Document:

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                                                                    Exhibit 10.2

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                               SECURITY AGREEMENT

                                      among

                      R.J. REYNOLDS TOBACCO HOLDINGS, INC.,

                             VARIOUS SUBSIDIARIES OF
                      R.J. REYNOLDS TOBACCO HOLDINGS, INC.

                                       and

                              JPMORGAN CHASE BANK,
                               as Collateral Agent

                            Dated as of July 15, 2003

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                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

ARTICLE I SECURITY INTERESTS...................................................3
         1.1      Grant of Security Interests..................................3
         1.2      Power of Attorney............................................5

ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS...................5
         2.1      Necessary Filings............................................5
         2.2      No Liens.....................................................5
         2.3      Other Financing Statements...................................5
         2.4      Chief Executive Office.......................................6
         2.5      Location of Inventory and Equipment..........................3
         2.6      Legal Names; Organizational Identification Number;
                    Trade Names; Change of Name; etc...........................6
         2.7      Recourse.....................................................7
         2.8      Jurisdiction and Type of Organization........................7
         2.9      Collateral in the Possession of a Bailee.....................7
         2.10     As-Extracted Collateral; Timber-to-be-Cut....................8

ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS;
         INSTRUMENTS...........................................................8
         3.1      Additional Representations and Warranties....................8
         3.2      Maintenance of Records.......................................8
         3.3      Modification of Terms; etc...................................8
         3.4      Collection...................................................9
         3.5      Direction to Account Debtors; etc............................9
         3.6      Instruments..................................................9
         3.7      Further Actions..............................................9
         3.8      Assignors Remain Liable Under Receivables and Contracts.....10
         3.9      Deposit Accounts; Etc.......................................10
         3.10     Letter-of-Credit Rights.....................................11
         3.11     Commercial Tort Claims......................................11
         3.12     Chattel Paper...............................................12

ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS...........................12
         4.1      Additional Representations and Warranties...................12
         4.2      Licenses and Assignments....................................13
         4.3      Infringements...............................................13
         4.4      Preservation of Marks.......................................13
         4.5      Maintenance of Registration.................................13
         4.6      Future Registered Marks.....................................13
         4.7      Remedies....................................................13

                                      (i)

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ARTICLE V SPECIAL PROVISIONS CONCERNING TRADE SECRET RIGHTS, PATENTS AND
         COPYRIGHTS...........................................................14
         5.1      Additional Representations and Warranties...................14
         5.2      Licenses and Assignments....................................15
         5.3      Infringements...............................................15
         5.4      Maintenance of Patents or Copyrights........................15
         5.5      Prosecution of Patent or Copyright Application..............15
         5.6      Other Patents and Copyrights................................15
         5.7      Remedies....................................................16

ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL...............................16
         6.1      Protection of Collateral Agent's Security...................16
         6.2      Further Actions.............................................17
         6.3      Financing Statements........................................17
         6.4      Additional Information......................................17

ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT......................17
         7.1      Remedies; Obtaining the Collateral Upon Default.............17
         7.2      Remedies; Disposition of the Collateral.....................19
         7.3      Waiver of Claims............................................20
         7.4      Application of Proceeds.....................................21
         7.5      Remedies Cumulative.........................................22
         7.6      Discontinuance of Proceedings...............................22

ARTICLE VIII INDEMNITY........................................................23
         8.1      Indemnity...................................................23
         8.2      Indemnity Obligations Secured by Collateral; Survival.......24

ARTICLE IX DEFINITIONS........................................................24

ARTICLE X MISCELLANEOUS.......................................................33
         10.1     Notices.....................................................33
         10.2     Waiver; Amendment...........................................34
         10.3     Obligations Absolute........................................35
         10.4     Successors and Assigns......................................35
         10.5     Headings Descriptive........................................35
         10.6     Severability................................................35
         10.7     Governing Law...............................................35
         10.8     Assignors' Duties...........................................36
         10.9     Termination; Release........................................36
         10.10    Collateral Agent............................................37
         10.11    Counterparts................................................37
         10.12    Additional Assignors........................................38
         10.13    No Third Party Beneficiaries................................38

                                      (ii)

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ANNEX A  Schedule of Chief Executive Offices; Record Locations
ANNEX B  Schedule of Equipment and Inventory Locations
ANNEX C  Schedule of Legal Names, Trade and Fictitious Names, Etc.
ANNEX D  Schedule of Marks and Applications
ANNEX E  Schedule of Patents and Patent Applications
ANNEX F  Schedule of Copyrights and Copyright Applications
ANNEX G  Assignment of Security Interest in United States Patents and Trademarks
ANNEX H  Assignment of Security Interest in United States Copyrights
ANNEX I  Schedule of Type of Organization and Jurisdiction of Organization
ANNEX J  Schedule of Deposit Accounts
ANNEX K  Description of Commercial Tort Claims
ANNEX L  Form of Control Agreement Regarding Deposit Accounts
ANNEX M  Collateral Agent

                                     (iii)

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                               SECURITY AGREEMENT

         SECURITY AGREEMENT, dated as of July 15, 2003, among each of the
undersigned (together with any other entity that becomes a party hereto pursuant
to Section 10.12 hereof, each, an "Assignor" and, collectively, the "Assignors")
and JPMORGAN CHASE BANK, as Collateral Agent (in such capacity, together with
any successor collateral agent, the "Collateral Agent") for the Secured
Creditors (as defined below). Capitalized terms used herein shall have the
meaning specified in Article IX herein or, if not defined therein, as specified
in the Credit Agreement referred to below.

                              W I T N E S S E T H:
                              - - - - - - - - - -

         WHEREAS, R.J. Reynolds Tobacco Holdings, Inc. (f/k/a RJR Nabisco, Inc.)
(the "Borrower"), the various lending institutions from time to time party
thereto (the "Lenders"), JPMORGAN CHASE BANK, as Administrative Agent (the
"Administrative Agent"), Citibank, N.A., as Syndication Agent (the "Syndication
Agent"), The Bank of New York, The Bank of Nova Scotia and Lehman Commercial
Paper Inc., as Documentation Agents (the "Documentation Agents") and Credit
Lyonnais New York Branch and Mizuho Corporate Bank, Ltd., as Co-Documentation
Agents (the "Co-Documentation Agents"), have entered into a Credit Agreement,
dated as of May 7, 1999, amended and restated as of November 17, 2000 and
further amended and restated as of May 10, 2002, providing for the making of
Loans to the Borrower and the issuance of, and participation in, Letters of
Credit for the account of the Borrower, all as contemplated therein (with (i)
the Lenders, each Letter of Credit Issuer, the Administrative Agent, the
Syndication Agent, the Documentation Agents, the Co-Documentation Agents, the
Senior Managing Agents, the Pledgee and the Collateral Agent being herein called
the "Lender Creditors" and (ii) the term "Credit Agreement" as used herein to
mean the Credit Agreement described above in this paragraph, as the same may be
further amended, modified, extended, renewed, replaced, restated, supplemented
and/or refinanced from time to time, and including any agreement extending the
maturity of, or refinancing or restructuring (including, but not limited to, the
inclusion of additional borrowers or guarantors thereunder or any increase in
the amount borrowed) all or any portion of, the indebtedness under such
agreement or any successor agreement, whether or not with the same agent,
trustee, representative, lenders or holders; provided that, with respect to any
agreement providing for the refinancing or replacement of indebtedness under the
Credit Agreement, such agreement shall only be treated as, or as part of, the
Credit Agreement hereunder if (x) either (A) all obligations under the Credit
Agreement being refinanced or replaced shall be paid in full at the time of such
refinancing or replacement, and all commitments and letters of credit issued
pursuant to the refinanced or replaced Credit Agreement shall have terminated in
accordance with their terms or (B) the Required Lenders shall have consented in
writing to the refinancing or replacement indebtedness being treated as
indebtedness pursuant to the Credit Agreement, and (y) a notice to the effect
that the refinancing or replacement indebtedness shall be treated as issued
under the Credit Agreement shall be delivered by the Borrower to the Collateral
Agent);

         WHEREAS, the Borrower has from time to time entered into, and/or may in
the future from time to time enter into, one or more (i) interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements), (ii) foreign

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exchange contracts, currency swap agreements, commodity agreements or other
similar agreements or arrangements designed to protect against the fluctuations
in currency values and/or (iii) other types of hedging agreements from time to
time (each such agreement or arrangement with a Hedging Creditor (as hereinafter
defined), a "Secured Hedging Agreement"), with any Lender or Lenders or a
syndicate of financial institutions organized by a Lender or an affiliate of a
Lender (even if any such Lender ceases to be a Lender under the Credit Agreement
for any reason) (any institution that participates therein, and in each case
their subsequent successors and assigns collectively, the "Hedging Creditors",
and together with the Lender Creditors, the "Lender Secured Creditors");

         WHEREAS, the Borrower and the trustee thereunder (the "New Senior Notes
Trustee"), on behalf of the holders of the New Senior Notes (such holders,
together with the New Senior Notes Trustee, the "New Senior Notes Creditors"),
have from time to time entered into, and may in the future from time to time
enter into, one or more Indentures (collectively, as amended, modified or
supplemented from time to time, the "New Senior Notes Indenture" and, together
with the New Senior Notes, the "New Senior Notes Documents") providing for the
issuance of New Senior Notes by the Borrower;

         WHEREAS, the Borrower and the trustee thereunder (the "Refinancing
Senior Notes Trustee"), on behalf of the holders of the Refinancing Senior Notes
(such holders, together with the Refinancing Senior Notes Trustee, the
"Refinancing Senior Notes Creditors", with the Lender Secured Creditors, the New
Senior Notes Creditors and the Refinancing Senior Notes Creditors being herein
called the "Secured Creditors"), have from time to time entered into, and may in
the future from time to time enter into, one or more Indentures (collectively,
as amended, modified or supplemented from time to time, the "Refinancing Senior
Notes Indenture" and, together with the Refinancing Senior Notes, the
"Refinancing Senior Notes Documents") providing for the issuance of Refinancing
Senior Notes by the Borrower;

         WHEREAS, pursuant to the Subsidiary Guaranty, each Assignor (other than
the Borrower) has jointly and severally guaranteed to the Lender Secured
Creditors the payment when due of the Guaranteed Obligations (as and to the
extent defined in the Subsidiary Guaranty);

         WHEREAS, pursuant to the Borrower Guaranty, the Borrower has guaranteed
to the Hedging Creditors the payment when due of the Guaranteed Obligations (as
and to the extent defined in the Borrower Guaranty);

         WHEREAS, each Specified Assignor (other than the Borrower) has jointly
and severally guaranteed to the New Senior Notes Creditors the payment when due
of principal and interest on the New Senior Notes;

         WHEREAS, each Specified Assignor (other than the Borrower) has jointly
and severally guaranteed to the Refinancing Senior Notes Creditors the payment
when due of principal and interest on the Refinancing Senior Notes;

         WHEREAS, the Credit Agreement requires this Agreement be executed and
delivered to the Collateral Agent by the Assignors and the Secured Hedging
Agreements, the

                                      (2)

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New Senior Notes Indenture and the Refinancing Senior Notes Indenture, require
that this Agreement secure the respective Obligations as provided herein;

         WHEREAS, each Assignor desires to execute this Agreement to satisfy the
conditions described in the preceding paragraph;

         NOW, THEREFORE, in consideration of the benefits accruing to each
Assignor, the receipt and sufficiency of which are hereby acknowledged, each
Assignor hereby makes the following representations and warranties and hereby
covenants and agrees as follows:

                                   ARTICLE I

                               SECURITY INTERESTS

         1.1 Grant of Security Interests. (a) As security for the prompt and
complete payment and performance when due of all of its Applicable Obligations,
each Assignor does hereby sell, assign and transfer unto the Collateral Agent,
and does hereby grant to the Collateral Agent for the benefit of the Secured
Creditors as their interests may appear, a continuing security interest in, all
of the right, title and interest of such Assignor in, to and under all of the
following, whether now existing or hereafter from time to time acquired:

                  (i) each and every Receivable;

                  (ii) all Contracts, together with all Contract Rights arising
         thereunder;

                  (iii) all Inventory;

                  (iv) all Equipment;

                  (v) all Marks, together with the registrations and right to
         all renewals thereof, and the goodwill of the business of such Assignor
         symbolized by the Marks;

                  (vi) the Cash Collateral Account established for such Assignor
         and all moneys, securities and instruments deposited or required to be
         deposited in such Cash Collateral Account;

                  (vii) all Patents and Copyrights and all reissues, renewals or
         extensions thereof;

                  (viii) all computer programs of such Assignor and all
         intellectual property rights therein and all other proprietary
         information of such Assignor, including, but not limited to, Trade
         Secrets Rights;

                  (ix) all insurance policies;

                  (x) all other Goods, General Intangibles, Chattel Paper
         (including without limitation all Tangible Chattel Paper and all
         Electronic Chattel Paper), Documents and Instruments;

                                      (3)

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                  (xi) all Permits;

                  (xii) all cash;

                  (xiii) all Commercial Tort Claims;

                  (xiv) all Deposit Accounts and all other demand, deposit,
         time, savings, cash management, passbook and similar accounts
         maintained by such Assignor with any Person and all moneys, securities,
         Instruments and other investments deposited or required to be deposited
         in any of the foregoing;

                  (xv) all Investment Property;

                  (xvi) all Letter-of-Credit Rights (whether or not the
         respective letter of credit is evidenced by a writing);

                  (xvii) all Software and all Software licensing rights, all
         writings, plans, specifications and schematics, all engineering
         drawings, customer lists, goodwill and licenses, and all recorded data
         of any kind or nature, regardless of the medium of recording;

                  (xviii) all Supporting Obligations; and

                  (xix) all Proceeds and products of any and all of the
         foregoing (all of the above, including this clause (xix), collectively,
         the "Collateral");

provided that the Collateral that secures the New Senior Notes Obligations and
the Refinancing Senior Notes Obligations of a Specified Assignor shall be
limited to Collateral owned by such Specified Assignor consisting of any shares
of stock, indebtedness or other obligations of a Subsidiary or of any Principal
Property of the Borrower or any Restricted Subsidiary (the "Designated
Collateral"), all of which Collateral shall also ratably secure all other
Applicable Obligations of such Specified Assignor, and the Collateral Proceeds
with respect to any item of Collateral owned by a Specified Assignor that are to
be applied to the New Senior Notes Obligations or to the Refinancing Senior
Notes Obligations shall be limited to Collateral Proceeds from the sale, other
disposition of or other realization upon, and other moneys received in respect
of, the Designated Collateral of such Specified Assignor, with such Collateral
Proceeds to also be applied ratably to all other Applicable Obligations of such
Specified Assignor.

         (b) Notwithstanding anything contained herein to the contrary,
"Collateral" shall not include any Copyright, Mark, Patent, Trade Secret,
computer program or Software to the extent such property is subject to a license
or agreement the terms of which prohibit an assignment of, or the granting of a
security interest in, such Assignor's rights thereunder or such Assignor's grant
of a security interest pursuant to this Agreement would give any party thereto
(other than such Assignor) the right to terminate its obligations thereunder;
provided that the foregoing limitation shall not affect, limit, restrict or
impair the grant by an Assignor of the security interest pursuant to this
Agreement in any account or any money or other amounts due or to become due

                                      (4)

<PAGE>

under any such Copyright, Mark, Patent, Trade Secret, computer program or
Software or such license or agreement governing the same.

         (c) The security interest of the Collateral Agent under this Agreement
extends to all Collateral of the kind which is the subject of this Agreement
which any Assignor may acquire at any time during the continuation of this
Agreement.

         1.2 Power of Attorney. Each Assignor hereby constitutes and appoints
the Collateral Agent its true and lawful attorney, irrevocably, with full power
after the occurrence of and during the continuance of an Event of Default (in
the name of such Assignor or otherwise) to act, require, demand, receive,
compound and give acquittance for any and all moneys and claims for moneys due
or to become due to such Assignor under or arising out of the Collateral, to
endorse any checks or other instruments or orders in connection therewith and to
file any claims or take any action or institute any proceedings which the
Collateral Agent may deem to be necessary or advisable in the premises, which
appointment as attorney is coupled with an interest.

                                   ARTICLE II

                GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS

         Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement, as follows:

         2.1 Necessary Filings. All filings, registrations and recordings
necessary or appropriate to create, preserve, protect and perfect the security
interest granted by such Assignor to the Collateral Agent hereby in respect of
all the Collateral have been accomplished or shall have been accomplished within
45 days of a Trigger Event (or, in the case of Collateral constituting Excluded
Unperfected Collateral, on the date on which such Collateral ceases to qualify
as such in accordance with the definition of Excluded Unperfected Collateral)
and the security interest granted to the Collateral Agent pursuant to this
Agreement in and to all of the Collateral (other than Excluded Unperfected
Collateral) constitutes, upon satisfaction of such filings, registrations and
recordings, a perfected security interest therein superior and prior to the
rights of all other Persons therein (other than any such rights pursuant to any
Permitted Liens that have a priority as provided under applicable law) and
subject to no other Liens (other than Permitted Liens) and is entitled to all
the rights, priorities and benefits afforded by the Uniform Commercial Code or
other relevant law as enacted in any relevant jurisdiction to perfected security
interests.

         2.2 No Liens. Such Assignor is, and as to all Collateral acquired by it
from time to time after the date hereof such Assignor will be, the owner of all
Collateral free from any Lien, security interest, encumbrance or other right,
title or interest of any Person (other than Permitted Liens), and such Assignor
shall defend the Collateral against all claims and demands of all Persons at any
time claiming the same or any interest therein (other than in connection with
Permitted Liens) adverse to the Collateral Agent.

         2.3 Other Financing Statements. As of the date hereof, there is no
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction)

                                      (5)

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covering or purporting to cover any interest of any kind in the Collateral
(other than financing statements filed in respect of Permitted Liens and
financing statements filed pursuant to the same liens as Permitted Liens) and at
all times prior to the Termination Date, such Assignor will not execute or
authorize to be filed in any public office any financing statement (or similar
statement or instrument of registration under the law of any jurisdiction) or
statements relating to the Collateral, except financing statements filed or to
be filed in respect of and covering the security interests granted hereby by
such Assignor or as permitted by the Credit Agreement.

         2.4 Chief Executive Office; Records. As of the date hereof, the chief
executive office of such Assignor is located at the address or addresses
indicated on Annex A hereto. Such Assignor will not move its chief executive
office except to such new location as such Assignor may establish in accordance
with the last sentence of this Section 2.4. The originals of all documents
evidencing all Receivables and Contract Rights and Trade Secret Rights of such
Assignor and the only original books of account and records of such Assignor
relating thereto are, and will continue to be, kept at such chief executive
office and/or one or more of the locations shown on Annex A, or at such new
locations as such Assignor may establish in accordance with the last sentence of
this Section 2.4. All Receivables and Contract Rights and Trade Secret Rights of
such Assignor are, and will continue to be, maintained at, and controlled and
directed (including, without limitation, for general accounting purposes) from,
the office locations described above, or such new locations as such Assignor may
establish in accordance with the last sentence of this Section 2.4. Such
Assignor shall not establish new locations for such chief executive offices
until (i) it shall have given to the Collateral Agent not less than 15 days'
prior written notice (or such lesser notice as shall be acceptable to the
Collateral Agent in the case of a new record location to be established in
connection with newly acquired Contracts) of its intention to do so, clearly
describing such new location and providing such other information in connection
therewith as the Collateral Agent may reasonably request, and (ii) with respect
to such new location, it shall have taken all action, reasonably satisfactory to
the Collateral Agent, to maintain the security interest of the Collateral Agent
in the Collateral intended to be granted hereby at all times fully perfected and
in full force and effect.

         2.5 Location of Inventory and Equipment. All Inventory and Equipment
held on the date hereof by each Assignor (other than immaterial amounts of
Inventory and Equipment) is located at one of the locations shown on Annex B
attached hereto, is in transit between such locations, or is in transit to
customers.

         2.6 Legal Names; Organizational Identification Number; Trade Names;
Change of Name; etc. The exact legal name of each Assignor, and the
organizational identification number (if any) of each Assignor, as of the date
hereof, is listed on Annex C hereto for such Assignor. No Assignor has or
operates in any jurisdiction under, or in the five years preceding the date
hereof has had or has operated in any jurisdiction under, any trade names,
fictitious names or other names except its legal name and such other trade or
fictitious names as are listed on Annex C hereto for such Assignor. No Assignor
shall change its legal name, organizational identification number (if any) or
assume or operate in any jurisdiction under any trade, fictitious or other name
except its legal name, organizational identification number and those trade
names in each case listed on Annex C hereto for such Assignor and those that may
be established in accordance with the immediately succeeding sentence of this
Section 2.6. No Assignor shall change its legal name or organizational
identification number or assume or

                                      (6)

<PAGE>

operate in any jurisdiction under any new trade, fictitious or other name or
operate under any existing name in any additional jurisdiction until (i) it
shall have given to the Collateral Agent not less than 15 days' prior written
notice of its intention so to do, clearly describing such new name and/or
jurisdiction and, in the case of a new name, the jurisdictions in which such new
name shall be used and providing such other information in connection therewith
as the Collateral Agent may reasonably request, (ii) with respect to such new
name and/or jurisdiction, it shall have taken all action necessary, or in the
reasonable opinion of the Collateral Agent, desirable to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted hereby
at all times fully perfected and in full force and effect and (iii) the
Collateral Agent shall have received evidence that all other actions (including,
without limitation, the payment of all filing fees and taxes, if any, payable in
connection with such filings) have been taken, in order to perfect (and maintain
the perfection and priority of) the security interest granted hereby. In
addition, to the extent that any Assignor does not have an organizational
identification number on the date hereof and later obtains one, such Assignor
shall promptly thereafter notify the Collateral Agent of such organizational
identification number and shall take all actions reasonably satisfactory to the
Collateral Agent to the extent necessary to maintain the security interest of
the Collateral Agent in the Collateral intended to be granted hereby fully
perfected and in full force and effect.

         2.7 Recourse. This Agreement is made with full recourse to such
Assignor and pursuant to and upon all the warranties, representations,
covenants, and agreements on the part of such Assignor contained herein, in the
other Credit Documents, in the Secured Hedging Agreements, in the New Senior
Notes Documents and in the Refinancing Senior Notes Documents, and otherwise in
writing in connection herewith or therewith.

         2.8 Jurisdiction and Type of Organization. The jurisdiction of
organization of each Assignor, and the type of organization of each Assignor, as
of the date hereof, is listed on Annex I hereto for such Assignor. No Assignor
shall change its jurisdiction of organization or its type of organization until
(i) it shall have given to the Collateral Agent not less than 15 day's prior
written notice of intention so to do, clearly describing such new jurisdiction
of organization and/or type of organization and providing such other information
in connection therewith as the Collateral Agent may reasonably request and (ii)
with respect to such new jurisdiction of organization and/or type of
organization, it shall have taken all actions reasonably requested by the
Collateral Agent to maintain the security interest of the Collateral Agent in
the Collateral intended to be granted hereby at all times fully perfected and in
full force and effect.

         2.9 Collateral in the Possession of a Bailee. If any Inventory or other
Goods are at any time in the possession of a bailee, the respective Assignor
shall promptly notify the Collateral Agent thereof and, if requested by the
Collateral Agent, shall use its reasonable best efforts to promptly obtain an
acknowledgment from such bailee, in form and substance reasonably satisfactory
to the Collateral Agent, that the bailee holds such Collateral for the benefit
of the Collateral Agent and shall act upon the instructions of the Collateral
Agent, without the further consent of the respective Assignor. The Collateral
Agent agrees with the Assignors that the Collateral Agent shall not give any
such instructions unless an Event of Default has occurred and is continuing or
would occur after taking into account any action by the respective Assignor with
respect to any such bailee.

