Douglas Elliman Inc. (Form: S-1, Received: 12/07/2021 17:13:18)

As filed with the Securities and Exchange Commission on December 7, 2021

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Douglas Elliman Inc.

(Exact name of registrant as specified in its charter)


Delaware	6531	87-2176850
(State of Incorporation)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

4400 Biscayne Boulevard

Miami, Florida 33137

(305) 579-8000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

J. Bryant Kirkland III

Senior Vice President, Treasurer and Chief Financial Officer

4400 Biscayne Boulevard

Miami, Florida 33137

(305) 579-8000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copy to:

Robert W. Downes

Sullivan & Cromwell LLP

125 Broad Street

New York, New York 10004

(212) 558-4000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☐

		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☒

CALCULATION OF REGISTRATION FEE



Title of Each Class of Securities to be Registered	Amount to be Registered⁽¹⁾	Proposed Maximum Offering Price Per Unit	Proposed Maximum Aggregate Offering Price⁽³⁾	Amount of Registration Fee
Common Stock, par value $0.01 per share	77,720,631 shares	Not Applicable⁽²⁾	$236,697,000	$21,941.81

(1)

This prospectus relates to shares of common stock, par value $0.01 per share of Douglas Elliman Inc. (“Douglas Elliman”) which will be distributed to the holders of common stock (including common stock underlying outstanding stock option awards and restricted stock awards) of Vector Group Ltd. (“Vector”). Each holder of Vector common stock (including each holder of outstanding Vector stock option awards and restricted stock awards) will receive a distribution of one share of Douglas Elliman common stock for every two shares of Vector common stock held or underlying Vector stock option awards and restricted stock awards on the record date. Because it is not possible to accurately state the number of shares of Vector common stock that will be outstanding as of the record date of the distribution, this calculation is based on the shares of Vector common stock outstanding as of September 30, 2021 and the number of shares of Vector common stock underlying outstanding Vector stock options and restricted stock awards as of September 30, 2021.

(2)	Not included pursuant to Rule 457(o) under the Securities Act.

(3)	Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f)(2) of the Securities Act. The book value of securities as of September 30, 2021, the latest practicable date prior to the filing of the registration statement, is $236,697,000.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not distribute these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell securities, and it is not soliciting an offer to buy these securities, in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED DECEMBER 7, 2021

PRELIMINARY PROSPECTUS

77,720,631 Shares

LOGO

Douglas Elliman Inc.

Common Stock

This prospectus is being furnished in connection with the distribution by Vector Group Ltd. (“Vector”) to holders of its common stock (including Vector common stock underlying outstanding stock option awards and restricted stock awards) of all of the outstanding shares of Douglas Elliman Inc. (collectively, “we,” “us,” “our,” “Spinco,” “Douglas Elliman,” or the “Company”) common stock. Prior to such distribution, we will enter into a series of transactions with Vector pursuant to which we will own the real estate services and property technology (“PropTech”) investment business currently owned and operated by Vector through its subsidiary New Valley LLC (“New Valley”), and will be capitalized with approximately $200 million in net cash and cash equivalents (as defined herein), as described in this prospectus.

Shares of our common stock will be distributed to holders of Vector common stock (including Vector common stock underlying outstanding stock option awards and restricted stock awards) of record as of the close of business, New York City time, on [ ], 2021, which will be the record date. Each such holder will receive one share of our common stock for every two shares of Vector common stock held or underlying an outstanding equity award on the record date. We refer to this distribution of securities as the “Distribution.” The Distribution will be effective at 11:59 p.m., New York City time, on [ ], 2021. For Vector stockholders who own common stock in registered form and for holders of outstanding Vector stock option awards and restricted stock awards, in most cases the transfer and distribution agent will credit their shares of Spinco common stock to their book entry accounts. Our transfer and distribution agent will send these stockholders a statement reflecting their Spinco common stock ownership shortly after [ ], 2021. For stockholders who own Vector common stock through a broker or other nominee, their shares of Spinco common stock will be credited to their accounts by the broker or other nominee. Stockholders will receive a cash payment in lieu of fractional shares, which generally will be taxable. See “The Distribution — Material U.S. Federal Income Tax Consequences of the Distribution.”

No stockholder approval of the Distribution is required or sought. We are not asking you for a proxy and you are requested not to send us a proxy. Vector stockholders will not be required to pay for the shares of our common stock to be received by them in the Distribution, or to surrender or to exchange their shares of Vector common stock in order to receive our common stock, or to take any other action in connection with the Distribution. There is currently no trading market for our common stock.

Our common stock has been authorized for listing on the New York Stock Exchange (the “NYSE”) under the symbol “DOUG”.

IN REVIEWING THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DESCRIBED UNDER THE CAPTION “RISK FACTORS” BEGINNING ON PAGE 30 OF THIS PROSPECTUS.

WE ARE AN EMERGING GROWTH COMPANY AS DEFINED IN THE JUMPSTART OUR BUSINESS STARTUPS ACT OF 2012. REFER TO “RISK FACTORS — RISKS RELATING TO THE DISTRIBUTION — THE REDUCED DISCLOSURE REQUIREMENTS APPLICABLE TO US AS AN ‘EMERGING GROWTH COMPANY’ MAY MAKE OUR COMMON STOCK LESS ATTRACTIVE TO INVESTORS” AND “BUSINESS — EMERGING GROWTH COMPANY STATUS.”

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.

Stockholders of Vector with inquiries related to the Distribution should contact Vector’s transfer and distribution agent, American Stock Transfer & Trust Company, at (800) 937-5449.

The date of this prospectus is [ ], 2021.

LOGO

4400 BISCAYNE BOULEVARD

MIAMI, FLORIDA 33137

[ ], 2021

Dear Stockholder:

I am pleased to report that the previously announced spin-off by Vector Group Ltd., which we refer to as “Vector,” of all of the outstanding shares of common stock of its Douglas Elliman Inc. subsidiary is expected to become effective on [ ], 2021. Douglas Elliman Inc., a Delaware corporation, which we refer to as “Spinco,” will become a public company on that date and will own the real estate services and property technology (“PropTech”) investment business currently owned and operated by Vector through its subsidiary New Valley LLC, and will be capitalized with approximately $200 million in net cash and cash equivalents (as defined herein), as described in this prospectus. Spinco’s common stock has been approved and is expected to be listed on the New York Stock Exchange, which we refer to as the “NYSE,” under the symbol “DOUG”.

Holders of record of Vector’s common stock (including Vector common stock underlying outstanding stock option awards and restricted stock awards) as of the close of business, New York City time, on [ ], 2021, which will be the record date, will receive one share of Spinco common stock for every two shares of Vector’s common stock held. No action is required on your part to receive your Spinco shares. You will not be required either to pay anything for the new shares or to surrender any shares of Vector stock.

No fractional shares of Spinco stock will be issued. If you otherwise would be entitled to a fractional share you will receive a check for the cash value thereof, which generally will be taxable to you. Vector expects to obtain an opinion from Sullivan & Cromwell LLP substantially to the effect that, among other things, the distribution of Spinco common stock to the holders of Vector common stock will qualify as a tax-free distribution for U.S. federal income tax purposes.

The enclosed prospectus describes the distribution of shares of Spinco stock and contains important information about Spinco, including financial statements. I suggest that you read it carefully. If you have any questions regarding the Distribution, please contact Vector’s transfer and distribution agent, American Stock Transfer & Trust Company, at (800) 937-5449.

Sincerely,

Howard M. Lorber

President and Chief Executive Officer

TABLE OF CONTENTS


	Page
Summary		1
Summary Risk Factors		11
The Distribution		13
Selected Historical and Unaudited Pro Forma Condensed Combined Consolidated Financial Data		17
Questions and Answers About the Distribution		19
The Distribution		24
Risk Factors		30
Use of Proceeds		51
Determination of Offering Price		52
Special Note on Forward-Looking Statements		53
Business		55
Dividend Policy		67
Unaudited Pro Forma Condensed Combined Consolidated Financial Information		68
Management’s Discussion and Analysis of Financial Condition and Results of Operations		74
Corporate Governance and Management		93
Executive Compensation		102
Certain Relationships and Related Party Transactions		118
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		123
Shares Eligible For Future Sale		126
Description of Capital Stock		127
Indemnification of Directors and Officers		132
Available Information		133
Legal Matters		134
Experts		135
Index To Combined Consolidated Financial Statements		F-1

This prospectus is being furnished solely to provide information to holders of Vector’s common stock (including Vector’s common stock underlying outstanding stock option awards and restricted stock awards) who will receive shares of Douglas Elliman common stock in connection with the Distribution. It is not and is not to be construed as an inducement or encouragement to buy or sell any securities of Vector or Douglas Elliman. This prospectus describes Douglas Elliman’s business, its relationship with Vector and how the Distribution affects Vector and its stockholders, and provides other information to assist you in evaluating the benefits and risks of holding or disposing of the common stock that you will receive in connection with the Distribution.

You should not assume that the information contained in this prospectus is accurate as of any date other than the date set forth on the cover. Changes to the information contained in this prospectus may occur after that date, and we undertake no obligation to update the information, except in the normal course of our public disclosure obligations.

SUMMARY

This summary highlights selected information contained elsewhere in this prospectus relating to the distribution by Vector to holders of its common stock (including Vector common stock underlying outstanding stock option awards and restricted stock awards) of all of the outstanding shares of Douglas Elliman Inc. The information contained in this summary may not include all the information that is important to you. To understand fully and for a more complete description of the terms and conditions of the Distribution, you should read this entire prospectus in its entirety carefully, including the discussion under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements and related notes thereto contained elsewhere in this prospectus. This prospectus includes forward looking-statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” for more information.

Unless the context otherwise requires, all references to “we,” “us,” “our,” “Spinco,” “Douglas Elliman” or the “Company” refer to Douglas Elliman Inc., together with its direct and indirect subsidiaries. Where we describe in this prospectus our business activities, we do so as if the transfer of the real estate services and property technology (“PropTech”) investment business currently owned and operated by Vector through its subsidiary New Valley LLC (“New Valley”) to Spinco and the capitalization of Spinco with approximately $200 million in cash and cash equivalents, net of each of the current and long-term portion of “Notes payable and other obligations,” which we refer to in this prospectus as “net cash and cash equivalents,” has already occurred.

Overview

With a leading luxury brand and a comprehensive suite of technology-enabled real estate services and investments, Spinco is well positioned to capitalize on opportunities in the large and growing U.S. residential real estate market. Since the beginning of 2020, U.S. homeowner equity has grown 17.6% to $23.6 trillion. Further, new and existing home sales in the U.S. are forecast to grow to approximately 7.4 million units in 2022, compared to approximately 6.9 million, 6.5 million and 6.0 million units in 2021, 2020 and 2019, respectively, according to the Mortgage Bankers Association — MBA Mortgage Finance Forecast. We believe increased homeowner equity and growth in home sales are benefiting from several factors, including low mortgage interest rates, historically low inventory, and increased mobility resulting from the novel coronavirus pandemic (“COVID-19”). This expanding market presents opportunities for significant commission income with national commission rates averaging approximately 5.8% as of September 30, 2021, according to HomeLight, while our actual commission rates have ranged between 5.27% in 2017 and 4.93% in 2020 due to our sales mix, which consists of higher-priced homes. Despite various “agentless” models such as “iBuying,” approximately 88% of buyers purchased their home through a real estate agent or broker and 89% of sellers were assisted by a real estate agent when selling their home, according to the National Real Estate Association (“NAR”), highlighting the central role agents continue to play in real estate transactions. Agents are able to generate significant repeat business from clients and referrals, with 67% of home sellers and 60% of home buyers in 2020 choosing to work with an agent they had used in the past or through a referral, according to NAR. Repeat business, as well the ability to provide ancillary services, allows agents to extend their client relationships and generate significant lifetime value.

principal competitors. Douglas Elliman is one of the largest residential brokerage companies in the New York metropolitan area, which includes New York City, Long Island, Westchester and the Hamptons, and the sixth largest in the U.S. We also operate leading property management, title and escrow companies, among other ancillary services.

Today, we are building on our record of innovation. Douglas Elliman is focused on digitizing, integrating and simplifying real estate activities for agents and elevating their clients’ experiences. We are bringing innovative, technology-driven PropTech solutions to Douglas Elliman by adopting new PropTech solutions for agents and their clients and also investing in select PropTech opportunities through New Valley Ventures LLC, which we refer to as “New Valley Ventures.” Our model is to source and use best-of-breed products and services that we believe will increase our efficiency. In addition to entering into business relationships with PropTech companies, as described further below, we are committed to creating over time a portfolio of PropTech companies that, through our business and investment relationship, have access to our agents and their clients, as well as our know-how and experience, to grow their own businesses, while benefiting our operations. This keeps Douglas Elliman and our agents on the cutting edge of the industry with new solutions and services that can be integrated into our technology foundation, while also remaining asset-light. Furthermore, we maintain upside potential in the success of our PropTech partners in which we invest through minority stakes in their capital structures.

We have a track record of generating profitable growth. For the year ended December 31, 2020, despite the unprecedented impact of the COVID-19 pandemic on many of our markets, we had total revenues of $774.0 million, a net loss of $46.4 million and Adjusted EBITDA of $22.1 million. Our management responded to the profound impact of the COVID-19 pandemic by adjusting Douglas Elliman’s expense structure and introducing additional technology to improve the efficiency of our agents. Consequently, as markets reopened and vaccinations for COVID-19 became available, Douglas Elliman’s business rapidly improved and, for the twelve months ended September 30, 2021, our revenues were $1.29 billion, our net income was $92.7 million and our Adjusted EBITDA was $106.2 million. For the nine months ended September 30, 2021, our revenues were $1.02 billion, representing a 101% increase from the prior year period, and for the three months ended September 30, 2021, our revenues were $354.2 million, on track for our highest yearly revenue ever. We are experiencing strong momentum in many of our markets and we believe we are well positioned to continue capitalizing on the attractive market opportunity. Douglas Elliman’s gross transaction value increased from $29.1 billion for the year ended December 31, 2020 to $47.7 billion for the twelve months ended September 30, 2021. The number of Douglas Elliman agents who are either leaders of their respective agent teams or individual agents operating independently on our platform (“Principal Agents”) was 5,246 as of September 30, 2021, an increase from 4,996 as of December 31, 2020. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Business Metrics and Non-GAAP Financial Measures” for information regarding our non-GAAP financial measures and reconciliations to the most comparable GAAP measures.

We believe our comprehensive suite of real estate solutions, our industry-leading brand name, and our talented team of employees and agents set us apart in the industry. We will pursue profitable growth opportunities through the expansion of our footprint, investments in cutting-edge PropTech companies through New Valley Ventures, continued recruitment of best-in-class talent, acquisitions (acqui-hires), and operational efficiencies. We will employ a disciplined capital allocation strategy aimed at generating sustainable long-term value for our stockholders.

Our Company

stockholders of Vector, is expected to qualify as a tax-free distribution for U.S. federal income tax purposes for Vector and its stockholders with respect to Spinco stock that is distributed with respect to the stock of Vector. Upon conclusion of the spin-off, Spinco will be headquartered in Miami, Florida.

Real Estate Services

Large residential brokerage company with a recognized luxury brand. Douglas Elliman is one of the largest residential brokerage companies in the New York metropolitan area, which includes New York City, Long Island, Westchester and the Hamptons, and the sixth largest in the U.S. Douglas Elliman has approximately 100 offices with approximately 6,600 real estate agents in the New York metropolitan area, as well as in Florida, California, Connecticut, Massachusetts, Colorado, New Jersey, and Texas. The Douglas Elliman name is synonymous with luxury.

In August 2021, Douglas Elliman increased its ownership in Real Estate Associates of Houston LLC (d/b/a Douglas Elliman Real Estate Texas, which we refer to as “Douglas Elliman Texas”) from 1% to 50% and is fully integrating the Texas business with the rest of our operations. We believe that the Texas market will be complementary to Douglas Elliman’s markets as several of its major cities are densely populated international finance and technology hubs with premium-priced housing inventory. Texas continues to be a top destination for many different demographics from across the country, which has supported the housing market and the number of real estate transactions in the state. According to the Texas Real Estate Research Center at Texas A&M University, the Texas median home price reached a record-breaking $305,400 in August 2021, up 16.8% year-over-year. Texas’ average days on market (“DOM”) fell to a record-breaking 27 days, according to the same report, indicating strong demand.

Prominent new development sales and marketing firm. Douglas Elliman’s Development Marketing (“DEDM”) division distinguishes our positioning and reputation in the luxury real estate segment. DEDM is sought after by well-known real estate developers as it offers expertise in sales, leasing, and marketing for new developments throughout key markets in the United States and internationally. Drawing upon decades of experience and market-specific knowledge, DEDM offers a multidisciplinary approach that includes comprehensive in-house research, planning and design, marketing and sales. The firm ranks among New York City’s most prominent sales and marketing firms, with approximately 75 in-house development professionals. Through a strategic global alliance with Knight Frank Residential, the world’s largest privately-owned property consultancy, DEDM markets properties to international audiences. We employ a hybrid broker model where our traditional residential real estate agents work in tandem with our DEDM professionals and leverage their extensive industry relationships for the benefit of DEDM clients. Agents are able to market and sell high profile developments that enhance their brands and provide additional revenue commission potential. We believe this model provides a competitive advantage to our DEDM business while also increasing the attractiveness of the Douglas Elliman platform to current and prospective agents.

Premium residential property management business. Douglas Elliman is also engaged in the management of cooperative, condominium and rental apartment buildings though its subsidiary, Residential Management Group, LLC, which conducts business as Douglas Elliman Property Management. Residential Management Group provides a full range of fee-based management services for approximately 360 properties representing approximately 56,500 units in New York City, Nassau County, Long Island City and Westchester County.

Full-service title insurance business. Douglas Elliman is also engaged in the provision of title insurance services through its subsidiary DE Title Services. DE Title Services acts in the capacity of a title insurance agent and sells title insurance to property buyers and mortgage lenders. DE Title Services is licensed as a title insurance agent in New York. In addition to DE Title Services, in June 2021, we acquired a 50% interest in Partners Land Services LLC, a newly-formed entity, which will be engaged in the provision of title insurance services in Florida. Douglas Elliman is actively exploring similar ventures in other of its real estate markets.

Leading provider of escrow services. In November 2020, Douglas Elliman acquired Portfolio Escrow, an escrow company that is a leader in the California escrow market. After execution of a home purchase contract, purchase funds are deposited by the buyer into a Portfolio Escrow trust account. After all parties agree that all contingencies of the sale contract have been satisfied, Portfolio Escrow delivers all pertinent documents for recording to the appropriate county clerk’s office, then releases funds to the seller and any other agreed-upon entity. Portfolio Escrow, as an escrow holder, is paid a fee equal to a percentage of the sales price.

Provider of mortgage services. In April 2021, we acquired a 50% interest in Biscayne Mortgage LLC, which conducts business as Clear Path Mortgage. Clear Path Mortgage will originate mortgage loans, including both purchase and refinancing transactions, to be sold in the market to mortgage companies and the governmental-sponsored enterprises. Clear Path Mortgage will originate and market its mortgage lending services to real estate agents across Douglas Elliman’s Florida market as well as a broad consumer audience.

PropTech Solutions Supporting Real Estate Services

Our general approach to PropTech solutions is to leverage best-of-breed, proven legacy technologies while also selectively partnering with early-stage, disruptive PropTech companies to support our real estate brokerage and services operations. This strategy gives our stakeholders, including our agents, their clients and our management team, access to fast-changing and industry-leading technology. Hiring technology talent to develop new products inside of a large company such as Douglas Elliman is costly, takes longer to bring new technology to market, rarely generates the most cutting-edge solutions, and then limits the value of the emerging product to the company’s own usage. Instead, we believe technology innovation is best fostered in smaller, purpose-built PropTech companies. We operate an open architecture technology infrastructure that allows for a “plug and play” environment where new features and functionality can be quickly added for the benefit of our agents and their clients. This ensures our technology remains state-of-the-art, vendor optionality is maintained, and our costs are minimized. Examples of our PropTech platform for Douglas Elliman’s agents and their clients are summarized below.

MyDouglas portal supports our agents in managing their business anytime, anywhere and on any device. Our MyDouglas agent portal is built on a native cloud SaaS technology foundation that is designed to rapidly adjust and incorporate new innovative solutions. The user-friendly portal incorporates automated and simplified workflows for agent interactions, expansive data-rich dashboards and reports backed by artificial intelligence and integrated data assets. The technology is completely “plug and play” enabled, which supports our ability to quickly adjust our solutions in concert with the digital transformation happening in PropTech today.

Components of our MyDouglas solution include integrated customer relationship management, email marketing, marketing content creation and management, transaction management, video creation and virtual tours, comparative market analysis, home valuation tools, listing analytics, digital ad campaigns, open house management, new development sales and digital marketing, artificial intelligence (“AI”), predictive analytics and more.

Elliman Everywhere offers robust virtual and mobile resources. Our Elliman Everywhere effort seeks to provide agents with the robust virtual and mobile resources they desire and will need to transact business from anywhere in the world, including markets where we do not have offices. This cloud-based agent portal includes workflow processing, a commission system, customer acquisition tools, an Innovation Lab and more, enhancing the agent experience and agents’ efficiency.

MyLearning provides our agents and employees with additional development and growth opportunities. Our recently integrated MyLearning platform enables Douglas Elliman agents and employees to access and participate in live and recorded on-demand training sessions directed at various experience levels and subjects, including professional development, entrepreneurialism, business writing, public speaking and marketing.

Elliman Essentials provides agents and employees with enhanced vendor access. Elliman Essentials provides a curated list of offerings from preferred vendors that Douglas Elliman’s approximately 6,600 agents and 775 employees access to source products, services and experiences in order to enhance business practices and purchase closing gifts for customers. Elliman Essentials can be accessed on our intranet portal, MyDouglas.

Currently integrating a new client and customer lifetime concierge solution. We are incorporating seasoned third-party products into a new white-glove homeowners engagement solution that provides access to services such as insurance, moving, telecommunications, utilities, solar, home security and home services to facilitate all of clients’ and customers’ moving and home management needs. This fully automated, contextual, end-to-end homeowner engagement platform includes more than 40 direct partnerships and integrations across multiple industries. It will leverage PropTech startups such as MoveEasy, Humming Homes, Fyxify and more.

LOGO

PropTech Investments

In addition to leveraging PropTech solutions to support our real estate brokerage and services operations, we believe that by investing in early-stage PropTech companies, Douglas Elliman can gain differentiated access to innovative PropTech services while benefiting from the expected growth and valuations of these firms without the need to build or fully acquire them. We believe investing in these PropTech companies and investment funds enables us to establish relationships with these companies (and funds’ portfolio companies) to seek preferred terms, become an early adopter of emerging technologies and achieve greater product integration with our users and IT systems. At the same time, we are actively seeking to capitalize on our unique real estate knowledge and experience by investing in PropTech companies that will both supplement and enhance the technology-based experience of Douglas Elliman’s agents and the general real estate industry as well as improve our operating efficiency. For example, the foundation for our agent communications platform and customer relationship management system was developed in consultation with one of our PropTech investee companies. We believe that these investments will provide us with unique access to cutting-edge and industry-leading technology, providing us with valuable technology systems to improve the efficiency of Douglas Elliman’s businesses while also capturing some of the value created by the combination of our expertise in the real estate industry and the PropTech companies with which we partner.

As of September 30, 2021, New Valley Ventures has investments (at a carrying value) of approximately $7.1 million in PropTech companies. This amounts to approximately 1% of the value of Douglas Elliman’s total assets, which totaled approximately $534 million, as of September 30, 2021. As of September 30, 2021 our PropTech investments include:

•

Rechat: a lead-to-close fully-mobile technology dashboard for real estate agents including marketing, customer relationship management and transaction-management software. Douglas Elliman has a multi-year services agreement with Rechat for its agents, who are increasingly requesting and requiring superior access to technology and back-office support services. The Rechat technology is a key element of MyDouglas, Douglas Elliman’s primary agent portal designed to be our agents’ technology front door, and StudioPro, the cloud-based agent portal and marketing tool recently launched by Douglas Elliman that helps integrate all agent resources in one user-friendly suite.

•

Purlin: an automated intelligence platform to aid in home buying, an agent “paid social media” integration in MyDouglas and Portfolio Escrow client and agent portals that also integrate with MyDouglas.

•

Humming Homes: a tech-enabled home management service that is creating a new category of end-to-end home management. It has built a solution for single-family homeowners with a digital-first experience, offering a dedicated in-person home management team with a single point of contact and 24/7 support. The service employs data and insights to avoid reactive and expensive home maintenance issues. The investment will complement Douglas Elliman’s business in the Hamptons and align Humming Homes’ geographical growth with Douglas Elliman’s footprint in locations such as Aspen, Florida and Southern California.

•

MoveEasy: a client- and customer-facing digital concierge service designed to assist clients and customers moving into and “setting up” their new homes, while offering additional services to maintain their homes. In partnership with residential real estate brokerages, MoveEasy is delivered in a white-labeled format that features the name and contact information of the selling agent.

•

Fyxify: a tech-enabled platform that utilizes direct scheduling and operating technology to avoid the inefficiencies of home repairs (for example: calling around, mystery repair costs and wasting time).

•

EVPassport: an entity that offers complete electronic vehicle charging solutions including hardware and software.

•

Bilt: a leading loyalty program and co-branded credit card for renters to earn points on their rent payments. Douglas Elliman has joined the Bilt Rewards Alliance, a network of more than 2 million rental units across the country where renters can enroll in the loyalty program to earn points on rent paid. This platform enhances Douglas Elliman’s suite of offerings for both the renters and landlords it represents.

•

Persefoni AI: a software-as-a-service (“SaaS”) platform built to enable enterprises of all sizes to accurately, dynamically, and regularly measure their carbon footprint across all operations.

•

The Lab PropTech Fund: a fund advised or managed by a Miami-based firm that aims to invest in emerging technologies with a focus on residential real estate and construction services.

•

MetaProp Venture Capital Fund: a fund advised or managed by a New York-based venture capital firm. This investment provides New Valley Ventures with exposure to opportunities in the emerging PropTech industry.

•

Camber Creek Venture Capital Funds: two funds that invest in a diversified pipeline of new PropTech ventures. Camber Creek’s portfolio includes Notarize, a digitized notary service, and Curbio, a renovation firm designed to increase a property’s selling price.

Other than the four private funds listed above in which New Valley Ventures invests as a limited partner, all of these companies currently provide technology or services to Douglas Elliman. To date, the Company has not recognized revenue from these investments and does not anticipate recognizing revenue from these non-controlling PropTech investments. However, the Company targets earning an attractive rate of return from the capital appreciation of its PropTech investments.

Our Competitive Strengths

Leading luxury brand with a strong presence in markets where we have brand recognition and brand equity. We have a presence in most major U.S. luxury real estate markets, including New York, Florida, California, Texas, Colorado and others. Further, we have established a reputation for luxury and trust, which we believe has differentiated our brand from those of our peers. To build on this established brand presence, Douglas Elliman produces owned content and generates earned media regarding a range of relevant topics — including brand initiatives, exclusive listings, new development projects and closed deals — that resonate with our clients and contribute to a strong share of voice across all major markets in which we operate, as compared to our principal real estate competitors, and enhances the professional credibility of agents and executives whose thought leadership is often sought by major global media outlets.

Experienced team of talented agents and employees. The residential real estate business is built upon personal relationships, and we have long believed Douglas Elliman’s team of approximately 775 employees and approximately 6,600 agents (including 5,246 Principal Agents) as of September 30, 2021 distinguishes us from other residential real estate brokerage firms. Forbes recognized Douglas Elliman in its 2021 list of America’s best large employers.

Leading new development marketing platform. DEDM offers leading expertise in sales, leasing, and marketing for new developments in New York City, Long Island, the Hamptons, New Jersey, South Florida, California, Massachusetts and Texas, as well as throughout the United States and internationally. We believe Douglas Elliman’s “hybrid” platform of involving both experienced new development experts and skilled brokerage professionals provides highly differentiated expertise and real-time market intelligence to its clients.

the residential brokerage industry, including: cloud-based agent portal, workflow processing, commission system, customer acquisition tools, Innovation Lab, customer relationship management (“CRM”) and marketing tools. These tools are designed to support agent productivity, earnings potential and satisfaction and we believe they enhance our efforts to recruit and retain high-performing agents.

Growth Strategy

Expand our footprint into adjoining markets. We aim to build on our leadership position in the New York metropolitan area, including New York City, Long Island, Westchester and the Hamptons, while entering and expanding in adjoining markets as well as key markets in Florida, California, Colorado and Texas, where the Elliman brand has strong awareness and brand equity.

Continue executing on DEDM growth strategy. Our hybrid DEDM platform matches experienced new development experts with skilled brokerage professionals to provide differentiated expertise and real time market intelligence to DEDM’s developer clients. We believe there is a clear path to growth, both as a result of recovery from COVID-19 and also through expansion into new markets (e.g., Texas).

Provide ancillary services to enhance the client experience and drive growth. We are seeking, through investment and acquisition, to expand and optimize our ancillary real estate services that allow our agents and our other businesses to enhance the client experience and drive growth in revenues and earnings. These services include escrow, title, mortgage finance, property management, notary, staging, renovation, security, moving, capital fundraising for developers, and more. We expect technology to be a key differentiator as we grow our ancillary services businesses, in terms of adoption by our agents, delivery to their clients and disruption of traditional business models not yet transformed by technology.

Invest in compelling PropTech opportunities that facilitate our growth and competitive differentiation. Our goal is to create over time a portfolio of PropTech companies in which we are invested and also leverage their technology for the benefit of our agents and their clients. We believe that investing strategically in disruptive, early-stage PropTech companies equips Spinco stakeholders with early and differentiated access to new technology built in entrepreneurial environments, while enabling PropTech investee companies to access our know-how and experience through our commercial relationships in order to grow their own businesses. Concurrently, we believe investing in these PropTech companies enables us to establish relationships with these companies to seek preferred terms, become an early adopter of emerging technologies and achieve greater product integration with our users and IT systems, which enhances our competitive differentiation with agents and their clients. Furthermore, we maintain upside potential in the success of our PropTech partners in which we invest through minority stakes in their capital structures.

Continue to recruit best-in-class agents. Our recognized brand, combined with DEDM and the PropTech resources provided to our agents, support our ability to recruit experienced, high-performing agents. Leveraging regional recruiting teams, along with CRM and other necessary technology support, we will seek to continue recruiting best-in-class talent at all levels.

Relentlessly pursue operational efficiencies. We have an ongoing, firm-wide focus on expense control, operational efficiency and profitability. Beginning in the second quarter of 2020, we began significant expense reduction initiatives at Douglas Elliman, which continue today.

acquisitions (acqui-hires), and we also contemplate paying a quarterly dividend, initially $0.05 per share of our common stock, subject to approval by our Board of Directors, as described under “Dividend Policy” on page 67.

COVID-19 Pandemic

The COVID-19 pandemic continues to evolve and disrupt normal activities in many segments of the U.S. economy even as COVID-19 vaccines have been and continue to be administered. Many uncertainties continue to surround the pandemic, including risks associated with the timing and extent of vaccine administration and the impact of COVID-19 variants, the duration of the pandemic and the length of immunity.

During the nine months ended September 30, 2021, we believe sustained high levels of demand in the markets in which we operate have been supported by beneficial consumer trends such as relaxation of social distancing measures and office re-openings coupled with further adoption of remote work trends, which we believe enhance consumers’ propensity to relocate to attractive tax and weather destinations, coupled with a favorable mortgage rate environment. In addition, continued high demand and low housing inventory levels in the markets in which we operate have driven increased average home prices throughout such markets in 2021, and we believe limited inventory contributed to the decline in our gross transaction volume from the second quarter to the third quarter. Nonetheless, we anticipate that our markets, and in particular, New York City, will continue to improve from 2020 levels for the remainder of 2021 and into 2022, with average existing home prices increasing and existing home transaction growth remaining strong.

The circumstances around the potential impact of the COVID-19 pandemic on our business remain fluid, and we continue to actively monitor the impact of the pandemic, including risks associated with the timing and extent of vaccine administration and the impact of COVID-19 variants, the duration of the pandemic and how long immunity lasts. Based on the most recent data, the emergence of the COVID-19 Delta variant has not impacted the key U.S. markets Douglas Elliman serves. Nevertheless, we are unable to predict the ultimate impact of the COVID-19 pandemic and related macroeconomic trends (including, in particular, relaxation of social distancing measures and office re-openings coupled with further adoption of remote work trends) or other factors resulting therefrom on our future financial condition, results of operations and cash flows. See “Risk Factors — Risks Associated with Our Real Estate Services Business — We are impacted by the performance of the real estate market in the New York metropolitan area, which has been adversely impacted by COVID-19” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — COVID-19 Pandemic and Current Business and Industry Trends” for additional information.

Company Information

We are a Delaware corporation with our principal executive offices at 4400 Biscayne Boulevard, Miami, Florida 33137. Our telephone number is (305) 579-8000 and our website is www.elliman.com. The information contained in or accessible through our website is not part of this prospectus or the registration statement of which this prospectus forms a part. Spinco is a holding company and conducts substantially all of its operations through its subsidiaries.

Spinco was incorporated on August 13, 2021 and is a direct, wholly owned subsidiary of New Valley LLC, which in turn is a direct, wholly owned subsidiary of Vector. Vector’s board of directors approved the Distribution on [ ], 2021. Prior to the Distribution, Spinco will acquire DER Holdings LLC, New Valley Ventures LLC, NV Mortgage LLC and NV Title LLC, which are the subsidiaries of Vector that own, directly and indirectly, the subsidiaries, businesses and other assets described in this prospectus. In addition, Vector will capitalize Spinco with approximately $200 million in net cash and cash equivalents immediately prior to the Distribution. Where we describe in this prospectus our business activities, we do so as if these transfers have already occurred.

Our common stock has been authorized for listing on the NYSE under the symbol “DOUG”.

SUMMARY RISK FACTORS

Ownership of our common stock is subject to numerous risks, including risks relating to the Distribution. The following list of risk factors is not exhaustive. Please read the information in the section entitled “Risk Factors” beginning on page 30 of this prospectus for a more thorough description of these and other risks.

•

We are subject to risks relating to the real estate industry.

•

A significant portion of our business is concentrated in the states of New York, California, Connecticut, New Jersey and Massachusetts, and changes in U.S. tax laws could impact these markets.

•

Lack of financing for homebuyers in the U.S. residential real estate market at favorable rates and on favorable terms (including higher interest rates or tighter mortgage underwriting standards) could have a material adverse effect on our financial performance and results of operations.

•

We depend on a strong brand, and any failure to maintain, protect and enhance the Douglas Elliman brand would have an adverse effect on our ability to grow its real estate brokerage business.

•

The real estate brokerage business in the New York City metropolitan area, Florida, California, Massachusetts, Colorado, New Jersey, Connecticut, and Texas is extremely competitive.

•

The financial results of our real estate brokerage business are affected directly by the success of our agents.

•

Any decrease in our gross commission income or the percentage of commissions that we collect may harm our business, results of operations and financial condition.

•

Maintaining the integrity of our computer systems and protecting confidential information and personal identifying information has become increasingly costly, as cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations.

•

There are risks inherent in PropTech Investments.

•

We are impacted by the performance of the real estate market in New York City, which has been adversely impacted by COVID-19.

•

Following the Distribution, we will be materially dependent on Vector’s performance under various agreements.

•

Because there has not been any public market for our common stock, the market price and trading volume of our common stock may be volatile and you may not be able to resell your shares at or above the initial market price of our stock following the Distribution.

•

The combined post-Distribution value of Vector and Spinco shares may not equal or exceed the pre-Distribution value of Vector shares.

•

The Distribution could result in significant tax liability.

•

We could be subject to future tobacco-related lawsuits.

•

We do not have an operating history as a stand-alone public company.

•

Our historical financial results and our unaudited pro forma condensed combined consolidated financial statements may not be representative of our results as a separate, stand-alone company.

•

We may incur material costs and expenses as a result of our separation from Vector.

•

If, following the Distribution, we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned and our stock price may suffer.

•

The reduced disclosure requirements applicable to us as an “emerging growth company” may make our common stock less attractive to investors.

•

Future stock sales could adversely affect the trading price of our common stock.

•

Our overlapping directors and officers with Vector may result in the diversion of corporate opportunities to Vector, and other conflicts, and provisions in our amended and restated certificate of incorporation may provide us no remedy in that circumstance.

•

Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders to replace or remove our current management.

THE DISTRIBUTION

Please see “The Distribution” for a more detailed description of the matters described below.

Distributing Company

Vector is a holding company engaged principally in two business segments. In addition to the New Valley real estate business, a substantial portion of which is being transferred to Spinco, Vector also is engaged in the manufacture and sale of cigarettes in the United States through two subsidiaries, Liggett Group LLC and Vector Tobacco Inc.

Distributed Company

Spinco is a wholly owned subsidiary of Vector, which will own and operate the real estate services and PropTech investment business currently owned and operated by Vector through its New Valley subsidiary, as described in this prospectus. In addition, Spinco will be capitalized with at least $200 million in net cash and cash equivalents. Please see “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information concerning this business.

Distribution Ratio

Each holder of Vector common stock (including each holder of outstanding Vector stock option awards and restricted stock awards) will receive a distribution of one share of our common stock for every two shares of Vector common stock held or underlying Vector stock option awards and restricted stock awards on the record date.

Securities to be Distributed

Based on 153,959,427 shares of Vector common stock outstanding on September 30, 2021 (as well as 3,822,819 shares of Vector common stock underlying Vector stock option awards and restricted stock awards), approximately 77,720,631 shares of our common stock will be distributed (net of shares not issued to holders of Vector stock option awards and restricted stock awards to satisfy applicable tax obligations). The shares of our common stock to be distributed will constitute all of the outstanding shares of our common stock immediately after the Distribution. Vector stockholders will not be required to pay for the shares of our common stock to be received by them in the Distribution, or to surrender or exchange shares of Vector common stock in order to receive our common stock, or to take any other action in connection with the Distribution.

Fractional Shares

Fractional shares of our common stock will not be distributed. Fractional shares of our common stock will be aggregated and sold in the public market by the transfer and distribution agent, and stockholders will receive a cash payment in lieu of a fractional share. The aggregate net cash proceeds of these sales will be distributed ratably to holders of Vector common stock who would otherwise have received fractional interests. These proceeds generally will be taxable to those stockholders.

Distribution Agent, Transfer Agent and Registrar for the Shares

American Stock Transfer & Trust Company will be the distribution agent, transfer agent and registrar for the shares of our common stock.

Record Date

The record date is the close of business, New York City time, on [ ], 2021.

Distribution Date

11:59 p.m., New York City time, on [ ], 2021.

Material U.S. Federal Income Tax Consequences of
the Distribution

Vector expects to obtain an opinion from Sullivan & Cromwell LLP substantially to the effect that, among other things, the distribution by Vector of our common stock to the holders of Vector common stock will qualify as a tax-free distribution under the Internal Revenue Code of 1986, as amended (the “Code”). The Distribution is expected to qualify as a tax-free distribution for U.S. federal income tax purposes for Vector and its stockholders with respect to Spinco stock that is distributed with respect to the stock of Vector and, except to the extent a stockholder receives cash in lieu of fractional shares of our common stock, no income, gain or loss will be recognized by, and no amount will be included in the income of, such holder upon the receipt of shares of our common stock pursuant to the Distribution. The opinion and the above discussed consequences do not apply to the distribution of Spinco common stock with respect to Vector stock option awards and restricted stock awards. The Distribution of Spinco common stock in respect of Vector common stock underlying Vector stock option awards and restricted stock awards is expected to be taxable to both Vector and holders of such Vector stock option awards and restricted stock awards. The number of shares of Spinco common stock distributed in respect of shares of Vector common stock underlying Vector stock option awards and restricted stock awards will be reduced in satisfaction of such holders’ tax obligations. The opinion will not be binding on the Internal Revenue Service (“IRS”) or the courts. See “The Distribution — Material U.S. Federal Income Tax Consequences of the Distribution.” Certain transactions related to the Distribution that are not addressed by the opinion could result in the recognition of income or gain by Vector. The opinion will rely on factual representations and reasonable assumptions, which, if incorrect or inaccurate, may jeopardize the ability to rely on such opinion.

Stock Exchange Listing

Relationship Between Vector and Us After the Distribution

Following the Distribution, we will be a separate public company. We and Vector will enter into a distribution agreement (the “Distribution

Agreement”) and several ancillary agreements for the purpose of accomplishing the distribution of our common stock to Vector’s stockholders. These agreements also will govern our relationship with Vector subsequent to the Distribution and will provide for the allocation of employee benefit, tax and some other liabilities and obligations attributable to periods prior to, at and after the Distribution. These agreements also will include arrangements with respect to transition services (the “Transition Services Agreement”) and a number of ongoing commercial relationships. The Distribution Agreement includes an agreement that we and Vector will provide each other with appropriate indemnities with respect to liabilities arising out of the business being transferred to us by Vector. We will be party to other arrangements with Vector and its subsidiaries. See “Certain Relationships and Related Party Transactions — Relationship Between Vector and Us After the Distribution.”

Overlapping Directors and Officers and Potential Conflicts of Interest

Following the Distribution, there will be an overlap between certain officers of the Company and of Vector. Howard M. Lorber will serve as the President and Chief Executive Officer of the Company and of Vector. Richard J. Lampen will serve as the Chief Operating Officer of the Company and of Vector, J. Bryant Kirkland III will serve as the Chief Financial Officer and Treasurer of the Company and of Vector, Marc N. Bell will serve as the General Counsel and Secretary of the Company and of Vector, and J. David Ballard will serve as Senior Vice President, Enterprise Efficiency and Chief Technology Officer of the Company and of Vector. Furthermore, immediately following the Distribution, three of the members of the Board of Directors of the Company (the “Board of Directors” or the “Board”), Mr. Lorber, Mr. Lampen and Wilson L. White, will also serve as directors of Vector.

The overlapping directors and officers may have actual or apparent conflicts of interest with respect to matters involving or affecting each company. In addition, after the Distribution, certain of our directors and officers will continue to own stock and/or stock options or other equity awards of Vector. These ownership interests could create actual, apparent or potential conflicts of interest when these individuals are faced with decisions that could have different implications for our Company and for Vector and its subsidiaries.

occur by reason of the fact that any such individual directs a corporate opportunity (other than certain limited types of opportunities set forth in our amended and restated certificate of incorporation) to Vector instead of the Company, or does not refer or communicate information regarding such corporate opportunities to the Company. These provisions in our amended and restated certificate of incorporation will also expressly validate certain contracts, agreements, arrangements and transactions (and amendments, modifications or terminations thereof) between the Company and Vector and, to the fullest extent permitted by law, will provide that the actions of the Overlap Persons in connection therewith are not breaches of fiduciary duties owed to the Company, any of its subsidiaries or their respective stockholders.

See “Certain Relationships and Related Party Transactions — Certain Relationships and Potential Conflicts of Interest” and “Description of Capital Stock — Certain Corporate Opportunities and Conflicts.”

Post-Distribution Dividend Policy

We currently contemplate paying a quarterly cash dividend of $0.05 per share of our common stock in the foreseeable future to the extent we have adequate cash to fund such dividends and subject to the future tax treatment of dividends generally. The declaration and payment of future dividends to holders of our common stock will fall within the sole discretion of our Board and will depend upon many factors, including our financial condition, earnings, capital requirements of our business, legal requirements (including potential changes to tax laws), regulatory constraints, industry practice and other factors that the Board deems relevant. We cannot guarantee that we will continue to pay any dividend even if we commence the payment of dividends. See “Dividend Policy”.

Risk Factors

Stockholders should carefully consider the matters discussed under “Risk Factors.”

SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL DATA

The historical operating and balance sheet data included in the following selected financial data table have been derived from the unaudited condensed combined consolidated financial statements as of September 30, 2021 and for the nine months ended September 30, 2021 and 2020 and the audited combined consolidated financial statements as of December 31, 2020, 2019 and 2018 and for the three years ended December 31, 2020, 2019 and 2018 of Spinco. The historical financial information presented below does not necessarily reflect what our results of operations and financial position would have been if we had operated as a separate publicly-traded entity during those periods. The selected historical financial data presented below should be read in conjunction with the combined consolidated financial statements included elsewhere in this prospectus and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Also set forth below are summary unaudited pro forma condensed combined consolidated balance sheet data as of September 30, 2021 and summary unaudited pro forma condensed combined consolidated statements of income data for the nine months and twelve months ended September 30, 2021 and the year ended December 31, 2020. See “Unaudited Pro Forma Condensed Combined Consolidated Financial Information” for more information.


	Pro Forma Combined							Historical
	Nine Months Ended September 30,		Last Twelve Months Ended September 30,		Year Ended December 31,			Nine Months Ended September 30,						Years Ended December 31,
	2021		2021		2020			2021			2020			2020			2019			2018⁽¹⁾

	(in thousands)
Operating Data:
Revenue	$	1,018,912	$	1,286,373	$	773,987		$	1,018,912			506,526		$	773,987		$	784,108		$	754,089
Operating expenses		948,362		1,206,626		839,772			935,987			569,133			823,272			787,588			750,122

Operating income (loss)		70,550		79,747	$	(65,785	)		82,925			(62,607	)		(49,285	)		(3,480	)		3,967

Other income (expense)		513		1,369		808			(2,739	)		2,034			2,957			12,293			1,630
Income (loss) before taxes		71,063		81,116		(64,977	)		80,186			(60,573	)		(46,328	)		8,813			5,597
Income tax expense (benefit)		22,409		25,626		(17,580	)		1,656			(168	)		44			354			400

Net income (loss)		48,654		55,490		(47,397	)		78,530			(60,405	)		(46,372	)		8,459			5,197

Net loss (income) attributed to non-controlling interest		120		120		—			120			—			—			—			(1,528	)

Net income (loss) attributed to Douglas Elliman Inc.	$	48,774	$	55,610	$	(47,397	)	$	78,650		$	(60,405	)	$	(46,372	)	$	8,459		$	3,669

Earnings per share
Basic	$	0.63	$	0.72	$	(0.61	)

Diluted	$	0.63	$	0.72	$	(0.61	)

Weighted average shares outstanding⁽²⁾
Basic		77,720,631		77,720,631		77,720,631

Diluted		77,720,631		77,720,631		77,720,631


	Pro Forma Combined		Historical
	September 30,		September 30,		As of December 31,
	2021		2021		2020		2019		2018⁽¹⁾

	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	212,500	$	158,804	$	94,421	$	71,485	$	85,514
Working capital⁽³⁾		131,083		99,138		48,716		34,677		75,894
Total assets		588,136		534,440		453,982		488,607		358,023
Total liabilities		329,607		297,743		290,392		284,324		141,941
Parent’s net investment/ stockholders’ equity		258,529		236,697		163,590		204,283		216,082

(1)	We adopted ASC 842, Leases, effective January 1, 2019, using the modified retrospective transition method.

(2)	“Weighted average shares outstanding” refers to the approximate number of shares of common stock of the Company expected to be outstanding immediately following the Distribution.

(3)	Working capital is calculated as current assets minus current liabilities.

QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION

The following is a brief summary of the terms of the Distribution. Please see “The Distribution” for a more detailed description of the matters described below.

Q:	What is the Distribution?

The Distribution is the method by which Vector will separate the business of our Company from Vector’s other business, creating two separate, publicly-traded companies. In the Distribution, Vector will distribute to its stockholders shares of the Company’s common stock. Following the Distribution, the Company will be a separate company from Vector and Vector will not retain any ownership interest in the Company. The number of shares of Vector common stock you own will not change as a result of the Distribution.

Q:	What is being distributed in the Distribution?

Approximately 77,720,631 shares of our common stock will be distributed in the Distribution, based upon the number of shares of Vector common stock outstanding on the record date (including the number of shares underlying outstanding Vector stock option awards and restricted stock awards). The shares of our common stock to be distributed by Vector will constitute all of the issued and outstanding shares of our common stock immediately after the Distribution. For more information on the shares being distributed in the Distribution, see “Description of Capital Stock — Common Stock.”

Q:	Which business and assets will remain with Vector and which business and assets will transfer to the Company?

Following the Distribution, the Company will own and operate the real estate services and technology businesses currently operated through Vector’s subsidiary, New Valley LLC, which (i) owns Douglas Elliman and (ii) is seeking to acquire or invest in additional real estate services, technologies, properties or projects. In addition, the Company will be capitalized with at least $200 million in net cash and cash equivalents.

Following the Distribution, Vector will continue to own, through New Valley LLC, interests in numerous properties and real estate projects across the United States and operate the tobacco segment of its business, which includes the manufacture and sale of cigarettes in the United States through Vector’s subsidiaries Liggett Group LLC and Vector Tobacco Inc.

Q:	What will I receive in the Distribution?

Holders of Vector common stock will receive a distribution of one share of our common stock for every two shares of Vector common stock held by them on the record date. As a result of the Distribution, your proportionate interest in Vector will not change. For a more detailed description, see “The Distribution.”

Q:	What is the record date for the Distribution?

Record ownership will be determined as of the close of business, New York City time, on [ ], 2021, which we refer to as the “record date.” The person in whose name shares of Vector common stock are registered as of the close of business on the record date is the person to whom shares of the Company’s common stock will be issued in the Distribution. As described below, if a record holder of Vector common stock sells those shares regular way after the record date and on or prior to the Distribution date, the seller will be obligated to deliver to the purchaser the shares of our common stock that are issued in respect of the transferred Vector common stock.

Q:	When will the Distribution occur?

A:	Shares of our common stock will be distributed by the transfer and distribution agent, on behalf of Vector, effective at 11:59 p.m., New York City time, on [ ], 2021, which we refer to as the “Distribution date.”

Q:	What will the relationship between Vector and us be following the Distribution?

Following the Distribution, we will be a separate public company and Vector will have no continuing stock ownership interest in us. In connection with the Distribution, we and Vector will enter into a Distribution Agreement, Transition Services Agreement, Tax Disaffiliation Agreement, Employee Matters Agreement (as defined herein) and several other agreements for the purpose of accomplishing the Distribution of our common stock to Vector’s stockholders. These agreements also will govern our relationship with Vector subsequent to the Distribution and will provide for the allocation of employee benefit, tax and some other liabilities and obligations attributable to periods prior to, at and after the Distribution. These agreements also will include arrangements with respect to transition services under the Transition Services Agreement and a number of ongoing commercial relationships. The Distribution Agreement will provide that we and Vector will provide each other with appropriate indemnities with respect to liabilities arising out of the business being transferred to us by Vector. We will also be party to other arrangements with Vector. See “Certain Relationships and Related Party Transactions.”

Following the Distribution, there will be an overlap between certain officers of the Company and of Vector. Howard M. Lorber will serve as the President and Chief Executive Officer of the Company and of Vector. Richard J. Lampen will serve as the Chief Operating Officer of the Company and of Vector, J. Bryant Kirkland III will serve as the Chief Financial Officer and Treasurer of the Company and of Vector, Marc N. Bell will serve as the General Counsel and Secretary of the Company and of Vector. J. David Ballard will serve as Senior Vice President, Enterprise Efficiency and Chief Technology Officer of the Company and of Vector. Furthermore, immediately following the Distribution, three of the members of our Board of Directors, Messrs. Lorber, Lampen and White, will also be directors of Vector.

See “Certain Relationships and Related Party Transactions — Certain Relationships and Potential Conflicts of Interest” for a discussion of the policy that will be in place for dealing with potential conflicts of interest that may arise from our ongoing relationships with Vector.

Q:	What do I have to do to participate in the Distribution?

A:	No action is required on your part. Stockholders of Vector on the record date for the Distribution are not required to pay any cash or deliver any other consideration, including any shares of Vector common stock, for the shares of our common stock distributable to them in the Distribution.

Q:	If I sell, on or before the Distribution date, shares of Vector common stock that I held on the record date, am I still entitled to receive shares of Spinco common stock distributable with respect to the shares of Vector common stock I sold?

It depends on the market in which you sell your shares. Beginning on [ ], 2021 and continuing until the occurrence of the Distribution, Vector expects that the Vector common stock will trade in two markets on the NYSE: in the “regular way” market under the symbol “VGR” and in the “ex-distribution” market under the symbol “VGR WI”. If you own shares of Vector common stock on the record date and thereafter sell those shares regular way on or prior to the Distribution date, you will also be selling the shares of our common stock that would have been distributed to you in the Distribution with respect to the shares of Vector common stock you sell. Conversely, a person who purchases shares of Vector common stock after the record date and on or prior to the Distribution date will be entitled to receive from the seller of those shares the shares of our common stock issued in the Distribution with respect to the transferred Vector common stock.

However, if you own shares of Vector common stock on the record date and thereafter sell those shares in the ex-distribution market on or prior to the Distribution date, you will not be selling the shares of our

common stock that will be distributed to you in the Distribution with respect to the shares of Vector common stock you sell. Conversely, a person who purchases shares of Vector common stock in the ex-distribution market after the record date and on or prior to the Distribution date will not be entitled to receive from the seller of those shares the shares of our common stock issued in the Distribution with respect to the transferred Vector common stock.

Q:	How will fractional shares be treated in the Distribution?

If you would be entitled to receive a fractional share of our common stock in the Distribution, you will instead receive a cash payment. See “The Distribution — Manner of Effecting the Distribution” for an explanation of how the cash payments will be determined and “The Distribution — Material U.S. Federal Income Tax Consequences of the Distribution” for an explanation of the tax consequences of such cash payments.

Q:	How will Vector distribute shares of Spinco common stock to me?

A:	Holders of shares of Vector common stock on the record date will receive shares of our common stock, in book entry form. See “The Distribution — Manner of Effecting the Distribution” for a more detailed explanation.

Q:	What is the reason for the Distribution?

A:	The potential benefits considered by Vector’s board of directors in making the determination to consummate the Distribution included the following:

•

to provide each of Vector and the Company with increased flexibility to fully pursue and fund its business plan, including capital expenditures, investments and acquisitions that would be more difficult to consider or effectuate in the absence of the Distribution. This increased financial flexibility reflects the belief that investors in a company with the mix of assets that each of Vector and the Company will own following the Distribution will be more receptive to strategic initiatives that Vector and the Company may respectively pursue;

•

to create distinct and clear financial profiles and compelling investment cases. Investment in one or the other company may appeal to investors with different goals, interests and expectations. The Distribution will allow investors to make independent investment decisions with respect to Vector and the Company and may result in greater alignment between the interests of each company’s stockholder base and the characteristics of its respective business, capital structure and financial results;

•

to create independent equity securities and increased strategic opportunities. The Distribution will afford Vector and the Company the ability to offer their independent equity securities to the capital markets and enable each standalone company to use its own industry-focused stock to pursue portfolio enhancing acquisitions or other strategic opportunities that are more closely aligned with each company’s strategic goals and expected growth opportunities;

•

to facilitate incentive compensation arrangements for employees of each business more directly tied to the performance of the relevant company’s business and may enhance employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives of each of Vector and the Company; and

•

to increase the aggregate value of the stock of Vector and the Company above the value that the stock of Vector would have had if it had continued to represent an interest in both the businesses of Vector and the Company, so as to: (i) allow each company to use its stock to pursue and achieve strategic objectives, including evaluating and effectuating acquisitions and increasing the long-term attractiveness of equity compensation programs in a significantly more efficient and effective manner with significantly less dilution to existing stockholders; and (ii) allow each company to offer a more focused investment profile to investors.

Vector’s board of directors also considered several factors that might have a negative effect on Vector as a result of the Distribution. Vector’s common stock may come under initial selling pressure as certain Vector stockholders sell their shares because they are not interested in holding an investment in Vector’s remaining business. In addition, the Distribution would separate from Vector the business and assets of the Company, which represent significant value. Finally, following the Distribution, Vector and its remaining business will need to absorb certain corporate and administrative costs previously allocated to Douglas Elliman.

Vector’s board of directors considered certain aspects of the Distribution that may be adverse to the Company. The Company’s common stock may come under initial selling pressure as certain Vector stockholders sell their shares in the Company because they are not interested in holding an investment in the Company’s business. In addition, after the Distribution, the Company’s results will not reflect the generally more predictable cash flow from Vector’s tobacco and real estate investment businesses, which may result in more volatile and less predictable operating results and cash flow for the Company. As a result of the Distribution, the Company will bear significant incremental costs associated with being a publicly-held company and will need to absorb certain corporate and operational support costs previously allocated to Vector. Refer to the “Unaudited Pro Forma Condensed Combined Consolidated Financial Information” section for further details.

Q:	What are the federal income tax consequences to me of the Distribution?

Vector expects to obtain an opinion from Sullivan & Cromwell LLP substantially to the effect that, among other things, the distribution by Vector of our common stock will qualify as a tax-free distribution under the Code. The Distribution is expected qualify as a tax-free distribution for U.S. federal income tax purposes for Vector and its stockholders with respect to Spinco stock that is distributed with respect to the stock of Vector and, except to the extent that you receive cash in lieu of fractional shares of our common stock, you will not recognize income, gain or loss, and no amount will be included in your income upon the receipt of shares of our common stock pursuant to the Distribution. The opinion and the above discussed consequences do not apply to the distribution of Spinco common stock with respect to Vector stock option awards and restricted stock awards. The Distribution of Spinco common stock in respect of Vector stock option awards and restricted stock awards is expected to be taxable to both Vector and the recipients thereof. The number of shares of Spinco common stock distributed in respect of shares of Vector common stock underlying Vector stock option awards and restricted stock awards will be reduced in satisfaction of such holders’ tax obligations. The opinion will not be binding on the IRS or the courts. See “The Distribution — Material U.S. Federal Income Tax Consequences of the Distribution.” Certain transactions related to the Distribution that are not addressed by the opinion could result in the recognition of income or gain by Vector. The opinion will rely on factual representations and reasonable assumptions, which, if incorrect or inaccurate, may jeopardize the ability to rely on such opinion.

Q:	Does Spinco intend to pay cash dividends?

Q:	How will Spinco common stock trade?

Currently, there is no public market for our common stock. Our common stock has been authorized for listing on the NYSE under the symbol “DOUG”. Assuming that such listing application is approved, it is anticipated that trading will commence on a when-issued basis prior to the Distribution. On the first trading day following the Distribution date, when-issued trading in respect of our common stock will end and regular way trading will begin.

Q:	Will the Distribution affect the trading price of my Vector common stock?

Yes. After the initial distribution of our common stock, the trading price of Vector common stock may be lower than the trading price of the Vector common stock immediately prior to the Distribution. Moreover, until the market has evaluated the operations of Vector without the operations of the real estate services and PropTech business that was owned and operated by New Valley, the trading price of Vector common stock may fluctuate significantly. Vector believes that the separation of the Company from Vector offers its stockholders the greatest long-term value. However, the combined trading prices of Vector common stock and Spinco common stock after the Distribution may be lower than the trading price of Vector common stock prior to the Distribution. See “Risk Factors” beginning on page 30.

Q:	Can Vector decide to cancel the Distribution?

Yes. The occurrence of the Distribution will be subject to certain conditions, including the final approval of the Vector board of directors. The Vector board of directors may, in its sole and absolute discretion, determine to impose or waive conditions to the Distribution or abandon the Distribution. If the Vector board of directors decides to cancel the Distribution or otherwise materially amend the terms of the Distribution, Vector will notify stockholders of such decision by issuing a press release and/or filing a current report on Form 8-K.

Q:	Do I have appraisal rights?

A:	No. Holders of Vector common stock are not entitled to appraisal rights in connection with the Distribution.

Q:	Who is the transfer and distribution agent for Spinco common stock?

A:	American Stock Transfer & Trust Company, 6201 15th Ave, Brooklyn, NY 11219. Telephone: (800) 937-5449. Corporate website: www.astfinancial.com.

Q:	Where can I get more information?

A:	If you have questions relating to the mechanics of the Distribution of shares of Spinco common stock, you should contact the transfer and distribution agent:

American Stock Transfer & Trust Company, 6201 15th Ave, Brooklyn, NY 11219. Telephone: (800) 937-5449. Corporate website: www.astfinancial.com.

If you have questions relating to the Distribution or Spinco, you should contact:

Vector Group Ltd.

Investor Relations Department

4400 Biscayne Boulevard

Miami, Florida 33137

Telephone: (305) 579-8000

THE DISTRIBUTION

The discussion in this prospectus of the Distribution is subject to, and qualified by reference to, the distribution agreement and other definitive documents, forms of which are filed as exhibits to the registration statement that contains this prospectus and are incorporated by reference into this prospectus.

General

Vector will distribute all of the outstanding shares of our common stock to the holders of Vector’s common stock (including Vector common stock underlying outstanding Vector stock option awards and restricted stock awards). We refer to this distribution of securities as the “Distribution.”

In the Distribution, each holder of Vector common stock (including Vector common stock underlying outstanding Vector stock option awards and restricted stock awards) will receive a distribution of one share of our common stock for every two shares of Vector common stock held as of the close of business, New York City time, on [ ], 2021, which will be the record date.

Manner of Effecting the Distribution

The general terms and conditions relating to the Distribution will be set forth in the Distribution Agreement between us and Vector. Under the Distribution Agreement, the Distribution will be effective at 11:59 p.m., New York City time, on [ ], 2021. For most Vector stockholders who own Vector common stock in registered form on the record date and for holders of outstanding Vector stock option awards and restricted stock awards, our transfer and distribution agent will credit their shares of our common stock to book entry accounts established to hold these shares. Our transfer and distribution agent will send these stockholders a statement reflecting their ownership of our common stock. Book-entry refers to a method of recording stock ownership in our records in which no physical certificates are used. For stockholders who own Vector common stock through a broker or other nominee, their shares of our common stock will be credited to these stockholders’ accounts by the broker or other nominee. As further discussed below, fractional shares will not be distributed. Following the Distribution, stockholders whose shares are held in book entry form may request that their shares of our common stock be transferred to a brokerage or other account at any time, as well as delivery of physical stock certificates for their shares, in each case without charge.

VECTOR STOCKHOLDERS WILL NOT BE REQUIRED TO PAY FOR SHARES OF OUR COMMON STOCK RECEIVED IN THE DISTRIBUTION, OR TO SURRENDER OR EXCHANGE SHARES OF VECTOR COMMON STOCK IN ORDER TO RECEIVE OUR COMMON STOCK, OR TO TAKE ANY OTHER ACTION IN CONNECTION WITH THE DISTRIBUTION. NO VOTE OF VECTOR STOCKHOLDERS IS REQUIRED OR SOUGHT IN CONNECTION WITH THE DISTRIBUTION, AND VECTOR STOCKHOLDERS HAVE NO APPRAISAL RIGHTS IN CONNECTION WITH THE DISTRIBUTION.

Fractional shares of our common stock will not be issued to Vector stockholders as part of the Distribution or credited to book entry accounts. In lieu of receiving fractional shares, each holder of Vector common stock who would otherwise be entitled to receive a fractional share of our common stock will receive cash for the fractional interest, which generally will be taxable to such holder. An explanation of the tax consequences of the Distribution can be found below in the subsection captioned “— Material U.S. Federal Income Tax Consequences of the Distribution.” The transfer and distribution agent will, as soon as practicable after the Distribution date, aggregate fractional shares of our common stock into whole shares and sell them in the open market at the prevailing market prices and distribute the aggregate proceeds, net of brokerage fees, ratably to stockholders otherwise entitled to fractional interests in our common stock. The amount of such payments will depend on the prices at which the aggregated fractional shares are sold by the transfer and distribution agent in the open market shortly after the Distribution date. The Distribution of Spinco common stock in respect of Vector stock option awards and restricted stock awards is expected to be taxable to both Vector and the recipients thereof. The number of shares of Spinco common stock distributed in respect of shares of Vector common stock underlying Vector stock option awards and restricted stock awards will be reduced in satisfaction of such holders’ tax obligations.

See “Executive Compensation — Treatment of Outstanding Awards,” for a discussion of how outstanding Vector stock options and restricted stock awards will be affected by the Distribution.

In order to be entitled to receive shares of our common stock in the Distribution, Vector stockholders must be stockholders of record of Vector common stock at the close of business, New York City time, on the record date, [ ], 2021.

Reasons for the Distribution

Vector’s board of directors has determined that separation of our business from Vector’s other business is in the best interests of Vector and its stockholders. The potential benefits considered by Vector’s board of directors in making the determination to consummate the Distribution included the following:

•

to facilitate incentive compensation arrangements for employees of each business more directly tied to the performance of the relevant company’s business and enhance employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives of each of Vector and the Company; and

•

shares in the Company because they are not interested in holding an investment in the Company’s business. In addition, after the Distribution, the Company’s results will not reflect the generally more predictable cash flow from Vector’s tobacco and real estate investment businesses, which may result in more volatile and less predictable operating results and cash flow for the Company. As a result of the Distribution, the Company will bear significant incremental costs associated with being a publicly-held company and will need to absorb certain corporate and operational support costs previously allocated to Vector. Refer to the “Unaudited Pro Forma Condensed Combined Consolidated Financial Information” section for further details.

Results of the Distribution

After the Distribution, we will be a public company owning and operating the real estate services and PropTech investment business currently owned and operated by Vector through New Valley. Immediately after the Distribution, we expect to have approximately 1,558 holders of record of our common stock and approximately 77,720,631 shares of common stock outstanding, based on the number of stockholders of record and outstanding shares of Vector common stock (including shares of Vector common stock underlying outstanding Vector stock option awards and restricted stock awards) on September 30, 2021 and after giving effect to the delivery to stockholders of cash in lieu of fractional shares of our common stock and reduction of shares issued in respect of Vector stock option awards and restricted share awards in satisfaction of such holders’ tax obligations. The actual number of shares to be distributed will be determined on the record date.

In connection with the Distribution, we will enter into a number of agreements with Vector (and certain of its subsidiaries) covering such areas as employee matters, tax and other services.

The Distribution will not affect the number of outstanding shares of Vector common stock (including the number of shares of Vector common stock underlying outstanding Vector stock option awards and restricted stock awards) or any rights of Vector stockholders.

Material U.S. Federal Income Tax Consequences of the Distribution

The following is a summary of the material U.S. federal income tax consequences of the Distribution to us, Vector and Vector stockholders. This summary is based on the Code, the regulations promulgated under the Code by the Department of the Treasury, and interpretations of such authorities by the courts and the IRS, all as of the date of this prospectus and all of which are subject to change at any time, possibly with retroactive effect. Unless otherwise noted, this summary is limited to holders of Vector common stock that are U.S. holders, as defined below, that hold their shares of Vector common stock as capital assets, within the meaning of Section 1221 of the Code. Further, except as otherwise provided herein, this summary does not discuss all tax considerations that may be relevant to holders of Vector common stock in light of their particular circumstances, nor does it address the consequences to holders of Vector common stock subject to special treatment under the U.S. federal income tax laws, such as tax-exempt entities, partnerships (including arrangements treated as partnerships for U.S. federal income tax purposes), persons who acquired such shares of Vector common stock pursuant to the exercise of employee stock options or otherwise as compensation, persons who were distributed Spinco common stock with respect to their Vector stock option awards and restricted stock awards, financial institutions, insurance companies, dealers in securities or currencies, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, persons liable for the alternative minimum tax, persons who hold their shares of Vector common stock as part of a straddle, hedge, conversion, constructive sale, synthetic security, integrated investment or other risk-reduction transaction for U.S. federal income tax purposes, and persons whose functional currency is not the U.S. dollar. This summary does not address any U.S. federal estate, gift or other non-income tax consequences or any applicable state, local, foreign, or other tax consequences. Each stockholder’s individual circumstances may affect the tax consequences of the Distribution.

For purposes of this summary, a “U.S. holder” is a beneficial owner of Vector common stock that is, for U.S. federal income tax purposes:

•

an individual who is a citizen or a resident of the United States;

•

a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States or any state or political subdivision thereof;

•

an estate, the income of which is subject to United States federal income taxation regardless of its source; or

•

a trust, if (i) a court within the United States is able to exercise primary jurisdiction over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or (ii) it has a valid election in place under applicable U.S. Department of Treasury regulations to be treated as a U.S. person.

A “non-U.S. holder” is a beneficial owner of Vector common stock that is not a U.S. holder for U.S. federal income tax purposes.

If a partnership (including any arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of Vector common stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A partner of a partnership holding shares of Vector common stock should consult its tax advisor regarding the tax consequences of the Distribution.

Vector expects to obtain an opinion from Sullivan & Cromwell LLP substantially to the effect that, among other things, the distribution by Vector of our common stock will qualify as a tax-free distribution under the Code. The Distribution of Spinco common stock in respect of Vector stock option awards and restricted stock awards is expected to be taxable to both Vector and the recipients thereof. The number of shares of Spinco common stock distributed in respect of shares of Vector common stock underlying Vector stock option awards and restricted stock awards will be reduced in satisfaction of such holders’ tax obligations. The opinion will not be binding on the IRS or the courts. Certain transactions related to the Distribution that are not addressed by the opinion could result in the recognition of income or gain by Vector. The opinion will rely on factual representations and reasonable assumptions, which, if incorrect or inaccurate, may jeopardize the ability to rely on such opinion.

On the basis of the opinion Vector expects to receive, and assuming that Vector common stock is a capital asset in the hands of a Vector stockholder on the Distribution date:

•

Except for any cash received in lieu of a fractional share of our common stock, a Vector stockholder will not recognize any income, gain or loss as a result of the receipt of our common stock in the Distribution.

•

A Vector stockholder’s holding period for our common stock received (including, for this purpose, any fractional share of our common stock for which cash is received) in the Distribution will include the period for which that stockholder’s Vector common stock was held.

•

A Vector stockholder’s tax basis for our common stock received in the Distribution will be determined by allocating to that common stock, on the basis of the relative fair market values of Vector common stock and our common stock at the time of the Distribution, a portion of the stockholder’s tax basis in its Vector common stock. A Vector stockholder’s tax basis in its Vector common stock will be decreased by the portion allocated to our common stock.

•

The receipt of cash in lieu of a fractional share of our common stock generally will be treated as a sale of the fractional share of our common stock, and a Vector stockholder will recognize gain or loss equal to the difference between the amount of cash received and the stockholder’s tax basis in the fractional share of our common stock, as determined above. The gain or loss will be long-term capital gain or loss if the holding period for the fractional share of our common stock, as determined above, is more than one year.

•

The Distribution will not be a taxable transaction to us or Vector. However, certain transactions related to the Distribution that are not expected to be addressed by the opinion could result in the recognition of income or gain by Vector.

If the Distribution does not qualify for tax-free treatment for U.S. federal income tax purposes, then, in general, Vector would recognize taxable gain in an amount equal to the excess of the fair market value of our common stock distributed in the Distribution over Vector’s tax basis therein (i.e., as if it had sold such common stock in a taxable sale for its fair market value). In addition, the receipt by Vector stockholders of our common stock would be a taxable distribution, and each U.S. holder that receives our common stock in the Distribution would be treated as if the U.S. holder had received a distribution equal to the fair market value of our common stock that was distributed to it, which generally would be treated first as a taxable dividend to the extent of such holder’s pro rata share of Vector’s earnings and profits, then as a non-taxable return of capital to the extent of the holder’s tax basis in its Vector common stock, and thereafter as capital gain with respect to any remaining value.

