agent such documents or instruments as the Collateral Agent may reasonably request further
to implement, preserve or evidence the Collateral Agent’s interest therein.

 

    	46

    	 

    

 

3.2           Amendment
to Schedule. The Grantor authorizes the Collateral Agent to modify this Agreement and the Assignments of Trademarks, without
the necessity of such Grantor’s further approval or signature, by amending Schedule A hereto and the Annex to each Assignment
of Trademarks to include any future or other Trademarks, Trademark Licenses, Trade Secrets or Trade Secret Licenses that become
part of the Trademark Collateral under Section 2 or Section 3.1.

 

4.

Governing
Law; CONSENT TO JURISDICTION.

 

This Agreement,
the relationship between the parties hereunder and any claim or dispute (whether sounding in contract, tort, statute or otherwise)
relating to this Agreement or that relationship shall be governed by and construed in accordance with law of the State of New York
including section 5-1401 of the New York General Obligations Law but excluding any other conflict of law rules that would lead
to the application of the law of another jurisdiction. If the law of a jurisdiction other than New York is, under section 1-105(2)
of the UCC, mandatorily applicable to the perfection, priority or enforcement of any security interest granted under this Agreement
in respect of any Trademark Collateral, that other law shall apply solely to the matters of perfection, priority or enforcement
to which it is mandatorily applicable.

 

5.

miscellaneous.

 

(a)          Headings.
The headings of each section of this Agreement are for convenience only and shall not define or limit the provisions thereof. This
Agreement and all rights and obligations hereunder shall be binding upon the Grantor and its respective successors and assigns,
and shall inure to the benefit of the Collateral Agent, the Noteholders and their respective successors and assigns. If any term
of this Agreement shall be held to be invalid, illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby, and this Agreement shall be construed and be enforceable as if such invalid, illegal or unenforceable term
had not been included herein. The Grantor acknowledges receipt of a copy of this Agreement.

 

(b)          Counterparts.
This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original,
but all such counterparts together shall constitute but one and the same instrument.

 

[Signatures begin on next page]

 

    	47

    	 

    

 

IN WITNESS WHEREOF,
this Trademark Security and Pledge Agreement has been executed and delivered by its duly authorized officer as of the day and year
first above written.

 

	 	[	], as Grantor
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:
	 	 	 
	 	U.S. Bank National Association, as Collateral Agent
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

    	48

    	 

    

 

Schedule A

to the Trademark Security and Pledge
Agreement

(to be completed by the Grantor)

 

Grantor: [                             ]

 

United States Trademark Registrations
of Grantor

 

	Trademark 	 	Registration No./

Application No.	 	Registration Date/

Application Date
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

 

    	49

    	 

    

 

ANNEX 1

ASSIGNMENT OF TRADEMARKS

 

WHEREAS, ____________________,
a ________________ organized and existing under the laws of the State of _________________, having a place of business at ________________
(the “Assignor”), has adopted and used and is using the trademarks (the “Trademarks”) identified
on the Annex hereto, and is the owner of such Patents; and

 

WHEREAS, U.S.
Bank National Association, having a place of business at 60 Livingston Avenue, EP-MN-WS3C, St. Paul, Minnesota 55107-2292 (the
“Assignee”), is desirous of acquiring the Trademarks;

 

WHEREAS, the
Assignor and the Assignee have entered into that certain Trademark Security and Pledge Agreement, dated as of ____________ __,
20____ (as may be amended, Trademark Collateral Agreement”). Capitalized terms used and not defined herein have the
meanings given such terms in the Trademark Collateral Agreement;

 

NOW, THEREFORE,
for good and valuable consideration, receipt of which is hereby acknowledged, the Assignor does hereby assign, sell and transfer
unto the Assignee all right, title and interest in and to the Trademarks, together with (i) the Trademarks, Trademark Licenses
and Trade Secret Licenses identified on the Annex attached hereto and incorporated herein by reference, (ii) the goodwill of the
business symbolized by and associated with the Trademarks, and (iii) the right to sue and recover for, and the right to profits
or damages due or accrued arising out of or in connection with, any and all past, present or future infringements of or damage
or injury to the Trademarks or such associated goodwill.

 

This Assignment of
Trademarks is intended to and shall take effect at such time as the Assignee shall complete this instrument by signing its acceptance
of this Assignment of Trademarks below.

 

IN WITNESS WHEREOF,
the Assignor, by its duly authorized officer, has executed this assignment, on this __ day of ________, 20__.

 

	 	[__________________________]
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

The foregoing assignment
of the Trademarks by the Assignor to the Assignee is hereby accepted as of the ___ day of ________, 20__.

 

    	50

    	 

    

 

	 	U.S. Bank National Association
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

	COMMONWEALTH OR STATE OF	 	)

	 	) ss.