                                      (7)

<PAGE>

         2.10 As-Extracted Collateral; Timber-to-be-Cut. As of the date hereof,
no Assignor owns, or expects to acquire, any property which constitutes, or
would constitute, As-Extracted Collateral or Timber-to-be-Cut. If at any time
after the date hereof any Assignor owns, acquires or obtains rights to any
As-Extracted Collateral or Timber-to-be-Cut, such Assignor shall furnish the
Collateral Agent with prompt written notice thereof (which notice shall describe
in reasonable detail the As-Extracted Collateral and/or Timber-to-be-Cut and the
locations thereof) and shall take all actions as may be deemed reasonably
necessary or desirable by the Collateral Agent to perfect the security interest
of the Collateral Agent therein.

                                  ARTICLE III

                          SPECIAL PROVISIONS CONCERNING
                    RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS

         3.1 Additional Representations and Warranties. As of the time when each
of its Receivables arises, each Assignor shall be deemed to have represented and
warranted that such Receivable, and all material records, papers and documents
relating thereto (if any) are genuine and in all material respects what they
purport to be, and that all papers and documents (if any) relating thereto (i)
will be the only original writings evidencing and embodying such obligation of
the account debtor named therein (other than copies created for general
accounting purposes) and (ii) will, to the knowledge of such Assignor, evidence
true and valid obligations of the account debtor named therein.

         3.2 Maintenance of Records. Each Assignor will keep and maintain at its
own cost and expense satisfactory and complete records of its Receivables and
Contracts, and such Assignor will make the same available to the Collateral
Agent for inspection, at such Assignor's own cost and expense, at any and all
reasonable times (i.e., during normal business hours) and upon reasonable prior
notice to such Assignor. If requested by the Collateral Agent while an Event of
Default is in existence, such Assignor shall, at its own cost and expense,
deliver all tangible evidence of its Receivables and Contract Rights (including,
without limitation, copies of all documents evidencing the Receivables and all
Contracts) and such books and records to the Collateral Agent or to its
representatives (copies of which evidence and books and records may be retained
by such Assignor). If the Collateral Agent so directs, upon the occurrence and
during the continuance of an Event of Default, such Assignor shall legend, in
form and manner reasonably satisfactory to the Collateral Agent, the Receivables
and Contracts, as well as books, records and documents of such Assignor
evidencing or pertaining to such Receivables with an appropriate reference to
the fact that such Receivables and Contracts have been assigned to the
Collateral Agent and that the Collateral Agent has a security interest therein.

         3.3 Modification of Terms; etc. No Assignor shall rescind or cancel any
indebtedness evidenced by any Receivable or under any Contract, or modify any
term thereof or make any adjustment with respect thereto, or extend or renew the
same, or compromise or settle any material dispute, claim, suit or legal
proceeding relating thereto, or sell any Receivable or Contract, or interest
therein, without the prior written consent of the Collateral Agent, except (i)
as permitted by Section 3.4 hereof and (ii) in accordance with such Assignor's
reasonable business practices. Each Assignor will duly fulfill all obligations
on its part to be fulfilled under

                                      (8)

<PAGE>

or in connection with all material Receivables and Contracts and will do nothing
to impair the rights of the Collateral Agent in the Receivables or Contracts.

         3.4 Collection. Each Assignor shall endeavor in accordance with
reasonable business practices to cause to be collected from the account debtor
named in each of its Receivables or obligor under any Contract, as and when due
(including, without limitation, amounts which are delinquent, such amounts to be
collected in accordance with generally accepted lawful collection procedures)
any and all amounts owing under or on account of such Receivable or Contract,
and apply forthwith upon receipt thereof all such amounts as are so collected to
the outstanding balance of such Receivable or under such Contract, except that,
so long as no Event of Default is then in existence in respect of which the
Collateral Agent has given notice that this exception is no longer applicable,
any Assignor may allow in the ordinary course of business as adjustments to
amounts owing under its Receivables and Contracts (i) an extension or renewal of
the time or times of payment, or settlement for less than the total unpaid
balance, which such Assignor finds appropriate in accordance with sound business
judgment and (ii) a refund or credit due as a result of returned or damaged
merchandise or improperly performed services. The reasonable costs and expenses
(including, without limitation, attorneys' fees) of collection, whether incurred
by any Assignor or the Collateral Agent, shall be borne by such Assignor.

         3.5 Direction to Account Debtors; etc. Upon the occurrence and during
the continuance of a Noticed Event of Default, and if the Collateral Agent so
directs any Assignor, to the extent permitted by applicable law, such Assignor
agrees (x) to cause all payments on account of the Receivables and Contracts to
be made directly to the Cash Collateral Account, (y) that the Collateral Agent
may, at its option, directly notify the obligors with respect to any Receivables
and/or under any Contracts to make payments with respect thereto as provided in
preceding clause (x) and (z) that the Collateral Agent may enforce collection of
any Receivables or Contracts and may adjust, settle or compromise the amount of
payment thereof, in the same manner and to the same extent as the Assignor. The
Collateral Agent may apply any or all amounts then in, or thereafter deposited
in, the Cash Collateral Account in the manner provided in Section 7.4 of this
Agreement. The reasonable costs and expenses (including reasonable attorneys'
fees) of collection, whether incurred by any Assignor or the Collateral Agent,
shall be borne by such Assignor. The Collateral Agent shall deliver a copy of
each notice referred to in the preceding clause (y) to the relevant Assignor;
provided that, the failure of the Collateral Agent to so notify such Assignor
shall not affect the effectiveness of such notice or the other rights of the
Collateral Agent created by this Section 3.5.

         3.6 Instruments. If any Assignor owns or acquires any Instrument, such
Assignor will within 30 Business Days notify the Collateral Agent thereof, and
upon request by the Collateral Agent promptly deliver such Instrument (other
than checks payable to any Assignor and processed in the ordinary course of
business) to the Collateral Agent appropriately endorsed to the order of the
Collateral Agent as further security hereunder.

         3.7 Further Actions. Each Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps, including any and all actions as may be necessary or required

                                      (9)

<PAGE>

under the Federal Assignment of Claims Act, relating to its Receivables,
Contracts, Instruments and other property or rights covered by the security
interest hereby granted, as the Collateral Agent may reasonably require to give
effect to the purposes of this Agreement.

         3.8 Assignors Remain Liable Under Receivables and Contracts. Anything
herein to the contrary notwithstanding, the Assignors shall remain liable under
each of the Receivables and each Contract to observe and perform all of the
conditions and obligations to be observed and performed by them thereunder, all
in accordance with the terms of the agreement giving rise to such Receivables or
such Contract. Neither the Collateral Agent nor any other Secured Creditor shall
have any obligation or liability under any Receivable (or any agreement giving
rise thereto) or any Contract by reason of or arising out of this Agreement or
the receipt by the Collateral Agent or any other Secured Creditor of any payment
relating to such Receivable or such Contract pursuant hereto, nor shall the
Collateral Agent or any other Secured Creditor be obligated in any manner to
perform any of the obligations of any Assignor under or pursuant to any
Receivable (or any agreement giving rise thereto) or any Contract, to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by them or as to the sufficiency of any performance by any party under
any Receivable (or any agreement giving rise thereto) or any Contract, to
present or file any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned to them or to
which they may be entitled at any time or times.

         3.9 Deposit Accounts; Etc. (a) No Assignor maintains, or at any time
after the date hereof shall establish or maintain, any demand, time, savings,
passbook or similar account, except for such accounts maintained with a bank (as
defined in Section 9-102 of the UCC) whose jurisdiction (determined in
accordance with Section 9-304 of the UCC) is within a State of the United
States, provided that an Assignor may maintain or establish an account or
accounts outside of the United States on terms, and in circumstances, reasonably
acceptable to the Collateral Agent, so long as (i) any amounts deposited in any
such account represent monies from revenue generated exclusively from operations
outside of the United States and (ii) the aggregate amount of cash in all such
accounts maintained outside the United States does not exceed an amount
reasonably satisfactory to the Collateral Agent (each such account outside the
United States meeting the foregoing requirements, a "Non-U.S. Deposit Account").
Annex J hereto accurately sets forth, as of the date of this Agreement, for each
Assignor, each Deposit Account maintained by such Assignor (including a
description thereof and the respective account number), the name of the
respective bank with which such Deposit Account is maintained, and the
jurisdiction of the respective Bank with respect to such Deposit Account. For
each Perfected Deposit Account, the respective Assignor shall cause the bank
with which the Perfected Deposit Account is maintained to execute and deliver to
the Collateral Agent, within 45 days after the date hereof or, if later, at the
time of the establishment of the respective Perfected Deposit Account, a
"control agreement" in the form of Annex L hereto (appropriately completed),
with such changes thereto as may be approved by the Collateral Agent (such
approval not to be unreasonably withheld). If any bank with which a Perfected
Deposit Account is maintained refuses to, or does not, enter into such a
"control agreement", then the respective Assignor shall promptly (and in any
event within 45 days after the date of this Agreement or, if later, 45 days
after the opening of such account) close the respective Perfected Deposit
Account and transfer all balances therein to the Cash Collateral Account or
another Perfected Deposit Account meeting the requirements of this Section 3.9.
If any bank with which a Perfected Deposit Account is

                                      (10)

<PAGE>

maintained refuses to subordinate all its claims with respect to such Perfected
Deposit Account to the Collateral Agent's security interest therein on terms
satisfactory to the Collateral Agent, then the Collateral Agent, at its option,
may (x) require that such Perfected Deposit Account be terminated in accordance
with the immediately preceding sentence or (y) agree to a "control agreement"
without such subordination, provided that in such event the Collateral Agent may
at any time, at its option, subsequently require that such Perfected Deposit
Account be terminated (within 45 days after notice from the Collateral Agent) in
accordance with the requirements of the immediately preceding sentence.

         (b) After the date hereof, no Assignor shall establish any new demand,
time, savings, passbook or similar account, except for Perfected Deposit
Accounts established and maintained with banks and meeting the requirements of
preceding clause (a). At the time any such Perfected Deposit Account is
established, the appropriate "control agreement" shall be entered into in
accordance with the requirements of preceding clause (a) and the respective
Assignor shall furnish to the Collateral Agent a supplement to Annex J hereto
containing the relevant information with respect to the respective Perfected
Deposit Account and the bank with which same is established.

         3.10 Letter-of-Credit Rights. If any Assignor is at any time a
beneficiary under a letter of credit with a stated amount of $1,000,000 or more,
such Assignor shall promptly notify the Collateral Agent thereof and, at the
request of the Collateral Agent, such Assignor shall, pursuant to an agreement
in form and substance reasonably satisfactory to the Collateral Agent, use its
reasonable best efforts to (i) arrange for the issuer and any confirmer of such
letter of credit to consent to an assignment to the Collateral Agent of the
proceeds of any drawing under such letter of credit or (ii) arrange for the
Collateral Agent to become the transferee beneficiary of such letter of credit,
with each Assignor and the Collateral Agent agreeing, in each case, that the
proceeds of any drawing under the letter of credit are to be applied as provided
in this Agreement after the occurrence and during the continuance of a Noticed
Event of Default (it being understood and agreed that at any time prior to the
occurrence of a Noticed Event of Default, such proceeds shall be directed to the
relevant Assignor).

         3.11 Commercial Tort Claims. All Commercial Tort Claims of each
Assignor and any events or circumstances that would reasonably be expected to
give rise to any Commercial Tort Claims of each Assignor as of the date of this
Agreement are described in Annex K hereto. If any Assignor shall at any time and
from time to time after the date hereof become aware of any Commercial Tort
Claims or events or circumstances that would reasonably be expected to give rise
to a Commercial Tort Claim of such Assignor, in an amount (taking the greater of
the aggregate claimed damages thereunder or the reasonably estimated value
thereof) of $1,000,000 or more, such Assignor shall (i) promptly notify the
Collateral Agent thereof in a writing signed by such Assignor and describing the
details thereof and shall grant to the Collateral Agent in such writing a
security interest in all such Commercial Tort Claims and in the proceeds
thereof, all upon the terms of this Agreement, with such writing to be in form
and substance reasonably satisfactory to the Collateral Agent and (ii) perform
all actions reasonably requested by the Collateral Agent to perfect such
security interest in such Commercial Tort Claims.

                                      (11)

<PAGE>

         3.12 Chattel Paper. Upon the request of the Collateral Agent made at
any time or from time to time, each Assignor shall promptly furnish to the
Collateral Agent a list of all Electronic Chattel Paper held or owned by such
Assignor. Furthermore, if requested by the Collateral Agent, each Assignor shall
promptly take all actions which are reasonably practicable so that the
Collateral Agent has "control" of all Electronic Chattel Paper in accordance
with the requirements of Section 9-105 of the UCC. Each Assignor will promptly
(and in any event within 10 days) following any request by the Collateral Agent,
deliver all of its Tangible Chattel Paper to the Collateral Agent.

                                   ARTICLE IV

                    SPECIAL PROVISIONS CONCERNING TRADEMARKS

         4.1 Additional Representations and Warranties. Each Assignor represents
and warrants as of the date hereof that it is the true and lawful owner of the
United States Patent and Trademark Office registrations, and applications for
registrations, of the Marks listed in Annex D, Part I attached hereto and that
Annex D, Part I lists all the United States Patent and Trademark Office, or the
equivalent office thereof in any foreign country, registrations and applications
for registrations, of the Marks that such Assignor now owns or uses in
connection with its business. Each Assignor represents and warrants as of the
date hereof that except with respect to those licensed marks set forth in Annex
D, Part I, it owns, is licensed to use or otherwise has the right to use all
material Marks that it uses. Each Assignor further warrants as of the date
hereof that it is aware of no third party claim that any aspect of such
Assignor's present or contemplated business operations infringes or will
infringe any material Mark. Except as set forth on Annex D, Part II, each
Assignor represents and warrants as of the date hereof that it is the true and
lawful owner of or otherwise has the right to use all material U.S. trademark
registrations and applications listed in Annex D, Part I hereto and that said
registrations are valid, subsisting, have not been cancelled and that such
Assignor is not aware of any third-party claim that any of said registrations or
applications for registration with respect to a Mark is invalid or unenforceable
or is not aware that there is any reason that any of said material registrations
or applications for registration with respect to a Mark is invalid or
unenforceable, or that there is any reason that any of said applications will
not pass to registration. Each Assignor represents and warrants that upon the
recordation of an Assignment of Security Interest in United States Trademarks
and Patents in the form of Annex G hereto in the United States Patent and
Trademark Office, together with filings on Form UCC-1 pursuant to this
Agreement, all filings, registrations and recordings necessary or appropriate to
perfect the security interest granted to the Collateral Agent in the United
States Marks covered by this Agreement under federal law will have been
accomplished. Each Assignor agrees to execute such an Assignment of Security
Interest in United States Trademark and Patents covering all of such Assignor's
right, title and interest in each United States Mark, and the associated
goodwill, of such Assignor, and to record the same. Each Assignor hereby grants
to the Collateral Agent an absolute power of attorney to sign, upon the
occurrence and during the continuance of a Noticed Event of Default, any
document which may be required by the United States Patent and Trademark Office
in order to effect an absolute assignment of all such Assignor's right, title
and interest in each United States Mark owned by an Assignor, and record the
same.

                                      (12)

<PAGE>

         4.2 Licenses and Assignments. Subject to the provisions of Sections 4.4
and 4.5, each Assignor hereby agrees not to divest itself of any right under a
Mark other than in the ordinary course of business absent prior written approval
of the Collateral Agent.

         4.3 Infringements. Each Assignor agrees, promptly upon learning
thereof, to notify the Collateral Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect to,
any party who may be infringing or otherwise violating in any material respect
any of such Assignor's rights in and to any Mark material to the operation of
its business, or with respect to any party claiming that such Assignor's use of
any Mark material to the operation of its business violates in any material
respect any property right of that party. Each Assignor further agrees, to
prosecute diligently any Person infringing in any material respect any Mark
owned by such Assignor in a manner consistent with its past practice and in
accordance with reasonable business practices.

         4.4 Preservation of Marks. Each Assignor agrees to use or license the
use of its Marks in interstate commerce during the time in which this Agreement
is in effect, sufficiently to preserve such Marks as trademarks or service marks
registered under the laws of the United States or the relevant foreign
jurisdiction; provided, that no Assignor shall be obligated to preserve any Mark
in the event such Assignor determines, in its reasonable business judgment, that
the preservation of such Mark is no longer necessary in the conduct of its
business.

         4.5 Maintenance of Registration. Each Assignor shall, at its own
expense, diligently process all documents required to maintain trademark
registrations, including but not limited to affidavits of use and applications
for renewals of registration in the United States Patent and Trademark Office or
equivalent governmental agency in any foreign jurisdiction for all of its Marks
(excluding unregistered Marks), and shall pay all fees and disbursements in
connection therewith, and shall not abandon any such filing of affidavit of use
or any such application of renewal prior to the exhaustion of all administrative
and judicial remedies without prior written consent of the Collateral Agent;
provided, that no Assignor shall be obligated to maintain any Mark or prosecute
any such application for registration in the event that such Assignor
determines, in its reasonable business judgment, that such Mark or application
is no longer necessary in the conduct of its business.

         4.6 Future Registered Marks. If any Mark registration issues hereafter
to any Assignor as a result of any application now or hereafter pending before
the United States Patent and Trademark Office or equivalent governmental agency
in any foreign jurisdiction, at the time of the delivery (or required delivery)
of the annual or quarterly financial information of the Borrower to the Lenders
pursuant to Section 7.01(a) or (b), as the case may be, of the Credit Agreement,
such Assignor shall deliver a copy of the related registration certificate, and
a grant of security in such mark to the Collateral Agent, confirming the grant
thereof hereunder, the form of such confirmatory grant to be substantially the
same as the form of Annex G hereof or in such other form as may be reasonably
acceptable to the Collateral Agent.

         4.7 Remedies. If a Noticed Event of Default shall occur and be
continuing, the Collateral Agent may, by written notice to the relevant
Assignor, take any or all of the following actions: (i) declare the entire
right, title and interest of such Assignor in and to each of

                                      (13)

<PAGE>

the Marks, together with all trademark rights and rights of protection to the
same, vested, in which event such rights, title and interest shall immediately
vest, in the Collateral Agent for the benefit of the relevant Secured Creditors
pursuant to a trademark security agreement in form and substance satisfactory to
the Collateral Agent, executed by such Assignor and filed on the date hereof,
pursuant to which all of such Assignor's rights, title and interest in and to
the Marks are assigned to the Collateral Agent for the benefit of the relevant
Secured Creditors; (ii) take and use or sell the Marks and the goodwill of such
Assignor's business symbolized by the Marks and the right to carry on the
business and use the assets of such Assignor in connection with which the Marks
have been used; and (iii) direct such Assignor to refrain, in which event such
Assignor shall refrain, from using the Marks in any manner whatsoever, directly
or indirectly, and, if requested by the Collateral Agent, change such Assignor's
corporate name to eliminate therefrom any use of any Mark and execute such other
and further documents that the Collateral Agent may request to further confirm
this and to transfer ownership of the Marks and registrations and any pending
trademark application in the United States Patent and Trademark Office or any
equivalent governmental agency or office in any foreign jurisdiction to the
Collateral Agent.

                                   ARTICLE V

                          SPECIAL PROVISIONS CONCERNING
                   TRADE SECRET RIGHTS, PATENTS AND COPYRIGHTS

         5.1 Additional Representations and Warranties. Except as set forth in
the Annexes attached hereto, each Assignor represents and warrants as of the
date hereof that it is the true and lawful owner or licensee of all rights in
(i) all Trade Secret Rights, (ii) the Patents of such Assignor listed in Annex E
attached hereto and that said Patents constitute all the patents and
applications for patents that such Assignor now owns and (iii) the Copyrights of
such Assignor listed in Annex F attached hereto and that said Copyrights
constitute all the registered copyrights and applications for copyright
registrations that such Assignor now owns. Except as set forth on Annex F, each
Assignor further warrants as of the date hereof that it is aware of no third
party claim that any aspect of such Assignor's present or contemplated business
operations infringes or will infringe any material patent or any material
copyright or that such Assignor has misappropriated any material Trade Secret
Rights. Each Assignor represents and warrants that upon the recordation of an
Assignment of Security Interest in United States Trademarks and Patents in the
form of Annex G hereto in the United States Patent and Trademark Office and the
recordation of an Assignment of Security Interest in United States Copyrights in
the form of Annex H hereto in the United States Copyright Office, together with
filings on Form UCC-1 pursuant to this Agreement, all filings, registrations and
recordings necessary or appropriate to perfect the security interest granted to
the Collateral Agent in the United States Patents and United States Copyrights
covered by this Agreement under federal law will have been accomplished. Upon
obtaining any Patent, each Assignor agrees to execute an Assignment of Security
Interest in United States Trademarks and Patents covering all right, title and
interest in each United States Patent of such Assignor and to record the same,
and upon obtaining any registration of a Copyright, to execute such an
Assignment of Security Interest in United States Copyrights covering all right,
title and interest in each such registered United States Copyright of such
Assignor and to record the same. Each Assignor hereby grants to the Collateral
Agent an absolute power of attorney to sign, upon the occurrence and during the
continuance of any Event

                                      (14)

<PAGE>

of Default, any document which may be required by the U.S. Patent and Trademark
Office or equivalent governmental agency in any foreign jurisdiction or the U.S.
Copyright Office or equivalent governmental agency in any foreign jurisdiction
in order to effect an absolute assignment of all right, title and interest in
each Patent and Copyright, and to record the same.

         5.2 Licenses and Assignments. Subject to the provisions of Sections 5.4
and 5.5, each Assignor hereby agrees not to divest itself of any right under a
Patent or Copyright other than in the ordinary course of business absent prior
written approval of the Collateral Agent.

         5.3 Infringements. Each Assignor agrees, promptly upon learning
thereof, to furnish the Collateral Agent in writing with all pertinent
information available to such Assignor with respect to any material infringement
or other violation of such Assignor's rights in any Patent or Copyright, in each
case material to its business, or with respect to any claim that the practice of
any Patent or the use of any Copyright, in each case material to its business,
violates in any material respect any property right of a third party or with
respect to any misappropriation of any Trade Secret Right material to its
business or any claim that the practice of any Trade Secret Right material to
its business violates any property right of a third party. To the extent
consistent with its past practice and in accordance with reasonable business
practices, each Assignor further agrees, to prosecute diligently any Person
materially infringing any Patent or Copyright owned by such Assignor or any
Person misappropriating any Trade Secret Right.

         5.4 Maintenance of Patents or Copyrights. At its own expense, each
Assignor shall make timely payment of all post-issuance fees required to
maintain in force rights under each of its Patents and Copyrights; provided,
that no Assignor shall be obligated to maintain any Patent in the event such
Assignor determines, in its reasonable business judgment, that the maintenance
of such Patent is no longer necessary in the conduct of its business.

         5.5 Prosecution of Patent or Copyright Application. At its own expense,
each Assignor shall diligently prosecute all applications for (i) Patents of
such Assignor listed on Annex E hereto and (ii) Copyrights listed on Annex F
hereto, and, in each case, shall not abandon any such application prior to
exhaustion of all administrative and judicial remedies, absent written consent
of the Collateral Agent, provided that no Assignor shall be obligated to
maintain any Patent or Copyright in the event such Assignor determines it is no
longer necessary in the conduct of its business.