Even if the Distribution otherwise qualifies for tax-free treatment under the Code, the Distribution may be taxable to Vector and would result in a significant U.S. federal income tax liability to Vector (but not to the Vector stockholders) under Section 355(e) of the Code if the Distribution were deemed to be part of a plan (or a series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, stock representing a 50% or greater interest, by vote or value, in Vector or us. For this purpose, any acquisitions of Vector’s stock or our stock within the period beginning two years before the Distribution and ending two years after the Distribution are presumed to be part of such a plan, although Vector or we may be able to rebut that presumption. The process for determining whether a prohibited acquisition has occurred under the rules described in this paragraph is complex, inherently factual and subject to interpretation of the facts and circumstances of a particular case. Vector or we might inadvertently cause or permit a prohibited change in the ownership of Vector or us to occur, thereby triggering tax to Vector, which could have a material adverse effect. If such an acquisition of our stock or Vector’s stock triggers the application of Section 355(e) of the Code, Vector would recognize taxable gain equal to the excess of the fair market value of our common stock distributed in the Distribution over Vector’s tax basis therein, but the Distribution would be tax-free to each Vector stockholder. In certain circumstances, under the tax disaffiliation agreement between Vector and us (the “Tax Disaffiliation Agreement”), we would be required to indemnify Vector against certain taxes imposed on Vector if they resulted from certain actions by us after the Distribution, and Vector would be required to indemnify us against certain taxes imposed on us if they resulted from certain actions by Vector after the Distribution. Please see “Certain Relationships and Related Party Transactions — Relationship Between Vector and Us After the Distribution — Tax Disaffiliation Agreement” for a more detailed discussion of the Tax Disaffiliation Agreement between Vector and us.

Payments of cash in lieu of a fractional share of our common stock made in connection with the Distribution may, under certain circumstances, be subject to backup withholding, unless a holder provides proof of an applicable exception or a correct taxpayer identification number, and otherwise complies with the applicable requirements of the backup withholding rules. Any amounts withheld under the backup withholding rules are not additional tax and may be refunded or credited against the holder’s U.S. federal income tax liability, provided that the holder furnishes the required information to the IRS.

U.S. Treasury regulations require certain Vector stockholders with significant ownership in Vector that receive shares of our stock in the Distribution to attach to their U.S. federal income tax return for the year in which such stock is received a detailed statement setting forth such data as may be appropriate to show that the Distribution is tax-free under the Code. Upon request, Vector will provide its stockholders who receive our common stock pursuant to the Distribution with the information necessary to comply with such requirement.

A non-U.S. holder generally will be subject to U.S. federal income tax with respect to gain realized on a sale or other taxable disposition of our common stock if we are or have been a “United States real property holding corporation” (a “USRPHC”) within the meaning of Code Section 897(c)(2) at any time within the shorter of the five-year period preceding such disposition or the holder’s holding period in our common stock. In general, we would be a USRPHC if “United States real property interests” (as defined in the Code and Treasury Regulations) constituted (by fair market value) at least half of our assets. We believe that we are not, and do not anticipate becoming, a USRPHC. However, because this belief is based on factual evaluations that are dependent upon a

number of factors, some of which are beyond our control (including, for example, fluctuations in the value of our assets), there can be no assurance that we are not or will not become a USRPHC. Even if we were to be treated as a USRPHC, gain realized by a non-U.S. holder on a disposition of our common stock will not be subject to U.S. federal income tax so long as (i) the non-U.S. holder owned, directly, indirectly, or constructively, no more than five percent of our common stock at all times within the shorter of (x) the five-year period preceding the disposition or (y) the holder’s holding period and (ii) our common stock is “regularly traded” (as defined in the applicable Treasury Regulations) on an established securities market. There can be no assurance that our common stock will qualify as regularly traded for such purposes.

The Distribution of Spinco common stock in respect of Vector stock option awards and restricted stock awards is expected to be taxable to both Vector and the recipients thereof. Shares of Spinco common stock will be withheld from the Distribution in respect of shares of Vector common stock underlying Vector stock option awards and restricted stock awards in satisfaction of such holders’ tax obligations.

EACH VECTOR STOCKHOLDER SHOULD CONSULT ITS TAX ADVISOR ABOUT THE PARTICULAR CONSEQUENCES OF THE DISTRIBUTION TO SUCH STOCKHOLDER, INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS AND POSSIBLE CHANGES IN TAX LAW THAT MAY AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE.

Listing and Trading of Our Common Stock

There is not currently a public market for our common stock. Our common stock has been authorized for listing on the NYSE under the symbol “DOUG”. Assuming that such listing application is approved, it is anticipated that trading will commence on a when-issued basis prior to the Distribution. On the first trading day following the Distribution date, when-issued trading in our common stock will end and regular way trading will begin. “When-issued trading” refers to trading which occurs before a security is actually issued. These transactions are conditional with settlement to occur if and when the security is actually issued and the NYSE determines transactions are to be settled. “Regular way trading” refers to normal trading transactions, which are settled by delivery of the securities against payment on the third business day after the transaction.

We cannot assure you as to the price at which our common stock will trade before, on or after the Distribution date. Until our common stock is fully distributed and an orderly market develops in our common stock, the price at which such stock trades may fluctuate significantly. In addition, the combined trading prices of our common stock and Vector common stock held by stockholders after the Distribution may be less than, equal to, or greater than the trading price of the Vector common stock prior to the Distribution.

The shares of our common stock distributed to Vector stockholders will be freely transferable, except for shares received by people who may have a special relationship or affiliation with us or shares subject to contractual restrictions. People who may be considered our affiliates after the Distribution generally include individuals or entities that control, are controlled by, or are under common control with us. This may include certain of our officers and directors. Persons who are our affiliates will be permitted to sell their shares only pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), or an exemption from the registration requirements of the Securities Act, or in compliance with Rule 144 under the Securities Act.

Reason for Furnishing this Prospectus

This prospectus is being furnished by Vector solely to provide information to stockholders of Vector who will receive shares of our common stock in the Distribution. It is not, and is not to be construed as, an inducement or encouragement to buy or sell any of our securities. We and Vector will not update the information in this prospectus except in the normal course of our and Vector’s respective public disclosure obligations and practices.

RISK FACTORS

You should carefully consider the following risk factors and all the other information contained in this prospectus in evaluating us and our common stock.

Risks Associated with Our Real Estate Services Business

We are subject to risks relating to the real estate industry.

The real estate industry is significantly affected by changes in economic and political conditions as well as real estate markets, which could adversely impact returns on our investments, trigger defaults in project financing, cause cancellations of property sales, reduce the value of our properties or investments and could affect our results of operations and liquidity. The real estate industry is cyclical and is significantly affected by changes in general and local economic conditions which are beyond our control.

These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets, levels of unemployment, consumer confidence and the general economic condition of the United States and the global economy. The real estate market also depends upon the strength of financial institutions, which are sensitive to changes in the general macroeconomic environment. Lack of available credit or lack of confidence in the financial sector could impact the real estate market, which in turn could adversely affect our business, financial condition and results of operations.

Any of the following could be associated with cyclicality in the real estate market by halting or limiting a recovery in the residential real estate market, and have an adverse effect on our business by causing periods of lower growth or a decline in the number of home sales and/or property prices which in turn could adversely affect our revenue and profitability:

•

periods of economic slowdown or recession;

•

rising interest rates;

•

the general availability of mortgage financing;

•

a negative perception of the market for residential real estate;

•

commission pressure from brokers who discount their commissions;

•

an increase in the cost of homeowners’ insurance;

•

weak credit markets;

•

a low level of consumer confidence in the economy and/or the real estate market;

•

instability of financial institutions;

•

legislative, tax or regulatory changes that would adversely impact the real estate market, including but not limited to potential reform relating to Fannie Mae, Freddie Mac and other government sponsored entities that provide liquidity to the U.S. housing and mortgage markets, and potential limits on, or elimination of, the deductibility of certain mortgage interest expense and property taxes;

•

adverse changes in economic and general business conditions in the New York metropolitan area;

•

a decline in the affordability of homes;

•

declining demand for real estate;

•

decreasing home ownership rates, declining demand for real estate and changing social attitudes toward home ownership;

•

acts of God, such as hurricanes, earthquakes and other natural disasters, or acts or threats of war or terrorism; and/or

•

adverse changes in global, national, regional and local economic and market conditions, particularly in the New York metropolitan area and the other markets where we operate, including those relating to pandemics and health crises, such as the COVID-19 pandemic.

A reduction in the attractiveness of the real estate markets of New York City and the other markets in which we operate could affect our business, financial condition and results of operations.

The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) placed new limits on mortgage interest deductions as well as state and local income and property tax deductions. The loss of the use of these deductions may encourage residents of states with high income and property taxes and costs of housing to migrate to states with lower tax rates and housing costs. In 2020, approximately 73.0% of our closed sales occurred in New York, California, Connecticut, New Jersey and Massachusetts, and a migration of residents from these markets or a reduction in the attractiveness of these markets as a place to live could adversely impact our business, financial condition and results of operations.

We are impacted by the attractiveness of New York City as a place to live and invest in and its status as an international center for business and commerce. If New York City’s economy stagnates or contracts or if there are significant concerns or uncertainty regarding the strength of New York City’s economy due to domestic, international or global macroeconomic trends (including, in particular, relaxation of social distancing measures and office re-openings coupled with further adoption of remote work trends), or other factors (including, in particular, any matters which adversely affect New York City’s status as an international center for business and commerce or the economic benefits of New York City’s financial services industry), the New York metropolitan area may become a less attractive place to live, work, study or to own residential property for investment purposes. The attractiveness of New York City may also be negatively affected by other factors, including high residential property sales prices or rents (or a risk or perceived risk of a fall in sales prices in the future), high costs of living, the impact of the Tax Act, the impact of changes in state tax law, such as the real estate transfer tax on luxury property, and negative perceptions surrounding quality of life, safety and security (including the risk or perceived risk of acts of terrorism or protests).

Any reduction in the attractiveness of New York City as a place to live or a place to invest in residential real estate and any matters which adversely affect New York City’s status as an international center for business and commerce could result in a reduction, by volume and/or by value, in residential property sales transactions in the New York metropolitan area, which would adversely affect our business, financial condition and results of operations.

Lack of financing for homebuyers in the U.S. residential real estate market at favorable rates and on favorable terms could have a material adverse effect on our financial performance and results of operations.

Our business is significantly impacted by the availability of financing at favorable rates or on favorable terms (including interest rates and mortgage underwriting standards) for homebuyers, which may be affected by government regulations and monetary policies of the federal government and its agencies.

The monetary policy of the U.S. government, and particularly the Federal Reserve Board, which regulates the supply of money and credit in the U.S., significantly affects the availability of financing at favorable rates and on favorable terms, which in turn significantly affects the domestic real estate market.

We believe that low mortgage rates has been a significant factor in the trend in increased homeowner equity and growth in home prices and sales. Policies of the Federal Reserve Board affect interest rates available to potential homebuyers. Changes in the Federal Reserve Board’s policies, the interest rate environment and mortgage

market are beyond our control, are difficult to predict, and could restrict the availability of financing for homebuyers, which could result in lower transaction prices or volume, that would, if realized, have a material adverse effect on our business, results of operations and financial condition.

In addition, the imposition of more stringent mortgage underwriting standards or a reduction in the availability of alternative mortgage products could also reduce homebuyers’ ability to access the credit markets on reasonable terms and adversely affect the ability and willingness of prospective buyers to finance home purchases or to sell their existing homes. A decline in the number of home sale transactions or mortgage and refinancing activity due to the foregoing would adversely affect our operating results.

A significant adoption by consumers of alternatives to full-service agents could have an adverse effect on our business, financial condition and results of operations.

A significant change in consumer sales that eliminates or minimizes the role of the agent in the real estate transaction process could have an adverse effect on our business, financial condition and results of operations. These options may include direct-buyer companies (also called iBuyers) that purchase directly from the seller at below-market rates in exchange for speed and convenience and then resell them shortly thereafter at market prices, and discounters who reduce the role of the agent in order to offer sellers a low commission or a flat fee while giving rebates to buyers. Consumer preferences regarding buying or selling houses and financing their home purchase will determine if these models reduce or replace the long-standing preference for full-service agents.

We depend on a strong brand, and any failure to maintain, protect and enhance the Douglas Elliman brand would have an adverse effect on our ability to grow our real estate brokerage business.

We have developed a strong brand that we believe has contributed significantly to the success of our business. Maintaining, protecting and enhancing Douglas Elliman as a premium real estate brokerage brand is critical to growing our business. If we do not successfully build and maintain a strong brand, our real estate brokerage business could be negatively impacted. Preserving and increasing the quality of the Douglas Elliman brand may require us to make substantial investments in areas such as marketing, community relations, outreach technology and employee training. Douglas Elliman actively engages in print and online advertisements, social media, targeted promotional mailings and email communications and engages on a regular basis in public relations and sponsorship activities. There is no assurance that those activities will enhance Douglas Elliman’s brand awareness.

Brand value can be severely damaged even by isolated incidents, particularly if the incidents receive considerable negative publicity or result in litigation. Some of these incidents may relate to the way we manage our relationship with our agents, our growth strategies or the ordinary course of our business or our brokerage business. Other incidents may arise from events that are or may be beyond our ability to control and may damage our brand, such as actions taken (or not taken) by one or more agents relating to health, safety, welfare or other matters; cybersecurity incidents; litigation and claims; failure to maintain high ethical and social standards for all of our operations and activities; failure to comply with local laws and regulations; and illegal activity targeted at Douglas Elliman or others. Douglas Elliman’s brand value could diminish significantly if any such incidents or other matters erode consumer confidence in it, which may result in a decrease in our total agent count and, ultimately, could adversely affect our business and operating results.

The failure of third-party vendors or partners to perform as we expect or appropriately manage risks, or our failure to adequately monitor third-party performance, could result in harm to our reputation and have a material adverse effect on our business and results of operations.

We engage with third-party vendors and partners in a variety of ways, ranging from strategic collaborations and product development to running key internal operational processes and critical client systems. In many instances,

these third parties are in direct contact with our agents and customers in order to deliver services on our behalf or to fulfill their role in the applicable collaboration. In some instances, these third parties may be in possession of personal information of our customers, agents or employees. In other instances, these third parties may play a critical role in developing products and services central to our business strategy. Our third-party partners may encounter difficulties in the provision of required deliverables or may fail to provide us with timely services, which may delay us, and also may make decisions that may harm us or that are contrary to our best interests, including by pursuing opportunities outside of the applicable Company project or program, to the detriment of such project or program.

If our third-party partners or vendors (or their respective vendors) were to fail to perform as we expect, fail to appropriately manage risks, provide diminished or delayed services to our customers or face cybersecurity breaches of their information technology systems, or if we fail to adequately monitor their performance, our operations and reputation could be materially adversely affected, in particular any such failures related to the development of key products. Depending on the function involved, vendor or third-party application failure or error may lead to increased costs, business disruption, distraction to management, processing inefficiencies, the loss of or damage to intellectual property or sensitive data through security breaches or otherwise, effects on financial reporting, loss of customers, damage to our reputation, or litigation, regulatory claims and/or remediation costs (including claims based on theories of breach of contract, vicarious liability, negligence or failure to comply with laws and regulations). Third-party vendors and partners (or their respective vendors) may also fail to maintain or keep adequate levels of insurance, which could result in a loss to us or expose us to litigation. The actions of our third party vendors and unaffiliated third-party developers are beyond our control. We face the same risks with respect to subcontractors that might be engaged by our third-party vendors and partners or their subcontractors.

The real estate brokerage business in the New York City metropolitan area, Florida, California, Massachusetts, Colorado, New Jersey, Connecticut, and Texas is extremely competitive.

We compete with other multi-office independent real estate organizations and with franchise real estate organizations competing in local areas. Competition is particularly intense in the densely populated metropolitan areas of New York City, South Florida and Los Angeles in which we operate. In addition, in the real estate brokerage industry, new participants face minimal barriers to entry into the market. We also compete for the services of qualified licensed agents. The ability of our brokerage offices to retain agents is generally subject to numerous factors, including the sales commissions they receive, advertising support and perception of brand value.

The financial results of our real estate brokerage business are affected directly by the success of our agents.

Our real estate brokerage offices generate revenue in the form of commissions and service fees. Accordingly, our financial results depend upon the operational and financial success of our brokerage offices and our agents. As mentioned above, there is significant competition among brokerage firms for the services of high producing agents. The failure to recruit and retain these agents could negatively impact the financial success of our brokerage business.

Contractual obligations related to confidentiality and noncompetition may be ineffective or unenforceable against departing employees.

Our operations are dependent on the efforts, abilities and experience of our employees, and we compete for their services. We have contracts with certain employees that include provisions preventing these persons from competing with us both during and after the term of our employment contracts with them. Enforceability of the non-compete agreements that we have in place is not guaranteed, and contractual restrictions could be breached without discovery or adequate remedies.

On July 9, 2021, President Biden signed an executive order encouraging the Federal Trade Commission to curtail unfair use of non-compete agreements and other agreements that may unfairly limit worker mobility. While we

cannot predict how the initiatives set forth in the executive order will be implemented or, as a result, the impact that the executive order will have on our operations, there is now increased uncertainty regarding the long-term enforceability of our non-compete agreements.

Douglas Elliman is subject to risks and operational limitations associated with its strategic alliance with Knight Frank Residential.

Douglas Elliman has entered into a strategic alliance with Knight Frank Residential, the world’s largest privately-owned property consultancy, to market, through co-branded offices across New York City; Westchester, Nassau and Suffolk counties in New York State; Miami-Dade, Broward and Palm Beach counties in South Florida; the greater City of Los Angeles metropolitan area, including Malibu; Eagle and Pitkin counties in the State of Colorado; and Fairfield County in the State of Connecticut, as well as to select top-tier agents, certain luxury residential properties of at least $2 million to international audiences. The agreement provides for sharing of commissions and certain other payments in respect of jointly marketed properties. This strategic alliance subjects Douglas Elliman to a number of risks, including risks associated with the sharing of proprietary information between parties, non-performance by Douglas Elliman or Knight Frank Residential of obligations under the strategic alliance agreement, disputes over strategic or operational decisions or other matters and reputational risks, as well as litigation risks associated therewith. In particular, Douglas Elliman is subject to certain exclusivity and non-compete provisions in connection with marketing and selling properties outside the United States in markets in which Knight Frank Residential operates, subject to certain exceptions. Although Douglas Elliman believes that the strategic alliance enhances its ability to serve its luxury customers, such restrictions could limit Douglas Elliman’s growth prospects.

Any decrease in our gross commission income or the percentage of commissions that we collect may harm our business, results of operations and financial condition.

Our business model depends upon our agents’ success in generating gross commission income, which we collect and from which we pay to them net commissions. Real estate commission rates vary somewhat by market, and although historical rates have been relatively consistent over time across markets, there can be no assurance that prevailing market practice will not change in a given market, or across the industry, in the future. Customary commission rates could change due to market forces locally or industry-wide, as well as due to regulatory or legal changes in such markets, including as a result of litigation or enforcement actions. If any such decrease in commission rates were to occur, our business, financial condition, and results of operations may be adversely impacted.

In addition, there can be no assurance that we will be able to maintain the percentage of commission income that we collect from our agents. If industry conditions change, we may be forced to reduce the percentage of commissions that we collect from our agents, and our business, financial condition, and results of operations may be adversely impacted.

Negligence or intentional actions of real estate agents engaged by us could materially and adversely affect our reputation and subject us to liability.

Our operations rely on the performance of real estate agents. If our agents were to provide lower quality services to our customers or engage in negligent or intentional misconduct, our image and reputation could be materially adversely affected. In addition, we could also be subject to litigation and regulatory claims arising out of their performance of brokerage services, which if adversely determined, could materially and adversely affect us.

There may be adverse financial and operational consequences to us if independent real estate agents are reclassified as employees.

Although the legal relationship between residential real estate brokers and licensed real estate agents throughout most of the real estate industry historically has been that of independent contractor, newer rules and

interpretations of state and federal employment laws and regulations, including those governing employee classification and wage and hour regulations in our and other industries, may impact industry practices and our company owned brokerage operations.

Significant agent reclassification determinations in the absence of available exemptions from minimum wage or overtime laws, including damages and penalties for prior periods (if assessed), could be disruptive to our business, constrain our operations in certain jurisdictions and could have a material adverse effect on the operational and financial performance of the Company.

We may not be able to maintain or establish relationships with multiple listing services (“MLSs”) and third-party listing services, which could limit the information we are able to provide to our agents and clients.

Our ability to attract agents and to appeal to clients depends upon providing a robust number of listings. To provide these listings, we maintain relationships with multiple listing services and other third-party listing providers and aggregators, as well as our agents themselves to include listing data in our services. Certain of our agreements with real estate listing providers are short-term agreements that may be terminated with limited notice. The loss of some of our existing relationships with listing providers, whether due to termination of agreements or otherwise, changes to our rights to use listing data, or an inability to continue to add new listing providers, may cause our listing data to omit information important to our agents or clients. Any loss or changes to our rights to use listing data or add listings, or any similar loss of rights in the markets we serve, could negatively impact agent and client confidence in the listing data we provide and reduce our ability to attract and retain agents, which could harm our business, financial condition, and results of operations.

Industry structure changes that disrupt the functioning of the residential real estate market could materially adversely affect our operations and financial results.

Through our brokerages, we participate in MLSs and are a member of the National Association of Realtors (“NAR”) and state real estate associations and, accordingly, are subject to each group’s rules, policies, data licenses, and terms of service. The rules of each MLS to which we belong can vary widely and are complex.

From time to time, certain industry practices, including NAR and MLS rules, have come under regulatory scrutiny. There can be no assurances as to whether the Department of Justice (the “DOJ”) or Federal Trade Commission, their state counterparts, or other governmental body will determine that any industry practices or developments have an anti-competitive effect on the industry. Any such determination could result in industry investigations, legislative or regulatory action or other actions, any of which could have the potential to disrupt our business.

On July 1, 2021, the DOJ announced its withdrawal from a settlement agreement reached during the prior administration with the NAR in relation to claims of anticompetitive behavior with respect to commissions received by buyers’ agents from sellers’ agents. The settlement previously required NAR to adopt certain rule changes, such as increased disclosure of commission offers from sellers’ agents to buyers’ agents. Although Douglas Elliman has not experienced a material erosion of commission percentage rates during 2017 and 2021, the withdrawal of the DOJ from this settlement and the executive order signed by President Biden on July 9, 2021 directs the Federal Trade Commission to consider additional rule making pertaining to the real estate industry indicates increased regulatory scrutiny of the real estate industry. Such increased focus may reduce the fees we receive, require additional expenditure, or distract our management’s attention from pursuing our growth strategy, each of which, in turn, could adversely affect our financial condition and results of operations.

Meaningful changes in industry operations or structure, as a result of governmental pressures, the result of litigation, changes to NAR or MLS rules, the actions of certain competitors or the introduction or growth of certain competitive models, or otherwise could materially adversely affect our operations, revenues, earnings and financial results.

We are impacted by the performance of the real estate market in the New York metropolitan area, which has been adversely impacted by COVID-19.

Our business significantly depends on sales transactions for residential property in the New York City market, and we derived approximately 29% of our revenues in 2020 and 46% of our revenues in 2019 and 2018 from the New York City market. Published reports and data indicate that the New York metropolitan area was impacted more than any other area in the United States by the COVID-19 pandemic. Various governmental agencies in the New York metropolitan area and other markets where we operate and where our real estate investments are located instituted, and may institute again in the future, quarantines, “pause” orders, “shelter-in-place” rules, restrictions on travel and restrictions on the types of businesses that can operate. For example, our agents were restricted from performing personal showings of properties or conducting open houses in most of our markets from March 2020 to June 2020. As a result of such measures, volumes of residential property sales transactions in New York City declined significantly in 2020, and the aggregate sales commissions we earned on sales transactions in the New York City area correspondingly declined. Although the suburban New York markets have improved and, recently, we have seen significant improvement in the New York City market, these measures have had, and if such measures are imposed again in the future, may have, a significant effect on our financial condition and results of operations, notwithstanding the mitigating actions we initiated (including employee-related and other expense-reduction measures) and expect to continue during and immediately following this pandemic.

Our real estate brokerage offices generate revenue in the form of commissions and service fees. Accordingly, our financial results depend upon the operational and financial success of our brokerage offices and our agents. In response to the COVID-19 pandemic, we made significant operating adjustments in our real estate brokerage business, including staff reductions, which could negatively impact the financial success of our brokerage business in the future. Although certain of these measures have been reversed, these actions may have adversely affected employee morale, our culture, our ability to attract and retain employees and the success of our brokerage business.

The COVID-19 pandemic could continue to have a material impact on our business; the likelihood and magnitude of a material impact increases with the amount of time the virus impacts activity levels in locations in which we operate. Therefore, we are unable to predict the ultimate impact of the COVID-19 pandemic on our future financial condition, results of operations and cash flows.

Infringement, misappropriation or dilution of the Douglas Elliman intellectual property could harm our business.

We regard the Douglas Elliman trademark portfolio as having significant value and as being an important factor in the marketing of our brand. We believe that this and other intellectual property are valuable assets that are critical to our success. We rely on a combination of protections provided by contracts, as well as copyright, trademark, and other laws, to protect our intellectual property from infringement, misappropriation or dilution. We have registered certain trademarks and service marks and have other trademark and service mark registration applications pending in the U.S. and foreign jurisdictions. Although we monitor our trademark portfolio both internally and through external search agents and impose an obligation on agents to notify us upon learning of potential infringement, there can be no assurance that we will be able to adequately maintain, enforce and protect our trademarks or other intellectual property rights.

We are not aware of any challenges to our right to use any of our brand names or trademarks. We are commonly involved in numerous proceedings, generally on a small scale, to enforce our intellectual property and protect our brand. Unauthorized uses or other infringement of our trademarks or service marks, including ones that are currently unknown to us, could diminish the value of our brand and may adversely affect our business. Failure to adequately protect our intellectual property rights could damage our brand and impair our ability to compete effectively. Even where we have effectively secured statutory protection for our trademarks and other intellectual

property, our competitors may misappropriate our intellectual property. Defending or enforcing our trademark rights, branding practices and other intellectual property, and seeking an injunction and/or compensation for misappropriation of confidential information, could result in the expenditure of significant resources and divert the attention of management, which in turn may adversely affect our business and operating results.

Moreover, unauthorized third parties may use the Douglas Elliman intellectual property to trade on the goodwill of our brand, resulting in consumer confusion or dilution. Any reduction of our brand’s goodwill, consumer confusion, or dilution is likely to impact sales, and could adversely affect our business and operating results.

We rely on traffic to our websites, including our flagship website, elliman.com, directed from search engines. If these websites fail to rank prominently in unpaid search results, traffic to these websites could decline and our business would be adversely affected.

Our success depends in part on our ability to attract users through unpaid Internet search results on search engines. The number of users we attract to our websites, including our flagship website elliman.com, from search engines is due in large part to how and where our websites rank in unpaid search results. These rankings can be affected by a number of factors, many of which are not under our direct control, and they may change frequently. For example, a search engine may change its ranking algorithms, methodologies or design layouts. As a result, links to our websites may not be prominent enough to drive traffic to our websites, and we may not know how or otherwise be in a position to influence the results. In some instances, search engine companies may change these rankings in order to promote their own competing services or the services of one or more of our competitors. Our websites have experienced fluctuations in search result rankings in the past, and we anticipate fluctuations in the future. Any reduction in the number of users directed to our websites could adversely affect our real estate brokerage business and results of operations. Further, a failure of our websites or website-based technology, either due to malfunction, outside intrusion through hacking or otherwise, could significantly disrupt our business and lead to reduced revenue and reputational damage as we may not be able to effectively scale and adapt our existing technology and network infrastructure to ensure our platforms are accessible.

We rely on licenses to use the intellectual property rights of third parties which are incorporated into our products and services. Failure to renew or expand existing licenses may require us to modify, limit or discontinue certain offerings, which could materially affect our business, financial condition and results of operations.

We rely on products, technologies and intellectual property that we license from third parties for use in our services. We cannot assure that these third-party licenses, or support for such licensed products and technologies, will continue to be available to us on commercially reasonable terms, if at all. In the event that we cannot renew and/or expand existing licenses, we may be required to discontinue or limit our use of the products and technologies that include or incorporate the licensed intellectual property.

We cannot be certain that our licensors are not infringing the intellectual property rights of others or that our suppliers and licensors have sufficient rights to the technology in all jurisdictions in which we may operate. Some of our license agreements may be terminated by our licensors for convenience. If we are unable to obtain or maintain rights to any of this technology because of intellectual property infringement claims brought by third parties against our suppliers and licensors or against us, or if we are unable to continue to obtain the technology or enter into new agreements on commercially reasonable terms, our ability to develop our services containing that technology could be severely limited and our business could be disrupted or otherwise harmed. Additionally, if we are unable to obtain necessary technology from third parties, we may be forced to acquire or develop alternate technology, which may require significant time and effort and may be of lower quality or performance standards. This would limit and delay our ability to provide new or competitive offerings and increase our costs. If alternate technology cannot be obtained or developed, we may not be able to offer certain functionality as part of our offerings, which could adversely affect our business, financial condition and results of operations.

Some of our products and services contain open source software, which may pose particular risks to our proprietary software, products, and services in a manner that could have a negative effect on our business.

We use open source software in our products and services and anticipate using open source software in the future. Some open source software licenses require those who distribute open source software as part of their own software product to publicly disclose all or part of the source code to such software product or to make available any derivative works of the open source code on unfavorable terms or at no cost, and we may be subject to such terms. The terms of certain open source licenses to which our business is subject have not been interpreted by U.S. or foreign courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services. Additionally, we could face claims from third parties alleging ownership of, or demanding release of, the open source software or derivative works that we developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. The use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have a negative effect on our business, financial condition and results of operations.

Failure to successfully complete or integrate acquisitions and joint ventures into our existing operations, or to complete or effectively manage divestitures, could adversely affect our business, financial condition or results of operations.

We regularly review and evaluate potential acquisitions, joint ventures, divestitures, and other strategic transactions. Potential issues associated with these activities could include, among other things: our ability to complete or effectively manage such transactions on terms commercially favorable to us or at all; our ability to realize the full extent of the expected returns, benefits, cost savings or synergies as a result of a transaction, within the anticipated time frame, or at all; and diversion of management’s attention from day-to-day operations. In addition, the success of any future acquisition strategy we may pursue will depend upon our ability to fund such acquisitions given our total outstanding indebtedness, find suitable acquisition candidates on favorable terms and for target companies to find our acquisition proposals more favorable than those made by other competitors. If an acquisition or joint venture is not successfully completed or integrated into our existing operations (including our internal controls and compliance environment), or if a divestiture is not successfully completed or managed or does not result in the benefits or cost savings we expect, our business, financial condition or results of operations may be adversely affected.

Risks Associated with our PropTech Investments

There are risks inherent in PropTech Investments.

Our PropTech investments may involve a high degree of risk. In general, financial and operating risks confronting portfolio companies can be significant. While targeted returns should reflect the perceived level of risk in any investment situation, there can be no assurance that New Valley Ventures will be adequately compensated for risks taken, and the loss of its entire investment is possible. The investments may be difficult to value, and the timing of any profit realization is highly uncertain. Losses are likely to occur.

Early-stage and development-stage companies often experience unexpected problems in the areas of product development, manufacturing, marketing, financing and general management, which, in some cases, cannot be adequately solved. In addition, such companies may require substantial amounts of financing which may not be available through institutional private placements or the public markets. The percentage of companies that survive and prosper can be small.

Investments in more mature companies in the expansion or profitable stage may involve substantial risks. Such companies typically have obtained capital in the form of debt and/or equity to expand rapidly, reorganize

operations, acquire other businesses, or develop new products and markets. These activities by definition involve a significant amount of change in a company and could give rise to significant problems in sales, manufacturing, and general management of these activities.

We may engage in business activities that could result in us holding investment interests in a number of entities which could subject us to regulation under the Investment Company Act of 1940.

Although we will be subject to regulation under the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we believe we will not be subject to regulation under the Investment Company Act of 1940 (the “Investment Company Act”) insofar as we will not be engaged in the business of investing or trading in securities within the definitions and parameters which would make us subject to the Investment Company Act, or holding unconsolidated minority interests in multiple companies and cash that might fall within the “holding company” definitions under the Investment Company Act. We will maintain controls and procedures designed to ensure that we will not be subject to regulation under the Investment Company Act. In the event we engage in business activities that result in us holding minority interests in a number of nonconsolidated entities with significant value, we might become subject to regulation under the Investment Company Act. In such event, we would be required to register as an investment company and incur significant registration and compliance costs. Additionally, the Investment Company Act requires that a number of structural safeguards, such as an independent board of directors and a separate investment adviser whose contract must be approved by a majority of the company’s shareholders, be put in place within such companies. The Investment Company Act also imposes significant disclosure and reporting requirements beyond those found in the Securities Act and the Exchange Act. Likewise, the Investment Company Act contains its own anti-fraud provisions and private remedies, and it strictly limits investments made by one investment company in another to prevent pyramiding of investment companies, leading to consolidated investment companies acting in the interest of other investment companies rather than in the interest of securities holders. Regulation of Douglas Elliman as an investment company would significantly impair our business plan and operations and could have a material adverse effect on our financial condition.

Risks Relating to Our Structure and Other Business Risks

Our quarterly results and other operating metrics may fluctuate from quarter to quarter, which makes these metrics difficult to predict.

Our results of operations have fluctuated in the past and are likely to fluctuate significantly from quarter-to-quarter and year-to-year in the future for a variety of reasons, many of which are outside of our control and difficult to predict. As a result, you should not rely upon our historical results of operations as indicators of future performance. Numerous factors can influence our results of operations, including:

•

our ability to attract and retain agents;

•

our ability to develop new solutions and offer new services on our platform;

•

changes in interest rates or mortgage underwriting standards;

•

the actions of our competitors;

•

costs and expenses related to the strategic acquisitions and partnerships;

•

increases in and timing of operating expenses that we may incur to grow and expand our operations and to remain competitive;

•

changes in the legislative or regulatory environment, including with respect to real estate commission rates and disclosures;

•

system failures or outages, or actual or perceived breaches of security or privacy, and the costs associated with preventing, responding to, or remediating any such outages or breaches;

•

adverse judgments, settlements, or other litigation-related costs and the fees associated with investigating and defending claims;

•

the overall tax rate for our business and the impact of any changes in tax laws or judicial or regulatory interpretations of tax laws, which are recorded in the period such laws are enacted or interpretations are issued and may significantly affect the effective tax rate of that period;

•

the application of new or changing financial accounting standards or practices; and

•

changes in regional or national business or macroeconomic conditions, including as a result of the COVID-19 pandemic, which may impact the other factors described above.

In addition, our results of operations are tied to certain key business metrics and non-GAAP financial measures that have fluctuated in the past and are likely to fluctuate in the future. As a result of such variability, our historical performance, including from recent quarters or years, may not be a meaningful indicator of future performance and period-to-period comparisons also may not be meaningful.

We are a holding company and depend on cash payments from our subsidiaries, which are subject to contractual and other restrictions, in order to service our debt and to pay dividends on our common stock.

We are a holding company and have no operations of our own. We hold our interests in our business through our wholly-owned subsidiaries. In addition to our own cash resources, our ability to pay dividends on our common stock depends on the ability of our subsidiaries to make cash available to us. Our receipt of cash payments, as dividends or otherwise, from our subsidiaries is an important source of our liquidity and capital resources. If we do not have sufficient cash resources of our own and do not receive payments from our subsidiaries in an amount sufficient to repay our debts and to pay dividends on our common stock, we must obtain additional funds from other sources. There is a risk that we will not be able to obtain additional funds at all or on terms acceptable to us. Our inability to service these obligations and to continue to pay dividends on our common stock would significantly harm us and the value of our common stock.

Goodwill and indefinite-lived intangible asset impairment charges may adversely affect our operating results and financial condition.

We have a substantial amount of goodwill and other intangible assets on our balance sheet, primarily comprised of goodwill and trademarks related to Douglas Elliman. Goodwill, trademarks and other identifiable intangible assets must be tested for impairment at least annually. The fair value of the goodwill assigned to a reporting unit could decline if projected revenues or cash flows were to be lower in the future due to the effects of the global economy or other causes. If the carrying value of intangible assets or of goodwill were to exceed its fair value, the asset would be written down to its fair value, with the impairment loss recognized as a non-cash charge in our Consolidated Statement of Operations.

As of September 30, 2021, we had approximately $32.6 million of goodwill and $74.6 million of trademarks and other intangible assets related to Douglas Elliman. During the first quarter of 2020, we determined that a triggering event occurred related to Douglas Elliman due to a decline in sales and profitability projections for the reporting unit driven by the COVID-19 pandemic and related economic disruption. Vector utilized third-party valuation specialists to prepare a quantitative assessment of goodwill and trademark intangible assets related to Douglas Elliman. The quantitative assessments resulted in impairment charges to goodwill of $46.3 million and to the trademark intangible asset of $12.0 million. Changes in the future outlook of the Douglas Elliman reporting unit could result in an impairment loss, which could have a material adverse effect on our results of operations and financial condition.

Global cybersecurity threats and incidents can range from uncoordinated individual attempts that gain unauthorized access to information technology systems, both internally and externally, to sophisticated and targeted measures, known as advanced persistent threats, directed at us and our affiliated agents. In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and intellectual property, and personally identifiable information of our customers. Additionally, we increasingly rely on third-party providers, including cloud storage solution providers. The secure processing, maintenance and transmission of this information are critical to our operations and with respect to information collected and stored by our third-party service providers, we are reliant upon their security procedures. Our systems and the confidential information on them may also be compromised by employee misconduct or employee error. We and our third-party service providers have experienced, and expect to continue to experience, these types of internal and external threats and incidents, which can result, and have resulted, in the misappropriation and unavailability of critical data and confidential or proprietary information (our own and that of third parties, including personally identifiable information) and the disruption of business operations. For example, in April 2021, we determined that an unauthorized party gained access to Douglas Elliman Property Management’s IT network, temporarily disrupted business operations and obtained certain files that contained personal information pertaining to owners and others in buildings managed by and employees of Douglas Elliman Property Management. Douglas Elliman Property Management took steps to secure its systems, contacted law enforcement, conducted an investigation and enhanced its security protocols to help prevent a similar incident from occurring in the future. Depending on their nature and scope, these incidents could potentially also result in the destruction or corruption of such data and information. Our business interruption insurance may be insufficient to compensate us for losses that may occur. The potential consequences of a material cybersecurity incident include reputational damage, litigation with third parties, diminution in the value of the services we provide to our customers, and increased cybersecurity protection and remediation costs, which in turn could adversely affect our competitiveness and results of operations. Developments in the laws and regulations governing the handling and transmission of personal identifying information in the United States may require us to devote more resources to protecting such information, which could in turn adversely affect our results of operations and financial condition.

Investors’ expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks.

There is an increasing focus from certain investors, employees and other stakeholders concerning corporate responsibility, specifically related to environmental, social and governance factors. Some investors may use these factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies relating to corporate responsibility are inadequate. Third-party providers of corporate responsibility ratings and reports on companies have increased to meet growing investor demand for measurement of corporate responsibility performance. The criteria by which companies’ corporate responsibility practices are assessed may change, which could result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria. If we elect not to or are unable to satisfy such new criteria, investors may conclude that our policies with respect to corporate responsibility are inadequate. We may face reputational damage in the event that our corporate responsibility procedures or standards do not meet the standards set by various constituencies.

Furthermore, if our competitors’ corporate responsibility performance is perceived to be greater than ours, potential or current investors may elect to invest with our competitors instead. In addition, in the event that we communicate certain initiatives and goals regarding environmental, social and governance matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals. If we fail to satisfy the expectations of investors, employees and other stakeholders or our initiatives are not executed as planned, our reputation and financial results could be materially and adversely affected.

We are periodically subject to claims, lawsuits, government investigations and other proceedings that may adversely affect our business, financial condition and results of operations.

We may be subject to claims, lawsuits, arbitration proceedings, government investigations and other legal and regulatory proceedings in the ordinary course of business, including those involving labor and employment, anti-discrimination, commercial disputes, competition, professional liability and consumer complaints, intellectual property disputes, compliance with regulatory requirements, antitrust and anti-competition claims, securities laws and other matters, and we may become subject to additional types of claims, lawsuits, government investigations and legal or regulatory proceedings as our business grows and as we deploy new offerings, including proceedings related to our acquisitions, securities issuances or business practices.

The results of any such claims, lawsuits, arbitration proceedings, government investigations or other legal or regulatory proceedings cannot be predicted with certainty. Any claims against us or investigations involving us, whether meritorious or not, could be time-consuming, result in significant defense and compliance costs, be harmful to our reputation, require significant management attention and divert significant resources. Determining reserves for our pending litigation is a complex and fact-intensive process that requires significant subjective judgment and speculation. It is possible that a resolution of one or more such proceedings could result in substantial damages, settlement costs, fines and penalties that could adversely affect our business, financial condition and results of operations. These proceedings could also result in harm to our reputation and brand, sanctions, consent decrees, injunctions or other orders requiring a change in our business practices. Any of these consequences could adversely affect our business, financial condition and results of operations. Furthermore, under certain circumstances, we have contractual and other legal obligations to indemnify and to incur legal expenses on behalf of our business and commercial partners and current and former directors, officers and employees.

Adverse decisions in litigation or regulatory actions against companies unrelated to us could impact our business practices in a manner that adversely impacts our financial condition and results of operations.

Litigation, investigations, claims and regulatory proceedings against other participants in the residential real estate or relocation industry may impact us when the rulings or settlements in those cases cover practices common to the broader industry and which may generate litigation. Examples may include claims associated with Real Estate Settlement Procedures Act (“RESPA”) compliance (including, but not limited to, those related to the broker-to-broker exception, marketing agreements or consumer rebates), broker fiduciary duties, multiple listing service practices, sales agent classification, federal and state fair housing laws, and state laws limiting or prohibiting inducements, cash rebates and gifts to consumers. Similarly, we may be impacted by litigation and other claims against companies in other industries. To the extent plaintiffs are successful in these types of litigation matters, and we cannot distinguish our or their practices (or our industry’s practices), we could face significant liability and could be required to modify certain business relationships, either of which could materially and adversely impact our financial condition and results of operations.

We depend on our key personnel.

We depend on the efforts of our executive officers and other key personnel. While we believe that we could find replacements for these key personnel, the loss of their services could have a significant adverse effect on our operations.

Some of our potential losses may not be covered by insurance. We may not be able to obtain or maintain adequate insurance coverage.

We maintain insurance to cover costs and losses from certain risk exposures in the ordinary course of our operations, but our insurance does not cover all of the costs and losses from all events. We are responsible for certain retentions and deductibles that vary by policy, and we may suffer losses that exceed our insurance

coverage limits by a material amount. We may also incur costs or suffer losses arising from events against which we have no insurance coverage. In addition, large-scale market trends or the occurrence of adverse events in our business may raise our cost of procuring insurance or limit the amount or type of insurance we are able to secure. We may not be able to maintain our current coverage, or obtain new coverage in the future, on commercially reasonable terms or at all. Incurring uninsured or underinsured costs or losses could harm our business.

Our fraud detection processes and information security systems may not successfully detect all fraudulent activity by third parties aimed at our employees or agents, which could adversely affect our reputation and business results.

We make a large number of wire transfers in connection with loan and real estate closings and process sensitive personal data in connection with these transactions. Although we have sophisticated fraud detection processes and have taken other measures to continuously improve controls to identify fraudulent activity, we may not be able to detect and prevent all such activity. Persistent or pervasive fraudulent activity may cause agents or clients to lose trust in us and decrease or terminate their usage of our platform, which could materially harm our operations, business, results, and financial condition.

Failure to maintain effective internal control over financial reporting could adversely affect us.

The accuracy of our financial reporting depends on the effectiveness of our internal control over financial reporting, the implementation of which requires significant management attention. Internal control over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements and may not prevent or detect misstatements because of its inherent limitations. These limitations include, among others, the possibility of human error, inadequacy or circumvention of controls and fraud. If we do not maintain effective internal control over financial reporting or design and implement controls sufficient to provide reasonable assurance with respect to the preparation and fair presentation of our financial statements, including in connection with controls executed for us by third parties, we might fail to timely detect any misappropriation of corporate assets or inappropriate allocation or use of funds and could be unable to file accurate financial reports on a timely basis. As a result, our reputation, results of operations and stock price could be materially adversely affected.

Changes in accounting standards, subjective assumptions and estimates used by management related to complex accounting matters could have an adverse effect on our business, financial condition and results of operations.

Generally accepted accounting principles in the United States of America, or GAAP, and related accounting pronouncements, implementation guidance and interpretations with regard to a wide range of matters, such as revenue recognition, lease accounting, stock-based compensation, asset impairments, valuation reserves, income taxes and the fair value and associated useful lives of acquired long-lived assets, intangible assets and goodwill, are highly complex and involve many subjective assumptions, estimates and judgments made by management. Changes in these rules or their interpretations or changes in underlying assumptions, estimates or judgments made by management could significantly change our reported results and adversely impact our business, financial condition and results of operations.

Risks Relating to the Distribution

Following the Distribution, we will be materially dependent on Vector’s performance under various agreements.

We will enter into various agreements with Vector related to the Distribution, including a Distribution Agreement, a Tax Disaffiliation Agreement, a Transition Services Agreement, an Employee Matters Agreement and Aviation Agreements, and will enter into certain other arrangements (including other support services).

These agreements include the allocation of employee benefits, taxes and certain other liabilities and obligations attributable to periods prior to, at and after the Distribution. In connection with the Distribution, we will provide Vector with indemnities with respect to liabilities arising out of our business, and Vector will provide us with indemnities with respect to liabilities arising out of the business retained by Vector.

Vector will provide the Company with certain business services that were performed by Vector prior to the Distribution, such as information technology, accounts payable, payroll, tax, certain legal and accounting functions, human resources, insurance and risk management, government affairs, investor relations, corporate communications, benefit plan administration and reporting, and internal audit functions as well as certain marketing functions. These services include the collection and storage of certain personal information regarding employees and/or customers as well as information regarding the Company, Vector and our counter-parties. The Company will also pay Vector $350,000 per month for office space and secretarial and administrative services provided to members of our management team.

The Company and Vector will each rely on the other to perform its obligations under all of these agreements. If Vector were to breach or be unable to satisfy its material obligations under these agreements, including a failure to satisfy its indemnification or other financial obligations, or these agreements otherwise terminate or expire and we do not enter into replacement agreements, we could suffer operational difficulties and/or significant losses.

Prior to the Distribution, there will have been no regular way trading market for our common stock. We cannot predict the extent to which investors’ interest will lead to a liquid trading market or whether the market price of our common stock will be volatile. The market price of our common stock could fluctuate significantly for many reasons, including in response to the risk factors listed in this prospectus or for reasons unrelated to our specific performance, such as reports by industry analysts, investor perceptions, or negative developments for our customers, competitors or suppliers, as well as general economic and industry conditions.

The combined post-Distribution value of Vector and Spinco shares may not equal or exceed the pre-Distribution value of Vector shares.

After the Distribution, Vector common stock will continue to be listed and traded on the NYSE. We cannot assure you that the combined trading prices of Vector common stock and Spinco common stock after the Distribution, as adjusted for any changes in the combined capitalization of these companies, will be equal to or greater than the trading price of Vector common stock prior to the Distribution. Until the market has fully evaluated the business of Vector without the business of Spinco, the price at which Vector common stock trades may fluctuate significantly. Similarly, until the market has fully evaluated the business of Spinco, the price at which shares of Spinco common stock trade may fluctuate significantly.

The Distribution could result in significant tax liability.

respect of shares of Vector common stock underlying Vector stock option awards and restricted stock awards will be reduced in satisfaction of such holders’ tax obligations. The opinion will not be binding on the IRS or the courts. See “The Distribution — Material U.S. Federal Income Tax Consequences of the Distribution.” Certain transactions related to the Distribution that are not addressed by the opinion could result in the recognition of income or gain by Vector. The opinion will rely on factual representations and reasonable assumptions, which, if incorrect or inaccurate, may jeopardize the ability to rely on such opinion.

If the Distribution does not qualify for tax-free treatment for U.S. federal income tax purposes, then, in general, Vector would recognize taxable gain in an amount equal to the excess of the fair market value of our common stock distributed in the Distribution over Vector’s tax basis therein (i.e., as if it had sold such common stock in a taxable sale for its fair market value). In addition, the receipt by Vector stockholders of common stock of our Company would be a taxable distribution, and each U.S. holder that receives our common stock in the Distribution would be treated as if the U.S. holder had received a distribution equal to the fair market value of our common stock that was distributed to it, which generally would be treated first as a taxable dividend to the extent of such holder’s pro rata share of Vector’s earnings and profits, then as a non-taxable return of capital to the extent of the holder’s tax basis in its Vector common stock, and thereafter as capital gain with respect to any remaining value. It is expected that the amount of any such taxes to Vector stockholders and Vector would be substantial. See “The Distribution — Material U.S. Federal Income Tax Consequences of the Distribution.”

We may have a significant indemnity obligation to Vector if the Distribution is treated as a taxable transaction.

We will enter into a Tax Disaffiliation Agreement with Vector, which will set out each party’s rights and obligations with respect to federal, state, local or foreign taxes for periods before and after the Distribution and related matters such as the filing of tax returns and the conduct of IRS and other audits. Pursuant to the Tax Disaffiliation Agreement, we will be required to indemnify Vector for its losses and taxes resulting from the breach of certain covenants and for certain taxable gain recognized by Vector, including as a result of certain acquisitions of our stock or assets. If we are required to indemnify Vector under the circumstances set forth in the Tax Disaffiliation Agreement, we may be subject to substantial liabilities, which could materially adversely affect our financial position.

The tax rules applicable to the Distribution may restrict us from engaging in certain corporate transactions or from raising equity capital beyond certain thresholds for a period of time after the Distribution.

To preserve the tax-free treatment of the Distribution to Vector and its stockholders, under the Tax Disaffiliation Agreement with Vector, for the two-year period following the Distribution, we will be subject to restrictions with respect to:

•

entering into any transaction pursuant to which 35% or more of our shares or 50% or more of our assets would be acquired, whether by merger or otherwise, unless certain tests are met;

•

issuing equity securities, if any such issuances would, in the aggregate, constitute 35% or more of the voting power or value of our capital stock;

•

certain repurchases of our common shares;

•

ceasing to actively conduct our business;

•

amendments to our organizational documents (i) affecting the relative voting rights of our stock or (ii) converting one class of our stock to another;

•

liquidating or partially liquidating; and

•

taking any other action that prevents the Distribution and certain related transactions from being tax-free.

These restrictions may limit our ability during such period to pursue strategic transactions of a certain magnitude that involve the issuance or acquisition of our stock or engage in new businesses or other transactions that might

increase the value of our business. These restrictions may also limit our ability to raise significant amounts of cash through the issuance of stock, especially if our stock price were to suffer substantial declines, or through the sale of certain of our assets. For more information, see the sections entitled “The Distribution — Material U.S. Federal Income Tax Consequences of the Distribution” and “Certain Relationships and Related Party Transactions — Relationship Between Vector and Us After the Distribution — Tax Disaffiliation Agreement.”

We could be subject to future tobacco-related lawsuits.

In connection with Vector’s tobacco business, from time to time we may be named as a defendant in tobacco-related lawsuits, notwithstanding the completion of the Distribution. Pursuant to the Distribution Agreement we will enter into with Vector in connection with the Distribution, Vector and each of its subsidiaries has agreed to indemnify us for liabilities related to Vector’s tobacco business, including liabilities that we may incur for tobacco-related litigation. While we do not believe that we have any liability for tobacco-related claims, an adverse decision in a tobacco-related lawsuit against us could, if the indemnification is deemed for any reason to be unenforceable or any amounts owed to us thereunder are not collectible, in whole or in part, have a material adverse effect on us.

We do not have an operating history as a stand-alone public company.

In the past, our operations have been a part of Vector and Vector provided us with various financial, operational and managerial resources for conducting our business. Following the Distribution, we will maintain our own credit and banking relationships and perform certain of our own financial and operational functions. We cannot assure you that we will be able to successfully put in place the financial, operational and managerial resources necessary to operate as a public company or that we will be able to be profitable doing so.

Our historical financial results and our unaudited pro forma condensed combined consolidated financial statements may not be representative of our results as a separate, stand-alone company.

The historical financial information we have included in this prospectus has been derived from the combined consolidated financial statements and accounting records of Vector and does not necessarily reflect what our financial position, results of operations or cash flows would have been had we been a separate, stand-alone company during the periods presented. Although Vector did account for our business as a separate business segment, we were not operated as a separate, stand-alone company for the historical periods presented. The historical costs and expenses reflected in our combined consolidated financial statements include an allocation for certain corporate functions historically provided by Vector, including general corporate expenses and employee benefits and incentives. These allocations were based on what we and Vector considered to be reasonable reflections of the historical utilization levels of these services required in support of our business. The historical information does not necessarily indicate what our results of operations, financial position, cash flows or costs and expenses will be in the future. Our pro forma financial information set forth under “Unaudited Pro Forma Condensed Combined Consolidated Financial Information” reflects changes to our operations as a result of the separation. However, there can be no assurances that this unaudited pro forma condensed combined consolidated financial information will appropriately reflect our financial position or results of operations as a separate, stand-alone company.

We may incur material costs and expenses as a result of our separation from Vector.

We may incur costs and expenses greater than those we currently incur as a result of our separation from Vector. These increased costs and expenses may arise from various factors, including financial reporting and costs associated with complying with federal securities laws (including compliance with the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”)). In addition, we expect to either maintain similar or have increased corporate and administrative costs and expenses to those we incurred while part of Vector, even though

following the Distribution we will be a smaller, stand-alone company. We cannot assure you that these costs will not be material to our business.

Section 404 of the Sarbanes-Oxley Act requires any company subject to the reporting requirements of the U.S. securities laws to do a comprehensive evaluation of its and its consolidated subsidiaries’ internal control over financial reporting. To comply with this statute, we will eventually be required to document and test our internal control procedures, our management will be required to assess and issue a report concerning our internal control over financial reporting, and our independent auditors will be required to issue an opinion on the Company’s internal controls over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of its testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act. If our management cannot favorably assess the effectiveness of our internal control over financial reporting or our auditors identify material weaknesses in our internal controls, investor confidence in our financial results may weaken, and our stock price may suffer.

The reduced disclosure requirements applicable to us as an “emerging growth company” may make our common stock less attractive to investors.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may avail ourselves of certain exemptions from various reporting requirements of public companies that are not “emerging growth companies,” including, but not limited to, an exemption from complying with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, and, like smaller reporting companies, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirement of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may remain an emerging growth company for up to five full fiscal years following the Distribution. We would cease to be an emerging growth company, and, therefore, become ineligible to rely on the above exemptions, if we: (a) have more than $1.07 billion in annual revenue in a fiscal year; (b) issue more than $1 billion of non-convertible debt over a three-year period; or (c) become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would generally occur after: (i) we have filed at least one annual report; (ii) we have been a Securities and Exchange Commission (“SEC”) reporting company for at least twelve months; and (iii) the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.

If some investors find our common stock less attractive as a result of the exemptions available to us as an emerging growth company, there may be a less active trading market for our common stock and our value may be more volatile than that of an otherwise comparable company that does not avail itself of the same or similar exemptions.

Future stock sales could adversely affect the trading price of our common stock.

All of the shares of common stock will be freely tradable without restriction or further registration under the Securities Act unless the shares are owned by our “affiliates” as that term is defined in the rules under the Securities Act. Shares held by “affiliates” may be sold in the public market only if registered or if they qualify for an exemption from registration under Rule 144, which is summarized under “Shares Eligible for Future Sale.”

Sales of a substantial number of shares of common stock could adversely affect the market price of the common stock and could impair our future ability to raise capital through an offering of our equity securities.

We will share certain key directors and officers with Vector, which means those officers will not devote their full time and attention to our affairs and the overlap may give rise to conflicts.

Following the Distribution, there will be an overlap between certain key directors and officers of the Company and of Vector. Howard M. Lorber will serve as the President and Chief Executive Officer of the Company and of Vector. Richard J. Lampen will serve as the Chief Operating Officer of the Company and of Vector, J. Bryant Kirkland III will serve as the Chief Financial Officer and Treasurer of the Company and of Vector, Marc N. Bell will serve as General Counsel and Secretary of the Company and of Vector, and J. David Ballard will serve as Senior Vice President, Enterprise Efficiency and Chief Technology Officer of the Company and of Vector. As a result, following the Distribution, not all of our executive officers will be devoting their full time and attention to the Company’s affairs. In addition, immediately following the Distribution, three members of our Board, Messrs. Lorber, Lampen and White, will also be directors of Vector. The Overlap Persons may have actual or apparent conflicts of interest with respect to matters involving or affecting each company. For example, there will be the potential for a conflict of interest when we on the one hand, and Vector and its respective subsidiaries and successors on the other hand, are party to commercial transactions concerning the same or adjacent real property investments. In addition, after the Distribution, certain of our directors and officers will continue to own stock and/or stock options or other equity awards of Vector. These ownership interests could create actual, apparent or potential conflicts of interest when these individuals are faced with decisions that could have different implications for our Company and Vector. See “Certain Relationships and Related Party Transactions — Related Party Transaction Approval Policy” for a discussion of certain procedures we will institute to help ameliorate such potential conflicts that may arise.

Our overlapping directors and officers with Vector may result in the diversion of corporate opportunities to Vector, and other conflicts and provisions in our amended and restated certificate of incorporation may provide us no remedy in that circumstance.

The Company’s amended and restated certificate of incorporation will acknowledge that directors and officers of the Company may also be serving as directors, officers, employees or agents of Vector or any subsidiary thereof, and that the Company may engage in material business transactions with Vector. The Company will renounce its rights to certain business opportunities and the Company’s amended and restated certificate of incorporation will provide that no Overlap Person will be liable to the Company or its stockholders for breach of any fiduciary duty that would otherwise occur by reason of the fact that any such individual directs a corporate opportunity (other than certain limited types of opportunities set forth in our amended and restated certificate of incorporation) to Vector or any subsidiary thereof instead of the Company, or does not refer or communicate information regarding such corporate opportunities to the Company. These provisions in our amended and restated certificate of incorporation will also expressly validate certain contracts, agreements, arrangements and transactions (and amendments, modifications or terminations thereof) between the Company and Vector and, to the fullest extent permitted by law, will provide that the actions of the Overlap Persons in connection therewith are not breaches of fiduciary duties owed to the Company, any of its subsidiaries or their respective stockholders. See “Description of Capital Stock — Certain Corporate Opportunities and Conflicts.”

Our amended and restated certificate of incorporation will provide, to the fullest extent permitted by law, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.

Our amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that the Court of Chancery of the State of Delaware will be the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (1) any derivative action or proceeding brought on the Company’s behalf; (2) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of

the Company’s directors, officers, employees, or agents to us or the Company’s stockholders; (3) any action asserting a claim against the Company arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or amended and restated bylaws; (4) any action to interpret, apply, enforce, or determine the validity of the Company’s amended and restated certificate of incorporation or amended and restated bylaws; or (5) any action asserting a claim governed by the internal affairs doctrine.

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers or employees, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder and may therefore bring a claim in another appropriate forum. We cannot be certain that a court will decide that this provision is either applicable or enforceable, and if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

Our amended and restated certificate of incorporation will provide that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law, subject to certain exceptions. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both federal and state courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, the amended and restated certificate of incorporation will provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act and the rules and regulations thereunder. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions:

•

prohibit our stockholders from calling special stockholder meetings, or taking action by written consent;

•

permit the Board to establish the number of directors and fill any vacancies and newly-created directorships;

•

provide for a classified board of directors, with each director serving a staggered three-year term;

•

provide that each director may be removed by the stockholders only for cause;

•

disallow the use of cumulative voting for the election of directors;

•

authorize the issuance of preferred stock which can be created and issued by our Board without prior stockholder approval, with rights senior to those of the common stock;

•

require at least a supermajority vote of our stockholders to amend our bylaws or certain provisions of our certificate of incorporation; and

•

provide for advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors.

In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law (the “DGCL”), which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by our then-current board of directors, including delaying or impeding a merger, tender offer, or proxy contest involving our company. Any delay or prevention of a change of control transaction or changes in our Board could cause the market price of our common stock to decline.

USE OF PROCEEDS

We will not receive any proceeds from the distribution of our common stock in the Distribution.

DETERMINATION OF OFFERING PRICE

No consideration will be paid for the shares of our common stock distributed in the Distribution.

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

In addition to historical information, this prospectus contains “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements include information relating to our intent, belief or current expectations, primarily with respect to, but not limited to, economic outlook, capital expenditures, cost reduction, cash flows, operating performance, growth expectations, competition, legislation and regulations, litigation, and related industry developments (including trends affecting our business, financial condition and results of operations) and our potential spin-off from Vector.

We identify forward-looking statements in this prospectus by using words or phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may be,” “objective,” “opportunistically,” “plan,” “potential,” “predict,” “project,” “prospects,” “seek,” and “will be” and similar words or phrases or their negatives.

Forward-looking statements involve important risks and uncertainties that could cause our actual results, performance or achievements to differ materially from our anticipated results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, without limitation, the following:

•

general economic and market conditions, and any changes therein, due to acts of war and terrorism or otherwise;

•

governmental regulations and policies;

•

adverse changes in global, national, regional and local economic and market conditions, including those related to pandemics and health crises, such as the outbreak of COVID-19 and the impact of potential COVID-19 variants;

•

the extent and timing of COVID-19 vaccine administration and the duration of the COVID-19 pandemic;

•

our ability to effectively manage the impacts of the COVID-19 pandemic and any government-mandated or encouraged suspension of our business operations;

•

the impacts of the Tax Cuts and Jobs Act of 2017, including its impact on the markets of our business;

•

effects of industry competition;

•

severe weather events or natural or man-made disasters, including increasing the severity or frequency of such events due to climate change or otherwise, or other catastrophic events may disrupt our business and have an unfavorable impact on home sale activity;

•

the level of our expenses, including our corporate expenses as a stand-alone publicly-traded company;

•

our status as an emerging growth company;

•

the tax-free treatment of the Distribution;

•

our lack of operating history as a public company and costs associated with being an independent public company;

•

potential dilution to holders of our common stock as a result of issuances of additional shares of common stock to fund our financial obligations and other financing activities;

•

the failure of the Company or Vector to satisfy its obligations under the Transition Services Agreement or other agreements entered into in connection with the Distribution; and

•

the additional factors described under “Risk Factors” in this prospectus.

Further information on the risks and uncertainties to our business include the risk factors discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in this prospectus.

Although we believe the expectations reflected in these forward-looking statements are based on reasonable assumptions, there is a risk that these expectations will not be attained and that any deviations will be material. The forward-looking statements speak only as of the date they are made, and we disclaim any obligation to update or revise the forward-looking statements contained herein, except as otherwise required by applicable federal securities laws.

BUSINESS

Our common stock has been authorized for listing on the NYSE under the symbol “DOUG”.

Overview

With a leading luxury brand and a comprehensive suite of technology-enabled real estate services and investments, Spinco is well positioned to capitalize on opportunities in the large and growing U.S. residential real estate market. Since the beginning of 2020, U.S. homeowner equity has grown 17.6% to $23.6 trillion. Further, new and existing home sales in the U.S. are forecast to grow to approximately 7.4 million units in 2022, compared to approximately 6.9 million, 6.5 million and 6.0 million units in 2021, 2020 and 2019, respectively, according to the Mortgage Bankers Association — MBA Mortgage Finance Forecast. We believe increased homeowner equity and growth in home sales are benefiting from several factors including low mortgage interest rates, historically low inventory, and increased mobility resulting from COVID-19. This expanding market presents opportunities for significant commission income with national commission rates averaging approximately 5.8% as of September 30, 2021, according to HomeLight, while our actual commission rates have ranged between 5.27% in 2017 and 4.93% in 2020 due to our sales mix, which consists of higher-priced homes. Despite various “agentless” models such as “iBuying,” approximately 88% of buyers purchased their home through a real estate agent or broker and 89% of sellers were assisted by a real estate agent when selling their home, according to the NAR, highlighting the central role agents continue to play in real estate transactions. Agents are able to generate significant repeat business from clients and referrals, with 67% of home sellers and 60% of home buyers in 2020 choosing to work with an agent they had used in the past or through a referral, according to NAR. Repeat business, as well the ability to provide ancillary services, allows agents to extend their client relationships and generate significant lifetime value.

Since its inception in 1911, Douglas Elliman has challenged the status quo of the real estate industry. The company was founded on Douglas L. Elliman’s vision that New Yorkers would shift their preference for traditional homes to favor luxury apartments that were both sold and managed by comprehensive real estate companies. More than a century later, the Douglas Elliman brand is still associated with service, luxury and forward thinking — our markets are primarily international finance and technology hubs that are densely populated and offer housing inventory at premium price points. The average transaction value of a home we sold in the nine months ended September 30, 2021 was approximately $1.60 million — significantly higher than our principal competitors. Douglas Elliman is one of the largest residential brokerage companies in the New York metropolitan area, which includes New York City, Long Island, Westchester and the Hamptons, and the sixth largest in the U.S. We also operate leading property management, title and escrow companies, among other ancillary services.

Today, we are building on our record of innovation. Douglas Elliman is focused on digitizing, integrating and simplifying real estate activities for agents and elevating their clients’ experiences. We are bringing innovative, technology-driven PropTech solutions to Douglas Elliman by adopting new PropTech solutions for agents and their clients and also investing in select PropTech opportunities through New Valley Ventures. Our model is to source and use best-of-breed products and services that we believe will increase our efficiency. In addition to entering into business relationships with PropTech companies, we are committed to creating over time a portfolio of PropTech companies that, through our business and investment relationship, have access to our agents and their clients, as well as our know-how and experience, to grow their own businesses, while benefiting our operations. This keeps Douglas Elliman and our agents on the cutting edge of the industry with new solutions and services that can be integrated into our technology foundation, while also remaining asset-light. Furthermore, we maintain upside potential in the success of our PropTech partners in which we invest through minority stakes in their capital structures.

We have a track record of generating profitable growth. For the year ended December 31, 2020, despite the unprecedented impact of the COVID-19 pandemic on many of our markets, we had total revenues of $774.0 million, a net loss of $46.4 million and Adjusted EBITDA of $22.1 million. Our management responded to the profound impact of the COVID-19 pandemic by adjusting Douglas Elliman’s expense structure and introducing additional technology to improve the efficiency of our agents. Consequently, as markets reopened and vaccinations for COVID-19 became available, Douglas Elliman’s business rapidly improved and, for the twelve months ended September 30, 2021, our revenues were $1.29 billion, our net income was $92.7 million and our Adjusted EBITDA was $106.2 million. For the nine months ended September 30, 2021, our revenues were $1.02 billion, representing a 101% increase from the prior year period, and for the three months ended September 30, 2021, our revenues were $354.2 million, on track for our highest yearly revenue ever. We are experiencing strong momentum in many of our markets and we believe we are well positioned to continue capitalizing on the attractive market opportunity. Douglas Elliman’s gross transaction value increased from $29.1 billion for the year ended December 31, 2020 to $47.7 billion for the twelve months ended September 30, 2021. The number of Principal Agents was 5,246 as of September 30, 2021, an increase from 4,996 as of December 31, 2020. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Business Metrics and Non-GAAP Financial Measures” for information regarding our non-GAAP financial measures and reconciliations to the most comparable GAAP measures.

Our Company

We are presently a subsidiary of Vector, a Delaware corporation engaged principally in the tobacco and real estate businesses. On November 8, 2021, Vector announced its plans to separate into two public companies, Vector and Spinco. The transaction, expected to be structured as a distribution of the Spinco business to the stockholders of Vector, is expected to qualify as a tax-free distribution for U.S. federal income tax purposes for Vector and its stockholders with respect to Spinco stock that is distributed with respect to the stock of Vector. Upon conclusion of the spin-off, Spinco will be headquartered in Miami, Florida.

Real Estate Services

offices with approximately 6,600 real estate agents in the New York metropolitan area, as well as in Florida, California, Connecticut, Massachusetts, Colorado, New Jersey, and Texas. The Douglas Elliman name is synonymous with luxury.

In August 2021, Douglas Elliman increased its ownership in Douglas Elliman Texas from 1% to 50% and is fully integrating the Texas business with the rest of our operations. We believe that the Texas market will be complementary to Douglas Elliman’s markets as several of its major cities are densely populated international finance and technology hubs with premium-priced housing inventory. Texas continues to be a top destination for many different demographics from across the country, which has supported the housing market and the number of real estate transactions in the state. According to the Texas Real Estate Research Center at Texas A&M University, the Texas median home price reached a record-breaking $305,400 in August 2021, up 16.8% year-over-year. Texas’ average DOM fell to a record-breaking 27 days, according to the same report, indicating strong demand.

Prominent new development sales and marketing firm. Douglas Elliman’s DEDM division distinguishes our positioning and reputation in the luxury real estate segment. DEDM is sought after by well-known real estate developers as it offers expertise in sales, leasing, and marketing for new developments throughout key markets in the United States and internationally. Drawing upon decades of experience and market-specific knowledge, DEDM offers a multidisciplinary approach that includes comprehensive in-house research, planning and design, marketing and sales. The firm ranks among New York City’s most prominent sales and marketing firms, with approximately 75 in-house development professionals. Through a strategic global alliance with Knight Frank Residential, the world’s largest privately-owned property consultancy, DEDM markets properties to international audiences. We employ a hybrid broker model where our traditional residential real estate agents work in tandem with our DEDM professionals and leverage their extensive industry relationships for the benefit of DEDM clients. Agents are able to market and sell high profile developments that enhance their brands and provide additional revenue commission potential. We believe this model provides a competitive advantage to our DEDM business while also increasing the attractiveness of the Douglas Elliman platform to current and prospective agents.

sponsored enterprises. Clear Path Mortgage will originate and market its mortgage lending services to real estate agents across Douglas Elliman’s Florida market as well as a broad consumer audience.

PropTech Solutions Supporting Real Estate Services

Elliman Essentials provides agents and employees with enhanced vendor access. Elliman Essentials provides a curated list of offerings from preferred vendors that Douglas Elliman’s approximately 6,600 agents and 775 employees access to source products, services and experiences in order to enhance business practices and purchase closing gifts for customers. Elliman Essentials can be accessed on our intranet portal, MyDouglas.

LOGO

PropTech Investments

•

Humming Homes: a tech-enabled home management service that is creating a new category of end-to-end home management. It has built a solution for single-family homeowners with a digitalfirst experience, offering a dedicated in-person home management team with a single point of contact and 24/7 support. The service employs data and insights to avoid reactive and expensive home maintenance issues. The investment will complement Douglas Elliman’s business in the Hamptons and align Humming Homes’ geographical growth with Douglas Elliman’s footprint in locations such as Aspen, Florida and Southern California.

•

MoveEasy: a client-and customer-facing digital concierge service designed to assist clients and customers moving into and “setting up” their new homes, while offering additional services to maintain their homes. In partnership with residential real estate brokerages, MoveEasy is delivered in a white-labeled format that features the name and contact information of the selling agent.

•

EVPassport: an entity that offers complete electronic vehicle charging solutions including hardware and software.