	COUNTY OF	 	 

 

On this the ___ day
of ______, 20__, before me appeared _________, the person who signed this instrument, who acknowledged that (s)he is the __________
of ___________________, and that being duly authorized (s)he signed such instrument as a free act on behalf of ___________________________.

 

	 	 
	 	Notary Public
	[Seal]	 
	 	My commission expires:

 

    	51

    	 

    

 

ANNEX

 

U.S. TRADEMARK REGISTRATIONS AND APPLICATIONS

 

	Title	 	
        App. No.

        Filing Date
	 	
        Reg. No.

        Issue Date
	 	Security Interest
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

 

    	52

    	 

    

 

EXHIBIT 3

 

Form of Copyright Security Agreement

 

(see attached)

 

    	53

    	 

    

 

FORM OF COPYRIGHT SECURITY AGREEMENT

 

This COPYRIGHT SECURITY
AGREEMENT, dated as of [            ], 2013 (as amended, restated,
amended and restated or otherwise modified, this “Agreement”), is made by [          ], a [         ] corporation (the “Grantor”)
in favor of U.S. Bank National Association, as collateral agent (in such capacity, the “Collateral Agent”) for
the Noteholders (as defined in the Security Agreement referred to below).

 

WHEREAS, the Grantor
has guaranteed the Notes issued under the Indenture, dated as of February 12, 2013 (as amended, supplemented, or otherwise modified
from time to time, the “Indenture”) among Vector Group Ltd. (the “Issuer”), the Grantor and
certain of the Issuer’s other direct and indirect subsidiaries and the Collateral Agent, in its capacity as trustee thereunder.

 

WHEREAS, it is a condition
precedent to the obligations of the Collateral Agent under the Indenture that the Grantor shall have executed and delivered that
certain Security Agreement, dated as of February 12, 2013, in favor of the Collateral Agent (as amended, supplemented, replaced
or otherwise modified from time to time, the “Security Agreement”).

 

WHEREAS, under the
terms of the Security Agreement, the Grantor has granted a security interest in certain Property, including, without limitation,
certain Intellectual Property of the Grantor to the Collateral Agent for the ratable benefit of the Noteholders, and have agreed
as a condition thereof to execute this Agreement for recording with the United States Copyright Office and other applicable Governmental
Authorities.

 

WHEREAS, this Agreement
is supplemental to the provisions contained in the Security Agreement and, in the event of an inconsistency among them, the Security
Agreement shall control over this Agreement.

 

NOW, THEREFORE, for
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor agrees as follows:

 

SECTION 1.          Defined
Terms. Unless otherwise defined herein, terms defined in the Security Agreement and used herein have the meaning given to them
in the Security Agreement.

 

“Assignment of Copyrights”
has the meaning set forth in Section 2.2 herein.

 

“Copyright Collateral”
has the meaning set forth in Section 2.1 herein.

 

    	54

    	 

    

 

SECTION 2.

 

2.1           Grant
of Security Interest in Copyright Collateral. Each Grantor hereby pledges and grants to Collateral Agent, for the benefit of
the Noteholders, a security interest in all of such Grantor’s right, title and interest in, to and under the Copyrights and
Copyright Licenses, including the Copyrights and Copyright Licenses referred to on Schedule I hereto, whether presently
existing or hereafter created or acquired (collectively, the “Copyright Collateral”).

 

2.2           Assignment
of Copyrights upon Default. Each Grantor acknowledges that the Collateral Agent has the right, pursuant to the power of attorney
granted the Collateral Agent hereunder and under the Security Agreement, upon the occurrence and during the continuance of an Event
of Default, to execute on behalf of such Grantor an assignment of Copyrights and Copyright Licenses that constitute Copyright Collateral
in substantially the form of Annex 1 hereto (each an “Assignment of Copyrights”) for the sole purpose
of effecting the Collateral Agent’s exercise of its remedies under Section 8 of the Security Agreement. In furtherance of
the foregoing, each Grantor hereby authorizes the Collateral Agent to complete, execute and record with the United States Copyright
Office an Assignment of Copyrights on behalf of such Grantor upon the occurrence and during the continuance of an Event of Default
for the sole purpose of effecting the Collateral Agent’s exercise of its remedies under Section 8 of the Security Agreement.

 

SECTION 3.          Security
Agreement. The security interest granted pursuant to this Agreement is granted in conjunction with the security interest granted
to the Collateral Agent for the Noteholders pursuant to the Security Agreement and Grantors hereby acknowledge and affirm that
the rights and remedies of the Collateral Agent with respect to the security interest in the Copyright Collateral made and granted
hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein
as if fully set forth herein. In the event that any provision of this Agreement is deemed to conflict with the Security Agreement,
the provisions of the Security Agreement shall control.