         5.6 Other Patents and Copyrights. At the time of the delivery (or
required delivery) of the annual or quarterly financial information of the
Borrower to the Lenders pursuant to Section 7.01(a) or (b), as the case may be,
of the Credit Agreement, the relevant Assignor shall deliver to the Collateral
Agent information of the type required by Annex E or Annex F hereto (as
applicable) relating to each newly acquired or issued Patent or Copyright
registration and each newly filed application for a Patent or Copyright
registration, as the case may be, with a grant of security as to such Patent or
Copyright, as the case may be, confirming the grant thereof hereunder, the form
of such confirmatory grant to be substantially in the form of Annex G or Annex
H, as the case may be, hereto; provided, that no Assignor (i) shall be obligated
to prosecute any application in the event such Assignor determines, in its
reasonable business judgment, that such application is no longer necessary in
the conduct of its business and

                                      (15)

<PAGE>

(ii) shall be obligated to provide a copy of a Patent application or any other
information with respect to an application for a Patent or Copyright
registration (other than the application date and filing number and such other
identifying information necessary to perfect a security interest in the
respective Patent or Copyright) if such Assignor reasonably believes such
information is confidential or such disclosure would materially impair or
prejudice Assignor's rights under such application or registration.

         5.7 Remedies. If a Noticed Event of Default shall occur and be
continuing, the Collateral Agent may by written notice to the relevant Assignor
take any or all of the following actions: (i) declare the entire right, title
and interest of such Assignor in each of the Patents and Copyrights vested, in
which event such right, title and interest shall immediately vest in the
Collateral Agent for the benefit of the relevant Secured Creditors, pursuant to
a patent security agreement or copyright security agreement, as the case may be,
in form and substance satisfactory to the Collateral Agent, executed by such
Assignor and filed on the date hereof, pursuant to which all of such Assignor's
right, title, and interest to such Patents and Copyrights are assigned to the
Collateral Agent for the benefit of the relevant Secured Creditors; (ii) take
and practice, use or sell the Patents and Copyrights; (iii) direct such Assignor
to refrain, in which event such Assignor shall refrain, from practicing the
Patents and using the Copyrights directly or indirectly, and such Assignor shall
execute such other and further documents as the Collateral Agent may request
further to confirm this and to transfer ownership of the Patents and Copyrights
to the Collateral Agent for the benefit of the relevant Secured Creditors.

                                   ARTICLE VI

                      PROVISIONS CONCERNING ALL COLLATERAL

         6.1 Protection of Collateral Agent's Security. Each Assignor will at
all times keep its Inventory and Equipment insured in favor of the Collateral
Agent, at its own expense, to the extent required by the Credit Agreement;
copies of all policies or certificates with respect to such insurance (i) shall
be endorsed to the Collateral Agent's reasonable satisfaction for the benefit of
the Collateral Agent (including, without limitation, by naming the Collateral
Agent as loss payee and the Collateral Agent and the other relevant Secured
Creditors as additional insureds), (ii) shall state that such insurance policies
shall not be cancelled or materially revised without at least 30 days' (or at
least 10 days' in the case of nonpayment of premium) prior written notice
thereof by the insurer to the Collateral Agent and (iii) shall be deposited with
the Collateral Agent. If any Assignor shall fail to insure such Inventory or
Equipment to the extent required by the Credit Agreement, or if any Assignor
shall fail to so endorse and deposit copies of all policies or certificates with
respect thereto, the Collateral Agent shall have the right (but shall be under
no obligation), upon prior written notice to such Assignor, to procure such
insurance and such Assignor agrees to reimburse the Collateral Agent for all
reasonable costs and expenses of procuring such insurance. Except as otherwise
provided in the Credit Agreement, the Collateral Agent shall apply any proceeds
of such insurance required after a Noticed Event of Default in accordance with
Section 7.4 (it being understood that so long as no Noticed Event of Default has
occurred and is continuing, the Collateral Agent will release any interest it
has in the proceeds of any casualty insurance to the Assignors). Each Assignor
assumes all liability and responsibility in connection with the Collateral
acquired by it and the

                                      (16)

<PAGE>

liability of such Assignor to pay its Obligations shall in no way be affected or
diminished by reason of the fact that such Collateral may be lost, destroyed,
stolen, damaged or for any reason whatsoever unavailable to such Assignor.

         6.2 Further Actions. Each Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
deems reasonably appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral.

         6.3 Financing Statements. Each Assignor agrees to execute and deliver
to the Collateral Agent such financing statements, in form acceptable to the
Collateral Agent, as the Collateral Agent may from time to time reasonably
request or as are reasonably necessary or desirable in the reasonable opinion of
the Collateral Agent to establish and maintain a valid, enforceable, first
priority perfected security interest in the Collateral (subject to the Permitted
Liens) as provided herein and the other rights and security contemplated hereby
all in accordance with the Uniform Commercial Code as enacted in any and all
relevant jurisdictions or any other relevant law. Each Assignor will pay any
applicable filing fees, recordation taxes and related expenses. Each Assignor
hereby authorizes the Collateral Agent to file any such financing statements
(including, without limitation, (x) financing statements which list the
Collateral specifically and/or "all assets" as collateral and (y) "in lieu of"
financing statements) without the signature of such Assignor where permitted by
law.

         6.4 Additional Information. Each Assignor will, at its own expense,
from time to time upon the reasonable request of the Collateral Agent, promptly
(and in any event within 10 days after its receipt of the respective request)
furnish to the Collateral Agent such information with respect to the Collateral
(including the identity of the Collateral or such components thereof as may have
been requested by the Collateral Agent, the value and location of such
Collateral, etc.) as may be requested by the Collateral Agent. Without limiting
the forgoing, each Assignor agrees that it shall promptly (and in any event
within 10 days after its receipt of the respective request) furnish to the
Collateral Agent such updated Annexes hereto as may from time to time be
reasonably requested by the Collateral Agent.

                                  ARTICLE VII

                  REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT

         7.1 Remedies; Obtaining the Collateral Upon Default. Each Assignor
agrees that, if a Noticed Event of Default shall have occurred and be
continuing, then and in every such case, subject to any mandatory requirements
of applicable law then in effect, the Collateral Agent, in addition to any
rights now or hereafter existing under applicable law and under the other
provisions of this Agreement, shall have all rights as a secured creditor under
the Uniform

                                      (17)

<PAGE>

Commercial Code in all relevant jurisdictions and such additional rights and
remedies to which a secured creditor is entitled under the laws in effect in all
relevant jurisdictions and may also:

                  (i) personally, or by agents or attorneys, immediately take
         possession of the Collateral or any part thereof, from such Assignor or
         any other Person who then has possession of any part thereof with or
         without notice or process of law, and for that purpose may enter upon
         such Assignor's premises where any of the Collateral is located and
         remove the same and use in connection with such removal any and all
         services, supplies, aids and other facilities of such Assignor;

                  (ii) instruct the obligor or obligors on any agreement,
         instrument or other obligation (including, without limitation, the
         Receivables and the Contracts) constituting the Collateral to make any
         payment required by the terms of such instrument or agreement directly
         to the Collateral Agent and may exercise any and all remedies of such
         Assignor in respect of such Collateral;

                  (iii) instruct all banks which have entered into a control
         agreement with the Collateral Agent to transfer all moneys, securities
         and instruments held by such depository bank to the Cash Collateral
         Account and withdraw all moneys, securities and instruments in the Cash
         Collateral Account for application to the Obligations in accordance
         with Section 7.4 hereof;

                  (iv) sell, assign or otherwise liquidate, or direct such
         Assignor to sell, assign or otherwise liquidate, any or all of the
         Collateral or any part thereof in accordance with Section 7.2 hereof,
         and take possession of the proceeds of any such sale or liquidation;

                  (v) take possession of the Collateral or any part thereof, by
         directing such Assignor in writing to deliver the same to the
         Collateral Agent at any place or places reasonably designated by the
         Collateral Agent, in which event such Assignor shall at its own
         expense:

                           (A) forthwith cause the same to be moved to the place
                  or places so designated by the Collateral Agent and there
                  delivered to the Collateral Agent,

                           (B) store and keep any Collateral so delivered to the
                  Collateral Agent at such place or places pending further
                  action by the Collateral Agent as provided in Section 7.2, and

                           (C) while the Collateral shall be so stored and kept,
                  provide such guards, other security and maintenance services
                  as shall be necessary to protect the same and to preserve and
                  maintain them in good condition;

                  (vi) license or sublicense whether on an exclusive or
         nonexclusive basis, any Marks, Patents or Copyrights included in the
         Collateral for such term and on such conditions and in such manner as
         the Collateral Agent shall in its sole judgment determine;

                                      (18)

<PAGE>

                  (vii) apply any moneys constituting Collateral or proceeds
         thereof in accordance with Section 8.4; and

                  (viii) take any other action as specified in clauses (1)
         through (5), inclusive, of Section 9-607 of the UCC.

it being understood that such Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by such Assignor of said obligation. By
accepting the benefits of this Agreement and each other Security Document, the
Secured Creditors expressly acknowledge and agree that (x) this Agreement and
each other Security Document may be enforced only by the action of the
Collateral Agent acting upon the instructions of the Required Lenders or, if the
CA Termination Date has occurred, the holders of a majority of the outstanding
principal amount of all remaining Obligations, provided that if prior to the CA
Termination Date a payment default with respect to at least $300,000,000
principal amount in the aggregate of New Senior Notes and/or Refinancing Senior
Notes has continued for at least 180 days (and such defaulted payment has not
been received pursuant to a drawing under any letter of credit), the holders of
a majority of the outstanding principal amount of the Indebtedness subject to
such payment default or defaults can direct the Collateral Agent to commence and
continue enforcement of the Liens created hereunder, which the Collateral Agent
shall comply with subject to receiving any indemnity which it reasonably
requests, provided further that the Collateral Agent shall thereafter comply
only with the directions of the Required Lenders as to carrying out such
enforcement so long as such directions are not adverse to the aforesaid
directions of the holders of Indebtedness subject to such payment default or
defaults, and (y) no other Secured Creditor shall have any right individually to
seek to enforce or to enforce this Agreement or any other Security Document or
to realize upon the security to be granted hereby or thereby, it being
understood and agreed that such rights and remedies shall be exercised
exclusively by the Collateral Agent for the benefit of the Secured Creditors as
their interest may appear upon the terms of this Agreement and the other
Security Documents.

         7.2 Remedies; Disposition of the Collateral. Upon the occurrence and
continuance of a Noticed Event of Default, any Collateral repossessed by the
Collateral Agent under or pursuant to Section 7.1 and any other Collateral
whether or not so repossessed by the Collateral Agent, may be sold, assigned,
leased or otherwise disposed of under one or more contracts or as an entirety,
and without the necessity of gathering at the place of sale the property to be
sold, and in general in such manner, at such time or times, at such place or
places and on such terms as the Collateral Agent may, in compliance with any
mandatory requirements of applicable law, determine to be commercially
reasonable. Any of the Collateral may be sold, leased or otherwise disposed of,
in the condition in which the same existed when taken by the Collateral Agent or
after any overhaul or repair which the Collateral Agent shall determine to be
commercially reasonable. Any such disposition which shall be a private sale or
other private proceedings permitted by such requirements shall be made upon not
less than ten (10) days' written notice to the relevant Assignor specifying the
time at which such disposition is to be made and the intended sale price or
other consideration therefor, and shall be subject, for the ten (10) days after
the giving of such notice, to the right of the relevant Assignor or any nominee
of such Assignor to acquire the Collateral involved at a price or for such other
consideration at least equal to the intended sale price or other consideration
so specified. Any such disposition which

                                      (19)

<PAGE>

shall be a public sale permitted by such requirements shall be made upon not
less than ten (10) days' written notice to the relevant Assignor specifying the
time and place of such sale and, in the absence of applicable requirements of
law, shall be by public auction (which may, at the Collateral Agent's option, be
subject to reserve), after publication of notice of such auction not less than
10 days prior thereto in one newspaper in general circulation in the City of New
York and one newspaper in general circulation in Winston Salem, North Carolina.
To the extent permitted by any such requirement of law, the Collateral Agent on
behalf of the Secured Creditors (or certain of them) may bid for and become the
purchaser (by bidding in the Obligations or otherwise) of the Collateral or any
item thereof, offered for sale in accordance with this Section without
accountability to the relevant Assignor (except to the extent of surplus money
received as provided in Section 7.4). If, under mandatory requirements of
applicable law, the Collateral Agent shall be required to make disposition of
the Collateral within a period of time which does not permit the giving of
notice to the relevant Assignor as hereinabove specified, the Collateral Agent
need give such Assignor only such notice of disposition as shall be reasonably
practicable in view of such mandatory requirements of applicable law.

         7.3 Waiver of Claims. Except as otherwise provided in this Agreement,
EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE
AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION
OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT
REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR WOULD OTHERWISE HAVE
UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and
such Assignor hereby further waives, to the extent permitted by law:

                  (i) all damages occasioned by such taking of possession or any
         such disposition except any damages which are the direct result of the
         Collateral Agent's gross negligence or wilful misconduct;

                  (ii) all other requirements as to the time, place and terms of
         sale or other requirements with respect to the enforcement of the
         Collateral Agent's rights hereunder; and

                  (iii) all rights of redemption, appraisement, valuation, stay,
         extension or moratorium now or hereafter in force under any applicable
         law in order to prevent or delay the enforcement of this Agreement or
         the absolute sale of the Collateral or any portion thereof, and each
         Assignor, for itself and all who may claim under it, insofar as it or
         they now or hereafter lawfully may, hereby waives the benefit of all
         such laws.

Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the relevant Assignor therein and
thereto, and shall be a perpetual bar both at law and in equity against such
Assignor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under such Assignor.

                                      (20)

<PAGE>

         7.4 Application of Proceeds. (a) All moneys collected by the Collateral
Agent upon any sale, other disposition of or other realization upon any
Collateral, together with all other moneys received by the Collateral Agent
hereunder (collectively, the "Collateral Proceeds"), shall be applied as
follows:

                  (i) first, to the payment of all Obligations owing to the
         Collateral Agent of the type described in clauses (v), (vi) and (vii)
         of the definition of "Obligations" contained in Article IX hereof;

                  (ii) second, to the extent proceeds of the sale, any
         disposition of or other realization upon any item of Collateral remain
         after the application pursuant to preceding clause (i), an amount equal
         to the outstanding Applicable Obligations secured by such item of
         Collateral shall be paid to the Secured Creditors in the manner
         provided below as their interests may appear, with each Secured
         Creditor receiving an amount equal to its outstanding Applicable
         Obligations secured by such item of Collateral or, if the proceeds are
         insufficient to pay in full all such Applicable Obligations, its Pro
         Rata Share of the amount so remaining to be distributed, with any such
         amount to be applied in the case of the Credit Document Obligations,
         the New Senior Notes Obligations and the Refinancing Senior Notes
         Obligations, first to the payment of interest in respect of the unpaid
         principal amount of Loans, New Senior Notes or Refinancing Senior
         Notes, as the case may be, second to the payment of principal of Loans,
         New Senior Notes or Refinancing Senior Notes, as the case may be, and
         finally to the other Credit Document Obligations, New Senior Notes
         Obligations or Refinancing Senior Notes Obligations, as the case may
         be; and

                  (iii) third, to the extent proceeds remain after the
         application pursuant to the preceding clauses (i) and (ii) to the
         relevant Assignor or, to the extent directed by such Assignor or a
         court of competent jurisdiction, to whomever may be lawfully entitled
         to receive such surplus.

         (b) For purposes of this Agreement, "Pro Rata Share" shall mean when
calculating a Secured Creditor's portion of any distribution or amount pursuant
to Section 7.4(a), the amount (expressed as a percentage) equal to a fraction
the numerator of which is the then outstanding amount of the relevant Applicable
Obligations secured by the relevant item of Collateral owed such Secured
Creditor and the denominator of which is the then outstanding amount of all
Applicable Obligations secured by the relevant item of Collateral.

         (c) All payments required to be made to the (i) Lender Creditors
hereunder shall be made to the Administrative Agent for the account of the
respective Lender Creditors, (ii) Hedging Creditors hereunder shall be made to
the paying agent under the applicable Secured Hedging Agreement or, in the case
of Secured Hedging Agreements without a paying agent, directly to the applicable
Hedging Creditors, (iii) New Senior Notes Creditors hereunder shall be made to
the New Senior Notes Trustee for the account of the respective New Senior Notes
Creditors, and (iv) Refinancing Senior Notes Creditors hereunder shall be made
to the Refinancing Senior Notes Trustee for the account of the respective
Refinancing Senior Notes Creditors.

                                      (21)

<PAGE>

         (d) For purposes of applying payments received in accordance with this
Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the
Administrative Agent for a determination of the outstanding Credit Document
Obligations, (ii) upon any Hedging Creditor for a determination of the
outstanding Hedging Obligations owed to such Hedging Creditor, (iii) the New
Senior Notes Trustee for a determination of the outstanding New Senior Notes
Obligations and (iv) the Refinancing Senior Notes Trustee for a determination of
the outstanding Refinancing Senior Notes Obligations. Unless it has actual
knowledge (including by way of written notice from a Secured Creditor) to the
contrary, the Administrative Agent under the Credit Agreement, in furnishing
information pursuant to the preceding sentence, and the Collateral Agent, in
acting hereunder, shall be entitled to assume that no Credit Document
Obligations other than principal, interest and regularly accruing fees are owing
to any Lender Creditor.

         (e) It is understood that each Assignor shall remain liable to the
extent of any deficiency between (x) the amount of the obligations for which it
is liable directly or as a Guarantor that are satisfied with proceeds of the
Collateral and (y) the aggregate outstanding amount of such Obligations.

         7.5 Remedies Cumulative. Each and every right, power and remedy hereby
specifically given to the Collateral Agent shall be in addition to every other
right, power and remedy specifically given under this Agreement, any Secured
Hedging Agreement, the other Credit Documents, any New Senior Notes Document or
any Refinancing Senior Notes Document or now or hereafter existing at law or in
equity, or by statute and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time or simultaneously and as often and in such order as may be deemed expedient
by the Collateral Agent. All such rights, powers and remedies shall be
cumulative and the exercise or the beginning of exercise of one shall not be
deemed a waiver of the right to exercise of any other or others. No delay or
omission of the Collateral Agent in the exercise of any such right, power or
remedy and no renewal or extension of any of the Obligations shall impair any
such right, power or remedy or shall be construed to be a waiver of any Default
or Event of Default or an acquiescence therein. In the event that the Collateral
Agent shall bring any suit to enforce any of its rights hereunder and shall be
entitled to judgment, then in such suit the Collateral Agent may recover
expenses, including attorneys' fees, and the amounts thereof shall be included
in such judgment.

         7.6 Discontinuance of Proceedings. In case the Collateral Agent shall
have instituted any proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Collateral Agent, then and in every such case the relevant
Assignor, the Collateral Agent and each holder of any of the Obligations shall
be restored to their former positions and rights hereunder with respect to the
Collateral subject to the security interest created under this Agreement, and
all rights, remedies and powers of the Collateral Agent shall continue as if no
such proceeding had been instituted (except to the extent of a determination
adverse to the Collateral Agent in such a proceeding).

                                      (22)

<PAGE>

                                  ARTICLE VIII

                                    INDEMNITY

         8.1 Indemnity. (a) Each Assignor jointly and severally agrees to
indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor
and their respective successors, permitted assigns, employees, agents and
servants (hereinafter in this Section 8.1 referred to individually as
"Indemnitee," and collectively as "Indemnitees") harmless from any and all
liabilities, obligations, losses, damages, penalties, claims, demands, actions,
suits, judgments and any and all reasonable costs and expenses (including
reasonable attorneys' fees and expenses) (for the purposes of this Section 8.1
the foregoing are collectively called "expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnitees in any way
relating to or arising out of this Agreement, or the documents executed in
connection herewith or in any other way connected with the enforcement of any of
the terms of, or the preservation of any rights hereunder, or in any way
relating to or arising out of the manufacture, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Collateral
(including, without limitation, latent or other defects, whether or not
discoverable), the violation of the laws of any country, state or other
governmental body or unit, any tort (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on account
of injury to or the death of any Person (including any Indemnitee), or property
damage), or contract claim; provided that no Indemnitee shall be indemnified
pursuant to this Section 8.1(a) for expenses, losses, damages or liabilities to
the extent caused by the gross negligence or wilful misconduct of such
Indemnitee. Each Assignor agrees that upon written notice by any Indemnitee of
the assertion of such a liability, obligation, loss, damage, penalty, claim,
demand, action, judgment or suit, such Assignor shall assume full responsibility
for the defense thereof. Each Indemnitee agrees to use its best efforts to
promptly notify such Assignor of any such assertion of which such Indemnitee has
knowledge.

         (b) Without limiting the application of Section 8.1(a), each Assignor
agrees, jointly and severally, to pay, or reimburse the Collateral Agent for (if
the Collateral Agent shall have incurred fees, costs or expenses because such
Assignor shall have failed to comply with its obligations under this Agreement)
any and all reasonable fees, costs and expenses of whatever kind or nature
incurred in connection with the creation, preservation or protection of the
Collateral Agent's Liens on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the Collateral, premiums
for insurance with respect to the Collateral and all other reasonable fees,
costs and expenses in connection with protecting, maintaining or preserving the
Collateral and the Collateral Agent's interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions, suits or
proceedings arising out of or relating to the Collateral. Any reference in this
Agreement, to "fees of counsel" or other similar phraseology shall mean the
actual and reasonable fees incurred at customary and reasonable hourly rates in
the jurisdiction in which the services of such counsel are performed, not
pursuant to any statutory formula or percentage calculation.

                                      (23)

<PAGE>

         (c) Without limiting the application of Section 8.1(a) or (b), each
Assignor jointly and severally agrees to pay, indemnify and hold each Indemnitee
harmless from and against any loss, costs, damages and expenses which such
Indemnitee may suffer, expend or incur in consequence of or growing out of any
material misrepresentation by an Assignor in this Agreement, or in any statement
or writing contemplated by or made or delivered pursuant to or in connection
with this Agreement.

         (d) If and to the extent that the obligations of any Assignor under
this Section 8.1 are unenforceable for any reason, each Assignor hereby agrees
to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.

         8.2 Indemnity Obligations Secured by Collateral; Survival. Any amounts
paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all the
Notes issued under the Credit Agreement, the termination of all Secured Hedging
Agreements, the full payment of all New Senior Notes issued under the New Senior
Notes Indenture, the full payment of all Refinancing Senior Notes issued under
the Refinancing Senior Notes Indenture and the payment of all of the other
Obligations and notwithstanding the discharge thereof.

                                   ARTICLE IX

                                   DEFINITIONS

         The following terms shall have the meanings herein specified unless the
context otherwise requires. Such definitions shall be equally applicable to the
singular and plural forms of the terms defined.

         "Administrative Agent" shall have the meaning provided in the recitals
to this Agreement.

         "Agreement" shall mean this Security Agreement, as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.

         "As-Extracted Collateral" shall mean "as-extracted collateral" as such
term is defined in the Uniform Commercial Code as in effect on the date hereof
in the State of New York.

         "Assignor" shall have the meaning specified in the first paragraph of
this Agreement.