•

rental units across the country where renters can enroll in the loyalty program to earn points on rent paid. This platform enhances Douglas Elliman’s suite of offerings for both the renters and landlords it represents.

•

Persefoni AI: a SaaS platform built to enable enterprises of all sizes to accurately, dynamically, and regularly measure their carbon footprint across all operations.

•

The Lab PropTech Fund: a fund advised or managed by a Miami-based firm that aims to invest in emerging technologies with a focus on residential real estate and construction services.

•

Our Competitive Strengths

Technology that we believe is industry-leading and supports recruitment and retention of agents. We provide our agents with what we believe is the most advanced set of digital- and mobile-enabled tools and resources in the residential brokerage industry, including: cloud-based agent portal, workflow processing, commission system, customer acquisition tools, Innovation Lab, CRM and marketing tools. These tools are designed to support agent productivity, earnings potential and satisfaction and we believe they enhance our efforts to recruit and retain high-performing agents.

Growth Strategy

Maintain a disciplined capital allocation framework to create value for our stockholders. We are profitable and generate significant operating cash flow which provides financial flexibility with respect to investments for growth and return of capital to shareholders. We will seek to deploy a significant portion of our operating cash flow to fund growth opportunities to create stockholder value, such as PropTech investments, recruiting efforts, acquisitions (acqui-hires), and we also contemplate paying a quarterly dividend, initially $0.05 per share of our common stock, subject to approval by our Board of Directors, as described under “Dividend Policy” on page 67.

COVID-19 Pandemic

Regulation

Several facets of real estate brokerage businesses are subject to government regulation. For example, the real estate brokerage divisions are licensed as real estate brokers in the states in which they conduct their real estate brokerage businesses. In addition, real estate sales associates must be licensed as real estate brokers or salespersons in the states in which they do business. Future expansion of our real estate brokerage operations of Douglas Elliman into new geographic markets may subject Douglas Elliman to similar licensing requirements in other states.

RESPA and state real estate brokerage laws restrict payments that real estate brokers, title agencies, mortgage bankers, mortgage brokers and other settlement service providers may receive or pay in connection with the sales of residences and referral of settlement services (e.g., mortgages, homeowners insurance and title insurance). Such laws may, to some extent, restrict preferred alliance and other arrangements involving our real estate franchise, real estate brokerage, settlement services and relocation businesses. In addition, RESPA and similar state laws require timely disclosure of certain relationships or financial interests with providers of real estate settlement services.

Pursuant to the Dodd-Frank Act, administration of RESPA was transferred from the United States Department of Housing and Urban Development (“HUD”) to the new Consumer Financial Protection Bureau (“CFPB”), and it is possible that the practices of HUD, taking very expansive broad readings of RESPA, will continue or accelerate at the CFPB creating increased regulatory risk. RESPA also has been invoked by plaintiffs in private litigation for various purposes.

Competition

The real estate brokerage business is highly competitive. However, we believe that our ability to offer our customers a range of inter-related services and our level of residential real estate sales and marketing help position us to meet the competition and improve our market share.

We compete with multi-office independent real estate organizations and, to some extent, with franchise real estate organizations, such as RE/MAX, Century 21 Real Estate, Coldwell Banker Real Estate, Keller Williams, Sotheby’s International Realty, EXIT Realty, ERA, United Country, Weichert, Better Homes and Gardens, and other privately-owned companies. We believe that our principal competitors in 2021 will also increasingly include multi-office real estate organizations, such as Realogy Brokerage Group (formerly NRT LLC, whose affiliates include the New York City-based Corcoran Group as well as Coldwell Banker and Sotheby’s International offices owned by Realogy), Berkshire Hathaway HomeServices of America, Inc., Compass, eXp Realty, Redfin and other privately-owned companies. Specific to New York City, our principal competitors include Corcoran, Compass, Brown Harris Stevens, Sotheby’s International and Warburg Realty. Residential brokerage firms compete for business primarily on the basis of reputation, personal contacts, marketing and public relations services; and, recently, technological innovations and, to a greater degree, commission.

Human Capital

We have long believed that the diversity and talent of our people provide a competitive advantage to Douglas Elliman. As of December 31, 2020, we employed approximately 775 people with 750 people employed by our real estate brokerage business and 25 people employed at our corporate headquarters.

The residential real estate business is built upon personal relationships and we have long believed Douglas Elliman’s team of approximately 775 employees and approximately 6,600 agents (including 5,246 Principal Agents) as of September 30, 2021 distinguishes us from other residential real estate brokerage firms. Forbes recently recognized Douglas Elliman in its 2021 list of America’s best large employers and we believe this recognition is a testament to the hard work and resiliency of the Douglas Elliman family.

While most of Douglas Elliman’s employees are located in the New York and Miami metropolitan areas, its agents are located throughout the United States in New York, Florida, California, Colorado and New England. In an effort to continue to foster relationships with our employees and agents, as well as to address the social and economic impact of COVID-19, Douglas Elliman’s management implemented the following initiatives:

•

Hosted, and continue to host, more than 20 company-wide virtual town halls, podcasts and communications across all regions. These town halls are intended to promote a spirit of camaraderie and educate our employees and agents about working in a COVID-19 environment, among other things;

•

Converted all of our real estate brokerage training and educational courses to its online platform and

•

Continued to support diversity efforts, including sponsoring Aspen Gay Ski Week, matching employees’ and agents’ contributions to the NAACP Legal and Education Fund, the Asian American and Pacific Islander community and various other health and social charitable organizations.

We offer comprehensive benefit programs to our employees which provide them with, among other things, medical, dental, and vision healthcare; 401K matching contributions; paid parental leave; and paid vacation time.

We will continue to listen, while engaging and connecting with our employees and Douglas Elliman’s agents, to further our human capital management objectives by continuing the initiatives we first began during the COVID-19 pandemic.

Properties

Our principal executive offices are located in Miami, Florida in offices leased by Vector. The lease is for 12,390 square feet and expires in April 2023, subject to a five-year renewal option. Lease expense will be included in the computation of fees Spinco pays Vector.

We also have an executive office in New York, New York in an office leased by Vector. The lease is for approximately 9,000 square feet of office space and expires in 2025. Spinco’s operating properties are discussed above under the description of Spinco’s business and in Note 4 to our combined consolidated financial statements.

We lease 102 offices throughout New York, Connecticut, Florida, California, Colorado, Massachusetts and New Jersey. Leases expire at various times between 2021 and 2033. As of December 31, 2020, the properties leased are as follows:

Type

Number of Offices

Location

Owned or Leased

Approximate
Square Footage

Offices

New York City, NY

Leased

162,000

Offices

Long Island, NY

Leased

89,000

Offices

Florida

Leased

43,000

Offices

Westchester County, NY

Leased

3,000

Offices

California

Leased

84,000

Offices

Other

Leased

1,000

Legal Proceedings

The Company and its subsidiaries are subject to numerous proceedings, lawsuits and claims in connection with their ordinary business activities. Many of these matters are covered by insurance or, in some cases, the Company is indemnified by third parties. The Company is a defendant in various lawsuits. Although the outcome of these lawsuits cannot be predicted with certainty, management of the Company does not believe that resolution of these lawsuits will have a material adverse effect on the Company.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” These exemptions generally include, but are not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Although we are still evaluating the JOBS Act, we may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us as long as we qualify as an emerging growth company, except that we have irrevocably elected not to take advantage of the extension of time to comply with new or revised financial accounting standards available under Section 102(b) of the JOBS Act.

We will, in general, remain as an emerging growth company for up to five full fiscal years following the Distribution. We would cease to be an emerging growth company and, therefore, become ineligible to rely on the above exemptions, if we:

•

have more than $1.07 billion in annual revenue in a fiscal year;

•

issue more than $1 billion of non-convertible debt during the preceding three-year period; or

•

become a “large accelerated filer” as defined in Exchange Act Rule 12b-2, which would occur after: (i) we have filed at least one annual report pursuant to the Exchange Act; (ii) we have been an SEC-reporting company for at least twelve months; and (iii) the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter.

DIVIDEND POLICY

While we currently contemplate paying a quarterly cash dividend of $0.05 per share of our common stock following the Distribution, we have not yet determined the extent to which we will pay dividends on our common stock. The payment of any dividends in the future, and the timing and amount thereof, to our shareholders will fall within the sole discretion of our Board of Directors and will depend on many factors, such as our financial condition, results of operations and capital requirements, debt service obligations, restrictive covenants in the agreements governing our debt or debt we may incur in the future, industry practice, legal requirements, regulatory constraints and other factors that our Board of Directors deems relevant. Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and on our access to the capital markets. We cannot guarantee that we will pay a dividend in the future or continue to pay any dividends if we commence paying dividends.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined consolidated financial information presented below consists of an unaudited pro forma condensed combined consolidated balance sheet as of September 30, 2021 and unaudited pro forma condensed combined consolidated statements of operations for the nine months ended September 30, 2021, the year ended December 31, 2020 and the last twelve months ended September 30, 2021. The unaudited pro forma condensed combined consolidated financial statements presented below have been derived from the historical annual and interim condensed combined consolidated financial statements of Douglas Elliman Inc., including the unaudited condensed combined consolidated balance sheet as of September 30, 2021, the unaudited condensed combined consolidated statement of operations for the nine months ended September 30, 2021 and September 30, 2020, and the audited combined consolidated statement of operations for the year ended December 31, 2020, included elsewhere in this prospectus.

The following unaudited pro forma condensed consolidated combined financial statements have been prepared to reflect adjustments to Douglas Elliman Inc.’s historical financial information for the following autonomous entity adjustments and transaction accounting adjustments (the “Pro Forma Transactions”):

•

The contribution by Vector to Spinco of all the assets and liabilities that comprise the real estate services and PropTech investment business currently owned and operated by Vector through New Valley, together with approximately $200 million cash and cash equivalents, net of each of the current and long-term portion of “Notes payable and other obligations,” which we refer to in this prospectus as “net cash and cash equivalents;” and

•

The impact of, and transactions contemplated by, the Distribution Agreement, Tax Disaffiliation Agreement, Transition Services Agreement and Employee Matters Agreement. See “Certain Relationships and Related Party Transactions — Relationship Between Vector and Us After the Distribution.”

The unaudited pro forma condensed combined consolidated balance sheet as of September 30, 2021 has been prepared giving effect to the Pro Forma Transactions as if the Pro Forma Transactions had occurred as of September 30, 2021. The unaudited pro forma condensed combined consolidated statements of operations for the nine months ended September 30, 2021, the year ended December 31, 2020 and the last twelve months ended September 30, 2021 have been prepared giving effect to the Pro Forma Transactions as if the Pro Forma Transactions had occurred on January 1, 2020. We present unaudited pro forma condensed combined consolidated financial information for the last twelve months ended September 30, 2021 because unusual events, primarily as a result of the COVID-19 pandemic in 2020, have occurred and, as a result of those unusual events, we believe that the most recent twelve month period is more representative of normal operations of Douglas Elliman than the year ended December 31, 2020.

The unaudited pro forma condensed combined consolidated financial statements presented below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical annual and interim condensed combined consolidated financial statements and corresponding notes thereto included elsewhere in this prospectus. The unaudited pro forma condensed combined consolidated financial statements constitute forward-looking information and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See “Cautionary Statement Concerning Forward-Looking Statements and Information.”

DOUGLAS ELLIMAN INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED

BALANCE SHEET

As of September 30, 2021

(in thousands, except share and per share data)


	September 30, 2021		Autonomous Entity Adjustments	Transaction Accounting Adjustments			Note	Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	158,804		$	53,696		(a)	$	212,500
Receivables		26,531							26,531
Income taxes receivable, net		—							—
Agent receivables, net		11,127							11,127
Restricted cash and cash equivalents		12,548							12,548
Other current assets		9,512							9,512

Total current assets		218,522			53,696				272,218
Property, plant and equipment, net		40,132							40,132
Operating lease right-of-use assets		124,797							124,797
Long-term investments at fair value		3,566							3,566
Contract assets, net		28,688							28,688
Goodwill		32,571							32,571
Other intangible assets, net		74,619							74,619
Equity-method investments		2,790							2,790
Other assets		8,755							8,755

Total assets	$	534,440		$	53,696			$	588,136

LIABILITIES AND NET INVESTMENT
Current liabilities:								$	12,526
Current portion of notes payable and other obligations	$	12,526							22,503
Current operating lease liabilities		22,503
Income taxes payable, net		1,143		$	24,058		(b)		25,201
Accounts payable		8,228							8,228
Commissions payable		25,648							25,648
Accrued salaries and benefits		23,293							23,293
Contract liabilities		5,843							5,843
Other current liabilities		20,200							20,200

Total current liabilities		119,384			24,058				143,442
Notes payable and other obligations, less current portion		3,309							3,309
Non-current operating lease liabilities		131,923							131,923
Contract liabilities		38,734							38,734
Deferred income taxes		143			14,363		(c)		14,506
Other liabilities		4,250			(4,250	)	(d)		—

Total liabilities		297,743			34,171				331,914

Commitments and contingencies
Stockholders’ equity/net investment
Common stock, $0.01 par value		—			776		(e)		776
Additional paid-in-capital		—			253,566		(e)		253,566
Parent’s net investment		234,817			(234,817	)	(e)		—
Non-controlling interest		1,880							1,880

Total stockholders’ equity/net investment		236,697			19,525				256,222

Total liabilities and net investment	$	534,440		$	53,696			$	588,136

DOUGLAS ELLIMAN INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED

STATEMENT OF OPERATIONS

For the year ended December 31, 2020

(in thousands, except share and per share data)


	Year ended December 31, 2020			Autonomous Entity Adjustments			Transaction Accounting Adjustments			Note	Pro Forma
Revenues
Commissions and other brokerage income	$	733,751									$	733,751
Property management		35,115										35,115
Other ancillary services		5,121										5,121

Total revenues		773,987										773,987

Expenses
Real estate agent commissions		546,948										546,948
Sales and marketing		64,097										64,097
Operations and support		49,895										49,895
General and administrative		76,134		$	16,500					(f)		92,634
Technology		14,858										14,858
Depreciation and amortization		8,537										8,537
Loss on disposal of assets		1,169										1,169
Impairments of goodwill and intangible assets		58,252										58,252
Restructuring expenses		3,382										3,382

Operating loss		(49,285	)		(16,500	)						(65,785	)

Other income
Interest income, net		190										190
Equity (losses) in from equity-method investments		(225	)									(225	)
Change in fair value of contingent liability		2,149					$	(2,149	)	(d)		—
Investment income		843										843

Loss before provision for income taxes		(46,328	)		(16,500	)		(2,149	)			(64,977	)
Income tax provision		44			(4,734	)		(12,890	)	(b)		(17,580	)

Net (loss) income attributed to Douglas Elliman Inc.	$	(46,372	)	$	(11,766	)	$	10,741			$	(47,397	)

Earnings per share
Basic											$	(0.61	)

Diluted											$	(0.61	)

Weighted average shares outstanding^(g)
Basic												77,720,631

Diluted												77,720,631

DOUGLAS ELLIMAN INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED

STATEMENT OF OPERATIONS

For the nine months ended September 30, 2021

(in thousands, except share and per share data)


	Nine months ended September 30, 2021			Autonomous Entity Adjustments			Transaction Accounting Adjustments			Note	Pro Forma
Revenues
Commissions and other brokerage income	$	974,048									$	974,048
Property management		28,289										28,289
Other ancillary services		16,575										16,575

Total revenues		1,018,912										1,018,912

Expenses
Real estate agent commissions		737,767										737,767
Sales and marketing		59,331										59,331
Operations and support		56,697										56,697
General and administrative		64,481		$	12,375					(f)		76,856
Technology		11,302										11,302
Depreciation and amortization		6,409										6,409
Loss on disposal of assets		—										—
Impairments of goodwill and intangible assets		—										—
Restructuring expenses		—										—

Operating income		82,925			(12,375	)						70,550

Other income
Interest income		65										65
Equity in earnings from equity-method investments		(118	)									(118	)
Change in fair value of contingent liability		(3,252	)				$	3,252		(d)		—
Investment income		566						—				566

Income (loss) before provision for income taxes		80,186			(12,375	)		3,252				71,063
Income tax provision		1,656			(3,551	)		24,304		(b)		22,409

Net income (loss)		78,530			(8,824	)		(21,052	)			48,654
Net loss attributed to non-controlling interest		120			—			—				120

Net income (loss) attributed to Douglas Elliman Inc.	$	78,650		$	(8,824	)	$	(21,052	)		$	48,774

Earnings per share
Basic											$	0.63

Diluted											$	0.63

Weighted average shares outstanding
Basic												77,720,631

Diluted												77,720,631

DOUGLAS ELLIMAN INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED

STATEMENT OF OPERATIONS

For the twelve months ended September 30, 2021

(in thousands, except share and per share data)


	A			B			C			A-B+C = D			E			F				D+E+F
	Year ended December 31, 2020			Nine months ended September 30, 2020			Nine months ended September 30, 2021			Twelve months ended September 30, 2021			Autonomous Entity Adjustments			Transaction Accounting Adjustments			Note	Pro Forma
Revenues
Commissions and other brokerage income	$	733,751		$	477,720		$	974,048		$	1,230,079									$	1,230,079
Property management		35,115			26,195			28,289			37,209										37,209
Other ancillary services		5,121			2,611			16,575			19,085										19,085

Total revenues		773,987			506,526			1,018,912			1,286,373										1,286,373

Expenses		xx			xx			xx
Real estate agent commissions		546,948			351,325			737,767			933,390										933,390
Sales and marketing		64,097			40,649			59,331			82,779										82,779
Operations and support		49,895			35,809			56,697			70,783										70,783
General and administrative		76,134			62,275			64,481			78,340		$	16,500					(f)		94,840
Technology		14,858			11,137			11,302			15,023										15,023
Depreciation and amortization		8,537			6,405			6,409			8,541										8,541
Loss on disposal of assets		1,169			—			—			1,169										1,169
Impairments of goodwill and intangible assets		58,252			58,252			—			—										—
Restructuring expenses		3,382			3,281			—			101										101

Operating (loss) income		(49,285	)		(62,607	)		82,925			96,247			(16,500	)						79,747

Other income
Interest income, net		190			148			65			107										107
Equity in (losses) earnings from equity-method investments		(225	)		(196	)		(118	)		(147	)									(147	)
Change in fair value of contingent liability		2,149			2,082			(3,252	)		(3,185	)				$	3,185		(d)		—
Investment income		843			—			566			1,409						—				1,409

Income (loss) before provision for income taxes		(46,328	)		(60,573	)		80,186			94,431			(16,500	)		3,185				81,116
Income tax provision		44			(168	)		1,656			1,868			(4,734	)		28,492		(b)		25,626

Net income (loss)		(46,372	)		(60,405	)		78,530			92,563			(11,766	)		(25,307	)			55,490
Net loss attributed to non-controlling interest		—			—			120			120			—			—				120

Net (loss) income attributed to Douglas Elliman Inc.	$	(46,372	)	$	(60,405	)	$	78,650		$	92,683		$	(11,766	)	$	(25,307	)		$	55,610

Earnings per share
Basic																				$	0.72

Diluted																				$	0.72

Weighted average shares outstanding
Basic																					77,720,631

Diluted																					77,720,631

DOUGLAS ELLIMAN INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED

COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

(a)	Reflects cash received from Vector to effect the capitalization of Douglas Elliman in connection with the transaction.

(b)

Reflects the change in the provision for income tax expense as a result of the Company’s incorporation as a stand-alone corporation. The Company’s provision will include its distributable share of income from Douglas Elliman Realty, LLC which will continue to be taxed as a partnership for US income tax purposes. The provision for income taxes was calculated applying a blended statutory tax rate of 28.69% to the Company’s income before tax, adjusted for permanent items. The deferred tax impact from changes in temporary differences was also calculated using a blended statutory tax rate of 28.69%. These rates reflect the blended statutory tax rates in the U.S. as well as the states in which the Company operates.

(c)	Reflects the transfer of differences in financial statement carrying value and income tax basis in Vector’s investment in the Company.

(d)	Reflects the change in the fair value of the contingent liability associated with the acquisition of the 29.41% non-controlling interest of Douglas Elliman Realty, LLC in December 2018. In connection with the spin-off, Vector will assume such liability.

(e)

Upon Distribution, for purposes of the September 30, 2021 condensed combined consolidated balance sheet, Vector’s net investment in the Company will be redesignated as Douglas Elliman Inc.’s stockholders’ equity. Common stock, at par value, will be $776 to common stock and $253,566 to additional paid-in-capital based on the number of shares of Douglas Elliman Inc. common stock outstanding at the Distribution date. This adjustment also reflects the impact of the other pro forma adjustments reflected within the balance sheet. The adjustments are summarized below:


Impact of pro forma adjustments	$	19,525
Redesignation of net parent investment		234,817
Common stock adjustment		(776	)

Total additional paid-in-capital adjustment	$	253,566

(f)

Amounts allocated reflect management’s estimate of expenses allocable of Vector’s corporate headquarters operations and is established in the Transition Services Agreement filed in this prospectus as well as other public company expenses associated with Douglas Elliman having separate company operations.

(g)	“Weighted average shares outstanding” refers to the approximate number of shares of common stock of the Company expected to be outstanding immediately following the Distribution.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the combined consolidated financial statements and corresponding notes, and the unaudited pro forma condensed combined consolidated financial statements and corresponding notes included elsewhere in this prospectus. Any forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Any forward-looking statements are subject to a number of important factors, including those factors discussed under “Risk Factors” and “Special Note on Forward-Looking Statements,” that could cause our actual results to differ materially from those indicated in such forward-looking statements. We believe the assumptions underlying the unaudited pro forma condensed combined consolidated financial statements and corresponding notes are reasonable.

(All dollar amounts included herein are presented in thousands, except as otherwise noted.)

Introduction

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of the Company’s financial statements with a narrative from our management’s perspective. Our MD&A is organized as follows:

COVID-19 Pandemic and Current Business and Industry Trends. This section discusses the effects of the COVID-19 pandemic on our business and the steps we have taken to address such effects, including current business and industry trends.

Proposed Distribution and Basis of Presentation. This section provides a general description of the proposed spin-off that would separate our business from the other businesses of Vector.

Business Overview. This section provides a general description of our business, as well as other matters that we believe are important in understanding our results of operations and financial condition and in anticipating future trends.

Critical Accounting Estimates. This section includes a discussion of accounting estimates considered to be important to our financial condition and results of operations and which require significant judgment and estimates on the part of management in their application. In addition, our significant accounting estimates, including our critical accounting estimates, are discussed in the notes to our audited combined consolidated annual financial statements included elsewhere in this prospectus.

Results of Operations. This section provides an analysis of our results of operations for the nine months ended September 30, 2021 and 2020 and the years ended December 31, 2020, 2019 and 2018.

Liquidity and Capital Resources. This section provides a discussion of our financial condition and liquidity, an analysis of our cash flows for the nine months ended September 30, 2021 and 2020 and the years ended December 31, 2020, 2019 and 2018, as well as certain contractual obligations and off-balance sheet arrangements that existed at December 31, 2020.

COVID-19 Pandemic and Current Business and Industry Trends

We are one of the largest residential real estate brokers in the New York City market and approximately 46% of our brokerage revenues were derived from the New York City market in 2018 and 2019. Published reports and data indicate that the New York metropolitan area was initially impacted more than any other area in the United States. Consequently, various governmental agencies in the New York metropolitan area and in other markets where we operate instituted quarantines, “pause” orders, “shelter-in-place” rules, restrictions on travel and restrictions on the types of businesses that could operate. These restrictions adversely impacted our ability to conduct business during the year ended December 31, 2020 and, in particular from March 2020 to October 2020. For example, our agents were restricted from performing in-person showings of properties or conducting open houses in most of our markets from March 2020 to June 2020. We experienced a severe decline in closed sales volume in New York City from March 2020 to October 2020. As a result of the impact of the COVID-19 pandemic on the New York City market, and combined with the increased demand for existing homes in other areas of the U.S., the percentage of our brokerage revenues from the New York City market declined from approximately 46% in 2019 to approximately 32% for the twelve months ended September 30, 2021.

Beginning in April 2020, as a response to the impact of the COVID-19 pandemic, we made significant operating adjustments, including a reduction of brokerage personnel of approximately 25% and reductions of other administrative expenses, as well as a reduction, deferral or elimination of certain office lease expenses. As markets have reopened and our revenues have significantly increased, our expenses have increased in 2021 from the comparable 2020 periods. These increases were primarily the result of increased personnel expenses (associated with both discretionary compensation as well as the reinstatement of salary levels) and advertising expenses (associated with increased listing volume) in 2021.

A strong recovery in markets complementary to New York City, including Long Island, Westchester County, the Hamptons, Connecticut, Palm Beach, Miami, Los Angeles, and Aspen began late in the second quarter of 2020, following a period of sharp decline in existing home transactions that began in the final weeks of the first quarter of 2020 due to the COVID-19 crisis. More recently, we have experienced a recovery in New York City as well.

During the nine months ended September 30, 2021, we believe sustained high levels of demand in the markets in which we operate have been supported by beneficial consumer trends such as relaxation of social distancing measures and office re-openings coupled with further adoption of remote work trends, which we believe enhance consumers’ propensity to relocate to attractive tax and weather destinations, coupled with a favorable mortgage rate environment. In addition, continued high demand and low housing inventory levels in the markets in which we operate have driven increased average existing home prices throughout such markets in 2021, and we believe limited inventory contributed to the decline in our gross transaction volume from the second quarter to the third quarter. Nonetheless, we anticipate that our markets, and in particular, New York City, will continue to improve from 2020 levels for the remainder of 2021 and into 2022, with average existing home prices increasing and existing homes transaction growth remaining strong.

There remain significant uncertainties regarding whether the beneficial consumer trends discussed above, partially offset by low housing inventory levels, will be maintained, and whether such trends will continue to have a positive effect on our results of operations, financial position and cash flow, as well as significant uncertainties related to the COVID-19 pandemic, including the impact of COVID-19 variants, the duration of the pandemic and the length of immunity. See “Risk Factors.”

Proposed Distribution and Basis of Presentation

On August 13, 2021, the newly formed registrant, Douglas Elliman Inc. (together with its subsidiaries, “Spinco” or the “Company”), was incorporated in the State of Delaware. At a meeting on November 3, 2021, the board of directors of Vector authorized Vector’s management to proceed with the public filing of a registration on Form 10 and prepare for the separation of the Vector real estate services and technology business from its tobacco and real estate investment businesses. Subsequently, on [December 6], 2021, the board of directors of Vector and the board of directors of Spinco authorized the public filing of this prospectus. The spin-off is expected to be completed through a tax-free pro rata distribution of all the common stock of Spinco to Vector stockholders.

Completion of the transaction is subject to various conditions, including final approval by the board of directors of Vector, receipt of a tax opinion from counsel and the effectiveness of the registration statement with the SEC. References to “we,” “us,” “our,” “Spinco,” “Douglas Elliman” or the “Company” include the subsidiaries of Vector that will be subsidiaries of Spinco at the time of the Distribution.

The combined consolidated financial statements of the Company (the “combined consolidated financial statements”) were prepared on a stand-alone basis derived from the combined consolidated financial statements and accounting records of Vector. These financial statements reflect the combined historical results of operations, financial position and cash flows of the Company in accordance with GAAP and SEC Staff Accounting Bulletin Topic 1-B, Allocation of Expenses and Related Disclosure in Financial Statements of Subsidiaries, Divisions or Lesser Business Components of Another Entity. References to GAAP issued by the Financial Accounting Standards Board (“FASB”) are to the FASB Accounting Standards Codification, also referred to as the “Codification” or “ASC.”

Historically, separate financial statements have not been prepared for the Company, and it has not operated as a stand-alone business from Vector. The combined consolidated financial statements include certain assets and liabilities that have historically been held by Vector or by other Vector subsidiaries but are specifically identifiable or otherwise attributable to the Company. All significant intercompany transactions and balances between Vector and the Company have been included as components of Parent’s net investment in the combined consolidated financial statements, as they are to be considered effectively settled upon effectiveness of the Distribution. The combined consolidated financial statements are presented as if the Spinco businesses had been combined for all periods presented. The assets and liabilities in the combined consolidated financial statements have been reflected on a historical cost basis, as immediately prior to the Distribution all of the assets and liabilities presented are wholly owned by Vector and are being transferred to the Company at carry-over basis.

The combined consolidated statements of operations include allocations for certain support functions that are provided on a centralized basis and not historically recorded at the business unit level by Vector, such as expenses related to executive management, finance, legal, human resources, government affairs, information technology, and venue operations, among others. As part of the Distribution, certain corporate and operational support functions are being transferred to Spinco, and therefore, charges were reflected in order to properly burden all business units comprising Vector’s historical operations. These expenses have been allocated to Spinco on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis of combined revenues, headcount or other measures of Spinco or Vector, which is recorded as an increase to general and administrative expense.

Management believes the assumptions underlying the combined consolidated financial statements, including the assumptions regarding allocating general corporate expenses, are reasonable. Nevertheless, the combined consolidated financial statements may not include all of the actual expenses that would have been incurred by the Company and may not reflect its combined results of operations, financial position and cash flows had it been a stand-alone company during the periods presented. Actual costs that would have been incurred if the Company had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. The Company is unable to quantify the amounts that it would have recorded during the historical periods on a stand-alone basis as it is not practicable to do so.

Business Overview

according to the Mortgage Bankers Association — MBA Mortgage Finance Forecast. We believe increased homeowner equity and growth in home sales are benefiting from several factors including low mortgage interest rates, historically low inventory, and increased mobility resulting from COVID-19. This expanding market presents opportunities for significant commission income with national commission rates averaging approximately 5.8% as of September 30, 2021, according to HomeLight, while our actual commission rates have ranged between 5.27% in 2017 and 4.93% in 2020 due to our sales mix, which consists of higher-priced homes. Despite various “agentless” models such as “iBuying,” approximately 88% of buyers purchased their home through a real estate agent or broker and 89% of sellers were assisted by a real estate agent when selling their home, according to NAR, highlighting the central role agents continue to play in real estate transactions. Agents are able to generate significant repeat business from clients and referrals, with 67% of home sellers and 60% of home buyers in 2020 choosing to work with an agent they had used in the past or through a referral, according to NAR. Repeat business, as well the ability to provide ancillary services, allows agents to extend their client relationships and generate significant lifetime value.

Since its inception in 1911, Douglas Elliman has challenged the status quo of the real estate industry. The company was founded on Douglas L. Elliman’s vision that New Yorkers would shift their preference for traditional homes to favor luxury apartments that were both sold and managed by comprehensive real estate companies. More than a century later, the Douglas Elliman brand is still associated with service, luxury and forward thinking — our markets are primarily international finance and technology hubs that are densely populated and offer housing inventory at premium price points. The average transaction value of a home we sold in the nine months ended September 30, 2021 was $1,598 — significantly higher than our principal competitors. Douglas Elliman is one of the largest residential brokerage companies in the New York metropolitan area, which includes New York City, Long Island, Westchester and the Hamptons, and the sixth largest in the U.S. We also operate leading property management, title and escrow companies, among other ancillary services.

Today, we are building on our record of innovation. Douglas Elliman is focused on digitizing, integrating and simplifying real estate activities for agents and elevating their clients’ experiences. We are bringing innovative, technology-driven PropTech solutions to Douglas Elliman by adopting new PropTech solutions for agents and their clients and also investing in select PropTech opportunities through New Valley Ventures. Our model is to source and use best-of-breed products and services that we believe will increase our efficiency. In addition to entering into business relationships with PropTech companies, as described further below, we are committed to creating over time a portfolio of PropTech companies that, through our business and investment relationship, have access to our agents and their clients, as well as our know-how and experience, to grow their own businesses, while benefiting our operations. This keeps Douglas Elliman and our agents on the cutting edge of the industry with new solutions and services that can be integrated into our technology foundation, while also remaining asset-light. Furthermore, we maintain upside potential in the success of our PropTech partners in which we invest through minority stakes in their capital structures.

We have a track record of generating profitable growth. For the year ended December 31, 2020, despite the unprecedented impact of the COVID-19 pandemic on many of our markets, we had total revenues of $774,000, net loss of $46,400 and Adjusted EBITDA of $22,100. Our management responded to the profound impact of the COVID-19 pandemic by adjusting Douglas Elliman’s expense structure and introducing additional technology to improve the efficiency of our agents. Consequently, as markets reopened and vaccinations for COVID-19 became available, Douglas Elliman’s business rapidly improved and, for the twelve months ended September 30, 2021, our revenues were $1,290,000, our net income was $92,700 and our Adjusted EBITDA was $106,200. For the nine months ended September 30, 2021, our revenues were $1,019,000, representing a 101% increase from the prior year period, and for the three months ended September 30, 2021, our revenues were $354,000. We are experiencing strong momentum in many of our markets and we believe we are well positioned to continue capitalizing on the attractive market opportunity. Douglas Elliman’s gross transaction value increased from $29,100,000 for the year ended December 31, 2020 to $47,700,000 for the twelve months ended September 30, 2021. The number of Principal Agents was 5,246 as of September 30, 2021, an increase from 4,996 as of December 31, 2020. During this period of growth, we have maintained stable agent retention. See “— Key

Business Metrics and Non-GAAP Financial Measures” for information regarding our non-GAAP financial measures and reconciliations to the most comparable GAAP measures.

We believe our comprehensive suite of real estate solutions, our industry-leading brand name, and our talented team of employees and agents set us apart in the industry. We will pursue profitable growth opportunities through the expansion of our footprint, investments in cutting-edge PropTech companies through New Valley Ventures, continued recruitment of best-in-class talent, acquisitions (acqui-hires) and operational efficiencies. We will employ a disciplined capital allocation strategy aimed at generating sustainable long-term value for our stockholders.

Key Business Metrics and Non-GAAP Financial Measures

In addition to our financial results, we use the following business metrics to evaluate our business and identify trends affecting our business. To evaluate our operating performance, we also use Adjusted EBITDA and Adjusted EBITDA Margin and financial measures for the last twelve months (“LTM”) ended September 30, 2021 (“Non-GAAP Financial Measures”), which are financial measures not prepared in accordance with GAAP.


	Nine months ended September 30,						Years ended December 31,
	2021			2020			2020			2019			2018
Key Business Metrics
Total transactions (absolute)⁽¹⁾		23,299			15,135			22,686			23,479			22,990
Gross transaction value (in billions)⁽²⁾	$	37.2		$	18.6		$	29.1		$	28.8		$	28.1
Average transaction value per transaction (in thousands)⁽³⁾	$	1,598.2		$	1,232.2		$	1,281.2		$	1,226.9		$	1,222.4
Number of Principal Agents⁽⁴⁾		5,246	⁽⁵⁾		5,231			4,996			5,370			5,498
Annual Retention⁽⁶⁾		90	%		91	%		89	%
Net income (loss) attributed to Douglas Elliman Inc.	$	78,650		$	(60,405	)	$	(46,372	)	$	8,459		$	3,669
Net income (loss) margin		7.7	%		(11.9	%)		(5.99	%)		1.08	%		0.49	%
Adjusted EBITDA	$	89,334		$	5,331		$	22,055		$	5,158		$	12,331
Adjusted EBITDA margin		8.77	%		1.05	%		2.85	%		0.66	%		1.64	%

(1)

We calculate total transactions by taking the sum of all transactions closed in which our agent represented the buyer or seller in the purchase or sale of a home (excluding rental transactions). We include a single transaction twice when one or more of our agents represent both the buyer and seller in any given transaction.

(2)	Gross transaction value is the sum of all closing sale prices for homes transacted by our agents (excluding rental transactions). We include the value of a single transaction twice when our agents serve both the home buyer and home seller in the transaction.

(3)	Average transaction value per transaction is calculated as gross transaction value divided by total transactions.

(4)	The number of Principal Agents is determined as of the last day of the specified period. We use the number of Principal Agents, in combination with our other key business metrics such as total transactions and gross transaction value, as a measure of agent productivity.

(5)	Includes the Principal Agents acquired in connection with increased ownership from 1% to 50% in Douglas Elliman Texas in August 2021.

(6)	Annual Retention is calculated as the quotient of (x) the prior year revenue generated by agents retained divided by (y) the prior year revenue generated by all agents. We use Annual Retention as a measure of agent stability.

Non-GAAP Financial Measures

Adjusted EBITDA is a non-GAAP financial measure that represents our net income adjusted for depreciation and amortization, investment income, net, stock-based compensation expense, benefit from income taxes, and other items. Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by revenue. LTM financial measures are non-GAAP financial measures that are calculated by reference to the trailing four-quarter performance for the relevant metric.

We believe that Non-GAAP Financial Measures are important measures that supplement analysis of our results of operations and enhance an understanding of our operating performance. We believe Non-GAAP Financial Measures provide a useful measure of operating results unaffected by non-recurring items, differences in capital structures and ages of related assets among otherwise comparable companies. Management uses Non-GAAP Financial Measures as measures to review and assess operating performance of our business, and management and investors should review both the overall performance (GAAP net income) and the operating performance (Non-GAAP Financial Measures) of our business. While management considers Non-GAAP Financial Measures to be important, they should be considered in addition to, but not as substitutes for or superior to, other measures of financial performance prepared in accordance with GAAP, such as operating income, and net income. In addition, Non-GAAP Financial Measures are susceptible to varying calculations and our measurement of Non-GAAP Financial Measures may not be comparable to those of other companies.

Reconciliations of these non-GAAP measures have been provided in the table below.

Computation of Adjusted EBITDA


	(e) Last twelve months ended			Nine months ended September 30,						Years ended December 31,
	September 30, 2021			2021			2020			2020			2019			2018
Net income (loss) attributed to Douglas Elliman Inc.	$	92,683		$	78,650		$	(60,405	)	$	(46,372	)	$	8,459		$	3,669
Interest income, net		(107	)		(65	)		(148	)		(190	)		(600	)		(387	)
Income tax expense (benefit)		1,868			1,656			(168	)		44			354			400
Depreciation and amortization		8,541			6,409			6,405			8,537			8,638			8,364
Equity in losses (earnings) from equity-method investments^(a)		147			118			196			225			(8,472	)		(1,243	)
Restructuring^(b)		101			—			3,281			3,382			—			—
Loss on disposal of assets		1,169			—			—			1,169			—			—
Impairments of goodwill and other intangible assets^(c)		—			—			58,252			58,252			—			—
Change in fair value of contingent liability		3,185			3,252			(2,082	)		(2,149	)		(3,157	)		—
Other, net		(1,529	)		(686	)		—			(843	)		(64	)		1,528

Adjusted EBITDA^(d)	$	106,058		$	89,334		$	5,331		$	22,055		$	5,158		$	12,331

(a)	Represents equity in losses (earnings) recognized from the Company’s investment in an equity method investment that is accounted for under the equity method and is not consolidated in the Company’s financial results.

(b)	Represents restructuring related to Douglas Elliman Realty, LLC’s realignment of administrative support functions, office locations and business model.

(c)	Represents non-cash intangible asset impairment charges related to the goodwill and trademark of Douglas Elliman Realty, LLC.

(d)	“Adjusted EBITDA”, as used throughout this prospectus, refers to adjusted EBITDA attributed to Douglas Elliman Inc.

(e)	The results for the last twelve months ended September 30, 2021 are computed by adding results from the year ended December 31, 2020 to the results from the nine months ended September 30, 2021 and subtracting the results from the nine months ended September 30, 2020.

Computation of LTM Non-GAAP Financial Measures as of September 30, 2021


	(d) Last twelve months ended		Year ended			Nine months ended September 30,
	September 30, 2021		December 31, 2020			2021		2020
Revenues	$	1,286,373	$	773,987		$	1,018,912	$	506,526

Net income (loss) attributed to Douglas Elliman Inc.	$	92,683	$	(46,372	)	$	8,650	$	(60,405	)

Critical Accounting Estimates

General. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Significant estimates subject to material changes in the near term include revenue recognition, impairment charges, valuation of intangible assets, deferred tax liabilities, valuation of investments, and including other-than-temporary impairments to such investments. Actual results could differ from those estimates.

Revenue Recognition. Revenue is measured based on consideration specified in a contract with a customer and excludes any sales incentives. Revenue is recognized when (a) an enforceable contract with a customer exists, that has commercial substance, and collection of substantially all consideration for services is probable; and (b) the performance obligations to the customer are satisfied either over time or at a point in time.

Real estate commissions earned by our brokerage businesses are recognized as revenue when the real estate sale is completed or lease agreement is executed, which is the point in time that the performance obligation is satisfied. Any commission and other payments received in advance are deferred until the satisfaction of the performance obligation. Corresponding agent commission expenses, including any advance commission or other direct expense payments, are deferred and recognized as cost of sales concurrently with related revenues.

Contracts in our development marketing business provide us with the exclusive right to sell units in a subject property for a commission fee per unit sold calculated as a percentage of the sales price of each unit. Accordingly, a performance obligation exists for each unit in the Development Marketing property under contract, and a portion of the total contract transaction price is allocated to and recognized at the time each unit is sold.

Under development marketing service arrangements, dedicated staff are required for a subject property and these costs are typically reimbursed from the customer through advance payments that are recoupable from future commission earnings. Advance payments received and associated direct costs paid are deferred, allocated to each unit in the subject property, and recognized at the time of the completed sale of each unit.

Development marketing service arrangements also include direct fulfillment costs incurred in advance of the satisfaction of the performance obligation. We capitalize costs incurred in fulfilling a contract with a customer if the fulfillment costs (1) relate directly to an existing contract or anticipated contract, (2) generate or enhance

resources that will be used to satisfy performance obligations in the future, and (3) are expected to be recovered. These costs are amortized over the estimated customer relationship period which is the contract term. We use an amortization method that is consistent with the pattern of the transfer of goods or services to our customers by allocating these costs to each unit in the subject property and expensing these costs as each unit sold is closed over the contract.

Commission revenue is recognized at the time the performance obligation is met for our commercial leasing contracts, which is when the lease agreement is executed, as there are no further performance obligations, including any amounts of future payments under extended payment terms.

Our property management revenue arrangements consist of providing operational and administrative services to manage a subject property. Fees for these services are typically billed and collected monthly. Property management service fees are recognized as revenue over time using the output method as the performance obligations under the customer arrangement are satisfied each month. Our title insurance commission fee revenue is earned when the sale of the title insurance is completed, which corresponds to the point in time when the underlying real estate sale transaction closes and the payment is received.

Accounting for Leases. On January 1, 2019, we adopted ASU No. 2016-02- Leases (Topic 842), therefore, our lease accounting policy has been modified as discussed in Note 4 to our combined consolidated financial statements. Under ASC 842, we determine if an arrangement is a lease at contract inception. At lease commencement, we record and recognize right-of-use (“ROU”) assets for the lease liability amount and initial direct costs incurred, offset by lease incentives received. We record lease liabilities for the net present value of future lease payments over the lease term. The discount rate we use is generally our estimated incremental borrowing rate unless the lessor’s implicit rate is readily determinable. We calculate discount rates periodically to estimate the rate we would pay to borrow the funds necessary to obtain an asset of similar value, over a similar term, with a similar security. The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We recognize operating lease expense on a straight-line basis over the lease term. Operating leases are included in operating lease ROU assets and lease liabilities on the combined consolidated balance sheets.

Stock-Based Compensation. In connection with the Distribution, we will grant stock-based compensation to employees and will recognize expense on such grants. Our stock-based compensation will use a fair-value-based method to recognize non-cash compensation expense for share-based transactions. Under the fair value recognition provisions, we will recognize stock-based compensation net of an estimated forfeiture rate and only recognize compensation cost for those shares expected to vest on a straight-line basis over the requisite service period of the award.

Current Expected Credit Losses. On January 1, 2020, we adopted ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, therefore, our measurement of credit losses for most financial assets and certain other instruments has been modified as discussed in Note 3 to our combined consolidated financial statements. We are exposed to credit losses for various amounts due from real estate agents, which are included in other current assets on the combined consolidated balance sheets, net of an allowance for credit losses. We historically estimated our allowance for credit losses on receivables from agents based on an evaluation of aging, agent sales in pipeline, any security, specific exposures, and historical experience of collections from the individual agents. Based on our historical credit losses on receivables from agents, current and expected future market trends (such as the current and expected impact of COVID-19 on the real estate market), it was determined that the requirements of ASU No. 2016-13 did not result in a material impact on our allowance for credit losses as of January 1, 2020 of $6,132. We estimated that the credit losses for these receivables were $7,038 at December 31, 2020.

Goodwill and Indefinite Life Assets. Goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment on an annual basis, or whenever events or changes in business circumstances

indicate the carrying value of the assets may not be recoverable. We follow ASC 350, Intangibles — Goodwill and Other, and subsequent updates including ASU 2011-08, Testing Goodwill for Impairment and ASU 2017-14, Simplifying the Test for Goodwill Impairment. The amendments permit entities to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we conclude that it is more likely than not that a reporting unit’s fair value is less than its carrying value or choose to bypass the optional qualitative assessment, we would then assess recoverability by comparing the fair value of the reporting unit to our carrying amount; otherwise, no further impairment test would be required. The fair value of the intangible asset associated with the Douglas Elliman trademark is determined using a “relief from royalty payments” method. This approach involves two steps: (i) estimating reasonable royalty rates for its trademark associated with the Douglas Elliman trademark and (ii) applying these royalty rates to a net sales stream and discounting the resulting cash flows to determine fair value. This fair value is then compared with the carrying value of the trademark. As discussed in Note 7 to our combined consolidated financial statements, during the first quarter of 2020, we performed quantitative assessments of our goodwill and our trademark intangible asset in conjunction with our quarterly review for indicators of impairment. The quantitative assessments resulted in impairment charges to goodwill of $46,252 and to the trademark intangible asset of $12,000. We performed a qualitative assessment for the year ended December 31, 2020, which did not result in additional impairment charges related to our goodwill or trademark.

Results of Operations

The following discussion provides an assessment of our results of operations, capital resources and liquidity and should be read in conjunction with our combined consolidated financial statements and related notes included elsewhere in this report.

The primary components of our operating expenses, the changes in which are described in the following discussion of our results of operations, are defined below:

•

Sales and marketing. Sales and marketing expense consists primarily of marketing and advertising expenses, compensation and other personnel-related costs for employees supporting sales, marketing, expansion and related functions, occupancy-related costs and agent acquisition incentives.

•

Operations and support. Operations and support expense consists primarily of compensation and other personnel-related costs for employees supporting agents, third-party consulting and professional services costs (not included in general and administrative or technology), fair value adjustments to contingent consideration for our acquisitions and other related expenses.

•

General and administrative. General and administrative expense consists primarily of compensation and other personnel-related costs for executive management and administrative employees, including finance and accounting, legal, human resources and communications, the occupancy costs for our headquarters and other offices supporting our administrative functions and, after the Distribution, will include transition services paid to our former parent, Vector, for the use of office space and employees, professional services fees for legal and finance, insurance expenses and talent acquisition expenses.

•

Technology. Technology expense consists primarily of compensation and other personnel-related costs for employees in the product, engineering and technology functions, website hosting expenses, software licenses and equipment, third-party consulting costs, data licenses of PropTech and other related expenses associated with the implementation of our technology initiatives.

Three and Nine Months Ended September 30, 2021 Compared to Three and Nine Months Ended September 30, 2020

The following table sets forth our consolidated statements of operations data for the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020:


	Three months ended September 30,								Nine months ended September 30,
	2021				2020				2021				2020
Revenue
Commissions and other brokerage income	$	338,915	95.7	%	$	198,500	95.4	%	$	974,048	95.6	%	$	477,720		94.3	%
Property management		9,120	2.6	%		8,584	4.1	%		28,289	2.8	%		26,195		5.2	%
Other		6,126	1.7	%		912	0.4	%		16,575	1.6	%		2,611		0.5	%

Revenue		354,161	100.0	%		207,996	100.00	%		1,018,912	100.0	%		506,526		100.0	%

Operating expenses
Real estate agent commissions	$	257,098	72.6	%	$	149,010	71.6	%	$	737,767	72.4	%	$	351,325		69.4	%
Sales and marketing		20,237	5.7	%		10,522	5.1	%		59,331	5.8	%		40,649		8.0	%
Operations and support		22,448	6.3	%		10,277	4.9	%		56,697	5.6	%		35,809		7.1	%
General and administrative		22,287	6.3	%		20,280	9.8	%		64,481	6.3	%		62,275		12.3	%
Technology		4,388	1.2	%		3,707	1.8	%		11,302	1.1	%		11,137		2.2	%
Depreciation and amortization		2,189	0.6	%		2,093	1.0	%		6,409	0.6	%		6,405		1.3	%
Impairments of goodwill and other intangible assets		—	0.0	%		—	0.0	%		—	0.0	%		58,252		11.5	%
Restructuring		—	0.0	%		320	0.2	%		—	0.0	%		3,281		0.6	%

Operating expenses		328,647				196,209				935,987				569,133
Operating income (loss)	$	25,514	7.2	%	$	11,787	5.7	%	$	82,925	8.1	%	$	(62,607	)	(-12.4	%)

Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020

Revenues. Our revenues increased by $146,165 (70.3%), for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, which was primarily related to an increase of $140,415 in our commission and other brokerage income, which increased as a result of increased existing home sales caused by home-buying trends in our markets.

In 2020, and, in particular, the second quarter of 2020, we experienced a severe decline in closed sales volume in New York City. Therefore, as a result of the impact of the COVID-19 pandemic on the New York City market and combined with the increased demand for existing-homes in other areas of the U.S., the percentage of our brokerage revenues from the New York City market declined from approximately 46% in 2019 to approximately 32% for the twelve months ended September 30, 2021.

In particular, the New York City market continued to improve in the third quarter of 2021. For the three months ended September 30, 2021, the percentage of our brokerage revenues from the New York City market increased from 24.0% from the comparable 2020 period to 38.9%. The three months ended September 30, 2021 demonstrated continued strength in the residential real estate market, which has improved markedly from a sharp decline in transactions, primarily in the second quarter of 2020, due to factors related to the COVID-19 pandemic. As our markets began reopening and vaccines for COVID-19 have become available, and consistent

with home-buying trends in the U.S., our business improved significantly in markets complementary to New York City, including South Florida (Miami and Palm Beach), the New York City suburbs (Long Island, Westchester County and Connecticut), the Hamptons, Los Angeles, and Aspen. More recently, we have experienced a recovery in New York City as well. For the three months ended September 30, 2021, our commission and other brokerage income generated from the sales of existing homes increased by $74,449 in New York City, $32,021 in the Southeast region, $19,487 in the West (California and Colorado) region, and $4,806 in the Northeast region, which excludes New York City. In addition, our revenues from Development Marketing increased by $9,652 for the three months ended September 30, 2021 compared to the comparable 2020 period.

Operating Expenses

Our operating expenses in 2020 and 2021 were significantly impacted by the COVID-19 pandemic and, beginning in the second half of 2020, home buying trends. In the second quarter of 2020, in response to the COVID-19 pandemic, we made operating adjustments to reduce expenses and, in 2021, home-buying trends, which began in the second half of 2020, resulted in significantly increased demand for existing homes and, thus, an increase in associated expenses. As our business improved with market re-opening, beginning in the fourth quarter of 2020, we relinquished certain expense-reduction initiatives implemented in 2020. In addition, the increases in business also resulted in increased personnel expenses (associated with both discretionary compensation as well as the reinstatement of salary levels) and advertising expenses (associated with increased listing volume) in the 2021 period.

Real Estate Agent Commissions. As a result of our growth in commissions and other brokerage income, our real estate agent commissions expense increased from $149,010 for the three months ended September 30, 2020 to $257,098, or $108,088 (72.5%). Commission expenses, as a percentage of revenues, increased from 71.6% in the 2020 period to 72.6% in the 2021 period as a result of a higher percentage of revenues being generated in the Southeast (Florida) and Western (primarily California), which traditionally pay higher commission rates than other regions.

Sales and Marketing. Sales and marketing expense increased from $10,522 for the three months ended September 30, 2020 to $20,237 in the comparable 2021 period. The increase was the result of increased demand for our active listings in 2021 (caused by home-buying trends and reopened markets after the COVID-19 pandemic) as well as significant growth in revenues associated with increased demand for existing homes in our markets in 2021.

Operations and support. Operations and support expense increased from $10,277 for the three months ended September 30, 2020 to $22,448 in the comparable 2021 period. The increase was primarily attributable to the acquisition of our interest in Portfolio Escrow in the fourth quarter of 2020.

General and administrative. General and administrative expenses increased from $20,280 for the three months ended September 30, 2020 to $22,287 in the comparable 2021 period. The increase was primarily due to increases in expenses associated with significant growth in revenues during the second quarter of 2021 as well as the relinquishment of certain expense-reduction initiatives that were implemented during the second quarter of 2020.

Technology. Technology expenses increased from $3,707 for the three months ended September 30, 2020 to $4,388 for the comparable 2021 period, primarily related to further investment in our technology platform.

Operating income. Operating income increased from $11,787 (5.7% of revenues) to $25,514 (7.2% of revenues). The increase is associated with increased revenues as well as continued relinquishment of expense-reduction initiatives that began in the second quarter of 2020. While variable expenses, such as discretionary compensation expense and advertising expense, have increased in 2021, we continue to analyze our expense structure for additional efficiencies.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Revenues. Our revenues increased by $512,386 (101.2%), for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, from $506,526 to $1,018,912, which was primarily related to an increase of $496,328 in our commission and other brokerage income, which increased as a result of increased revenues from existing home sales caused by home-buying trends in our markets.

In 2020, and, in particular, the second quarter of 2020, we experienced a severe decline in closed sales volume in New York City. Therefore, as a result of the impact of the COVID-19 pandemic on the New York City market, and combined with the increased demand for existing-homes in other areas of the U.S., the percentage of our brokerage revenues from the New York City market declined from approximately 46% in 2019 to approximately 32% for the twelve months ended September 30, 2021.

In particular, the New York City market continued to improve in the second and third quarters of 2021. For the nine months ended September 30, 2021, the percentage of our brokerage revenues from the New York City market increased from 30.8% from the comparable 2020 period to 34.1%. The nine months ended September 30, 2021 demonstrated continued strength in the residential real estate market, which has improved markedly from a sharp decline in transactions, primarily in the second quarter of 2020, due to factors related to the COVID-19 pandemic. As our markets began reopening and vaccines for COVID-19 have become available, and consistent with home buying trends in the U.S., our business improved significantly in markets complementary to New York City, including South Florida (Miami and Palm Beach), the New York City suburbs (Long Island, Westchester County and Connecticut), the Hamptons, Los Angeles, and Aspen. More recently, we have experienced a recover in New York City as well. For the nine months ended September 30, 2021, our commission and other brokerage income generated from the sales of existing homes increased by $176,130 in the Southeast region, $164,466 in New York City, $66,359 in the West region, and $57,120 in the Northeast region, which excludes New York City, in each case compared to the comparable 2020 period. In addition, our revenues from Development Marketing increased by $32,253 for the nine months ended September 30, 2021.

Operating Expenses

Our operating expenses in 2020 and 2021 were significantly impacted by the COVID-19 pandemic in 2020 and, beginning in the second half of 2020, home buying trends. In the second quarter of 2020, in response to the COVID-19 pandemic, we made operating adjustments that resulted in reduced expenses and, in 2021, home-buying trends, which began in the second half of 2020, resulted in significantly increased demand for existing homes and, thus, an increase in associated expenses. As our business improved with market re-opening, beginning in the fourth quarter of 2020, we relinquished certain expense-reduction initiatives implemented during 2020. In addition, the increases in business also resulted in increased personnel expenses (associated with both discretionary compensation as well as the reinstatement of salary levels) and advertising expenses (associated with increased listing volume) in the 2021 period.

Real Estate Agent Commissions. As a result of our growth in commissions and other brokerage income, our real estate agent commissions expense increased from $351,325 for the nine months ended September 30, 2020 to $737,767, or $386,442 (110%). Real estate agent commissions expense, as a percentage of revenues, increased from 69.4% in the 2020 period to 72.4% in the 2021 period as a result of a higher percentage of revenues being generated in the Southeast (Florida) and Western (primarily California) regions, which traditionally pay higher commission rates than other regions.

Sales and Marketing. Sales and marketing expense increased from $40,649 for the nine months ended September 30, 2020 to $59,331 in the comparable 2021 period. The increase was the result of increased demand for our active listings in 2021 (caused by home buying trends and reopened markets after the COVID-19 pandemic) as well as significant growth in revenues associated with increased demand for existing homes in our markets in 2021.

Operations and support. Operations and support expense increased from $35,809 for the nine months ended September 30, 2020 to $56,697 in the comparable 2021 period. The increase was primarily attributable to the acquisition of our interest in Portfolio Escrow in the fourth quarter of 2020.

General and administrative. General and administrative expenses increased slightly from $62,275 for the nine months ended September 30, 2020 to $64,481 in the comparable 2021 period. The increase in expenses was the result of the relinquishment of certain expense-reduction initiatives that were implemented during the second quarter of 2020 as our markets reopened and our revenues increased significantly. The increases in 2021 were offset by the favorable impact of our expense reductions that began in 2020 as we continue to more efficiently serve our agents and their clients.

Technology. Technology expenses increased slightly from $11,137 for the nine months ended September 30, 2020 to $11,302 for the comparable 2021 period.

Operating income (loss). Operating income increased from a loss of $62,607 (negative 12.4% of revenues) to income of $82,925 (8.1% of revenues). The increase is associated with the absence of a one-time non-cash impairment charge of $58,252 and restructuring charges of $3,281 in the 2020 period as well as increased revenues in 2021 and continued expense-reduction initiatives that began in the second quarter of 2020. The non-cash impairment related to the evaluation of potential impacts of the COVID-19 pandemic, including the possibility of an economic recession, on our business. The restructuring charges were the result of realigning our administrative support functions, and office locations as well as adjusting our business model to more efficiently serve our agents and clients. While variable expenses, such as discretionary compensation expense and advertising expense, have increased in 2021, we continue to analyze our expense structure for additional efficiencies.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

The following table sets forth our consolidated statements of operations data for the year ended December 31, 2020 compared to the year ended December 31, 2019:


	2020					2019
Revenues
Commissions and other brokerage income	$	733,751		94.8	%	$	742,414		94.7	%
Property management		35,115		4.5	%		35,461		4.5	%
Other ancillary services		5,121		0.7	%		6,233		0.8	%

Total		773,987		100.0	%		784,108		100.0	%

Operating expenses
Real estate agent commissions	$	546,948		70.7	%	$	525,233		67.0	%
Sales and marketing		64,097		8.3	%		76,897		9.8	%
Operations and support		49,895		6.4	%		65,044		8.3	%
General and administrative		76,134		9.8	%		96,540		12.3	%
Technology		14,858		1.9	%		15,236		1.9	%
Depreciation and amortization		8,537		1.1	%		8,638		1.1	%
Loss on sale of assets		1,169		0.2	%		—		0.0	%
Impairments of goodwill and intangible assets		58,252		7.5	%		—		0.0	%
Restructuring		3,382		0.4	%		—		0.0	%

Operating loss	$	(49,285	)	(6.4	%)	$	(3,480	)	(0.4	%)

Revenues. Our revenues declined by $10,121, in 2020 compared to 2019, which was primarily related to declines in existing-home sales in New York City of $106,780, as well as declines in revenues from development

marketing of $25,563. This was offset by increases in existing-home sales in the Southeast market (Florida) of $53,817, the Northeast market (primarily Long Island, the Hamptons, Westchester and Connecticut) of $40,090 and the West market (California and Colorado) of $31,130.

The COVID-19 pandemic had a significant effect on the economy in 2020 and, especially, in the New York City market, where approximately 46% of our real estate commissions revenues were derived in 2018 and 2019. In response to the pandemic, various governmental agencies in the markets where we operate instituted restrictions on individuals and on the types of businesses that were permitted to operate from March 2020 to September 2020, which adversely impacted our business and real estate commissions income declined by 46.5% in the second quarter of 2020 compared to the second quarter of 2019. When the economy reopened, our business improved significantly in markets complementary to New York City, including South Florida (Miami and Palm Beach), the New York City suburbs (Long Island, Westchester County and Connecticut), the Hamptons, Los Angeles, and Aspen and, consequently, real estate commissions income increased by 52.9% in the fourth quarter of 2020.

Consequently, as a result of the declines in the second quarter of 2020, which were offset by increases in the fourth quarter of 2020, commission and other brokerage income declined by 1.0% for the year ended December 31, 2020 compared to 2019.

Operating Expenses

Real Estate Agent Commissions. As a result of our growth in commissions and other brokerage income in the Southeast (Florida) and West (primarily California) regions, our real estate agent commissions expense increased from $525,233 for the year ended December 31, 2019 to $546,948 in 2020, or $21,715. Real estate agent commissions expense, as a percentage of revenues, increased from 67.0% in the 2019 period to 70.7% in the 2020 period as a result of a higher percentage of revenues being generated in the Southeast (Florida) and Western (primarily California) regions, which traditionally pay higher commission rates than other regions.

Sales and Marketing. Sales and marketing expense declined from $76,897 in 2019 to $64,097 in 2020, primarily as a result of lower advertising expense associated with a decline in revenues in the second quarter of 2020 as well as lower marketing expenses associated with expense-reduction initiatives, which began in the second quarter of 2020.

Operations and support. Operations and support expense declined from $65,044 in 2019 to $49,895 in 2020 as a result of expense reduction initiatives, which began in the second quarter of 2020, and are discussed above.

General and administrative. General and administrative expenses declined from $96,540 in 2019 to $76,134 in 2020 as a result of expense reduction initiatives, which began in the second quarter of 2020, and are discussed above.

Technology. Technology expenses declined from $15,236 in 2019 to $14,858 in 2020. The decline in technology expenses in 2020 was associated with the absence of incremental expenses in 2019 related to the implementation of a cloud-based accounting system. In 2020, this decline was offset by investments in the enhancements to the technology-based experience of our agents and other technology initiatives to improve efficiencies.

Operating Income (loss). Operating loss increased from a loss of $3,480 in 2019 to $49,285 in 2020. The increase is associated with the non-cash impairment charge associated with goodwill and other intangible assets of $58,252 and restructuring charges of $3,382 in the 2020 period offset by expense reduction initiatives that

began in the second quarter of 2020 as described in Note 1 to our combined consolidated financial statements. The non-cash impairment related to the evaluation of potential impacts of the COVID-19 pandemic, including the possibility of an economic recession, on Douglas Elliman’s business. The restructuring charges were the result of realigning our administrative support functions, and office locations as well as adjusting our business model to more efficiently serve our agents and clients.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

The following table sets forth our consolidated statements of operations data for the year ended December 31, 2019 compared to the year ended December 31, 2018:


	2019					2018
Revenues
Commissions and other brokerage income	$	742,414		94.7	%	$	715,458		94.9	%
Property management		35,461		4.5	%		33,350		4.4	%
Other ancillary services		6,233		0.8	%		5,281		0.7	%

Total		784,108		100.00	%		754,089		100.0	%

Operating expenses
Real estate agent commissions	$	525,233		67.0	%	$	500,369		66.4	%
Sales and marketing		76,897		9.8	%		72,419		9.6	%
Operations and support		65,044		8.3	%		70,957		9.4	%
General and administrative		96,540		12.3	%	$	91,682		12.2	%
Technology		15,236		1.9	%		8,799		1.2	%
Depreciation and amortization		8,638		1.1	%		8,364		1.1	%
Litigation settlement and judgment income		—		0.0	%		(2,468	)	(0.3	%)
Impairments of goodwill and intangible assets		—		0.0	%		—		0.0	%
Restructuring		—		0.0	%		—		0.0	%

Operating (loss) income	$	(3,480	)	(0.4	%)	$	3,967		0.5	%

Revenues. Our revenues increased by $30,019, in 2019 compared to 2018, which was primarily related to increases of commission and other brokerage income of $26,956. This increase in commission and other brokerage income was primarily related to increased existing-home sales in the New York City of $7,684, the Southeast market of $6,867 and the West market of $5,143, as well as increased revenues from development marketing of $8,638. This was offset by declines in the Northeast market of $1,376. Effective July 1, 2019, New York State increased its transfer tax and “mansion” tax associated with resales of homes of more than $1,000.

We believe that the July 1, 2019 tax increase resulted in an acceleration of home sales and, therefore, our commission and other brokerage income, in New York City, before June 30, 2019 and, consequently, may have increased commission and other brokerage income for the year ended December 31, 2019.

Operating Expenses

Real Estate Agent Commissions. As a result of increases in commissions and other brokerage income, our real estate agent commissions expense increased to $525,233 in 2019 from $500,369 in 2018, or $24,864. Real estate agent commissions expense, as a percentage of revenues, was flat at 66.4% in the 2018 period to 67.0% in the 2019 period.

Sales and Marketing. Sales and marketing expense increased to $76,897 in 2019 from $72,419 in 2018, primarily as a result of increased expenses associated with marketing the Douglas Elliman brand name. Sales and marketing expense consists primarily of marketing and advertising expenses, compensation and other personnel-related costs for employees supporting sales, marketing, expansion and related functions, occupancy-related costs and agent acquisition incentives.

Operations and support. Operations and support expense declined to $65,044 in 2019 from $70,957 in 2018 as a result of lower personnel expenses in 2019 and other operational improvements.

General and administrative. General and administrative expenses increased to $96,540 in 2019 from $91,682 in 2018 as a result of increased personnel expense, professional service expenses and agent events.

Technology. Technology expenses increased to $15,236 in 2019 from $8,799 in 2018 due to incremental technology expenses in 2019 associated with the implementation of a cloud-based accounting system in 2019.

Operating Income (loss). Operating income declined from $3,967 in 2018 to an operating loss of $3,480 in 2019. Real estate operating income for the year ended December 31, 2018 included $2,468 of litigation and settlement income. The remaining difference of $4,979 was the result of increased sales and marketing and general and administrative expenses offset by the increase in our commissions and other brokerage income in excess of real estate agent commissions expense and lower operations and support expense.

Summary of PropTech Investments

As of September 30, 2021, New Valley Ventures has investments (at a carrying value) of approximately $7.1 million in PropTech companies. This amounts to approximately 1% of the value of Douglas Elliman’s total assets, which totaled approximately $534 million as of September 30, 2021. As of September 30, 2021 our PropTech investments include:

•

EVPassport: an entity that offers complete electronic vehicle charging solutions including hardware and software.

•

The Lab PropTech Fund: a fund advised or managed by a Miami-based firm that aims to invest in emerging technologies with a focus on residential real estate and construction services.

•

Other than the four private funds listed above in which New Valley Ventures invests as a limited partner, all of these companies currently provide technology or services to Douglas Elliman. To date, we have not recognized revenue from these investments and do not anticipate recognizing revenue from these non-controlling PropTech investments. However, we target earning an attractive rate of return from the capital appreciation of our PropTech investments.

Liquidity and Capital Resources

Cash, cash equivalents and restricted cash increased by $65,988 and $5,746 for the nine months ended September 30, 2021, and 2020 and by $27,634 in 2020 and declined by $13,062 and $3,252 in 2019 and 2018, respectively. Restricted Cash, which is included in cash, was $13,886, $9,131, $10,374, $4,423 and $6,550 as of September 30, 2021 and 2020, December 31, 2020, 2019 and 2018, respectively.

Cash provided from operations was $93,436 and $10,962 for the nine months ended September 30, 2021 and 2020. Cash provided from operations was $31,865, $7,568 and $13,212 in 2020, 2019 and 2018, respectively. The increase in the nine months ended September 30, 2021 period compared to the nine months ended September 30, 2020 related to increased operating income associated with increased home buying trends in 2021 as well as an improvement of our business as a result of markets reopening and COVID-19 vaccines have become available. The increase in 2020 related primarily to increases in operating income (taking into account the exclusion of the $58,252 non-cash impairment charge and non-cash loss on disposal of assets of $1,169). The decline in 2019 related primarily to declines in operating income. The increase in 2018 related primarily to increases in operating income, including the litigation settlement, compared to the 2019 period.

Cash used in investing activities was $6,553 for the nine months ended September 30, 2021 and $5,073 for the nine months ended September 30, 2020. In addition to capital expenditures of $2,693, cash used for investments for the nine months ended September 30, 2021 related to investments of $3,390 in the Corporation’s PropTech business, and $500 for the acquisition of the controlling interest in Douglas Elliman Texas. This was offset by $30 of distributions from equity-method investments. Cash used in investing activities for the nine months ended September 30, 2020 related entirely to capital expenditures. Cash used in investing activities was $4,088 in 2020, $1,509 in 2019 and $12,715 in 2018. In 2020, cash used in investing activities was comprised of capital expenditures of $6,126 and the purchase of our Portfolio Escrow subsidiary of $722 and these amounts were partially offset by cash acquired from the purchase of the Portfolio Escrow subsidiary of $2,760. In 2019, cash used in investing activities was comprised of capital expenditures of $8,079, equity-method investments of $1,667 and purchases of subsidiaries of $380 and these amounts were offset by distributions received from an equity-method investment, which was sold in 2019, of $8,617. In 2018, cash used in investing activities was $12,715 and it comprised primarily of capital expenditures of $12,965 and purchase of subsidiaries of $404 and these amounts were partially offset by cash acquired in the purchase of subsidiaries of $654.

Our investment philosophy is to maximize return on investments using a reasonable expectation for return when investing in non-consolidated real estate businesses and PropTech investments as well as making capital expenditures.

Cash used in financing activities was $20,895 for the nine months ended September 30, 2021 compared to $143 for the nine months ended September 30, 2020. The cash used in financing activities in the 2021 period consisted of $25,520 of distributions to Vector, $354 for repayment of debt and $102 of earn-out payments. These amounts were offset by capital contributions to New Valley Ventures by Vector of $3,581 and contributions from non-controlling interest associated with Douglas Elliman Texas of $1,500. Cash used for financing activities for the nine months ended September 30, 2020 consisted of $63 for repayment of debt and $80 of earn-out payments. Cash used in financing activities was $143 in 2020, $19,121 in 2019 and $3,749 in 2018. In 2020, cash used in financing activities was $143 and comprised of the repayments of debt of $63 and earn-out payments, associated with acquisitions, of $80. In 2019, cash used in financing activities was $19,121 and primarily related to dividends paid to Vector of $18,750, the repayment of debt of $155 and earn-out payments, associated with acquisitions, of $216. In 2018, cash used in financing activities was $3,749 and related to dividends paid to Vector of $2,558, the repayment of debt of $125 and, prior to Vector’s acquisition of the 29.41% interest on December 31, 2018, $1,066 of distributions to the owner of 29.41% of Douglas Elliman. We believe that our operations are positive cash-flow-generating units and will continue to be able to sustain their operations without any significant liquidity concerns.

We contemplate paying a quarterly cash dividend of $0.05 per share, which would result in annual dividends of approximately $15,500. In order to meet the above liquidity requirements as well as other anticipated liquidity needs in the normal course of business, in addition to our cash from operations, we had cash and cash equivalents of approximately $173,000 as of September 30, 2021. At the time of the Distribution, Vector will capitalize Douglas Elliman so that it has approximately $200,000 in net cash and cash equivalents (as defined herein). Management currently anticipates that these amounts, as well as expected cash flows from our operations, proceeds from public and/or private debt and equity financing to the extent available, management fees and other payments from subsidiaries should be sufficient to meet our liquidity needs over the next twelve months. We may acquire or seek to acquire additional operating businesses through merger, purchase of assets, stock acquisition or other means, or to make or seek to make other investments, which may limit our liquidity otherwise available.