 

SECTION 4.          After-Acquired
Copyrights. If, after the execution of the Agreement and before the end of the Security Period, the Grantor shall obtain any
right, title or interest in or to any other or new Copyrights or Copyright Licenses or become entitled to the benefit of any Copyrights
or Copyright Licenses, the provisions of this Agreement shall automatically apply thereto and such Grantor shall promptly provide
to the Collateral Agent notice thereof in writing and execute and deliver to the Collateral Agent such documents or instruments
as the Collateral Agent may reasonably request further to implement, preserve or evidence the Collateral Agent’s interest
therein.

 

SECTION 5.          MISCELLANEOUS

 

5.1           Applicable
Law. This Agreement, the relationship between the parties hereunder and any claim or dispute (whether sounding in contract,
tort, statute or otherwise) relating to this Agreement or that relationship shall be governed by and construed in accordance with
law of the State of New York including section 5-1401 of the New York General Obligations Law but excluding any other conflict
of law rules that would lead to the application of the law of another jurisdiction. If the law of a jurisdiction other than New
York is, under section 1-105(2) of the UCC, mandatorily applicable to the perfection, priority or enforcement of any security interest
granted under this Agreement in respect of any Copyright Collateral, that other law shall apply solely to the matters of perfection,
priority or enforcement to which it is mandatorily applicable.

 

    	55

    	 

    

 

5.2           Amendment
to Schedule. The Grantor authorizes the Collateral Agent to modify this Agreement, without the necessity of such Grantor’s
further approval or signature, by amending Schedule A hereto and the Annex to each Assignment of Copyrights to include any future
or other Copyrights or Copyright Licenses that become part of the Copyright Collateral under Section 2 or Section 4.

 

SECTION 6.          Counterparts.
This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original,
but all such counterparts together shall constitute but one and the same instrument.

 

[Remainder of page intentionally left
blank]

 

    	56

    	 

    

 

IN WITNESS WHEREOF, each
Grantor has caused this Copyright Security Agreement to be executed and delivered by its duly authorized officer as of the date
first set forth above.

 

	 	[	],
	 	as Grantor
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:
	 	 	 
	 	U.S. Bank National Association,
	 	as Collateral Agent
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

    	57

    	 

    

 

SCHEDULE I 

to 

COPYRIGHT SECURITY AGREEMENT

 

COPYRIGHT REGISTRATIONS AND APPLICATIONS

 

Registrations

 

	Registration No.	 	Registration Date	 	Title
	 	 	 	 	 

 

Applications

 

	Application No.	 	Application Date	 	Title
	 	 	 	 	 

 

    	58

    	 

    

 

ANNEX 1

ASSIGNMENT OF COPYRIGHTS

 

WHEREAS, ____________________,
a ________________ organized and existing under the laws of the State of _________________, having a place of business at ________________
(the “Assignor”), has adopted and used and is using the copyrights (the “Copyrights”) identified
on the Annex hereto, and is the owner of such Copyrights; and

 

WHEREAS, U.S.
Bank National Association, having a place of business at 60 Livingston Avenue, EP-MN-WS3C, St. Paul, Minnesota 55107-2292 (the
“Assignee”), is desirous of acquiring the Copyrights;

 

WHEREAS, the
Assignor and the Assignee have entered into that certain Copyright Security Agreement, dated as of ____________ __, 20____ (as
may be amended, Copyright Security Agreement”). Capitalized terms used and not defined herein have the meanings given
such terms in the Copyright Security Agreement;

 

NOW, THEREFORE,
for good and valuable consideration, receipt of which is hereby acknowledged, the Assignor does hereby assign, sell and transfer
unto the Assignee all right, title and interest in and to the Copyrights and Copyright Licenses, including the Copyrights and Copyright
Licenses identified on the Annex attached hereto and incorporated herein by reference.

 

This Assignment of
Copyrights is intended to and shall take effect at such time as the Assignee shall complete this instrument by signing its acceptance
of this Assignment of Copyrights below.

 

IN WITNESS WHEREOF,
the Assignor, by its duly authorized officer, has executed this assignment, , on this __ day of ________, 20__.

 

	 	[__________________________]
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

The foregoing assignment
of the Copyrights by the Assignor to the Assignee is hereby accepted as of the ___ day of ________, 20__.

 

    	59

    	 

    

 

	 	U.S. Bank National Association
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

	COMMONWEALTH OR STATE OF	 	)

	 	) ss.

	COUNTY OF	 	 

 

On this the ___ day
of ______, 20__, before me appeared _________, the person who signed this instrument, who acknowledged that (s)he is the __________
of ___________________, and that being duly authorized (s)he signed such instrument as a free act on behalf of ___________________________.

 

	 	 
	 	Notary Public
	[Seal]	 
	 	My commission expires:

 

    	60

    	 

    

 

ANNEX

 

COPYRIGHT REGISTRATIONS AND APPLICATIONS

 

	Title	 	
        App. No.

        Filing Date
	 	
        Reg. No.

        Issue Date
	 	Security Interest
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

 

    	61

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