         "Applicable Obligations" shall mean (x) for each Assignor that is a
Specified Assignor, all the Obligations and (y) for each other Assignor, all the
Obligations other than the New Senior Notes Obligations and the Refinancing
Senior Notes Obligations, provided that (i) the New Senior Notes Obligations
shall be excluded from the Applicable Obligations of the Borrower or a
Restricted Subsidiary to the extent the New Senior Notes Documents do not

                                      (24)

<PAGE>

require the New Senior Notes Obligations to be secured pursuant to this
Agreement, and (ii) the Refinancing Senior Notes Obligations shall be excluded
from the Applicable Obligations of the Borrower or a Restricted Subsidiary to
the extent the Refinancing Senior Notes Documents do not require the Refinancing
Senior Notes Obligations to be secured pursuant to this Agreement.

         "Business Day" means any day excluding Saturday, Sunday and any day
which shall be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law to close.

         "CA Termination Date" shall have the meaning provided in Section 10.9
hereof.

         "Cash Collateral Account" shall mean a non-interest bearing cash
collateral account maintained with, and in the sole dominion and control of, the
Collateral Agent for the benefit of the Secured Creditors as their interests may
appear.

         "Chattel Paper" shall mean "chattel paper" as such term is defined in
the Uniform Commercial Code as in effect on the date hereof in the State of New
York. Without limiting the foregoing, the term "Chattel Paper" shall in any
event include all Tangible Chattel Paper and all Electronic Chattel Paper.

         "Class" shall have the meaning provided in Section 10.2 hereof.

         "Co-Documentation Agents" shall have the meaning provided in the
recitals of this Agreement.

         "Collateral" shall have the meaning provided in Section 1.1(a) hereof.

         "Collateral Agent" shall have the meaning specified in the first
paragraph of this Agreement.

         "Collateral Proceeds" shall have the meaning provided in Section 7.4(a)
hereof.

         "Commercial Tort Claims" shall mean "commercial tort claims" as such
term is defined in the Uniform Commercial Code as in effect on the date hereof
in the State of New York.

         "Contract Rights" shall mean all rights of any Assignor under each
Contract, including, without limitation, (i) any and all rights to receive and
demand payments under any or all Contracts, (ii) any and all rights to receive
and compel performance under any or all Contracts and (iii) any and all other
rights, interests and claims now existing or in the future arising in connection
with any or all Contracts.

         "Contracts" shall mean all contracts between an Assignor and one or
more additional parties (including, without limitation, any Secured Hedging
Agreement and related documents entered into in connection therewith) to the
extent the grant by an Assignor of a security interest pursuant to this
Agreement in its right, title and interest in any such contract is not
prohibited by such contract without the consent of any other party thereto or
would not give any other party to such contract the right to terminate its
obligations thereunder; provided, that

                                      (25)

<PAGE>

the foregoing limitation shall not affect, limit, restrict or impair the grant
by an Assignor of a security interest pursuant to this Agreement in any account
or any money or other amounts due or to become due under any such contract,
agreement, instrument or indenture.

         "Copyrights" shall mean any United States or foreign copyright owned by
any Assignor now or hereafter, including any registration of any copyrights, in
the United States Copyright Office or the equivalent thereof in any foreign
country, as well as any application for a United States or foreign copyright
registration now or hereafter made with the United States Copyright Office or
the equivalent thereof in any foreign jurisdiction by any Assignor.

         "Credit Agreement" shall have the meaning provided in the recitals of
this Agreement.

         "Credit Document Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.

         "Deposit Accounts" shall mean all "deposit accounts" as such term is
defined in the Uniform Commercial Code as in effect on the date hereof in the
State of New York; provided that the term "Deposit Account" shall not include
any Excluded Escrow Account.

         "Designated Collateral" shall have the meaning provided in Section
1.1(a) hereof.

         "Documentation Agents" shall have the meaning provided in the recitals
of this Agreement.

         "Documents" shall mean "documents" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York.

         "Electronic Chattel Paper" shall mean "electronic chattel paper" as
such term is defined in the Uniform Commercial Code as in effect on the date
hereof in the State of New York.

         "Equipment" shall mean any "equipment," as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all machinery, equipment, furnishings, fixtures now
or hereafter owned by such Assignor and any and all additions, substitutions and
replacements of any of the foregoing and all accessories hereto, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto but excluding (i) Equipment to
the extent it is subject to a Permitted Lien and the terms of the Indebtedness
securing such Permitted Liens prohibits assignment or granting of a security
interest in such Assignor's rights and obligations thereunder and (ii) certain
heat exchangers owned by the Assignor's on the date of this Agreement which are
leased to third-party tobacco growers and having an aggregate book value not
exceeding $2,600,000 on such date.

         "Event of Default" shall mean any Event of Default under the Credit
Agreement, any "event of default" under the New Senior Notes Documents or the
Refinancing Senior Notes

                                      (26)

<PAGE>

Documents or any payment default, after any applicable grace period, under any
Secured Hedging Agreement.

         "Excluded Deposit Account" shall mean (i) the Cash Collateral Account,
(ii) payroll accounts, (iii) accounts used solely for disbursement purposes,
(iv) the eight (8) deposit accounts established with various Lenders and
identified as "Excluded Deposit Accounts" on Annex J hereto (provided that such
deposit accounts shall be "Excluded Deposit Accounts" only so long as the
aggregate amount of cash and cash equivalents on deposit in such accounts does
not exceed $1,000,000 at any time) and (v) each Non-U.S. Deposit Account.

         "Excluded Escrow Accounts" shall mean (i) the account maintained with
the Bank of New York in which cash has been deposited for the benefit of certain
former shareholders of Nabisco Group Holdings, (ii) the account maintained with
the Bank of New York (Account No: 304238) in which cash has been deposited in
connection with the acquisition of Sante Fe Natural Tobacco Company, Inc. and
(iii) escrow accounts which collateralize litigation appeal bonds or judgments
being appealed by an Assignor.

         "Excluded Unperfected Collateral" shall mean and include (i) Excluded
Deposit Accounts (other than the Cash Collateral Account), (ii) any motor
vehicles or similar titled property a security interest over which may not be
perfected by the filing of a UCC-1 financing statement in the relevant
jurisdiction, (iii) Patents, Trademarks and Copyrights acquired or issued after
the date of this Agreement during (and only during) the period from such date of
acquisition or issuance to and including the 15th day following the date of the
required delivery of a confirmatory grant of security interest therein pursuant
to Section 4.6 or Section 5.6, as the case may be, (iv) during the 45 day period
prior to the required delivery of a "control agreement" with respect to a
Perfected Deposit Account pursuant to Section 3.9, the respective such Perfected
Deposit Account and (v) any Collateral acquired after a given Trigger Date
during (and only during) the period from such date of acquisition thereof to and
including the 15th day following such acquisition.

         "General Intangibles" mean "general intangibles" as such term is
defined in the Uniform Commercial Code as in effect on the date hereof in the
State of New York.

         "Goods" shall mean "goods" as such term is defined in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.

         "Health-Care-Insurance Receivable" shall mean any
"health-care-insurance receivable" as such term is defined in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.

         "Hedging Creditors" shall have the meaning provided in the recitals of
this Agreement.

         "Hedging Obligations" shall have the meaning provided in the definition
of "Obligations" in this Article IX.

         "Indemnitee" shall have the meaning provided in Section 8.1 hereof.

                                      (27)

<PAGE>

         "Instrument" shall mean "instrument" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York; provided that the term "Instrument" shall not include (x) any Instrument
(as defined above in the absence of this proviso) pledged pursuant to the Pledge
Agreement or (y) the LSB Note (as defined in the Pledge Agreement).

         "Inventory" shall mean merchandise, inventory and goods, and all
additions, substitutions and replacements thereof and all accessions thereto,
wherever located, together with all goods, supplies, incidentals, packaging
materials, labels, materials and any other items used or usable in
manufacturing, processing, packaging or shipping same; in all stages of
production -- from raw materials through work-in-process to finished goods --
and all products and proceeds of whatever sort and wherever located and any
portion thereof which may be returned, rejected, reclaimed or repossessed by the
Collateral Agent from any Assignor's customers, and shall specifically include
all "inventory" as such term is defined in the Uniform Commercial Code as in
effect on the date hereof in the State of New York, now or hereafter owned by
any Assignor.

         "Investment Property" shall mean "investment property" as such term is
defined in the Uniform Commercial Code as in effect on the date hereof in the
State of New York, provided that the term "Investment Property" shall not
include (i) Collateral (as defined in the Pledge Agreement) pledged pursuant to
the Pledge Agreement or (ii) "investment property" excluded pursuant to the
definition of "Investment Property" contained in the Pledge Agreement.

         "Lender Creditor" shall have the meaning provided in the recitals of
this Agreement.

         "Lender Secured Creditor" shall have the meaning provided in the
recitals of this Agreement.

         "Lenders" shall have the meaning provided in the recitals of this
Agreement.

         "Letter-of-Credit Rights" shall mean "letter-of-credit rights" as such
term is defined in the Uniform Commercial Code as in effect on the date hereof
in the State of New York.

         "Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument, in, of, or on an Assignor's property.

         "Location" of any Assignor, shall mean such Assignor's "location" as
determined pursuant to Section 9-307 of the UCC.

         "Marks" shall mean all right, title and interest in and to any United
States or foreign trademarks, service marks and trade names now held or
hereafter acquired by any Assignor, including any registration or application
for registration of any trademarks and service marks now held or hereafter
acquired by an Assignor, which are registered in the United States Patent and
Trademark Office or the equivalent thereof in any State of the United States or
in any foreign country, as well as any unregistered marks used by any Assignor,
and any trade dress

                                      (28)

<PAGE>

including logos, designs, company names, business names, fictitious business
names and other business identifiers used by any Assignor in the United States
or any foreign country.

         "New Senior Notes Creditors" shall have the meaning provided in the
recitals of this Agreement.

         "New Senior Notes Documents" shall have the meaning provided in the
recitals of this Agreement.

         "New Senior Notes Indenture" shall have the meaning provided in the
recitals of this Agreement.

         "New Senior Notes Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.

         "New Senior Notes Trustee" shall have the meaning provided in the
recitals of this Agreement.

         "Non-U.S. Deposit Account" has the meaning provided in Section 3.9(a).

         "Noticed Event of Default" shall mean (i) an Event of Default with
respect to the Borrower under Section 9.05 of the Credit Agreement and (ii) any
other Event of Default in respect of which the Collateral Agent has given the
Borrower notice that such Event of Default constitutes a "Noticed Event of
Default."

         "Notified Non-Credit Agreement Event of Default" means (i) the
acceleration of the maturity of any New Senior Notes or Refinancing Senior Notes
or the failure to pay at maturity any New Senior Notes or Refinancing Senior
Notes, or the occurrence of any bankruptcy or insolvency Event of Default under
the New Senior Notes Indenture or the Refinancing Senior Notes Indenture, or
(ii) any Event of Default under a Secured Hedging Agreement, in the case of any
event described in clause (i) or (ii) to the extent the New Senior Notes
Trustee, the Refinancing Senior Notes Trustee or the relevant Hedging Creditor,
as the case may be, has given written notice to the Collateral Agent that a
"Notified Non-Credit Agreement Event of Default" exists; provided that such
written notice may only be given if such Event of Default is continuing and,
provided further, that any such Notified Non-Credit Agreement Event of Default
shall cease to exist (I) once there is no longer any Event of Default under the
New Senior Notes Indenture, the Refinancing Senior Notes Indenture or the
respective Secured Hedging Agreement, as the case may be, in existence, (II) in
the case of an Event of Default under the New Senior Notes Indenture or the
Refinancing Senior Notes Indenture, after all New Senior Notes Obligations or
Refinancing Senior Notes Obligations, as the case may be, have been repaid in
full, (III) in the case of an Event of Default under a Secured Hedging
Agreement, such Secured Hedging Agreement has been terminated and all Hedging
Obligations thereunder repaid in full, (IV) in the case of an Event of Default
under the New Senior Notes Indenture or the Refinancing Senior Notes Indenture,
if the New Senior Notes Creditors or the Refinancing Senior Notes Creditors, as
the case may be, holding at least a majority of the aggregate principal amount
of the outstanding new Senior Notes or the Refinancing Senior Notes, as the case
may be, at such time have rescinded such written notice and (V) in the case of

                                      (29)

<PAGE>

an Event of Default under a Secured Hedging Agreement, the requisite Hedging
Creditors with Hedging Obligations thereunder at such time have rescinded such
written notice.

         "Obligations" shall mean (i) the full and prompt payment when due
(whether at stated maturity, by acceleration or otherwise) of all obligations
(including obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due) and liabilities of each Assignor, now
existing or hereafter incurred under, arising out of or in connection with any
Credit Document to which it is a party (including, without limitation,
indemnities, fees and interest (including all interest that accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency, reorganization or similar proceeding of the Borrower or any other
Credit Party at the rate provided for in the respective documentation, whether
or not a claim for post-petition interest is allowed in any such proceeding))
and the due performance and compliance by such Assignor with the terms of each
such Credit Document (all such obligations and liabilities under this clause
(i), except to the extent consisting of obligations or indebtedness with respect
to Secured Hedging Agreements, being herein collectively called the "Credit
Document Obligations"); (ii) the full and prompt payment when due (whether at
the stated maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities of each Assignor, now
existing or hereafter incurred under, arising out of or in connection with any
Secured Hedging Agreement, including all obligations, if any, under a Guaranty
in respect of any Secured Hedging Agreement and all interest that accrues after
the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency, reorganization or similar proceeding of the Borrower or
any other Credit Party at the rate provided for in the respective documentation,
whether or not a claim for post-petition interest is allowed in any such
proceeding (all such obligations and indebtedness under this clause (ii) being
herein collectively called the "Hedging Obligations"); (iii) the full and prompt
payment when due (whether at stated maturity, by acceleration or otherwise) of
all obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each
Assignor, now existing or hereafter incurred under, arising out of or in
connection with any New Senior Notes Document to which it is a party (including
all interest that accrues after the commencement of any case, proceeding or
other action relating to the bankruptcy, insolvency, reorganization or similar
proceeding of the Borrower or any other Credit Party at the rate provided for in
the respective documentation, whether or not a claim for post-petition interest
is allowed in any such proceeding) and the due performance and compliance by
such Assignor with the terms of each such New Senior Notes Document (all such
obligations and liabilities under this clause (iii), being herein collectively
called the "New Senior Notes Obligations"); (iv) the full and prompt payment
when due (whether at stated maturity, by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each
Assignor, now existing or hereafter incurred under, arising out of or in
connection with any Refinancing Senior Notes Document to which it is a party
(including all interest that accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency,
reorganization or similar proceeding of the Borrower or any other Credit Party
at the rate provided for in the respective documentation, whether or not a claim
for post-petition interest is allowed in any such proceeding) and the due
performance and compliance by such Assignor with the terms of each such
Refinancing Senior Notes Document (all such obligations and liabilities under
this clause (iv), being herein collectively called the

                                      (30)

<PAGE>

"Refinancing Senior Notes Obligations"); (v) any and all sums advanced by the
Collateral Agent or Pledgee in order to preserve the Collateral or preserve its
security interest in the Collateral; (vi) in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations, or liabilities of
each Assignor referred to in clauses (i), (ii), (iii), (iv) and (v), after an
Event of Default shall have occurred and be continuing, the reasonable expenses
of re-taking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, or of any exercise by the
Collateral Agent or Pledgee of its rights hereunder, together with reasonable
attorneys' fees and court costs; and (vii) all amounts paid by any Indemnitee as
to which such Indemnitee has the right to reimbursement under Section 8.1
hereof.

         "Patents" shall mean any United States or foreign patent with respect
to which any Assignor now or hereafter has any right, title or interest, and any
divisions, continuations (including, but not limited to, continuations-in-parts)
and improvements thereof, as well as any application for a United States or
foreign patent now or hereafter made by any Assignor.

         "Perfected Deposit Account" shall mean, as to any Assignor, each
Deposit Account of such Assignor other than an Excluded Deposit Account.

         "Permits" shall mean, to the extent permitted to be assigned by the
terms thereof or by applicable law, all licenses, permits, rights, orders,
variances, franchises or authorizations (including certificates of need) of or
from any governmental authority or agency.

         "Permitted Lien" shall mean the Liens permitted to be outstanding under
Section 8.03 of the Credit Agreement as in effect on the date hereof.

         "Principal Property" shall have the meaning provided in the New Senior
Notes Indenture or the Refinancing Senior Notes Indenture (in each case as in
effect on the date hereof), as the context may require.

         "Proceeds" shall have the meaning assigned that term under the Uniform
Commercial Code as in effect in the State of New York on the date hereof or
under other relevant law and, in any event, shall include, but not be limited
to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to the Collateral Agent or an Assignor from time to time with respect to
any of the Collateral, (ii) any and all payments (in any form whatsoever) made
or due and payable to an Assignor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of governmental authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.

         "Pro Rata Share" shall have the meaning provided in Section 7.4(b) of
this Agreement.

         "Receivable" shall mean any "account" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, and in any event shall include but shall not be limited to, all rights to
payment of any monetary obligation, whether or not earned by performance, (i)
for property that has been or is to be sold, leased, licensed, assigned or
otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a
policy of

                                      (31)

<PAGE>

insurance issued or to be issued, (iv) for a secondary obligation incurred or to
be incurred, (v) for energy provided or to be provided, (vi) for the use or hire
of a vessel under a charter or other contract, (vii) arising out of the use of a
credit or charge card or information contained on or for use with the card, or
(viii) as winnings in a lottery or other game of chance operated or sponsored by
a State, governmental unit of a State, or person licensed or authorized to
operate the game by a State or governmental unit of a State. Without limiting
the foregoing, the term "account" shall include all Health-Care-Insurance
Receivables.

         "Refinancing Senior Notes Creditors" shall have the meaning provided in
the recitals of this Agreement.

         "Refinancing Senior Notes Documents" shall have the meaning provided in
the recitals of this Agreement.

         "Refinancing Senior Notes Indenture" shall have the meaning provided in
the recitals of this Agreement.

         "Refinancing Senior Notes Obligations" shall have the meaning provided
in the definition of "Obligations" in this Article IX.

         "Refinancing Senior Notes Trustee" shall have the meaning provided in
the recitals of this Agreement.

         "Registered Organization" shall have the meaning provided in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York.

         "Requisite Creditors" shall have the meaning provided in Section 10.2
hereof.

         "Restricted Subsidiary" shall mean each Subsidiary that is a Restricted
Subsidiary, as such term is defined in the New Senior Notes Indenture or the
Refinancing Senior Notes Indenture (each, as in effect on the date hereof), as
the context may require.

         "Secured Creditors" shall have the meaning provided in the recitals of
this Agreement.

         "Secured Debt Agreements" shall mean each Credit Document, each Secured
Hedging Agreement, each New Senior Notes Document and each Refinancing Senior
Notes Document.

         "Secured Hedging Agreements" shall have the meaning provided in the
recitals of this Agreement.

         "Security" shall mean "security" as such term is defined in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.

         "Software" shall mean "software" as such term is defined in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.

                                      (32)

<PAGE>

         "Specified Assignor" shall mean each of the Borrower and each Assignor
that is a Restricted Subsidiary.

         "Supporting Obligations" shall mean any "supporting obligation" as such
term is defined in the Uniform Commercial Code as in effect on the date hereof
in the State of New York, now or hereafter owned by any Assignor, or in which
any Assignor has any rights, and, in any event, shall include, but shall not be
limited to all of such Assignor's rights in any Letter-of-Credit Right or
secondary obligation that supports the payment or performance of, and all
security for, any Receivable, Chattel Paper, Document, General Intangible,
Instrument or Investment Property.

         "Syndication Agent" shall have the meaning provided in the recitals of
this Agreement.

         "Tangible Chattel Paper" shall mean "tangible chattel paper" as such
term is defined in the Uniform Commercial Code as in effect on the date hereof
in the State of New York.

         "Termination Date" shall have the meaning provided in Section 10.9
hereof.

         "Timber-to-be-Cut" shall mean "timber-to-be-cut" as such term is used
in the Uniform Commercial Code as in effect on the date hereof in the State of
New York.

         "Trade Secret Rights" shall mean the rights of an Assignor in any Trade
Secret it holds.

         "Trade Secrets" means any secretly held existing engineering and other
data, information, production procedures and other know-how relating to the
design, manufacture, assembly, installation, use, operation, marketing, sale and
servicing of any products or business of an Assignor worldwide whether written
or not written.

                                   ARTICLE X

                                  MISCELLANEOUS

         10.1 Notices. All notices and other communications provided for
hereunder shall be in writing (including telegraphic, telex, facsimile
transmission or cable communication) and mailed, telegraphed, telexed,
telecopied, cabled or delivered (including by way of overnight courier):

                  (i) if to any Assignor, at its address contained in the Credit
         Agreement (for the Borrower) or the Subsidiary Guaranty (for the other
         Assignors);

                  (ii) if to the Collateral Agent, at:

                           JPMorgan Chase Bank
                           270 Park Avenue

                                      (33)

<PAGE>

                           New York, New York  10017
                           Attn.:  Raju Nanoo
                           Tel. No.:  212-270-2272
                           Fax. No.: 212-270-5120

                  (iii) if to any Lender (other than the Collateral Agent), at
         such address as such Lender shall have specified in the Credit
         Agreement;

                  (iv) if to any Hedging Creditor, at such address as such
         Hedging Creditor shall have specified in writing to the Assignors and
         the Collateral Agent;

                  (v) if to any New Senior Notes Creditor, at such address of
         the New Senior Notes Trustee as the New Senior Notes Trustee shall have
         specified in writing to the Assignors and the Collateral Agent;

                  (vi) if to any Refinancing Senior Notes Creditor, at such
         address of the Refinancing Senior Notes Trustee as the Refinancing
         Senior Notes Trustee shall have specified in writing to the Assignors
         and the Collateral Agent;

or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder. Except as
otherwise expressly provided herein, all such notices and communications shall
be deemed to have been duly given or made when received.

         10.2 Waiver; Amendment. (a) None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the Collateral Agent (with the consent of (x)
if prior to the CA Termination Date, the Required Lenders or, to the extent
required by Section 12.12 of the Credit Agreement, all of the Lenders and (y) if
on or after the CA Termination Date, the holders of a majority of the
outstanding principal amount of the Obligations remaining outstanding) and each
Assignor affected thereby (it being understood that the addition or release of
any Assignor hereunder shall not constitute a change, waiver, modification or
variance affecting any Assignor other than the Borrower and the Assignor so
added or released), provided that any change, waiver, modification or variance
affecting the rights and benefits of a single Class of Secured Creditors (and
not all Secured Creditors in a like or similar manner) shall require the written
consent of the Requisite Creditors of such Class of Secured Creditors. For the
purpose of this Agreement, the term "Class" shall mean each class of Secured
Creditors, i.e., whether (w) the Lender Creditors as holders of the Credit
Document Obligations, (x) the Hedging Creditors as holders of the Hedging
Obligations, (y) the New Senior Notes Creditors as holders of the New Senior
Notes Obligations and (z) the Refinancing Senior Notes Creditors as holders of
the Refinancing Senior Notes Obligations. For the purpose of this Agreement, the
term "Requisite Creditors" of any Class shall mean each of (w) with respect to
each of the Credit Document Obligations, the Required Lenders, (x) with respect
to the Hedging Obligations, the holders of at least a majority of all Secured
Hedging Obligations outstanding from time to time, (y) with respect to the New
Senior Notes Obligations, the holders of at least a majority of the outstanding
principal amount of the New Senior Notes, and (z) with respect to the
Refinancing Senior Notes

                                      (34)

<PAGE>

Obligations, the holders of at least a majority of the outstanding principal
amount of the Refinancing Senior Notes.