Off-Balance Sheet Arrangements

We have various agreements in which we may be obligated to indemnify the other party with respect to certain matters. Generally, these indemnification clauses are included in contracts arising in the normal course of business under which we customarily agree to hold the other party harmless against losses arising from a breach of representations related to such matters as title to assets sold and licensed or certain intellectual property rights. Payment by us under such indemnification clauses is generally conditioned on the other party making a claim that is subject to challenge by us and dispute resolution procedures specified in the particular contract. Further, our obligations under these arrangements may be limited in terms of time and/or amount, and in some instances, we may have recourse against third parties for certain payments made by us. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of our obligations and the unique facts of each particular agreement. Historically, payments made by us under these agreements have not been material. As of September 30, 2021, we were not aware of any indemnification agreements that would or are reasonably expected to have a current or future material adverse impact on our financial position, results of operations or cash flows.

As of September 30, 2021, we had outstanding approximately $10,800 of letters of credit, collateralized by certificates of deposit. The letters of credit have been issued as security deposits for leases of office space, to secure the performance of our subsidiaries under various insurance programs and to provide collateral for various subsidiary borrowing and capital lease arrangements.

Market Risk

We are exposed to market risks principally from fluctuations in interest rates and could be exposed to market risks from foreign currency exchange rates and equity prices in the future. We seek to minimize these risks through our regular operating and financing activities and our long-term investment strategy. Our market risk management procedures cover all market risk sensitive financial instruments.

New Accounting Pronouncements

Refer to Note 1, Summary of Significant Accounting Estimates, to our interim condensed combined consolidated financial statements and annual combined consolidated financial statements for further information on New Accounting Pronouncements.

CORPORATE GOVERNANCE AND MANAGEMENT

Corporate Governance

General

Our common stock has been authorized for listing on the NYSE under the symbol “DOUG”. As a result, we are generally subject to NYSE corporate governance listing standards.

In connection with the consideration of the Distribution by Vector’s board of directors, the corporate governance and nominating committee of Vector’s board of directors recommended to the full Vector board of directors the principal elements of our governance structure, including our amended and restated certificate of incorporation, which the Vector board adopted as part of its approval of the filing with the SEC of the registration statement, of which this prospectus forms a part.

Director Independence

Under NYSE rules, independent directors must comprise a majority of a listed company’s board of directors. In addition, rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and nominating and corporate governance committees be independent. Under NYSE rules, a director will only qualify as an “independent director” if, in the opinion of the company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries. We intend to satisfy the audit committee independence requirements of Rule 10A-3 as of the date of the Distribution.

Our Board of Directors has undertaken a review of the independence of each director and considered whether each director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our board of directors determined that Ms. Mestel and Messrs. Kramer, Liebowitz, White and Zeitchick are “independent directors” as defined under the applicable rules and regulations of the SEC and the listing requirements and rules of the NYSE. In making these determinations, our Board of Directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and current and prior relationships as they may relate to us and our management, including the beneficial ownership of Vector’s and our capital stock by each non-employee director and the transactions involving them described in the section titled “Certain Relationships and Related Party Transactions.”

Corporate Governance Guidelines

Before the completion of the Distribution, our Board will adopt our Corporate Governance Guidelines (“Governance Guidelines”). These guidelines set forth our practices and policies with respect to Board composition and selection, Board meetings, executive sessions of the Board, Board committees, the expectations we have of our directors, selection of the Executive Chairman and the Chief Executive Officer, management succession, Board and executive compensation, and Board self-assessment requirements. Upon completion of the Distribution, the full text of our Governance Guidelines may be viewed at our website at www.elliman.com under Investors — Corporate Governance. A copy may be obtained by writing to Douglas Elliman Inc., 4400 Biscayne Boulevard, Miami, Florida 33137; Attention: Corporate Secretary.

Executive Sessions of Non-Management and Independent Board Members

Under our Governance Guidelines, either our directors who are not also executive officers of our Company (the “non-management directors”) or our directors who are independent under the NYSE rules are required to meet regularly in executive sessions with no members of management present. If non-management directors who are not independent participate in these executive sessions, the independent directors under the NYSE rules are required to meet separately in executive sessions at least once each year.

Communicating with Our Directors

Before the completion of the Distribution, our Board will adopt policies designed to allow our stockholders and other interested parties to communicate with our directors. Any interested party who wishes to communicate directly with the Board or any director or the non-management directors as a group should send communications in writing to the director, c/o the Company’s Secretary, at Douglas Elliman Inc., 4400 Biscayne Boulevard, Miami, Florida 33137. The secretary will forward these communications directly to the director(s) in question. The independent directors of the Board review and approve this communication process periodically to ensure effective communication with stockholders and other interested parties.

Code of Business Conduct and Ethics

Before the completion of the Distribution, our Board will adopt a Code of Business Conduct and Ethics for our directors, officers and employees. A portion of this Code of Business Conduct and Ethics also serves as a code of conduct and ethics for our senior financial officers, including our principal accounting officer and controller. Among other things, our Code of Business Conduct and Ethics covers conflicts of interest, disclosure responsibilities, legal compliance, reporting and compliance with the Code of Conduct and Ethics, confidentiality, corporate opportunities, fair dealing, and protection and proper use of Company assets. Upon completion of the Distribution, the full text of the Code of Conduct and Ethics will be available on our website at www.elliman.com under Investors — Corporate Governance. In addition, a copy may be obtained by writing to Douglas Elliman Inc., 4400 Biscayne Boulevard, Miami, Florida 33137; Attention: Corporate Secretary.

Our Directors

The following individuals are expected to be elected to serve as directors of the Company commencing on the Distribution date:


Name	Age	Position
Howard M. Lorber	73	Chairman, President, Chief Executive Officer
Richard J. Lampen	68	Director, Executive Vice President, Chief Operating Officer
Ronald J. Kramer	63	Director
Michael S. Liebowitz	53	Director
Lynn Mestel	68	Director
Wilson L. White	40	Director
Mark D. Zeitchick	56	Director

Howard M. Lorber — Chairman, President and Chief Executive Officer

Following the Distribution, Howard M. Lorber will serve as Chairman, President and Chief Executive Officer of the Company, and as Executive Chairman of its subsidiary Douglas Elliman Realty, LLC. Mr. Lorber has served as President and Chief Executive Officer of Vector since January 2006. Mr. Lorber has been with Vector and its diversified interests since 1994 and is actively involved in the management of all of Vector’s assets. In addition to his role at Vector, Mr. Lorber was President, Chief Operating Officer and a Director of New Valley Corporation from November 1994 until its merger with Vector in December 2005. Mr. Lorber was Chairman of

the Board of Hallman & Lorber Assoc., Inc., consultants and actuaries of qualified pension and profit sharing plans, and various of its affiliates from 1975 until December 2004 and has been a consultant to these entities since January 2005; Chairman of the Board of Directors since 1987 and Chief Executive Officer from November 1993 to December 2006 of Nathan’s Famous, Inc. (NASDAQ: NATH), a chain of fast food restaurants; a director of United Capital Corp., a real estate investment and diversified manufacturing company, since May 1991; Vice Chairman of the Board of Ladenburg Thalmann Financial Services (NYSE American: LTS) from May 2001 to February 2020; a member of the Board of Directors of Morgans Hotel Group Co. (NASDAQ: MHGC) from March 2015 until November 2016, and Chairman from May 2015 to November 2016; and a director of Clipper Realty Inc. (NYSE: CLPR), a real estate investment company that acquires, owns, manages, operates and repositions multi-family residential and commercial properties in the New York metropolitan area, since July 2015. In 2017, Mr. Lorber received a Presidential appointment to serve as Chairman of the U.S. Holocaust Memorial Museum. He has served on the board of Garden of Dreams, as Chairman of Southampton Hospital Foundation, and Co-Chairman of the Silver Shield Foundation — a non-profit organization that provides financial assistance towards the educational costs of children of police officers and firefighters killed in the line of duty. Mr. Lorber holds a Bachelor of Arts degree, a Master of Science degree in Taxation and an Honorary Doctorate from Long Island University, where he is also a trustee. Mr. Lorber’s pertinent experience, qualifications, attributes and skills include the knowledge and experience in the real estate and property services industry he has attained through his service as our President and a member of our Board of Directors since 2001 as well as his service as a director of other publicly-traded corporations.

Richard J. Lampen — Director, Executive Vice President and Chief Operating Officer

Following the Distribution, Richard J. Lampen will serve as Executive Vice President and Chief Operating Officer of the Company and as a member of the Company’s Board of Directors. Mr. Lampen was appointed Chief Operating Officer of Vector on January 14, 2021 and has served as Vector’s Executive Vice President since 1995. Mr. Lampen has been a director of Vector since January 2021 and also serves as a member of the Board of Managers of Vector’s subsidiary, Douglas Elliman Realty, LLC. From October 1995 to December 2005, Mr. Lampen served as the Executive Vice President and General Counsel of New Valley Corporation, where he also served as a director. Most recently, Mr. Lampen served as President and Chief Executive Officer of Ladenburg Thalmann Financial Services (NYSE American: LTS), a publicly-traded diversified financial services company, from September 2006 to February 2020 when the company was acquired by Advisor Group, a portfolio company of Reverence Capital Partners, for approximately $1.3 billion. Mr. Lampen also served as Chairman of Ladenburg Thalmann from September 2018 until the company was acquired. From October 2008 until October 2019, Mr. Lampen served as President and Chief Executive Officer and was a member of the Board of Directors of Castle Brands Inc. (NYSE American: ROX), a publicly-traded spirits company, prior to its acquisition by Pernod Ricard for approximately $300 million. Vector held an approximate 10% interest in Ladenburg and an approximate 8% equity interest in Castle. Prior to joining Vector in 1995, Mr. Lampen was a partner at Steel Hector & Davis, a law firm located in Miami, Florida. Previously, Mr. Lampen was a Managing Director at Salomon Brothers Inc. Mr. Lampen has served as a director of a number of companies, including Ladenburg Thalmann Financial Services Inc., Castle Brands Inc., New Valley Corporation, U.S. Can Corporation, Spec’s Music Inc. and The International Bank of Miami, N.A., as well as a court-appointed independent director of Trump Plaza Funding, Inc. Mr. Lampen received a Bachelor of Arts degree from Johns Hopkins University and a Juris Doctorate from Columbia Law School. Mr. Lampen’s pertinent experience, qualifications, attributes and skills include the knowledge and managerial experience in the real estate and property services industry he has attained through his service to our business since 1995 as well as his service as Chief Executive Officer of Ladenburg Thalmann Financial Services and Castle Brands and as a director of other publicly-traded corporations.

Ronald J. Kramer — Director

Following the Distribution, Ronald J. Kramer will serve as a member of the Company’s Board of Directors. Mr. Kramer has been the Chief Executive Officer of Griffon Corporation (NYSE: GFF), a diversified

management and holding company, since April 2008, a director since 1993 and Chairman of the Board since January 2018. Mr. Kramer was Vice Chairman of the Griffon Board from 2003 until January 2018. From 2002 through March 2008, he was President and a director of Wynn Resorts, Ltd. (NASDAQ: WYNN), a developer, owner and operator of destination casino resorts. From 1999 to 2001, Mr. Kramer was a Managing Director at Dresdner Kleinwort Wasserstein, an investment banking firm, and its predecessor Wasserstein Perella & Co. In addition to Griffon Corporation, he is currently a member of the board of directors of each of Business Development Corporation of America and Franklin BSP Capital Corporation. Mr. Kramer has been a senior executive officer of a number of corporations and brings to the Board extensive experience in all aspects of finance and business transactions.

Michael S. Liebowitz — Director

Following the Distribution, Michael S. Liebowitz will serve as a member of the Company’s Board of Directors. Mr. Liebowitz is an entrepreneur, private investor and seasoned business executive with extensive experience founding, acquiring, and monetizing businesses in the insurance and financial industries. In the past 25 years, Mr. Liebowitz has founded or acquired many companies, including (i) in 1995, Harbor Group Consulting LLC, an insurance and risk management consulting firm where he served as President and Chief Executive Officer from 1995, until its acquisition by Alliant Insurance Services, Inc. (“Alliant”) in 2018, (ii) in 1999, as a founding principal, National Financial Partners Corp. (NYSE: NFP), which was taken public in 2003 and was acquired by a controlled affiliate of Madison Dearborn Partners, LLC in 2013, and is now one of the largest insurance brokers in the world, (iii) in 2006, Innova Risk Management (“Innova”), a boutique real estate insurance firm and leading provider of property and casualty insurance in the co-op and condominium markets in the New York area, which he acquired in a joint venture with Douglas Elliman Real Estate, LLC until its sale in 2019, (iv) in 2017, High Street Valuations, a firm that specializes in providing insurable value calculations for banks, capital market lenders, owners, and property management companies, and (iv) in October 2020, New Beginnings Acquisition Corp. (NYSE American: NBA) (“NBA”), a special purpose acquisition company until its merger with Airspan Networks Holdings Inc. in August 2021. He currently serves as President and Chief Executive of the Harbor Group Division of Alliant (and Managing Director and Executive Vice President of Alliant) and High Street Valuations; and, is the principal shareholder of Open Acq LLC, a firm that provides consultancy and actuarial services to qualified pension plans. He also served as President and Chief Executive Officer of Harbor and Innova until 2018 and 2019, respectively, when they were acquired by Alliant as well as NBA from October 2020 to August 2021. He has served since August 2021 on the board of Airspan Network Holdings Inc. (NYSE American: MIMO), and he served on the board of Ladenburg Thalmann Financial Services Inc. (NYSE American: LTS) from January 2019 to February 2020. He also served on the board of The Hilb Group, a leading middle market insurance agency headquartered in Richmond, Virginia, from 2011 to 2013. Mr. Liebowitz has also acted as an advisor to many of the largest financial services companies around the globe on their complex insurance matters within their investment banking/M&A groups. He was special consultant to GMAC for the World Trade Center financing prior to and after 9/11 and its claims and litigation process and strategy and advised the U.S. Federal Reserve and Goldman Sachs in the depths of the financial crisis in the newly created TALF lending program. Mr. Liebowitz graduated from CW Post College-LI University with a B.S. in Finance. Mr. Liebowitz’s pertinent experience, qualifications, attributes and skills include his strong background as an investor and executive officer of numerous businesses in varied industries.

Lynn Mestel — Director

Following the Distribution, Lynn Mestel will serve as a member of the Company’s Board of Directors. Ms. Mestel is recognized as an entrepreneur and visionary in the legal recruiting and staffing industry, where she founded two companies and served as their Chief Executive Officer for more than two decades. In 1987, she founded Mestel & Company, a consultancy firm placing attorneys in all disciplines as well as advising on law firm mergers and acquisitions and, in 1993, she founded Hire Counsel, which provided temporary legal staffing and e-discovery managed review to a nationwide clientele of law firms, corporations and government agencies. In 2011, Ms. Mestel combined both companies (HCMC Legal, Inc.) brought in private equity investors, Long

Point Capital and created a 100% ESOP (Employee Stock Ownership Plan) providing equity participation and profit sharing to both full time and temporary employees. She remained as Chief Executive Officer of both Mestel & Company and Hire Counsel until 2017 and now serves as Non-Executive Chair of the Board of both companies and focuses on strategic direction, mergers and acquisitions and long-term planning. Prior to founding Mestel & Company and Hire Counsel, Ms. Mestel was an advertising executive with each of DDB Worldwide Communications Group Ltd. and Saatchi & Saatchi, both of which are internationally respected advertising firms. She earned a Bachelor of Arts from the Virginia Polytechnic Institute and State University, where she was elected Phi Beta Kappa, and a Juris Doctorate from the Benjamin N. Cardozo School of Law. She also attended The Julliard School. Ms. Mestel’s pertinent experience, qualifications, attributes and skills include her background as an entrepreneur and senior executive.

Wilson L. White — Director

Following the Distribution, Wilson L. White will serve as a member of the Company’s Board of Directors. Mr. White has been a director of Vector since June 2021. Mr. White currently serves as Senior Director of Government Affairs and Public Policy at Google, a subsidiary of Alphabet Inc. (NASDAQ: GOOG, GOOGL), where he is the global policy lead for Google’s Android, Hardware and Ads businesses. In addition to his employment at Google, Mr. White is engaged in numerous philanthropic and community activities. He serves as Board Chair of the Black Bank Fund, which aims to raise and invest $250 million into Black banks throughout the United States by 2025. Mr. White also serves on the Boards of the University of North Carolina School of Law Foundation and the South Carolina Governor’s School for Science & Mathematics Foundation. Mr. White earned a Bachelor of Science in Computer Engineering from North Carolina State University, where he was a Park Scholar, and received his Juris Doctor, with honors, from the University of North Carolina at Chapel Hill. Prior to being named to his current position in 2013, he served as Patent Litigation Counsel at Google from 2011 to 2013 and was a Senior Associate at Kilpatrick Townsend & Stockton LLP from 2007 to 2011. He also served as a judicial law clerk to the Honorable Alexander Williams, Jr. of the U.S. District Court of Maryland from 2006 to 2007. Mr. White’s pertinent experience, qualifications, attributes and skills include a strong background in computer engineering and the technology and legal sectors.

Mark D. Zeitchick — Director

Following the Distribution, Mark D. Zeitchick will serve as a member of the Company’s Board of Directors. Mr. Zeitchick has extensive experience as a business executive in the financial services industry where he enjoyed a 27-year career as an executive of Ladenburg Thalmann Financial Services Inc. (NYSE American: LTS) and its predecessors. During his tenure, he served as Executive Vice President of Ladenburg Thalmann from 2006 to February 2020. He also served as director of Ladenburg Thalmann Financial Services from 1999 until February 2020 and of Castle Brands Inc. (NYSE American: ROX) from March 2014 until October 2019. Mr. Zeitchick’s pertinent experience, qualifications, attributes and skills include managerial experience, industry knowledge and the knowledge and experience he has attained through his service as a director of publicly-traded corporations.

Board Structure

Our amended and restated certificate of incorporation that will be in effect immediately prior to the completion of the Distribution provides that, immediately after the completion of the Distribution, our Board will be divided into three classes with staggered three-year terms. Upon expiration of the term of a class of directors, directors for that class will be elected for three-year terms at the annual meeting of stockholders in the year in which that term expires. As a result, only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Each director’s term will continue until the election and qualification of his or her successor, or his or her earlier death, resignation, or removal. Our directors will be divided among the three classes as follows:

•

Class I directors, whose initial term will expire at the annual meeting of stockholders to be held in 2022, will consist of Messrs. Lampen and White;

•

Class II directors, whose initial term will expire at the annual meeting of stockholders to be held in 2023, will consist of Messrs. Liebowitz and Zeitchick; and

•

Class III directors, whose initial term will expire at the annual meeting of stockholders to be held in 2024, will consist of Ms. Mestel and Messrs. Lorber and Kramer.

Our amended and restated certificate of incorporation and restated bylaws, which will be in effect upon the completion of the Distribution, will provide that only our Board may fill vacancies on our Board. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of directors.

The classification of our Board may have the effect of delaying or preventing changes in our control or management. See “Description of Capital Stock — Anti-takeover Effects of the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws.”

Because we did not have any operations during the year ended December 31, 2020, our Board did not hold any meetings during that year.

Director Compensation

We expect to adopt a director compensation program for the Company’s non-employee directors effective immediately following the Distribution that is designed to be fair based on the amount of work required of directors of the Company. Directors who are also employees of the Company are not expected to receive any additional compensation for their services as directors. We have not yet paid any compensation to our non-employee directors.

Following the Distribution, our non-employee directors’ annual compensation is currently expected to consist of the following components:

•

annual cash retainer fee of $75,000;

•

annual committee retainer fee of $5,000;

•

fees for serving as the committee chairperson of $10,000 for each of the audit, compensation and corporate governance and nominating committees;

•

an initial grant of 10,000 shares vesting over two years and, afterwards, an annual grant of 10,000 shares vesting over two years, thereafter;

•

reimbursement for reasonable out-of-pocket expenses incurred in serving on the Board of Directors; and

•

access to and payment for the Company’s health, dental and standard life insurance coverage.

Board Committees

The Board will have four committees established in accordance with the Company’s amended and restated bylaws: an executive committee, an audit committee, a compensation and human capital committee, and a corporate governance and nominating committee.

Executive Committee

The executive committee exercises, in the intervals between meetings of the Board, all the powers of the Board in the management and affairs of the Company, except for matters expressly reserved by law for Board action.

Audit Committee

Following the Distribution, our audit committee will be comprised of Mr. Liebowitz, Ms. Mestel and Mr. White. Mr. Liebowitz will be the chairperson of our audit committee. The audit committee is governed by a written charter which requires that it discuss policies and guidelines to govern the process by which risk assessment and risk management are handled and that it meet periodically with management to review and assess the Company’s major financial risk exposures and the manner in which such risks are being monitored and controlled. Accordingly, in addition to its other duties, the audit committee will periodically review the Company’s risk assessment and management, including in the areas of legal compliance, internal auditing and financial controls. In this role, the audit committee will consider the nature of the material risks the Company faces, and the adequacy of the Company’s policies and procedures designed to respond to and mitigate these risks and receives reports from management and other advisors. The audit committee will oversee the Company’s financial statements, system of internal controls, and auditing, accounting and financial reporting processes and risks related thereto; the audit committee will appoint, compensate, evaluate and, where appropriate, replace the Company’s independent accountants; review annually the audit committee charter; and review and pre-approve audit and permissible non-audit services. Upon completion of the Distribution, the text of our audit committee charter will be available on our website at www.elliman.com under Investors — Corporate Governance. A copy may be obtained by writing to Douglas Elliman Inc., 4400 Biscayne Boulevard, Miami, Florida 33137; Attention: Corporate Secretary.

Compensation and Human Capital Committee

Following the Distribution, our compensation and human capital committee will be comprised of Mr. Kramer, Mr. Liebowitz and Mr. Zeitchick. Mr. Kramer will be the chairperson of our compensation and human capital committee. The compensation and human capital committee will be responsible for risks relating to employment policies and the Company’s compensation and benefits systems. The compensation and human capital committee will review, approve and administer management compensation and executive compensation plans and will be responsible for management development and succession planning, overseeing human capital management initiatives (including diversity and inclusion), overseeing stockholder communications and engagement efforts with stockholders on executive compensation. Upon completion of the Distribution, the text of our compensation and human capital committee charter will be available on our website at www.elliman.com under Investors — Corporate Governance. A copy may be obtained by writing to Douglas Elliman Inc., 4400 Biscayne Boulevard, Miami, Florida 33137; Attention: Corporate Secretary.

Corporate Governance and Nominating Committee

Following the Distribution, our corporate governance and nominating committee will be comprised of Mr. White, Mr. Kramer, Ms. Mestel, and Mr. Zeitchick. Mr. White will be the chairperson of our corporate governance and nominating committee. The corporate governance and nominating committee will be responsible for the oversight of risks relating to Board succession planning. The committee will assist the Board in identifying individuals qualified to become directors and recommend to the Board the nominees for election as directors at the next annual meeting of stockholders, develop and recommend to the Board the corporate governance guidelines and code of business conduct and ethics applicable to the Company, and oversee the evaluation of the Board and management. Upon completion of the Distribution, the text of our corporate governance and nominating committee charter will be available on our website at www.elliman.com under Investors — Corporate Governance. A copy may be obtained by writing to Douglas Elliman Inc., 4400 Biscayne Boulevard, Miami, Florida 33137; Attention: Corporate Secretary.

Our amended and restated bylaws will also permit the Board of Directors to appoint other committees of the Board from time to time which would have such powers and duties as the Board properly determines.

Our Executive Officers Following the Distribution

The following table sets forth information regarding the individuals who will be executive officers of the Company following the Distribution. Additional executive officers may be appointed prior to the Distribution.


	Age		Position
Howard M. Lorber		73	Chairman, President and Chief Executive Officer
Richard J. Lampen		68	Director, Executive Vice President and Chief Operating Officer
J. Bryant Kirkland III		56	Senior Vice President, Treasurer and Chief Financial Officer
Marc N. Bell		61	Senior Vice President, Secretary and General Counsel
J. David Ballard		53	Senior Vice President, Enterprise Efficiency and Chief Technology Officer
Karen J. Chesleigh		54	Vice President of Human Resources
Stephen T. Larkin		51	Vice President of Communications
Daniel A. Sachar		46	Vice President Innovation and Managing Director of New Valley Ventures LLC
Scott J. Durkin		59	President and Chief Executive Officer, Douglas Elliman Realty, LLC

Howard M. Lorber — Chairman, President and Chief Executive Officer. For a biography of Mr. Lorber, please refer to the section entitled “Directors”.

Richard J. Lampen — Director, Executive Vice President and Chief Operating Officer. For a biography of Mr. Lampen, please refer to the section entitled “Directors”.

J. Bryant Kirkland III. Following the distribution, J. Bryant Kirkland III will serve as our Senior Vice President, Treasurer and Chief Financial Officer. He has been Chief Financial Officer and Treasurer of Vector since April 2006 and Senior Vice President of Vector since May 2016. Mr. Kirkland served as a Vice President of Vector from January 2001 to April 2016 and served as New Valley’s Vice President and Chief Financial Officer from January 1998 to December 2005. He has served since July 1992 in various financial capacities with us, Liggett and New Valley. Mr. Kirkland has served as Chairman of the Board of Directors, President and Chief Executive Officer of Multi Soft II, Inc. and Multi Solutions II, Inc. since July 2012. Mr. Kirkland received a Bachelor of Science in Business Administration from the University of North Carolina at Chapel Hill and an MBA from Barry University. Mr. Kirkland is licensed as a Certified Public Accountant in the states of Florida, New York and North Carolina and is licensed as a real estate broker in the state of Florida.

Marc N. Bell. Following the distribution, Marc N. Bell will serve as our Senior Vice President, Secretary and General Counsel. He has served as Secretary and General Counsel of Vector since May 1994 and as Senior Vice President since May 2016. Mr. Bell served as a Vice President of Vector from January 1998 to April 2016. From November 1994 to December 2005, Mr. Bell served as Associate General Counsel and Secretary of New Valley and from February 1998 to December 2005, as a Vice President of New Valley. Mr. Bell previously served as Liggett’s General Counsel and currently serves as an officer, director or manager for many of Vector’s or New Valley’s subsidiaries. Mr. Bell received a Bachelor of Business Administration from George Washington University and a Juris Doctorate from Villanova Law School. Mr. Bell also received an MBA from The Wharton School, University of Pennsylvania. Mr. Bell is licensed to practice law in Pennsylvania, New York, New Jersey, Washington, D.C., and Florida.

J. David Ballard. Following the distribution, J. David Ballard will serve as our Senior Vice President, Enterprise Efficiency and Chief Technology Officer. He has served as Senior Vice President, Enterprise Efficiency and Chief Technology Officer of Vector since July 2020 and, from February 2020 to July 2020, served as a consultant to the Company. Prior to joining Vector, Mr. Ballard served as Senior Vice President, Enterprise Services of Ladenburg Thalmann Financial Services Inc. from April 2019 to February 2020. Prior to joining

100

Ladenburg, he served as President and Chief Operating Officer for Docupace Technologies, a leading digital operations technology provider in the wealth management space from March 2018 to April 2019. Mr. Ballard was Executive Vice President and Chief Operating Officer at Cetera Financial Group from April 2015 to March 2018. Prior to his role at Cetera, Mr. Ballard spent more than two decades working in executive and management positions at several firms in the independent financial advisory and asset management industries, including AIG Advisor Group, SunAmerica Mutual Funds and AIG Retirement Services.

Karen J. Chesleigh. Following the distribution, Karen J. Chesleigh will serve as our Vice President of Human Resources and continue to serve as Senior Vice President of Human resources of our subsidiary, Douglas Elliman, LLC. For more than two decades, Ms. Chesleigh has been employed in human resources positions at leading New York residential real estate brokerage firms and she provides extensive human capital experience to our employees and affiliated agents. She has been employed and has served as Senior Vice President of Human Resources of Douglas Elliman, LLC since December 2004 and previously served in various management positions at The Corcoran Group from 1998 to 2004.

Stephen T. Larkin. Following the distribution, Stephen T. Larkin will serve as our Vice President of Communications. With nearly two decades of experience in the real estate industry, Mr. Larkin is known as a trusted media source for trends in luxury living and market information and analysis. He has served as Executive Vice President and Chief Communications Officer of Douglas Elliman since September 2020, after serving as Vice President of Public Relations from December 2016 to September 2020. Prior to beginning his tenure at Douglas Elliman, Mr. Larkin served as a Director of Relevance International, an international public relations firm, from February 2015 to December 2016. Mr. Larkin previously served as a principal of Larkin Public Relations from October 2005 to February 2013 and a Vice President of The Corcoran Group from August 2003 to October 2005. Mr. Larkin graduated from Wheaton College in Massachusetts and received a Master of Science from the Columbia University Graduate School of Journalism.

Daniel A. Sachar. Following the distribution, Daniel A. Sachar will serve as our Vice President Innovation and Managing Director of New Valley Ventures. He joined Vector in September 2020 as Vice President Innovation after serving as Vice President of Enterprise Innovation at Ladenburg Thalmann Financial Services Inc. from January 2018 to February 2020, after serving as a full-time consultant to Ladenburg Thalmann since October 2015. Mr. Sachar led Ladenburg’s innovation platform, created a new division called the “Innovation Lab” and launched an industry-leading initiative to modernize and grow the nationwide network of independent financial advisors, until February 2020. Prior to joining Ladenburg, he spent seven years in management consulting at a New York-based firm focused on innovation and growth, helping publicly-traded companies launch new businesses. Mr. Sachar received a Bachelor of Arts degree from Swarthmore College and an MBA from Columbia Business School.

Scott J. Durkin. Scott J. Durkin’s expertise in Douglas Elliman’s markets spans the past three decades. He has served as President of Douglas Elliman since December 2017 and was named as Chief Executive Officer of Douglas Elliman Realty, LLC in August 2021, after serving as Chief Operating Officer since October 2016. He served as Executive Vice President of Douglas Elliman from January 2016 to October 2016. Prior to 2016, Mr. Durkin enjoyed a 26-year tenure at The Corcoran Group.

101

EXECUTIVE COMPENSATION

Introduction

The following discussion relates to the compensation of our principal executive officer and our two other most highly compensated executive officers, as determined under the rules of the SEC, based on compensation paid to or earned by such individuals for the fiscal year ended December 31, 2020. These executive officers, whom we refer to as our “named executive officers” or “NEOs”, are Mr. Howard M. Lorber, who will serve as our President and Chief Executive Officer following the Distribution; Mr. Richard J. Lampen, who will serve as our Chief Operating Officer following the Distribution; and Mr. J. Bryant Kirkland III, who will serve as our Chief Financial Officer and Treasurer following the Distribution.

Each of the named executive officers holds various long-term incentive equity awards that were granted by Vector. Treatment of these in the Distribution is described under “— Treatment of Outstanding Awards.”

Key Elements of Expected Executive Compensation from the Company Following the Distribution

As a newly-formed entity, we did not have any executive officers or pay any compensation during the year ended December 31, 2020. In connection with the Distribution, we expect that our compensation and human capital committee will determine our executive compensation program following the Distribution. The following summarizes the principal components of the annual compensation that we expect to provide following the Distribution to each of our named executive officers, subject to the approval of the compensation and human capital committee following the Distribution. The Company also expects to grant restricted stock awards to each of its NEOs in connection with the Distribution that will vest ratably over four years, subject to continued employment through each vesting date.


Name	Base Salary		Target Bonus
Howard M. Lorber	$	1,800,000	150% of Base Salary
Richard J. Lampen	$	650,000	112.5% of Base Salary
J. Bryant Kirkland III	$	550,000	33.33% of Base Salary

In addition, the NEOs are expected to receive other benefits and perquisites pursuant to Company benefit plans and arrangements, which the Company expects to establish in connection with the Distribution.

Historical Compensation Paid or Awarded Under Vector Plans and Arrangements

All of the information set forth in the following table reflects historical information regarding compensation earned by our NEOs during the year ended December 31, 2020. The information set forth below only reflects the compensation paid by Vector for services rendered to Vector. References in the tables that follow to “2020” refer to the year ended December 31, 2020. The information below is therefore not necessarily indicative of the compensation these individuals will receive as named executive officers of the Company.

The following section provides compensation information pursuant to the scaled disclosure rules applicable to “emerging growth companies” under the rules of the SEC, including reduced narrative and tabular disclosure obligations regarding executive compensation.

102

SUMMARY COMPENSATION TABLE FOR YEAR 2020


Name and Principal Position	Year		Salary ($)⁽¹⁾		Bonus ($)		Stock Awards ($)⁽²⁾		Option Awards ($)⁽²⁾		Non-Equity Incentive Plan Compensation ($)⁽³⁾		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)⁽⁴⁾		All Other Compensation ($)			Total ($)
Howard M. Lorber		2020	$	3,371,649		—	$	3,001,250	$	0	$	3,898,469	$	5,153,781	$	340,104	⁽⁵⁾	$	15,765,253
President and Chief
Executive Officer

Richard J. Lampen		2020	$	900,000		—	$	900,375	$	0	$	520,313	$	609,601	$	88,075	⁽⁶⁾	$	3,018,364
Executive Vice President

J. Bryant Kirkland III		2020	$	550,000		—	$	480,200	$	0	$	211,958	$	330,737	$	8,550	⁽⁷⁾	$	1,581,445
Senior Vice President,
Chief Financial Officer and Treasurer

(1)	Reflects actual base salary amounts paid for 2020, unless otherwise indicated.

(2)

Represents the aggregate grant date fair value of restricted stock granted under the 2014 Plan during the year ended December 31, 2020 as determined in accordance with FASB ASC Topic 718, rather than an amount paid to or realized by the named executive officer. Assumptions used in the calculation of such amount are included in note 14 to Vector’s audited financial statements for the year ended December 31, 2020 included in its Annual Report on Form 10-K filed with the SEC on March 1, 2021. These grants are subject to continued service conditions; consequently, FASB ASC Topic 718 amounts included in the table may never be realized by the named executive officer.

(3)	These amounts reflect performance-based cash awards under the 2014 Plan paid during 2021, in respect of service performed in 2020. This plan is discussed in further detail under the heading “Annual Incentive Awards.”

(4)

Amounts reported represent the increase in the actuarial present value of benefits associated with Vector’s pension plans. The amounts reflect the increase in actuarial present value for the named executive officer’s benefits under the Supplemental Retirement Plan determined using interest rate, retirement date and mortality rate assumptions consistent with those used in Vector’s financial statements. No amount is payable from this plan before a participant attains age 60 during active service except in the case of death, disability or termination without cause. There can be no assurance that the amounts shown will ever be realized by the named executive officers.

(5)

Represents perquisites consisting of $211,940 for use of corporate aircraft in 2020, a $90,000 allowance paid for lodging and related business expenses and $29,010 for use of a car and driver provided by Vector (which amount covers the cost of fuel, parking, tolls, depreciation expense and related expenses for Mr. Lorber’s personal and business-related use) in 2020. Also includes $8,550 for 401(k) Plan matching contributions in 2020. Also includes $604 for club memberships. For purposes of determining the value of corporate aircraft use, the personal use is calculated based on the aggregate incremental cost to Vector. For flights on corporate aircraft, aggregate incremental cost for purposes of this table is calculated based on a cost-per-flight-mile charge developed from internal Vector data. The charge reflects the direct operating cost of the aircraft, including fuel, additives and lubricants, airport fees and catering. In addition, the charge also reflects an allocable allowance for maintenance and engine restorations.

(6)	Represents perquisites consisting of $45,620 for personal use of corporate aircraft in 2020 (computed using the same assumptions as in footnote 5), $33,905 for reimbursement of automobile expenses and $8,550 for 401(k) Plan matching contributions in 2020.

(7)	Represents 401(k) plan matching contributions.

103

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2020

The table below provides information with respect to the outstanding equity awards of the named executive officers as of December 31, 2020.


	Option Awards												Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable			Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)			Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)			Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Howard M. Lorber		703,547		—			—		$	11.47		2/26/2023		—		—			—		—
		335,022		—			—		$	14.68		2/26/2024		—		—			—		—
		319,069		—			—		$	18.12		2/24/2025		—		—			—		—
		303,876		—			—		$	19.13		2/29/2026		—		—			—		—
		—		289,406	⁽¹⁾		—		$	19.71		2/23/2027							—		—
		—		275,625	⁽²⁾		—		$	18.42		2/27/2028							—		—
		—		262,500	⁽³⁾		—		$	10.92		2/27/2029							—		—
										—		—		191,443	$	2,230,311	⁽⁴⁾
										—		—		416,748	$	4,855,114	⁽⁵⁾
										—		—		250,000	$	2,912,500	⁽⁶⁾
Richard J. Lampen		175,884		—			—		$	11.47		2/26/2023		—		—			—		—
		83,754		—			—		$	14.68		2/26/2024		—		—			—		—
		79,766		—			—		$	18.12		2/24/2025		—		—			—		—
		75,968		—			—		$	19.13		2/29/2026		—		—			—		—
		—		72,351				⁽¹⁾	$	19.71		2/23/2027				—			—		—
		—		68,906				⁽²⁾	$	18.42		2/27/2028				—			—		—
		—		65,625				⁽³⁾	$	10.92		2/27/2029				—			—		—
														75,000	$	873,750	⁽⁶⁾
J. Bryant Kirkland III		105,531		—			—		$	11.47		2/26/2023		—		—			—		—
		50,251		—			—		$	14.68		2/26/2024		—		—			—		—
		47,859		—			—		$	18.12		2/24/2025		—		—			—		—
		45,580		—			—		$	19.13		2/29/2026		—		—			—		—
		—		43,410				⁽¹⁾	$	19.71		2/23/2027				—			—		—
		—		41,343				⁽²⁾	$	18.42		2/27/2028				—			—		—
		—		39,375				⁽³⁾	$	10.92		2/27/2029				—			—		—
														40,000	$	466,000	⁽⁶⁾

(1)	These option grants vested on February 23, 2021, the fourth anniversary of the grant date.

(2)	These option grants vest on February 27, 2022, the fourth anniversary of the grant date.

(3)	These option grants vest on February 27, 2023, the fourth anniversary of the grant date.

(4)

191,443 shares of this restricted stock award vested on each of August 15, 2015, July 1, 2016, July 1, 2017, July 1, 2018, July 1, 2019 and July 1, 2020. The remaining 191,443 unvested shares will vest on July 1, 2021, subject to Mr. Lorber’s continued service to Vector through such date because cumulative Vector Group Ltd. Adjusted EBITDA from July 1, 2014 to December 31, 2020 exceeded $1.138 billion. “Vector Group Ltd. Adjusted EBITDA” is defined in the Award Agreement to mean Vector’s Earnings Before Interest, Income Taxes, Depreciation and Amortization excluding litigation or claim judgments or settlements and non-operating items and expenses for restructuring, productivity initiatives and new business initiatives.

(5)

208,374 shares of this restricted stock award vested on each of November 15, 2016, July 1, 2017, July 1, 2018, July 1, 2019 and July 1, 2020. The remaining 416,748 unvested shares will vest, subject to Mr. Lorber’s continued service to Vector through the applicable vesting date, using the following schedule: 208,374 shares will vest on July 1, 2021 because cumulative Vector Group Ltd. Adjusted EBITDA from October 1, 2015 to December 31, 2020 exceeded $918.75 million and 208,374 shares will vest on July 1, 2022 if cumulative Vector Group Ltd. Adjusted EBITDA from October 1, 2015 to December 31, 2021 exceeds $1.09375 billion. “Vector Group Ltd. Adjusted EBITDA” is defined in the

104

Award Agreement to mean Vector’s Earnings Before Interest, Income Taxes, Depreciation and Amortization excluding litigation or claim judgments or settlements and non-operating items and expenses for restructuring, productivity initiatives and new business initiatives.

(6)

These restricted shares vest in four equal annual installments commencing on the first anniversary of the date of grant provided the recipient is then still an employee of Vector, subject to earlier vesting upon the recipient’s death or disability, termination of employment without cause, resignation for good reason and change in control.

Narrative Disclosure to Summary Compensation Table

The following describes the material features of the compensation disclosed in the Summary Compensation Table.

Components of Vector’s Compensation

The key components of Vector’s executive compensation program consist of a base salary, an annual performance-based bonus, equity awards and various benefits, including Vector’s Supplemental Retirement Plan, the Liggett Vector Brands Inc. Savings Plan (the “401(k) Plan”) and business and personal use of corporate aircraft by each of the President and the Executive Vice President. The employment agreements with Vector’s named executive officers also provide for severance compensation in the event of termination other than for cause during the term of the agreements or, in certain cases, following a change in control of Vector during the term of the agreements.

Base Salary

Base salaries for Vector’s named executive officers are established based on their overall business experience and managerial competence in their respective roles, as well as their personal contributions to Vector and are intended to provide competitive levels of fixed compensation. The compensation and human capital committee believes that executive base salaries should be set at competitive levels and reward Vector’s executives for its long-term outstanding performance with above-average total compensation. Base salaries are reviewed annually by the compensation and human capital committee, based on recommendations by Vector’s Chief Executive Officer with respect to the salaries of executive officers other than himself, and may be increased based on review of Vector’s results and individual executive performance. An automatic cost of living adjustment to base salary is included under the terms of Mr. Lorber’s employment agreement such that his base salary was increased $71,934 for 2020. The compensation and human capital committee also increased the base salary of Mr. Kirkland by $50,000 in 2020. Effective January 1, 2021, as a result of the cost of living provision in his employment agreement, Mr. Lorber’s base salary was increased from $3,371,649 to $3,426,270. In connection with Mr. Lampen’s appointment as Chief Operating Officer, the compensation and human capital committee increased Mr. Lampen’s base salary to $1,250,000 per annum, effective January 1, 2021.

Annual Incentive Awards

Vector’s executive officers are eligible to earn annual cash incentive awards under the 2014 Plan. In 2020, each of Vector’s named executive officers participated in the annual cash incentive program under the 2014 Plan. For Messrs. Lorber, Lampen and Kirkland the following performance metrics were established for 2020: 37.5% of the payment was based on adjusted earnings before interest and taxes, or Adjusted EBIT, as defined in the 2014 Plan, of Liggett; 37.5% of the payment was based on distributions to stockholders of Vector; and 25% of the payment was based on management’s performance related to Douglas Elliman’s response to the COVID-19 pandemic. The Subcommittee selected Adjusted EBIT as a performance criteria again this year as it is commonly used to measure performance in the tobacco industry, while selecting complementary metrics that incentivize management to seek strong stockholder returns and prioritize Vector’s long-term performance notwithstanding the impact of the COVID-19 pandemic.

The COVID-19 pandemic and the related economic, financial and public health consequences materially and adversely affected the business of Douglas Elliman from March 2020 to August 2020 as real estate showings

105

were limited and, as a result, in the second quarter, Douglas Elliman experienced a significant decline in revenues. In establishing 2020 targets, the Committee determined these factors were outside of the control of management; however, the Committee believed management had the ability to control and impact Douglas Elliman’s response to the COVID-19 pandemic. Accordingly, for the 2020 fiscal year, annual awards with respect to Douglas Elliman were determined by the Committee in its sole discretion based on its determination of how effectively management responded to the COVID-19 crisis, taking into account all of the factors it considered relevant and appropriate. In making this determination, the Committee considered both non-financial considerations, such as the safety of employees, agents and customers, as well as financial metrics it considers appropriate.

In evaluating achievement of the Douglas Elliman-related performance metric, the Subcommittee evaluated management’s cost-reduction and human capital initiatives. The Subcommittee considered Douglas Elliman’s commitment to its employees (Douglas Elliman was named by Forbes as one of the 100 best large employers in 2020) as well as initiatives that resulted in a decline in Douglas Elliman’s consolidated expenses, excluding restructuring and losses from asset disposals, of $47.8 million, or from $260.7 million in 2019 to $212.9 million in 2020. Based on these efforts, the Subcommittee determined that management had met the criteria for a 125% bonus payment with respect to the Douglas Elliman-related performance metric.

For 2020, like 2019 and prior years and in accordance with the terms of their respective employment agreements, Messrs. Lorber, Lampen and Kirkland remained eligible to receive a target annual incentive opportunity of 100%, 50%, 33.33% and 25% of their respective base salaries. In connection with Mr. Lampen’s appointment as Chief Operating Officer, the compensation and human capital committee increased Mr. Lampen’s target annual incentive opportunity to 75% of base salary (from his current target bonus opportunity of 50% of base salary), effective January 1, 2021. Vector has not increased the target percentage annual incentive opportunity for any of its other named executive officers from the percentage set forth in each named executive officer’s employment agreement.

Depending on the level of achievement of the performance criteria, the actual annual incentive payments could exceed the target annual incentive amount for each of Messrs. Lorber, Lampen and Kirkland up to a maximum payout of 125% of target. The Subcommittee may exercise negative discretion with respect to any award to reduce any amount that would otherwise be payable under the annual incentive program granted under the 2014 Plan.

The 2020 performance necessary for Messrs. Lorber, Lampen and Kirkland to receive annual incentive awards at the target level were set at levels which were believed to be rigorous, but reasonably achievable, based on internal corporate plans.

For Messrs. Lorber, Lampen and Kirkland, the performance necessary to achieve the minimum, target or maximum awards in 2020 was as follows:

•

percentages of the target cash incentive opportunity based on Liggett Adjusted EBIT were $240,000,000 (50%), $250,000,000 (100%), and $270,000,000 and above (125%); the actual Liggett Adjusted EBIT for 2020 were $324,670,000 resulting in a 125% payment on this metric;

•

percentages of the target cash incentive opportunity based on cash dividends per share of Vector were $0.70 (50%), $0.80 (100%), and $0.90 and above (125%); the actual cash dividends paid in 2020 were $0.80 per share resulting in a 100% payment on this metric; and,

•

as discussed above, the Subcommittee determined the payment for the portion of the target cash incentive opportunity based on the Douglas Elliman pandemic response was 125% based on management’s response to the COVID-19 pandemic.

Based on actual 2020 results compared to the established performance criteria, annual cash incentive payments equal to 115.625% of target amounts were achieved and awarded to Messrs. Lorber, Lampen and Kirkland.

106

Annual cash incentive payment amounts for achieving performance criteria in between the amounts listed above are determined by linear interpolation between the higher and lower amounts.

Equity Compensation

Long-term equity compensation is intended to provide a variable pay opportunity that rewards long-term performance by Vector as a whole and serves as a significant incentive to remain with Vector. In establishing long-term equity compensation awards, the compensation and human capital committee has considered the historical returns generated by Vector. In 2020, Vector’s annual long-term equity compensation program for its named executive officers consisted of restricted stock awards.

On May 27, 2020, the Subcommittee granted restricted stock awards to Messrs. Lorber (250,000 shares), Lampen (75,000 shares) and Kirkland (40,000 shares) to recognize past and current performance and to serve as a means of incentivizing and retaining these key employees. The restricted shares vest in four equal annual installments commencing on the first anniversary of the date of grant subject to continued employment through each vesting date subject to earlier vesting upon his death or disability, a termination of employment without cause or resignation for good reason or a change in control. Shares received in respect of the May 27, 2020 restricted stock grants will be subject to Vector’s Equity Retention and Hedging Policy.

Dividend Equivalents

Under the terms of certain equity awards made to Vector’s named executive officers under Vector’s stock plans, dividend equivalent payments and distributions are made to the executive officers with respect to the shares of Common Stock underlying the unexercised stock options and unvested restricted stock awards and the exercise prices of stock options are adjusted to reflect stock dividends. These payments and distributions are made at the same rate as dividends and other distributions paid on shares of Vector’s Common Stock. In 2020, named executive officers earned cash dividend equivalent payments on unexercised stock options and unvested restricted stock (granted in 2020) is as follows: Mr. Lorber — $2,513,552; Mr. Lampen — $542,803; and Mr. Kirkland — $322,679. In accordance with the disclosure rules of the SEC, these amounts have not been separately reported in the Summary Compensation Table because the value of the dividend equivalent rights was included in the initial grant date fair value of the underlying option grants which is reported in the Summary Compensation Table.

In 2020, quarterly cash dividends were paid at $0.20 per Vector common share.

Perquisites

Vector’s corporate aircraft are made available for the personal use of Mr. Lorber and other executive officers at Mr. Lorber’s discretion. Vector’s corporate aircraft policy permits personal use of corporate aircraft by executives, subject to an annual limit of $200,000 and $50,000 for personal use by Messrs. Lorber and Lampen, respectively. For purposes of determining the amounts allowable under this policy, the value of the personal usage is calculated using the applicable standard industry fare level formula established by the Internal Revenue Service (as distinguished from the aggregate incremental cost approach used for determining the value included in the Summary Compensation Table), and Mr. Lorber and any other executive officers pay income tax on such value. In addition, Mr. Lorber is entitled to a car and driver provided by Vector, a $7,500 per month allowance for lodging and related business expenses, and two club memberships, and Mr. Lampen is reimbursed for automobile and club expenses on an after-tax basis. See the Summary Compensation Table for details regarding the value of perquisites received by the named executive officers.

Supplemental Retirement Plan

Vector’s named executive officers and certain other management employees are eligible to participate in the Supplemental Retirement Plan, which was adopted by the Board in January 2002 to promote retention of key

107

executives and to provide them with financial security following retirement. The Supplemental Retirement Plan provides for the payment to a participant at his normal retirement date of a lump sum amount that is the actuarial equivalent of a single life annuity commencing on that date. The “normal retirement date” under the Supplemental Retirement Plan is defined as the January 1st following attainment by a participant of the later of age 60 or the completion of eight years of employment following January 1, 2002 (in the case of Mr. Lorber) or January 1, 2004 (in the case of Messrs. Lampen and Kirkland). The single life annuity amounts for the named executives were determined by Vector’s Board giving consideration to a variety of pertinent factors including (but not limited to) the executive’s level of annual compensation.

No benefits are payable under the Supplemental Retirement Plan if a named executive officer resigns without good reason before attaining his normal retirement date. In the case of a participant who becomes disabled prior to his normal retirement date or whose service is terminated without cause, the participant’s benefit consists of a pro rata portion of the full projected retirement benefit to which he would have been entitled had he remained employed through his normal retirement date, as actuarially discounted back to the date of payment. The beneficiary of a participant who dies while working for Vector or a subsidiary (and before becoming disabled or attaining his normal retirement date) will be paid an actuarially discounted equivalent of his projected retirement benefit; conversely, a participant who retires beyond his normal retirement date will receive an actuarially increased lump sum payment to reflect the delay in payment using a post-retirement interest rate of 7.5%. The lump sum amount under the Supplemental Retirement Plan is paid six months following the named executive officer’s retirement on or after his normal retirement date or termination of employment without cause, along with interest at the prime lending rate as published in the Wall Street Journal on the lump sum amount for this six-month period.

Employment Agreements

Compensation arrangements, as reflected in the employment agreements with Vector’s executive officers, are usually negotiated on an individual basis between the Chief Executive Officer and each of the other executives. While the compensation and human capital committee has delegated to the Chief Executive Officer the responsibility of negotiating these employment agreements and his input is given significant consideration by the compensation and human capital committee, the compensation and human capital committee and the Board have final authority over all executive compensation matters.

On January 27, 2006, Vector and Howard M. Lorber entered into an amended and restated employment agreement (the “Amended Lorber Agreement”), which replaced his prior employment agreements with Vector and with New Valley. The Amended Lorber Agreement had an initial term of three years effective as of January 1, 2006, with an automatic one-year extension on each anniversary of the effective date unless notice of non-extension is given by either party within 60 days before this date. Under the Amended Lorber Agreement, Mr. Lorber’s base salary is subject to an annual cost of living adjustment. In addition, Vector’s Board must periodically review his base salary and may increase, but not decrease, his base salary in its sole discretion. Mr. Lorber is eligible on an annual basis to receive a target bonus of 100% of his base salary under Vector’s non-equity incentive bonus plan. During the period of his employment, Mr. Lorber is entitled to various benefits, including a car and driver provided by Vector, a $7,500 per month allowance for lodging and related business expenses, two club memberships and dues, and use of corporate aircraft in accordance with Vector’s Corporate Aircraft Policy. Following termination of his employment by Vector without cause (as specified in the Amended Lorber Agreement), termination of his employment by him for good reason (as specified in the Amended Lorber Agreement) or upon death or disability, he (or his beneficiary in the case of death) would continue to receive for a period of 36 months following the termination date his base salary and the bonus amount earned by him for the prior year (with such bonus amount limited to 100% of base salary). In addition, except as otherwise provided in an award agreement, all of Mr. Lorber’s outstanding equity awards would be vested and any stock options granted after January 27, 2006 would continue to be exercisable for no less than two years or the remainder of the original term if shorter. Following termination of his employment for any of the reasons described above (other than death or disability) within two years after a change in control (as defined in the Amended Lorber

108

Agreement) or before a change in control that actually occurs in anticipation of or at the request of a third party effectuating such change in control, he would receive a lump sum payment equal to 2.99 times the sum of his then current base salary and the bonus amount earned by him for the prior year (with such bonus amount limited to 100% of base salary). In addition, Mr. Lorber will be indemnified in the event that excise taxes are imposed on change in control payments under Section 4999 of the Code.

On January 27, 2006, Vector entered into employment agreements (the “Other Executive Agreements”) with Richard J. Lampen, Vector’s Executive Vice President and Chief Operating Officer, and J. Bryant Kirkland III, Vector’s Senior Vice President, Treasurer and Chief Financial Officer. The Other Executive Agreements replaced prior employment agreements with Vector or New Valley. The Other Executive Agreements had an initial term of two years effective as of January 1, 2006, with an automatic one-year extension on each anniversary of the effective date unless notice of non-extension is given by either party within 60 days before this date. As of January 1, 2021, the annual base salaries provided for in these Other Executive Agreements were $1,250,000 for Mr. Lampen (increased, effective January 1, 2021, from $900,000) and $550,000 for Mr. Kirkland. In addition, the Board must periodically review these base salaries and may increase, but not decrease, their base salaries in its sole discretion. These executives are eligible to receive a target bonus of 75% for Mr. Lampen (increased, effective January 1, 2021, from 50%) and 33.33% for Mr. Kirkland, of their base salaries under Vector’s non-equity incentive bonus plan. Following termination of their employment by Vector without cause (as defined in the Other Executive Agreements), termination of their employment by the executives for good reason (as defined in the Other Executive Agreements) or upon death or disability, they (or their beneficiaries in the case of death) would continue to receive for a period of 24 months following the termination date their base salary and the bonus amount earned by them for the prior year (with such bonus amount limited to 75% of base salary for Mr. Lampen, and 33.33% of base salary for Mr. Kirkland).

Potential Termination and Change in Control Payments

The compensation payable to named executive officers upon voluntary termination, involuntary termination without cause, termination for cause, termination following a change in control and in the event of disability or death of the executive is described below.

Payments Made Upon Termination

Regardless of the manner in which a named executive officer’s employment terminates, unless terminated for cause, he or she may be entitled to receive amounts earned during his or her term of employment. Such amounts include:

•

unpaid base salary through the date of termination;

•

any accrued and unused vacation pay;

•

any unpaid bonus with respect to a completed performance period;

•

all accrued and vested benefits under Vector’s compensation and benefit programs, including the pension plan and the Supplemental Retirement Plan; and

•

with respect solely to Mr. Lorber, payment by Vector of a tax gross-up for any excise taxes and related income taxes on gross-ups for benefits received upon termination of employment in connection with a change in control.

Payments Made Upon Involuntary Termination of Employment Without Cause or for Good Reason, Death or Disability

In the event of the termination of employment of a named executive officer by Vector without cause or by the named executive officer for good reason, or upon the death or the disability of a named executive officer, in

109

addition to the benefits listed under the heading “Payments Made Upon Termination,” the named executive officer or his designated beneficiary upon his death will receive the following benefits:

•

payments for 36 months for Mr. Lorber or 24 months for the other named executive officers (the “Severance Period”) equal to 100% of the executive’s then-current base salary and the most recent bonus paid to the executive (up to the amount of the executive’s target bonus);

•

continued participation, at Vector’s expense, during the Severance Period in all employee welfare and health benefit plans, including life insurance, health, medical, dental and disability plans which cover the executive and the executive’s eligible dependents (or, if such plans do not permit the executive and his eligible dependents to participate after his termination, Vector is required to pay an amount each quarter (not to exceed $35,000 per year in the case of Messrs. Lampen and Kirkland) to keep them in the same economic position on an after-tax basis as if they had continued in such plans);

•

acceleration of the vesting of the named executive officer’s stock options upon death or disability and with respect solely to Mr. Lorber, upon a termination of employment without cause or resignation for good reason; and,

•

acceleration of the vesting of the named executive officer’s restricted stock awards upon death, disability, a termination of employment without cause or resignation for good reason.

Payments Made Upon a Change in Control

Howard M. Lorber

Mr. Lorber’s employment agreement has a “double-trigger” change in control provision: if his employment is terminated by Vector without cause or by Mr. Lorber for good reason within two years after a change in control (or before a change in control that actually occurs in anticipation of or at the request of a third party effectuating such a change in control), Mr. Lorber would be entitled to receive the following severance benefits:

•

a lump-sum cash payment equal to 2.99 times the sum of his base salary plus the last annual bonus earned by him (up to 100% of base salary, including any deferred amount) for the performance period immediately preceding the date of termination;

•

participation by Mr. Lorber and his eligible dependents in all welfare benefit plans in which they were participating on the date of termination until the earlier of (x) the end of the employment period under his employment agreement and (y) the date that he receives equivalent coverage and benefit under the plans and programs of a subsequent employer;

•

continued participation at Vector’s expense for 36 months in life, disability, accident, health and medical insurance benefits substantially similar to those received by Mr. Lorber and his eligible dependents prior to such termination, subject to reduction if comparable benefits are actually received from a subsequent employer; and

•

termination of certain restrictive covenants in his employment agreement, including non-competition and non-solicitation covenants.

Mr. Lorber’s unvested and outstanding equity awards will vest in full upon a change in control.

Richard J. Lampen and J. Bryant Kirkland III

While their respective employment agreements do not contain any change in control provisions, in the event of the termination of Messrs. Lampen and Kirkland by Vector without cause or by the named executive officer for good reason upon a change in control, such named executive officers would receive the same severance benefits described under “— Payments Made Upon Termination” and “— Payments Made Upon Involuntary Termination

110

of Employment Without Cause or for Good Reason, Death or Disability,” above. In addition, the unvested and outstanding stock options and restricted stock held by Messrs. Lampen and Kirkland will vest in full upon a change in control.

Employment Agreements

We expect to enter into an employment agreement with each of Messrs. Lorber and Lampen in connection with the Distribution, the material terms of which will be approved by our compensation and human capital committee following the Distribution.

Equity Compensation Plan Information

Our Stock Incentive Plan.

Prior to the Distribution, we expect to adopt a Stock Incentive Plan. A form of the Stock Incentive Plan is filed as an exhibit to the registration statement, of which this prospectus forms a part. The following description of the Stock Incentive Plan is qualified in its entirety by reference to the Stock Incentive Plan.

Overview

The Stock Incentive Plan provides the Company with the ability to grant equity-based and cash incentive awards to its employees, non-employee directors, consultants and independent contractors. Such incentive awards are granted to attract, retain and motivate the Company’s service providers and help align them with the Company’s financial success over the long term and the interests of the Company and our stockholders. The Stock Incentive Plan will terminate ten years from inception unless terminated sooner.

Stock Incentive Plan Share Reserve; Limits; Adjustments

The available share reserve under the Stock Incentive Plan is 10,000,000 shares, plus an annual increase on the first day of each year beginning in 2023 and ending in 2031, equal to the lesser of (A) 4% percent of the Shares outstanding on the last day of the immediately preceding fiscal year and (B) such smaller number of Shares as determined by the Board or the Compensation and Human Capital Committee of the Board (the “committee”). The Company may satisfy its obligations under any equity-based award granted under the Stock Incentive Plan by issuing new shares or Treasury shares.

Shares subject to an equity award are counted only to the extent they are actually issued. Thus, awards that terminate by expiration, forfeiture, cancellation, or otherwise are settled in cash in lieu of shares, or exchanged for awards not involving shares, shall again be available for grant under the Stock Incentive Plan.

Any shares withheld to satisfy tax withholding obligations on awards issued under the Stock Incentive Plan, tendered to pay the exercise price of an award under the Stock Incentive Plan and shares repurchased on the open market with the proceeds of an option exercise will not be eligible to be again available for grant under the Stock Incentive Plan. Any substitute awards shall not be counted against the shares available for granting awards under the Stock Incentive Plan.

The number of shares that may be issued or subject to outstanding awards, the option price or grant price applicable to outstanding awards and other value determinations are subject to adjustment by the committee to reflect stock dividends, stock splits, reverse stock splits, spin-offs, and other corporate events or transactions, including without limitation distributions of stock or property other than normal cash dividends.

Non-employee directors can be granted any of the awards available under the Stock Incentive Plan except ISOs, which are only available for employees. The Board shall from time to time determine the nature and number of

111

awards to be granted to non-employee directors. The aggregate value of all compensation granted or paid, as applicable, to a non-employee director with respect to any calendar year, including awards granted and cash fees paid by the Company to such non-employee director, will not exceed $500,000, calculating the value of any equity awards based on the grant date fair value of such equity awards for financial reporting purposes.

Administration

The Stock Incentive Plan will be administered by the committee appointed by the Board from among its members, provided that the full Board may act at any time as the committee. In the case of awards intended to qualify for the exemption from Section 16(b) of the Securities Exchange Act of 1934 that is available under Rule 16b-3, a subcommittee of the Board composed of at least two directors who are “outside directors” is responsible for administering the Stock Incentive Plan and has the final discretion, responsibility and authority to interpret the terms and intent of the Stock Incentive Plan and any related documentation, to determine eligibility for awards and the terms and conditions of awards, and to adopt rules, regulations, forms, instruments, and guidelines. The committee may delegate administrative duties and powers to one or more of its members or to one or more officers, agents, or advisers. The committee may also delegate to one or more officers the power to designate other employees (other than officers subject to Section 157(c) of the Delaware General Corporate Law) to be recipients of awards.

Eligibility

Employees, non-employee directors, consultants and independent contractors of the Company who are selected by the committee are eligible to participate in the Stock Incentive Plan.

Types of Awards

The Stock Incentive Plan provides that the committee may grant awards of various types. A description of each of the types of awards follows.

Stock Options

The committee may grant both incentive stock options (“ISOs”) and nonqualified stock options (“NQSOs”) under the Stock Incentive Plan. Eligibility for ISOs is limited to employees of the Company and its subsidiaries. The exercise price for options cannot be less than the fair market value of the Company’s Common Stock as of the date of grant. The latest expiration date cannot be later than the tenth anniversary of the date of grant. Fair market value under the Stock Incentive Plan may be determined by reference to market prices on a particular trading day or on an average of trading days. The exercise price may be paid by means approved by the committee, which may include cash or check, the tendering of previously acquired Common Stock, a reduction in shares issuable upon exercise which have a value at the time of exercise that is equal to the option price (a “net exercise”), to the extent permitted by applicable law, the proceeds of sale from a broker-assisted cashless exercise or any other legal consideration that the committee may deem appropriate on such basis as the committee may determine in accordance with the Plan.

Stock Appreciation Rights

The committee may grant stock appreciation rights (“SARs”) under the Stock Incentive Plan either alone or in tandem with stock options. The grant price of an SAR cannot be less than the fair market value of the Company’s Common Stock as of the date of grant.

Restricted Stock and Restricted Stock Units

The committee may award restricted Common Stock and restricted stock units. Restricted stock awards consist of shares of stock that are transferred to the participant subject to restrictions that may result in forfeiture if

112

specified conditions are not satisfied. Restricted stock unit awards result in the transfer of shares of stock to the participant only after specified conditions are satisfied. A holder of restricted stock is treated as a current stockholder and is entitled to dividend and voting rights, whereas the holder of a restricted stock unit award may be entitled to dividend equivalents but otherwise is only treated as a stockholder with respect to the award when the shares of Common Stock are delivered in the future. The committee will determine the restrictions and conditions applicable to each award of restricted stock or restricted stock units.

Performance-Based Restricted Shares and Performance-Based Restricted Share Units

Performance-based restricted shares and performance-based restricted share units may be granted under the Stock Incentive Plan. The performance cycle for each award will be determined by the committee and specify the performance goals that are to be achieved by the participant and a formula for determining the amount of any payment to be made.

In the case of performance-based restricted shares, during the period for which a substantial risk of forfeiture is to continue, the participant will not have any right to transfer any rights under the award, but the participant will have voting and other ownership rights (except for any rights to a liquidating distribution). Prior to payment of the award of performance-based restricted share units, the participant will not have any right to transfer any rights under the award or have any rights of ownership, including the right to vote.

For both performance-based restricted shares and performance-based restricted share units, the committee may on or after the grant date authorize the payment of dividend equivalents on the performance-based restricted shares or performance-based restricted share units in cash or securities with respect to any dividends or other distributions paid by the Company. Any dividend equivalents paid or adjustments made with respect to the dividends paid in Common Stock will be subject to the same restrictions as the underlying award.

Following the completion of a performance cycle, the committee will determine whether the performance goals that have been chosen for a particular performance period have been met and calculate and determine the amount of the award earned for such performance cycle. Awards may be adjusted upwards or downwards in the sole discretion of the committee

Cash-Based Awards

The committee may grant cash-based awards under the Stock Incentive Plan that specify the amount of cash to which the award pertains, the conditions under which the award will be vested and payable, and such other conditions as the committee may determine that are consistent with the terms of the Stock Incentive Plan.

Other Stock-Based Awards

The committee may grant equity-based or equity-related awards, referred to as “other stock-based awards,” other than options, SARs, restricted stock, restricted stock units, performance shares, or performance units. The terms and conditions of such other stock-based award shall be determined by the committee. Payment under any other stock-based award will be made in shares of Common Stock or cash, as determined by the committee.

Termination of Employment

Except as otherwise provided in the award agreement or other written agreement between the participant and the Company, vesting of awards will cease upon termination of the participant’s continued service. Notwithstanding any other provision of the Stock Incentive Plan to the contrary, the committee may in its sole discretion determine the rights of participants with respect to awards upon termination of employment or service as a director.

113

Treatment of Awards Upon a Change in Control

In the event of a “change in control” of the Company, as defined in the Stock Incentive Plan, then unless otherwise provided in an award agreement, the committee may, in its sole discretion: (a) cancel awards for a cash payment equal to their fair value (as determined in the sole discretion of the committee), (b) provide for the issuance of replacement awards, (c) terminate options without providing accelerated vesting, (d) immediately vest the unvested portion of any award or (e) take any other action with respect to the awards the committee deems appropriate. The treatment of awards upon a change in control may vary among participants and types of awards in the committee’s sole discretion. Awards subject to performance goals shall be settled upon a “change in control” of the Company based upon the extent to which the performance goals underlying such awards have been achieved as determined in the sole discretion of the committee.

Amendment of Awards or Stock Incentive Plan

The committee may at any time alter, amend, modify, suspend, or terminate the Stock Incentive Plan or any outstanding award in whole or in part. No amendment of the Stock Incentive Plan will be made without stockholder approval if stockholder approval is required by law or stock exchange rule. No amendment may adversely affect the rights of any participant without his or her consent under an outstanding award, unless specifically provided for in the Stock Incentive Plan.

2021 Employee Stock Purchase Plan

General

Prior to the Distribution, we expect to adopt an Employee Stock Purchase Plan (“ESPP”). A form of the ESPP is filed as an exhibit to the registration statement, of which this prospectus forms a part. The following description of the ESPP is qualified in its entirety by reference to the ESPP. Our ESPP is intended to qualify under Section 423 of the Code.

Share Reserve

A total of 1,600,000 shares of our common stock plus an annual increase on the first day of each year beginning in 2023, equal to the lesser of (A) 1% percent of the Shares outstanding on the last day of the immediately preceding fiscal year and (B) such smaller number of Shares as determined by the Board or the Committee, have been reserved and are available for sale under the ESPP, subject to adjustment in accordance with the terms of the ESPP.

Administration

The ESPP is administered by the Committee, who may delegate its administrative authority to a person or committee who shall serve as the “Plan Administrator.” The Plan Administrator will have the authority to make and adopt rules and regulations not inconsistent with the provisions of the ESPP or the Code. In addition, the Plan Administrator will correct any defect or supply any omission or reconcile any inconsistency in the ESPP. The interpretations and decisions of the Plan Administrator in respect to the ESPP are final and binding. The Plan Administrator may also retain a third-party stock broker or financial institution to act as a broker and third-party administrator for the ESPP.

Eligible Employees

All of our employees or employees of participating subsidiaries, as defined in the ESPP, who are customarily employed for more than 20 hours a week, are employed on the first day of an offering period and are not subject to the rules or laws of a foreign jurisdiction that would prohibit the grant of an option, are eligible to participate in the ESPP, provided that the Plan Administrator has discretion to exclude employees who (i) are customarily

114

employed for less than five months in a calendar year, (ii) have been employed by us for less than two years, or (iii) are highly compensated employees as defined in Section 414(q) of the Code. In addition, no employee may purchase shares of our common stock under the ESPP that would result in the employee owning 5% or more of the total combined voting power or value of our stock or the stock of any of our subsidiaries.

Offerings

The Plan will be implemented by offering options (“Offerings”) that are six (6) months in duration or such other duration as determined by the Plan Administrator (the period during which an Offering is effective, the “Offering Period”). Offering Periods will commence on January 1 and July 1 of each year (or if such dates are not business days, the first business day thereafter) and end six (6) months thereafter, on the following June 30 and December 31 (or if such dates are not business days, the first business day thereafter), respectively. Notwithstanding the foregoing, the Plan Administrator may establish a different duration (not to exceed twenty-seven (27) months) for one or more future Offering Periods or different commencing or ending dates for such Offering Periods, including the initial Offering Period under the ESPP.

Purchase Price

The purchase price paid by participants for the shares purchased under the ESPP will be set by the Plan Administrator and will, in any case, be no less than 85% of the fair market value of a Share on the last day of the applicable offering period. Unless provided otherwise, the default purchase price per share provided for in the ESPP will be 85% of the lesser of the closing price of a Share on the first day of the offering period or the last day of the applicable offering period.

Limitations on Purchase

As required by the Code, no eligible employee may purchase stock under the ESPP at a rate which, when aggregated with his or her other rights to purchase a Share, exceeds $25,000 in fair market value per year. Unless the Plan Administrator determines otherwise, employees are also limited in making elections under the ESPP to contributing no more than 15% of their after-tax “compensation” (as defined in the ESPP) to the ESPP.

Holding Period

If the purchase price of Shares under the ESPP is less than fair market value, participants will lose preferential tax treatment of such shares if the Shares are sold prior to the later of the second anniversary of the first day of the offering period during which such Shares were purchased or the first anniversary of the purchase date of such Shares (i.e., the last day of such offering period).

Adjustments and Reorganization Events

In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of Shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of Shares other than an ordinary cash dividend, (a) the number and class of securities available under the ESPP, (b) the share limitations of the ESPP and (c) the option price will be equitably adjusted to the extent determined by the Committee. Upon the occurrence of certain reorganization events constituting a change in control, as defined under “2021 Stock Incentive Plan — Change in Control” above, the Committee may take any actions to adjust options to purchase Shares under the ESPP, including the length of offering periods.

Amendments or Termination

Our Committee generally may, at any time, amend or terminate the ESPP in any respect, except that (a) if the approval of any amendment by our stockholders is required by Section 423 of the Code, or if the amendment

115

would increase the maximum number of shares issuable under the ESPP, such amendment may not be effected without stockholder approval, and (b) in no event may any amendment be made that would cause the ESPP to fail to comply with Section 423 of the Code. The ESPP may be terminated at any time by our Committee.

Treatment of Outstanding Awards

Vector has granted options to purchase shares of Vector common stock to its employees (each, a “Vector option”). In connection with the Distribution, each such employee who is a holder of a Vector option, whether vested or unvested, that is outstanding on the record date will receive one share of Spinco common stock for every two shares of Vector common stock underlying such Vector option. Such distribution will be made to the such holder, less any required withholding taxes, at the same time that the distribution is made to the Vector stockholders. Other than such distribution, there will be no adjustments to the existing Vector options in connection with the Distribution and the Vector options will continue to be governed by the same terms and conditions (including vesting terms, the number of shares of Vector common stock underlying the Vector options and the exercise price of such Vector options), as were applicable to the Vector option immediately prior to the Distribution.

Vector has issued restricted shares of Vector common stock to its employees and non-employee directors that are subject to time-based vesting conditions (each, a “Vector time-based restricted share award”). In connection with the Distribution, each such employee and non-employee director who is a holder of a Vector time-based restricted share award that is outstanding on the record date will receive one share of Spinco common stock for every two Vector restricted shares under the Vector time-based restricted share award. Such distribution will be made to the such holder, less any required withholding taxes, at the same time that the distribution is made to the Vector stockholders. Other than such distribution, there will be no adjustment to the existing Vector time-based restricted share award in connection with the Distribution and the Vector time-based restricted share award will continue to be governed by the same terms and conditions (including vesting terms and the number of Vector restricted shares outstanding under the Vector time-based restricted share award), as were applicable to the Vector time-based restricted share award immediately prior to the Distribution.

Vector has also issued restricted shares of Vector common stock to certain employees that are subject to performance-based vesting conditions (each, a “Vector performance-based restricted share award” and together with the Vector options and Vector time-based restricted share awards, the “Vector equity awards”). In connection with the Distribution, each such employee who is a holder of a Vector performance-based restricted share award that is outstanding on the record date will receive one share of Spinco common stock for every two Vector restricted shares under the Vector performance-based restricted share award (based on the full number of restricted shares under the equity award); provided that (i) for the Vector performance-based restricted share award granted on November 10, 2015, such distribution will be subject to the same restrictions as the underlying Vector performance-based restricted share award and when the underlying Vector performance-based restricted share award vests, the distribution will be made, less any required withholding taxes and (ii) for the Vector performance-based restricted share award granted on February 24, 2021, the Distribution will be made to such holder, less any required withholding Taxes, at the same time that the Distribution is made to the Vector stockholders. Other than such distribution, there will be no adjustment to the existing Vector performance-based restricted share award in connection with the Distribution and the Vector performance-based restricted share award will continue to be governed by the same terms and conditions (including vesting terms and the number of Vector restricted shares outstanding under the Vector performance-based restricted share award), as were applicable to the Vector performance-based restricted share award immediately prior to the Distribution.

116

The total percentage of Douglas Elliman stock that will be distributed to employees and directors in respect of outstanding Vector equity awards is approximately 3.3%, and, other than the performance-based restricted share granted on November 10, 2015, such stock will be distributed to the holders of outstanding Vector equity awards without any vesting conditions even if the Vector equity awards are never exercised or vested. The Distribution of Spinco common stock in respect of Vector stock option awards and restricted stock awards is expected to be taxable to both Vector and the recipients thereof. The number of shares of Spinco common stock distributed in respect of shares of Vector common stock underlying Vector stock option awards and restricted stock awards will be reduced in satisfaction of such holders’ tax obligations.

No fractional shares of Spinco common stock will be issued in connection with the Distribution. If a holder of an outstanding Vector equity award would be entitled to receive a fractional share, such amount will be paid in cash at the time specified above and will generally be taxable to the holder of such outstanding Vector equity award.

117

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Introduction

For purposes of governing the ongoing relationships between the Company and Vector after the Distribution, we will enter into certain agreements with Vector prior to the Distribution.

Relationship Between Vector and Us After the Distribution

Following the Distribution, we will be a public company and Vector will have no continuing common stock ownership interest in us. For purposes of governing the ongoing relationships between Vector and us after the Distribution and to provide for an orderly transition, Vector and the Company entered into or will enter into the agreements described in this section prior to the Distribution.

Certain of the agreements summarized in this section have been filed as exhibits to the registration statement, of which this prospectus forms a part, that we have filed with the SEC, and the following summaries of those agreements are qualified in their entirety by reference to the agreements that have been filed prior to the Distribution.

Distribution Agreement

We will enter into a Distribution Agreement with Vector as part of a series of transactions pursuant to which we have acquired or will acquire prior to the Distribution the subsidiaries, businesses and other assets of Vector that constitute our business.

Under the Distribution Agreement, Vector will distribute all of our outstanding common stock to holders of its common stock (including Vector common stock underlying outstanding stock option awards and restricted stock awards).

Under the Distribution Agreement, Vector will provide us with indemnities with respect to liabilities, damages, costs and expenses arising out of any of: (i) Vector’s businesses (other than businesses of ours); (ii) certain identified claims or proceedings; and (iii) any breach by Vector of its obligations under the Distribution Agreement. We will provide Vector with indemnities with respect to liabilities, damages, costs and expenses arising out of any of (i) our businesses; and (ii) certain identified claims or proceedings; and (iii) any breach by us of our obligations under the Distribution Agreement.

In the Distribution Agreement, we and Vector will each release the other party from all liabilities existing or arising from any acts occurring on or prior to the Distribution.

The Distribution Agreement also will provide that Vector has the sole and absolute discretion to determine whether to proceed with the Distribution, including the form, structure and terms of any transactions to effect the Distribution and the timing of and satisfaction of conditions to the consummation of the Distribution.

The Distribution Agreement also provides for access to records and information, cooperation in defending litigation, as well as methods of resolution for certain disputes.

Transition Services Agreement

We will enter into a Transition Services Agreement with Vector under which, in exchange for the fees specified in such agreement, Vector will agree to provide certain corporate and other services to the Company, including with respect to such areas as information technology, accounts payable, payroll, tax, certain legal functions, human resources, insurance and risk management, government affairs, investor relations, corporate communications, benefit plan administration and reporting, and internal audit functions as well as certain

118

marketing functions. For these services, we will pay Vector an arms’ length amount determined pursuant to a transfer pricing study conducted by a third party. The Company and Vector, as parties receiving services under the agreement, will agree to indemnify the party providing services for losses incurred by such party that arise out of or are otherwise in connection with the provision by such party of services under the agreement, except to the extent that such losses result from the providing party’s gross negligence, willful misconduct or breach of its obligations under the agreement. Similarly, each party providing services under the agreement will agree to indemnify the party receiving services for losses incurred by such party that arise out of or are otherwise in connection with the indemnifying party’s provision of services under the agreement if such losses result from the providing party’s gross negligence, willful misconduct or breach of its obligations under the agreement.

Tax Disaffiliation Agreement

We will enter into a Tax Disaffiliation Agreement with Vector that governs Vector’s and our respective rights, responsibilities and obligations with respect to taxes and tax benefits, the filing of tax returns, the control of audits and other tax matters. References in this summary description of the Tax Disaffiliation Agreement to the terms “tax” or “taxes” mean taxes as well as any interest, penalties, additions to tax or additional amounts in respect of such taxes.

We and our eligible subsidiaries currently join with Vector in the filing of certain consolidated, combined, and unitary returns for state, local, and other applicable tax purposes. However, for periods (or portions thereof) beginning after the Distribution, we generally will not join with Vector or any of its subsidiaries (as determined after the Distribution) in the filing of any federal, state, local or other applicable consolidated, combined or unitary tax returns.

Under the Tax Disaffiliation Agreement, with certain exceptions, Vector will be generally responsible for all of our U.S. federal, state, local and other applicable income and non-income taxes for any taxable period or portion of such period ending on or before the Distribution date. We will be generally responsible for all taxes that are attributable to us or one of our subsidiaries after the Distribution date.

We will be generally responsible for filing all separate company tax returns that relate to us or one of our subsidiaries for any taxable period or portion of such period beginning after the Distribution date. Vector will be generally responsible for filing all other tax returns. Where possible, we will waive the right to carry back any losses, credits, or similar items to periods ending prior to or on the Distribution date, however, if we cannot waive the right, we will be entitled to receive the resulting refund or credit, net of any taxes incurred by Vector with respect to the refund or credit.

Generally, we will have the authority to conduct all tax proceedings, including tax audits, relating to taxes or any adjustment to taxes for which we are responsible for filing a return under the Tax Disaffiliation Agreement, and Vector will have the authority to conduct all tax proceedings, including tax audits, relating to taxes or any adjustment to taxes for which Vector is responsible for filing a return under the Tax Disaffiliation Agreement.

However, if one party acknowledges a liability to indemnify the other party for a tax to which such proceeding relates, and provides evidence to the other party of its ability to make such payment, the first-mentioned party will have the authority to conduct such proceeding. The Tax Disaffiliation Agreement will further provide for cooperation between Vector and the Company with respect to tax matters, the exchange of information and the retention of records that may affect the tax liabilities of the parties to the agreement.

Finally, the Tax Disaffiliation Agreement will require that neither we nor any of our subsidiaries will take, or fail to take, any action where such action, or failure to act, would be inconsistent with or preclude the Distribution from qualifying as a tax-free transaction to Vector and to its stockholders under Section 355 of the Code, or would otherwise cause holders of Vector stock receiving our stock in the Distribution to be taxed as a result of the Distribution and certain transactions undertaken in connection with the Distribution. Additionally, for the

119

two-year period following the Distribution, we will be restricted from engaging in certain activities that may jeopardize the tax-free treatment of the Distribution to Vector and its stockholders, unless we receive Vector’s consent or otherwise obtain a ruling from the IRS or a legal opinion, in either case reasonably satisfactory to Vector, that the activity will not alter the tax-free status of the Distribution to Vector and its stockholders. Such restricted activities will include:

•

entering into any transaction pursuant to which 35% or more of our shares or 50% or more of our assets would be acquired, whether by merger or otherwise, unless certain tests are met;

•

issuing equity securities, if any such issuances would, together with certain other transactions, constitute 35% or more of the voting power or value of our capital stock;

•

certain repurchases of our common shares;

•

ceasing to actively conduct our business;

•

amendments to our organizational documents (i) affecting the relative voting rights of our stock or (ii) converting one class of our stock to another;

•

liquidating or partially liquidating; and

•

taking any other action that prevents the Distribution and certain related transactions from being tax-free.

Moreover, we will be required to indemnify Vector, directors and officers for any taxes, resulting from action or failure to act, if such action or failure to act precludes the Distribution from qualifying as a tax-free transaction (including taxes imposed as a result of a violation of the restrictions set forth above).

Employee Matters Agreement

We will have in place an employee matters agreement (the “Employee Matters Agreement”) with Vector that will allocate assets, liabilities and responsibilities with respect to certain employee compensation and benefit plans and programs and certain other related matters upon completion of the Distribution. In general, our employees currently participate in various of the Company’s retirement, health and welfare, and other employee benefit plans. After the Distribution, it is anticipated that our employees will generally continue to participate in such plans and arrangements established and maintained by the Company. Effective as of the Distribution date, we and Vector generally will each hold responsibility for our respective employees and compensation plans.

For a description of the impact of the Distribution on holders of Vector equity awards, see “Executive Compensation — Treatment of Outstanding Awards.”

Aviation Agreements

Subject to applicable Federal Aviation Administration rules, we intend to enter into dry lease agreements with subsidiaries of Vector, pursuant to which we will have the right to lease on a flight-by-flight basis certain aircraft owned by Vector. We will be required to pay Vector an hourly rental rate for each flight. We expect to enter into an additional agreement with a third-party management company to provide crew, and other necessary administrative support services, which is expected to be the same management company contracted by Vector, in which case we expect payments for fixed costs to be allocated on an equitable basis.

Other Arrangements and Agreements with Vector

The Company may also enter into a number of commercial and other arrangements and agreements with Vector, which will be described in this section by appropriate amendment to this prospectus.

120

Certain Relationships and Potential Conflicts of Interest

Following the Distribution, there will be an overlap between certain key directors and officers of the Company and of Vector. Howard M. Lorber will serve as the President and Chief Executive Officer of the Company and of Vector. Richard J. Lampen will serve as the Chief Operating Officer of the Company and of Vector. J. Bryant Kirkland III will serve as the Chief Financial Officer and Treasurer of the Company and of Vector, Marc N. Bell will serve as General Counsel and Secretary of the Company and of Vector, and J. David Ballard will serve as Senior Vice President, Enterprise Efficiency and Chief Technology Officer of the Company and of Vector. As a result, following the Distribution, not all of our executive officers will be devoting their full time and attention to the Company’s affairs. In addition, immediately following the Distribution, three members of our Board, Mr. Lorber, Mr. Lampen, and Mr. White, will also be directors of Vector. The Overlap Persons may have actual or apparent conflicts of interest with respect to matters involving or affecting each company. For example, there will be the potential for a conflict of interest when we, on the one hand, and Vector and its respective subsidiaries and successors, on the other hand, are party to commercial transactions concerning the same or adjacent real property investments at certain acquisitions and other corporate opportunities that may be suitable for more than one of the companies. Also, conflicts may arise if there are issues or disputes under the commercial arrangements that will exist between Vector and us. In addition, after the Distribution, certain of our directors and officers will continue to own stock and/or stock options or other equity awards earned from Vector.

In addition, we have been engaged by the developers as the sole broker or the co-broker for several of Vector’s subsidiaries’ real estate development projects that New Valley owns an interest in through its real estate venture investments. We reported gross commissions of approximately $10.8 million, $19.0 million, and $20.1 million from these projects for the years ended December 31, 2020, 2019, and 2018, respectively.

A son of our Chairman and Chief Executive Officer is an associate broker of Douglas Elliman and he received commissions and other payments of approximately of $870,000, $712,000 and $317,600, respectively, in accordance with brokerage activities in 2020, 2019 and 2018, respectively. For the nine months ended September 30, 2021, he received commissions and other payments of approximately $631,000.

The spouse of the President and Chief Executive Officer of Douglas Elliman Realty, LLC is a licensed salesperson of Douglas Elliman and he received commissions and other payments of approximately $40,000, $98,000 and $27,000, respectively, in accordance with brokerage activities in 2020, 2019 and 2018, respectively. For the nine months ended September 30, 2021, he received commissions and other payments of approximately $397,000.

Beginning in September 2020, Mr. Sachar, the son-in-law of our Executive Vice President and Chief Operating Officer, serves as Vice President, Enterprise Innovation and Managing Director of New Valley Ventures LLC, and received total compensation, which included salary, bonus and 401(k) matching awards of approximately $133,000 in 2020.

Mr. Liebowitz and Douglas Elliman each owned a 50% interest in Innova Risk Management, which was sold to an unrelated third-party in 2019. We could receive earn-out payments based on the performance of such business in 2020 and 2021. To date, no payments have been received.

These ownership interests could create actual, apparent or potential conflicts of interest when these individuals are faced with decisions that could have different implications for our Company and Vector. See “— Related Party Transaction Approval Policy” for a discussion of certain procedures we will institute to help ameliorate such potential conflicts that may arise.

121

provide that no Overlap Person will be liable to the Company or its stockholders for breach of any fiduciary duty that would otherwise occur by reason of the fact that any such individual directs a corporate opportunity (other than certain limited types of opportunities set forth in our amended and restated certificate of incorporation) to Vector or any subsidiary thereof instead of the Company, or does not refer or communicate information regarding such corporate opportunities to the Company. These provisions in our amended and restated certificate of incorporation will also expressly validate certain contracts, agreements, arrangements and transactions (and amendments, modifications or terminations thereof) between the Company and Vector and, to the fullest extent permitted by law, will provide that the actions of the Overlap Persons in connection therewith are not breaches of fiduciary duties owed to the Company, any of its subsidiaries or their respective stockholders. See “Description of Capital Stock — Certain Corporate Opportunities and Conflicts.”

Related Party Transaction Approval Policy

We will adopt a written policy whereby the audit committee of our Board of Directors will review and approve or take such other action as it may deem appropriate with respect to transactions involving the Company and its subsidiaries, and in which any director, officer, greater than 5% stockholder of the Company or any other “related person” as defined in Item 404 has or will have a direct or indirect material interest. In determining whether to approve, disapprove or ratify a related party transaction, the audit committee will take into account, among other factors it deems appropriate, (i) whether the transaction is on terms no less favorable to the Company than terms that would have been reached with an unrelated third party, (ii) the extent of the interest of the related party in the transaction and (iii) the purpose and the potential benefits to the Company of the transaction.

122

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Beneficial Ownership of Stock

The following table sets forth the beneficial ownership of Spinco common stock, the only class of voting securities, expected to be owned of record and beneficially at the time of the Distribution by:

•

each person known to Vector that would own beneficially more than five percent of Spinco common stock;

•

each of the Company’s directors and nominees;

•

each of the Company’s named executive officers shown in the Summary Compensation Table below; and

•

all directors and executive officers as a group.

Unless otherwise indicated, each person possesses sole voting and investment power with respect to the shares indicated as beneficially owned. All information in the table and related footnotes is based solely upon the Company’s review of the most recently available SEC filings as of December 7, 2021 with respect to the ownership of Vector common stock and is presented as if the Distribution has occurred prior to the dates of ownership information used in the table.


Name and Address^† of Beneficial Owner	Number of Shares		Percent of Class
BlackRock, Inc.⁽¹⁾ 55 East 52nd Street New York, NY 10055		10,192,938		13.11	%
The Vanguard Group, Inc.⁽²⁾ 100 Vanguard Blvd. Malvern, PA 19355		8,277,727		10.65	%
Dr. Phillip Frost⁽³⁾ 4400 Biscayne Boulevard Miami, FL 33137		7,381,760		9.50	%
Capital Research Global Investors⁽⁴⁾ 333 South Hope Street, 55th Fl, Los Angeles, CA 90071		5,803,686		7.47	%
Renaissance Technologies LLC⁽⁵⁾ 800 Third Avenue New York, NY 10022		4,352,967		5.60	%
Howard M. Lorber^(6)(8)(9)		3,649,362		4.70	%
Bennett S. LeBow⁽⁷⁾ 667 Madison Avenue New York, NY 10065		1,058,508		1.36	%
Richard J. Lampen^(8)(9)(10)		607,520		(	*)
Ronald J. Kramer⁽⁸⁾		—		(	*)
Michael S. Liebowitz⁽⁸⁾		—		(	*)
Lynn Mestel⁽⁸⁾		—		(	*)
Wilson L. White⁽⁸⁾		1,750		(	*)
Mark D. Zeitchick⁽⁸⁾		—		(	*)
J. Bryant Kirkland III^(9)(11)		339,107		(	*)
Marc N. Bell^(9)(12)		269,200		(	*)
J. David Ballard⁽⁹⁾		21,516		(	*)
Daniel A Sachar^(9)(13)		3,990		(	*)
All directors and executive officers as a group (14 persons)		4,892,444		6.30	%

123

(*)	The percentage of shares beneficially owned does not exceed 1% of the outstanding Common Stock.

(1)	Based on Schedule 13-F filed by BlackRock, Inc. with the Securities and Exchange Commission on November 9, 2021 with respect to shares of Vector common stock.

(2)	Based on Schedule 13-F filed by The Vanguard Group, Inc. (“Vanguard”) with the SEC on November 12, 2021 with respect to shares of Vector common stock.

(3)

Based upon Schedule 13-D/A filed by Dr. Frost with the SEC on December 10, 2019, which reports ownership of 14,746,422 shares of Vector common stock owned by Frost Gamma Investments Trust (“Frost Gamma Trust”), a trust organized under Florida law. Dr. Frost is the sole trustee of Frost Gamma Trust. As the sole trustee, Dr. Frost may be deemed the beneficial owner of all shares owned by Frost Gamma Trust, by virtue of his shared power to vote or direct the vote of such shares or to dispose or direct the disposition of such shares owned by these trusts. Frost Gamma Limited Partnership (“Frost Gamma LP”) is the sole and exclusive beneficiary of Frost Gamma Trust. Dr. Frost is one of two limited partners of Frost Gamma LP. The general partner of Frost Gamma LP is Frost Gamma, Inc. Includes 17,098 shares of Vector common stock owned by Dr. Frost’s spouse, as to which shares Dr. Frost disclaims beneficial ownership.

(4)

Based on Schedule 13-F filed by Capital Research Global Investors (“CRGI”) with the SEC on November 15, 2021, which reports ownership of 11,240,710 shares of Vector common stock. CRGI is a division of Capital Research and Management Company (“CRMC”), as well as its investment management subsidiaries and affiliates Capital Bank and Trust Company, Capital International, Inc., Capital International Limited, Capital International Sarl and Capital International K.K. (together with CRMC, the “investment management entities”). CRGI’s divisions of each of the investment management entities collectively provide investment management services under the name “Capital Research Global Investors.”

(5)	Based on Schedule 13-F filed by Renaissance Technologies LLC and Renaissance Technologies Holding Corporation with the SEC on November 12, 2021 with respect to shares of Vector common stock.

(6)

Includes distributions based on 2,207,410 shares of Vector Common Stock held directly by Mr. Lorber, 2,629,035 shares of Vector Common Stock held by Lorber Alpha II Limited Partnership, a Nevada limited partnership and 19 shares of Vector Common Stock in an Individual Retirement Account. Mr. Lorber’s beneficial ownership also includes distributions from 2,489,045 shares of options to purchase Vector Common Stock. Mr. Lorber exercises sole voting power and sole dispositive power over the shares of Common Stock held by the partnership and by himself. Lorber Alpha II, LLC, a Delaware limited liability company, is the general partner of Lorber Alpha II Limited Partnership. Mr. Lorber is the managing member of Lorber Alpha II, LLC. Mr. Lorber disclaims beneficial ownership of distributions from 12,502 shares of Vector Common Stock held by Lorber Charitable Fund, which are not included. Lorber Charitable Fund is a New York not-for-profit corporation, of which family members of Mr. Lorber serve as directors and executive officers.

(7)

Includes distributions of 1,757,278 shares of Vector Common Stock held directly by Mr. LeBow, 232,714 shares of Vector Common Stock held by LeBow Gamma Limited Partnership, a Delaware limited partnership, and 127,024 shares of Vector Common Stock held by LeBow Alpha LLLP, a Delaware limited liability limited partnership. There are 189,823 common shares and 1,563,955 common shares held by Mr. LeBow in two separate accounts that are pledged to collateralize two separate margin loans. LeBow 2011 Management Trust is the managing member of LeBow Holdings LLC, a Delaware limited liability company, which is the sole stockholder of LeBow Gamma, Inc., a Nevada corporation, which is the general partner of LeBow Gamma Limited Partnership. Mr. LeBow is trustee of LeBow 2011 Management Trust and a director and officer of LeBow Gamma, Inc. LeBow Alpha LLLP is a Delaware limited liability limited partnership. LeBow Holdings LLC, a Delaware limited liability company, is the general partner of LeBow Alpha LLLP. LeBow 2011 Management Trust is the managing member of LeBow Holdings LLC.

(8)	The named individual is a director of the Company.

(9)	The named individual is an executive officer of the Company.

(10)	Includes distributions from 622,254 shares of options to purchase Vector Common Stock and 3,089 shares held by Mr. Lampen’s spouse, as to which Mr. Lampen disclaims beneficial ownership.

(11)	Includes distributions from 373,349 shares of options to purchase Vector Common Stock.

(12)	Includes distributions from 338,171 shares of options to purchase Vector Common Stock.

124

(13)	Includes distributions on 756 shares of Vector Common Stock held in Mr. Sachar’s Individual Retirement Account.

†	Unless otherwise indicated, the business address of each listed beneficial owner is c/o Douglas Elliman Inc., 4400 Biscayne Boulevard, Miami, FL 33137

125

SHARES ELIGIBLE FOR FUTURE SALE

Sales or the availability for sale of substantial amounts of our common stock in the public market could adversely affect the prevailing market price for such stock. Upon completion of the Distribution, we will have outstanding an aggregate of approximately 77,720,631 shares of our common stock based upon the shares of Vector common stock outstanding on September 30, 2021, excluding treasury stock. All of the shares of common stock will be freely tradable without restriction or further registration under the Securities Act unless the shares are owned by our “affiliates” as that term is defined in the rules under the Securities Act. Shares held by “affiliates” may be sold in the public market only if registered or if they qualify for an exemption from registration or in compliance with Rule 144 under the Securities Act which is summarized below. Further, as described below, we plan to file a registration statement to cover the shares issued under our Stock Incentive Plan.

Rule 144

In general, under Rule 144 as currently in effect, an affiliate would be entitled to sell within any three-month period a number of shares of common stock that does not exceed the greater of:

•

one percent of the number of shares of our common stock then outstanding; or

•

the average weekly trading volume of our common stock on the NYSE during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Sales under Rule 144 are also subject to certain holding period requirements, manner of sale provisions and notice requirements and to the availability of current public information about us.

Employee Stock Awards under Stock Incentive Plan

In connection with the Distribution we anticipate, subject to the approval of our Compensation and Human Capital Committee, that we will issue under our Stock Incentive Plan restricted stock awards with respect to approximately 3.2 million shares of our common stock. In addition, we anticipate making other equity-based awards to our employees in the future. We currently expect to file a registration statement under the Securities Act to register shares to be issued under our Stock Incentive Plan, including the restricted stock that will be granted in connection with the Distribution. Shares covered by such registration statement, other than shares issued to affiliates, generally will be freely tradable without further registration under the Securities Act.

126

DESCRIPTION OF CAPITAL STOCK

We are currently authorized to issue 1,000 shares of common stock, par value $0.10 per share. Prior to the Distribution we will amend our certificate of incorporation to provide authorization for us to issue 250,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares will be preferred stock, par value $0.01 per share. The amended and restated certificate of incorporation will provide that our common stock and preferred stock will have the rights described below.

Common Stock

All shares of our common stock currently outstanding are fully paid and non-assessable, not subject to redemption and without preemptive or other rights to subscribe for or purchase any proportionate part of any new or additional issues of stock of any class or of securities convertible into stock of any class.

Voting

Holders of common stock are entitled to one vote per share.

The number of authorized shares of common stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of the majority of the common stock. Our amended and restated certificate of incorporation will not provide for cumulative voting.

Conversions

The common stock has no conversion rights.

Dividends

Holders of common stock are entitled to receive dividends equally on a per-share basis if and when such dividends are declared by the Board of Directors from funds legally available therefor.

Transfer Agent

The transfer and distribution agent and registrar for the common stock is American Stock Transfer & Trust Company.

Preferred Stock

Under our amended and restated certificate of incorporation, our Board will be authorized, subject to limitations prescribed by Delaware law, to issue preferred stock in one or more series, to establish from time to time the number of shares to be included in each series, and to fix the designation, powers, preferences, and rights of the shares of each series and any of its qualifications, limitations, or restrictions, in each case without further vote or action by our stockholders. Our Board can also increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders. Our Board may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring, or preventing a change in control of our company and might adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. We have no current plan to issue any shares of preferred stock.

127

Anti-takeover Effects of the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may delay, defer or discourage another party from acquiring control of the Company. We expect that these provisions, which are summarized below, will discourage coercive takeover practices or inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of the Company to first negotiate with the Board, which we believe may result in an improvement of the terms of any such acquisition in favor of our stockholders. However, they also give the Board the power to discourage mergers that some stockholders may favor.

Stockholder Action; Special Meeting of Stockholders.

Our amended and restated certificate of incorporation will provide that special meetings of our stockholders may be called only by a majority of our Board, the chairperson of our Board, or our Chief Executive Officer. In addition, our amended and restated certificate of incorporation will provide that our stockholders may not take action by written consent, and instead may only take action at annual or special meetings of our stockholders. As a result, holders of our capital stock would not be able to amend our amended and restated bylaws or remove directors without holding a meeting of our stockholders called in accordance with our amended and restated bylaws. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders to take any action, including the removal of directors.

Board of Directors Vacancies.

Our amended and restated certificate of incorporation and amended and restated bylaws will authorize only our Board to fill vacant directorships, including newly created seats. In addition, the number of directors constituting our Board is permitted to be set only by a resolution adopted by a majority vote of our entire Board. These provisions would prevent a stockholder from increasing the size of our Board and then gaining control of our Board by filling the resulting vacancies with its own nominees. This makes it more difficult to change the composition of our Board but promotes continuity of management.

Staggered Board.

Our Board will be divided into three classes. The directors in each class will serve for a three-year term, one class being elected each year by our stockholders. This system of electing and removing directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of the Company, because it generally makes it more difficult for stockholders to replace a majority of the directors.

Removal of Directors.

The Board or any individual director may be removed from office at any time, but only for cause and only by the affirmative vote of not less than two-thirds of the voting power of all of the then outstanding shares of voting stock of the Company entitled to vote at an election of directors.

Stockholders Not Entitled to Cumulative Voting.

The amended and restated certificate of incorporation will not permit stockholders to cumulate their votes in the election of directors. Accordingly, the holders of a majority of the outstanding shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they choose, other than any directors that holders of our preferred stock may be entitled to elect.

Issuance of Undesignated Preferred Stock.

After the filing of our amended and restated certificate of incorporation, our Board will have the authority, without further action by the stockholders, to issue up to 10,000,000 shares of undesignated preferred stock with

128

rights and preferences, including voting rights, designated from time to time by our Board. The existence of authorized but unissued shares of preferred stock enables our Board to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest, or other means.

Supermajority Requirements for Amendments of Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws.

Our amended and restated certificate of incorporation will further provide that the affirmative vote of holders of at least two-thirds of the voting power of all of the then outstanding shares of voting stock will be required to amend certain provisions of our amended and restated certificate of incorporation, including provisions relating to the classified board, the size of the board, removal of directors, special meetings, actions by written consent, and designation of our preferred stock. The affirmative vote of holders of at least two-thirds of the voting power of all of the then outstanding shares of voting stock will be required to amend or repeal our amended and restated bylaws, although our amended and restated bylaws may be amended by a simple majority vote of our board of directors.

Advance Notice Requirements for Stockholder Proposals and Director Nominations.

Our amended and restated bylaws provide advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. Our amended and restated bylaws also specify certain requirements regarding the form and content of a stockholder’s notice. These provisions might preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions might also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

Delaware Anti-takeover Statute.

The Company will be subject to Section 203 of the DGCL, an anti-takeover law. Section 203 is a default provision of the DGCL that prohibits a publicly-traded Delaware corporation from engaging in a business combination, such as a merger, with “interested stockholders” (a person or group owning 15% or more of the corporation’s voting stock) for three years following the date that person becomes an interested stockholder, unless: (i) before such stockholder becomes an “interested stockholder,” the board of directors approves the business combination or the transaction that results in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the outstanding voting stock of the corporation at the time of the transaction (excluding stock owned by certain persons); or (iii) at the time or after the stockholder became an interested stockholder, the board of directors and at least two-thirds of the disinterested outstanding voting stock of the corporation approves the transaction. While Section 203 is the default provision under the DGCL, the DGCL allows companies to opt out of Section 203 of the DGCL by including a provision in their certificate of incorporation expressly electing not to be governed by Section 203 of the DGCL.

Exclusive Jurisdiction of Certain Actions

The amended and restated certificate of incorporation will provide that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware will be the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (1) any derivative action or proceeding brought on the Company’s behalf; (2) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of the Company’s directors, officers, employees, or agents to us or the Company’s stockholders; (3) any action asserting a claim against the Company arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or amended and restated bylaws; (4) any action to interpret, apply, enforce, or determine the validity of the Company’s amended and restated certificate of incorporation or amended and restated bylaws; or (5) any action asserting a claim governed by the internal affairs doctrine. While the Delaware

129

courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of the amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

The amended and restated certificate of incorporation will provide that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law, subject to certain exceptions. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both federal and state courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, the amended and restated certificate of incorporation will provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act and the rules and regulations thereunder. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

Certain Corporate Opportunities and Conflicts

Our amended and restated certificate of incorporation will recognize that Overlap Persons may serve as directors, officers, employees, and agents of Vector or any subsidiary thereof and will provide that if a director or officer of the Company who is an Overlap Person is presented or offered, or otherwise acquires knowledge of, a potential transaction or matter that may constitute or present a business opportunity for the Company or any of its subsidiaries, in which the Company could have an interest or expectancy (any such transaction or matter, and any such actual or potential business opportunity, a “Potential Business Opportunity”), (i) such Overlap Person will, to the fullest extent permitted by law, have no duty or obligation to refrain from referring such Potential Business Opportunity to Vector and, if such director or officer refers such Potential Business Opportunity to Vector, such Overlap Person shall have no duty or obligation to refer such Potential Business Opportunity to the Company or to give any notice to the Company regarding such Potential Business Opportunity (or any matter related thereto), (ii) if such Overlap Person refers a Potential Business Opportunity to Vector, such Overlap Person, to the fullest extent permitted by law, will not be liable to the Company as a director, officer, stockholder or otherwise, for any failure to refer such Potential Business Opportunity to the Company, or for referring such Potential Business Opportunity to Vector, or for any failure to give any notice to the Company regarding such Potential Business Opportunity or any matter relating thereto, (iii) Vector or any subsidiary thereof may participate, engage or invest in any such Potential Business Opportunity notwithstanding that such Potential Business Opportunity may have been referred to Vector by an Overlap Person, and (iv) if a director or officer who is an Overlap Person refers a Potential Business Opportunity to Vector, then, as between the Company, on the one hand, and Vector or any subsidiary thereof, on the other hand, the Company shall be deemed to have renounced any interest, expectancy or right in or to such Potential Business Opportunity or to receive any income or proceeds derived therefrom solely as a result of such Overlap Person having been presented or offered, or otherwise acquiring knowledge of, such Potential Business Opportunity, unless in each case referred to in clause (i), (ii), (iii) or (iv), such Potential Business Opportunity is considered a “Restricted Potential Business Opportunity” as defined in our amended and restated certificate of incorporation. In our amended and restated certificate of incorporation, the Company has renounced to the fullest extent permitted by law, any interest or expectancy in any Potential Business Opportunity that is not a Restricted Potential Business Opportunity. In the event that the Company’s Board of Directors declines to pursue a Restricted Potential Business Opportunity, Overlap Persons are free to refer such Restricted Potential Business Opportunity to Vector.

130

Our amended and restated certificate of incorporation will provide that no contract, agreement, arrangement or transaction (or any amendment, modification or termination thereof) entered into between the Company and/or any of its subsidiaries, on the one hand, and Vector and/or any of its subsidiaries, on the other hand, before the Company ceased to be an indirect, wholly owned subsidiary of Vector shall be void or voidable or be considered unfair to the Company or any of its subsidiaries solely because Vector and/or any of its subsidiaries is a party thereto, or because any directors, officers or employees of Vector and/or any of its subsidiaries were present at or participated in any meeting of the Board of Directors, or a committee thereof, of the Company that authorized the contract, agreement, arrangement or transaction (or any amendment, modification or termination thereof), or because his, her or their votes were counted for such purpose. The Company may from time to time enter into and perform, and cause or permit any of its subsidiaries to enter into and perform, one or more contracts, agreements, arrangements or transactions (or amendments, modifications or supplements thereto) with Vector and/or any of its subsidiaries. To the fullest extent permitted by law, no such contract, agreement, arrangement or transaction (nor any such amendments, modifications or supplements), nor the performance thereof by the Company or Vector, shall be considered contrary to any fiduciary duty owed to the Company (or to any stockholder of the Company) by any director or officer of the Company who is an Overlap Person. To the fullest extent permitted by law, no director or officer of the Company who is an Overlap Person thereof shall have or be under any fiduciary duty to the Company (or to any stockholder of the Company) to refrain from acting on behalf of the Company or Vector in respect of any such contract, agreement, arrangement or transaction or performing any such contract, agreement, arrangement or transaction in accordance with its terms, and each such director or officer of the Company who is an Overlap Person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and shall be deemed not to have breached his or her duties of loyalty to the Company (or to any stockholders of the Company) and not to have derived an improper personal benefit therefrom.

No alteration, amendment or repeal of, or adoption of any provision inconsistent with the provisions described above will have any effect upon: (a) any agreement between the Company or a subsidiary thereof and Vector or a subsidiary thereof, that was entered into before the time of such alteration, amendment or repeal or adoption of any such inconsistent provision (the “Amendment Time”), or any transaction entered into in connection with the performance of any such agreement, whether such transaction is entered into before or after the Amendment Time; (b) any transaction entered into between the Company or a subsidiary thereof and Vector or a subsidiary thereof, before the Amendment Time; (c) allocation of any business opportunity between the Company or any subsidiary thereof and Vector or any subsidiary thereof before the Amendment Time; or (d) any duty or obligation owed by any director or officer of the Company or any subsidiary thereof (or the absence of any such duty or obligation) with respect to any Potential Business Opportunity which such director or officer was offered, or of which such director or officer otherwise became aware, before the Amendment Time (regardless of whether any proceeding relating to any of the above is commenced before or after the Amendment Time).

Limitation on Personal Liability

We have provided, consistent with the DGCL, in our amended and restated certificate of incorporation that a director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:

•

any breach of the director’s duty of loyalty to us or our stockholders;

•

acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

•

payments of unlawful dividends or unlawful stock repurchases or redemptions; or

•

any transaction from which the director derived an improper personal benefit.

•

Neither the amendment nor repeal of such provision will adversely affect any right or protection of a person that exists at the time of such amendment or repeal.

131

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the DGCL provides that a corporation may indemnify any current or former director, officer or employee or other individual against expenses, judgments, fines and amounts paid in settlement in connection with civil, criminal, administrative or investigative actions or proceedings, other than a derivative action by or in the right of the corporation, if the director, officer, employee or other individual acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, if he or she had no reasonable cause to believe his or her conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses incurred in connection with the defense or settlement of such actions, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation’s bylaws, disinterested director vote, stockholder vote, agreement or otherwise.

Our amended and restated certificate of incorporation will provide that, to the fullest extent permitted by Section 145 of the DGCL, as the same may be amended and supplemented, or by any successor thereto, the Company will indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section. Such right to indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. The right to indemnification provided under the certificate of incorporation is not exclusive of any other rights to which a person seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. The amended and restated certificate of incorporation also will provide that no amendment, modification or repeal of the indemnification provision shall adversely affect any right or protection of a person that exists at the time of such amendment, modification or repeal.

Prior to the Distribution, we expect to enter into indemnification agreements with each of our directors and executive officers. The indemnification agreements will provide that we will, to the fullest extent permitted by Delaware law, and subject to the terms and conditions of each indemnification agreement, indemnify each director and executive officer against certain types of liabilities and pay or reimburse certain expenses if the director or executive officer is involved in any manner (including as a party or witness) in certain types of proceedings by reason of the fact of such person’s service as a director, officer, partner, trustee, fiduciary, manager or employee of the Company or of any other corporation, limited liability company, public limited company, partnership, joint venture, trust, employee benefit plan, fund or other enterprise (a) that is affiliated with the Company or (b) at the written request of the Board, a Board committee, the Executive Chairman or the Chief Executive Officer of the Company.

The Distribution Agreement between us and Vector provides for indemnification by us of Vector and its directors, officers and employees and by Vector of us and our directors, officers and employees for some liabilities, including liabilities under the Securities Act and the Exchange Act. The amount of these indemnity obligations is unlimited.

132

AVAILABLE INFORMATION

We have filed a registration statement on Form S-1 to register with the SEC the shares of our common stock being distributed to Vector stockholders in the Distribution. This document constitutes a part of that registration statement, together with all amendments, supplements, schedules and exhibits to the registration statement. This document does not contain all of the information set forth in the registration statement and its exhibits and schedules, to which reference is made hereby. Statements in this prospectus as to the contents of any contract, agreement or other document are qualified in all respects by reference to such contract, agreement or document. If we have filed any of those contracts, agreements or other documents as an exhibit to the registration statement, you should read the full text of such contract, agreement or document for a more complete understanding of the document or matter involved. For further information with respect to us and our common stock, we refer you to the registration statement, of which this document forms a part, including the exhibits and the schedules filed as a part of it.

We intend to furnish the holders of our common stock with annual reports and proxy statements containing financial statements audited by an independent public accounting firm and file with the SEC quarterly reports for the first three quarters of each fiscal year containing interim unaudited financial information. We also intend to furnish other reports as we may determine or as required by law.

The registration statement, of which this prospectus forms a part, and its exhibits and schedules, and other documents which we file with the SEC are available to the public at the SEC’s website at http://www.sec.gov. You can also obtain reports, proxy statements and other information about us at the NYSE’s website at http://www.nyse.com.

Information that we file with the SEC after the date of this prospectus may supersede the information in this prospectus. You may read these reports, proxy statements and other information and obtain copies of such documents and information as described above.

No person is authorized to give any information or to make any representations other than those contained in this prospectus, and, if given or made, such information or representations must not be relied upon as having been authorized. Neither the delivery of this prospectus nor any distribution of securities made hereunder shall imply that there has been no change in the information set forth or in our affairs since the date hereof.

133

LEGAL MATTERS

The validity of the shares of our common stock to be distributed will be passed upon by Sullivan & Cromwell LLP. Certain matters regarding the U.S. federal income tax consequences of the distribution will be passed upon by Sullivan & Cromwell LLP.

134

EXPERTS

The financial statements of Douglas Elliman Inc. as of December 31, 2020 and 2019, and for each of the three years in the period ended December 31, 2020, included in this Prospectus, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report. Such financial statements are included in reliance upon the report of such firm given their authority as experts in accounting and auditing.

135

INDEX TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS


	Page
Unaudited Condensed Combined Consolidated Financial Statements
As of September 30, 2021 (unaudited)
Condensed Combined Consolidated Balance Sheets		F-2
Condensed Combined Consolidated Statements of Operations		F-3
Condensed Combined Consolidated Statements of Parent’s Net Investment		F-4
Condensed Combined Consolidated Statements of Cash Flows		F-5
Notes to Condensed Combined Consolidated Financial Statements		F-6
Audited Combined Consolidated Financial Statements As of December 31, 2020, December 31, 2019 and December 31, 2018
Report of Independent Registered Public Accounting Firm		F-27
Combined Consolidated Balance Sheets		F-28
Combined Consolidated Statements of Operations		F-29
Combined Consolidated Statements of Parent’s Net Investment		F-30
Combined Consolidated Statements of Cash Flows		F-31
Notes to Combined Consolidated Financial Statements		F-32
Schedule II — Valuation and Qualifying Accounts		F-57

F-1

DOUGLAS ELLIMAN INC.

CONDENSED COMBINED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

Unaudited


	September 30, 2021		December 31, 2020
ASSETS:
Current assets:
Cash and cash equivalents	$	158,804	$	94,421
Receivables		26,531		24,377
Agent receivables, net		11,127		7,346
Restricted cash and cash equivalents		12,548		10,374
Other current assets		9,512		11,847

Total current assets		218,522		148,365
Property, plant and equipment, net		40,132		42,703
Operating lease right-of-use assets		124,797		133,103
Long-term investments at fair value		3,566		237
Contract assets, net		28,688		24,002
Goodwill		32,571		31,756
Other intangible assets, net		74,619		68,310
Equity-method investments		2,790		1,412
Other assets		8,755		4,094

Total assets	$	534,440	$	453,982

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Current portion of notes payable and other obligations	$	12,526	$	12,500
Current operating lease liabilities		22,503		23,753
Income taxes payable, net		1,143		17
Accounts payable		8,228		6,337
Commissions payable		25,648		25,615
Accrued salaries and benefits		23,293		12,038
Contract liabilities		5,843		7,633
Other current liabilities		20,200		11,756
Total current liabilities		119,384		99,649
Notes payable and other obligations less current portion		3,309		12,920
Deferred income taxes, net		143		143
Non-current operating lease liabilities		131,923		143,296
Contract liabilities		38,734		32,104
Other liabilities		4,250		2,280

Total liabilities		297,743		290,392

Commitments and contingencies (Note 8)
Net Investment:
Parent’s net investment		234,817		163,590
Non-controlling interest		1,880		—

Total net investment		236,697		163,590

Total liabilities and net investment	$	534,440	$	453,982

The accompanying notes are an integral part of the condensed combined consolidated financial statements.

F-2

DOUGLAS ELLIMAN INC.

CONDENSED COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands)

Unaudited


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenues:
Commissions and other brokerage income	$	338,915		$	198,500		$	974,048		$	477,720
Property management		9,120			8,584			28,289			26,195
Other ancillary services		6,126			912			16,575			2,611

Total revenues		354,161			207,996			1,018,912			506,526

Expenses:
Real estate agent commissions		257,098			149,010			737,767			351,325
Sales and marketing		20,237			10,522			59,331			40,649
Operations and support		22,448			10,277			56,697			35,809
General and administrative		22,287			20,280			64,481			62,275
Technology		4,388			3,707			11,302			11,137
Depreciation and amortization		2,189			2,093			6,409			6,405
Impairments of goodwill and other intangible assets		—			—			—			58,252
Restructuring		—			320			—			3,281

Operating income (loss)		25,514			11,787			82,925			(62,607	)

Other income:
Interest (expense) income, net		(7	)		49			65			148
Equity in (losses) earnings from equity-method investments		(193	)		14			(118	)		(196	)
Change in fair value of contingent liability		271			251			(3,252	)		2,082
Investment income (loss)		175			(207	)		566			—

Income (loss) before provision for income taxes		25,760			11,894			80,186			(60,573	)
Income tax expense (benefit)		667			(142	)		1,656			(168	)

Net income (loss)		25,093			12,036			78,530			(60,405	)

Net loss attributed to non-controlling interest		120			—			120			—

Net income (loss) attributed to Douglas Elliman Inc.	$	25,213		$	12,036		$	78,650		$	(60,405	)

The accompanying notes are an integral part of the condensed combined consolidated financial statements.

F-3

DOUGLAS ELLIMAN INC.

CONDENSED COMBINED CONSOLIDATED STATEMENTS OF PARENT’S NET INVESTMENT

(Dollars in Thousands)

Unaudited


	Parent’s Net Investment			Non-controlling Interest			Total Equity
Balance as of July 1, 2021	$	222,176		$	—		$	222,176
Net income (loss)		25,213			(120	)		25,093
Acquisition of subsidiary		—			500			500
Net transfers from Non-controlling interest		—			1,500			1,500
Net transfers to Parent		(12,572	)		—			(12,572	)

Balance as of September 30, 2021	$	234,817		$	1,880		$	236,697


	Parent’s Net Investment		Non-controlling Interest		Total Equity
Balance as of July 1, 2020	$	135,216	$	—	$	135,216
Net income		12,036		—		12,036
Net transfers from Parent		1,286		—		1,286

Balance as of September 30, 2020	$	148,538	$	—	$	148,538


	Parent’s Net Investment			Non-controlling Interest			Total Equity
Balance as of January 1, 2021	$	163,590		$	—		$	163,590
Net income (loss)		78,650			(120	)		78,530
Acquisition of subsidiary		—			500			500
Net transfers from Non-controlling interest		—			1,500			1,500
Net transfers to Parent		(7,423	)		—			(7,423	)

Balance as of September 30, 2021	$	234,817		$	1,880		$	236,697


	Parent’s Net Investment			Non-controlling Interest		Total Equity
Balance as of January 1, 2020	$	204,283		$	—	$	204,283
Net loss		(60,405	)		—		(60,405	)
Net transfers from Parent		4,660			—		4,660

Balance as of September 30, 2020	$	148,538		$	—	$	148,538

The accompanying notes are an integral part of the condensed combined consolidated financial statements.

F-4

DOUGLAS ELLIMAN INC.

CONDENSED COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

Unaudited


	Nine Months Ended
	September 30, 2021			September 30, 2020
Net cash provided by operating activities	$	93,436		$	10,962
Cash flows from investing activities:
Purchase of long-term investments		(3,200	)		—
Distributions from equity-method investments		30			—
Purchase of equity securities		(190	)		—
Capital expenditures		(2,693	)		(5,073	)
Purchase of subsidiaries		(500	)		—

Net cash used in investing activities		(6,553	)		(5,073	)

Cash flows from financing activities:
Repayments of debt		(354	)		(63	)
Contributions from parent		3,581			—
Distributions to parent		(25,520	)		—
Earn out payments		(102	)		(80	)
Contributions from non-controlling interest		1,500			—

Net cash used in financing activities		(20,895	)		(143	)

Net increase in cash, cash equivalents and restricted cash		65,988			5,746
Cash, cash equivalents and restricted cash, beginning of period		106,702			79,068

Cash, cash equivalents and restricted cash, end of period	$	172,690		$	84,814

The accompanying notes are an integral part of the condensed combined consolidated financial statements.

F-5

DOUGLAS ELLIMAN INC.

NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands)

Unaudited

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)

Organization of “Carve-out” Financial Statements:

These condensed combined consolidated financial statements are that of the real estate services and property technology business of Vector Group Ltd. (“Vector,” and collectively, with its consolidated subsidiaries, “Parent”) and comprised of the operations of DER Holdings LLC and New Valley Ventures LLC (“New Valley Ventures”), directly and indirectly wholly-owned subsidiaries of Vector. DER Holdings LLC owns Douglas Elliman Realty, LLC and Douglas Elliman of California, Inc. New Valley Ventures consists of minority investments in innovative and cutting edge Property Technology companies (“PropTech”).

Vector plans to spin off a newly formed entity, Douglas Elliman Inc. (“Douglas Elliman” or the “Company”) to its stockholders through a pro rata distribution of the Company’s stock to existing Vector stockholders. Douglas Elliman will own the real estate services and property technology business of Vector.

Douglas Elliman is amongst the largest residential brokerage companies in the New York metropolitan area and the sixth largest in the U.S., conducting real estate brokerage operations through 12 subsidiaries. The 12 brokerage companies have approximately 100 offices with approximately 6,600 real estate agents in the New York metropolitan area as well as in Florida, California, Connecticut, Massachusetts, Colorado, New Jersey, and Texas. In August 2021, Douglas Elliman increased its ownership in Real Estate Associates of Houston LLC (d/b/a Douglas Elliman Real Estate Texas, which we refer to as “Douglas Elliman Texas”) from 1% to 50%.

Douglas Elliman’s combined results of operations, financial position and cash flows may not be indicative of its future performance and do not necessarily reflect what its combined results of operations, financial position and cash flows would have been had Douglas Elliman operated as a separate, stand-alone entity during the periods presented, including changes in its operations and capitalization as a result of the separation and distribution from Vector.

The distribution is subject to the satisfaction or waiver of certain conditions, including, among other things: final approval of the distribution by the Vector board of directors; the Registration Statement on Form 10, of which these financial statements form a part, being declared effective by the Securities and Exchange Commission (“SEC”); Douglas Elliman’s common stock being approved for listing on a national securities exchange; the receipt of opinions with respect to certain tax matters related to the distribution from Vector’s spin-off tax advisors; the receipt of solvency and surplus opinions from a nationally recognized valuation firm; the receipt of all material governmental approvals; no order, injunction or decree issued by any governmental entity preventing the consummation of all or any portion of the distribution being in effect; and the completion of the financing transactions described in these financial statements.

(b)

Basis of Presentation:

The accompanying condensed combined consolidated financial statements include the accounts and transactions of Douglas Elliman, as well as the entities in which Douglas Elliman directly or indirectly has a controlling financial interest. The accompanying condensed combined consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

Douglas Elliman’s condensed combined consolidated financial statements include certain indirect general and administrative costs allocated to it by Parent for certain functions and services including, but not limited to, executive office, finance and other administrative support. These expenses have been allocated to Douglas Elliman

F-6

on the basis of direct usage, when identifiable, or a management fee of $500, which was charged from January 1, 2018 to March 31, 2020. The management fee was suspended in connection with the impact of the COVID-19 pandemic.

In presenting the condensed combined consolidated financial statements, management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates.

In the opinion of the Company, the accompanying unaudited condensed combined consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of its financial position and its results of operations, changes in parent’s net investment, and cash flows. The condensed combined consolidated balance sheet as of September 30, 2021 is unaudited. The condensed combined consolidated balance sheet as of December 31, 2020 was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. The accompanying unaudited condensed combined consolidated financial statements and related financial information should be read in conjunction with the audited combined consolidated financial statements and the related notes thereto for the fiscal year ended December 31, 2020.

(c)

Principles of Consolidation:

The condensed combined consolidated financial statements presented herein have been prepared on a stand-alone basis and are derived from the consolidated financial statements and accounting records of Vector. The condensed combined consolidated financial statements include Douglas Elliman’s and New Valley Ventures’s assets, liabilities, revenues, expenses and cash flows and all entities in which Douglas Elliman has a controlling financial interest. All intercompany balances and transactions have been eliminated in the condensed combined consolidated financial statements.

When evaluating an entity for consolidation, Douglas Elliman first determines whether an entity is within the scope of the guidance for consolidation of variable interest entities (“VIE”) and if it is deemed to be a VIE. If the entity is considered to be a VIE, Douglas Elliman determines whether it would be considered the entity’s primary beneficiary. Douglas Elliman consolidates those VIEs for which it has determined that it is the primary beneficiary. Douglas Elliman will consolidate an entity not deemed a VIE upon a determination that it has a controlling financial interest. For entities where Douglas Elliman does not have a controlling financial interest, the investments in such entities are classified as available-for-sale securities or accounted for using the equity or cost method, as appropriate.

(d)

Parent’s Net Investment:

The Parent’s net investment in the condensed combined consolidated balance sheets represents Vector’s historical net investment in Douglas Elliman resulting from various transactions with and allocations from the Parent. Balances due to and due from the Parent and accumulated earnings attributable to Douglas Elliman operations have been presented as components of Parent investment.

(e)

Segments:

Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s Chief Executive Officer is the Company’s CODM. The CODM reviews financial information on a consolidated basis for purposes of making operating decisions, allocating resources and evaluating financial performance. As such, the Company has one operating and reportable segment. All of the Company’s long-lived assets are located in the United States and all revenue is attributed to transactions based in the United States.

F-7

(f)

Estimates and Assumptions:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Significant estimates subject to material changes in the near term include impairment charges and valuation of intangible assets. Actual results could differ from those estimates.

(g)

Cash and Cash Equivalents:

Cash includes cash on hand, cash on deposit in banks, and money market accounts. Cash equivalents is comprised of short-term investments which have an original maturity of 90 days or less. Interest on short-term investments is recognized when earned. The Company places its cash and cash equivalents with large commercial banks. The Federal Deposit Insurance Corporation and Securities Investor Protection Corporation insure these balances, up to $250 and $500, respectively. Substantially all of the Company’s cash balances at September 30, 2021 are uninsured.

(h)

Reconciliation of Cash, Cash Equivalents and Restricted Cash:

Restricted cash amounts included in current assets and other assets represent cash and cash equivalents required to be deposited into escrow for amounts required for letters of credit related to office leases, and certain deposit requirements for banking arrangements. The restrictions related to the letters of credit will remain in place for the duration of the respective lease. The restrictions related to the banking arrangements will remain in place for the duration of the arrangement.

The components of “Cash, cash equivalents and restricted cash” in the condensed combined consolidated statements of cash flows were as follows:


	September 30, 2021		December 31, 2020
Cash and cash equivalents	$	158,804	$	94,421
Restricted cash and cash equivalents		11,979		10,374
Restricted cash and cash equivalents included in other assets		1,907		1,907

Total cash, cash equivalents, and restricted cash shown in the condensed combined consolidated statements of cash flows	$	172,690	$	106,702

(i)

Investment Securities:

The Company classifies investments in debt securities as trading. Investments classified as trading are carried at fair value, with changes in fair value recognized in net income. Gains and losses are recognized when realized in the Company’s condensed combined consolidated statements of operations. The cost of securities sold is determined based on average cost.

(j)

Significant Concentrations of Credit Risk:

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables. The Company places its temporary cash in money market securities (investment grade or better) with, what management believes, high credit quality financial institutions.

F-8

(k)

Receivables:

Receivables consist of commissions earned on sales transactions which closed prior to the Company’s year-end but for which the related commissions have not yet been received. The Company provides an allowance for potential losses on uncollectible receivables based principally on the specific identification method. There are no allowances for bad debt for commission receivables as of September 30, 2021 and December 31, 2020. Uncollectible accounts are written off when the likelihood of collection is remote and when collection efforts have been abandoned.

(l)

Property, Plant and Equipment:

Property, plant and equipment are stated at cost. Property, plant and equipment are depreciated using the straight-line method over the estimated useful lives of the respective assets, which are 3 to 10 years for machinery and equipment.

The cost and related accumulated depreciation of property, plant and equipment are removed from the accounts upon retirement or other disposition and any resulting gain or loss is reflected in operations.

The cost of leasehold improvements is amortized over the lesser of the related leases or the estimated useful lives of the improvements. Costs of major additions and betterments are capitalized, while expenditures for routine maintenance and repairs are charged to expense as incurred.

(m)

Investments accounted for under the equity-method of accounting:

In accounting for its equity-method investments, the Company identified its participation in Variable Interest Entities (“VIE”), which are defined as (a) entities in which the equity investment at risk is not sufficient to finance its activities without additional subordinated financial support; (b) as a group, the equity investors at risk lack 1) the power to direct the activities of a legal entity that most significantly impact the entity’s economic performance, 2) the obligation to absorb the expected losses of the entity, or 3) the right to receive the expected residual returns of the entity; or (c) as a group, the equity investors have voting rights that are not proportionate to their economic interests and the entity’s activities involve or are conducted on behalf of an investor with a disproportionately small voting interest.

The Company’s interest in VIEs is primarily in the form of equity ownership. The Company examines specific criteria and uses judgment when determining if the Company is the primary beneficiary of a VIE. Factors considered include risk and reward sharing, experience and financial condition of other partner(s), voting rights, involvement in day-to-day capital and operating decisions, representation on a VIE’s executive committee, existence of unilateral kick-out rights exclusive of protective rights or voting rights and level of economic disproportionality between the Company and its other partner(s).

Accounting guidance requires the consolidation of VIEs in which the Company is the primary beneficiary. The guidance requires consolidation of VIEs that an enterprise has a controlling financial interest. A controlling financial interest will have both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The Company’s maximum exposure to loss in its investments in unconsolidated VIEs is limited to its investment in the VIE, any unfunded capital commitments to the VIE, and, in some cases, guarantees in connection with debt on the specific project.

F-9

whether such impairment is considered temporary or other than temporary. The Company believes that the assessment of temporary or other-than-temporary impairment is facts-and-circumstances driven.

(n)

Goodwill and Other Intangible Assets:

Goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment on an annual basis, or whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable. The Company follows ASC 350, Intangibles – Goodwill and Other, and subsequent updates including ASU 2011-08, Testing Goodwill for Impairment and ASU 2017-14, Simplifying the Test for Goodwill Impairment. The amendments permit entities to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying value or chooses to bypass the optional qualitative assessment, the Company would then assess recoverability by comparing the fair value of the reporting unit to its carrying amount; otherwise, no further impairment test would be required. The fair value of the intangible asset associated with the Douglas Elliman trademark is determined using a “relief from royalty payments” method. This approach involves two steps: (i) estimating reasonable royalty rates for its trademark associated with the Douglas Elliman trademark and (ii) applying these royalty rates to a net sales stream and discounting the resulting cash flows to determine fair value. This fair value is then compared with the carrying value of the trademark. As discussed in Note 9 to the Company’s condensed combined consolidated financial statements, during the first quarter of 2020, the Company performed quantitative assessments of its goodwill and its trademark intangible asset in conjunction with its quarterly review for indicators of impairment. The quantitative assessments resulted in impairment charges to goodwill of $46,252 and to the trademark intangible asset of $12,000. The Company determined that there have not been any triggering events since the first quarter of 2020.

Goodwill from acquisitions represents the excess of the purchase price over the fair value of the underlying acquired net tangible and intangible assets. Factors that contribute to the recognition of goodwill in the Company’s acquisitions include (i) expected growth rates and profitability of the acquired companies, (ii) securing buyer-specific synergies that increase revenue and profits and are not otherwise available to market participants, (iii) significant cost savings opportunities, (iv) experienced workforce and (v) the Company’s strategies for growth in sales, income and cash flows.

Intangible assets with finite lives are amortized over their respective estimated useful lives. Identifiable intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate long-lived assets described below.

(o)

Impairment of Long-Lived Assets:

The Company reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company performs a test for recoverability, comparing projected undiscounted cash flows to the carrying value of the asset group to determine if impairment exists. If impairment is determined to exist, any related impairment loss is calculated based on fair value of the asset on the basis of discounted cash flow. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.

F-10

business prospects of the investee, (b) a significant adverse change in the regulatory, economic, or technological environment of the investee, (c) a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates, and (d) factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements.

(p)

Leases:

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and lease liabilities on the Company’s condensed combined consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the duration of the lease term. Lease liabilities represent the Company’s obligation to make lease payments as determined by the lease agreement. Lease liabilities are recorded at commencement for the net present value of future lease payments over the lease term. The discount rate used is generally the Company’s estimated incremental borrowing rate unless the lessor’s implicit rate is readily determinable. Discount rates are calculated periodically to estimate the rate the Company would pay to borrow the funds necessary to obtain an asset of similar value, over a similar term, with a similar security. ROU assets are recorded and recognized at commencement for the lease liability amount, initial direct costs incurred and is reduced for lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components; the Company has elected the accounting policy to combine lease and non-lease components for all underlying asset classes.

(q)

Income Taxes:

The Company’s principal subsidiaries, Douglas Elliman Realty, LLC and New Valley Ventures LLC, are limited liability companies. The members of a limited liability company are taxed on their proportionate share of the Company’s taxable income. Accordingly, no provision or liability for Federal income taxes is included in the financial statements, except for Douglas Elliman of California, Inc. which is taxed as a corporation and has net operating loss carryforwards, which have been fully reserved for with a valuation allowance. The Company is, however, subject to New York City Unincorporated Business Tax (“UBT”) and accordingly has recorded a provision for UBT in its condensed combined consolidated financial statements.

The Company adopted the provisions related to uncertain tax positions and recognizes tax liabilities when, despite the Company’s belief that its tax return positions are supportable, the Company believes that certain positions may not be fully sustained upon review by tax authorities. Benefits from tax positions are measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences impact income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense. Adoption of this guidance did not have an impact on the Company’s condensed combined consolidated financial statements.

(r)

Contingencies:

The Company and its subsidiaries record provisions in its condensed combined consolidated financial statements for pending litigation when they determine that an unfavorable outcome is probable and the amount of loss can be reasonably estimated.

F-11

(s)

Revenue:

Commissions and other brokerage income: Real estate commissions earned by the Company’s real estate brokerage businesses are recognized as revenue when the real estate sale is completed or lease agreement is executed, which is the point in time that the performance obligation is satisfied. Any commission and other payments received in advance are deferred until the satisfaction of the performance obligation. Corresponding agent commission expenses, including any advance commission or other direct expense payments, are deferred and recognized as agent commission expenses concurrently with related revenues. The accounting for these commissions and other brokerage income under Topic 606 are largely consistent with the previous accounting for these transactions under Topic 605, except for customer arrangements in the development marketing business and extended payments terms that exist in some commercial leasing contracts.

Real estate commissions includes commissions of approximately $7,493 and $8,829 for the nine months ended September 30, 2021 and 2020, respectively, from projects where the Company has been engaged by the developers as the sole broker or the co-broker for several of the real estate development projects that Vector owns an interest in through its real estate venture investments.

Property management: Property management revenue arrangements consist of providing operational and administrative services to manage a subject property. Fees for these services are typically billed and collected monthly. Property management service fees are recognized as revenue over time using the output method as the performance obligations under the customer arrangement are satisfied each month.

Ancillary services: Ancillary services revenue earned by the Company related primarily to title and escrow services. They are recognized as revenue when the real estate sale is completed, which is the point in time that the performance obligation is satisfied.

See Note 2 — Revenue Recognition for additional information.

(t)

Real estate agent commissions:

Real estate agent commissions consists of commissions paid to the Company’s agents, who are independent contractors, upon the closing of a real estate transaction and fees paid to external brokerages for client referrals, which are recognized and paid upon the closing of a real estate transaction.

(u)

Sales and marketing expenses:

Sales and marketing expenses consists primarily of marketing and advertising expenses, compensation and other personnel-related costs for employees supporting sales, marketing, expansion and related functions, occupancy-related costs and agent acquisition incentives. Advertising expense primarily includes the cost of marketing activities such as print advertising, online advertising and promotional items, which are expensed as incurred. Compensation and other personnel-related costs include salaries, benefits, bonuses and stock-based compensation expense.

Real estate advertising costs, which are expensed as incurred and included within sales and marketing expenses, were $7,656, $3,944, $20,506 and $12,317 for the three and nine months ended September 30, 2021 and 2020, respectively.

(v)

Operations and support expenses:

Operations and support expenses consists primarily of compensation and other personnel-related costs for employees supporting agents, third-party consulting and professional services costs (not included in general and administrative or technology), fair value adjustments to contingent consideration for the Company’s acquisitions and other related expenses.

F-12

(w)

Technology expenses:

Technology expenses consists primarily of compensation and other personnel-related costs for employees in the product, engineering and technology functions, website hosting expenses, software licenses and equipment, third-party consulting costs, data licenses of PropTech and other related expenses associated with the implementation of our technology initiatives.

(x)

General and administrative expenses:

General and administrative expenses consists primarily of compensation and other personnel-related costs for executive management and administrative employees, including finance and accounting, legal, human resources and communications, the occupancy costs for its headquarters and other offices supporting its administrative functions, transition services paid to its parent, Vector, for the use of office space and employees, professional services fees for legal and finance, insurance expenses and talent acquisition expenses.

(z)

Restructuring:

In response to the current novel coronavirus pandemic (“COVID-19”), the Company has completed a restructuring by realigning its administrative support function and office locations as well as adjusting its business model to more efficiently serve its clients. This included a reduction of staff by approximately 25% at Douglas Elliman. For the three and nine months ended September 30, 2021, there were no restructuring charges. As of December 31, 2020, there was no accrual for restructuring charges.

The following table summarizes amounts expensed for the three and nine months ended September 30, 2020:


	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
Cash Charges:
Employee severance and benefits	$	186	$	1,785
Other restructuring expenses		64		282

		250		2,067

Non-Cash:
Loss on fixed assets associated with consolidation of sales offices		70		1,214

Total restructuring	$	320	$	3,281

All amounts expensed for the nine months ended September 30, 2020 are included as restructuring in the Company’s condensed combined consolidated statements of operations.

Employee severance and benefits expensed for the nine months ended September 30, 2020 relate entirely to the reduction in staff.

F-13

The following table presents the activity under the restructuring plan for the nine months ended September 30, 2020:


	Employee Severance and Benefits			Other			Non-Cash Loss on Fixed Assets			Total
Accrual balance as of January 1, 2020	$	—		$	—		$	—		$	—
Restructuring		1,785			282			1,214			3,281
Utilized		(1,735	)		(282	)		(1,214	)		(3,231	)

Accrual balance as of September 30, 2020	$	50		$	—		$	—		$	50

(aa)

Acquisitions:

On August 6, 2021, the Company acquired an additional 49% ownership in Douglas Elliman Texas, a licensed real estate service provider in Houston, Texas, for a purchase price of $500. The purchase price allocation for this acquisition resulted in the recognition of $6,527 of intangible assets related to a non-compete agreement, $5,047 of assets, $11,389 of liabilities and $815 of goodwill. The goodwill is not expected to be deductible for income tax purposes. The non-compete agreement is expected to be amortized over ten years. The Company controls the board of Douglas Elliman Texas and consolidates its ownership interest under the voting interest model in accordance with ASC 810, resulting in a non-controlling interest for the remaining 50% of Douglas Elliman Texas not owned by the Company on its condensed combined consolidated financial statements.

The assets, liabilities and results of operations of Douglas Elliman Texas were not material to the Company’s condensed combined consolidated financial position, results of operations, or cash flows and therefore pro forma financial information for the acquisition was not presented.

(ab)

Supplemental Cash Flow Information:


	Nine Months Ended
	September 30, 2021		September 30, 2020
Non-cash investing and financing activities:
Non-cash contributions of assets by Parent	$	4,852	$	—
Non-cash assumption of liabilities by Parent		9,664		4,660

(ac)

Subsequent Events:

On November 8, 2021, Vector announced its intention to spin off its real estate services and PropTech investment business (the “Proposed Spin-off”) through a pro rata distribution of all of the outstanding shares of common stock of the Company (“Spinco”) to holders of the Vector’s common stock (including common stock underlying outstanding stock option awards and restricted stock awards). The Proposed Spin-off is intended to be a tax-free transaction for U.S. federal income tax purposes for Vector and its stockholders with respect to Spinco stock that is distributed with respect to the stock of Vector and is expected to be completed by the end of calendar year 2021, subject to the satisfaction of customary conditions, including final approval by Vector’s board of directors and the effectiveness of this registration statement on Form 10 filed with the SEC.

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to December 7, 2021, the date the condensed combined consolidated financial statements were available to be issued, and determined that, other than as disclosed above, there have been no events that have occurred that would require adjustments to the disclosures in the condensed combined consolidated financial statements.

F-14

(ad)

New Accounting Pronouncements:

Accounting Standards Updates (“ASU”) adopted in 2021:

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This update simplifies various aspects related to accounting for income taxes, removes certain exceptions to the general principles in Accounting Standards Codification (“ASC”) 740, and clarifies and amends existing guidance to improve consistent application. ASU No. 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020. Adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.

In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”). The new standard clarifies the interaction of accounting for the transition into and out of the equity method. The new standard also clarifies the accounting for measuring certain purchased options and forward contracts to acquire investments. The ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.