         (b) No delay on the part of the Collateral Agent in exercising any of
its rights, remedies, powers and privileges hereunder or partial or single
exercise thereof, shall constitute a waiver thereof. No notice to or demand on
any Assignor shall constitute a waiver of any of the rights of the Collateral
Agent to any other or further action without notice or demand to the extent such
action is permitted to be taken by the Collateral Agent without notice or demand
under the terms of this Agreement.

         10.3 Obligations Absolute. The obligations of each Assignor hereunder
shall remain in full force and effect without regard to, and shall not be
impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of any Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement, any other Credit Document, any
Secured Hedging Agreement, any New Senior Notes Document or any Refinancing
Senior Notes Document, except as specifically set forth in a waiver granted
pursuant to Section 10.2 hereof; or (c) any amendment to or modification of any
other Credit Document, any Secured Hedging Agreement, any New Senior Notes
Document, any Refinancing Senior Notes Document or any security for any of the
Obligations; whether or not any Assignor shall have notice or knowledge of any
of the foregoing. The rights and remedies of the Collateral Agent herein
provided are cumulative and not exclusive of any rights or remedies which the
Collateral Agent would otherwise have.

         10.4 Successors and Assigns. This Agreement shall be binding upon each
Assignor and its successors and assigns and shall inure to the benefit of the
Collateral Agent and its successors and assigns. All agreements, statements,
representations and warranties made by such Assignor herein or in any
certificate or other instrument delivered by each Assignor or on its behalf
under this Agreement shall be considered to have been relied upon by the Secured
Creditors and shall survive the execution and delivery of this Agreement, the
other Credit Documents, the Secured Hedging Agreements, the New Senior Notes
Documents and the Refinancing Senior Notes Documents, regardless of any
investigation made by the Secured Creditors on their behalf.

         10.5 Headings Descriptive. The headings of the several sections of this
Agreement are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.

         10.6 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

         10.7 Governing Law. This Agreement and the rights and obligations of
the parties hereunder shall be construed in accordance with and governed by the
law of the State of New York.

                                      (35)

<PAGE>

         10.8 Assignors' Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Assignor shall remain
liable to perform all of the obligations, if any, assumed by it with respect to
the Collateral and the Collateral Agent shall not have any obligations or
liabilities with respect to any Collateral by reason of or arising out of this
Agreement, nor shall the Collateral Agent be required or obligated in any manner
to perform or fulfill any of the obligations of any Assignor under or with
respect to any Collateral.

         10.9 Termination; Release. (a) After the Termination Date (as defined
below), this Agreement shall terminate (provided that all indemnities set forth
herein including, without limitation, in Article VIII hereof shall survive any
such termination) and the Collateral Agent, at the request and expense of the
respective Assignor, will execute and deliver to such Assignor a proper
instrument or instruments acknowledging the satisfaction and termination of this
Agreement as provided above, and will duly assign, transfer and deliver to such
Assignor (without recourse and without any representation or warranty) such of
the Collateral as may be in the possession of the Collateral Agent and as has
not theretofore been sold or otherwise applied or released pursuant to this
Agreement, together with any moneys at the time held by the Collateral Agent
hereunder. As used in this Agreement, (i) "CA Termination Date" shall mean the
date upon which the Total Commitment has been terminated, no Letter of Credit or
Note under the Credit Agreement is outstanding and all other Credit Document
Obligations have been paid in full in cash (other than arising from indemnities
for which no request for payment has been made) and (ii) "Termination Date"
shall mean the date upon which (x) the CA Termination Date shall have occurred
and (y) if (but only if) a Notified Non-Credit Agreement Event of Default shall
have occurred and be continuing on the CA Termination Date (and after giving
effect thereto), either (I) such Notified Non-Credit Agreement Event of Default
shall have been cured or waived by the requisite holders of the relevant
Obligations subject to such Notified Non-Credit Agreement Event of Default or
(II) all Secured Hedging Agreements (if any) giving rise to a Notified
Non-Credit Agreement Event of Default shall have been terminated and all
Obligations subject to such Notified Non-Credit Agreement Event of Default shall
have been paid in full (other than arising from indemnities for which no request
for payment has been made).

         (b) So long as no Notified Non-Credit Agreement Event of Default has
occurred and is continuing, in the event that (x) prior to the CA Termination
Date, (i) any part of the Collateral is sold or otherwise disposed of in
connection with a sale or other disposition permitted by Section 8.02 of the
Credit Agreement (it being agreed for such purposes that a release will be
deemed "permitted by Section 8.02 of the Credit Agreement" if the proposed
transaction constitutes an exception to Section 8.02 of the Credit Agreement) or
(ii) all or any part of the Collateral is released at the direction of the
Required Lenders (or all the Lenders if required by Section 12.12 of the Credit
Agreement), and the proceeds of such sale or disposition or from such release
(if any) are applied in accordance with the terms of the Credit Agreement to the
extent required to be so applied or (y) on and after the CA Termination Date,
any part of the Collateral is sold or otherwise disposed of without violating
the New Senior Notes Documents, the Refinancing Senior Notes Documents and the
Secured Hedging Agreements, the Collateral Agent, at the request and expense of
the respective Assignor will release such Collateral from this Agreement, duly
assign, transfer and deliver to such Assignor (without recourse and without any
representation or warranty) such of the Collateral as is then being (or has
been) so sold or released and as may be in possession of the Collateral Agent
and has not theretofore been

                                      (36)

<PAGE>

released pursuant to this Agreement (it being understood and agreed that upon
the release of all or any portion of the Collateral by the Collateral Agent at
the direction of the Lenders as provided above, the Lien on the Collateral in
favor of the Hedging Creditors, the New Senior Notes Creditors and the
Refinancing Senior Notes Creditors shall automatically be released).

         (c) In addition to the foregoing, all Collateral shall be automatically
released (subject to reinstatement upon the occurrence of a new Trigger Event)
in accordance with the provisions of the last sentence of Section 7.11(b) of the
Credit Agreement.

         (d) At any time that the relevant Assignor desires that the Collateral
Agent take any action to give effect to any release of Collateral pursuant to
the foregoing Section 10.9(a), (b) or (c), it shall deliver to the Collateral
Agent a certificate signed by an authorized officer describing the Collateral to
be released and certifying its entitlement to a release pursuant to the
applicable provisions of Sections 10.9(b) or (c) and in such case the Collateral
Agent, at the request and expense of such Assignor, will execute such documents
as required to duly release such Collateral and to assign, transfer and deliver
to such Assignor or its designee (without recourse and without any
representation or warranty) such of the Collateral as is then being released and
as may be in the possession of the Collateral Agent. The Collateral Agent shall
have no liability whatsoever to any Secured Creditor as the result of any
release of Collateral by it as permitted by (or which the Collateral Agent in
the absence of gross negligence or willful misconduct believes to be permitted
by) this Section 10.9. Upon any release of Collateral pursuant to Section
10.9(a), (b) or (c), so long as no Noticed Event of Default is then in
existence, none of the Secured Creditors shall have any continuing right or
interest in such Collateral, or the proceeds thereof (subject to reinstatement
rights upon the occurrence of a new Trigger Event in the case of a release
pursuant to Section 10.9(c)).

         10.10 Collateral Agent. The Collateral Agent will hold in accordance
with this Agreement all items of the Collateral at any time received under this
Agreement. By accepting the benefits of this Agreement, each Secured Creditor
acknowledges and agrees that the obligations of the Collateral Agent as holder
of the Collateral and interests therein and with respect to the disposition
thereof, and otherwise under this Agreement, are only those expressly set forth
in this Agreement and Annex M hereto. The Collateral Agent shall act hereunder
on the terms and conditions set forth in Section 11 of the Credit Agreement and
in Annex M hereto, the terms of which shall be deemed incorporated herein by
reference as fully as if the same were set forth herein in their entirety. In
the event that any provision set forth in Section 11 of the Credit Agreement in
respect of the Collateral Agent conflicts with any provision set forth in Annex
M hereto, the provisions of Annex M hereto shall govern (except that the Lenders
shall remain obligated to indemnify the Collateral Agent pursuant to Section 11
of the Credit Agreement, to the extent the Collateral Agent is not indemnified
by Secured Creditors pursuant to Annex M). Notwithstanding anything to the
contrary contained in Section 10.2 of this Agreement, this Section 10.10, and
the duties and obligations of the Collateral Agent set forth in this Section
10.10, may not be amended or modified without the consent of the Collateral
Agent.

         10.11 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the

                                      (37)

<PAGE>

same instrument. A set of counterparts executed by all the parties hereto shall
be lodged with the Borrower and the Collateral Agent.

         10.12 Additional Assignors. It is understood and agreed that any
Subsidiary of the Borrower that is required to become a party to this Agreement
after the date hereof pursuant to the requirements of the Credit Agreement shall
become an Assignor hereunder by (x) executing a counterpart hereof and/or an
assumption agreement, in each case in form and substance satisfactory to the
Collateral Agent, (y) delivering supplements to Annexes A through F hereto and
Annexes I, J and K hereto, as are necessary to cause such Annexes to be complete
and accurate with respect to such additional Assignor on such date and (z)
taking all actions as specified in this Agreement and the Credit Agreement, in
each case with all documents required above to be delivered to the Collateral
Agent and with all documents and action required above to be taken to the
reasonable satisfaction of the Collateral Agent.

         10.13 No Third Party Beneficiaries. This Agreement is entered into
solely for the benefit of the parties hereto and their respective successors and
assigns and for the benefit of the Secured Creditors from time to time and their
respective successors and assigns and, except for the Secured Creditors and
their successors and assigns, there shall be no third party beneficiaries
hereof, nor shall any Person other than the parties hereto and their respective
successors and assigns, and the Secured Creditors and their respective
successors and assigns, be entitled to enforce the provisions hereof or have any
claims against any party hereto (or any Secured Creditor) or their successors
and assigns arising from, or under, this Agreement.

                                      * * *

                                      (38)

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.

                                           R.J. REYNOLDS TOBACCO HOLDINGS, INC.,
                                             as an Assignor

                                           By: /s/  Lynn L. Lane
                                               ---------------------------------
                                               Name:  Lynn L. Lane
                                               Title: SVP and Treasurer

                                           R.J. REYNOLDS TOBACCO COMPANY,
                                             as an Assignor

                                           By: /s/  Lynn L. Lane
                                               ---------------------------------
                                               Name:  Lynn L. Lane
                                               Title: SVP and Treasurer

                                           RJR ACQUISITION CORP., as an Assignor

                                           By: /s/  Lynn L. Lane
                                               ---------------------------------
                                               Name:  Lynn L. Lane
                                               Title: VP and Treasurer

                                           GMB, INC., as an Assignor

                                           By: /s/  Daniel A. Fawley
                                               ---------------------------------
                                               Name:  Daniel A. Fawley
                                               Title: Treasurer

                                           FHS, INC., as an Assignor

                                           By: /s/  Caroline M. Price
                                               ---------------------------------
                                               Name:  Caroline M. Price
                                               Title: President

                                      (39)

<PAGE>

                                         R.J. REYNOLDS TOBACCO CO.,
                                           as an Assignor

                                         By: /s/  Lynn L. Lane
                                             ----------------------------------
                                             Name:  Lynn L. Lane
                                             Title: Treasurer

                                         SANTA FE NATURAL TOBACCO COMPANY, INC.,
                                           as an Assignor

                                         By: /s/  Michael O. Johnson
                                             ----------------------------------
                                             Name:  Michael O. Johnson
                                             Title: SVP, General Counsel and
                                                    Secretary

                                         RJR PACKAGING, LLC, as an Assignor

                                         By: /s/  Lynn L. Lane
                                             ----------------------------------
                                             Name:  Lynn L. Lane
                                             Title: Treasurer

                                      (40)

<PAGE>

Acknowledged And Agreed:

JPMORGAN CHASE BANK,
     as Collateral Agent and Assignee

By: /s/  Robert T. Sacks
    ----------------------------------
    Name:  Robert T. Sacks
    Title: Managing Director

                                      (41)<PAGE>

                                                                    EXHIBIT 10.3

                                PLEDGE AGREEMENT

         PLEDGE AGREEMENT, dated as of July 15, 2003 (as amended, modified or
supplemented from time to time, the "Agreement"), made by each of the
undersigned (together with any other entity that becomes a party hereto pursuant
to Section 23 hereof, each a "Pledgor" and, collectively, the "Pledgors"), in
favor of JPMORGAN CHASE BANK, as Collateral Agent (including any successor
collateral agent, the "Pledgee") for the benefit of the Secured Creditors (as
defined below). Except as otherwise defined herein, terms used herein and
defined in the Credit Agreement referred to below shall be used herein as
therein defined.

                              W I T N E S S E T H:
                              - - - - - - - - - -

         WHEREAS, R.J. Reynolds Tobacco Holdings, Inc. (f/k/a RJR Nabisco, Inc.)
(the "Borrower"), the various lending institutions from time to time party
thereto (the "Lenders"), JPMORGAN CHASE BANK, as Administrative Agent (the
"Administrative Agent"), Citibank, N.A., as Syndication Agent (the "Syndication
Agent"), The Bank of New York, The Bank of Nova Scotia and Lehman Brothers,
Inc., as Documentation Agents (the "Documentation Agents") and Credit Lyonnais
New York Branch and Mizuho Corporate Bank, Ltd., as Co-Documentation Agents (the
"Co-Documentation Agents") have entered into a Credit Agreement, dated as of May
7, 1999, amended and restated as of November 17, 2000 and further amended and
restated as of May 10, 2002, providing for the making of Loans to the Borrower
and the issuance of, and participation in, Letters of Credit for the account of
the Borrower, all as contemplated therein (with (i) the Lenders, each Letter of
Credit Issuer, the Administrative Agent, the Syndication Agent, the
Documentation Agents, the Co-Documentation Agents, the Senior Managing Agents,
the Pledgee and the Collateral Agent being herein called the "Lender Creditors"
and (ii) the term "Credit Agreement" as used herein to mean the Credit Agreement
described above in this paragraph, as the same may be further amended, modified,
extended, renewed, replaced, restated, supplemented and/or refinanced from time
to time, and including any agreement extending the maturity of, or refinancing
or restructuring (including, but not limited to, the inclusion of additional
borrowers or guarantors thereunder or any increase in the amount borrowed) all
or any portion of, the indebtedness under such agreement or any successor
agreement, whether or not with the same agent, trustee, representative, lenders
or holders; provided that, with respect to any agreement providing for the
refinancing or replacement of indebtedness under the Credit Agreement, such
agreement shall only be treated as, or as part of, the Credit Agreement
hereunder if (x) either (A) all obligations under the Credit Agreement being
refinanced or replaced shall be paid in full at the time of such refinancing or
replacement, and all commitments and letters of credit issued pursuant to the
refinanced or replaced Credit Agreement shall have terminated in accordance with
their terms or (B) the Required Lenders shall have consented in writing to the
refinancing or replacement indebtedness being treated as indebtedness pursuant
to the Credit Agreement, and (y) a notice to the effect that the refinancing or
replacement indebtedness shall be treated as issued under the Credit Agreement
shall be delivered by the Borrower to the Collateral Agent);

<PAGE>

         WHEREAS, the Borrower has from time to time entered into, and/or may in
the future from time to time enter into, one or more (i) interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements), (ii) foreign exchange contracts,
currency swap agreements, commodity agreements or other similar agreements or
arrangements designed to protect against the fluctuations in currency values
and/or (iii) other types of hedging agreements from time to time (each such
agreement or arrangement with a Hedging Creditor (as hereinafter defined), a
"Secured Hedging Agreement"), with any Lender or Lenders or a syndicate of
financial institutions organized by a Lender or an affiliate of a Lender (even
if any such Lender ceases to be a Lender under the Credit Agreement for any
reason) (any institution that participates therein, and in each case their
subsequent successors and assigns collectively, the "Hedging Creditors", and
together with the Lender Creditors, the "Lender Secured Creditors");

         WHEREAS, the Borrower and the trustee thereunder (the "New Senior Notes
Trustee"), on behalf of the holders of the New Senior Notes (such holders,
together with the New Senior Notes Trustee, the "New Senior Notes Creditors"),
have from time to time entered into, and may in the future from time to time
enter into, one or more Indentures (collectively, as amended, modified or
supplemented from time to time, the "New Senior Notes Indenture" and, together
with the New Senior Notes, the "New Senior Notes Documents") providing for the
issuance of New Senior Notes by the Borrower;

         WHEREAS, the Borrower and the trustee thereunder (the "Refinancing
Senior Notes Trustee"), on behalf of the holders of the Refinancing Senior Notes
(such holders, together with the Refinancing Senior Notes Trustee, the
"Refinancing Senior Notes Creditors", with the Lender Secured Creditors, the New
Senior Notes Creditors and the Refinancing Senior Notes Creditors being herein
called the "Secured Creditors"), have from time to time entered into, and may in
the future from time to time enter into, one or more Indentures (collectively,
as amended, modified or supplemented from time to time, the "Refinancing Senior
Notes Indenture" and, together with the Refinancing Senior Notes, the
"Refinancing Senior Notes Documents") providing for the issuance of Refinancing
Senior Notes by the Borrower;

         WHEREAS, pursuant to the Subsidiary Guaranty, each Pledgor (other than
the Borrower) has jointly and severally guaranteed to the Lender Secured
Creditors the payment when due of the Guaranteed Obligations (as and to the
extent defined in the Subsidiary Guaranty);

         WHEREAS, pursuant to the Borrower Guaranty, the Borrower has guaranteed
to the Hedging Creditors the payment when due of the Guaranteed Obligations (as
and to the extent defined in the Borrower Guaranty);

         WHEREAS, each Specified Pledgor (other than the Borrower) has jointly
and severally guaranteed to the New Senior Notes Creditors the payment when due
of principal and interest on the New Senior Notes;

         WHEREAS, each Specified Pledgor (other than the Borrower) has jointly
and severally guaranteed to the Refinancing Senior Notes Creditors the payment
when due of principal and interest on the Refinancing Senior Notes;

                                      -2-

<PAGE>

         WHEREAS, the Credit Agreement requires this Agreement be executed and
delivered to the Pledgee by the Pledgors and the Secured Hedging Agreements, the
New Senior Notes Indenture and the Refinancing Senior Notes Indenture require
that this Agreement secure the respective Obligations as provided herein;

         WHEREAS, each Pledgor desires to execute this Agreement to satisfy the
requirements described in the preceding paragraph;

         NOW, THEREFORE, in consideration of the benefits accruing to each
Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:

         1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor for
the benefit of the Secured Creditors to secure:

                  (i) the full and prompt payment when due (whether at the
         stated maturity, by acceleration or otherwise) of all obligations
         (including obligations which, but for the automatic stay under Section
         362(a) of the Bankruptcy Code, would become due) and liabilities of
         such Pledgor, now existing or hereafter incurred under, arising out of
         or in connection with any Credit Document to which such Pledgor is a
         party (including, without limitation, indemnities, fees and interest
         (including all interest that accrues after the commencement of any
         case, proceeding or other action relating to the bankruptcy,
         insolvency, reorganization or similar proceeding of the Borrower or any
         other Credit Party at the rate provided for in the respective
         documentation, whether or not a claim for post-petition interest is
         allowed in any such proceeding)) and the due performance of and
         compliance by such Pledgor with the terms of each such Credit Document
         (all such obligations and liabilities under this clause (i), except to
         the extent consisting of obligations or liabilities with respect to
         Secured Hedging Agreements, being herein collectively called the
         "Credit Document Obligations");

                  (ii) the full and prompt payment when due (whether at the
         stated maturity, by acceleration or otherwise) of all obligations
         (including obligations which, but for the automatic stay under Section
         362(a) of the Bankruptcy Code, would become due) and liabilities of
         such Pledgor, now existing or hereafter incurred under, arising out of
         or in connection with any Secured Hedging Agreement, including, all
         obligations, if any, of such Pledgor under the Subsidiary Guaranty in
         respect of Secured Hedging Agreements (all such obligations and
         liabilities under this clause (ii) being herein collectively called the
         "Hedging Obligations");

                  (iii) the full and prompt payment when due (whether at the
         stated maturity, by acceleration or otherwise) of all obligations
         (including obligations which, but for the automatic stay under Section
         362(a) of the Bankruptcy Code, would become due) and liabilities of
         such Pledgor (including, without limitation, indemnities, fees and
         interest (including all interest that accrues after the commencement of
         any case, proceeding or other action relating to the bankruptcy,
         insolvency, reorganization or similar proceeding of the Borrower or any
         other Credit Party at the rate provided for in the respective

                                      -3-

<PAGE>

         documentation, whether or not a claim for post-petition interest is
         allowed in any such proceeding)), now existing or hereafter incurred
         under, arising out of or in connection with any New Senior Notes
         Document, including, all obligations, if any, of such Pledgor under a
         guaranty in respect of the New Senior Notes (all such obligations and
         liabilities under this clause (iii) being herein collectively called
         the "New Senior Notes Obligations");

                  (iv) the full and prompt payment when due (whether at the
         stated maturity, by acceleration or otherwise) of all obligations
         (including obligations which, but for the automatic stay under Section
         362(a) of the Bankruptcy Code, would become due) and liabilities of
         such Pledgor (including, without limitation, indemnities, fees and
         interest (including all interest that accrues after the commencement of
         any case, proceeding or other action relating to the bankruptcy,
         insolvency, reorganization or similar proceeding of the Borrower or any
         other Credit Party at the rate provided for in the respective
         documentation, whether or not a claim for post-petition interest is
         allowed in any such proceeding)), now existing or hereafter incurred
         under, arising out of or in connection with any Refinancing Senior
         Notes Document, including, all obligations, if any, of such Pledgor
         under a guaranty in respect of the Refinancing Senior Notes (all such
         obligations and liabilities under this clause (iv) being herein
         collectively called the "Refinancing Senior Notes Obligations");

                  (v) any and all sums advanced by the Pledgee in order to
         preserve the Collateral and/or its security interest therein;

                  (vi) in the event of any proceeding for the collection of the
         Obligations (as defined below) or the enforcement of this Agreement,
         after an Event of Default (such term, as used in this Agreement, shall
         mean any Event of Default under the Credit Agreement, any "event of
         default" under the New Senior Notes Documents or the Refinancing Senior
         Notes Documents or any payment default by the Borrower under any
         Secured Hedging Agreement after the expiration of any applicable grace
         period) shall have occurred and be continuing, the reasonable expenses
         of retaking, holding, preparing for sale or lease, selling or otherwise
         disposing of or realizing on the Collateral, or of any exercise by the
         Pledgee of its rights hereunder, together with reasonable attorneys'
         fees and court costs; and

                  (vii) all amounts paid by any Secured Creditor as to which
         such Secured Creditor has the right to reimbursement under Section 11
         of this Agreement;

all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (vii) of this Section 1 being herein collectively called the
"Obligations".

         2. DEFINITIONS; REPRESENTATIONS. (a) The following capitalized terms
used herein shall have the definitions specified below:

         "Adverse Claim" has the meaning given such term in Section 8-102(a)(1)
of the UCC.

                                      -4-

<PAGE>

         "Agreement" shall have the meaning set forth in the first paragraph of
this Agreement.

         "Applicable Obligations" shall have the meaning provided in Section 3.1
hereof.

         "Borrower" shall have the meaning provided in the recitals to this
Agreement.

         "CA Termination Date" shall have the meaning set forth in Section 18
hereof.