2.	REVENUE RECOGNITION

Disaggregation of Revenue

In the following table, revenue is disaggregated by major services line and primary geographical market:


	Three Months Ended September 30, 2021
	New York City		Northeast		Southeast		West		Total
Revenues:
Commission and other brokerage income — existing home sales	$	117,488	$	63,715	$	75,904	$	61,487	$	318,594
Commission and other brokerage income — development marketing		14,263		—		5,835		223		20,321
Property management revenue		8,979		141		—		—		9,120
Title and escrow fees		1,060		508		—		4,558		6,126

Total revenue	$	141,790	$	64,364	$	81,739	$	66,268	$	354,161


	Three Months Ended September 30, 2020
	New York City		Northeast		Southeast		West		Total
Revenues:
Commission and other brokerage income — existing home sales	$	43,039	$	58,909	$	43,883	$	42,000	$	187,831
Commission and other brokerage income — development marketing		4,571		—		5,564		534		10,669
Property management revenue		8,334		250		—		—		8,584
Title fees		358		554		—		—		912

Total revenue	$	56,302	$	59,713	$	49,447	$	42,534	$	207,996

F-15



	Nine Months Ended September 30, 2021
	New York City		Northeast		Southeast		West		Total
Revenues:
Commission and other brokerage income — existing home sales	$	293,475	$	186,384	$	273,423	$	154,083	$	907,365
Commission and other brokerage income — development marketing		38,626		—		27,220		837		66,683
Property management revenue		27,836		453		—		—		28,289
Title fees		2,939		1,317		—		12,319		16,575

Total revenue	$	362,876	$	188,154	$	300,643	$	167,239	$	1,018,912


	Nine Months Ended September 30, 2020
	New York City		Northeast		Southeast		West		Total
Revenues:
Commission and other brokerage income — existing home sales	$	129,009	$	129,264	$	97,293	$	87,724	$	443,290
Commission and other brokerage income — development marketing		18,195		—		15,033		1,202		34,430
Property management revenue		25,513		682		—		—		26,195
Title fees		1,425		1,186		—		—		2,611

Total revenue	$	174,142	$	131,132	$	112,326	$	88,926	$	506,526

Contract Balances

The following table provides information about contract assets and contract liabilities from development marketing and commercial leasing contracts with customers:


	September 30, 2021		December 31, 2020
Receivables, which are included in receivables	$	2,248	$	1,520
Contract assets, net, which are included in other current assets		3,087		6,529
Payables, which are included in commissions payable		1,682		1,113
Contract liabilities, current		5,843		7,633
Contract assets, net		28,688		24,002
Contract liabilities, non-current		38,734		32,104

The Company recognized revenue of $2,292 and $4,941 for the three and nine months ended September 30, 2021, that were included in the contract liabilities balances at December 31, 2020. The Company recognized revenue of $1,451 and $8,109 for the three and nine months ended September 30, 2020, that were included in the contract liabilities balances at December 31, 2019.

3.	CURRENT EXPECTED CREDIT LOSSES

Real estate broker agent receivables: Douglas Elliman is exposed to credit losses for various amounts due from real estate agents, which are included in current assets on the condensed combined consolidated balance sheets, net of an allowance for credit losses. The Company estimates its allowance for credit losses on receivables from agents based on an evaluation of aging, agent sales in pipeline, any security, specific exposures, historical experience of collections from the individual agents, and current and expected future market trends

F-16

(such as the current and expected impact of COVID-19 on the real estate market). The Company estimated that the credit losses for these receivables were $7,623 and $7,038 at September 30, 2021 and December 31, 2020, respectively.

The following is the rollforward of the allowance for credit losses for the nine months ended September 30, 2021:


	January 1, 2021		Current Period Provision			Write-offs		Recoveries		September 30, 2021
Allowance for credit losses:
Real estate broker agent receivables	$	7,038	$	904	⁽¹⁾	$	319	$	—	$	7,623

(1)	The bad debt expense related to the real estate broker agent receivables is included in General and administrative expenses on the condensed combined consolidated statements of operations.

The following is the rollforward of the allowance for credit losses for the nine months ended September 30, 2020:


	January 1, 2020		Current Period Provision			Write-offs		Recoveries		September 30, 2020
Allowance for credit losses:
Real estate broker agent receivables	$	6,132	$	1,724	⁽¹⁾	$	141	$	—	$	7,715

(1)	The bad debt expense related to the real estate broker agent receivables is included in General and administrative expenses on the condensed combined consolidated statements of operations.

4.	LEASES

Leases

The Company has operating leases for corporate and sales offices, and equipment. The components of lease expense were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating lease cost	$	8,194	$	8,359	$	24,471	$	24,843
Short-term lease cost		128		131		497		750
Variable lease cost		713		699		2,645		2,540
Total lease cost	$	9,035	$	9,189	$	27,613	$	28,133

Supplemental cash flow information related to leases was as follows:


	Nine Months Ended September 30,
	2021		2020
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	29,135	$	16,339
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		5,527		10,727

F-17

Supplemental balance sheet information related to leases was as follows:


	September 30, 2021			December 31, 2020
Weighted average remaining lease term:
Operating leases		7.82			8.18
Weighted average discount rate:
Operating leases		9.15	%		9.18	%

As of September 30, 2021, maturities of lease liabilities were as follows:


	Operating Leases
Period Ending December 31:
Remainder of 2021	$	10,053
2022		34,981
2023		30,876
2024		25,348
2025		21,204
2026		19,165
Thereafter		79,656

Total lease payments		221,283
Less imputed interest		(66,857	)

Total	$	154,426

As of September 30, 2021, the Company had no undiscounted lease payments relating to operating leases for office space and equipment that have not yet commenced.

As a result of the COVID-19 pandemic, the Company received lease concessions from landlords in 2020 mostly in the form of rent deferrals and a few in the form of rent abatements. The Company elected to treat these deferrals and abatements as lease modifications and the existing lease liabilities were remeasured with a corresponding adjustment to the right-of-use asset on the effective date of the modification in 2020. The deferrals varied as to the timing of repayment but all agreements required repayment of the deferrals over the remaining lease terms.

5.	LONG-TERM INVESTMENT SECURITIES

Long-term investment securities consisted of the following:


	September 30, 2021		December 31, 2020
PropTech convertible trading debt securities	$	2,208	$	—
Long-term investment securities at fair value⁽¹⁾		1,358		237

Total long-term investments	$	3,566	$	237

(1)	These assets are measured at NAV as a practical expedient under ASC 820, Fair Value Measurement.

F-18

Net gains recognized on investment securities were included as a part of Investment income on the condensed combined consolidated income statements and were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net gains recognized on PropTech convertible trading debt securities	$	65	$	—	$	46	$	—
Net gains recognized on long-term investments at fair value		82		—		203		—

Net gains recognized on investment securities	$	147	$	—	$	249	$	—

Total PropTech investments consisted of the following:


	September 30, 2021		December 31, 2020
PropTech convertible trading debt securities ⁽¹⁾	$	2,208	$	—
PropTech investments at fair value ⁽²⁾		1,358		237
PropTech investments at cost ⁽³⁾		3,563		—

	$	7,129	$	237

(1)	Included in Long-term investment securities at fair value. See item (a) below for further detail.

(2)	Included in Long-term investment securities at fair value. See item (b) below for further detail.

(3)	These assets are without readily determinable fair values that do not qualify for the NAV practical expedient and are in included in Other assets on the condensed consolidated balance sheets. See item (c) below for further detail.

(a)

PropTech Convertible Trading Debt Securities:

During the nine months ended September 30, 2021, New Valley Ventures invested $2,500 into convertible notes of four PropTech ventures. The securities are classified as trading debt securities and are accounted for at fair value. The maturities of the notes are between February 2023 and March 2023.

(b)

Long-Term Investments at Fair Value:

The following is a summary of unrealized and realized net gains recognized in net income on long-term investments at fair value during the three and nine months ended September 30, 2021 and 2020, respectively:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net gains recognized on long-term investments	$	82	$	—	$	203	$	—
Less: Net gains (losses) recognized on long-term investments sold		—		—		—		—

Net unrealized gains recognized on long-term investments still held at the reporting date	$	82	$	—	$	203	$	—

F-19

(c)

Equity Securities Without Readily Determinable Fair Values That Do Not Qualify for the NAV Practical Expedient:

Equity securities without readily determinable fair values that do not qualify for the NAV practical expedient consisted of investments in various limited liability companies at September 30, 2021. The total carrying value of these investments was $3,563 as of September 30, 2021, and was included in “Other assets” on the condensed combined consolidated balance sheets. No impairment or other adjustments related to observable price changes in orderly transactions for identical or similar investments were identified for the three and nine months ended September 30, 2021.

6.	EQUITY METHOD INVESTMENTS

Equity-method investments consisted of the following:


	September 30, 2021		December 31, 2020
Ancillary services ventures	$	2,790	$	1,412

At September 30, 2021, the Company’s ownership percentages in the investments accounted for under the equity method ranged from 17% to 50%. The Company’s ownership percentage in these investments meets the threshold for equity-method accounting. The Company made contributions of $1,600 for the nine months ended September 30, 2021. These contributions were made into two new investments. For the nine months ended September 30, 2021, the Company received $105 of distributions from its equity method investments, of which $75 were treated as cash inflows from operations, while the remaining were treated as cash inflows from investing activities. For the nine months ended September 30, 2020, the Company received $26 of distributions from its equity method investments, all of which were treated as cash inflows from operations.

VIE Consideration:

The Company has determined that the Company is not the primary beneficiary of any of its equity method investments because it does not control the activities that most significantly impact the economic performance of the investment. The Company determined that the entities were VIEs but the Company was not the primary beneficiary. Therefore, the Company’s equity method investments have been accounted for under the equity method of accounting.

Maximum Exposure to Loss:

The Company’s maximum exposure to loss from its equity method investments consisted of the net carrying value of the investments adjusted for any future capital commitments and/or guarantee arrangements. The maximum exposure to loss was $2,790 as of September 30, 2021.

7.	NOTES PAYABLE AND OTHER OBLIGATIONS

Notes payable, long-term debt and other obligations consisted of:


	September 30, 2021			December 31, 2020
Notes payable	$	15,625		$	25,000
Other		210			420

Total notes payable and other obligations		15,835			25,420
Less:
Current maturities		(12,526	)		(12,500	)

Amount due after one year	$	3,309		$	12,920

F-20

Notes Payable:

Notes payable consists of $15,625 of notes payable issued by DER Holdings LLC as part of the acquisition of the remaining 29.41% interest in Douglas Elliman in December 2018. Interest on the outstanding principal balance of the notes accrues at the then-current mid-term applicable federal rate. Principal and interest is payable in installments with the final payment due October 1, 2022. Principal of $14,375 has been repaid through September 30, 2021 and the remaining principal is due to be repaid as follows: $3,125 in 2021; and $12,500 in 2022.

Fair Value of Notes Payable and Other Obligations:

The estimated fair value of the Company’s notes payable and other obligations were as follows:


	September 30, 2021				December 31, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
Notes payable	$	15,625	$	15,625	$	25,000	$	25,000
Other		210		210		420		420

Notes payable and other obligations	$	15,835	$	15,835	$	25,420	$	25,420

Notes payable and other obligations are carried on the condensed combined consolidated balance sheets at amortized cost. The fair value determinations disclosed above would be classified as Level 2 under the fair value hierarchy disclosed in Note 11 if such liabilities were recorded on the condensed combined consolidated balance sheets at fair value. The estimated fair value of the Company’s notes payable and other obligations debt has been determined by the Company using available information. However, considerable judgment is required to develop the estimates of fair value and, accordingly, the estimate presented herein is not necessarily indicative of the amount that could be realized in a current market exchange.

8.	CONTINGENCIES

The Company is involved in litigation through the normal course of business. The majority of claims have been referred to the insurance carrier and related counsel. The Company believes that the resolution of these matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company.

9.	GOODWILL AND OTHER INTANGIBLE ASSETS

The components of Goodwill and other intangible assets, net were as follows:


	December 31, 2020		Acquisitions ⁽¹⁾		Impairment Losses		Amortization			September 30, 2021
Goodwill	$	31,756	$	815	$	—	$	—		$	32,571
Indefinite life intangibles:
Trademark - Douglas Elliman		68,000		—		—		—			68,000
Intangibles with a finite life, net		310		6,527		—		(218	)		6,619

Total goodwill and other intangible assets, net	$	100,066	$	7,342	$	—	$	(218	)	$	107,190

(1)	The acquisition of Real Estate Associates of Houston, LLC in the third quarter of 2021, resulted in $6,527 of the purchase price allocated to a non-compete agreement to be amortized over ten years and $815 allocated to Goodwill.

F-21


	December 31, 2019		Acquisitions ⁽¹⁾		Impairment Losses			Amortization			September 30, 2020
Goodwill	$	78,008	$	—	$	(46,252	)	$	—		$	31,756
Indefinite life intangibles:
Trademark - Douglas Elliman		80,000		—		(12,000	)		—			68,000
Intangibles with a finite life, net		474		—		—			(123	)		351

Total goodwill and other intangible assets, net	$	158,482	$	—	$	(58,252	)	$	(123	)	$	100,107

Goodwill is evaluated for impairment annually or whenever the Company identifies certain triggering events or circumstances that would more likely than not reduce the fair value of the Company below its carrying amount. Events or circumstances that might indicate an interim evaluation is warranted include, among other things, unexpected adverse business conditions, macro and reporting unit specific economic factors (for example, interest rate and foreign exchange rate fluctuations, and loss of key personnel), supply costs, unanticipated competitive activities, and acts by governments and courts.

During the first quarter of 2020, the Company determined that a triggering event occurred due to a decline in sales and profitability projections for the Company driven by the COVID-19 pandemic and related economic disruption. The Company utilized third-party valuation specialists to prepare a quantitative assessment of goodwill and trademark intangible asset related to Douglas Elliman.

For the goodwill testing, the Company utilized an income approach (a discounted cash flows method) to estimate the fair value of the Douglas Elliman business. The estimated fair value of the trademark indefinite-life intangible asset related to the Douglas Elliman brand name was determined using an approach that values the Company’s cash savings from having a royalty-free license compared to the market rate it would pay for access to use the trade name.

The third-party quantitative assessments of the goodwill and trademark intangible asset reflected management’s assumptions regarding revenue growth rates, economic and market trends including current expectations of deterioration resulting from the COVID-19 pandemic, changes to cost structures and other expectations about the anticipated short-term and long-term operating results of the Company. The quantitative assessments resulted in impairment charges to goodwill of $46,252 and to the trademark intangible asset of $12,000.

The Company determined that there have not been any triggering events since the first quarter of 2020. If the Company fails to achieve the financial projections used in the quantitative assessments of fair value or the impacts of COVID-19 are more severe than expected, additional impairment charges could result in future periods, and such impairment charges could be material.

10.

INCOME TAXES

The carve-out financial statements of Douglas Elliman Inc. include the tax accounts of the following entities: (i) DER Holdings LLC, the parent of Douglas Elliman Realty, LLC, is a single-member limited liability company that is a disregarded entity for U.S. income tax purposes, (ii) Douglas Elliman Realty, LLC is a limited liability company that files as a partnership for U.S. income tax purposes, (iii) Douglas Elliman of California, Inc. is a corporation that reported on a separate company basis until February 28, 2019 and thereafter elected to become a consolidated subsidiary included in the Parent’s consolidated U.S. income tax return, (iv) DER Holdings II LLC, a subsidiary of DER Holdings LLC, which has elected to be taxed as corporation for U.S. income tax purposes, and, (v) New Valley Ventures LLC, NV Mortgage LLC and NV Title LLC, which are single member limited liability companies that are treated as disregarded entities for U.S. income tax purposes.

F-22

The Company calculated its provision for income taxes by using a separate-return method and has elected not to allocate tax expense to single-member limited liability companies or partnerships that did not incur income tax liability because they are not severally liable for the taxes of their owners. Douglas Elliman of California, Inc. and DER Holdings II LLC are the only two entities taxed as a corporation for U.S. Income Tax purposes while the remaining entities are pass through entities for federal income tax purposes. Therefore, no income tax expense has been allocated to DER Holdings LLC, New Valley Ventures LLC, NV Mortgage LLC or NV Title LLC and income tax expense has been allocated to DER Holdings II LLC, Douglas Elliman of California, Inc. and, for purposes of New York City UBT only, Douglas Elliman Realty, LLC.

The amounts provided for income taxes were as follows:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020			2021		2020
Provision for New York City UBT	$	597	$	(179	)	$	1,430	$	(177	)
Tax expense on taxable entities		70		37			226		9

Total income tax expense (benefit)	$	667	$	(142	)	$	1,656	$	(168	)

Douglas Elliman of California Inc. has historically reported net operating losses since its incorporation. Consequently, management has assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2020 for Douglas Elliman of California, Inc. Further, such objective evidence limits the ability to consider other subjective evidence, such as its projections for future growth.

A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2020 for Douglas Elliman of California, Inc. Such objective evidence limits the ability to consider other subjective evidence, such as its projections for future growth. The Company’s effective income tax rate is based on expected income, statutory rates, valuation allowances against deferred tax assets, and any tax planning opportunities available to the Company. For interim financial reporting, the Company estimates the annual effective income tax rate based on full year projections and applies the annual effective income tax rate against year-to-date, adjusted for discrete items, if any. The Company refines annual estimates as new information becomes available. The Company’s tax rate does not bear a relationship to statutory tax rates due to permanent differences, which are primarily related to nondeductible compensation, and state taxes.

Liabilities for uncertain tax positions reflected as of September 30, 2021 and December 31, 2020 are not significant and it is not anticipated that they will materially change in the next 12 months. Douglas Elliman Realty, LLC received notice of an IRS audit for its 2018 tax return. Although the outcome of tax audits is always uncertain, Douglas Elliman Realty, LLC believes that its tax positions will generally be sustained under audit.

F-23

11.

INVESTMENTS AND FAIR VALUE MEASUREMENTS

The Company’s financial assets and liabilities subject to fair value measurements were as follows:


	Fair Value Measurements as of September 30, 2021
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds ⁽¹⁾	$	35,684	$	35,684	$	—	$	—
Certificates of deposit ⁽²⁾		569		—		569		—
Long-term investments
PropTech convertible debt securities		2,208		—		—		2,208
Long-term investment securities at fair value ⁽³⁾		1,358		—		—		—

Total	$	39,819	$	35,684	$	569	$	2,208

Liabilities:
Fair value of contingent liability	$	4,250	$	—	$	—	$	4,250

Total	$	4,250	$	—	$	—	$	4,250

(1)	Amounts included in Cash and cash equivalents on the condensed combined consolidated balance sheets, except for $11,979 that is included in current restricted assets and $1,907 that is included in non-current restricted assets.

(2)	Amounts included in current restricted assets and non-current restricted assets on the condensed combined consolidated balance sheets.

(3)	In accordance with Subtopic 820-10, investments that are measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy.


	Fair Value Measurements as of December 31, 2020
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds ⁽¹⁾	$	61,199	$	61,199	$	—	$	—
Certificates of deposit ⁽²⁾		569		—		569		—
Long-term investments
Long-term investment securities at fair value ⁽³⁾		237		—		—		—

Total	$	62,005	$	61,199	$	569	$	—

Liabilities:
Fair value of contingent liability	$	999	$	—	$	—	$	999

Total	$	999	$	—	$	—	$	999

(1)	Amounts included in Cash and cash equivalents on the condensed combined consolidated balance sheets, except for $10,374 that is included in current restricted assets and $1,907 that is included in non-current restricted assets.

F-24

(2)	Amounts included in current restricted assets and non-current restricted assets on the condensed combined consolidated balance sheets.

(3)	In accordance with Subtopic 820-10, investments that are measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy.

The fair value of the Level 2 certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is the rate offered by the financial institution. The fair value of investment securities at fair value included in Level 1 is based on quoted market prices from various stock exchanges. The Level 2 investment securities at fair value are based on quoted market prices of securities that are thinly traded, quoted prices for identical or similar assets in markets that are not active or inputs other than quoted prices such as interest rates and yield curves.

The long-term investments are based on NAV per share provided by the partnerships based on the indicated market value of the underlying assets or investment portfolio. In accordance with Subtopic 820-10, these investments are not classified under the fair value hierarchy disclosed above because they are measured at fair value using the NAV practical expedient.

The fair values of the Level 3 PropTech convertible trading debt securities were derived using a discounted cash flow model utilizing a probability-weighted expected return method based on the probabilities of different potential outcomes for the convertible trading debt securities.

The fair value of the Level 3 contingent liability was derived using a Monte Carlo valuation model. As part of the acquisition of the 29.41% non-controlling interest in Douglas Elliman Realty, LLC, DER Holdings LLC entered into a four-year payout agreement that requires it to pay the sellers a portion of the fair value in excess of the purchase price of Douglas Elliman Realty, LLC should a sale of a controlling interest in Douglas Elliman Realty, LLC occur.

The unobservable inputs related to the valuations of the Level 3 assets and liabilities were as follows at September 30, 2021:


	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at September 30, 2021		Valuation Technique	Unobservable Input	Range (Actual)
PropTech convertible trading debt securities	$	2,208	Discounted cash flow	Interest rate	5%
				Maturity	Feb 2023 - Mar 2023
				Volatility	36.2% - 100.8%
				Discount rate	27.08% - 46.66%
				Maturity	Feb 2023 - Mar 2023
Fair value of contingent liability	$	4,250	Monte Carlo simulation model	Estimated fair value of the Douglas Elliman reporting unit	$765,886
				Risk-free rate for a 1.25-year term	0.14%
				Leverage-adjusted equity volatility of peer firms	29.22%

F-25

The unobservable inputs related to the valuations of the Level 3 assets and liabilities were as follows at December 31, 2020:


	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at December 31, 2020		Valuation Technique	Unobservable Input	Range (Actual)
Fair value of contingent liability	$	999	Monte Carlo simulation model	Estimated fair value of the Douglas Elliman reporting unit	$	169,000
				Risk-free rate for a 2-year term		0.13	%
				Leverage-adjusted equity volatility of peer firms		78.57	%

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record assets and liabilities at fair value on a nonrecurring basis. Generally, assets and liabilities are recorded at fair value on a nonrecurring basis as a result of impairment charges. The Company had no nonrecurring nonfinancial assets subject to fair value measurements as of September 30, 2021 and December 31, 2020, respectively.

F-26

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Vector Group Ltd.

Opinion on the Financial Statements

We have audited the accompanying combined consolidated balance sheets of Douglas Elliman Inc. (the “Company”) (see Note 1) as of December 31, 2020 and 2019, the related combined consolidated statements of operations, parent’s net investment, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in the Index to Combined Consolidated Financial Statements (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Miami, Florida

August 24, 2021

We have served as the Company’s auditor since 2020.

F-27

DOUGLAS ELLIMAN INC.

COMBINED CONSOLIDATED BALANCE SHEETS


	December 31, 2020		December 31, 2019
	(Dollars in thousands)
ASSETS:
Current assets:
Cash and cash equivalents	$	94,421	$	71,485
Receivables		24,377		21,308
Income taxes receivable, net		—		162
Agent receivables, net		7,346		5,115
Restricted cash and cash equivalents		10,374		4,423
Other current assets		11,847		15,749

Total current assets		148,365		118,242
Property, plant and equipment, net		42,703		47,919
Operating lease right-of-use assets		133,103		137,452
Contract assets, net		24,002		18,443
Goodwill		31,756		78,008
Other intangible assets, net		68,310		80,474
Equity-method investments		1,412		1,667
Other assets		4,331		6,402

Total assets	$	453,982	$	488,607

LIABILITIES AND NET INVESTMENT:
Current liabilities:
Current portion of notes payable and other obligations	$	12,500	$	10,063
Current operating lease liabilities		23,753		15,692
Income taxes payable, net		17		—
Accounts payable		6,337		3,066
Commissions payable		25,615		18,378
Accrued salaries and benefits		12,038		13,325
Contract liabilities		7,633		9,358
Other current liabilities		11,756		13,683

Total current liabilities		99,649		83,565
Notes payable and other obligations less current portion		12,920		20,000
Deferred income taxes, net		143		277
Non-current operating lease liabilities		143,296		145,873
Contract liabilities		32,104		29,045
Other liabilities		2,280		5,564

Total liabilities		290,392		284,324

Commitments and contingencies (Note 11)
Net Investment:
Parent’s net investment		163,590		204,283

Total liabilities and net investment	$	453,982	$	488,607

The accompanying notes are an integral part of the combined consolidated financial statements.

F-28

DOUGLAS ELLIMAN INC.

COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS


	Year Ended December 31,
	2020			2019			2018
	(Dollars in thousands)
Revenues:
Commissions and other brokerage income	$	733,751		$	742,414		$	715,458
Property management		35,115			35,461			33,350
Other ancillary services		5,121			6,233			5,281

Total revenues		773,987			784,108			754,089
Expenses:
Real estate agent commissions		546,948			525,233			500,369
Sales and marketing		64,097			76,897			72,419
Operations and support		49,895			65,044			70,957
General and administrative		76,134			96,540			91,682
Technology		14,858			15,236			8,799
Depreciation and amortization		8,537			8,638			8,364
Loss on disposal of assets		1,169			—			—
Litigation settlement and judgment income		—			—			(2,468	)
Impairments of goodwill and other intangible assets		58,252			—			—
Restructuring		3,382			—			—

Operating (loss) income		(49,285	)		(3,480	)		3,967
Other income:
Interest income, net		190			600			387
Equity in (loss) earnings from equity-method investments		(225	)		8,472			1,243
Change in fair value of contingent liability		2,149			3,157			—
Investment income		843			64			—

(Loss) income before provision for income taxes		(46,328	)		8,813			5,597
Income tax expense		44			354			400

Net (loss) income		(46,372	)		8,459			5,197
Net income attributed to non-controlling interest		—			—			(1,528	)

Net (loss) income attributed to Douglas Elliman Inc.	$	(46,372	)	$	8,459		$	3,669

The accompanying notes are an integral part of the combined consolidated financial statements.

F-29

DOUGLAS ELLIMAN INC.

COMBINED CONSOLIDATED STATEMENTS OF PARENT’S NET INVESTMENT


	Parent’s Net Investment			Non-controlling Interest			Total Equity
	(Dollars in thousands)
Balance, January 1, 2018	$	187,486		$	78,384		$	265,870
Net income		3,669			1,528			5,197
Impact of adoption of new accounting standards		(11,091	)		(4,894	)		(15,985	)
Acquisition of Non-controlling interest		28,800			(73,952	)		(45,152	)
Net transfers to Non-controlling interest		—			(1,066	)		(1,066	)
Net transfers from Parent		7,218			—			7,218

Balance, December 31, 2018		216,082			—			216,082
Net income		8,459			—			8,459
Impact of adoption of new accounting standards		(1,508	)		—			(1,508	)
Net transfers to Parent		(18,750	)		—			(18,750	)

Balance, December 31, 2019		204,283			—			204,283
Net loss		(46,372	)		—			(46,372	)
Net transfers from Parent		5,679			—			5,679

Balance, December 31, 2020	$	163,590		$	—		$	163,590

The accompanying notes are an integral part of the combined consolidated financial statements.

F-30

DOUGLAS ELLIMAN INC.

COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended December 31,
	2020			2019			2018
	(Dollars in thousands)
Cash flows from operating activities:
Net (loss) income	$	(46,372	)	$	8,459		$	5,197
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		8,537			8,638			8,364
Impairments of goodwill and other intangible assets		58,252			—			—
Loss on sale of assets		1,169			—			—
Deferred income taxes		78			225			(283	)
Equity in losses (earnings) from equity-method investments		225			(8,472	)		(1,243	)
Distributions from equity-method investments		30			2,014			600
Non-cash lease expense		17,326			17,973			—
Non-cash portion of restructuring		1,214			—			—
Change in fair value of contingent liability		(2,149	)		(3,157	)		—
Provision for credit losses		1,460			—			—
Other		(1,098	)		—			—
Changes in assets and liabilities:
Receivables		(4,816	)		(2,278	)		(5,000	)
Accounts payable and accrued liabilities		3,529			1,905			(5,148	)
Operating lease right-of-use liability, net		(7,498	)		(16,965	)		—
Accrued salary and benefits		(1,287	)		(1,566	)		550
Other		3,265			2,019			10,175
Operating lease right-of-use assets		—			(1,218	)		—

Net cash provided by operating activities		31,865			7,577			13,212

Cash flows from investing activities:
Investments in equity-method investments		—			(1,667	)		—
Distributions from equity-method investments		—			8,617			—
Cash acquired in purchase of subsidiaries		2,760			—			654
Capital expenditures		(6,126	)		(8,079	)		(12,965	)
Purchase of subsidiaries		(722	)		(380	)		(404	)

Net cash used in investing activities		(4,088	)		(1,509	)		(12,715	)

Cash flows from financing activities:
Repayments of debt		(63	)		(155	)		(125	)
Distributions to parent		—			(18,750	)		(2,558	)
Distributions to non-controlling interest		—			—			(1,066	)
Earn out payments		(80	)		(216	)		—

Net cash used in financing activities		(143	)		(19,121	)		(3,749	)

Net increase (decrease) in cash, cash equivalents and restricted cash		27,634			(13,053	)		(3,252	)
Cash, cash equivalents and restricted cash, beginning of year		79,068			92,121			95,373

Cash, cash equivalents and restricted cash, end of year	$	106,702		$	79,068		$	92,121

The accompanying notes are an integral part of the combined consolidated financial statements.

F-31

DOUGLAS ELLIMAN INC.

NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands, Except Per Share Amounts)

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)

Organization of “Carve-out” Financial Statements:

These combined consolidated financial statements are that of the real estate services and property technology business of Vector Group Ltd. (“Vector,” and collectively, with its consolidated subsidiaries, “Parent”) and comprised of the operations of DER Holdings LLC and New Valley Ventures LLC (“New Valley Ventures”), directly and indirectly wholly-owned subsidiaries of Vector. DER Holdings LLC owns Douglas Elliman Realty, LLC and Douglas Elliman of California, Inc. New Valley Ventures consists of minority investments in innovative and cutting edge Property Technology companies (“PropTech”).

Vector plans to spin-off a newly formed entity, Douglas Elliman Inc. (“Douglas Elliman” or the “Company”) to its stockholders through a pro rata distribution of the Company’s stock to existing Vector stockholders. Douglas Elliman will own the real estate services and property technology business of Vector.

Douglas Elliman is amongst the largest residential brokerage companies in the New York metropolitan area and the sixth largest in the U.S. Douglas Elliman has approximately 100 offices with approximately 6,600 real estate agents in the New York metropolitan area as well as in Florida, California, Connecticut, Massachusetts, Colorado, New Jersey, and Texas. In August 2021, Douglas Elliman increased its ownership in Douglas Elliman Texas from 1% to 50%.

Douglas Elliman’s combined consolidated results of operations, financial position and cash flows may not be indicative of its future performance and do not necessarily reflect what its combined consolidated results of operations, financial position and cash flows would have been had Douglas Elliman operated as a separate, stand-alone entity during the periods presented, including changes in its operations and capitalization as a result of the separation and distribution from Vector.

Prior to December 31, 2018, DER Holdings LLC owned a 70.59% interest in Douglas Elliman Realty, LLC. On December 31, 2018, DER Holdings LLC acquired the remaining 29.41% interest in Douglas Elliman for a total purchase price of $40,000, which included $10,000 of cash paid by Parent and the remaining $30,000 of notes payable to the sellers. The principal and interest on the notes are payable quarterly ending on October 1, 2022. The transaction increased DER Holdings LLC’s indirect ownership interest in Douglas Elliman Realty, LLC to 100%.

(b)

Basis of Presentation:

The accompanying combined consolidated financial statements include the accounts and transactions of Douglas Elliman, as well as the entities in which Douglas Elliman directly or indirectly has a controlling financial interest. The accompanying combined consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

F-32

Douglas Elliman’s combined consolidated financial statements include certain indirect general and administrative costs allocated to it by Parent for certain functions and services including, but not limited to, executive office, finance and other administrative support. These expenses have been allocated to Douglas Elliman on the basis of direct usage, when identifiable, or a management fee of $500 per quarter, which was charged from January 1, 2018 to March 31, 2020. The management fee was suspended in connection with the impact of the COVID-19 pandemic.

In presenting the combined consolidated financial statements, management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates.

(c)

Principles of Consolidation:

The combined consolidated financial statements presented herein have been prepared on a stand-alone basis and are derived from the consolidated financial statements and accounting records of Vector. The combined consolidated financial statements include DER Holdings LLC’s and New Valley Ventures’s assets, liabilities, revenues, expenses and cash flows and all entities in which Douglas Elliman has a controlling financial interest. All intercompany balances and transactions have been eliminated in the combined consolidated financial statements.

(d)

Parent’s Net Investment:

The Parent’s net investment in the combined consolidated balance sheets represents Vector’s historical net investment in Douglas Elliman resulting from various transactions with and allocations from the Parent. Balances due to and due from the Parent and accumulated earnings attributable to Douglas Elliman operations have been presented as components of Parent investment.

(e)

Segments:

(f)

Estimates and Assumptions:

F-33

(g)

Cash and Cash Equivalents:

(h)

Reconciliation of Cash, Cash Equivalents and Restricted Cash:

The components of “Cash, cash equivalents and restricted cash” in the combined consolidated statements of cash flows were as follows:


	December 31, 2020		December 31, 2019
Cash and cash equivalents	$	94,421	$	71,485
Restricted cash and cash equivalents		10,374		4,423
Restricted cash and cash equivalents included in other assets		1,907		3,160

Total cash, cash equivalents, and restricted cash shown in the combined consolidated statements of cash flows	$	106,702	$	79,068

(i)

Investment Securities:

The Company classifies investments in debt securities as trading. Investments classified as trading are carried at fair value, with changes in fair value recognized in net income. Gains and losses are recognized when realized in the Company’s combined consolidated statements of operations. The cost of securities sold is determined based on average cost.

(j)

Significant Concentrations of Credit Risk:

(k)

Receivables:

Receivables consist of commissions earned on sales transactions which closed prior to the Company’s year-end but for which the related commissions have not yet been received. The Company provides an allowance for potential losses on uncollectible receivables based principally on the specific identification method. There are no allowances for bad debt for commission receivables as of December 31, 2020 and 2019. Uncollectible accounts are written off when the likelihood of collection is remote and when collection efforts have been abandoned.

F-34

(l)

Property, Plant and Equipment:

(m)

Investments accounted for under the equity-method of accounting:

In accounting for its equity-method investments, the Company identified its participation in VIEs, which are defined as (a) entities in which the equity investment at risk is not sufficient to finance its activities without additional subordinated financial support; (b) as a group, the equity investors at risk lack 1) the power to direct the activities of a legal entity that most significantly impact the entity’s economic performance, 2) the obligation to absorb the expected losses of the entity, or 3) the right to receive the expected residual returns of the entity; or (c) as a group, the equity investors have voting rights that are not proportionate to their economic interests and the entity’s activities involve or are conducted on behalf of an investor with a disproportionately small voting interest.

On a quarterly basis, the Company evaluates its equity-method investments to determine if there are indicators of impairment. If so, the Company further investigates to determine if an impairment has occurred and whether such impairment is considered temporary or other than temporary. The Company believes that the assessment of temporary or other-than-temporary impairment is facts-and-circumstances driven.

(n)

Goodwill and Other Intangible Assets:

F-35

subsequent updates including ASU 2011-08, Testing Goodwill for Impairment and ASU 2017-14, Simplifying the Test for Goodwill Impairment. The amendments permit entities to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying value or chooses to bypass the optional qualitative assessment, the Company would then assess recoverability by comparing the fair value of the reporting unit to its carrying amount; otherwise, no further impairment test would be required. The fair value of the intangible asset associated with the Douglas Elliman trademark is determined using a “relief from royalty payments” method. This approach involves two steps: (i) estimating reasonable royalty rates for its trademark associated with the Douglas Elliman trademark and (ii) applying these royalty rates to a net sales stream and discounting the resulting cash flows to determine fair value. This fair value is then compared with the carrying value of the trademark. As discussed in Note 6 to the Company’s combined consolidated financial statements, during the first quarter of 2020, the Company performed quantitative assessments of its goodwill and its trademark intangible asset in conjunction with its quarterly review for indicators of impairment. The quantitative assessments resulted in impairment charges to goodwill of $46,252 and to the trademark intangible asset of $12,000. The Company performed a qualitative assessment for the year ended December 31, 2020, which did not result in additional impairment charges related to its goodwill or trademark.

(o)

Impairment of Long-Lived Assets:

Additionally, the Company performs impairment reviews on its long-term investments that are classified as equity securities without readily determinable fair values that do not qualify for the net asset value (“NAV”) practical expedient. On a quarterly basis, the Company evaluates the investments to determine if there are indicators of impairment. If so, a determination is made of whether there is an impairment and if it is considered temporary or other than temporary. The assessment of temporary or other-than-temporary impairment is facts-and-circumstances driven. The impairment indicators that are taken into consideration as part of the analysis include (a) a significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee, (b) a significant adverse change in the regulatory, economic, or technological environment of the investee, (c) a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates, and (d) factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements.

F-36

(p)

Leases:

The Company has lease agreements with lease and non-lease components; the Company has elected the accounting policy to combine lease and non-lease components for all underlying asset classes.

(q)

Income Taxes:

(r)

Contingencies:

The Company and its subsidiaries record provisions in its combined consolidated financial statements for pending litigation when they determine that an unfavorable outcome is probable and the amount of loss can be reasonably estimated.

(s)

Revenue:

F-37

and recognized as agent commission expenses concurrently with related revenues. The accounting for these commissions and other brokerage income under Topic 606 is largely consistent with the previous accounting for these transactions under Topic 605, except for customer arrangements in the development marketing business and extended payments terms that exist in some commercial leasing contracts.

Ancillary services: Ancillary services revenue earned by the Company related primarily to title and escrow services. These services are recognized as revenue when the real estate sale is completed, which is the point in time that the performance obligation is satisfied.

See Note 2 — Revenue Recognition for additional information.

(t)

Real estate agent commissions:

(u)

Sales and marketing expenses:

Real estate advertising costs, which are expensed as incurred and included within sales and marketing expenses, were $18,875, $22,917 and $23,424 for the years ended December 31, 2020 and 2019 and 2018, respectively.

(v)

Operations and support expenses:

(w)

General and administrative expenses:

General and administrative expenses consists primarily of compensation and other personnel-related costs for executive management and administrative employees, including finance and accounting, legal, human resources and communications, the occupancy costs for its headquarters and other offices supporting its administrative functions, and transition services paid to its parent, Vector, for the use of office space and employees, professional services fees for legal and finance, insurance expenses and talent acquisition expenses.

(x)

Technology expenses:

Technology expenses consist primarily of compensation and other personnel-related costs for employees in the product, engineering and technology functions, website hosting expenses, software licenses and equipment, third-party consulting costs, data licenses of PropTech and other related expenses associated with the implementation of our technology initiatives.

F-38

(y)

Restructuring:

In response to COVID-19, the Company has commenced a restructuring by realigning its administrative support function and office locations as well as adjusting its business model to more efficiently serve its clients. This included a reduction of staff by approximately 25% at Douglas Elliman.

The following table summarizes amounts expensed for the year ended December 31, 2020:


	Year Ended December 31, 2020
Cash Charges:
Employee severance and benefits	$	1,875
Other restructuring expenses		293

		2,168
Non-Cash:
Loss on disposal of fixed assets associated with consolidation of sales offices		1,214

Total restructuring	$	3,382

All amounts expensed for the year ended December 31, 2020 are included as restructuring in the Company’s combined consolidated statements of operations.

Employee severance and benefits expensed for the year ended December 31, 2020 relate entirely to the reduction in staff.

The following table presents the activity under the restructuring plan for the year ended December 31, 2020:


	Employee Severance and Benefits			Other			Non-Cash Loss on Fixed Assets			Total
Accrual balance as of January 1, 2020	$	—		$	—		$	—		$	—
Restructuring		1,875			293			1,214			3,382
Utilized		(1,875	)		(293	)		(1,214	)		(3,382	)

Accrual balance as of December 31, 2020	$	—		$	—		$	—		$	—

(z)

Other Comprehensive Income:

The Company does not have any activity that results in Other Comprehensive Income, therefore no statement of Comprehensive Income is included in the combined consolidated financial statements.

(aa)

Subsequent Events:

The Company has evaluated subsequent events through August 24, 2021, the date the financial statements were issued.

(ab)

New Accounting Pronouncements:

Accounting Standards Updates (“ASU”) adopted in 2020:

In October 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. The

F-39

guidance requires indirect interests held through related parties under common control arrangements be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Adoption of this update did not have a material impact on the Company’s combined consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles — Goodwill and Other Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this update did not have a material impact on the Company’s combined consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which is designed to improve the effectiveness of disclosures by removing, modifying and adding disclosures related to fair value measurements. The ASU eliminates disclosures such as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. The ASU also adds new disclosure requirements for Level 3 measurements. ASU No. 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of ASU 2018-13 impacted financial statement disclosure and had no impact on operating results.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), sets forth a current expected credit loss model that changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. Subsequent updates were released in November 2018 (ASU No. 2018-19), November 2019 (ASU No. 2019-10 and 2019-11) and February 2020 (ASU No. 2020-02) that provided additional guidance on this Topic. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The ASU introduces a new accounting model, the Current Expected Credit Losses model (CECL), which requires earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for notes and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. This model replaced the previous impairment models in GAAP, which generally required that a loss be incurred before it is recognized. The new standard applies to receivables arising from revenue transactions such as contract assets and accounts receivables. See Note 3.

In January 2017, the FASB issued ASU 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount. Under the amendments of the ASU, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments in this update are effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. This guidance was adopted on January 1, 2020, on a prospective basis. The Company applied the new guidance to evaluate its goodwill during the first quarter of 2020. As a result, a goodwill impairment charge of $46,252 was recorded as the Company’s estimated fair value of a reporting unit was less than its book value.

F-40

ASUs to be adopted in future periods:

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This update simplifies various aspects related to accounting for income taxes, removes certain exceptions to the general principles in Accounting Standards Codification (“ASC”) 740, and clarifies and amends existing guidance to improve consistent application. ASU No. 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020. Early adoption is permitted. The Company believes the adoption of this update should not have a material impact on its combined consolidated financial statements and related disclosures.

In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”). The new standard clarifies the interaction of accounting for the transition into and out of the equity-method. The new standard also clarifies the accounting for measuring certain purchased options and forward contracts to acquire investments. The ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted, including early adoption in an interim period. The Company believes the adoption of this update should not have a material impact on its combined consolidated financial statements and related disclosures.

2.	REVENUE RECOGNITION

Revenue Recognition Policies

Revenue is measured based on consideration specified in a contract with a customer less any sales incentives. Revenue is recognized when (a) an enforceable contract with a customer exists, that has commercial substance, and collection of substantially all consideration for services is probable; and (b) the performance obligations to the customer are satisfied either over time or at a point in time.

Real estate sales: Real estate commissions earned by the Company’s real estate brokerage businesses are recognized as revenue when the real estate sale is completed or lease agreement is executed, which is the point in time that the performance obligation is satisfied. Any commission and other payments received in advance are deferred until the satisfaction of the performance obligation. Corresponding agent commission expenses, including any advance commission or other direct expense payments, are deferred and recognized as real estate agent commissions expense concurrently with related revenues.

The Company’s revenue contracts with customers do not have multiple material performance obligations to customers under Topic 606, except for contracts in the Company’s development marketing business. Contracts in the development marketing business provide the Company with the exclusive right to sell units in a subject property for a commission fee per unit sold calculated as a percentage of the sales price of each unit. Accordingly, a performance obligation exists for each unit in the development marketing property under contract, and a portion of the total contract transaction price is allocated to and recognized at the time each unit is sold. The Company applies the optional exemption in paragraph 606-10-50-14A of Topic 606, and does not disclose the amount of the transaction price allocated to the remaining performance obligations for the real estate development marketing business because the transaction prices in these contracts are comprised entirely of variable consideration based on the ultimate selling price of each unit in the subject property. The total contract transaction price is allocated to each unit in the subject property and recognized when the performance obligation, i.e. the sale of each unit, is satisfied. Accordingly, the transaction price allocated to the remaining performance obligations for the development marketing business represents variable consideration allocated entirely to wholly unsatisfied performance obligations.

F-41

Development marketing service arrangements also include direct fulfillment costs incurred in advance of the satisfaction of the performance obligation. The Company capitalizes costs incurred in fulfilling a contract with a customer if the fulfillment costs 1) relate directly to an existing contract or anticipated contract, 2) generate or enhance resources that will be used to satisfy performance obligations in the future, and 3) are expected to be recovered. These costs are amortized over the estimated customer relationship period which is the contract term. The Company uses an amortization method that is consistent with the pattern of transfer of goods or services to its customers by allocating these costs to each unit in the subject property and expensing these costs as each unit sold is closed over the contract.

Commission revenue is recognized at the time the performance obligation is met for commercial leasing contracts, which is when the lease agreement is executed, as there are no further performance obligations, including any amounts of future payments under extended payment terms.

Property management revenue arrangements consist of providing operational and administrative services to manage a subject property. Fees for these services are typically billed and collected monthly. Property management service fees are recognized as revenue over time using the output method as the performance obligations under the customer arrangement are satisfied each month. The Company applies the optional exemption in paragraph 606-10-50-14 of Topic 606, and does not disclose the amount of the transaction price allocated to the remaining performance obligations for the Real Estate property management business because the contracts to provide property management services are typically annual contracts and provide cancellation rights to customers.

Title insurance commission fee revenue is earned when the sale of the title insurance policy is completed, which corresponds to the point in time when the underlying real estate sale is completed, which is when the performance obligation is satisfied. Escrow commission fee revenue is recorded at a point in time which occurs at the time a home sale transaction or refinancing closes.

Disaggregation of Revenue

In the following table, revenue is disaggregated by major services line and primary geographical market:


	Year Ended December 31, 2020
	Total		New York City		Northeast		Southeast		West
Revenues:
Commission and other brokerage income — existing home sales	$	686,389	$	186,229	$	204,814	$	160,404	$	134,942
Commission and other brokerage income — development marketing		47,362		24,590		—		22,081		691
Property management revenue		35,115		34,209		906		—		—
Title fees		5,121		2,047		1,717		—		1,357

Total revenue	$	773,987	$	247,075	$	207,437	$	182,485	$	136,990

F-42


	Year Ended December 31, 2019
	Total		New York City		Northeast		Southeast		West
Revenues:
Commission and other brokerage income — existing home sales	$	669,489	$	293,009	$	164,724	$	106,587	$	105,169
Commission and other brokerage income — development marketing		72,925		48,850		—		19,594		4,481
Property management revenue		35,461		34,741		720		—		—
Title fees		6,233		—		6,233		—		—

Total revenue	$	784,108	$	376,600	$	171,677	$	126,181	$	109,650


	Year Ended December 31, 2018
	Total		New York City		Northeast		Southeast		West
Revenues:
Commission and other brokerage income — existing home sales	$	651,171	$	285,325	$	166,100	$	99,720	$	100,026
Commission and other brokerage income — development marketing		64,287		48,072		252		15,068		895
Property management revenue		33,350		32,635		715		—		—
Title fees		5,281		—		5,281		—		—

Total revenue	$	754,089	$	366,032	$	172,348	$	114,788	$	100,921

Contract Balances

The following table provides information about contract assets and contract liabilities from development marketing and commercial leasing contracts with customers:


	December 31, 2020		December 31, 2019
Receivables, which are included in receivables	$	1,520	$	2,129
Contract assets, net, which are included in other current assets		6,529		8,766
Payables, which are included in commissions payable		1,113		1,663
Contract liabilities, current		7,633		9,358
Contract assets, net		24,002		18,443
Contract liabilities		32,104		29,045

Receivables and payables relate to commission receivables and commissions payable from the commercial leasing contracts for which the performance obligation has been satisfied, have extended payment terms and are expected to be received and paid in the next twelve months. Receivables decreased $609 for the twelve-month period ended December 31, 2020 primarily due to cash collections of $1,911 offset by revenue accrued as performance obligations are satisfied. Correspondingly, payables declined by $550 primarily due to cash payments of $1,398 offset by additional expense accruals as performance obligations are satisfied.

Contract assets increased by $3,322 during the year ended December 31, 2020 due to $21,067 of payments made for direct fulfillment costs incurred in advance of the satisfaction of the performance obligations for Real Estate development marketing contracts, offset by costs recognized for units closed during the quarter.

F-43

Contract liabilities relate to payments received in advance of the performance obligations being satisfied under the Real Estate development marketing contracts and are recognized as revenue at the points in time when the Company performs under the contracts. Performance obligations related to the real estate development marketing contracts are considered satisfied when each unit is closed. Development marketing projects tend to span four to six years from the time the Company enters into the contract with the developer to the time that all of the sales of the units in a subject property are closed. The timing for sales closings are dependent upon several external factors outside the Company’s control, including but not limited to, economic factors, seller and buyer actions, construction timing and other real estate market factors. Accordingly, all contract liabilities and contract costs associated with development marketing are considered long-term until closing dates for unit sales are scheduled. As of December 31, 2020, the Company estimates approximately $7,633 of contract liabilities will be recognized as revenue within the next twelve months.

Contract liabilities increased by $1,334 during the year ended December 31, 2020 due to $24,821 of advance payments received from customer prior to the satisfaction of performance obligations for real estate development marketing contracts, offset by revenue recognized for units sold during the year. The Company recognized revenue of $8,846 for the year ended December 31, 2020 that were included in the contract liabilities balances at December 31, 2019. The Company recognized revenue of $14,973 for the year ended December 31, 2019 that were included in the contract balances at December 31, 2018. The Company recognized revenue of $12,135 for the year ended December 31, 2018 that were included in the contract balances at January 1, 2018.

Topic 606 requires an entity to disclose the revenue recognized in the reporting period from performance obligations satisfied (or partially satisfied) in previous periods (for example, due to changes in transaction price). There were no revenues recognized relating to performance obligations satisfied or partially satisfied in prior periods for the years ended December 31, 2020, 2019 and 2018, respectively.

3.	CURRENT EXPECTED CREDIT LOSSES

On January 1, 2020, the Company adopted ASU No. 2016-13, which sets forth a current expected credit loss model that changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

ASU 2016-13 introduces a new accounting model, the Current Expected Credit Losses model (“CECL”), which requires earlier recognition of credit losses and additional disclosures related to credit risk. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. The Company adopted this guidance using the modified retrospective approach, as required, and has not adjusted prior period comparative information and will continue to disclose the prior period financial information in accordance with the previous guidance. The adoption of this standard did not result in adjustment to expected credit losses on receivables as of January 1, 2020.

Real estate broker agent receivables: The Company is exposed to credit losses for various amounts due from real estate agents, which are included in current assets on the combined consolidated balance sheets, net of an allowance for credit losses. The Company historically estimated its allowance for credit losses on receivables from agents based on an evaluation of aging, agent sales in pipeline, any security, specific exposures, and historical experience of collections from the individual agents. Based on the Company’s historical credit losses on receivables from agents, current and expected future market trends (such as the current and expected impact of COVID-19 on the real estate market), the requirements of ASU No. 2016-13 did not result in a material impact on the Company’s allowance for credit losses on real estate broker agent receivables as of January 1, 2020 of $6,132. The Company estimated that the credit losses for these receivables were $7,038 at December 31, 2020.

F-44

The following is the rollforward of the allowance for credit losses for the year ended December 31, 2020:


	January 1, 2020		Current Period Provision			Write-offs		Recoveries		December 31, 2020
Allowance for credit losses:
Real estate broker agent receivables	$	6,132	$	1,460	⁽¹⁾	$	554	$	—	$	7,038

(1)	The bad debt expense related to the real estate broker agent receivables was included in General and administrative expenses on the combined consolidated statements of operations.

4.	LEASES

Leasing Accounting Pronouncement Adoption

On January 1, 2019, the Company adopted ASU No. 2016-02 — Leases (Topic 842) applying the modified retrospective method and the option presented under ASU 2018-11 to transition only active leases as of January 1, 2019 with a cumulative effect adjustment as of that date. All comparative periods prior to January 1, 2019 retain the financial reporting and disclosure requirements of ASC 840, Leases. The Company elected the package of practical expedients permitted under the transition guidance within the new standard. The package of three expedients includes: 1) the ability to carry forward the historical lease classification, 2) the elimination of the requirement to reassess whether existing or expired agreements contain leases, and 3) the elimination of the requirement to reassess initial direct costs. The Company also elected the practical expedient related to short-term leases without purchase options reasonably certain to exercise, allowing it to exclude leases with terms of less than 12 months from capitalization for all asset classes. The Company did not elect the hindsight practical expedient when determining the lease terms. The adoption of the new standard resulted in the recording of ROU assets and lease liabilities of $114,282 and $137,820, respectively, as of January 1, 2019. The difference between the ROU assets and lease liabilities reflects the reclassification of historical deferred rent balances of approximately $21,988 and an adjustment that increased Parent’s net investment by $1,508 to recognize the impairment in ROU assets for asset groups previously identified as being impaired. The standard did not materially impact the Company’s combined consolidated net earnings and had no impact on cash flows. The new standard had no material impact on liquidity.

Leases

The Company has operating leases for corporate and sales offices, and certain equipment. The leases have remaining lease terms of one year to 12 years, some of which include options to extend for up to five years, and some of which include options to terminate the leases within one year. However, the Company in general is not reasonably certain to exercise options to renew or terminate, and therefore renewal and termination options are not considered in the lease term or the ROU asset and lease liability balances. The Company’s lease population does not include any residual value guarantees. The Company’s lease population does not contain any material restrictive covenants.

The Company has leases with variable payments, most commonly in the form of Common Area Maintenance (“CAM”) and tax charges which are based on actual costs incurred. These variable payments were excluded from the ROU asset and lease liability balances since they are not fixed or in-substance fixed payments. Variable payments are expensed as incurred.

F-45

The components of lease expense were as follows:


	Year Ended December 31,
	2020		2019
Operating lease cost	$	32,926	$	33,180
Short-term lease cost		912		1,042
Variable lease cost		3,552		4,209

Total lease cost	$	37,390	$	38,431

Supplemental cash flow information related to leases was as follows:


	Year Ended December 31,
	2020		2019
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	22,201	$	33,366
ROU assets obtained in exchange for lease obligations:
Operating leases		12,977		39,875

Supplemental balance sheet information related to leases was as follows:


	December 31, 2020			December 31, 2019
Weighted average remaining lease term in years:
Operating leases		8.18			8.78
Weighted average discount rate:
Operating leases		9.18	%		10.76	%

As of December 31, 2020, maturities of lease liabilities were as follows:


	Operating Leases
Year Ending December 31:
2021	$	38,560
2022		33,916
2023		29,740
2024		24,177
2025		20,022
Thereafter		96,411

Total lease payments		242,826
Less imputed interest		(75,777	)

Total	$	167,049

The Company’s rental expense for the year ended December 31, 2018, in accordance with ASC 840, Leases was $34,621.

Due to the business disruptions and challenges severely affecting the global economy caused by the COVID-19 pandemic, lessors may provide rent deferrals and other lease concessions to lessees. While the lease modification guidance in Topic 842 addresses routine changes to lease terms resulting from negotiations between the lessee and the lessor, this guidance does not contemplate concessions being so rapidly executed to address the sudden liquidity constraints of some lessees arising from the COVID-19 pandemic and restrictions intended to prevent its spread.

F-46

In April 2020, the FASB staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows the Company, if certain criteria have been met, to bypass the lease by lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances.

As a result of the COVID-19 pandemic, the Company received lease concessions from landlords mostly in the form of rent deferrals and a few in the form of rent abatements during the year ended December 31, 2020. The Company elected to treat these deferrals and abatements as lease modifications and the existing lease liabilities were remeasured with a corresponding adjustment to the right-of-use asset on the effective date of the modification. The deferrals varied as to the timing of repayment and all agreements required repayment of the deferrals over the remaining lease terms.

5.	PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of:


	December 31, 2020			December 31, 2019
Machinery and equipment	$	38,038		$	40,273
Leasehold improvements		52,167			50,384

		90,205			90,657
Less accumulated depreciation and amortization		(47,502	)		(42,738	)

	$	42,703		$	47,919

Depreciation and amortization expense for the years ended December 31, 2020, 2019, and 2018 was $8,373, $8,456, and $7,558 respectively.

6.	EQUITY METHOD INVESTMENTS

Equity-method investments consisted of the following:


	December 31, 2020		December 31, 2019
Ancillary services ventures	$	1,412	$	1,667

At December 31, 2020 and 2019, the Company’s ownership percentage in the investment accounted for under the equity method was 17%. The Company’s ownership percentage in this investment meets the threshold for equity-method accounting. The Company made contributions of $1,667 for the year ended December 31, 2019. This contribution was made into a new investment. The Company received distributions of $30, $10,631 and $600 from its equity method investments for the years ended December 31, 2020, 2019 and 2018, respectively. Of the distributions received by the Company from its equity method investments, $8,617 for the year ended December 31, 2019 was a return of capital, while the remaining were distributions of earnings. Distributions from earnings are included in cash from operations in the combined consolidated statements of cash flows, while distributions that are returns of capital are included in cash flows from investing activities in the combined consolidated statements of cash flows.

F-47

The Company recognized equity in loss from equity-method investments of $225 for the year ended December 31, 2020 and equity in earnings from equity-method investments of $8,472 and $1,243 for the years ended December 31, 2019 and 2018, respectively. On November 1, 2019, the Company sold its 50.0% interest in Innova Risk Management, an insurance brokerage company. The components of equity in earnings of $8,472 related to the sale were $7,117 of gain on sale of the investment and $1,355 of the Company’s share of earnings. The Company received $8,732 in cash in November 2019 and may receive an additional $1,000 in a potential earn out over a two-year period that started on January 1, 2020.

VIE Consideration

Maximum Exposure to Loss

7.	GOODWILL AND OTHER INTANGIBLE ASSETS

The components of Goodwill and other intangible assets, net were as follows:


	December 31, 2019		Impairment Losses			Amortization			December 31, 2020
Goodwill	$	78,008	$	(46,252	)	$	—		$	31,756
Indefinite life intangibles:
Trademark — Douglas Elliman		80,000		(12,000	)		—			68,000
Intangibles with a finite life, net		474		—			(164	)		310

Total goodwill and other intangible assets, net	$	158,482	$	(58,252	)	$	(164	)	$	100,066


	December 31, 2018		Acquisition		Adjustments			Amortization			December 31, 2019
Goodwill	$	77,568	$	440	$	—		$	—		$	78,008
Indefinite life intangibles:
Trademark — Douglas Elliman		80,000		—		—			—			80,000
Intangibles with a finite life, net		1,532		229		(1,105	)⁽¹⁾		(182	)		474

Total goodwill and other intangible assets, net	$	159,100	$	669	$	(1,105	)	$	(182	)	$	158,482

(1)	Represents the removal of intangibles associated with favorable leases as a result of the adoption of Topic 842, Leases.

F-48

other things, unexpected adverse business conditions, macro and reporting unit specific economic factors (for example, interest rate and foreign exchange rate fluctuations, and loss of key personnel), supply costs, unanticipated competitive activities, and acts by governments and courts.

During the first quarter of 2020, the Company determined that a triggering event occurred related to the Douglas Elliman reporting unit due to a decline in sales and profitability projections for the reporting unit driven by the COVID-19 pandemic and related economic disruption. The Company utilized third-party valuation specialists to prepare a quantitative assessment of goodwill and trademark intangible asset related to Douglas Elliman.

The third-party quantitative assessments of the goodwill and trademark intangible asset reflected management’s assumptions regarding revenue growth rates, economic and market trends including current expectations of deterioration resulting from the COVID-19 pandemic, changes to cost structures and other expectations about the anticipated short-term and long-term operating results of Douglas Elliman. The quantitative assessments resulted in impairment charges to goodwill of $46,252 and to the trademark intangible asset of $12,000 for the year ended December 31, 2020. The Company had accumulated impairment charges to goodwill of $46,252 and to the trademark intangible asset of $12,000 as of December 31, 2020.

The Company performed its impairment test for the year ended December 31, 2020, which did not result in additional impairment charges related to the Company’s goodwill. If the Company fails to achieve the financial projections used in the quantitative assessments of fair value or the impacts of COVID-19 are more severe than expected, additional impairment charges could result in future periods, and such impairment charges could be material.

Other intangible assets assumed were as follows:


	Useful Lives in Years		December 31, 2020			December 31, 2019
Trademark — Douglas Elliman		Indefinite	$	68,000		$	80,000

Other intangibles		1—5		4,689			4,689

				4,689			4,689
Less: Accumulated amortization on amortizable intangibles				(4,379	)		(4,215	)

Other intangibles, net			$	310		$	474

The trademark intangible has been attributed to the acquisition of the Douglas Elliman brand name which the Company plans to continue using for the foreseeable future. The fair value of the intangible asset associated with the Douglas Elliman trademark is determined using a “relief from royalty payments” method. This approach involves two steps: (i) estimating reasonable royalty rates for its Douglas Elliman trademark and (ii) applying these royalty rates to a net sales stream and discounting the resulting cash flows to determine fair value. This fair value is then compared with the carrying value of the trademark. The Company performed its impairment test for the year ended December 31, 2020, which did not result in additional impairment charges related to the Company’s trademark. If the Company fails to achieve the financial projections used in the quantitative assessments of fair value or the impacts of COVID-19 are more severe than expected, additional impairment charges could result in future periods, and such impairment charges could be material.

F-49

As of December 31, 2020, other intangibles with finite lives included non-compete agreements recognized in prior business combinations. Other intangibles in prior periods included backlog and listing inventory for Development sales, and favorable and unfavorable leases arising from leases with terms that are less than or greater than market value assumed in the business combination.

For the years ended December 31, 2020, 2019, and 2018, respectively, amortization of other intangibles was $164, $182 and $806. For the year ended December 31, 2018, $1,175 was taken as rent expense for amortization of favorable leases, and $369 was taken as an offset to rent expense for amortization of unfavorable leases. The Company did not recognize rent expense for amortization of favorable or unfavorable leases in 2020 or 2019 due to the adoption of ASU 2016-02 — Leases (Topic 842) in 2019.

8.	NOTES PAYABLE AND OTHER OBLIGATIONS

Notes payable and other obligations consisted of:


	December 31, 2020			December 31, 2019
Notes payable		25,000			30,000
Other		420			63

Total notes payable and other obligations		25,420			30,063
Less:
Current maturities		(12,500	)		(10,063	)

Amount due after one year	$	12,920		$	20,000

Notes Payable:

Notes payable consist of $25,000 of notes payable issued by DER Holdings LLC. On December 31, 2018, DER Holdings LLC acquired the remaining 29.41% interest in Douglas Elliman for a total purchase price of $40,000, which included $10,000 of cash paid by Parent and the remaining $30,000 of notes payable to the sellers. Interest on the outstanding principal balance of the notes accrued at the mid-term applicable federal rate (“AFR”) in effect as of December 31, 2018. This interest rate was adjusted to the then-current AFR on January 1, 2020 and on each payment date thereafter. Vector, on behalf of DER Holdings LLC, commenced paying principal and interest in installments beginning with January 1, 2020 and with the final payment due on October 1, 2022. Principal of $5,000 has been repaid through December 31, 2020 and the remaining principal is due to be repaid as follows: $12,500 in 2021, and $12,500 in 2022.

Fair Value of Notes Payable and Other Obligations:

The estimated fair value of the Company’s notes payable and other obligations were as follows:


	December 31, 2020				December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Notes payable	$	25,000	$	25,000	$	30,000	$	30,000
Other		420		420		63		63

Notes payable and other obligations	$	25,420	$	25,420	$	30,063	$	30,063

Notes payable and other obligations are carried on the combined consolidated balance sheets at amortized cost. The fair value determinations disclosed above would be classified as Level 2 under the fair value hierarchy disclosed in Note 14 if such liabilities were recorded on the combined consolidated balance sheets at fair value.

F-50

The estimated fair value of the Company’s notes payable and other obligations has been determined by the Company using available information. However, considerable judgment is required to develop the estimates of fair value and, accordingly, the estimate presented herein is not necessarily indicative of the amount that could be realized in a current market exchange.

Scheduled Maturities:

Scheduled maturities of notes payable and other obligations were as follows:


	Principal
Year Ending December 31:
2021	$	12,500
2022		12,920
2023		—
2024		—
2025		—
Thereafter		—

Total	$	25,420

9.	EMPLOYEE BENEFIT PLANS

Profit Sharing and 401(k) Plans:

Douglas Elliman Realty, LLC maintains two 401(k) plans for substantially all of its U.S. employees which allow eligible employees to invest a percentage of their pre-tax compensation. Douglas Elliman Realty, LLC contributed to the 401(k) plans and expensed $370, $583, $418 and for the years ended December 31, 2020, 2019, and 2018, respectively.

10.

INCOME TAXES

The carve-out financial statements of Douglas Elliman Inc. include the tax accounts of the following entities: (i) DER Holdings LLC, the parent of Douglas Elliman Realty LLC, is a single-member limited liability company that is a disregarded entity for U.S. income tax purposes, (ii) Douglas Elliman Realty LLC is a limited liability company that files as a partnership for U.S. income tax purposes, (iii) Douglas Elliman of California, Inc. is a corporation that reported on a separate company basis until February 28, 2019 and thereafter elected to become a consolidated subsidiary included in the Parent’s consolidated U.S. income tax return, (iv) DER Holdings II LLC, a subsidiary of DER Holdings LLC, which has elected to be taxed as corporation for U.S. income tax purposes, and (v) New Valley Ventures LLC, NV Mortgage LLC and NV Title LLC, which are single member limited liability companies that are treated as disregarded entities for U.S. income tax purposes.

The Company calculated its provision for income taxes by using a separate-return method and has elected not to allocate tax expense to single-member limited liability companies or partnerships that did not incur income tax liability because they are not severally liable for the taxes of their owners. Douglas Elliman of California, Inc. and DER Holdings II Inc. are the only two entities taxed as a corporation for U.S. Income Tax purposes while the remaining entities are pass through entities for federal income tax purposes. Therefore, no income tax expense has been allocated to DER Holdings LLC, New Valley Ventures LLC, NV Mortgage LLC or NV Title LLC and income tax expense has been allocated to DER Holdings II LLC, Douglas Elliman of California, Inc. and, for purposes of New York City UBT only, Douglas Elliman Realty, LLC.

F-51

The amounts provided for income taxes were as follows:


	Year Ended December 31,
	2020			2019			2018
Current:
U.S. Federal	$	(20	)	$	(179	)	$	213
State and local		(14	)		308			470

		(34	)		129			683

Deferred:
U.S. Federal		56			169			(213	)
State and local		22			56			(70	)

		78			225			(283	)

Total	$	44		$	354		$	400

Douglas Elliman of California, Inc. has historically reported net operating losses since its incorporation. Consequently, management has assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2020 for Douglas Elliman of California, Inc. Further, such objective evidence limits the ability to consider other subjective evidence, such as its projections for future growth.

On the basis of this evaluation, as of December 31, 2020, a valuation allowance of $7,231 has been recorded to recognize only the portion of the deferred tax assets that were more likely than not to be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.

The tax effect of temporary differences which give rise to a significant portion of deferred tax assets and liabilities is as follows:


	December 31, 2020			December 31, 2019
Deferred tax assets:
Various U.S. federal and state tax loss carryforwards	$	7,297		$	5,599
Operating lease liabilities		6,344			6,937
Current expected credit losses		169			169
Other		2			2

		13,812			12,707
Less: Valuation allowance		(7,231	)		(5,590	)

Net deferred tax assets	$	6,581		$	7,117

Deferred tax liabilities:
Basis differences on fixed and intangible assets	$	(519	)	$	(519	)
Basis differences on prepaid assets		(186	)		(186	)
Revenue recognition		(108	)		(108	)
Basis differences on acquisition		(379	)		(277	)
Operating lease right of use assets		(5,532	)		(6,304	)

	$	(6,724	)	$	(7,394	)

Net deferred tax liabilities	$	(143	)	$	(277	)

F-52

The Company’s subsidiary, Douglas Elliman of California, Inc., files a consolidated U.S. income tax return that includes its wholly-owned U.S. subsidiaries. Stand alone subsidiaries had tax-effected federal and state and local net operating loss (“NOL”) carryforwards of $39,296 at December 31, 2020 and 2019, respectively, with $29,630 expiring through tax year 2029 and the remaining carried forward indefinitely. The Company records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company had valuation allowances of $7,231 and $5,590 at December 31, 2020 and 2019, respectively. The valuation allowances at December 31, 2020 and 2019 related to federal and state net operating loss carryforwards and the deferred tax assets of Douglas Elliman of California, Inc. prior to March 1, 2019, which are limited for use in the future to the extent of the taxable income of Douglas Elliman of California, Inc. under the “Separate Return Limitation Year” rules of Internal Revenue Code Section 381.

The combined consolidated balance sheets of the Company include deferred income tax assets and liabilities, which represent temporary differences in the application of accounting rules established by GAAP and income tax laws.

Differences between the amounts provided for income taxes and amounts computed at the federal statutory tax rate are summarized as follows:


	Year Ended December 31,
	2020			2019			2018
(Loss) income before provision for income taxes	$	(46,328	)	$	8,813		$	5,597

Federal income tax (benefit) expense at statutory rate		(9,729	)		1,851			1,175
Less Federal income tax benefit (expense) attributable to pass through entities		7,915			(2,654	)		(2,871	)
(Decreases) increases resulting from:
State income taxes, net of federal income tax benefits		(418	)		100			(164	)
Non-deductible expenses		568			—			—
Change in valuation allowance		1,708			1,057			2,260

Income tax expense	$	44		$	354		$	400

The Company’s income tax expense is principally attributable to the Company’s federal and state income taxes based on the Company’s earnings.

The Company files U.S. and state and local income tax returns in jurisdictions with varying statutes of limitations. Liabilities for uncertain tax positions reflected as of December 31, 2020 and 2019 were not significant and it is not anticipated that they will materially change in the next 12 months. Douglas Elliman Realty, LLC received notice of an IRS audit for its 2018 tax return. Although the outcome of tax audits is always uncertain, Douglas Elliman Realty, LLC believes that its tax positions will generally be sustained under audit.

11.

CONTINGENCIES

F-53

12.

SUPPLEMENTAL CASH FLOW INFORMATION


	Year Ended December 31,
	2020		2019		2018
Cash paid during the period for:
Interest	$	1	$	8	$	53
Income taxes, net		—		—		511
Non-cash investing and financing activities:
Transfer from Parent, net		5,679		—		9,776
Decrease in non-controlling interest related to purchase of subsidiary		—		—		(73,953	)
Notes payable issued for purchase of subsidiary		—		—		30,000
Contingent consideration related to purchase of subsidiary		—		—		6,304
Net receivable from purchase of subsidiary		—		—		(497	)

13.

RELATED PARTY TRANSACTIONS

The Company has been engaged by the developers as the sole broker or the co-broker for several of Vector’s subsidiaries’ real estate development projects that New Valley owns an interest in through its real estate venture investments. The Company had gross commissions of approximately $10,783, $18,952, and $20,118 from these projects for the years ended December 31, 2020, 2019, and 2018, respectively.

A son of the Company’s President and Chief Executive Officer is an associate broker with the Company and he received commissions and other payments of $870, $712 and $318, respectively, in accordance with brokerage activities in 2020, 2019 and 2018, respectively.

14.

INVESTMENTS AND FAIR VALUE MEASUREMENTS

The Company’s financial assets and liabilities subject to fair value measurements were as follows:


	Fair Value Measurements as of December 31, 2020
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds ⁽¹⁾	$	61,199	$	61,199	$	—	$	—
Certificates of deposit ⁽²⁾		569		—		569		—
Long-term investments included in Other assets
Long-term investment securities at fair value ⁽³⁾		237		—		—		—

Total	$	62,005	$	61,199	$	569	$	—

Liabilities:
Fair value of contingent liability	$	999	$	—	$	—	$	999

Total	$	999	$	—	$	—	$	999

(1)	Amounts included in Cash and cash equivalents on the combined consolidated balance sheets, except for $10,374 that is included in current restricted assets and $1,907 that is included in non-current restricted assets.

F-54

(2)	Amounts included in current restricted assets and non-current restricted assets on the combined consolidated balance sheets.

(3)	In accordance with Subtopic 820-10, investments that are measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy.