         "Certificated Security" has the meaning given such term in Section
8-102(a)(4) of the UCC.

         "Class" shall have the meaning provided in Section 20 hereof.

         "Clearing Corporation" has the meaning given such term in Section
8-102(a)(5) of the UCC.

         "Co-Documentation Agents" shall have the meaning provided in the
recitals to this Agreement.

         "Collateral" shall have the meaning provided in Section 3.1 hereof.

         "Collateral Accounts" means any and all accounts established and
maintained by the Pledgee in the name of any Pledgor to which Collateral may be
credited.

         "Collateral Proceeds" shall have the meaning provided in Section 9
hereof.

         "Credit Agreement" shall have the meaning provided in the recitals to
this Agreement.

         "Credit Document Obligations" shall have the meaning provided in
Section 1 hereof.

         "Designated Collateral" shall have the meaning provided in Section 3.1
hereof.

         "Documentation Agents" shall have the meaning provided in the recitals
to this Agreement.

         "Event of Default" shall have the meaning provided in Section 1 hereof.

         "Excluded Domestic Entities" shall mean and include (i) Northern Brands
International, Inc., a Delaware corporation, (ii) R.J. Reynolds Tobacco
International Inc., a Delaware corporation, and (iii) during the sixty day
period following the effectiveness of this Agreement, R.J. Reynolds Tobacco
Foreign Sales Corporation, a corporation organized under the laws of the laws of
the U.S. Virgin Islands.

         "Excluded Foreign Entities" shall mean and include (i) Quezon Holdings
BV, a corporation organized under the laws of the Netherlands, (ii) Santa Fe
Natural Tobacco Company Europe GmbH, a corporation organized under the laws of
Germany, (iii) Santa Fe

                                      -5-

<PAGE>

Natural Tobacco Company Limited, a corporation organized under the laws of
England and (iv) during the ninety day period following the effectiveness of
this Agreement, R.J. Reynolds Tobacco C.V., a corporation organized under the
laws of the Netherlands; provided that if at the time of the delivery (or
required delivery) of the financial statements of the Borrower pursuant to
Section 7.01(a) or (b) of the Credit Agreement, the net book value of the assets
of any Excluded Foreign Entity as at the last day of the fiscal quarter or
fiscal year, as the case may be, to which such financial statements relate is
greater than $25,000,000, then on the 90th day following the delivery (or
required delivery) of such financial statements, such entity shall cease to be
an "Excluded Foreign Entity" for purposes of this Agreement.

         "Excluded Investment Entities" shall mean and include (i) Targacept,
Inc., a Delaware corporation, (ii) Technology Concepts & Design, Inc., a
Virginia corporation, (iii) Intellilink Services, Inc., a Georgia corporation,
(iv) an investment in Mountain Capital CLO II Ltd, a corporation organized under
the laws of the Cayman Islands, so long as the aggregate amount of such
investment does not exceed $5,000,000, and (v) any other CLO investment owned by
a Pledgor, so long as the aggregate amount of all such CLO investments do not
exceed $15,000,000; provided that the each of foregoing entities shall cease to
be an "Excluded Investment Entity" at such time as the organizational documents
governing the respective such entity cease to prohibit the assignment of, or
granting of a security interest in, capital stock of such entity, it being
understood and agreed that any such excluded capital stock shall be subject to
the security interests created by this Agreement upon the receipt by the
respective Pledgor of any necessary approvals or waivers permitting the
assignment thereof or the granting of a security interest therein.

         "Financial Asset" has the meaning given such term in Section
8-102(a)(9) of the UCC, provided that the term "Financial Asset" shall not
include (i) any capital stock of any Excluded Domestic Entity or any Excluded
Investment Entity or (ii) any Margin Stock.

         "Hedging Creditors" shall have the meaning provided in the recitals to
this Agreement.

         "Hedging Obligations" shall have the meaning provided in Section 1
hereof.

         "Indemnitees" shall have the meaning set forth in Section 11 hereof.

         "Instrument" has the meaning given such term in Section 9-102(a)(47) of
the UCC.

         "Investment Property" has the meaning given such term in Section
9-102(a)(49) of the UCC, provided that the term "Investment Property" shall not
include (i) any capital stock of any Excluded Domestic Entity or any Excluded
Investment Entity or (ii) any Margin Stock.

         "Lender Creditors" shall have the meaning provided in the recitals to
this Agreement.

         "Lender Secured Creditors" shall have the meaning provided in the
recitals to this Agreement.

                                      -6-

<PAGE>

         "Lenders" shall have the meaning provided in the recitals to this
Agreement.

         "Limited Liability Company Assets" shall mean all assets, whether
tangible or intangible and whether real, personal or mixed (including, without
limitation, all limited liability company capital and interests in other limited
liability companies), at any time owned or represented by any Limited Liability
Company Interest.

         "Limited Liability Company Interest" shall mean the entire limited
liability company interest at any time owned by each Pledgor in any limited
liability company (with any limited liability company the equity interests of
which are required to be included as "Limited Liability Company Interests"
hereunder being herein called a "Pledged LLC").

         "LSB Note" shall mean that certain Non-Recourse Secured Promissory
Note, dated May 14, 1997, made by Technology Directors II, LLC to R.J. Reynolds
Tobacco Company (as assignee of Reynolds Technologies, Inc.) as amended from
time to time, in an aggregate principal amount of $15,000,000.

         "New Senior Notes Creditors" shall have the meaning provided in the
recitals to this Agreement.

         "New Senior Notes Documents" shall have the meaning provided in the
recitals to this Agreement.

         "New Senior Notes Indenture" shall have the meaning provided in the
recitals to this Agreement.

         "New Senior Notes Obligations" shall have the meaning provided in
Section 1 hereof.

         "New Senior Notes Trustee" shall have the meaning provided in the
recitals to this Agreement.

         "Notes" shall mean all promissory notes at any time issued to, or held
by, any Pledgor, provided that the term "Note" shall not include the LSB Note.

         "Noticed Event of Default" shall have the meaning provided in Section 5
hereof.

         "Notified Non-Credit Agreement Event of Default" means (i) the
acceleration of the maturity of any New Senior Notes or Refinancing Senior Notes
or the failure to pay at maturity any New Senior Notes or Refinancing Senior
Notes, or the occurrence of any bankruptcy or insolvency Event of Default under
the New Senior Notes Indenture or the Refinancing Senior Notes Indenture, or
(ii) any Event of Default under a Secured Hedging Agreement, in the case of any
event described in clause (i) or (ii) to the extent the New Senior Notes
Trustee, the Refinancing Senior Notes Trustee or the relevant Hedging Creditor,
as the case may be, has given written notice to the Collateral Agent that a
"Notified Non-Credit Agreement Event of Default" exists; provided that such
written notice may only be given if such Event of Default is continuing and,
provided further, that any such Notified Non-Credit Agreement Event of Default
shall cease to exist (I) once there is no longer any Event of Default

                                      -7-

<PAGE>

under the New Senior Notes Indenture, the Refinancing Senior Notes Indenture or
the respective Secured Hedging Agreement, as the case may be, in existence, (II)
in the case of an Event of Default under the New Senior Notes Indenture or the
Refinancing Senior Notes Indenture, after all New Senior Notes Obligations or
Refinancing Senior Notes Obligations, as the case may be, have been repaid in
full, (III) in the case of an Event of Default under a Secured Hedging
Agreement, such Secured Hedging Agreement has been terminated and all Hedging
Obligations thereunder repaid in full, (IV) in the case of an Event of Default
under the New Senior Notes Indenture or the Refinancing Senior Notes Indenture,
if the New Senior Notes Creditors or the Refinancing Senior Notes Creditors, as
the case may be, holding at least a majority of the aggregate principal amount
of the outstanding new Senior Notes or the Refinancing Senior Notes, as the case
may be, at such time have rescinded such written notice and (V) in the case of
an Event of Default under a Secured Hedging Agreement, the requisite Hedging
Creditors with Hedging Obligations thereunder at such time have rescinded such
written notice.

         "Obligations" shall have the meaning provided in Section 1 hereof.

         "Partnership Assets" shall mean all assets, whether tangible or
intangible and whether real, personal or mixed (including, without limitation,
all partnership capital and interests in other partnerships), at any time owned
or represented by any Pledged Partnership or represented by any Partnership
Interest.

         "Partnership Interest" shall mean the entire partnership interests
(whether general and/or limited partnership interests) at any time owned by each
Pledgor in any partnership (with any partnership the partnership interests of
which are required to be included as "Partnership Interests" hereunder being
herein called a "Pledged Partnership", and together with any Pledged LLC, each,
a "Pledged Entity").

         "Pledged Entity" shall have the meaning provided in the definition of
"Partnership Interest."

         "Pledged Notes" shall mean all Notes at any time pledged or required to
be pledged hereunder.

         "Pledged Limited Liability Company Interests" shall mean all Limited
Liability Company Interests at any time pledged or required to be pledged
hereunder.

         "Pledged LLC" shall have the meaning provided in the definition of
"Limited Liability Company Interest".

         "Pledged Partnership" shall have the meaning provided in the definition
of "Partnership Interest".

         "Pledged Partnership Interests" shall mean all Partnership Interests at
any time pledged or required to be pledged hereunder.

         "Pledgee" shall have the meaning provided in the first paragraph of
this Agreement.

                                      -8-

<PAGE>

         "Pledgor" shall have the meaning provided in the first paragraph of
this Agreement.

         "Principal Property" shall have the meaning provided in the New Senior
Notes Indenture or the Refinancing Senior Notes Indenture (in each case as in
effect on the date hereof), as the context may require.

         "Proceeds" has the meaning given such term in Section 9-102(a)(64) of
the UCC.

         "Pro Rata Share" shall have the meaning provided in Section 9 hereof.

         "Refinancing Senior Notes Creditors" shall have the meaning provided in
the recitals to this Agreement.

         "Refinancing Senior Notes Documents" shall have the meaning provided in
the recitals to this Agreement.

         "Refinancing Senior Notes Indenture" shall have the meaning provided in
the recitals to this Agreement.

         "Refinancing Senior Notes Obligations" shall have the meaning provided
in Section 1 hereof.

         "Refinancing Senior Notes Trustee" shall have the meaning provided in
the recitals to this Agreement.

         "Requisite Creditors" shall have the meaning provided in Section 20
hereof.

         "Restricted Subsidiary" shall mean each Subsidiary that is a Restricted
Subsidiary, as such term is defined in the New Senior Notes Indenture or the
Refinancing Senior Notes Indenture (each, as in effect on the date hereof), as
the context may require.

         "Secured Creditors" shall have the meaning set forth in the recitals to
this Agreement.

         "Secured Debt Agreements" shall have the meaning provided in Section 5
hereof.

         "Secured Hedging Agreement" shall have the meaning provided in the
recitals to this Agreement.

         "Securities Account" has the meaning given such term in Section
8-501(a) of the UCC.

         "Security" and "Securities" has the meaning given such term in Section
8-102(a)(15) of the UCC and shall in any event also include all Stock and all
Notes, provided that the terms "Security" and "Securities" shall not include (i)
any capital stock of any Excluded Domestic Entity or any Excluded Investment
Entity or (ii) any Margin Stock.

                                      -9-

<PAGE>

         "Security Entitlement" has the meaning given such term in Section
8-102(a)(17) of the UCC.

         "Specified Pledgor" shall have the meaning provided in Section 3.1
hereof.

         "Stock" shall mean (i) all of the issued and outstanding shares of
stock of any corporation (other than a corporation that is not organized under
the laws of the United States or any State or territory thereof (a "Foreign
Corporation")) at any time directly owned by any Pledgor, and (ii) all of the
issued and outstanding shares of capital stock of any Foreign Corporation at any
time owned by any Pledgor, provided that such Pledgor shall not be required to
pledge hereunder the capital stock of a Foreign Corporation if more than 65% of
the total combined voting power of all classes of capital stock of any Foreign
Corporation entitled to vote are pledged hereunder (after giving effect to the
pledge of capital stock of such Foreign Corporation by other Pledgors
hereunder), provided further that the term "Stock" shall not include (i) any
capital stock of any Excluded Domestic Entity or any Excluded Investment Entity,
(ii) any Margin Stock and (iii) excess capital stock of a Foreign Corporation
not required to be pledged hereunder as a result of the application of the
preceding proviso.

         "Subsequent Effective Date" shall have the meaning set forth in Section
18 hereof.

         "Syndication Agent" shall have the meaning provided in the recitals to
this Agreement.

         "Termination Date" shall have the meaning set forth in Section 18
hereof.

         "UCC" means the Uniform Commercial Code as in effect in the State of
New York from time to time; provided that all references herein to specific
sections or sub-sections of the UCC are references to such sections or
subsections, as the case may be, of the Uniform Commercial Code as in effect in
the State of New York on the date hereof.

         "Uncertificated Security" has the meaning given such term in Section
8-102(a)(18) of the UCC.

         (b) Each Pledgor represents and warrants that on the date hereof (or if
later the date it first becomes party hereto) and on any Subsequent Effective
Date: (a) each Subsidiary of such Pledgor, and the direct ownership thereof, is
listed on Annex A hereto; (b) the Stock held by such Pledgor consists of the
number and type of shares of the stock of the corporations as described in Annex
B hereto; (c) such Stock constitutes that percentage of the issued and
outstanding capital stock of the issuing corporation as set forth in Annex B
hereto; (d) the Notes held by such Pledgor consist of the promissory notes
described in Annex C hereto; (e) the Limited Liability Company Interests held by
such Pledgor consists of the number and type of interest of the Pledged LLC as
described in Annex D hereto; (f) such Limited Liability Company Interests
constitute the percentage of the issued and outstanding equity interests of the
Pledged LLC as set forth in Annex D hereto; (g) except for such immaterial
exceptions set forth on Annexes B and C as may be reasonably acceptable to the
Pledgee, each such Pledgor is the holder of record and sole beneficial owner of
the Stock, the Notes and the Securities identified on Annex G hereto; (h) the
Partnership Interests held by such Pledgor consists of the number and

                                      -10-

<PAGE>

type of interest of the Pledged Partnership as described in Annex E hereto; (i)
the Partnership Interests held by such Pledgor constitutes that percentage of
the entire Partnership Interest of the respective Pledged Partnership as is set
forth in Annex E hereto for such Pledgor; (j) such Pledgor owns or possesses no
other Securities except as described on Annexes B, C, D, E and G hereto; and (k)
such Pledgor has complied with the respective procedures set forth in Section
3.2(a) with respect to each item of Collateral described in Annexes B through E
hereto that is required by this Agreement to be pledged to the Pledgee on the
date hereof (or the respective subsequent Effective Date).

         3. PLEDGE OF SECURITIES, ETC.

         3.1 Pledge. To secure the Applicable Obligations for such Pledgor and
for the purposes set forth in Section 1, each Pledgor does hereby grant, pledge
and assign to the Pledgee for the benefit of the relevant Secured Creditors, and
does hereby create a continuing security interest in favor of the Pledgee for
the benefit of the relevant Secured Creditors in, all of the right, title and
interest in and to the following, whether now existing or hereafter from time to
time acquired (collectively, the "Collateral"):

                  (i) each of the Collateral Accounts, including any and all
         assets of whatever type or kind deposited by such Pledgor in such
         Collateral Account, whether now owned or hereafter acquired, existing
         or arising, including, without limitation, all Financial Assets,
         Investment Property, moneys, checks, drafts, Instruments, Securities or
         interests therein of any type or nature deposited or required by the
         Credit Agreement or any other Secured Debt Agreement to be deposited in
         such Collateral Account, and all investments and all certificates and
         other Instruments (including depository receipts, if any) from time to
         time representing or evidencing the same, and all dividends, interest,
         distributions, cash and other property from time to time received,
         receivable or otherwise distributed in respect of or in exchange for
         any or all of the foregoing;

                  (ii) all Securities owned by such Pledgor from time to time
         and all options and warrants owned by such Pledgor from time to time to
         purchase Securities;

                  (iii) all Limited Liability Company Interests owned by such
         Pledgor from time to time and all of such Pledgor's right, title and
         interest in each limited liability company to which such interests
         relate, whether now existing or hereafter acquired, including, without
         limitation:

                           (1) all the capital thereof and its interest in all
                  profits, income, surpluses, losses, Limited Liability Company
                  Assets, distributions and other payments to which such Pledgor
                  shall at any time be entitled in respect of such Limited
                  Liability Company Interests;

                           (2) all other payments due or to become due to such
                  Pledgor in respect of Limited Liability Company Interests,
                  whether under any limited liability company agreement or
                  otherwise, whether as contractual obligations, damages,
                  insurance proceeds or otherwise;

                                      -11-

<PAGE>

                           (3) all of its claims, rights, powers, privileges,
                  authority, options, security interest, liens and remedies, if
                  any, under any limited liability company agreement or
                  operating agreement, or at law or otherwise in respect of such
                  Limited Liability Company Interests;

                           (4) all present and future claims, if any, of any of
                  such Pledgor against any such Pledged LLC for moneys loaned or
                  advanced, for services rendered or otherwise;

                           (5) all of such Pledgor's rights under any limited
                  liability company agreement or operating agreement or at law
                  to exercise and enforce every right, power, remedy, authority,
                  option and privilege of any of such Pledgor relating to such
                  Limited Liability Company Interests, including any power to
                  terminate, cancel or modify any limited liability company
                  agreement or operating agreement, to execute any instruments
                  and to take any and all other action on behalf of and in the
                  name of any of such Pledgor in respect of such Limited
                  Liability Company Interest and any such Pledged LLC, to make
                  determinations, to exercise any election (including, but not
                  limited to, election of remedies) or option or to give or
                  receive any notice, consent, amendment, waiver or approval,
                  together with full power and authority to demand, receive,
                  enforce, collect or receipt for any of the foregoing or for
                  any Limited Liability Company Asset, to enforce or execute any
                  checks, or other instruments or orders, to file any claims and
                  to take any action in connection with any of the foregoing
                  (with all of the foregoing rights to be exercisable only upon
                  the occurrence and during the continuation of a Noticed Event
                  of Default); and

                           (6) all other property hereafter delivered in
                  substitution for or in addition to any of the foregoing, all
                  certificates and instruments representing or evidencing such
                  other property and all cash, securities, interest, dividends,
                  rights and other property at any time and from time to time
                  received, receivable or otherwise distributed in respect of or
                  in exchange for any or all thereof;

                  (iv) all Partnership Interests owned by such Pledgor from time
         to time and all of such Pledgor's right, title and interest in each
         partnership to which such interests relate, whether now existing or
         hereafter acquired, including, without limitation:

                           (1) all of the capital thereof and its interest in
                  all profits, income, surplus, losses, Partnership Assets,
                  distributions and other payments to which such Pledgor shall
                  at any time be entitled in respect of any such Partnership
                  Interest;

                           (2) all other payments due or to become due to such
                  Pledgor in respect of any such Partnership Interest, whether
                  under any partnership agreement or otherwise, whether as
                  contractual obligations, damages, insurance proceeds or
                  otherwise;

                                      -12-

<PAGE>

                           (3) all of its claims, rights, powers, privileges,
                  authority, options, security interest, liens and remedies, if
                  any, under any partnership or other agreement or at law or
                  otherwise in respect of any such Partnership Interest;

                           (4) all present and future claims, if any, of such
                  Pledgor against any Pledged Partnership for moneys loaned or
                  advanced, for services rendered or otherwise;

                           (5) all of such Pledgor's rights under any
                  partnership agreement or at law to exercise and enforce every
                  right, power, remedy, authority, option and privilege of such
                  Pledgor relating to any Partnership Interest, including any
                  power, if any, to terminate, cancel or modify any general or
                  limited partnership agreement, to execute any instruments and
                  to take any and all other action on behalf of and in the name
                  of such Pledgor in respect of such Partnership Interest and
                  any Pledged Partnership, to make determinations, to exercise
                  any election (including, but not limited to, election of
                  remedies) or option or to give or receive any notice, consent,
                  amendment, waiver or approval, together with full power and
                  authority to demand, receive, enforce, collect, or receipt for
                  any of the foregoing or for any Partnership Asset, to enforce
                  or execute any checks, or other instruments or orders, to file
                  any claims and to take any action in connection with any of
                  the foregoing (with all of the foregoing rights to be
                  exercisable only upon the occurrence and during the
                  continuation of a Noticed Event of Default);

                           (6) all other property hereafter delivered in
                  substitution for or in addition to any of the foregoing, all
                  certificates and instruments representing or evidencing such
                  other property and all cash, securities, interest, dividends,
                  rights and other property at any time and from time to time
                  received, receivable or otherwise distributed in respect of or
                  in exchange for any or all thereof;

                  (v) all Financial Assets and Investment Property owned by such
         Pledgor from time to time;

                  (vi) all Security Entitlements owned by such Pledgor from time
         to time in any and all of the foregoing; and

                  (vii) all Proceeds of any and all of the foregoing.

As used herein, "Applicable Obligations" shall mean (x) for each Pledgor (each,
a "Specified Pledgor") that is the Borrower or a Restricted Subsidiary, all the
Obligations and (y) for each other Pledgor, all the Obligations other than the
New Senior Notes Obligations and the Refinancing Senior Notes Obligations,
provided that (i) the New Senior Notes Obligations shall be excluded from the
Applicable Obligations of the Borrower or a Restricted Subsidiary to the extent
the New Senior Notes Documents do not require the New Senior Notes Obligations
to be secured pursuant to this Agreement and (ii) the Refinancing Senior Notes
Obligations shall be excluded from the Applicable Obligations of the Borrower or
a Restricted Subsidiary to the extent the Refinancing Senior Notes Documents do
not require the Refinancing Senior Notes Obligations to be secured pursuant to
this Agreement. Notwithstanding anything to the contrary

                                      -13-

<PAGE>

contained in this Agreement, the Collateral that secures the New Senior Notes
Obligations or the Refinancing Senior Notes Obligations of a Specified Pledgor
shall be limited to Collateral consisting of any shares of stock, indebtedness
or other obligations of a Subsidiary or of any Principal Property of the
Borrower or any Restricted Subsidiary (the "Designated Collateral"), all of
which Collateral shall also ratably secure all other Applicable Obligations of
such Specified Pledgor, and the Collateral Proceeds with respect to any item of
Collateral owned by a Specified Pledgor that are to be applied to the New Senior
Notes Obligations or to the Refinancing Senior Notes Obligations shall be
limited to Collateral Proceeds resulting from the sale, other disposition of or
other realization upon, and other moneys received in respect of, the Designated
Collateral of such Specified Pledgor, with such Collateral Proceeds to also be
applied ratably to all other Applicable Obligations of such Specified Pledgor.