	Fair Value Measurements as of December 31, 2019
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds⁽¹⁾	$	68,736	$	68,736	$	—	$	—
Certificates of deposit ⁽²⁾		569		—		569		—

Total	$	69,305	$	68,736	$	569	$	—

Liabilities:
Fair value of contingent liability	$	3,147	$	—	$	—	$	3,147

Total	$	3,147	$	—	$	—	$	3,147

(1)	Amounts included in Cash and cash equivalents on the combined consolidated balance sheets, except for $4,423 that is included in current restricted assets and $3,160 that is included in non-current restricted assets.

(2)	Amounts included in current restricted assets and non-current restricted assets on the combined consolidated balance sheets.

The contingent liability is recorded within “Other liabilities” in the combined consolidated balance sheets, and any change in fair value will be recorded in “Other, net” within the combined consolidated statements of operations. The value of the contingent liability is calculated using the outstanding payable owed to the sellers and the estimated fair value of Douglas Elliman Realty, LLC. The liability is contingent upon the sale of a controlling interest in Douglas Elliman Realty, LLC by the Company prior to October 1, 2022.

F-55

The unobservable inputs related to the valuations of the Level 3 assets and liabilities were as follows at December 31, 2020:


	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at December 31, 2020		Valuation Technique	Unobservable Input	Range (Actual)
Fair value of contingent liability	$	999	Monte Carlo simulation model	Estimated fair value of the Douglas Elliman reporting unit	$	169,000

				Risk-free rate for a 2-year term		0.13	%

				Leverage-adjusted equity volatility of peer firms		78.57	%

The unobservable inputs related to the valuations of the Level 3 assets and liabilities were as follows at December 31, 2019:


	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at December 31, 2019		Valuation Technique	Unobservable Input	Range (Actual)
Fair value of contingent liability	$	3,147	Monte Carlo simulation model	Estimated fair value of the Douglas Elliman reporting unit	$	271,500

				Risk-free rate for a 3-year term		1.61	%

				Leverage-adjusted equity volatility of peer firms		35.56	%

F-56

DOUGLAS ELLIMAN INC.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

(Dollars in Thousands)


Description	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Deductions		Balance at End of Period
Year Ended December 31, 2020
Allowances for:
Doubtful accounts	$	245	$	—	$	245	$	—
Deferred tax valuation allowance		5,590		1,641		—		7,231

Total	$	5,835	$	1,641	$	245	$	7,231

Year Ended December 31, 2019
Allowances for:
Doubtful accounts	$	428	$	—	$	183	$	245
Deferred tax valuation allowance		4,418		1,172		—		5,590

Total	$	4,846	$	1,172	$	183	$	5,835

Year Ended December 31, 2018
Allowances for:
Doubtful accounts	$	698	$	137	$	407	$	428
Deferred tax valuation allowance		1,875		2,543		—		4,418

Total	$	2,573	$	2,680	$	407	$	4,846

F-57

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

Set forth below is an estimate (other than for the SEC registration fee and NYSE listing fee) of the fees and expenses payable by the registrant in connection with the Distribution, all of which will be reimbursed to the registrant by Vector.


SEC registration fee	$	21,942
Legal fees and expenses	$	3,000,000	*
Accounting fees and expenses	$	1,500,000	*
Transfer agent and registrar fees and expenses	$	20,000	*
Printing and engraving expenses	$	350,000	*
NYSE Listing Fee	$	295,000
Miscellaneous	$	818,058	*

Total	$	6,000,000

Estimate

Item 14. Indemnification of Directors and Officers

The section of the prospectus included in this registration statement entitled “Indemnification of Directors and Officers” is incorporated by reference in this Item 14.

Item 15. Recent Sales of Unregistered Securities

On August 13, 2021, Douglas Elliman Inc. was incorporated in the State of Delaware. On August 24, 2021, Vector Group Ltd. acquired 1,000 uncertificated shares of common stock of Douglas Elliman Inc. for $100.

Item 16. Financial Statements and Exhibits

(a)	See Exhibit Index.

(b)	Financial Statements. The information required by this item is contained under the section “Combined Consolidated Financial Statements” beginning on page F-1 of the prospectus. That section is incorporated herein by reference.

Item 17. Undertakings

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

II-1

EXHIBIT INDEX


Exhibit		Description

2.1		Form of Distribution Agreement, between Vector Group Ltd. and Douglas Elliman Inc.

2.2		Form of Employee Matters Agreement, between Vector Group Ltd. and Douglas Elliman Inc.

3.1		Certificate of Incorporation of Douglas Elliman Inc.

3.2		Form of Amended and Restated Certificate of Incorporation (as in effect immediately prior to Distribution) of Douglas Elliman Inc.

3.3		Bylaws of Douglas Elliman Inc.

3.4		Form of Amended and Restated Bylaws (as in effect immediately prior to Distribution) of Douglas Elliman Inc.

5.1		Opinion of Sullivan & Cromwell LLP

8.1		Tax Opinion of Sullivan & Cromwell LLP

10.1		Form of Transition Services Agreement

10.2		Form of Tax Disaffiliation Agreement

10.3		Form of Trademark License Agreement

10.4		2021 Management Incentive Plan

10.5		2021 Employee Stock Purchase Plan

10.6		Form of Indemnification Agreement between Douglas Elliman Inc. and its Directors and Officers

10.7		Form of Non-exclusive Aircraft Lease Agreement

21.1		Subsidiaries of the Registrant

23.1		Consent of Deloitte & Touche LLP

23.2		Consent of Sullivan & Cromwell LLP (included in Exhibit 5.1)

23.3		Consent of Sullivan & Cromwell LLP (included in Exhibit 8.1)

24.1		Power of Attorney (included on signature page of this Registration Statement)

II-2

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.


DOUGLAS ELLIMAN INC.

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

Dated: December 7, 2021

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints each of Howard M. Lorber, J. Bryant Kirkland III and Marc N. Bell his true and lawful attorney-in-fact, with full power of substitution and resubstitution for such person and in his name, place and stead, in any and all capacities to sign any and all amendments including post-effective amendments to this registration statement and any and all registration statements filed pursuant to Rule 462 under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his substitute, each acting alone, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.


Signature	Title	Date

/s/ Howard M. Lorber Howard M. Lorber	Chairman, President, Chief Executive Officer (Principal Executive Officer)	December 7, 2021

/s/ J. Bryant Kirkland III J. Bryant Kirkland III	Senior Vice President, Treasurer and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	December 7, 2021

/s/ Ronald J. Kramer Ronald J. Kramer	Director	December 7, 2021

/s/ Richard J. Lampen Richard J. Lampen	Director	December 7, 2021

/s/ Michael S. Liebowitz Michael S. Liebowitz	Director	December 7, 2021

/s/ Lynn Mestel Lynn Mestel	Director	December 7, 2021

/s/ Wilson L. White Wilson L. White	Director	December 7, 2021

/s/ Mark D. Zeitchick Mark D. Zeitchick	Director	December 7, 2021

II-3

Exhibit 2.1

Form of

DISTRIBUTION AGREEMENT

by and between

VECTOR GROUP LTD.

and

DOUGLAS ELLIMAN INC.

Dated as of [•], 2021

TABLE OF CONTENTS


		Page

ARTICLE I

DEFINITIONS AND INTERPRETATION

Section 1.1	General		2
Section 1.2	References; Interpretation		18
Section 1.3	Relevant Time; Suspension		19

ARTICLE II

THE SEPARATION

Section 2.1	General		19
Section 2.2	Transfer of Assets		19
Section 2.3	Assumption and Satisfaction of Liabilities		20
Section 2.4	Intercompany Accounts		20
Section 2.5	Limitation of Liability		21
Section 2.6	Transfers Not Effected on or Prior to the Relevant Time; Transfers Deemed Effective as of the Relevant Time		22
Section 2.7	Conveyancing and Assumption Instruments		24
Section 2.8	Novation of Liabilities		24
Section 2.9	Guarantees		25
Section 2.10	Bank Accounts		26
Section 2.11	DISCLAIMER OF REPRESENTATIONS AND WARRANTIES		26

ARTICLE III

CERTAIN ACTIONS AT OR PRIOR TO THE DISTRIBUTIONS

Section 3.1	Certificate of Incorporation; By-laws		27
Section 3.2	Directors		27
Section 3.3	Resignations		27
Section 3.4	Cash Adjustment		27
Section 3.5	Ancillary Agreements		28
Section 3.6	Commercial Arrangements		28

ARTICLE IV

THE DISTRIBUTION

Section 4.1	Stock Dividends by Vector		28
Section 4.2	Fractional Shares		28
Section 4.3	Actions in Connection with the Distribution		29
Section 4.4	Sole Discretion of Vector		29
Section 4.5	Conditions to the Distribution		30

-i-


ARTICLE V

CERTAIN COVENANTS

Section 5.1	Financial Statements and Accounting	31
Section 5.2	Further Assurances	32

ARTICLE VI

INDEMNIFICATION

Section 6.1	Release of Pre-Distribution Claims	33
Section 6.2	Indemnification by Vector	35
Section 6.3	Indemnification by Spinco	35
Section 6.4	Procedures for Indemnification	35
Section 6.5	Cooperation in Defense and Settlement	37
Section 6.6	Indemnification Payments	38
Section 6.7	Contribution	38
Section 6.8	Indemnification Obligations Net of Insurance Proceeds and Other Amounts	39
Section 6.9	Additional Matters; Survival of Indemnities	40

ARTICLE VII

CONFIDENTIALITY; ACCESS TO INFORMATION

Section 7.1	Provision of Corporate Records	40
Section 7.2	Access to Information	41
Section 7.3	Witness Services	41
Section 7.4	Reimbursement; Other Matters	41
Section 7.5	Confidentiality	42
Section 7.6	Privileged Matters	43
Section 7.7	Ownership of Information	45
Section 7.8	Record Retention.	45
Section 7.9	Liability for Information Provided	46
Section 7.10	Other Agreements	46

ARTICLE VIII

DISPUTE RESOLUTION

Section 8.1	Negotiation	46
Section 8.2	Mediation	47
Section 8.3	Arbitration	47

-ii-


Section 8.4	Arbitration Period	48
Section 8.5	Treatment of Negotiations, Mediation and Arbitration	48
Section 8.6	Continuity of Service and Performance	48
Section 8.7	Consolidation	48

ARTICLE IX

MISCELLANEOUS

Section 9.1	Complete Agreement; Construction	49
Section 9.2	Ancillary Agreements	49
Section 9.3	Counterparts	49
Section 9.4	Survival of Agreements	49
Section 9.5	Expenses	50
Section 9.6	Notices	50
Section 9.7	Waivers and Consents	50
Section 9.8	Amendments	50
Section 9.9	Assignment	51
Section 9.10	Successors and Assigns	51
Section 9.11	Certain Termination and Amendment Rights	51
Section 9.12	Payment Terms	51
Section 9.13	No Circumvention	51
Section 9.14	Subsidiaries	51
Section 9.15	Third Party Beneficiaries	52
Section 9.16	Titles and Headings	52
Section 9.17	Exhibits and Schedules	52
Section 9.18	Governing Law	52
Section 9.19	Consent to Jurisdiction	52
Section 9.20	Specific Performance	52
Section 9.21	WAIVER OF JURY TRIAL	53
Section 9.22	Severability	53
Section 9.23	Force Majeure	53
Section 9.24	Interpretation	53
Section 9.25	No Duplication; No Double Recovery	53

-iii-

DISTRIBUTION AGREEMENT

This DISTRIBUTION AGREEMENT (this “Agreement”), dated as of [•], 2021, is entered into by and between Vector Group Ltd., a Delaware corporation (“Vector”), and Douglas Elliman Inc., a Delaware corporation (“Spinco”). Each of Vector and Spinco is referred to herein as a “Party” and collectively, as the “Parties”.

W I T N E S S E T H:

WHEREAS, Vector, acting through its direct and indirect Subsidiaries, currently conducts a number of businesses, including (i) the Spinco Business (real estate brokerage and other services and property technology investment), and (ii) the Vector Retained Business (tobacco manufacturing, distribution and sale and real estate investments);

WHEREAS, the Board of Directors of Vector (the “Vector Board”) has determined that it is appropriate, desirable and in the best interests of Vector and its stockholders to separate into two independent, publicly traded companies: Spinco and Vector;

WHEREAS, in order to effect such separation, the Vector Board has determined that it is appropriate, desirable and in the best interests of Vector and its stockholders (i) to enter into a series of transactions whereby (A) Vector and/or one or more members of the Vector Group will own all of the Vector Retained Assets and assume (or retain) all of the Vector Retained Liabilities, and (B) Spinco and/or one or more members of the Spinco Group will own all of the Spinco Assets and assume (or retain) all of the Spinco Liabilities (such transactions set forth in this clause (i), as they may be amended or modified from time to time, collectively, the “Plan of Reorganization”), and (ii) after the transactions to implement the Plan of Reorganization, for Vector to distribute to the holders of Vector Common Stock on a pro rata basis (including Vector Common Stock underlying outstanding stock option awards and restricted stock awards), in each case without consideration being paid by such stockholders, one share of Spinco common stock, par value $0.01 per share (“Spinco Common Stock”), for every two shares of Vector Common Stock held on the Record Date, which constitutes one-hundred percent (100%) of the outstanding Spinco Common Stock;

WHEREAS, Spinco has been incorporated solely for these purposes and has not engaged in activities except for activities undertaken in preparation for the Distribution;

WHEREAS, it is the intention of the Parties that each of the contributions of Assets to, and the Assumption of Liabilities by, Spinco together with the distribution of the Spinco Common Stock qualifies as a reorganization within the meaning of Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, each of Vector and Spinco has determined that it is necessary and desirable to set forth the principal corporate transactions required to effect the Plan of Reorganization and the Distribution and to set forth other agreements that will govern certain other matters following the Relevant Time.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements, provisions and covenants contained in this Agreement, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

Section 1.1 General. As used in this Agreement, the following terms shall have the following meanings:

(1) “AAA” shall have the meaning set forth in Section 8.2.

(2) “Action” shall mean any demand, action, claim, suit, countersuit, arbitration, inquiry, subpoena, proceeding or investigation by or before any Governmental Entity or any arbitration or mediation tribunal.

(3) “Affiliate” shall mean, when used with respect to a specified Person, a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such specified Person. For the purposes of this definition, “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), when used with respect to any specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by Contract or otherwise. It is expressly agreed that no Party or member of its Group shall be deemed to be an Affiliate of the other Party or member of such other Party’s Group by reason of having one or more directors or officers in common. For the avoidance of doubt, following the Distribution, (a) Spinco shall not be considered an Affiliate of Vector; and (b) Vector shall not be considered an Affiliate of Spinco.

(4) “Agreement” shall have the meaning set forth in the preamble.

(5) “Agreement Disputes” shall have the meaning set forth in Section 8.1.

(6) “Ancillary Agreements” shall mean all of the written Contracts, instruments, assignments, licenses or other arrangements (other than this Agreement and the Commercial Arrangements) entered into in connection with the transactions contemplated hereby, including the Transition Services Agreement, Tax Disaffiliation Agreement, Employee Matters Agreement and Spinco Intellectual Property Agreement.

(7) “Annual Reports” shall have the meaning set forth in Section 5.1(c).

(8) “Assets” shall mean assets, properties, claims and rights (including goodwill), wherever located (including in the possession of vendors or other third parties or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the Records or financial statements of any Person, including the following:

(i) all accounting and other legal and business books, records, ledgers and files whether printed, electronic or written;

-2-

(ii) all apparatuses, computers and other electronic data processing and communications equipment, fixtures, machinery, equipment, furniture, office equipment, automobiles, trucks, aircraft and other transportation equipment, special and general tools, manufacturing equipment and machinery and other tangible personal property;

(iii) all inventories of products, goods, materials, parts, raw materials and supplies;

(iv) all interests in real property of whatever nature, including easements, whether as owner, mortgagee or holder of a Security Interest in real property, lessor, sublessor, lessee, sublessee or otherwise;

(v) all interests in any capital stock or other equity interests of any Subsidiary or any other Person, all bonds, notes, debentures or other securities issued by any Subsidiary or any other Person, all loans, advances or other extensions of credit or capital contributions to any Subsidiary or any other Person and all other investments in securities of any Person;

(vi) all license Contracts, leases of personal property, open purchase orders for raw materials, supplies, parts or services, unfilled orders for the manufacture and sale of products and other Contracts or commitments;

(vii) all deposits, letters of credit and performance and surety bonds;

(viii) all written (including in electronic form) technical information, data, specifications, research and development information, engineering drawings and specifications, operating and maintenance manuals, and materials and analyses prepared by consultants and other third parties;

(ix) all Intellectual Property;

(x) all Software;

(xi) all cost information, sales and pricing data, customer prospect lists, supplier records, customer and supplier lists, customer and vendor data, correspondence and lists, product data and literature, artwork, design, development and business process files and data, vendor and customer drawings, specifications, quality records and reports and other books, records, studies, surveys, reports, plans and documents;

(xii) all prepaid expenses, trade accounts and other accounts and notes receivables;

(xiii) all rights under Contracts, all claims or rights against any Person, causes in action or similar rights, whether accrued or contingent;

-3-

(xiv) all rights under insurance Policies and all rights in the nature of insurance, indemnification or contribution;

(xv) all licenses, permits, approvals and authorizations which have been issued by any Governmental Entity;

(xvi) all cash or cash equivalents, bank accounts, lock boxes and other third-party deposit arrangements; and

(xvii) all interest rate, currency, commodity or other swap, collar, cap or other hedging or similar Contracts or arrangements.

(9) “Assume”, and variations thereof, shall have the meaning set forth in Section 2.3, mutatis mutandis.

(10) “Audited Party” shall have the meaning set forth in Section 5.1(b).

(11) “Business” shall mean the Vector Retained Business or the Spinco Business, as applicable.

(12) “Business Day” shall mean any day that is not a Saturday, a Sunday or any other day on which banks are required or authorized by Law to be closed in The City of New York.

(13) “Business Entity” shall mean any corporation, partnership, limited liability company, joint venture or other entity which may legally hold title to Assets.

(14) “Code” shall have the meaning set forth in the recitals hereto.

(15) “Commercial Arrangements” shall mean those arrangements set forth on Schedule 1.1(15) and such other commercial arrangements between the Parties that are intended to survive and continue following the Relevant Time; provided, however, that for the avoidance of doubt, Commercial Arrangements shall not apply to any of the following Contracts, arrangements, course of dealings or understandings (or to any of the provisions thereof):

(i) the Transition Services Agreement;

(ii) [Aviation Leasing Agreements];

(iii) any agreements, arrangements, commitments or understandings to which any Person other than the Parties and their respective Groups is a party thereto (it being understood that to the extent that the rights and obligations of the Parties and the members of their respective Groups under any such Contracts constitute Spinco Assets or Spinco Liabilities or Vector Retained Assets or Vector Retained Liabilities, such Contracts shall be assigned or retained pursuant to Article II); and

-4-

(iv) any agreements, arrangements, commitments or understandings to which any non-wholly owned Subsidiary of Vector or Spinco, as the case may be, is a Party.

(16) “Confidential Information” shall mean all information concerning or belonging to a Party and/or its Subsidiaries or Business which, prior to or following the Relevant Time, has been disclosed by a Party or its Subsidiaries to the other Party or its Subsidiaries, in written, oral (including by recording), electronic, or visual form to, or otherwise has come into the possession of, the other, including pursuant to the access provisions of Section 7.1 or Section 7.2 or any other provision of this Agreement (except to the extent that such information can be shown to have been (i) in the public domain through no fault of such Party or its Subsidiaries or (ii) lawfully acquired by such Party or its Subsidiaries from other sources; provided, however, in the case of clause (ii) that, to the furnished Party’s knowledge, such furnishing sources did not provide such information in breach of any confidentiality obligations).

(17) “Consents” shall mean any consents, waivers or approvals from, or notification requirements to, any Person other than a Governmental Entity.

(18) “Contract” shall mean any agreement, contract, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment or undertaking (whether written or oral and whether express or implied).

(19) “Conveyancing and Assumption Instruments” shall mean, collectively, the various Contracts and other documents heretofore entered into and to be entered into to effect the Transfer of Assets and the Assumption of Liabilities in the manner contemplated by this Agreement and the Plan of Reorganization, or otherwise relating to, arising out of or resulting from the transactions contemplated by this Agreement, in such form or forms as the Parties agree.

(20) “Dispute Notice” shall have the meaning set forth in Section 8.1.

(21) “Distribution” shall mean the distribution by Vector to holders of record of shares of Vector Common Stock (including Vector Common Stock underlying outstanding stock option awards and restricted stock awards) as of the Distribution Record Date of 100% of the Spinco Common Stock owned by Vector on the basis of one share of Spinco Common Stock for every two outstanding shares of Vector Common Stock.

(22) “Distribution Agent” shall mean American Stock Transfer & Trust Company.

(23) “Distribution Date” shall mean the date on which the Distribution is effected.

(24) “Employee Matters Agreement” shall mean the Employee Matters Agreement, dated as of the date hereof, by and between Vector and Spinco.

-5-

(25) “Force Majeure” shall mean, with respect to a Party, an event beyond the control of such Party (or any Person acting on its behalf), which by its nature could not have been foreseen by such Party (or such Person), or, if it could have been foreseen, was unavoidable, and includes, without limitation, acts of God, storms, floods, riots, labor unrest, pandemics, nuclear incidents, fires, sabotage, civil commotion or civil unrest, interference by civil or military authorities, acts of war (declared or undeclared) or armed hostilities or other national or international calamity or one or more acts of terrorism or failure of energy sources or distribution facilities.

(26) “Form S-1” shall mean the registration statement on Form S-1 filed by Spinco with the SEC in connection with the Distribution.

(27) “Governmental Approvals” shall mean any notices or reports to be submitted to, or other filings to be made with, or any consents, registrations, approvals, permits or authorizations to be obtained from, any Governmental Entity.

(28) “Governmental Entity” shall mean any domestic or foreign governmental or regulatory authority, agency, commission, body, court or other legislative, executive or judicial governmental entity.

(29) “Group” shall mean (i) with respect to Vector, the Vector Group, and (ii) with respect to Spinco, the Spinco Group.

(30) “Guaranty Release” shall have the meaning set forth in Section 2.9(b).

(31) “Indemnifiable Loss” shall mean any and all damages, losses, deficiencies, Liabilities, obligations, penalties, judgments, settlements, claims, payments, fines, interest, costs and expenses (including the costs and expenses of any and all Actions and demands, assessments, judgments, settlements and compromises relating thereto and the reasonable costs and expenses of attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense thereof or the enforcement of rights hereunder), excluding special, consequential, indirect and/or punitive damages (other than special, consequential, indirect and/or punitive damages awarded to any third party against an Indemnitee).

(32) “Indemnifying Party” shall have the meaning set forth in Section 6.4(b).

(33) “Indemnitee” shall have the meaning set forth in Section 6.4(b).

(34) “Indemnity Payment” shall have the meaning set forth in Section 6.8(a).

-6-

(35) “Information” shall mean information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, trade secrets, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), communications and materials otherwise related to or made or prepared in connection with or in preparation for any legal proceeding, and other technical, financial, employee or business information or data.

(36) “Insurance Proceeds” shall mean those monies (i) received by an insured person from an insurance carrier, including due to premium adjustments, whether or not retrospectively rated, or (ii) paid by an insurance carrier on behalf of an insured person, in either case net of any applicable premium deductible or self-insured retention. For the avoidance of doubt, “Insurance Proceeds” shall not include any costs or expenses incurred by a Party or its Affiliates in pursuing insurance coverage.

(37) “Intellectual Property” shall mean all intellectual property and industrial property rights of any kind or nature, including all U.S. and foreign (i) Patents, (ii) Trademarks, (iii) copyrights and copyrightable subject matter, (iv) rights of publicity, (v) moral rights and rights of attribution and integrity, (vi) rights in Software, (vii) trade secrets and all other Confidential Information, know-how, inventions, proprietary processes, formulae, models and methodologies, (viii) rights of privacy and rights to personal information, (ix) telephone numbers and Internet protocol addresses, (x) all rights in the foregoing and in other similar intangible assets, (xi) all applications and registrations for the foregoing, and (xii) all rights and remedies against past, present, and future infringement, misappropriation, or other violation of the foregoing.

(38) “Internal Control Audit and Management Assessments” shall have the meaning set forth in Section 5.1(a).

(39) “Law” shall mean any U.S. or non-U.S. federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, income Tax treaty, stock exchange rule, order, requirement or rule of law (including common law).

(40) “Liabilities” shall mean any and all debts, liabilities, costs, expenses, interest and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, reserved or unreserved, or determined or determinable, including those arising under any Law, claim, demand, Action, whether asserted or unasserted, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Entity and those arising under any Contract or any fines, damages or equitable relief which may be imposed and including all costs and expenses related thereto.

(41) “Liable Party” shall have the meaning set forth in Section 2.8(b).

-7-

(42) “Mediation Period” shall have the meaning set forth in Section 8.2.

(43) “New York Courts” shall have the meaning set forth in Section 9.19.

(44) “NYSE” shall mean The New York Stock Exchange.

(45) “Other Party” shall have the meaning set forth in Section 2.8(a).

(46) “Other Party’s Auditors” shall have the meaning set forth in Section 5.1(b).

(47) “Outside Notice Date” shall have the meaning set forth in Section 6.4(b).

(48) “Party” shall have the meaning set forth in the preamble.

(49) “Patents” shall mean any patents, patent applications, patent disclosures, derivative patents and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions and extensions thereof.

(50) “Person” shall mean any natural person, firm, individual, corporation, business trust, joint venture, association, company, limited liability company, partnership or other organization or entity, whether incorporated or unincorporated, or any Governmental Entity.

(51) “Plan of Reorganization” shall have the meaning set forth in the recitals hereto.

(52) “Policies” shall mean insurance policies and insurance Contracts of any kind (other than life and benefits policies or Contracts), including primary, excess and umbrella policies, comprehensive general liability policies, director and officer liability, fiduciary liability, automobile, aircraft, marine, property and casualty, workers’ compensation and employee dishonesty insurance policies, bonds and self-insurance and captive insurance company arrangements, together with the rights, benefits and privileges thereunder.

(53) “Prime Rate” shall mean the rate per annum publicly announced by Citibank, N.A. (or successor thereto) from time to time as its prime rate in effect at its principal office in New York City. For purposes of this Agreement, any change in the Prime Rate shall be effective on the date such change in the Prime Rate is publicly announced as effective.

(54) “Record Date” shall mean such date as may be determined by the Vector Board as the record date for the Distribution.

(55) “Records” shall mean any Contracts, documents, books, records or files whether written or electronic.

(56) “Relevant Time” shall mean 12:01 a.m., Eastern Time, on the Distribution Date.

-8-

(57) “Rules” shall have the meaning set forth in Section 8.3.

(58) “SEC” shall mean the United States Securities and Exchange Commission.

(59) “Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time that reference is made thereto.

(60) “Security Interest” shall mean any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever, excluding restrictions on transfer under securities Laws.

(61) “Separation Expenses” shall have the meaning set forth in Section 9.5.

(62) “Shared Contract” shall mean any Contract (a) listed on Schedule 1.1(64) or that relates to a customer or supplier listed on Schedule 1.1(64), or (b) any Contract of any member of either Group (i) that relates to the Business of both Parties and (ii) either (A) that the Parties specifically intended to amend, divide, modify, partially assign or replicate (in whole or in part) the respective rights and obligations under and in respect of such Contract prior to the Relevant Time or (B) the existence of which either Party discovers prior to the date that is eighteen (18) months after the Relevant Time and had the Parties given specific consideration to such Contract they would have amended, divided, modified, partially assigned or replicated (in whole or in part) the respective rights and obligations under and in respect of such Contract. For the avoidance of doubt, any Contract relating to a Commercial Arrangement shall not be considered a Shared Contract for any purpose under this Agreement.

(63) “Software” shall mean all computer programs (whether in source code, object code, or other form), algorithms, databases, compilations and data, and technology supporting the foregoing, and all documentation, including flowcharts and other logic and design diagrams, technical, functional and other specifications, and user and training materials related to any of the foregoing.

(64) “Spinco” shall have the meaning set forth in the preamble.

(65) “Spinco Accounts” shall have the meaning set forth in Section 2.10(a).

(66) “Spinco Assets” shall mean:

(i) the ownership interests in those Business Entities that are included in the definition of Spinco Group including those Business Entities set forth on Schedule 1.1(74) in the definition of Spinco Group;

(ii) the offices, facilities and other owned real property listed on Schedule 1.1(68) and the leases governing the leased real property (or subleases governing the subleased real property) listed on Schedule 1.1(68);

-9-

(iii) all Spinco Contracts, any rights or claims arising thereunder, and any other rights or claims or contingent rights or claims primarily relating to or arising from any Spinco Asset or the Spinco Business;

(iv) any and all Assets reflected on the Spinco Balance Sheet or the accounting records supporting such balance sheet and any Assets acquired by or for Spinco or any member of the Spinco Group subsequent to the date of such balance sheet which, had they been so acquired on or before such date and owned as of such date, would have been reflected on such balance sheet if prepared on a consistent basis, subject to any dispositions of any of such Assets subsequent to the date of such balance sheet;

(v) any rights of any member of the Spinco Group under any Policies, including any rights thereunder arising after the Distribution Date in respect of any Policies that are occurrence policies;

(vi) subject to Section 9.2, any and all Assets owned or held immediately prior to the Relevant Time by Vector or any of its Subsidiaries primarily relating to or used in the Spinco Business. The intention of this clause (vi) is only to rectify any inadvertent omission of Transfer of any Asset that, had the Parties given specific consideration to such Asset as of the date hereof, would have otherwise been classified as a Spinco Asset. Subject to Section 9.2, no Asset shall be deemed a Spinco Asset solely as a result of this clause (vi) including with respect to any of the Assets described in Section 9.2 unless a claim with respect thereto is made by Spinco within the applicable time period(s) established by Section 2.6(d);

(vii) and any and all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets which have been or are to be Transferred to Spinco or any other member of the Spinco Group;

(viii) any and all furnishings and office equipment and any other equipment located at a physical site or the portion thereof of which the ownership or leasehold interest is held by, or being Transferred to, Spinco; provided, however, that personal computers shall be Transferred to the Party who, following the Relevant Time, employs the applicable employee who, prior to the Relevant Time, used such personal computer; and

Notwithstanding the foregoing, the Spinco Assets shall not include any Assets that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Assets to be retained by or Transferred to any member of the Vector Group.

In the event of any inconsistency or conflict which may arise in the application or interpretation of any of the foregoing provisions, for the purpose of determining what is and is not a Spinco Asset, any item explicitly included on a Schedule referred to in this definition shall take priority over any provision of the text hereof including, for the avoidance of doubt, any interpretation of the definition of Vector Retained Assets.

-10-

(67) “Spinco Balance Sheet” shall mean the condensed combined consolidated balance sheet of the Spinco Group, including the notes thereto, as of [September 30], 2021, as filed with the Form S-1.

(68) “Spinco Board” shall have the meaning set forth in Section 3.2.

(69) “Spinco Business” shall mean (i) the business and operations of Vector’s real estate brokerage and other services and property technology investment business as described in the Form S-1, (ii) any other business conducted primarily through the use of the Spinco Assets prior to the Relevant Time, and (iii) the businesses and operations of the Business Entities acquired or established by or for Spinco or any of its Subsidiaries after the date of this Agreement.

(70) “Spinco Common Stock” shall have the meaning set forth in the recitals hereto.

(71) “Spinco Contracts” shall mean the following Contracts to which Vector or any of its Affiliates is a party or by which it or any of its Affiliates or any of their respective Assets is bound, whether or not in writing, except for any such Contract or part thereof (i) that is expressly contemplated not to be Transferred by any member of the Vector Group to the Spinco Group or (ii) that is expressly contemplated to be Transferred to (or remain with) any member of the Vector Group, in each case, pursuant to any provision of this Agreement or any Ancillary Agreement:

(i) any Contract entered into in the name of, or expressly on behalf of, any division, business unit or member of the Spinco Group;

(ii) any Contract that relates primarily to the Spinco Business;

(iii) any Contract representing lease obligations reflected on the Spinco Balance Sheet;

(iv) any Contract or part thereof that is otherwise expressly contemplated pursuant to this Agreement (including pursuant to Section 2.2(c)) or any of the Ancillary Agreements to be assigned to any member of the Spinco Group, including those set forth on Schedule 1.1(73)(iv); and

(v) any guarantee, indemnity, representation or warranty of or in favor of any member of the Spinco Group.

(72) “Spinco Group” shall mean Spinco and each Person (other than any member of the Vector Group) that is a direct or indirect Subsidiary of Spinco immediately after the Relevant Time, and each Person that becomes a Subsidiary of Spinco after the Relevant Time, which shall include those entities identified as such on Schedule 1.1(74).

-11-

(73) “Spinco Indemnitees” shall mean each member of the Spinco Group and each of their and their Affiliates and each of their respective Affiliates’ directors, officers, employees, advisors and agents.

(74) “Spinco Intellectual Property Agreement” shall mean the Trademark License Agreement, dated as of the date hereof, by and between New Valley LLC and New Valley Ventures LLC, including any exhibits, schedules, amendments or supplements thereto.

(75) “Spinco Liabilities” shall mean:

(i) any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto, including Schedule 1.1(77)(vi) hereto) as Liabilities to be Assumed by any member of the Spinco Group, and all obligations and Liabilities expressly Assumed by any member of the Spinco Group under this Agreement or any of the Ancillary Agreements;

(ii) any and all Liabilities primarily relating to, arising out of or resulting from:

(a) the operation or conduct of the Spinco Business, as conducted at any time prior to, on or after the Relevant Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority));

(b) the operation or conduct of any business conducted by any member of the Spinco Group at any time after the Relevant Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority));

(d) any Intellectual Property Transferred to Spinco or any of its Subsidiaries pursuant to the Spinco Intellectual Property Agreement, whether arising before, on or after the Relevant Time;

(iii) any Liabilities to the extent relating to, arising out of or resulting from any terminated or divested Business Entity, business or operation formerly and primarily related to the Spinco Group or the Spinco Business;

(iv) any Liabilities relating to, arising out of or resulting from any litigation set forth in Schedule 1.1(77)(vi);

-12-

(v) any Liabilities relating to, arising out of or resulting from any indebtedness of any member of the Spinco Group; and

(vi) all Liabilities reflected as liabilities or obligations on the Spinco Balance Sheet or the accounting records supporting such balance sheet, and all Liabilities arising or Assumed after the date of such balance sheet which, had they arisen or been Assumed on or before such date and been retained as of such date, would have been reflected on such balance sheet if prepared on a consistent basis, subject to any discharge of such Liabilities subsequent to the date of the Spinco Balance Sheet.

Notwithstanding anything to the contrary herein, the Spinco Liabilities shall not include:

(x) any Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be retained or Assumed by any member of the Vector Group or for which Vector is liable;

(y) any Contracts expressly Assumed by any member of the Vector Group under this Agreement or any of the Ancillary Agreements; and

(z) any Liabilities expressly discharged pursuant to Section 2.4 of this Agreement.

In the event of any inconsistency or conflict which may arise in the application or interpretation of any of the foregoing provisions, for the purpose of determining what is and is not a Spinco Liability, any item explicitly included on a Schedule referred to in this definition shall take priority over any provision of the text hereof.

(76) “Spinco Portion” shall have the meaning set forth in Section 2.2(b).

(77) “Subsidiary” shall mean, with respect to any Person, any corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or other entity in which such Person, directly or indirectly (i) beneficially owns more than fifty percent (50%) of (A) the total combined voting power of all classes of voting securities of such Person, (B) the total combined equity economic interest thereof or (C) the capital or profits thereof, in the case of a partnership, or (ii) otherwise has the power to elect or direct the election of more than fifty percent (50%) of the members of the governing body of such entity or otherwise has control over such entity (e.g., as the managing partner of a partnership).

(78) “Tax” or “Taxes” shall have the meaning set forth in the Tax Disaffiliation Agreement.

(79) “Tax Contest” shall have the meaning set forth in the Tax Disaffiliation Agreement.

-13-

(80) “Tax Disaffiliation Agreement” shall mean the Tax Disaffiliation Agreement, dated as of the date hereof, by and between Vector and Spinco.

(81) “Tax Return” shall have the meaning set forth in the Tax Disaffiliation Agreement.

(82) “Third Party Claim” shall have the meaning set forth in Section 6.4(b).

(83) “Third Party Claim Notice” shall have the meaning set forth in Section 6.4(b).

(84) “Third Party Proceeds” shall have the meaning set forth in Section 6.8(a).

(85) “Trademarks” shall mean all U.S. and foreign trademarks, service marks, corporate names, trade names, domain names, logos, slogans, designs, trade dress and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing.

(86) “Transfer” shall have the meaning set forth in Section 2.2(a)(i).

(87) “Transition Services Agreement” shall mean the Transition Services Agreement, dated as of the date hereof, by and between Vector and Spinco.

(88) “Vector” shall have the meaning set forth in the preamble.

(89) “Vector Accounts” shall have the meaning set forth in Section 2.10(a).

(90) “Vector Balance Sheet” shall mean the condensed combined consolidated balance sheet of Vector prepared to give effect to the transactions contemplated hereby, including the notes thereto, as of [September 30], 2021, attached hereto as Schedule 1.1(92); provided, however, that to the extent any Assets or Liabilities are Transferred by Spinco or any member of its Group to Vector or any member of the Vector Group or vice versa in connection with the Plan of Reorganization and prior to the Distribution Date, such assets and/or liabilities shall be deemed to be included or excluded from the Vector Balance Sheet, as the case may be.

(91) “Vector Board” shall have the meaning set forth in the recitals hereto.

(92) “Vector Common Stock” shall mean the issued and outstanding shares of Vector common stock, par value $0.10 per share, of Vector.

(93) “Vector Group” shall mean Vector and each Person (other than any member of the Spinco Group) that is a direct or indirect Subsidiary of Vector immediately after the Relevant Time, and each Business Entity that becomes a Subsidiary of Vector after the Relevant Time, which shall include those entities identified as such on Schedule 1.1(95).

-14-

(94) “Vector Indemnitees” shall mean Vector, each member of the Vector Group, each of their respective directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing, except the Spinco Indemnitees.

(95) “Vector Portion” shall have the meaning set forth in Section 2.2(b).

(96) “Vector Retained Assets” shall mean:

(i) the ownership interests in those Business Entities that are included in the definition of Vector Group, including those Business Entities set forth on Schedule 1.1(95) in the definition of Vector Group;

(ii) the offices, facilities and other owned real property listed on Schedule 1.1(98) and the leases governing the leased real property (or subleases governing the subleased real property) listed on Schedule 1.1(98);

(iii) all Vector Retained Contracts, any rights or claims arising thereunder, and any other rights or claims or contingent rights or claims primarily relating to or arising from any Vector Retained Asset or the Vector Retained Business;

(iv) any and all Assets (other than cash and cash equivalents and investments) reflected on the Vector Balance Sheet or the accounting records supporting such balance sheet and any Assets acquired by or for Vector or any member of the Vector Group subsequent to the date of such balance sheet which, had they been so acquired on or before such date and owned as of such date, would have been reflected on such balance sheet if prepared on a consistent basis, subject to any dispositions of any of such Assets subsequent to the date of such balance sheet;

(v) any rights of any member of the Vector Group under any Policies;

(vi) subject to Section 9.2, any and all Assets owned or held immediately prior to the Relevant Time by Vector or any of its Subsidiaries (including, prior to the Relevant Time, Spinco or any of its Subsidiaries) primarily relating to or used in the Vector Retained Business. The intention of this clause (vi) is only to rectify any inadvertent omission of Transfer of any Asset that, had the Parties given specific consideration to such Asset as of the date hereof, would have otherwise been classified as a Vector Retained Asset. Subject to Section 9.2, no Asset shall be deemed a Vector Retained Asset solely as a result of this clause (vi) unless a claim with respect thereto is made by Vector within the applicable time period(s) established by Section 2.6(d);

(vii) any and all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets which are being retained by, or have been or are to be Transferred to, Vector or any other member of the Vector Group; and

-15-

(viii) any and all furnishings and office equipment and any other equipment located at a physical site or the portion thereof of which the ownership or leasehold interest is held by, being retained by or Transferred to, Vector; provided, however, that personal computers shall be Transferred to the Party who, following the Relevant Time, employs the applicable employee who, prior to the Relevant Time, used such personal computer.

Notwithstanding the foregoing, the Vector Retained Assets shall not include any Assets that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Assets to be retained by or Transferred to any member of the Spinco Group.

In the event of any inconsistency or conflict which may arise in the application or interpretation of any of the foregoing provisions, for the purpose of determining what is and is not a Vector Retained Asset, any item explicitly included on a Schedule referred to in this definition shall take priority over any provision of the text hereof including, for the avoidance of doubt, any interpretation of the definition of Spinco Assets.

(97) “Vector Retained Business” shall mean:

(i) Vector’s current tobacco segment;

(ii) the assessment, development and management of, and investment in, real estate properties and projects, including fundraising, sales and similar ancillary activities in connection therewith;

(iii) the real property investments listed on Schedule 1.1(99);

(iv) any other business conducted primarily through the use of the Vector Retained Assets prior to the Relevant Time; and

(v) the businesses and operations of Business Entities acquired or established by or for Vector or any of its Subsidiaries in connection with the operation of the Vector Retained Business after the date of this Agreement.

(98) “Vector Retained Contracts” shall mean the following Contracts to which Vector or any of its Affiliates is a party or by which it or any of its Affiliates or any of their respective Assets is bound, whether or not in writing, except for any such Contract or part thereof (i) that is expressly contemplated not to be Transferred by any member of the Spinco Group to Vector or (ii) that is expressly contemplated to be Transferred to (or remain with) any member of the Spinco Group, in each case, pursuant to any provision of this Agreement or any Ancillary Agreement:

(i) any Contract entered into in the name of, or expressly on behalf of, any division, business unit or member of the Vector Group;

(ii) any Contract that relates primarily to the Vector Retained Business;

-16-

(iii) any Contract representing capital or operating equipment lease obligations reflected on the Vector Balance Sheet;

(iv) any Contract, or part thereof, that is otherwise expressly contemplated pursuant to this Agreement (including pursuant to Section 2.2(c)) or any of the Ancillary Agreements to be assigned to any member of the Vector Group; and

(v) any guarantee, indemnity, representation or warranty of or in favor of any member of the Vector Group.

(99) “Vector Retained Liabilities” shall mean:

(i) any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto, including Schedule 1.1(101)(iii) and Schedule 1.1(101)(iv) hereto) as Liabilities to remain with or be Assumed by any member of the Vector Group, and all obligations and Liabilities expressly Assumed by any member of the Vector Group under this Agreement or any of the Ancillary Agreements;

(ii) any and all Liabilities primarily relating to, arising out of or resulting from:

(A) the operation or conduct of the Vector Retained Business, as conducted at any time prior to, on or after the Relevant Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority));

(B) the operation or conduct of any business conducted by any member of the Vector Group at any time after the Relevant Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority));

(D) any Intellectual Property retained by or Transferred to Vector or any of its Subsidiaries pursuant to the Spinco Intellectual Property Agreement, whether arising before, on or after the Relevant Time;

(iii) any Liabilities to the extent relating to, arising out of or resulting from any terminated or divested Business Entity, business or operation (A) formerly and primarily related to the Vector Retained Business or (B) set forth on Schedule 1.1(101)(iii);

-17-

(iv) any Liabilities relating to, arising out of or resulting from (i) any indebtedness (including debt securities and asset-backed debt) of any member of the Vector Group, (ii) any indebtedness (regardless of the issuer of such indebtedness) secured exclusively by any of the Vector Retained Assets (including any Liabilities relating to, arising out of or resulting from a claim by a holder of any such indebtedness, in its capacity as such) or (iii) any indebtedness set forth on Schedule 1.1(101)(iv); and

(v) all Liabilities reflected as Liabilities or obligations on the Vector Balance Sheet or the accounting records supporting such balance sheet, and all Liabilities arising or Assumed after the date of such balance sheet which, had they arisen or been Assumed on or before such date and been retained as of such date, would have been reflected on such balance sheet if prepared on a consistent basis, subject to any discharge of such Liabilities subsequent to the date of the Vector Balance Sheet.

Notwithstanding anything to the contrary herein, the Vector Retained Liabilities shall not include:

(y) any Contracts expressly Assumed by any member of the Spinco Group under this Agreement or any of the Ancillary Agreements; and

(z) any Liabilities expressly discharged pursuant to Section 2.4 of this Agreement.

In the event of any inconsistency or conflict which may arise in the application or interpretation of any of the foregoing provisions, for the purpose of determining what is and is not a Vector Liability, any item explicitly included on a Schedule referred to in this definition shall take priority over any provision of the text hereof including, for the avoidance of doubt, any interpretation of the definition of Spinco Assets.

Section 1.2 References; Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. Unless the context otherwise requires, the words “include”, “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation”. Unless the context otherwise requires, references in this Agreement to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Unless the context otherwise requires, the words “hereof”, “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement.

-18-

Section 1.3 Relevant Time; Suspension.

(a) This Agreement shall be effective as of the Relevant Time.

(b) Notwithstanding Section 1.3(a) above, as between any of the Parties that are Affiliates, the provisions of, and the obligations under, this Agreement shall be suspended as between such Parties until the Relevant Time, other than for Sections 2.1, 2.2, 2.3 and 2.7, each of which will be effective as of the Relevant Time.

ARTICLE II

THE SEPARATION

Section 2.1 General. Subject to the terms and conditions of this Agreement, in accordance with the Plan of Reorganization set forth on Schedule 2.1 and to the extent not previously effected pursuant to the steps set forth in the Plan of Reorganization, the Parties shall, and shall cause their respective Affiliates to, effect the transactions contemplated by the Plan of Reorganization. It is the intent of the Parties that after consummation of the transactions contemplated thereby Vector Group shall be reorganized, to the extent necessary, such that following the consummation of such reorganization, subject to Section 2.6, (i) all of Vector’s and its Subsidiaries’ right, title and interest in and to the Spinco Assets will be owned or held by a member of the Spinco Group, the Spinco Business will be conducted by the members of the Spinco Group and all of the Spinco Liabilities will be Assumed directly or indirectly by (or remain with) a member of the Spinco Group and (iii) all of Vector’s and its Subsidiaries’ right, title and interest in and to the Vector Retained Assets will be owned or held by a member of the Vector Group, the Vector Retained Business will be conducted by the members of the Vector Group and all of the Vector Retained Liabilities will be Assumed directly or indirectly by (or remain with) a member of the Vector Group.

Section 2.2 Transfer of Assets.

(a) Subject to the terms and conditions of this Agreement, including those set forth in Section 9.2, on or prior to the Relevant Time and to the extent not already completed (and it being understood that some of such Transfers may occur following the date hereof and prior to the Relevant Time):

(i) Vector shall, on behalf of itself and its Subsidiaries, as applicable, transfer, contribute, assign and convey or cause to be transferred, contributed, assigned and conveyed (“Transfer”) to Spinco, or another member of the Spinco Group, all of its and its Subsidiaries’ right, title and interest in and to the Spinco Assets; and

(ii) [Spinco shall, on behalf of itself and its Subsidiaries, as applicable, Transfer to Vector, or another member of the Vector Group, all of its and its Subsidiaries’ right, title and interest in and to the Vector Retained Assets.]

-19-

(b) [Treatment of Shared Contracts. Without limiting the generality of the obligations set forth in Section 2.2(a), the Parties shall, and shall cause their respective Subsidiaries to, use their respective reasonable best efforts to work together (and, if necessary and desirable, to work with the third party to such Shared Contract) in an effort to divide, partially assign, modify and/or replicate (in whole or in part) the respective rights and obligations under and in respect of any Shared Contract, such that (a) a member of the Spinco Group is the beneficiary of the rights and is responsible for the obligations related to that portion of such Shared Contract relating to the Spinco Business (the “Spinco Portion”), which rights shall be Spinco Assets and which obligations shall be Spinco Liabilities and (b) a member of the Vector Group is the beneficiary of the rights and is responsible for the obligations related to such Shared Contract relating to the Vector Business (the “Vector Portion”), which rights shall be Vector Retained Assets and which obligations shall be Vector Liabilities. If the Parties, or their respective Subsidiaries, as applicable, do not or are not able to enter into an arrangement to formally divide, partially assign, modify and/or replicate such Shared Contract as contemplated by the previous sentence, then the Parties shall, and shall cause their respective Subsidiaries to, cooperate in any lawful arrangement to provide that a member of the Spinco Group shall receive the interest in the benefits and obligations of the Spinco Portion under such Shared Contract and a member of the Vector Group shall receive the interest in the benefits and obligations of the Vector Portion under such Shared Contract; provided, however, that no Party shall be required to expend any money or take any action in furtherance of this Section 2.2(b) that would require the expenditure of money (other than any payment obligations under the applicable Shared Contract).]

(c) Consents. The Parties shall use their reasonable best efforts to obtain the required licenses, permits and authorizations issued by any Governmental Entity or parts thereof as contemplated by this Agreement.

Section 2.3 Assumption and Satisfaction of Liabilities. Except as otherwise specifically set forth in any Ancillary Agreement, from and after the Relevant Time, (a) Vector shall, or shall cause a member of the Vector Group to, accept, assume (or, as applicable, retain) and perform, discharge and fulfill, in accordance with their respective terms (“Assume”), all of the Vector Retained Liabilities and (b) Spinco shall, or shall cause a member of the Spinco Group to, Assume all the Spinco Liabilities, in each case, regardless of (i) when or where such Liabilities arose or arise, (ii) whether the facts upon which they are based occurred prior to, on or subsequent to the Relevant Time, (iii) where or against whom such Liabilities are asserted or determined, or (iv) whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the Vector Group or the Spinco Group, or any of their past or present respective directors, officers, employees, agents, Subsidiaries or Affiliates.

Section 2.4 Intercompany Accounts.

(a) Except as set forth in Section 2.4(b), Vector (and/or any member of the Vector Group) and Spinco (and/or any member of the Spinco Group), hereby terminate, effective as of the Relevant Time, any and all Contracts and intercompany Liabilities, whether or not in writing, between Vector (and/or any member of the Vector Group) and Spinco (and/or any member of the Spinco Group), that are effective or outstanding as of

-20-

immediately prior to the Relevant Time. No such terminated Contract (including any provision thereof that purports to survive termination) or intercompany Liability shall be of any further force or effect from and after the Relevant Time. Each Party shall, at the reasonable request of the other Party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing.

(b) The provisions of Section 2.4(a) shall not apply to any of the following Contracts (or to any of the provisions thereof):

(i) this Agreement and the other Ancillary Agreements (and each other Contract expressly contemplated by this Agreement or any other Ancillary Agreements to be entered into or continued by the Parties or any of the members of their respective Groups after the Relevant Time);

(ii) any Contracts to which any Person, other than the Parties and their respective wholly owned Subsidiaries, is a Party (it being understood that to the extent that the rights and obligations of the Parties and the members of their respective Groups under any such Contracts constitute Vector Retained Assets, Spinco Assets or Vector Retained Liabilities or Spinco Liabilities, they shall be assigned pursuant to Section 2.1);

(iii) [any Shared Contracts];

(iv) any Commercial Arrangements; and

(v) any intercompany trade payables due or trade receivables owed solely between Vector and/or any member of the Vector Group and Spinco and/or any member of the Spinco Group that are effective or outstanding as of immediately prior to the Relevant Time, which amounts shall be settled (and net amounts paid) as of the Relevant Time or as promptly as practicable thereafter (with all invoices for such payables due to be delivered by the Parties within five (5) Business Days following the Relevant Time and to be paid, in any event, within thirty (30) days of the receipt of such invoice) (except for any such intercompany payables or receivables arising pursuant to any Ancillary Agreements, which shall instead be settled in accordance with the terms of such Ancillary Agreements).

Section 2.5 Limitation of Liability.

(a) Except as provided in Section 3.4 or in the case of any knowing violation of Law, fraud or material misrepresentation, no Party shall have any Liability to the other Party in the event that any Information exchanged or provided pursuant to this Agreement which is an estimate or forecast, or which is based on an estimate or forecast, is found to be inaccurate.

(b) No Party or any Subsidiary thereof shall be liable to the other Party or any Subsidiary of the other Party based upon, arising out of or resulting from any Contract, arrangement, course of dealing or understanding existing on or prior to the Relevant Time (other than this Agreement, any Ancillary Agreement, any Commercial Arrangements, any Contract entered into in connection herewith or in order to consummate the transactions contemplated hereby or thereby or by the Plan of Reorganization).

-21-

Section 2.6 Transfers Not Effected on or Prior to the Relevant Time; Transfers Deemed Effective as of the Relevant Time.

(a) Subject to Section 9.2, to the extent that any Transfers contemplated by this Article II shall not have been consummated on or prior to the Relevant Time, the Parties shall use reasonable best efforts to effect such Transfers as promptly following the Relevant Time as shall be practicable. Nothing herein shall be deemed to require the Transfer of any Assets or the Assumption of any Liabilities which by their terms or operation of Law cannot be Transferred; provided, however, that the Parties and their respective Subsidiaries shall cooperate and use reasonable best efforts to seek to obtain any necessary Governmental Approvals for the Transfer of all Assets and Assumption of all Liabilities contemplated to be Transferred and Assumed pursuant to this Article II. In the event that any such Transfer of Assets or Assumption of Liabilities has not been consummated, from and after the Relevant Time (i) the Party retaining such Asset shall thereafter hold such Asset for the use and benefit of the Party entitled thereto (at the expense of the Person entitled thereto) and (ii) the Party intended to Assume such Liability shall, or shall cause the applicable member of its Group to, pay or reimburse the Party retaining such Liability for all amounts paid or incurred in connection with the retention of such Liability. In addition, the Party retaining such Asset or Liability shall, insofar as reasonably possible and to the extent permitted by applicable Law, treat such Asset or Liability in the ordinary course of business and take such other actions as may be reasonably requested by the Party to which such Asset is to be Transferred or by the Party that is to Assume such Liability in order to place such Party, insofar as reasonably possible, in the same position as if such Asset or Liability had been Transferred or Assumed as contemplated hereby and so that all the benefits and burdens relating to such Asset or Liability, including possession, use, risk of loss, potential for gain, and dominion, control and command over such Asset or Liability, are to inure from and after the Relevant Time to the member or members of the Vector Group or Spinco Group entitled to the receipt of such Asset or required to Assume such Liability. In furtherance of the foregoing, subject to Section 9.2, the Parties agree that, as of the Relevant Time, each Party shall be deemed to have acquired complete and sole beneficial ownership over all of the Assets, together with all rights, powers and privileges incident thereto, and shall be deemed to have Assumed in accordance with the terms of this Agreement all of the Liabilities, and all duties, obligations and responsibilities incident thereto, which such Party is entitled to acquire or required to Assume pursuant to the terms of this Agreement.

(b) If and when the Governmental Approvals, third-party consents and/or conditions, the absence or non-satisfaction of which caused the deferral of Transfer of any Asset or deferral of the Assumption of any Liability pursuant to Section 2.6(a), are obtained or satisfied, the Transfer, assignment, Assumption or novation of the applicable Asset or Liability shall be effected in accordance with and subject to the terms of this Agreement and/or the applicable Ancillary Agreement.

-22-

(c) The Party retaining any Asset or Liability due to the deferral of the Transfer of such Asset or the deferral of the Assumption of such Liability pursuant to Section 2.6(a) or otherwise shall not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced, assumed, or agreed in advance to be reimbursed by the Party entitled to such Asset or the Person intended to be subject to such Liability, other than reasonable attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by the Party entitled to such Asset or the Person intended to be subject to such Liability.

(d) Subject to Section 9.2, on and prior to the eighteen (18) month anniversary following the Relevant Time, if a Party owns any Asset, that, although not Transferred pursuant to this Agreement, is agreed by such Party and the other Party in their good faith judgment to be an Asset that more properly belongs to the other Party or a Subsidiary of the other Party, or an Asset that such other Party or Subsidiary was intended to have the right to continue to use (other than (for the avoidance of doubt), as between the Parties, for any Asset acquired from an unaffiliated third party by a Party or member of such Party’s Group following the Relevant Time), then the Party owning such Asset shall, as applicable (i) Transfer any such Asset to the Party identified as the appropriate transferee and following such Transfer, such Asset shall be a Spinco Asset or Vector Retained Asset, as the case may be, or (ii) grant such mutually agreeable rights with respect to such Asset to permit such continued use, subject to, and consistent with this Agreement, including with respect to Assumption of associated Liabilities, in all events, subject to the Parties’ agreement (I) as to the most cost efficient means of effecting such Transfer or grant of rights and (II) to share any incremental costs arising as a result of such Transfer.

(e) After the Relevant Time, each Party may receive mail, packages and other communications properly belonging to the other Party. Accordingly, at all times after the Relevant Time, each Party authorizes the other Party to receive and open all mail, packages and other communications received by such Party, and to the extent that they do not relate to the business of the receiving Party, the receiving Party shall promptly deliver such mail, packages or other communications (or, in case the same relate to both businesses, copies thereof) to the other Party as provided for in Section 9.6. The provisions of this Section 2.6(e) are not intended to, and shall not, be deemed to constitute an authorization by any Party to permit the other to accept service of process on its behalf and no Party is or shall be deemed to be the agent of the other Party for service of process purposes.

(f) With respect to Assets and Liabilities described in Section 2.6(a), unless otherwise required by a change in applicable Tax Law or by a final determination within the meaning of Section 1313(a) of the Code (or a similar determination under applicable state or local Law), each of Vector and Spinco shall, and shall cause the members of its respective Group to, (i) treat for all purposes of the Tax Disaffiliation Agreement (A) the deferred Assets as assets having been Transferred to and owned by the Party entitled to such Assets not later than the Relevant Time and (B) the deferred Liabilities as liabilities having been Assumed and owned by the Person intended to be subject to such Liabilities not later than the Relevant Time, and (ii) neither report nor take any income Tax position (on a Tax Return or otherwise) inconsistent with such treatment.

-23-

Section 2.7 Conveyancing and Assumption Instruments. In connection with, and in furtherance of, the Transfers of Assets and Assumptions of Liabilities contemplated by this Agreement, subject to Section 9.2, the Parties shall execute or cause to be executed, on or prior to the Relevant Time, by the appropriate entities, the Conveyancing and Assumption Instruments necessary to evidence the valid and effective Assumption by the applicable Party of its Assumed Liabilities and the valid Transfer to the applicable Party or member of such Party’s Group of all right, title and interest in and to its Assets, in substantially the form contemplated hereby for Transfers and Assumptions to be effected pursuant to New York Law, the Laws of the United States or the applicable Laws of one of the other states of the United States, as applicable, in such other form as the Parties shall reasonably agree. The Transfer of capital stock shall be effected by means of executed stock powers and notation on the stock record books of the corporation or other legal entities involved and, only to the extent required by applicable Law, by notation on public registries.

Section 2.8 Novation of Liabilities.

(a) Each Party, at the request of the other Party, shall use reasonable best efforts (i) to obtain, or to cause to be obtained, any Consent, substitution or amendment required to novate or assign all obligations under Contracts, licenses and other Liabilities for which a member of such Party’s Group and a member of the other Party’s Group are prior to the Relevant Time jointly or severally liable and that do not constitute Liabilities of such other Party following the Relevant Time as provided in this Agreement (such other Party, the “Other Party”), or (ii) to obtain in writing the unconditional release of all parties to such arrangements (other than any member of the Group who Assumed or retained such Liability as set forth in this Agreement), so that, in any such case, the members of the applicable Group will be solely responsible for such Liabilities; provided, however, that no Party shall be obligated to pay any consideration therefor to any third party from whom any such Consent, substitution or amendment is requested (unless such Party is fully reimbursed by the requesting Party).

(b) If the Parties are unable to obtain, or to cause to be obtained, any such required Consent, release, substitution or amendment, the Other Party or a member of the Other Party’s Group shall continue to be bound by such Contract, license or other obligation that does not constitute a Liability of such Other Party and, unless not permitted by Law or the terms thereof, as agent or subcontractor for such Party, the Party or member of such Party’s Group who Assumed or retained such Liability as set forth in this Agreement (the “Liable Party”) shall, or shall cause a member of its Group to, pay, perform and discharge fully all the obligations or other Liabilities of such Other Party or member of the Other Party’s Group thereunder from and after the Relevant Time. The Liable Party shall indemnify the Other Party and hold each of them harmless against any Liabilities (other than Liabilities of such Other Party) arising in connection therewith; provided, however, that the Liable Party shall have no obligation to indemnify the Other Party losses resulting from their gross negligence, willful misconduct or bad faith. The Other Party shall, without further consideration, promptly pay and remit, or cause to be promptly paid or remitted, to the Liable Party or any member of the Liable Party’s Group, any money, rights and other consideration received by it or any member of its Group in respect of such

-24-

performance by the Liable Party (unless any such consideration is an Asset of such Other Party pursuant to this Agreement). If and when any such Consent, release, substitution or amendment shall be obtained or such agreement, lease, license or other rights or obligations shall otherwise become assignable or able to be novated, the Other Party shall promptly Transfer all rights and Liabilities thereunder of any member of such Other Party’s Group to the Liable Party, or to another member of the Liable Party’s Group, without payment of any further consideration and the Liable Party, or another member of the Liable Party’s Group, without the payment of any further consideration, shall Assume such rights and Liabilities.

Section 2.9 Guarantees.

(a) On or prior to the Relevant Time or as soon as practicable thereafter, (i) Vector shall (with the reasonable cooperation of the relevant beneficiary) use its reasonable best efforts to have any member of the Spinco Group removed as guarantor of or obligor for any Vector Retained Liability to the extent that they relate to Vector Retained Liabilities and (ii) Spinco shall (with the reasonable cooperation of the relevant beneficiary) use its reasonable best efforts to have any member of the Vector Group removed as guarantor of or obligor for any Spinco Liability to the extent that they relate to Spinco Liabilities.

(b) On or prior to the Relevant Time, to the extent required to obtain a release from a guaranty, surety bond or other credit support instrument (a “Guaranty Release”):

(i) of any member of the Vector Group, Spinco shall execute a guaranty agreement in the form of the existing guaranty, surety bond or other credit support instrument, except to the extent that such existing guaranty, surety bond or other credit support instrument contains representations, covenants or other terms or provisions either (A) with which Spinco would be reasonably unable to comply or (B) which would be reasonably expected to be breached; and

(ii) of any member of the Spinco Group, Vector shall execute a guaranty agreement in the form of the existing guaranty, surety bond or other credit support instrument, except to the extent that such existing guaranty, surety bond or other credit support instrument contains representations, covenants or other terms or provisions either (A) with Spinco would be reasonably unable to comply or (B) which would be reasonably expected to be breached.

(c) If Vector or Spinco is unable to obtain, or to cause to be obtained, any such required removal as set forth in clauses (a) and (b) of this Section 2.9, (i) the relevant beneficiary shall indemnify and hold harmless the guarantor or obligor for any Indemnifiable Loss arising from or relating thereto (in accordance with the provisions of Article VI) and shall or shall cause one of its Subsidiaries to pay, perform and discharge fully all the obligations or other Liabilities of such guarantor or obligor thereunder, and (ii) each of Vector and Spinco, on behalf of themselves and the members of their respective Groups, agree not to renew or extend the term of, increase its obligations under, or Transfer to a third party, any guarantee or other obligation for which the other

-25-

Party or member of such Party’s Group is or may be liable unless all obligations of such other Party and the members or member of such Party’s Group with respect thereto are thereupon terminated by documentation reasonably satisfactory in form and substance to such Party; provided, however, that with respect to leases, in the event a Guaranty Release is not obtained and the relevant beneficiary wishes to extend the term of such guaranteed lease of such guaranteed lease, then such beneficiary shall have the option of extending the term if it provides such security as is reasonably satisfactory to the guarantor under such guaranteed lease.

Section 2.10 Bank Accounts.

(a) Vector and Spinco each agrees to take, or cause the members of their respective Groups to take, prior to the Relevant Time (or as soon as possible thereafter), all actions necessary to amend all Contracts governing each bank and brokerage account owned by Spinco or any member of the Spinco Group (collectively, the “Spinco Accounts”), including all Spinco Accounts listed or described on Schedule 2.10(a)(i), so that such Spinco Accounts, if currently linked (whether by automatic withdrawal, automatic deposit or any other authorization to transfer funds from or to, hereinafter “linked”) to any bank or brokerage account owned by Vector or any other member of the Vector Group (collectively, the “Vector Accounts”), including all Vector Accounts listed or described on Schedule 2.10(a)(ii), are de-linked from such Vector Accounts.

(b) Vector and Spinco each agrees to take, or cause the members of their respective Groups to take, prior to the Relevant Time (or as soon as possible thereafter), all actions necessary to amend all Contracts governing the Vector Accounts so that such Vector Accounts, if currently linked to any Spinco Accounts, are de-linked from such Spinco Accounts.

(c) With respect to any outstanding checks issued by Vector or Spinco or any of their respective Subsidiaries prior to the Relevant Time, such outstanding checks shall be honored from and after the Relevant Time by the Person or Group owning the account on which the check is drawn, without limiting the ultimate allocation of Liability for such amounts under this Agreement or any other Ancillary Agreement.

Section 2.11 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. EACH OF VECTOR (ON BEHALF OF ITSELF AND EACH MEMBER OF THE VECTOR GROUP) AND SPINCO (ON BEHALF OF ITSELF AND EACH MEMBER OF THE SPINCO GROUP), UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, IN ANY ANCILLARY AGREEMENT OR IN ANY COMMERCIAL ARRANGEMENT, NO PARTY TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, ANY ANCILLARY AGREEMENTS OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES CONTRIBUTED, TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS OR GOVERNMENTAL APPROVALS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER

-26-

CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SETOFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY ACTION OR OTHER ASSET, INCLUDING ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY CONTRIBUTION, ASSIGNMENT, DOCUMENT, CERTIFICATE OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT OR COMMERCIAL ARRANGEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS,” “WHERE IS” BASIS AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE SHALL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST AND (II) ANY NECESSARY CONSENTS OR GOVERNMENTAL APPROVALS ARE NOT OBTAINED OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

ARTICLE III

CERTAIN ACTIONS AT OR PRIOR TO THE DISTRIBUTIONS

Section 3.1 Certificate of Incorporation; By-laws. On or prior to the Distribution Date, all necessary actions shall be taken to adopt the form of amended and restated certificate of incorporation and amended and restated by-laws filed by Spinco with the SEC as exhibits to the Form S-1.

Section 3.2 Directors. On or prior to the Distribution Date, Vector shall take all necessary action to cause the Board of Directors of Spinco (the “Spinco Board”) to consist, as of or immediately following the Distribution, of the individuals identified in the Form S-1 as directors of Spinco, including causing the existing directors of Spinco to appoint such individuals and, where applicable, to resign from the Spinco Board.

Section 3.3 Resignations. On or prior to the Distribution Date, except as set forth on Schedule 3.3, (i) Vector shall cause all its employees and any employees of its Affiliates (excluding any employees of any member of the Spinco Group) to resign, effective as of the Distribution Date, from all positions as officers or directors of any member of the Spinco Group in which they serve, and (ii) Spinco shall cause all its employees and any employees of its Affiliates to resign, effective as of the Distribution Date, from all positions as officers or directors of any members of the Vector Group in which they serve.

Section 3.4 Cash Adjustment. Prior to the Relevant Time, either (i) Vector will transfer funds to Spinco or a member of the Spinco Group designated by it or (ii) Spinco will transfer or cause the transfer of funds to Vector or a member of the Vector Group designated by it, such that, on a consolidated basis, Spinco’s cash and cash equivalents balance immediately prior to the Relevant Time shall equal at least $200 million.

-27-

Section 3.5 Ancillary Agreements. On or prior to the Relevant Time, each of Vector and Spinco shall enter into, and/or (where applicable) shall cause a member or members of their respective Group to enter into, the applicable Ancillary Agreements and any other Contracts in respect of the Distributions reasonably necessary or appropriate in connection with the transactions contemplated hereby and thereby.

Section 3.6 Commercial Arrangements. On or prior to the Relevant Time, each of Vector and Spinco shall enter into, and/or (where applicable) shall cause a member or members of their respective Group to enter into, the applicable Commercial Arrangements.

ARTICLE IV

THE DISTRIBUTION

Section 4.1 Stock Dividends by Vector. On the Distribution Date, Vector will cause the Distribution Agent to distribute 100% of the outstanding shares of Spinco Common Stock then owned by Vector to holders of Vector Common Stock (including Vector Common Stock underlying outstanding stock option awards and restricted stock awards subject to the terms and conditions set forth in the Employee Matters Agreement) on the Record Date, and to credit the appropriate class and number of such shares of Spinco Common Stock to book-entry accounts for each such holder of Vector Common Stock (including Vector Common Stock underlying outstanding stock option awards and restricted stock awards subject to the terms and conditions set forth in the Employee Matters Agreement). For stockholders of Vector who own Vector Common Stock through a broker or other nominee, their shares of Spinco Common Stock will be credited to their respective accounts by such broker or nominee. Each holder of Vector Common Stock (including Vector Common Stock underlying outstanding stock option awards and restricted stock awards subject to the terms and conditions set forth in the Employee Matters Agreement) on the Record Date will be entitled to receive in the Distribution one share of Spinco Common Stock for every two shares of Vector Common Stock held by such stockholder. No action by any such stockholder shall be necessary for such stockholder to receive the applicable number of shares of (and, if applicable, cash in lieu of any fractional shares pursuant to Section 4.2 hereof) Spinco Common Stock such stockholder is entitled to in the Distribution.

Section 4.2 Fractional Shares. Vector stockholders holding a number of shares of Vector Common Stock, on the Record Date, which would entitle such stockholders to receive less than one whole share of Spinco Common Stock in the Distribution, will receive cash in lieu of fractional shares. Fractional shares of Spinco Common Stock will not be distributed in the Distribution nor credited to book-entry accounts. The Distribution Agent shall, as soon as practicable after the Distribution Date (a) determine the number of whole shares and fractional shares of Spinco Common Stock allocable to each holder of record of Vector Common Stock as of the close of business on the Record Date (or in accordance with the applicable procedures of The Depository Trust Company, to members thereof), (b) aggregate all such fractional shares into whole shares and sell the whole shares obtained thereby in open market transactions, in each case, at then prevailing trading prices on behalf of holders who would otherwise be entitled to fractional share interests, and (c) distribute to each such holder, or for the benefit of each beneficial owner, such holder or owner’s ratable share of the net proceeds of such sale, based upon the average gross selling price per share of Spinco Common Stock after making appropriate deductions for any amount required to be withheld for [United States federal income Tax and other applicable Tax purposes]. Spinco shall bear the cost of brokerage fees incurred in connection with these sales of

-28-

fractional shares, which sales shall occur as soon after the Distribution Date as practicable and as determined by the Distribution Agent. None of Vector, Spinco or the Distribution Agent will guarantee any minimum sale price for the fractional shares of Spinco Common Stock. None of Vector or Spinco will pay any interest on the proceeds from the sale of fractional shares. The Distribution Agent acting on behalf of Spinco will have the sole discretion to select the broker-dealers through which to sell the aggregated fractional shares and to determine when, how and at what price to sell such shares. Neither the Distribution Agent nor the broker-dealers through which the aggregated fractional shares are sold will be Affiliates of Vector or Spinco.