         3.2. Procedures. (a) To the extent that any Pledgor at any time or from
time to time owns, acquires or obtains any right, title or interest in any
Collateral, such Collateral shall automatically (and without the taking of any
action by the respective Pledgor) be pledged pursuant to Section 3.1 of this
Agreement and, in addition thereto, such Pledgor shall (to the extent provided
below) take the following actions for the benefit of the Pledgee and the other
relevant Secured Creditors as set forth below as promptly as practicable and, in
any event, within 10 Business Days after it obtains such Collateral, provided
that (i) in the case of Collateral consisting of an Uncertificated Security,
Limited Liability Company Interest or Partnership Interest of a Person which is
not a Subsidiary of such Pledgor and a security interest in which is to be
perfected by taking an action specified in sub-clause (ii) or (iv)(2) below,
such Pledgor shall have 30 days after it obtains such Collateral to take the
respective action required by said sub-clause, (ii) in the case of Collateral a
security interest in which is to be perfected by taking an action specified in
sub-clause (iii) below, such Pledgor shall have 90 days after the date of this
Agreement (or, if such Collateral is acquired after the date hereof, the date it
obtains such Collateral) to take the respective action required by said
sub-clause and (iii) in the case of any Security, Stock, Limited Liability
Company Interest or Partnership Interest of an Excluded Foreign Entity, such
Pledgor owning the same shall take the respective action required below on the
date such Excluded Foreign Entity ceases to qualify as an "Excluded Foreign
Entity" in accordance with the definition thereof:

                  (i) with respect to a Certificated Security (other than a
         Certificated Security credited on the books of a Clearing Corporation),
         the respective Pledgor shall deliver such Certificated Security to the
         Pledgee, indorsed to the Pledgee or indorsed in blank;

                  (ii) with respect to an Uncertificated Security (other than an
         Uncertificated Security credited on the books of a Clearing
         Corporation), the respective Pledgor shall cause the issuer of such
         Uncertificated Security (or, in the case of an issuer that is not a
         Subsidiary of such Pledgor, will use reasonable efforts to cause such
         issuer) to duly authorize and execute, and deliver to the Pledgee, an
         agreement for the benefit of the Pledgee and the other Secured
         Creditors substantially in the form of Annex F hereto (appropriately
         completed to the reasonable satisfaction of the Pledgee and with such
         modifications, if any, as shall be reasonably satisfactory to the
         Pledgee) pursuant to which, subject to Section 5 hereof, such issuer
         agrees to comply with any and all instructions originated by the
         Pledgee without further consent by the registered owner and not to
         comply with instructions regarding such Uncertificated Security (and
         any

                                      -14-

<PAGE>

         Partnership Interest and Limited Liability Company Interest issued by
         such issuer) originated by any other Person other than a court of
         competent jurisdiction; provided that in the case of an Uncertificated
         Security issued by a Person that is organized under the laws of a
         jurisdiction other than the United States or any state thereof, such
         Pledgor shall enter into a Foreign Pledge Agreement and comply with the
         requirements of Section 16(d) as if said Person had been (but then
         ceased to be) an Excluded Foreign Entity,

                  (iii) with respect to a Certificated Security, Uncertificated
         Security, Partnership Interest or Limited Liability Company Interest
         credited on the books of a Clearing Corporation (including a Federal
         Reserve Bank, Participants Trust Company or The Depository Trust
         Company), the respective Pledgor shall promptly notify the Pledgee
         thereof and shall promptly take (x) all actions required (i) to comply
         with the applicable rules of such Clearing Corporation and (ii) to
         perfect the security interest of the Pledgee under applicable law
         (including, in any event, under Sections 9-314(a) and (b), 9-106 and
         8-106(d) of the UCC) and (y) such other actions as the Pledgee deems
         reasonably necessary or desirable to effect the foregoing;

                  (iv) with respect to a Partnership Interest or a Limited
         Liability Company Interest (other than a Partnership Interest or
         Limited Liability Interest credited on the books of a Clearing
         Corporation), (1) if such Partnership Interest or Limited Liability
         Company Interest is represented by a certificate and is a Security for
         purposes of the UCC, the procedure set forth in Section 3.2(a)(i)
         hereof, and (2) if such Partnership Interest or Limited Liability
         Company Interest is not represented by a certificate or is not a
         Security for purposes of the UCC, the procedure set forth in Section
         3.2(a)(ii) hereof;

                  (v) with respect to any Note, delivery of such Note to the
         Pledgee, indorsed to the Pledgee or indorsed in blank; and

                  (vi) with respect to cash proceeds, (i) establishment by the
         Pledgee of a cash account in the name of such Pledgor over which the
         Pledgee shall have exclusive and absolute control and dominion (and no
         withdrawals or transfers may be made therefrom by any Person except
         with the prior written consent of the Pledgee) and (ii) deposit of such
         cash in such cash account.

         (b) In addition to the actions required to be taken pursuant to Section
3.2(a) hereof, each Pledgor shall take the following additional actions with
respect to the Collateral:

                  (i) with respect to all Collateral of such Pledgor whereby or
         with respect to which the Pledgee may obtain "control" thereof within
         the meaning of Section 8-106 of the UCC (or under any provision of the
         UCC as same may be amended or supplemented from time to time, or under
         the laws of any relevant State other than the State of New York), the
         respective Pledgor shall take all actions as may be reasonably
         requested from time to time by the Pledgee so that "control" of such
         Collateral is obtained and at all times held by the Pledgee; and

                  (ii) each Pledgor shall from time to time cause appropriate
         financing statements (on Form UCC-1 or other appropriate form) under
         the Uniform Commercial

                                      -15-

<PAGE>

         Code as in effect in the various relevant States, covering all
         Collateral hereunder (with the form of such financing statements to be
         satisfactory to the Pledgee), to be filed in the relevant filing
         offices so that at all times the Pledgee has a security interest in all
         Investment Property and other Collateral which is perfected by the
         filing of such financing statements (in each case to the maximum extent
         perfection by filing may be obtained under the laws of the relevant
         States, including, without limitation, Section 9-312(a) of the UCC).

         3.3. Subsequently Acquired Collateral. If any Pledgor shall acquire (by
purchase, stock dividend or similar distribution or otherwise) any additional
Collateral at any time or from time to time after the date hereof, such
Collateral shall automatically (and without any further action being required to
be taken) be subject to the pledge and security interests created pursuant to
Section 3.1 hereof and, furthermore, the respective Pledgor will promptly
thereafter take (or cause to be taken) all action with respect to such
Collateral in accordance with the procedures set forth in Section 3.2 hereof,
and will promptly thereafter deliver to the Pledgee (i) a certificate executed
by a principal executive officer of such Pledgor describing such Collateral and
certifying that the same has been duly pledged in favor of the Pledgee (for the
benefit of the relevant Secured Creditors entitled thereto) hereunder and (ii)
supplements to Annexes A through E hereto as are reasonably necessary to cause
such annexes to be complete and accurate at such time, provided that unless
specifically requested by the Collateral Agent, such updated Annexes shall not
be required to include any after-acquired Securities pledged to the Pledgee
pursuant to the procedures set forth in Section 3.2(a)(iii). Notwithstanding the
foregoing, no Pledgor shall be required at any time to pledge hereunder any
Stock which will result in more than 65% of the total combined voting power of
all classes of capital stock of any Foreign Corporation entitled to vote being
pledged hereunder.

         3.4. Transfer Taxes. Each pledge of Collateral under Section 3.1 or
Section 3.3 hereof shall be accompanied by any transfer tax stamps required in
connection with the pledge of such Collateral.

         4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall have
the right to appoint one or more sub-agents for the purpose of retaining
physical possession of the Collateral, which may be held (in the discretion of
the Pledgee) in the name of the relevant Pledgor, endorsed or assigned in blank
or, following a Noticed Event of Default which is continuing, in favor of the
Pledgee or any nominee or nominees of the Pledgee or a sub-agent appointed by
the Pledgee.

         5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until a Noticed
Event of Default shall have occurred and be continuing, each Pledgor shall be
entitled to exercise all voting rights attaching to any and all Collateral owned
by it, and to give consents, waivers or ratifications in respect thereof;
provided that no vote shall be cast or any consent, waiver or ratification given
or any action taken which would violate, result in breach of any covenant
contained in, or be inconsistent with, any of the terms of this Agreement, the
Credit Agreement, any other Credit Document, any New Senior Notes Document, any
Refinancing Senior Notes Document or any Secured Hedging Agreement
(collectively, the "Secured Debt Agreements"), or which would have the effect of
impairing the value of the Collateral or any part thereof or the position or
interests of the Pledgee or any other Secured Creditor therein, provided

                                      -16-

<PAGE>

however, each Pledgor shall be permitted to amend and/or modify intercompany
notes constituting Collateral in the ordinary course of business and consistent
with past practices. All such rights of a Pledgor to vote and to give consents,
waivers and ratifications shall cease in case a Noticed Event of Default shall
occur and be continuing and Section 7 hereof shall become applicable. As used
herein, a "Noticed Event of Default" shall mean (i) an Event of Default with
respect to the Borrower under Section 9.05 of the Credit Agreement and (ii) any
other Event of Default in respect of which the Pledgee has given the Borrower
notice that such Event of Default constitutes a "Noticed Event of Default".

         6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until a Noticed Event
of Default shall have occurred and be continuing, all cash dividends,
distributions, cash Proceeds or other amounts payable in respect of the
Collateral shall be paid to the respective Pledgor; provided that all dividends
or other amounts payable in respect of the Collateral which are determined by
the Pledgee, to represent in whole or in part an extraordinary, liquidating or
other distribution in return of capital not permitted by the Credit Agreement
shall be paid, to the extent so determined to represent an extraordinary,
liquidating or other distribution in return of capital, to the Pledgee and
retained by it as part of the Collateral (unless such cash dividends are applied
to repay the Obligations pursuant to Section 9 of this Agreement). The Pledgee
shall also be entitled to receive directly, and to retain as part of the
Collateral:

                  (i) all other or additional stock, notes, limited liability
         company interests, partnership interests, instruments or other
         securities or property (other than cash) paid or distributed by way of
         dividend or otherwise in respect of the Collateral;

                  (ii) all other or additional stock, notes, limited liability
         company interests, partnership interests, instruments or other
         securities or property (including cash) paid or distributed in respect
         of the Collateral by way of stock-split, spin-off, split-up,
         reclassification, combination of shares or similar rearrangement; and

                  (iii) all other or additional stock, notes, limited liability
         company interests, partnership interests, instruments or other
         securities or property (including cash) which may be paid in respect of
         the Collateral by reason of any consolidation, merger, exchange of
         stock, conveyance of assets, liquidation or similar corporate,
         partnership or other reorganization.

Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive proceeds of the Collateral in any form in accordance
with Section 3 of this Agreement. All dividends, distributions or other payments
which are received by the respective Pledgor contrary to the provisions of this
Section 6 or Section 7 shall be received in trust for the benefit of the Pledgee
and shall be forthwith paid over to the Pledgee as Collateral in the same form
as so received (with any necessary endorsement).

         7. REMEDIES IN CASE OF AN EVENT OF DEFAULT. In case a Noticed Event of
Default shall have occurred and be continuing, the Pledgee shall be entitled to
exercise all of the rights, powers and remedies (whether vested in it by this
Agreement or by any other Secured Debt Agreement or by law) for the protection
and enforcement of its rights in respect of the Collateral, including, without
limitation, all the rights and remedies of a secured party upon

                                      -17-

<PAGE>

default under the Uniform Commercial Code as in effect in any relevant
jurisdiction, and the Pledgee shall be entitled, without limitation, to exercise
any or all of the following rights, which each Pledgor hereby agrees to be
commercially reasonable:

                  (i) to receive all amounts payable in respect of the
         Collateral otherwise payable under Section 6 to such Pledgor;

                  (ii) to transfer all or any part of the Collateral into the
         Pledgee's name or the name of its nominee or nominees;

                  (iii) to accelerate any Pledged Note which may be accelerated
         in accordance with its terms, and take any other lawful action to
         collect upon any Pledged Note (including, without limitation, to make
         any demand for payment thereon);

                  (iv) to vote all or any part of the Collateral (in each case
         whether or not transferred into the name of the Pledgee) and give all
         consents, waivers and ratifications in respect of the Collateral and
         otherwise act with respect thereto as though it were the outright owner
         thereof (each Pledgor hereby irrevocably constituting and appointing
         the Pledgee the proxy and attorney-in-fact of such Pledgor, with full
         power of substitution to do so);

                  (v) at any time or from time to time to sell, assign and
         deliver, or grant options to purchase, all or any part of the
         Collateral, or any interest therein, at any public or private sale,
         without demand of performance or advertisement or to redeem or
         otherwise (all of which are hereby waived by each Pledgor), for cash,
         on credit or for other property, for immediate or future delivery
         without any assumption of credit risk, and for such price or prices and
         on such terms as the Pledgee in its reasonable discretion may
         determine, provided that at least 10 days' notice of the time and place
         of any such sale shall be given to such Pledgor. The Pledgee shall not
         be obligated to make such sale of Collateral regardless of whether any
         such notice of sale has theretofore been given. Each purchaser at any
         such sale shall hold the property so sold absolutely free from any
         claim or right on the part of any Pledgor, and each Pledgor hereby
         waives and releases to the fullest extent permitted by law any right or
         equity of redemption with respect to the Collateral, whether before or
         after sale hereunder, and all rights, if any, of marshalling the
         Collateral and any other security for the Obligations or otherwise. At
         any such sale, unless prohibited by applicable law, the Pledgee on
         behalf of all Secured Creditors (or certain of them) may bid for and
         purchase all or any part of the Collateral so sold free from any such
         right or equity of redemption. Neither the Pledgee nor any other
         Secured Creditor shall be liable for failure to collect or realize upon
         any or all of the Collateral or for any delay in so doing nor shall it
         be under any obligation to take any action whatsoever with regard
         thereto; and

                  (vi) to set-off any and all Collateral against any and all
         Obligations, and to withdraw any and all cash or other Collateral from
         any and all Collateral Accounts and to apply such cash and other
         Collateral to the payment of any and all Obligations.

                                      -18-

<PAGE>

         8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the
Pledgee provided for in this Agreement or any other Secured Debt Agreement, or
now or hereafter existing at law or in equity or by statute shall be cumulative
and concurrent and shall be in addition to every other such right, power or
remedy. The exercise or beginning of the exercise by the Pledgee or any other
Secured Creditor of any one or more of the rights, powers or remedies provided
for in this Agreement or any other Secured Debt Agreement or now or hereafter
existing at law or in equity or by statute or otherwise shall not preclude the
simultaneous or later exercise by the Pledgee or any other Secured Creditor of
all such other rights, powers or remedies, and no failure or delay on the part
of the Pledgee or any other Secured Creditor to exercise any such right, power
or remedy shall operate as a waiver thereof. Unless otherwise required by the
Credit Documents, no notice to or demand on any Pledgor in any case shall
entitle it to any other or further notice or demand in similar other
circumstances or constitute a waiver of any of the rights of the Pledgee or any
other Secured Creditor to any other further action in any circumstances without
demand or notice. By accepting the benefits of this Agreement, the Secured
Creditors expressly acknowledge and agree that (x) this Agreement may be
enforced only by the action of the Pledgee acting upon the instructions of the
Required Lenders or, if the CA Termination Date has occurred, the holders of a
majority of the outstanding principal amount of all remaining Obligations,
provided that if prior to the CA Termination Date a payment default with respect
to at least $300,000,000 principal amount in the aggregate of New Senior Notes
and/or Refinancing Senior Notes has continued for at least 180 days (and such
defaulted payment has not been received pursuant to a drawing under any letter
of credit), the holders of a majority of the outstanding principal amount of the
Indebtedness subject to such payment default or defaults can direct the Pledgee
to commence and continue enforcement of the Liens created hereunder, which the
Pledgee shall comply with subject to receiving any indemnity which it reasonably
requests, provided further that the Pledgee shall thereafter comply only with
the directions of the Required Lenders as to how to carry out such enforcement
so long as such directions are not adverse to the aforesaid directions of the
holders of Indebtedness subject to such payment default or defaults and (y) no
other Secured Creditor shall have any right individually to seek to enforce or
to enforce this Agreement or to realize upon the security to be granted hereby,
it being understood and agreed that such rights and remedies shall be exercised
exclusively by the Pledgee for the benefit of the Secured Creditors as their
interest may appear upon the terms of this Agreement.

         9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee
upon any sale, other disposition of or other realization upon any Collateral
pursuant to the terms of this Agreement, together with all other moneys received
by the Pledgee hereunder (collectively, the "Collateral Proceeds"), shall be
applied as follows:

                  (i) first, to the payment of all Obligations owing to the
         Pledgee of the type described in clauses (v), (vi) and (vii) of Section
         1 herein;

                  (ii) second, to the extent proceeds of the sale, other
         disposition of or other realization upon any item of Collateral remain
         after the application pursuant to preceding clause (i), an amount equal
         to the outstanding Applicable Obligations secured by such item of
         Collateral shall be paid to the Secured Creditors in the manner
         provided below as their interests may appear, with each Secured
         Creditor receiving an amount equal to its outstanding Applicable
         Obligations secured by such item of Collateral or, if the proceeds

                                      -19-

<PAGE>

         are insufficient to pay in full all such Applicable Obligations, its
         Pro Rata Share of the amount so remaining to be distributed, with any
         such amount to be applied in the case of the Credit Document
         Obligations, the New Senior Notes Obligations and the Refinancing
         Senior Notes Obligations, first to the payment of interest in respect
         of the unpaid principal amount of Loans, New Senior Notes or
         Refinancing Senior Notes, as the case may be, second to the payment of
         principal of Loans, New Senior Notes or Refinancing Senior Notes, as
         the case may be, and finally to the other Credit Document Obligations,
         New Senior Notes Obligations or Refinancing Senior Notes Obligations,
         as the case may be; and

                  (iii) third, to the extent proceeds remain after the
         application pursuant to the preceding clauses (i) and (ii) to the
         relevant Pledgor or, to the extent directed by such Pledgor or a court
         of competent jurisdiction, to whomever may be lawfully entitled to
         receive such surplus.

         (b) For purposes of this Agreement, "Pro Rata Share" shall mean when
calculating a Secured Creditor's portion of any distribution or amount pursuant
to clause (a) above, the amount (expressed as a percentage) equal to a fraction
the numerator of which is the then outstanding amount of the relevant Applicable
Obligations secured by the relevant item of Collateral owed such Secured
Creditor and the denominator of which is the then outstanding amount of all
Applicable Obligations secured by the relevant item of Collateral.

         (c) All payments required to be made to the (i) Lender Creditors
hereunder shall be made to the Administrative Agent for the account of the
respective Lender Creditors, (ii) Hedging Creditors hereunder shall be made to
the paying agent under the applicable Secured Hedging Agreement or, in the case
of Secured Hedging Agreements without a paying agent, directly to the applicable
Hedging Creditors, (iii) New Senior Notes Creditors hereunder shall be made to
the New Senior Notes Trustee for the account of the respective New Senior Notes
Creditors and (iv) Refinancing Senior Notes Creditors hereunder shall be made to
the Refinancing Senior Notes Trustee for the account of the respective
Refinancing Senior Notes Creditors.

         (d) For purposes of applying payments received in accordance with this
Section 9, the Pledgee shall be entitled to rely upon (i) the Administrative
Agent for a determination of the outstanding Credit Document Obligations, (ii)
upon any Hedging Creditor for a determination of the outstanding Hedging
Obligations owed to such Hedging Creditor, (iii) the New Senior Notes Trustee
for a determination of the outstanding New Senior Notes Obligations, and (iv)
the Refinancing Senior Notes Trustee for a determination of the outstanding
Refinancing Senior Notes Obligations. Unless it has actual knowledge (including
by way of written notice from a Secured Creditor) to the contrary, the
Administrative Agent under the Credit Agreement, in furnishing information
pursuant to the preceding sentence, and the Pledgee, in acting hereunder, shall
be entitled to assume that no Credit Document Obligations other than principal,
interest and regularly accruing fees are owing to any Lender Creditor.

         (e) It is understood and agreed that each Pledgor shall remain liable
to the extent of any deficiency between (x) the amount of the Obligations for
which it is responsible directly

                                      -20-

<PAGE>

or as a Guarantor that are satisfied with proceeds of the Collateral and (y)
the aggregate outstanding amount of such Obligations.

         10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.

         11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to
indemnify and hold harmless the Pledgee and each other Secured Creditor and
their respective successors, assigns, employees, agents and affiliates
(individually an "Indemnitee," and collectively the "Indemnitees") from and
against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever kind or nature, and (ii) to
reimburse each Indemnitee for all reasonable costs and expenses, including
reasonable attorneys' fees, in each case growing out of or resulting from this
Agreement or the exercise by any Indemnitee of any right or remedy granted to it
hereunder or under any other Secured Debt Agreement (but excluding any claims,
demands, losses, judgments and liabilities or expenses to the extent incurred by
reason of gross negligence or willful misconduct of such Indemnitee (as
determined by a court of competent jurisdiction in a final and non-appealable
decision)). In no event shall the Pledgee be liable, in the absence of gross
negligence or willful misconduct on its part, for any matter or thing in
connection with this Agreement other than to account for moneys or other
property actually received by it in accordance with the terms hereof. If and to
the extent that the obligations of any Pledgor under this Section 11 are
unenforceable for any reason, such Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.

         12. PLEDGEE NOT BOUND. (a) Nothing herein shall be construed to make
the Pledgee or any other Secured Creditor liable as a general partner or limited
partner of any Pledged Partnership or a member of any Pledged LLC or a
shareholder of any corporation and the Pledgee or any other Secured Creditor by
virtue of this Agreement or otherwise (except as referred to in the following
sentence) shall not have any of the duties, obligations or liabilities of a
general partner or limited partner of any Pledged Partnership or a member of any
Pledged LLC or a shareholder of any corporation. The parties hereto expressly
agree that, unless the Pledgee shall become the absolute owner of the respective
Pledged Partnership Interest, Pledged Limited Liability Company Interest or
Security pursuant hereto, this Agreement shall not be construed as creating a
partnership or joint venture among the Pledgee, any other Secured Creditor
and/or any Pledgor.

         (b) Except as provided in the last sentence of paragraph (a) of this
Section, the Pledgee, by accepting this Agreement, did not intend to become a
general partner or limited partner of any Pledged Partnership or a member of any
Pledged LLC or a shareholder of any corporation or otherwise be deemed to be a
co-venturer with respect to any Pledgor, any Pledged Partnership or any Pledged
LLC or a shareholder of any corporation. either before or after an Event of
Default under the Credit Agreement shall have occurred. The Pledgee shall have
only

                                      -21-

<PAGE>

those powers set forth herein and shall assume none of the duties, obligations
or liabilities of a general partner or limited partner of any Pledged
Partnership or a member of any Pledged LLC or a shareholder or of any
corporation or of any Pledgor.

         (c) Neither the Pledgee nor any other Secured Creditor shall be
obligated to perform or discharge any obligation of any Pledgor as a result of
the collateral assignment hereby effected.

         (d) The acceptance by the Pledgee of this Agreement, with all the
rights, powers, privileges and authority so created, shall not at any time or in
any event obligate the Pledgee to appear in or defend any action or proceeding
relating to the Collateral to which it is not a party, or to take any action
hereunder or thereunder, or to expend any money or incur any expenses or perform
or discharge any obligation, duty or liability under the Collateral.

         13. FURTHER ASSURANCES. (a) Each Pledgor agrees that it will join with
the Pledgee in executing and, at such Pledgor's own expense, file and refile
under the Uniform Commercial Code such financing statements, continuation
statements and other documents in such offices as the Pledgee may reasonably
deem necessary or appropriate and wherever required or permitted by law in order
to perfect and preserve the Pledgee's security interest in the Collateral
hereunder and hereby authorizes the Pledgee to file financing statements and
amendments thereto relative to all or any part of the Collateral without the
signature of such Pledgor where permitted by law, and agrees to do such further
acts and things and to execute and deliver to the Pledgee such additional
conveyances, assignments, agreements and instruments as the Pledgee may
reasonably require or reasonably deem advisable to carry into effect the
purposes of this Agreement or to further assure and confirm unto the Pledgee its
rights, powers and remedies hereunder or thereunder.

         (b) Each Pledgor hereby appoints the Pledgee, such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise, from time to time after the occurrence
and during the continuance of an Event of Default, in the Pledgee's reasonable
discretion to take any action and to execute any instrument which the Pledgee
may reasonably deem necessary or advisable to accomplish the purposes of this
Agreement.

         14. THE PLEDGEE AS COLLATERAL AGENT. The Pledgee will hold in
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. It is expressly understood and agreed that the obligations
of the Pledgee as holder of the Collateral and interests therein and with
respect to the disposition thereof, and otherwise under this Agreement, are only
those expressly set forth in this Agreement. The Pledgee shall act hereunder on
the terms and conditions set forth herein and in Annex M to the Security
Agreement, the terms of which shall be deemed incorporated herein by reference
as fully as if same were set forth herein in their entirety (for such purpose,
treating each reference to the "Security Agreement" as a reference to this
Agreement, each reference to the "Collateral Agent" as a reference to the
Pledgee and each reference to an "Assignor" as a reference to a "Pledgor").

         15. TRANSFER BY THE PLEDGORS. No Pledgor will sell or otherwise dispose
of, grant any option with respect to, or mortgage, pledge or otherwise encumber
any of

                                      -22

<PAGE>

the Collateral or any interest therein if prohibited by the terms of this
Agreement or any other Secured Debt Agreement.

         16. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS. (a) Each Pledgor
represents, warrants and covenants that:

                  (i) it is the legal, record and beneficial owner of, and has
         good and marketable title to, all Collateral consisting of one or more
         Securities pledged by it hereunder, subject to no pledge, lien,
         mortgage, hypothecation, security interest, charge, option or other
         encumbrance whatsoever, except the liens and security interests created
         by this Agreement and Permitted Liens;

                  (ii) it has full power, authority and legal right to pledge
         all the Collateral pledged by it pursuant to this Agreement without the
         consent of any other Person;

                  (iii) this Agreement has been duly authorized, executed and
         delivered by such Pledgor and constitutes a legal, valid and binding
         obligation of such Pledgor enforceable in accordance with its terms,
         except to the extent that the enforceability hereof may be limited by
         applicable bankruptcy, insolvency, reorganization, moratorium or
         similar laws generally affecting creditors' rights and by equitable
         principles (regardless of whether enforcement is sought in equity or
         law);

                  (iv) except to the extent already made or obtained, no consent
         of any other party (including, without limitation, any stockholder,
         member, limited or general partner or creditor of such Pledgor or any
         of its Subsidiaries) and no consent, license, permit, approval or
         authorization of, exemption by, notice or report to, or registration,
         filing or declaration with, any governmental authority is required to
         be obtained by such Pledgor in connection with (a) the execution,
         delivery or performance of this Agreement, (b) the validity or
         enforceability of this Agreement, (c) the perfection or enforceability
         of the Pledgee's security interest in the Collateral (other than with
         respect to the Stock of an Excluded Foreign Entity or (d) except for
         compliance with or as may be required by applicable securities laws,
         the exercise by the Pledgee of any of its rights or remedies provided
         herein;

                  (v) neither the execution, delivery or performance of this
         Agreement or any other Secured Debt Agreement to which it is a party
         violates (a) any material provision of any applicable law or regulation
         or of any order, judgment, writ, award or decree of any court,
         arbitrator or domestic or foreign governmental authority, (b) the
         certificate of incorporation, certificate of formation, certificate of
         partnership, partnership agreement, limited liability company agreement
         (or equivalent organizational documents) or by-laws, as the case may
         be, of such Pledgor or of any securities issued by such Pledgor or any
         of its Subsidiaries, or (c) any indenture, mortgage, lease, deed of
         trust, credit agreement, loan agreement, agreement or other instrument
         to which such Pledgor or any of its Subsidiaries is a party or which
         purports to be binding upon such Pledgor or any of its Subsidiaries or
         upon any of their respective assets and will not result in the creation
         or imposition of any lien or encumbrance on any of the assets of such
         Pledgor or any of its Subsidiaries except as contemplated by this
         Agreement;

                                      -23-

<PAGE>

                  (vi) all the Collateral consisting of Securities, Pledged
         Limited Liability Company Interests and Pledged Partnership Interests
         have been duly and validly issued, are fully paid and non-assessable
         and are subject to no options to purchase or similar rights;

                  (vii) to Pledgor's knowledge, each of the Pledged Notes
         constitute, or, when executed by the obligor thereof, will constitute,
         the legal, valid and binding obligation of such obligor, enforceable in
         accordance with its terms except to the extent that the enforceability
         thereof may be limited by applicable bankruptcy, insolvency,
         reorganization, moratorium or similar laws generally affecting
         creditors' rights and by equitable principles (regardless of whether
         enforcement is sought in equity or law);

                  (viii) the pledge, assignment and delivery to the Pledgee of
         the Collateral consisting of Certificated Securities (other than the
         Certificated Securities (x) of the Excluded Foreign Entities and (y)
         required to be pledged pursuant to the procedures set forth in Section
         3.2(a)(iii)) and Pledged Notes pursuant to this Agreement, creates a
         valid and perfected first security interest in such Collateral and the
         proceeds thereof, subject to no prior Lien or encumbrance or to any
         agreement purporting to grant to any third party a Lien or encumbrance
         on the property or assets of such Pledgor which would include the
         Securities;

                  (ix) it is not in default in the payment of any portion of any
         mandatory capital contribution, if any, required to be made under any
         partnership agreement or limited liability company agreement to which
         such Pledgor is a party, and such Pledgor is not in violation of any
         other material provisions of any partnership agreement or limited
         liability company agreement to which such Pledgor is a party, or
         otherwise in default or violation thereunder; no Partnership Interest
         or Limited Liability Company Interest is subject to any defense, offset
         or counterclaim, nor have any of the foregoing been asserted or alleged
         against such Pledgor by any Person with respect thereto;

                  (x) it shall not withdraw as a partner of any Pledged
         Partnership or member of any Pledged LLC, or file or pursue or take any
         action which may, directly or indirectly, cause a dissolution or
         liquidation of or with respect to any Pledged Entity or seek a
         partition of any property of any Pledged Entity, except as permitted by
         the Credit Agreement;

                  (xi) the Pledged Partnership Interests or Pledged Limited
         Liability Company Interests of such Pledgor, as the case may be,
         constitute, and will at all times hereafter continue to constitute, in
         the aggregate, all of the partnership interests or membership
         interests, as the case may be, of each Pledged Entity of such Pledgor
         and no Pledged Entity shall create any options or rights or other
         agreements to sell or otherwise transfer, or sell or otherwise
         transfer, any Partnership Interests or Limited Liability Company
         Interests;

                  (xii) each partnership agreement and limited liability company
         agreement is the legal, valid and binding obligation of the parties
         thereto, enforceable in accordance with

                                      -24-

<PAGE>

         its terms and, together with this Agreement, contains the entire
         agreement between the parties thereto relating to the subject matter
         thereof; and

                  (xiii) "control" (as defined in Section 8-106 of the UCC) has
         been obtained by the Pledgee over all Collateral consisting of
         Securities (including Notes which are Securities) with respect to which
         such "control" may be obtained pursuant to Section 8-106 of the UCC, in
         each such case to the extent required by the terms of this Agreement.

         (b) Each Pledgor covenants and agrees that it will defend the Pledgee's
right, title and security interest in and to the Securities and the proceeds
thereof against the claims and demands of all persons whomsoever; and each
Pledgor covenants and agrees that it will have like title to and right to pledge
any other property at any time hereafter pledged to the Pledgee as Collateral
hereunder and will likewise defend the right thereto and security interest
therein of the Pledgee and the other Secured Creditors.

         (c) Each Pledgor covenants and agrees that it will take no action which
would violate or be inconsistent with any of the terms of any Secured Debt
Agreement, or which would have the effect of impairing the position or interests
of the Pledgee or any other Secured Creditor under any Secured Debt Agreement
except as permitted by the Credit Agreement.

         (d) Any Pledgor which owns an equity interest in an Excluded Foreign
Entity covenants and agrees that on the date on which such entity ceases to
qualify as an "Excluded Foreign Entity" in accordance with the definition
thereof, (i) such Pledgor shall have duly authorized, executed and delivered to
the Pledgee a pledge agreement, in form and substance satisfactory to the
Pledgee, governed by the laws of the jurisdiction of organization of such
Excluded Foreign Entity and covering (subject to the pledge limitations in
subclause (ii) of the definition of the term "Stock") the equity interests of
such Excluded Foreign Entity owned by such Pledgor (as amended, restated,
modified and/or supplemented from time to time in accordance with the terms
thereof and of the Credit Agreement, each such pledge agreement, a "Foreign
Pledge Agreement"), (ii) such Foreign Pledge Agreement shall be in full force
and effect and shall have been duly recorded or filed in such manner and in such
places as required by the law of the jurisdiction governing such Foreign Pledge
Agreement to establish, perfect, preserve and protect the pledge in favor of the
Collateral Agent, (iii) all taxes, fees and other charges payable in connection
with the such Foreign Pledge Agreement (including the recordation thereof) shall
have been paid in full and (iv) the Pledgee shall have received such other
evidence that all actions necessary or, in the opinion of the Pledgee,
desirable, to perfect and/or render enforceable the security interest purported
to be created by such Foreign Pledge Agreement have been taken (including,
without limitation, the delivery of an opinion from local counsel acceptable to
the Pledgee in form, scope and substance reasonably satisfactory to the
Pledgee).

         (e) Each Pledgor represents and warrants as of the date of each Credit
Event under the Credit Agreement, that the fair market value of the Margin Stock
held by the Pledgors as of the date of such Credit Event does not exceed
$50,000,000.

         17. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force

                                      -25-

<PAGE>

and effect without regard to, and shall not be released, suspended, discharged,
terminated or otherwise affected by, any circumstance or occurrence whatsoever,
including, without limitation:

                  (i) any renewal, extension, amendment or modification of, or
         addition or supplement to or deletion from any of the Secured Debt
         Agreements, or any other instrument or agreement referred to therein,
         or any assignment or transfer of any thereof;

                  (ii) any waiver, consent, extension, indulgence or other
         action or inaction under or in respect of any such agreement or
         instrument or this Agreement;

                  (iii) any furnishing of any additional security to the Pledgee
         or its assignee or any acceptance thereof or any release of any
         security by the Pledgee or its assignee;

                  (iv) any limitation on any party's liability or obligations
         under any such instrument or agreement or any invalidity or
         unenforceability, in whole or in part, of any such instrument or
         agreement or any term thereof; or

                  (v) any bankruptcy, insolvency, reorganization, composition,
         adjustment, dissolution, liquidation or other like proceeding relating
         to such Pledgor or any Subsidiary of such Pledgor, or any action taken
         with respect to this Agreement by any trustee or receiver, or by any
         court, in any such proceeding, whether or not such Pledgor shall have
         notice or knowledge of any of the foregoing.

         18. TERMINATION; RELEASE. (a) After the Termination Date (as defined
below), this Agreement shall terminate (provided that all indemnities set forth
herein including, without limitation, in Section 11 hereof shall survive any
such termination) and the Pledgee, at the request and expense of the respective
Pledgor, will execute and deliver to such Pledgor a proper instrument or
instruments acknowledging the satisfaction and termination of this Agreement as
provided above, and will duly assign, transfer and deliver to such Pledgor
(without recourse and without any representation or warranty) such of the
Collateral as may be in the possession of the Pledgee and as has not theretofore
been sold or otherwise applied or released pursuant to this Agreement, together
with any moneys at the time held by the Pledgee hereunder. As used in this
Agreement, (i) "CA Termination Date" shall mean the date upon which the Total
Commitment has been terminated, no Letter of Credit or Note under the Credit
Agreement is outstanding and all other Credit Document Obligations have been
paid in full in cash (other than arising from indemnities for which no request
for payment has been made) and (ii) "Termination Date" shall mean the date upon
which (x) the CA Termination Date shall have occurred and (y) if (but only if) a
Notified Non-Credit Agreement Event of Default shall have occurred and be
continuing on the CA Termination Date (and after giving effect thereto), either
(I) such Notified Non-Credit Agreement Event of Default shall have been cured or
waived by the requisite holders of the relevant Obligations subject to such
Notified Non-Credit Agreement Event of Default or (II) all Secured Hedging
Agreements (if any) giving rise to a Notified Non-Credit Agreement Event of
Default shall have been terminated and all Obligations subject to such Notified
Non-Credit Agreement Event of Default shall have been paid in full (other than
arising from indemnities for which no request for payment has been made).

                                      -26-

<PAGE>

         (b) So long as no Notified Non-Credit Agreement Event of Default has
occurred and is continuing, in the event that (x) prior to the CA Termination
Date (i) any part of the Collateral is sold or otherwise disposed of in
connection with a sale or other disposition permitted by Section 8.02 of the
Credit Agreement (it being agreed for such purposes that a release will be
deemed "permitted by Section 8.02 of the Credit Agreement" if the proposed
transaction constitutes an exception to Section 8.02 of the Credit Agreement) or
(ii) all or any part of the Collateral is released at the direction of the
Required Lenders (or all the Lenders if required by Section 12.12 of the Credit
Agreement), and the proceeds of such sale or disposition or from such release
(if any) are applied in accordance with the terms of the Credit Agreement to the
extent required to be so applied or (y) on and after the CA Termination Date,
any part of the Collateral is sold or otherwise disposed of without violating
the New Senior Notes Documents, the Refinancing Senior Notes Documents and the
Secured Hedging Agreements, the Pledgee, at the request and expense of the
respective Pledgor will release such Collateral from this Agreement, duly
assign, transfer and deliver to such Pledgor (without recourse and without any
representation or warranty) such of the Collateral as is then being (or has
been) so sold or released and as may be in possession of the Pledgee and has not
theretofore been released pursuant to this Agreement (it being understood and
agreed that upon the release of all or any portion of the Collateral by the
Collateral Agent at the direction of the Lenders as provided above, the Lien on
the Collateral in favor of the Hedging Creditors, the New Senior Notes Creditors
and the Refinancing Senior Notes Creditors shall automatically be released).

         (c) In addition to the foregoing, all Collateral shall be automatically
released (subject to reinstatement upon the occurrence of a new Trigger Event,
with each date of such reinstatement, a "Subsequent Effective Date") in
accordance with the provisions of the last sentence of Section 7.11(b) of the
Credit Agreement.

         (d) At any time that the relevant Pledgor desires that the Pledgee take
any action to give effect to any release of Collateral pursuant to the foregoing
Section 18(a), (b) or (c), it shall deliver to the Pledgee a certificate signed
by an authorized officer describing the Collateral to be released and certifying
its entitlement to a release pursuant to the applicable provisions of Sections
18(b) or (c) and in such case the Pledgee, at the request and expense of such
Pledgor, will execute such documents as required to duly release such Collateral
and to assign, transfer and deliver to such Pledgor or its designee (without
recourse and without any representation or warranty) such of the Collateral as
is then being released and as may be in the possession of the Pledgee. The
Pledgee shall have no liability whatsoever to any other Secured Creditor as the
result of any release of Collateral by it in accordance with (or which the
Pledgee in the absence of gross negligence or willful misconduct believes to be
in accordance with) this Section 18. Upon any release of Collateral pursuant to
Section 18(a), (b) or (c), so long as no Noticed Event of Default is then in
existence, none of the Secured Creditors shall have any continuing right or
interest in such Collateral, or the proceeds thereof (subject to reinstatement
rights upon the occurrence of a new Trigger Event in the case of a release
pursuant to Section 18(c)(i)).

         19. NOTICES, ETC. All notices and other communications provided for
hereunder shall be in writing (including telegraphic, telex, facsimile
transmission or cable communication) and mailed, telegraphed, telexed,
telecopied, cabled or delivered (including by way of overnight courier):

                                      -27-

<PAGE>

                  (i) if to any Pledgor, at its address set forth opposite its
         signature below;

                  (ii) if to the Pledgee, at:

                         JPMorgan Chase Bank
                         270 Park Avenue
                         New York, New York  10017
                         Attention:  Raju Nanoo
                         Tel:  212-270-2272
                         Fax:  212-270-5120

                  (iii) if to any Lender (other than the Pledgee), at such
         address as such Lender shall have specified in the Credit Agreement;

                  (iv) if to any Hedging Creditor, at such address as such
         Hedging Creditor shall have specified in writing to the Pledgors and
         the Pledgee;

                  (v) if to any New Senior Notes Creditor, at such address of
         the New Senior Notes Trustee as the New Senior Notes Trustee shall have
         specified in writing to the Pledgors and the Pledgee;

                  (vi) if to any Refinancing Senior Notes Creditor, at such
         address of the Refinancing Senior Notes Trustee as the Refinancing
         Senior Notes Trustee shall have specified in writing to the Pledgors
         and the Pledgee;

or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder. Except as
otherwise expressly provided herein, all such notices and communications shall
be deemed to have been duly given or made when received.

         20. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the Pledgee (with the consent of (x) if prior
to the CA Termination Date, the Required Lenders or, to the extent required by
Section 12.12 of the Credit Agreement, all of the Lenders and (y) if on and
after the CA Termination Date, the holders of at least a majority of the
outstanding principal amount of the Obligations remaining outstanding), and each
Pledgor affected thereby (it being understood that the addition or release of
any Pledgor hereunder shall not constitute a change, waiver, discharge or
variance affecting any Pledgor other than the Borrower and the Pledgor so added
or released), provided that any change, waiver, modification or variance
affecting the rights and benefits of a single Class of Secured Creditors (and
not all Secured Creditors in a like or similar manner) shall require the written
consent of the Requisite Creditors of such Class of Secured Creditors. For the
purpose of this Agreement, the term "Class" shall mean each class of Secured
Creditors, i.e., whether (w) the Lender Creditors as holders of the Credit
Document Obligations, (x) the Hedging Creditors as holders of the Hedging
Obligations, (y) the New Senior Notes Creditors as holders of the New Senior
Notes Obligations, and (z) the Refinancing Senior Notes Creditors as holders of
the Refinancing Senior Notes Obligations. For the purpose of this Agreement, the
term "Requisite Creditors" of any Class shall mean each of (w) with respect to
each of the Credit Document Obligations, the Required

                                      -28-

<PAGE>

Lenders, (x) with respect to the Hedging Obligations, the holders of at least a
majority of all Secured Hedging Obligations outstanding from time to time, (y)
with respect to the New Senior Notes Obligations, the holders of at least a
majority of the outstanding principal amount of the New Senior Notes, and (z)
with respect to the Refinancing Senior Notes Obligations, the holders of at
least a majority of the outstanding principal amount of the Refinancing Senior
Notes.

         21. MISCELLANEOUS. This Agreement shall create a continuing security
interest in the Collateral and shall (i) remain in full force and effect,
subject to release and/or termination as set forth in Section 18, (ii) be
binding upon each Pledgor, its successors and assigns, and (iii) inure, together
with the rights and remedies of the Pledgee hereunder, to the benefit of the
Pledgee, the other Secured Creditors and their respective successors,
transferees and assigns. This Agreement shall be construed and enforced in
accordance with and governed by the law of the State of New York. The headings
of the several sections and subsections in this Agreement are for purposes of
reference only and shall not limit or define the meaning hereof. This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one instrument. In the
event that any provision of this Agreement shall prove to be invalid or
unenforceable, such provision shall be deemed to be severable from the other
provisions of this Agreement which shall remain binding on all parties hereto.

         22. WAIVER OF JURY TRIAL. Each party hereto irrevocably waives all
right to a trial by jury in any action, proceeding or counterclaim arising out
of or relating to this Agreement or the transactions contemplated hereby.

         23. ADDITIONAL PLEDGORS. It is understood and agreed that any
Subsidiary of the Borrower that is required to become a party to this Agreement
after the date hereof pursuant to the requirements of the Credit Agreement shall
become a Pledgor hereunder by (x) executing a counterpart hereof and/or an
assumption agreement, in each case in form and substance satisfactory to the
Collateral Agent, (y) delivering supplements to Annexes A through E hereto, as
are necessary to cause such Annexes to be complete and accurate with respect to
such additional Pledgor on such date and (z) taking all actions as specified in
this Agreement, in each case with all documents required above to be delivered
to the Collateral Agent and with all documents and action required above to be
taken to the reasonable satisfaction of the Collateral Agent.

         24. NO THIRD PARTY BENEFICIARIES. This Agreement is entered into solely
for the benefit of the parties hereto and their respective successors and
assigns and for the benefit of the Secured Creditors from time to time and their
respective successors and assigns and, except for the Secured Creditors and
their successors and assigns, there shall be no third party beneficiaries
hereof, nor shall any Person other than the parties hereto and their respective
successors and assigns, and the Secured Creditors and their respective
successors and assigns, be entitled to enforce the provisions hereof or have any
claims against any party hereto (or any Secured Creditor) or their successors
and assigns arising from, or under, this Agreement.

                                      * * *

                                      -29-

<PAGE>

         IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this
Agreement to be executed and delivered by their duly authorized officers as of
the date first above written.

                                   R.J. REYNOLDS TOBACCO HOLDINGS INC.,
                                     as a Pledgor

                                   By: /s/  Lynn L. Lane
                                       -----------------------------------------
                                       Name:  Lynn L. Lane
                                       Title: SVP and Treasurer

                                   R.J. REYNOLDS TOBACCO COMPANY,
                                     as a Pledgor

                                   By: /s/  Lynn L. Lane
                                       -----------------------------------------
                                       Name:  Lynn L. Lane
                                       Title: SVP and Treasurer

                                   RJR ACQUISITION CORP.,
                                     as a Pledgor

                                   By: /s/  Lynn L. Lane
                                       -----------------------------------------
                                       Name:  Lynn L. Lane
                                       Title: VP and Treasurer

                                   GMB, INC.,
                                     as a Pledgor

                                   By: /s/  Daniel A. Fawley
                                       -----------------------------------------
                                       Name:  Daniel A. Fawley
                                       Title: Treasurer

                                   FHS, INC.,
                                     as a Pledgor

                                   By: /s/  Caroline M. Price
                                       -----------------------------------------
                                       Name:  Caroline M. Price
                                       Title: President

                                      -30-

<PAGE>

                                   R.J. REYNOLDS TOBACCO CO.,
                                     as a Pledgor

                                   By: /s/  Lynn L. Lane
                                       -----------------------------------------
                                       Name:  Lynn L. Lane
                                       Title:

                                   SANTA FE NATURAL TOBACCO COMPANY, INC.,
                                     as a Pledgor

                                   By: /s/  Michael O. Johnson
                                       -----------------------------------------
                                       Name:  Michael O. Johnson
                                       Title: SVP, General Counsel and Secretary

                                   RJR PACKAGING, LLC,
                                     as a Pledgor

                                   By: /s/  Lynn L. Lane
                                       -----------------------------------------
                                       Name:  Lynn L. Lane
                                       Title:

                                      -31-

<PAGE>

Acknowledged And Agreed:

JPMORGAN CHASE BANK,
  as Collateral Agent and Pledgee

By: /s/  Robert T. Sacks
    -------------------------------
    Name:  Robert T. Sacks
    Title: Managing Director

                                      -32-

<PAGE>

                           Annexes to Pledge Agreement

Annex A  List of Subsidiaries

Annex B  List of Stock

Annex C  List of Notes

Annex D  Limited Liability Company Interests

Annex E  List of Partnership Interests

Annex F  Form of Agreement Regarding Uncertificated Securities, Limited
         Liability Company Interests and Partnership Interests

Annex G  Miscellaneous Investments

                                      -33-

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