Section 4.3 Actions in Connection with the Distribution.

(a) Spinco shall file such amendments and supplements to its Form S-1 as may be necessary or advisable in order to cause the same to become and remain effective as required by the SEC or federal, state or other applicable securities Laws. Spinco shall mail to the holders of Vector Common Stock as of the Record Date, on or prior to the Distribution Date, the prospectus included in its Form S-1, as well as any other information concerning Spinco, its business, operations and management, the Plan of Reorganization and such other matters as may be necessary or advisable or as may be required by Law.

(b) Each of Spinco and Vector shall cooperate in preparing, filing with the SEC or similar authority and causing to become effective registration statements or amendments thereof which are required to reflect the establishment of, or amendments to, any employee benefit and other plans necessary or appropriate in connection with the Plan of Reorganization or other transactions contemplated by this Agreement and the Ancillary Agreements. Spinco shall prepare and, in accordance with applicable Law, file with the SEC or similar authority any such documentation that is necessary or desirable to effectuate the Distribution, and Vector and Spinco shall each use reasonable best efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable.

(c) Spinco shall prepare and file, and shall use reasonable best efforts to have approved and made effective, an application for the original listing of the Spinco Common Stock to be distributed in the Distribution on the NYSE, subject to official notice of distribution.

Section 4.4 Sole Discretion of Vector. The Vector Board shall, in its sole and absolute discretion, determine the Distribution Date and all terms of the Distribution, including the form, structure and terms of any transactions and/or offerings to effect the Distribution and the timing of and conditions to the consummation thereof. In addition, the Vector Board may at any time and from time to time until the completion of the Distribution decide to abandon any or all of the Distribution or modify or change the terms of the Distribution, including by accelerating or delaying the timing of the consummation of all or part of any Distribution.

-29-

Section 4.5 Conditions to the Distribution. The Distribution is subject to the satisfaction of the following conditions or the Vector Board’s waiver of the following conditions:

(a) the Vector Board will, in its sole and absolute discretion, have authorized and approved (i) the Plan of Reorganization, (ii) any other transfers of Assets and assumptions of Liabilities contemplated by this Agreement and any related agreements with respect to Spinco and (iii) the Distribution, and will not have withdrawn that authorization and approval;

(b) the Vector Board will have declared the Distribution of 100% of the outstanding shares of Spinco Common Stock to holders Vector Common Stock (including Vector Common Stock underlying outstanding stock option awards and restricted stock awards);

(c) the SEC will have declared Spinco’s Registration Statement on Form S-1 effective under the Securities Act, no stop order suspending the effectiveness of the Registration Statement will be in effect, and no proceedings for that purpose will be pending before or threatened by the SEC;

(d) the Spinco Common Stock to be delivered in the Distribution shall have been approved for listing on NYSE, subject to official notice of distribution;

(e) the Plan of Reorganization will have been completed;

(f) Vector shall have received an opinion of Sullivan & Cromwell LLP, in form and substance satisfactory to the Vector Board, regarding the U.S. federal income Tax treatment of the Distribution and certain related transactions;

(g) no order, injunction or decree that would prevent the consummation of the Distribution will be threatened, pending or issued (and still in effect) by any governmental entity of competent jurisdiction, no other legal restraint or prohibition preventing the consummation of the Distribution will be in effect, and no other event outside the control of Vector will have occurred or failed to occur that prevents the consummation of the Distribution;

(h) no events or developments will have occurred or shall exist prior to the Distribution that, in the judgment of the Vector Board, would result in the Distribution having a material adverse effect on Vector or its stockholders;

(i) Vector and Spinco will have executed and delivered this Agreement, the Tax Disaffiliation Agreement, the Employee Matters Agreement, the Transition Services Agreement and all other Ancillary Agreements related to the Distribution; and

(j) the actions set forth in Section 3.1, Section 3.2, and Section 3.3 shall have been completed.

-30-

ARTICLE V

CERTAIN COVENANTS

Section 5.1 Financial Statements and Accounting. Each Party agrees to provide the following assistance and access set forth in subsections (a), (b) and (c) of this Section 5.1, (i) during the one (1) year period following the Relevant Time in connection with the preparation and audit of each of the Party’s financial statements for the year ended December 31, 2021, the preparation and review of each Party’s interim financial statements beginning with the nine (9) months ended September 30, 2021 the printing, filing and public dissemination of such financial statements, the audit of each Party’s internal control over financial reporting and management’s assessment thereof and management’s assessment of each Party’s disclosure controls and procedures, if required, in each case made as of December 31, 2021; (ii) following such initial one (1) year period, with the consent of the other Party (with such consent not to be unreasonably withheld, delayed or conditioned) for reasonable business purposes; (iii) in the event that any Party changes its auditors within two (2) years after the Relevant Time, then such Party may request reasonable access on the terms set forth in this Section 5.1 for a period of up to one hundred eighty (180) days from the date of such change; and (iv) from time to time following the Relevant Time, to the extent reasonably necessary to respond (and for the limited purpose of responding) to any written request or official comment from a Governmental Entity, such as in connection with responding to a comment letter from the SEC:

(a) Annual and Interim Financial Statements. Each Party shall provide or provide access to the other Party on a timely basis of all Information reasonably required to meet its schedule for the preparation, printing, filing, and public dissemination of its annual financial statements and for management’s assessment of the effectiveness of its disclosure controls and procedures and its internal control over financial reporting in accordance with Items 307 and 308, respectively, of Regulation S-K and, to the extent applicable to such Party, its auditor’s audit of its internal control over financial reporting and management’s assessment thereof in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the SEC’s and Public Company Accounting Oversight Board’s rules and auditing standards thereunder, if required (such assessments and audit being referred to as the “Internal Control Audit and Management Assessments”), and for the preparation, printing, filing and public dissemination of its interim financial statements. Without limiting the generality of the foregoing, each Party will provide all required financial and other Information with respect to itself and its Subsidiaries to its auditors in a sufficient and reasonable time and in sufficient detail to permit its auditors to take all steps and perform all reviews necessary to provide sufficient assistance to the other Party’s auditors with respect to Information to be included or contained in such other Party’s annual or interim financial statements and to permit such other Party’s auditors and management to complete the Internal Control Audit and Management Assessments, if required.

(b) Access to Personnel and Records. Each Party shall authorize its respective auditors to make reasonably available to the other Party’s auditors (such other Party’s auditors, collectively, the “Other Party’s Auditors”) both the personnel who performed or are performing the annual audits of such audited Party (such Party with respect to its own

-31-

audit, the “Audited Party”) and work papers related to the annual audits of such Audited Party, in all cases within a reasonable time prior to such Audited Party’s auditors’ opinion date, so that the Other Party’s Auditors are able to perform the procedures they reasonably consider necessary to take responsibility for the work of the Audited Party’s auditors as it relates to their auditors’ report on such other Party’s financial statements, all within sufficient time to enable such other Party to meet its timetable for the printing, filing and public dissemination of its annual financial statements. Each Party shall make reasonably available to the Other Party’s Auditors and management its personnel and Records in a reasonable time prior to the Other Party’s Auditors’ opinion date and other Party’s management’s assessment date so that the Other Party’s Auditors and the Other Party’s management are able to perform the procedures they reasonably consider necessary to conduct the Internal Control Audit and Management Assessments.

(c) Annual Reports. Each Party will deliver to the other Party a substantially final draft, as soon as the same is prepared, of the first report to be filed with the SEC (or otherwise) that includes their respective financial statements (in the form expected to be covered by the audit report of such Party’s independent auditors) for the year ended December 31, 2021 (such reports, collectively, the “Annual Reports”); provided, however, that each Party may continue to revise its respective Annual Report prior to the filing thereof, which changes will be delivered to the other Party as soon as reasonably practicable; provided, further, that each Party’s personnel will actively consult with the other Party’s personnel regarding any material changes which they may consider making to its respective Annual Report and related disclosures prior to the anticipated filing with the SEC, with particular focus on any changes which could reasonably be expected to have an effect upon the other Party’s financial statements or related disclosures.

Nothing in this Section 5.1 shall require any Party to violate any agreement with any third party regarding the confidentiality of confidential and proprietary Information relating to that third party or its business; provided, however, that in the event that a Party is required under this Section 5.1 to disclose any such Information, such Party shall use reasonable best efforts to seek to obtain such third party’s written consent to the disclosure of such Information.

Section 5.2 Further Assurances.

(a) In addition to and without limiting the actions specifically provided for elsewhere in this Agreement, including Section 2.6, each of the Parties shall cooperate with each other and use (and will cause their respective Subsidiaries and Affiliates to use) reasonable best efforts, on and after the Relevant Time, to take, or to cause to be taken, all actions, and to do, or to cause to be done, all things reasonably necessary on its part under applicable Law or contractual obligations to consummate and make effective the transactions contemplated by this Agreement the Ancillary Agreements and Commercial Arrangements.

(b) Without limiting the foregoing, on and after the Relevant Time, each Party shall cooperate with the other Party, and without any further consideration, but at the expense of the requesting Party from and after the Relevant Time, to execute and deliver, or use reasonable best efforts to cause to be executed and delivered, all instruments,

-32-

including instruments of Transfer, and to make all filings with, and to obtain all Governmental Approvals, any permit or license, and to take all such other actions as such Party may reasonably be requested to take by the other Party from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the Transfers of the applicable Assets and the assignment and Assumption of the applicable Liabilities and the other transactions contemplated hereby and thereby. Without limiting the foregoing, each Party will, at the reasonable request, cost and expense of the other Party, take such other actions as may be reasonably necessary to vest in such other Party good and marketable title to the Assets allocated to such Party under this Agreement or any of the Ancillary Agreements, free and clear of any Security Interest, if and to the extent it is practicable to do so.

ARTICLE VI

INDEMNIFICATION

Section 6.1 Release of Pre-Distribution Claims.

(a) Except (i) as provided in Section 6.1(b), (ii) as may be otherwise expressly provided in this Agreement or any Ancillary Agreement and (iii) for any matter for which any Party is entitled to indemnification or contribution pursuant to this Article VI, each Party, for itself and each member of its respective Group, their respective Affiliates and all Persons who at any time prior to the Relevant Time were directors, officers, agents or employees of any member of their Group (in their respective capacities as such), in each case, together with their respective heirs, executors, administrators, successors and assigns, do hereby remise, release and forever discharge the other Party and the other members of such other Party’s Group, their respective Affiliates and all Persons who at any time prior to the Relevant Time were stockholders, directors, officers, agents or employees of any member of such other Party’s Group (in their respective capacities as such), in each case, together with their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at Law or in equity (including any right of contribution), whether arising under any Contract, by operation of Law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Relevant Time, including in connection with the Plan of Reorganization and all other activities to implement the Distribution and any of the other transactions contemplated hereunder and under the Ancillary Agreements.

(b) Nothing contained in Sections 6.1(a) and 2.4(a) shall impair or otherwise affect any right of any Party, and as applicable, a member of the Party’s Group to enforce this Agreement, any Ancillary Agreement or any agreements, arrangements, commitments or understandings contemplated in this Agreement or any Ancillary Agreement that continue in effect after the Relevant Time. In addition, nothing contained in Section 6.1(a) shall release any Person from:

(i) any Liability Assumed, Transferred or allocated to a Party or a member of such Party’s Group pursuant to or contemplated by, or any other Liability of any member of such Group under, this Agreement or any Ancillary Agreement including (A) with respect to Vector, any Vector Retained Liability and (B) with respect to Spinco, any Spinco Liability;

-33-

(ii) any Liabilities that may arise out of the Vector Retained Assets or Spinco Assets;

(iii) any Liability for the sale, lease, construction or receipt of goods, property or services purchased, obtained or used in the ordinary course of business by a member of one Group from a member of any other Group prior to the Relevant Time;

(iv) any Liability for unpaid amounts for products or services or refunds owing on products or services due on a value-received basis for work done by a member of one Group at the request or on behalf of a member of the other Group;

(v) any Liability provided in or resulting from any other Contract or understanding that is entered into or in effect after the Relevant Time between any Party (and/or a member of such Party’s Group), on the one hand, and the other Party or Parties (and/or a member of such Party’s Group), on the other hand;

(vi) any Liability with respect to any Commercial Arrangements set forth on Schedule 1.1(15);

(vii) any Liability that the Parties may have with respect to indemnification or contribution pursuant to this Agreement or otherwise for claims brought against the Parties by third parties, which Liability shall be governed by the provisions of this Article VI and, if applicable, the appropriate provisions of the Ancillary Agreements.

In addition, nothing contained in Section 6.1(a) shall release Vector from indemnifying any director, officer or employee of Spinco who was a director, officer or employee of Vector or any of its Affiliates on or prior to the Relevant Time, as the case may be, to the extent such director, officer or employee is or becomes a named defendant in any Action with respect to which he or she was entitled to such indemnification pursuant to then existing obligations.

(c) Each Party shall not, and shall not permit any member of its Group to make, any claim, demand or offset, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against the other Party or any member of the other Party’s Group with respect to any Liabilities released pursuant to Section 6.1(a).

-34-

(d) It is the intent of each Party, by virtue of the provisions of this Section 6.1, to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Relevant Time, whether known or unknown, between or among any Party (and/or a member of such Party’s Group), on the one hand, and the other Party (and/or a member of such Party’s Group), on the other hand (including any contractual agreements or arrangements existing or alleged to exist between or among any such members on or before the Relevant Time), except as specifically set forth in Sections 6.1(a) and 6.1(b). At any time, at the reasonable request of the other Party, each Party shall cause each member of its respective Group and, to the extent practicable each other Person on whose behalf it released Liabilities pursuant to this Section 6.1 to execute and deliver releases reflecting the provisions hereof.

Section 6.2 Indemnification by Vector. Except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, following the Distribution Date (with respect to the Spinco Indemnitees), Vector shall and shall cause the other members of the Vector Group to indemnify, defend and hold harmless the Spinco Indemnitees from and against any and all Indemnifiable Losses of the Spinco Indemnitees arising out of, by reason of or otherwise in connection with (i) the Vector Retained Liabilities or alleged Vector Retained Liabilities, (ii) any Liabilities arising out of Vector Retained Assets or alleged Vector Retained Assets or (iii) any breach by Vector of any provision of this Agreement or any Ancillary Agreement unless such Ancillary Agreement expressly provides for separate indemnification therein, in which case any such indemnification claims shall be made thereunder.

Section 6.3 Indemnification by Spinco. Except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, Spinco shall and shall cause the other members of the Spinco Group to indemnify, defend and hold harmless the Vector Indemnitees from and against any and all Indemnifiable Losses of the Vector Indemnitees arising out of, by reason of or otherwise in connection with (i) the Spinco Liabilities or alleged Spinco Liabilities, (ii) any Liabilities arising out of Spinco Assets or alleged Spinco Assets or (iii) any breach by Spinco of any provision of this Agreement or any Ancillary Agreement unless such Ancillary Agreement expressly provides for separate indemnification therein, in which case any such indemnification claims shall be made thereunder.

Section 6.4 Procedures for Indemnification.

(a) An Indemnitee shall give the Indemnifying Party notice of any matter that an Indemnitee has determined has given or could give rise to a right of indemnification under this Agreement (other than a Third Party Claim which shall be governed by Section 6.4(b)), within thirty (30) days of such determination, stating the amount of the Indemnifiable Loss claimed, if known, and method of computation thereof, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed by such Indemnitee or arises; provided, however, that the failure to provide such written notice shall not release the Indemnifying Party from any of its obligations except and solely to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure.

-35-

(b) Third Party Claims. If a claim or demand is made against a Vector Indemnitee or a Spinco Indemnitee (each, an “Indemnitee”) by any Person who is not a party to this Agreement or a member of the Vector Group or Spinco Group (a “Third Party Claim”) as to which such Indemnitee is or may be entitled to indemnification pursuant to this Agreement, such Indemnitee shall notify the Party that is or may be required pursuant to this Article VI or pursuant to any Ancillary Agreement to make such indemnification (the “Indemnifying Party”) in writing, and in reasonable detail, of the Third Party Claim promptly and in any event by the date (the “Outside Notice Date”) that is the tenth (10^th) Business Day after receipt by such Indemnitee of written notice of the Third Party Claim (such written notice, the “Third Party Claim Notice”); provided, however, that the failure to provide the Third Party Claim Notice of any such Third Party Claim pursuant to this sentence shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure (except that the Indemnifying Party shall not be liable for any expenses incurred during the period beginning immediately after the Outside Notice Date and ending on the date that the Indemnitee gives the required Third Party Claim Notice). Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly (and in any event within ten (10) Business Days) after the Indemnitee’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third Party Claim.

(c) Other than in the case of (i) indemnification pursuant to the Tax Disaffiliation Agreement or (ii) indemnification by a beneficiary Party of a guarantor Party pursuant to Section 2.9(c) (the defense of which shall be assumed and controlled by the beneficiary Party), an Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses and acknowledges in writing its obligation to indemnify the Indemnitee therefor, to assume the defense thereof with counsel selected by the Indemnifying Party, provided, however, that such counsel is not reasonably objected to by the Indemnitee. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party shall, within thirty (30) days following receipt of the Third Party Claim Notice (or sooner if the nature of the Third Party Claim so requires), notify the Indemnitee of its intent to do so, and the Indemnifying Party shall thereafter not be liable to the Indemnitee for legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that such Indemnitee shall have the right to employ counsel to represent such Indemnitee if, in such Indemnitee’s reasonable judgment, a conflict of interest between such Indemnitee and such Indemnifying Party exists in respect of such claim which would make representation of both such parties by one counsel inappropriate, and in such event the fees and expenses of such separate counsel shall be paid by such Indemnifying Party. If the Indemnifying Party assumes such defense, the Indemnitee shall have the right to participate in the defense thereof and to employ counsel, subject to the proviso of the preceding sentence, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party shall control such defense. The Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnitee for any period during which the Indemnifying Party has failed to or elected not to assume the defense thereof (other than during the period prior to the time the Indemnitee shall have given notice of the Third Party Claim as provided above); provided, further, that if the Indemnifying Party has assumed the defense of the Third Party Claim but has specified, and continues to assert, any reservations or exceptions to such defense, then, in any such

-36-

case, the reasonable fees and expenses of one separate counsel for all Indemnitees shall be borne by the Indemnifying Party. Notwithstanding anything to the contrary contained herein, a Party shall not be required to provide notice to the other Party for any Third Party Claims for which such Party is providing legal support pursuant to the Transition Services Agreement to the extent that such other Party has received notice in such capacity.

(d) If the Indemnifying Party acknowledges in writing responsibility under this Article VI for a Third Party Claim, regardless of the Indemnifying Party’s election to assume the defense thereof or not in accordance with the provisions of Section 6.4(c), then in no event will the Indemnitee admit any Liability with respect to, or settle, compromise or discharge, any Third Party Claim without the Indemnifying Party’s prior written consent; provided, however, that the Indemnitee shall have the right to settle, compromise or discharge such Third Party Claim without the consent of the Indemnifying Party if the Indemnitee releases the Indemnifying Party from its indemnification obligation hereunder in writing with respect to such Third Party Claim and such settlement, compromise or discharge would not otherwise adversely affect the Indemnifying Party. If the Indemnifying Party acknowledges in writing Liability for a Third Party Claim, the Indemnitee will agree to any settlement, compromise or discharge of a Third Party Claim that the Indemnifying Party may recommend and that by its terms obligates the Indemnifying Party to pay the full amount of the Liability in connection with such Third Party Claim and releases the Indemnitee completely in connection with such Third Party Claim and that would not otherwise adversely affect the Indemnitee or admit any wrongdoing by the Indemnitee. If an Indemnifying Party elects not to assume the defense of a Third Party Claim, or fails to notify an Indemnitee of its election to do so as provided herein, or an Indemnifying Party refuses to acknowledge in writing or otherwise disputes its responsibility for such Third Party Claim, such Indemnitee may compromise, settle or defend such Third Party Claim.

(e) In the event and to the extent of payment by an Indemnifying Party to any Indemnitee in connection with any Third Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right or claim.

Section 6.5 Cooperation in Defense and Settlement.

(a) With respect to any Third Party Claim, the Parties shall cooperate as may reasonably be required in connection with the investigation, defense, prosecution and/or settlement of any Third Party Claim. In furtherance of this obligation, the Parties agree that if an Indemnifying Party chooses to assume the defense of, or to compromise or settle, any Third Party Claim, the Indemnitee shall use its commercially reasonable efforts to make available to the Indemnifying Party, upon written request, (x) their former and then current directors, officers, employees and agents and those of their subsidiaries as witnesses and (y) as soon as reasonably practicable following the receipt of such written request, any

-37-

agreements, books, records, files or other documents within its control or which it otherwise has the ability to make available, to the extent that (i) any such Person, agreements, books, records, files or other documents may reasonably be required in connection with such defense, settlement, prosecution or compromise and (ii) making such Person, agreements, books records or other documents so available would not constitute a waiver of the attorney-client privilege of the Indemnitee. At the request of an Indemnifying Party, an Indemnitee shall enter into a reasonably acceptable joint defense agreement.

(b) Each of Vector and Spinco agrees that at all times from and after the Relevant Time, if an Action is commenced by a third party with respect to which one or more named Parties (or any member of such respective Party’s Group) is a nominal defendant and/or such Action is otherwise not a Liability allocated to such named Party under this Agreement or any Ancillary Agreement, then the other Party shall use reasonable best efforts to cause such nominal defendant to be removed from such Action, as soon as reasonably practicable.

(c) Except in the case of fraud or willful misconduct and except as set forth in Section 9.20, the remedies provided in this Article VI shall be the exclusive remedy and shall preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party.

Section 6.6 Indemnification Payments. Indemnification required by this Article VI shall be made by periodic payments of the amount thereof in a timely fashion during the course of the investigation or defense, as and when bills are received or an Indemnifiable Loss or Liability is incurred. For all Tax purposes and to the extent permitted by applicable Law, the Parties hereto shall treat (i) any payment (other than payments representing interest) made pursuant to this Article VI as a capital contribution or a distribution, as the case may be, immediately prior to the Distribution and (ii) any payment of interest as taxable or deductible, as the case may be, to the Party entitled under this Agreement to retain such payment or required under this Agreement to make such payment, in either case except as otherwise required by applicable Law.

Section 6.7 Contribution.

(a) If the indemnification provided for in Sections 6.2 and 6.3 is unavailable to, or insufficient to hold harmless an Indemnitee under this Agreement or any Ancillary Agreement in respect of any Liabilities referred to herein or therein, then the relevant Indemnifying Party shall contribute to the amount paid or payable by such Indemnitee as a result of such Liabilities in such proportion as is appropriate to reflect the relative fault of such Indemnifying Party and the Indemnitee in connection with the actions or omissions that resulted in Liabilities as well as any other relevant equitable considerations. With respect to the foregoing, the relative fault of such Indemnifying Party and Indemnitee shall be determined by reference to, among other things, the Information supplied by such Indemnifying Party or Indemnitee, and the Parties’ relative intent, knowledge, access to Information and opportunity to correct or prevent any statement or omission.

-38-

(b) The Parties agree that it would not be just and equitable if contribution pursuant to this Section 6.7 were determined by a pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in Section 6.7(a). The amount paid or payable by an Indemnitee as a result of the Liabilities referred to in Section 6.7(a) shall be deemed to include, subject to the limitations set forth above, any legal or other fees or expenses reasonably incurred by such Indemnitee in connection with investigating any claim or defending any Action. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

Section 6.8 Indemnification Obligations Net of Insurance Proceeds and Other Amounts.

(a) Any Indemnifiable Loss subject to indemnification or contribution pursuant to this Article VI will be calculated (i) net of Insurance Proceeds that actually reduce the amount of the Indemnifiable Loss, (ii) net of any proceeds received by the Indemnitee from any third party for indemnification for such Liability that actually reduce the amount of the Indemnifiable Loss (“Third Party Proceeds”), and (iii) net of any Tax benefits actually realized in accordance with, and subject to, the principles set forth or referred to in the Tax Disaffiliation Agreement, and increased in accordance with, and subject to, the principles set forth in the Tax Disaffiliation Agreement. Accordingly, the amount which any Indemnifying Party is required to pay pursuant to this Article VI to any Indemnitee pursuant to this Article VI will be reduced by any Insurance Proceeds or Third Party Proceeds theretofore actually recovered by or on behalf of the Indemnitee in respect of the related Indemnifiable Loss. If an Indemnitee receives a payment required by this Agreement from an Indemnifying Party in respect of any Indemnifiable Loss (an “Indemnity Payment”) and subsequently receives Insurance Proceeds or Third Party Proceeds, then the Indemnitee will pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds or Third Party Proceeds had been received, realized or recovered before the Indemnity Payment was made.

(b) The Parties acknowledge that the indemnification and contributions hereof do not relieve any insurer who would otherwise be obligated to pay any claim to pay such claim. In furtherance of the foregoing, the Indemnitee shall use reasonable best efforts to seek to collect or recover any third-party Insurance Proceeds and any Third Party Proceeds (other than Insurance Proceeds under an arrangement where future premiums are adjusted to reflect prior claims in excess of prior premiums) to which the Indemnitee is entitled in connection with any Indemnifiable Loss for which the Indemnitee seeks contribution or indemnification pursuant to this Article VI; provided, however, that the Indemnitee’s inability to collect or recover any such Insurance Proceeds or Third Party Proceeds shall not limit the Indemnifying Party’s obligations hereunder.

-39-

Section 6.9 Additional Matters; Survival of Indemnities.

(a) The indemnity and contribution agreements contained in this Article VI shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnitee; (ii) the knowledge by the Indemnitee of Indemnifiable Losses for which it might be entitled to indemnification or contribution hereunder; and (iii) any termination of this Agreement.

(b) The rights and obligations of each Party and their respective Indemnitees under this Article VI shall survive the sale or other Transfer by any Party or its respective Subsidiaries of any Assets or businesses or the assignment by it of any Liabilities.

(c) Each Party shall, and shall cause the members of its respective Group to, preserve and keep their Records relating to financial reporting, internal audit, employee benefits, past acquisition or disposition transactions, claims, demands, actions, and email files and backup tapes regarding any of the foregoing as such pertains to any period prior to the Relevant Time in their possession, whether in electronic form or otherwise, until the latest of, as applicable (i) [ten (10) years] following the Distribution Date or (ii) the date on which such Records are no longer required to be retained pursuant to such Party’s applicable record retention policy and schedules as in effect immediately prior to the Distribution Date; provided, however, to the extent the Tax Disaffiliation Agreement provides for a longer period of retention of Tax Records, such longer period as provided in the Tax Disaffiliation Agreement shall control.

ARTICLE VII

CONFIDENTIALITY; ACCESS TO INFORMATION

Section 7.1 Provision of Corporate Records. Other than in circumstances in which indemnification is sought pursuant to Article VI (in which event the provisions of such Article will govern) or for matters related to provision of Tax records (in which event the provisions of the Tax Disaffiliation Agreement will govern), and subject to appropriate restrictions for classified, privileged or Confidential Information:

(a) After the Relevant Time, upon the prior written request by Spinco for specific and identified Information which relates to (x) Spinco or the conduct of the Spinco Business up to the Distribution Date, or (y) any Ancillary Agreement to which Vector and Spinco are parties, Vector shall provide, as soon as reasonably practicable following the receipt of such request, appropriate copies of such Information (or the originals thereof if the Party making the request has a reasonable need for such originals) in the possession or control of Vector or any of its Affiliates or Subsidiaries, but only to the extent such items so relate and are not already in the possession or control of Spinco.

(b) After the Relevant Time, upon the prior written request by Vector for specific and identified Information which relates to (x) Vector or the conduct of the Vector Retained Business up to the Distribution Date, or (y) any Ancillary Agreement to which Spinco and Vector are parties, Spinco shall provide, as soon as reasonably practicable

-40-

following the receipt of such request, appropriate copies of such Information (or the originals thereof if the Party making the request has a reasonable need for such originals) in the possession or control of Spinco or any of its Subsidiaries, but only to the extent such items so relate and are not already in the possession or control of Vector.

Section 7.2 Access to Information. Other than in circumstances in which indemnification is sought pursuant to Article VI (in which event the provisions of such Article will govern) or for access with respect to Tax matters (in which event the provisions of the Tax Disaffiliation Agreement will govern), from and after the Relevant Time, each of Vector and Spinco shall afford to the other and its authorized accountants, counsel and other designated representatives reasonable access during normal business hours, subject to appropriate restrictions for classified, privileged or Confidential Information, to the personnel, properties, and Information of such Party and its Subsidiaries insofar as such access is reasonably required by the other Party and relates to (x) such other Party or the conduct of its business prior to the Relevant Time or (y) any Ancillary Agreement to which each of the Party requesting such access and the Party requested to grant such access are parties. Nothing in this Section 7.2 shall require any Party to violate any agreement with any third party regarding the confidentiality of confidential and proprietary information relating to that third party or its business; provided, however, that in the event that a Party is required to disclose any such Information, such Party shall use reasonable best efforts to seek to obtain such third party Consent to the disclosure of such Information. Nothing herein shall alter or affect any confidentiality provisions of any of the Ancillary Agreements, or any Commercial Arrangement.

Section 7.3 Witness Services. At all times from and after the Relevant Time, each of Vector and Spinco shall use its reasonable best efforts to make available to the others, upon reasonable written request, its and its Subsidiaries’ officers, directors, employees, consultants and agents as witnesses to the extent that (i) such Persons may reasonably be required to testify in connection with the prosecution or defense of any Action in which the requesting Party may from time to time be involved (except for claims, demands or Actions between members of each Group) and (ii) there is no conflict in the Action between the requesting Party and the other Party. A Party providing a witness to the other Party under this Section 7.3 shall be entitled to receive from the recipient of such services, upon the presentation of invoices therefor, payments for such amounts, relating to disbursements and other out-of-pocket expenses (which shall not include the costs of salaries and benefits of employees who are witnesses or any pro rata portion of overhead or other costs of employing such employees which would have been incurred by such employees’ employer regardless of the employees’ service as witnesses), as may be reasonably incurred and properly paid under applicable Law.

Section 7.4 Reimbursement; Other Matters. Except to the extent otherwise contemplated by this Agreement or any Ancillary Agreement a Party providing Information or access to Information to the other Party under this Article VII shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses, as may be reasonably incurred in providing such Information or access to such Information.

-41-

Section 7.5 Confidentiality.

(a) Notwithstanding any termination of this Agreement, for a period of three (3) years from the Relevant Time the Parties shall hold, and shall cause each of their respective Subsidiaries to hold, and shall each cause their respective officers, employees, agents, consultants and advisors to hold, in strict confidence, and not to disclose or release or use, without the prior written consent of the other Party (which may be withheld in such Party’s sole and absolute discretion, except where disclosure is required by applicable Law), any and all Confidential Information (as defined herein) concerning the other Party; provided, however, that the Parties may disclose, or may permit disclosure of, Confidential Information (i) to their respective auditors, attorneys, financial advisors, bankers and other appropriate consultants and advisors who have a need to know such Information and are informed of their obligation to hold such Information confidential to the same extent as is applicable to the Parties and in respect of whose failure to comply with such obligations, the applicable Party will be responsible, (ii) if the Parties or any of their respective Subsidiaries are required or compelled to disclose any such Confidential Information by judicial or administrative process or by other requirements of Law or stock exchange rule, (iii) as required in connection with any legal or other proceeding by one Party against the other Party, or (iv) as necessary in order to permit a Party to prepare and disclose its financial statements, Tax Returns or other required disclosures. Notwithstanding the foregoing, in the event that any demand or request for disclosure of Confidential Information is made pursuant to clause (ii) above, each Party, as applicable, shall promptly notify the other of the existence of such request or demand and shall provide the other a reasonable opportunity to seek an appropriate protective order or other remedy, which such Party will cooperate in obtaining. In the event that such appropriate protective order or other remedy is not obtained, the Party whose Confidential Information is required to be disclosed shall or shall cause the other Party to furnish, or cause to be furnished, only that portion of the Confidential Information that is legally required to be disclosed and shall take commercially reasonable steps to ensure that confidential treatment is accorded such Information.

(b) Notwithstanding anything to the contrary set forth herein, (i) the Parties shall be deemed to have satisfied their obligations hereunder with respect to Confidential Information if they exercise the same degree of care (but no less than a reasonable degree of care) as they take to preserve confidentiality for their own similar Information and (ii) confidentiality obligations provided for in any agreement between each Party or its Subsidiaries and their respective employees shall remain in full force and effect. Notwithstanding anything to the contrary set forth herein, Confidential Information of a Party in the possession of and used by the other Party as of the Relevant Time may continue to be used by such Party in possession of the Confidential Information in and only in the operation of the Spinco Business or the Vector Retained Business, as the case may be; provided, however, that such use is not competitive in nature, and may be used only so long as the Confidential Information is maintained in confidence and not disclosed in violation of Section 7.5(a). Such continued right to use may not be transferred (directly or indirectly) to any third party without the prior written consent of the applicable Party, except pursuant to Section 9.9.

-42-

(c) Each of the Parties acknowledges that it and the other members of its respective Group may have in their possession confidential or proprietary Information of third parties that was received under confidentiality or non-disclosure agreements with such third party while a subsidiary of Vector. Each of the Parties will hold, and will cause the other members of their respective Groups and their respective representatives to hold, in strict confidence the confidential and proprietary Information of third parties to which they or any other member of their respective Groups has access, in accordance with the terms of any agreements entered into prior to the Relevant Time between one or more subsidiaries of Vector (whether acting through, on behalf of, or in connection with, the Vector Retained Business or the Spinco Business) and such third parties.

Section 7.6 Privileged Matters.

(a) Pre-Separation Services. The Parties recognize that legal and other professional services that have been and will be provided prior to the Relevant Time have been and will be rendered for the collective benefit of each of the members of the Vector Group and the Spinco Group, including with regard to the transactions contemplated herein, and that each of the members of the Vector Group and the Spinco Group should be deemed to be the client with respect to such pre-separation services for the purposes of asserting all privileges which may be asserted under applicable Law.

(b) Post-Separation Services. The Parties recognize that legal and other professional services will be provided following the Relevant Time which will be rendered solely for the benefit of Vector or Spinco, as the case may be. With respect to such post-separation services, the Parties agree as follows:

(i) Vector shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged Information which relates solely to the Vector Retained Business, whether or not the privileged Information is in the possession of or under the control of Vector or Spinco. Vector shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged Information that relates solely to the subject matter of any claims constituting Vector Retained Liabilities, now pending or which may be asserted in the future, in any lawsuits or other proceedings initiated against or by Vector, whether or not the privileged Information is in the possession of or under the control of Vector or Spinco; and

(ii) Spinco shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged Information which relates solely to the Spinco Business, whether or not the privileged Information is in the possession of or under the control of Vector or Spinco. Spinco shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged Information that relates solely to the subject matter of any claims constituting Spinco Liabilities, now pending or which may be asserted in the future, in any lawsuits or other proceedings initiated against or by Spinco, whether or not the privileged Information is in the possession of or under the control of Vector or Spinco.

-43-

(c) The Parties agree that they shall have a shared privilege, with equal right to assert or waive, subject to the restrictions in this Section 7.6, with respect to all privileges not allocated pursuant to the terms of Section 7.6(b). All privileges relating to any claims, proceedings, litigation, disputes, or other matters which involve both of Vector or Spinco in respect of which both Parties retain any responsibility or Liability under this Agreement, shall be subject to a shared privilege among them.

(d) No Party may waive any privilege which could be asserted under any applicable Law, and in which the other Party has a shared privilege, without the consent of the other Party, with such consent not to be unreasonably withheld, delayed or conditioned, or as provided in subsections (e) or (f) below. Consent shall be in writing, or shall be deemed to be granted unless written objection is made within twenty (20) days after notice upon the other Party requesting such consent.

(e) In the event of any litigation or dispute between the Parties, or any members of their respective Groups, either such Party may waive a privilege in which the other Party or member of such Group has a shared privilege, with regard to the matters at issue in the litigation or dispute, without obtaining the consent of the other Party; provided, however, that such waiver of a shared privilege shall be effective only as to the use of Information with respect to the litigation or dispute between the relevant Parties and/or the applicable members of their respective Groups, and (i) shall not constitute a subject matter waiver with regard to all topic similar to topics at issue in the litigation or dispute, and (ii) shall not operate as a waiver of the shared privilege with respect to third parties.

(f) In the event of any litigation or dispute between or among any of the Parties, or any members of their respective Groups, neither internal nor external counsel for the members of the Vector Group and the Spinco Group, including with regard to the transactions contemplated herein, will be subject to disqualification. For the avoidance of doubt, in the event of any litigation or dispute between or among the Parties, or any members of their respective Groups, each Party agrees not to request disqualification of any employee of any Party from providing legal services to its employer on the basis that it was a former employee of Vector.

(g) If a dispute arises between or among the Parties or their respective Subsidiaries regarding whether a privilege should be waived to protect or advance the interest of any Party, each Party agrees that it shall negotiate in good faith, shall endeavor to minimize any prejudice to the rights of the other Party, and shall not unreasonably withhold consent to any request for waiver by the other Party. Each Party specifically agrees that it will not withhold consent to waiver for any purpose except to protect its own legitimate interests.

(h) Upon receipt by any Party or by any Subsidiary thereof of any subpoena, discovery or other request which arguably calls for the production or disclosure of Information subject to a shared privilege or as to which the other Party has the sole right hereunder to assert a privilege, or if any Party obtains knowledge that any of its or any of its Subsidiaries’ current or former directors, officers, agents or employees have received any subpoena, discovery or other requests which arguably calls for the production or disclosure

-44-

of such privileged Information, such Party shall promptly notify the other Party of the existence of the request and shall provide the other Party a reasonable opportunity to review the Information and to assert any rights it or they may have under this Section 7.6 or otherwise to prevent the production or disclosure of such privileged Information.

(i) The transfer of all Information pursuant to this Agreement is made in reliance on the agreement of Vector or Spinco as set forth in Section 7.5 and this Section 7.6, to maintain the confidentiality of privileged Information and to assert and maintain all applicable privileges. The access to Information being granted pursuant to Sections 6.5, 7.1 and 7.2 hereof, the agreement to provide witnesses and individuals pursuant to Sections 6.5 and 7.3 hereof, the furnishing of notices and documents and other cooperative efforts contemplated by Section 6.5 hereof, and the transfer of privileged Information between and among the Parties and their respective Subsidiaries pursuant to this Agreement shall not be deemed a waiver of any privilege that has been or may be asserted under this Agreement or otherwise.

(j) Notwithstanding any provision to the contrary in this Section 7.6, the Controlling Party (as defined in the Tax Disaffiliation Agreement) shall have the authority to disclose or not disclose, in its sole discretion, any and all privileged Information to (i) any Tax Authority (as defined in the Tax Disaffiliation Agreement) conducting a Tax Contest or (ii) to third parties in connection with connection with the defense of a Tax Contest, including, expert witnesses, accountants and other advisors, potential witnesses and other parties whose assistance is deemed, in the sole discretion of the Controlling Party, to be necessary or beneficial to representing the interests of the Parties hereunder.

Section 7.7 Ownership of Information. Any Information owned by one Party or any of its Subsidiaries that is provided to a requesting Party pursuant to this Article VII shall be deemed to remain the property of the providing Party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such Information.

Section 7.8 Record Retention.

(a) To facilitate the possible exchange of Information pursuant to this Article VII and other provisions of this Agreement, from and after the Relevant Time, the Parties agree to use their commercially reasonable efforts to retain all Information in their respective possession or control in accordance with Vector’s current Record Retention Policy in effect on the date hereof and attached hereto as Schedule 7.8 or ordinary course practices of Vector in effect as of the Relevant Time (including any Information that is subject to a “Litigation Hold” issued by any Party prior to the Relevant Time) or such other document retention policies as may be reasonably adopted by the applicable Party from the Relevant Time until the [fifth (5th)] anniversary of the Distribution Date (provided that such other document retention policies at least provide for the retention of documents until the expiration of any applicable statute of limitations and as otherwise required by applicable Law).

-45-

(b) Notwithstanding anything to the contrary herein, no Party will destroy, or permit any of its Subsidiaries to destroy, any Information contemplated by Section 7.2 without first offering to deliver such Information to the other Party, at the other Party’s cost and expense; provided that (i) in the case of any Information relating to a pending or threatened Action that is known to a member of the Group in possession of such Information, the Parties shall comply with the requirements of the applicable “Litigation Hold” (provided that with respect to any pending or threatened Action arising after the Relevant Time, the requirements of this clause (i) shall apply only to the extent that the member of the Vector Group or Spinco Group that is in possession of such Information has been notified in writing pursuant to a “Litigation Hold” of such pending or threatened Action); and (ii) in no event shall a Party destroy, or permit any of its Subsidiaries to destroy, any Information required to be retained by applicable Law.

(c) In the event of any Party’s or any of its Subsidiaries’ inadvertent failure to comply with its applicable document retention policies as required under this Section 7.8, such Party shall be liable to the other Party solely for the amount of any monetary fines or penalties imposed or levied against such other party by a governmental authority (which fines or penalties shall not include any Liabilities asserted in connection with the claims underlying the applicable Action, other than fines or penalties resulting from any claim of spoliation) as a result of such other Party’s inability to produce Information caused by such inadvertent failure and shall not be liable to such other party for any other Liabilities in connection therewith. Notwithstanding the foregoing, no party shall have any Liability to the other party if any Information is destroyed, provided that such party has used its reasonable best efforts to comply with Sections 7.8(a) and 7.8(b).

Section 7.9 Liability for Information Provided. No Party shall have any Liability to the other Party in the event that any Information exchanged or provided pursuant to this Agreement is found to be inaccurate, in the absence of willful misconduct by the Party providing such Information.

Section 7.10 Other Agreements. The rights and obligations granted under this Article VII are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of Information set forth in any Ancillary Agreement.

ARTICLE VIII

DISPUTE RESOLUTION

Section 8.1 Negotiation. In the event of a controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any way related to this Agreement or the transactions contemplated hereby, including any claim based on contract, tort, statute or constitution (but excluding any controversy, dispute or claim arising out of any Contract relating to the use or lease of real property if any third party is a necessary party to such controversy, dispute or claim) (collectively, “Agreement Disputes”), the Party claiming such Agreement Dispute shall give written notice to the other Party setting forth the Agreement Dispute

-46-

and a brief description thereof (a “Dispute Notice”) pursuant to the terms of the notice provisions of Section 9.6 hereof. Following delivery of a Dispute Notice, the general counsel of the other Party and/or such other executive officer designated by the other Party shall negotiate for a reasonable period of time to settle such Agreement Dispute; provided, however, that such reasonable period shall not, unless otherwise agreed by the Parties in writing, exceed forty-five (45) calendar days from the time of receipt by a Party of a Dispute Notice; provided further, that in the event of any arbitration in accordance with Section 8.3 hereof, the Parties shall not assert the defenses of statute of limitations and laches arising during the period beginning after the date of receipt of the Dispute Notice, and any contractual time period or deadline under this Agreement to which such Agreement Dispute relates occurring after the Dispute Notice is received shall not be deemed to have passed until such Agreement Dispute has been resolved.

Section 8.2 Mediation. If, within forty-five (45) calendar days (or such longer period as may be agreed in writing between the Parties) after receipt by a Party of a Dispute Notice, the Parties have not succeeded in negotiating a resolution of the Agreement Dispute, the Parties agree to submit the Agreement Dispute at the earliest possible date to mediation conducted in accordance with the Commercial Mediation Rules of the American Arbitration Association (“AAA”), and to bear equally the costs of the mediation; provided, however, that each Party shall bear its own costs in connection with such mediation. The Parties agree to participate in good faith in the mediation and negotiations related thereto for a period of thirty (30) days or such longer period as they may mutually agree following the initial mediation session (the “Mediation Period”).

Section 8.3 Arbitration. If the Agreement Dispute has not been resolved for any reason after the Mediation Period, such Agreement Dispute shall be determined, at the request of either Party, by arbitration conducted in New York City, New York, before and in accordance with the then-existing Commercial Arbitration Rules of the AAA, except as modified herein (the “Rules”). There shall be three arbitrators. Each Party shall appoint one arbitrator within twenty (20) calendar days of receipt by respondent of a copy of the demand for arbitration. The two party-appointed arbitrators shall have twenty (20) calendar days from the appointment of the second arbitrator to agree on a third arbitrator who shall chair the arbitral tribunal. Any arbitrator not timely appointed by the Parties under this Section 8.3 shall be appointed by the AAA in accordance with the listing, ranking and striking method in the Rules, and in any such procedure, each Party shall be given a limited number of strikes, excluding strikes for cause. Any controversy concerning whether an Agreement Dispute is an arbitrable Agreement Dispute, whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the interpretation of enforceability of this Article VIII shall be determined by the arbitrators. In resolving any Agreement Dispute, the Parties intend that the arbitrators shall apply the substantive laws of the State of New York, without regard to any choice of law principles thereof that would mandate the application of the laws of another jurisdiction. The Parties intend that the provisions to arbitrate set forth herein be valid, enforceable and irrevocable, and any award rendered by the arbitrators shall be final and binding on the Parties. The Parties agree to comply with any award made in any such arbitration proceedings and agree to enforcement of or entry of judgment upon such award in the United States District Court for the Southern District of New York. The arbitrators shall be entitled, if appropriate, to award any remedy in such proceedings, including monetary damages, specific performance and all other forms of legal and equitable relief; provided, however, the arbitrators shall not be entitled to award punitive, exemplary, treble or any other form of non-compensatory damages except in connection with indemnification for a Third Party Claim (and in such a case, only to the extent awarded in such Third Party Claim).

-47-

Section 8.4 Arbitration Period. Any arbitration proceeding shall be concluded in a maximum of six (6) months from the commencement of the arbitration. The Parties may agree in writing to extend the arbitration period if necessary to appropriately resolve the Agreement Dispute.

Section 8.5 Treatment of Negotiations, Mediation and Arbitration. Without limiting the provisions of the Rules, unless otherwise agreed in writing by the Parties or permitted by this Agreement, the Parties shall keep confidential all matters relating to and any negotiation, mediation, conference, arbitration, discussion or arbitration award pursuant to this Article VIII shall be treated as compromise and settlement negotiations for purposes of Rule 408 of the Federal Rules of Evidence and comparable state rules; provided, however, that such matters may be disclosed (i) to the extent reasonably necessary in any proceeding brought to enforce the award or for entry of a judgment upon the award and (ii) to the extent otherwise required by Law or stock exchange rules. Nothing said or disclosed, nor any document produced, in the course of any negotiations, conferences and discussions that is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current or future arbitration. Nothing contained herein is intended to or shall be construed to prevent any Party from applying to any court of competent jurisdiction for interim measures or other provisional relief in connection with the subject matter of any Agreement Disputes. Without prejudice to such provisional remedies as may be available under the jurisdiction of a court, the arbitral tribunal shall have full authority to grant provisional remedies and to direct the parties to request that any court modify or vacate any temporary or preliminary relief issued by such court, and to award damages for the failure of any Party to respect the arbitral tribunal’s orders to that effect.

Section 8.6 Continuity of Service and Performance. Unless otherwise agreed in writing, the Parties will continue to provide services and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Article VIII with respect to all matters not subject to such dispute resolution.

Section 8.7 Consolidation. The arbitrators may consolidate any Agreement Disputes under this Agreement if the subject of the Agreement Disputes thereunder arise out of or relate essentially to the same set of facts or transactions. Such consolidated arbitration shall be determined by the arbitrator appointed for the arbitration proceeding that was commenced first in time.

-48-

ARTICLE IX

MISCELLANEOUS

Section 9.1 Complete Agreement; Construction. This Agreement, including the Schedules and the Ancillary Agreements hereto, shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. In the event of any inconsistency between this Agreement and any Schedule hereto, the Schedule shall prevail. In the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of any Ancillary Agreement or continuing arrangement, such Ancillary Agreement or continuing arrangement shall control; provided, however, that with respect to any Conveyancing and Assumption Instrument, except as provided in Section 9.2, this Agreement shall control unless specifically stated otherwise in such Conveyancing and Assumption Instrument. Except as expressly set forth in this Agreement or any Ancillary Agreement: (a) all matters relating to Taxes and Tax Returns of the Parties and their respective Subsidiaries shall be governed exclusively by the Tax Disaffiliation Agreement; (b) for the avoidance of doubt, in the event of any conflict between this Agreement or any Ancillary Agreement, on the one hand, and the Tax Disaffiliation Agreement, on the other hand, with respect to such matters, the terms and conditions of the Tax Disaffiliation Agreement shall govern and (c) for the avoidance of doubt, in the event of any conflict between this Agreement or any Ancillary Agreement, on the one hand, and the Employee Matters Agreement, on the other hand, with respect to such matters, the terms and conditions of the Employee Matters Agreement shall govern. The rights and remedies of the Parties herein provided shall be cumulative and in addition to any other or further remedies provided by law or equity.

Section 9.2 Ancillary Agreements. This Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the Ancillary Agreements. Notwithstanding anything to the contrary in this Agreement, (a) only the Spinco Intellectual Property Agreement, and not this Agreement or any of the other Ancillary Agreements other than the Spinco Intellectual Property Agreement, shall govern any matter relating to the Transfer, recordation or registration of Transfer, maintenance, enforcement (including in any litigation, adversarial matter, interference or administrative proceeding), licensing or other rights to use or exploit all Intellectual Property of the type that is addressed in the Spinco Intellectual Property Agreement, and (b) no such Intellectual Property shall be Transferred or licensed (or other rights to use or exploit granted) pursuant to this Agreement (including for the avoidance of doubt, pursuant to Section 2.6).

Section 9.3 Counterparts. This Agreement may be executed in more than one counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Party. This Agreement may be executed and delivered by electronic means, including “.pdf” or “.tiff” files, and any electronic signature shall constitute an original for all purposes.

Section 9.4 Survival of Agreements. Except as otherwise contemplated by this Agreement or any Ancillary Agreement, all covenants and agreements of the Parties contained in this Agreement and each Ancillary Agreement shall survive the Relevant Time and remain in full force and effect in accordance with their applicable terms.

-49-

Section 9.5 Expenses. Except as otherwise provided (i) in this Agreement, or (ii) in any Ancillary Agreement, the Parties agree that all out-of-pocket fees and expenses incurred, or to be incurred and directly related to the Plan of Reorganization and transactions contemplated hereby (including third-party professional fees, fees and expenses incurred in connection with the execution and delivery of this Agreement, such other third-party fees and expenses incurred on a non-recurring basis directly as result of the Plan of Reorganization, and the fees and expenses payable to any Person listed on Schedule 9.5) (“Separation Expenses”) shall (A) to the extent incurred and payable prior to the Distribution Date be paid by Vector and (B) to the extent any such Separation Expenses arise and are payable by any Party following the Distribution Date be paid by such Party.

Section 9.6 Notices. All notices, requests, claims, demands and other communications under this Agreement and, to the extent applicable and unless otherwise provided therein, under each of the Ancillary Agreements, shall be in English, shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile (at a facsimile number to be provided by such Party to the other Party pursuant to the notice provisions of this Section 9.6) with receipt confirmed (followed by delivery of an original via overnight courier service), by email (at an email address to be provided by such Party to the other Party pursuant to the notice provisions of this Section 9.6) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Party at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 9.6):

To Vector:

Vector Group Ltd.

4400 Biscayne Boulevard

Miami, Florida 33137

Attention: General Counsel

To Spinco:

Douglas Elliman Inc.

4400 Biscayne Boulevard

Miami, Florida 33137

Attention: General Counsel

Section 9.7 Waivers and Consents. The failure of any Party to require strict performance by the other Party of any provision in this Agreement will not waive or diminish that Party’s right to demand strict performance thereafter of that or any other provision hereof. Any consent required or permitted to be given by any Party to the other Party under this Agreement shall be in writing and signed by the Party giving such consent.

Section 9.8 Amendments. Subject to the terms of Section 9.11 hereof, this Agreement may not be modified or amended except by an agreement in writing signed by a duly authorized representative of each of the Parties.

-50-

Section 9.9 Assignment. Except as otherwise provided for in this Agreement, this Agreement shall not be assignable, in whole or in part, directly or indirectly, by any Party without the prior written consent of the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void; provided, however, that a Party may assign this Agreement in connection with a merger transaction in which such Party is not the surviving entity or the sale by such Party of all or substantially all of its Assets; provided, however, that the surviving entity of such merger or the transferee of such Assets shall agree in writing, reasonably satisfactory to the other Party, to be bound by the terms of this Agreement as if named as a “Party” hereto.

Section 9.10 Successors and Assigns. The provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective successors and permitted transferees and assigns.

Section 9.11 Certain Termination and Amendment Rights. This Agreement may be terminated and the Distribution may be amended, modified or abandoned at any time prior to the Distribution Date by and in the sole discretion of Vector without the approval of Spinco or the stockholders of Vector. In the event of such termination, no Party shall have any liability of any kind to the other Party or any other Person. After the Relevant Time, this Agreement may not be terminated except by an agreement in writing signed by Vector and Spinco.

Section 9.12 Payment Terms.

(a) Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount to be paid or reimbursed by any Party (and/or a member of such Party’s Group), on the one hand, to the other Party (and/or a member of such Party’s Group), on the other hand, under this Agreement shall be paid or reimbursed hereunder within thirty (30) days after presentation of an invoice or a written demand therefor and setting forth, or accompanied by, reasonable documentation or other reasonable explanation supporting such amount.

(b) Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount not paid when due pursuant to this Agreement (and any amount billed or otherwise invoiced or demanded and properly payable that is not paid within thirty (30) days of such bill, invoice or other demand) shall bear interest at a rate per annum equal to the Prime Rate plus three percent (3%) (or the maximum legal rate, whichever is lower), calculated for the actual number of days elapsed, accrued from the date on which such payment was due up to the date of the actual receipt of payment.

Section 9.13 No Circumvention. The Parties agree not to directly or indirectly take any actions, act in concert with any Person who takes an action (including the failure to take a reasonable action) such that the resulting effect is to materially undermine the effectiveness of any of the provisions of this Agreement or any Ancillary Agreement (including adversely affecting the rights or ability of any Party to successfully pursue indemnification, contribution or payment pursuant to Article VII).

Section 9.14 Subsidiaries. Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such Party or by any entity that becomes a Subsidiary of such Party on and after the effective Relevant Time.

-51-

Section 9.15 Third Party Beneficiaries. Except (i) as provided in Article VII relating to Indemnitees and for the release under Section 6.1 of any Person provided therein and (ii) as specifically provided in any Ancillary Agreement, this Agreement is solely for the benefit of the Parties and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

Section 9.16 Titles and Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

Section 9.17 Exhibits and Schedules. The Exhibits and Schedules shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein.

Section 9.18 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any conflict-of-laws or other rule that would result in the application of the laws of a different jurisdiction.

Section 9.19 Consent to Jurisdiction. Subject to the provisions of Article VIII hereof, each of the Parties irrevocably submits to the jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan (and if the courts of the State of New York shall be unavailable, any New York State court or federal court sitting in the City and County of New York, Borough of Manhattan) (the “New York Courts”), for the purposes of any suit, Action or other proceeding to compel arbitration or for provisional relief in aid of arbitration in accordance with Article VIII or to prevent irreparable harm, and to the non-exclusive jurisdiction of the New York Courts for the enforcement of any award issued thereunder. Each of the Parties further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth above shall be effective service of process for any Action, suit or proceeding in the New York Courts with respect to any matters to which it has submitted to jurisdiction in this Section 9.19. Each of the Parties irrevocably and unconditionally waives any objection to the laying of venue of any Action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the New York Courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

Section 9.20 Specific Performance. The Parties agree that irreparable damage would occur in the event that the provisions of this Agreement were not performed in accordance with their specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled to an injunction or injunctions to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.

-52-

Section 9.21 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.21.

Section 9.22 Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

Section 9.23 Force Majeure. No Party (or any Person acting on its behalf) shall have any liability or responsibility for failure to fulfill any obligation (other than a payment obligation) under this Agreement or, unless otherwise expressly provided therein, any Ancillary Agreement, so long as and to the extent to which the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event: (a) notify the other Party of the nature and extent of any such Force Majeure condition and (b) use due diligence to remove any such causes and resume performance under this Agreement as soon as feasible.

Section 9.24 Interpretation. The Parties have participated jointly in the negotiation and drafting of this Agreement. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.

Section 9.25 No Duplication; No Double Recovery. Nothing in this Agreement is intended to confer to or impose upon any Party a duplicative right, entitlement, obligation or recovery with respect to any matter arising out of the same facts and circumstances (including with respect to the rights, entitlements, obligations and recoveries that may arise out of one or more of the following Sections: Section 3.4, Section 6.2, Section 6.3 and Section 6.4).

[Signature Page Follows]

-53-

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written.


VECTOR GROUP LTD.

By:
Name:
Title:

DOUGLAS ELLIMAN INC.

By:
Name:
Title:

Exhibit 2.2

Form of

EMPLOYEE MATTERS AGREEMENT

BY AND BETWEEN

VECTOR GROUP LTD.

AND

DOUGLAS ELLIMAN, INC.

Dated as of [•], 2021

TABLE OF CONTENTS


		Page
ARTICLE I
DEFINITIONS

Section 1.1	Definitions		5
Section 1.2	General Interpretive Principles		10

ARTICLE II
GENERAL PRINCIPLES

Section 2.1	Employees		10
Section 2.2	Assumption and Retention of Liabilities; Related Assets		11
Section 2.3	Spinco Participation in Vector Plans		12
Section 2.4	Service Recognition		12

ARTICLE III
U.S. QUALIFIED DEFINED BENEFIT PLAN

Section 3.1	Defined Benefit Pension Plans		12

ARTICLE IV
U.S. QUALIFIED DEFINED CONTRIBUTION PLANS

Section 4.1	Vector 401(k) Plan		12
Section 4.2	Spinco 401(k) Plan		12

ARTICLE V
NONQUALIFIED PLANS

Section 5.1	Vector Supplemental Retirement Plan		13
Section 5.2	No Separation from Service		13

ARTICLE VI
U.S. HEALTH AND WELFARE PLANS

Section 6.1	Vector Health and Welfare Plans		13
Section 6.2	Spinco Health & Welfare Plans		13
Section 6.3	Time-Off Benefits		13
Section 6.4	Severance Pay Plans		13

ARTICLE VII
TREATMENT OF OUTSTANDING EQUITY AWARDS

Section 7.1	Vector Option Awards		14
Section 7.2	Vector Time-Based Restricted Stock Awards		14
Section 7.3	Vector Performance-Based Restricted Stock Awards		14
Section 7.4	Fractional Shares		14



ARTICLE VIII
ADDITIONAL COMPENSATION AND BENEFITS MATTERS

Section 8.1	Cash Incentive Awards	15
Section 8.2	Individual Arrangements	15
Section 8.3	Labor Matters	16
Section 8.4	Director Programs	16

ARTICLE IX
INDEMNIFICATION

Section 9.1	Indemnification	16

ARTICLE X
GENERAL AND ADMINISTRATIVE

Section 10.1	Sharing of Information	16
Section 10.2	Reasonable Efforts/Cooperation	17
Section 10.3	Non-Termination of Employment; No Third-Party Beneficiaries	17
Section 10.4	Consent of Third Parties	17
Section 10.5	Access to Employees	18
Section 10.6	Beneficiary Designation/Release of Information/Right to Reimbursement	18
Section 10.7	Not a Change in Control	18

ARTICLE XI
MISCELLANEOUS

Section 11.1	Effect If Distribution Does Not Occur	18
Section 11.2	Complete Agreement; Construction	18
Section 11.3	Counterparts	18
Section 11.4	Survival of Agreements	18
Section 11.5	Notices	18
Section 11.6	Waivers	19
Section 11.7	Amendments	19
Section 11.8	Assignment	19
Section 11.9	Successors and Assigns	19
Section 11.10	Subsidiaries	19
Section 11.11	Title and Headings	19
Section 11.12	Governing Law	19
Section 11.13	Waiver of Jury Trial	20
Section 11.14	Specific Performance	20
Section 11.15	Severability	20

-3-


Exhibits

Exhibit A		Certain Employees
Exhibit B		Vector Health & Welfare Plans
Exhibit C		Spinco Health & Welfare Plans

-4-

EMPLOYEE MATTERS AGREEMENT

THIS EMPLOYEE MATTERS AGREEMENT (this “Agreement”), dated as of [•], 2021, is by and between Vector Group Ltd., a Delaware corporation (“Vector”), and Douglas Elliman Inc., a Delaware corporation (“Spinco” and, together with Vector, each, a “Party” and collectively, the “Parties”).

RECITALS

WHEREAS, Vector, acting through its direct and indirect Subsidiaries, currently conducts a number of businesses, including (i) the Spinco Business (real estate brokerage and other services and property technology investment), and (ii) the Vector Retained Business (tobacco manufacturing, distribution and sale and real estate investments);

WHEREAS, the Board of Directors of Vector (the “Vector Board”) has determined that it is appropriate, desirable and in the best interests of Vector and its stockholders to separate into two independent, publicly traded companies: Vector and Spinco, on the terms and subject to the conditions set forth in the Distribution Agreement (as defined below);

WHEREAS, in order to effectuate the foregoing, Vector and Spinco have entered into a Distribution Agreement, dated as of [•], 2021 (the “Distribution Agreement”), pursuant to which and subject to the terms and conditions set forth therein, the Spinco Business shall be separated from the Vector Retained Business, and all of the issued and outstanding shares of Spinco Common Stock beneficially owned by Vector shall be distributed to the holders of the issued and outstanding Vector Common Stock; and

WHEREAS, Vector and Spinco have agreed to enter into this Agreement for the purpose of allocating Assets, Liabilities and responsibilities with respect to certain employee compensation and benefit plans, programs and arrangements, and certain employment matters between and among them.

NOW, THEREFORE, in consideration of the premises and of the respective agreements and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:

“Action” means any claim, demand, complaint, charge, action, cause of action, suit, countersuit, arbitration, litigation, inquiry, proceeding or investigation by or before any Governmental Authority or any arbitration or mediation tribunal.

-5-

“Agreement” shall have the meaning ascribed thereto in the preamble to this Agreement, including all the exhibits hereto, and all amendments made hereto from time to time.

“Asset” means any right, property or asset, whether real, personal or mixed, tangible or intangible, of any kind, nature and description, whether accrued, contingent or otherwise, and wherever situated and whether or not carried or reflected, or required to be carried or reflected, on the books of any Person.

“COBRA” means the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Section 4980B of the Code and Sections 601 through 608 of ERISA.

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

“Distribution” shall mean the distribution by Vector to holders of record of shares of Vector Common Stock (including Vector Common Stock underlying outstanding Vector Equity Awards) as of the Distribution Record Date of 100% of the Spinco Common Stock owned by Vector on the basis of one share of Spinco Common Stock for every two outstanding shares of Vector Common Stock.

“Distribution Agreement” shall have the meaning ascribed thereto in the recitals to this Agreement.

“Distribution Date” shall have the meaning ascribed thereto in the Distribution Agreement.

“DOL” means the U.S. Department of Labor.

“Employee Representative Body” means any union, works council, or other agency or representative body certified or otherwise recognized for the purposes of bargaining collectively or established for the purposes of notification of or consultation on behalf of any employees.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Former Spinco Employee” means any former employee who terminated employment with all members of the Vector controlled group of corporations before the Distribution Date and who was last employed by, or designated prior to the Distribution Date as having been employed by a member of the Spinco Group or any entity primarily carrying on the Spinco Business.

“Former Vector Employee” means any former employee who terminated employment with all members of the Vector controlled group of corporations before the Distribution Date and who was last employed by, or designated prior to the Distribution Date as having been employed by a member of the Vector Group or any entity primarily carrying on the Vector Retained Business.

“Governmental Authority” means any federal, state, local, foreign or international court, government, department, commission, board, bureau, agency, official, the NYSE, NASDAQ or other regulatory, administrative or governmental authority.

-6-

“Group” means the Vector Group and/or the Spinco Group, as the context requires.

“Information” shall mean all information, whether in written, oral, electronic or other tangible or intangible form, stored in any medium, including non-public financial information, studies, reports, records, books, accountants’ work papers, contracts, instruments, flow charts, data, communications by or to attorneys, memos and other materials prepared by attorneys and accountants or under their direction (including attorney work product) and other financial, legal, employee or business information or data.

“IRS” means the U.S. Internal Revenue Service.

“Law” means all laws, statutes and ordinances and all regulations, rules and other pronouncements of Governmental Authorities having the effect of law of the United States, any foreign country, or any domestic or foreign state, province, commonwealth, city, country, municipality, territory, protectorate, possession or similar instrumentality, or any Governmental Authority thereof.

“Liabilities” means all debts, liabilities, obligations, responsibilities, Losses, damages (whether compensatory, punitive, or treble), fines, penalties and sanctions, absolute or contingent, matured or unmatured, liquidated or unliquidated, foreseen or unforeseen, joint, several or individual, asserted or unasserted, accrued or unaccrued, known or unknown, whenever arising, including without limitation those arising under or in connection with any Law, Action, threatened Action, order or consent decree of any Governmental Authority or any award of any arbitration tribunal, and those arising under any contract, guarantee, commitment or undertaking, whether sought to be imposed by a Governmental Authority, private party, or a Party, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, or otherwise, and including any costs, expenses, interest, attorneys’ fees, disbursements and expense of counsel, expert and consulting fees, fees of third-party administrators and costs related thereto or to the investigation or defense thereof.

“Loss” means any claim, demand, complaint, damages (whether compensatory, punitive, consequential, treble or other), fines, penalties, loss, liability, payment, cost or expense arising out of, relating to or in connection with any Action.

“NASDAQ” means The NASDAQ Stock Market LLC.

“NYSE” means the New York Stock Exchange.

“Participating Company” means Vector and any Person (other than a natural person) participating in a Vector Plan.

“Party” and “Parties” shall have the meanings ascribed thereto in the preamble to this Agreement.

“Person” means any natural person, corporation, business trust, limited liability company, joint venture, association, company, partnership or governmental, or any agency or political subdivision thereof.

-7-

“Plan” means, with respect to an entity, each plan, program, arrangement, agreement or commitment that is an employment, consulting, non-competition or deferred compensation agreement, or an executive compensation, incentive bonus or other bonus, employee pension, profit-sharing, savings, retirement, supplemental retirement, stock option, stock purchase, stock appreciation rights, restricted stock, other equity-based compensation, severance pay, salary continuation, life, health, hospitalization, sick leave, vacation pay, disability or accident insurance plan, corporate-owned or key-man life insurance or other employee benefit plan, program, arrangement, agreement or commitment, including any “employee benefit plan” (as defined in Section 3(3) of ERISA), entered into, sponsored or maintained by such entity (or to which such entity contributes or is required to contribute).

“Record Date” shall have the meaning ascribed thereto in the Distribution Agreement.

“Spinco” shall have the meaning ascribed thereto in the preamble to this Agreement.

“Spinco 401(k) Plan” means the Douglas Elliman LLC 401(k) Retirement Savings Plan.

“Spinco Business” shall have the meaning ascribed thereto in the Distribution Agreement.

“Spinco Common Stock” shall have the meaning ascribed thereto in the Distribution Agreement.

“Spinco Employee” means any individual who, immediately following the Distribution Date, will be employed by Spinco or any member of the Spinco Group in a capacity considered by Spinco to be common law employment, including active employees and employees on vacation and approved leaves of absence (including maternity, paternity, family, sick, short-term or long-term disability leave, qualified military service under the Uniformed Services Employment and Reemployment Rights Act of 1994, and leave under the Family Medical Leave Act and other approved leaves).

“Spinco Group” means, as of the Distribution Date, Spinco and each of its former and current Subsidiaries (or any predecessor organization thereof), and any corporation or entity that may become part of such Group from time to time thereafter. The Spinco Group shall not include any member of the Vector Group.

“Spinco Health & Welfare Plans” shall have the meaning ascribed thereto in Section 6.2 of this Agreement.

“Spinco Liabilities” shall have the meaning ascribed thereto in the Distribution Agreement.

“Spinco Participant” means any individual who, immediately following the Distribution Date, is a Spinco Employee, a Former Spinco Employee or a beneficiary, dependent or alternate payee of any of the foregoing.

“Spinco Plan” means any Plan sponsored, maintained or contributed to by any member of the Spinco Group, including, without limitation, the Spinco Health & Welfare Plans.

-8-

“Subsidiary” has the same meaning ascribed thereto in the Distribution Agreement.

“Taxes” has the same meaning ascribed thereto in the Distribution Agreement.

“U.S.” means the United States of America.

“Vector” shall have the meaning ascribed thereto in the preamble to this Agreement.

“Vector 401(k) Plan” means the Liggett Vector Brands Savings Plan.

“Vector Board” shall have the meaning ascribed thereto in the recitals to this Agreement.

“Vector Common Stock” means the issued and outstanding shares of Vector common stock, par value $0.01 per share, of Vector.

“Vector Compensation Committee” means the Compensation Committee of the Board of Directors of Vector.

“Vector Director” means any individual who is a current or former non-employee director of Vector as of the Distribution Date.

“Vector Employee” means any individual who, immediately following the Distribution Date, will be employed by Vector or any member of the Vector Group in a capacity considered by Vector to be common law employment, including active employees and employees on vacation and approved leaves of absence (including maternity, paternity, family, sick, short-term or long-term disability leave, qualified military service under the Uniformed Services Employment and Reemployment Rights Act of 1994, and leave under the Family Medical Leave Act and other approved leaves).

“Vector Equity Award” means, collectively, the Vector Option Awards, Vector Time-Based Restricted Stock Awards and Vector Performance-Based Restricted Stock Awards.

“Vector Group” means, as of the Distribution Date, Vector and each of its former and current Subsidiaries (or any predecessor organization thereof), and any corporation or entity that may become part of such Group from time to time thereafter. The Vector Group shall not include any member of the Spinco Group.

“Vector Health & Welfare Plans” shall have the meaning ascribed thereto in Section 6.1 of this Agreement.

“Vector Labor Agreements” means any agreement with any Employee Representative Body to which Vector or a member of the Vector Group is a party or bound that pertains to any Vector Employees.

“Vector Retained Liabilities” shall have the meaning ascribed thereto in the Distribution Agreement.

-9-

“Vector Option Award” means an option to buy Vector Common Stock granted pursuant to a Vector Share Plan.

“Vector Participant” means any individual who, immediately following the Distribution Date, is a Vector Employee, a Former Vector Employee or a beneficiary, dependent or alternate payee of any of the foregoing.

“Vector Performance-Based Restricted Stock Award” shall have the meaning ascribed thereto in Section 7.3 of this Agreement.

“Vector Plan” means any Plan sponsored, maintained or contributed to by Vector or any of its Subsidiaries, including, without limitation, the Vector Share Plans, Vector Supplemental Retirement Plan and Vector Health & Welfare Plans.

“Vector Retained Business” shall have the meaning ascribed thereto in the Distribution Agreement.

“Vector Retained Defined Benefit Pension Plans” means the Retirement Plan of Liggett Group Inc. for Salaried Non-Bargaining Unit Employees and Retirement Plan of Liggett Group Inc. for Bargaining Unit and Hourly Employees.

“Vector Share Plans” means, collectively, the Amended & Restated 1999 Long-Term Incentive Plan, the Amended and Restated 2014 Management Incentive Plan and any other equity incentive compensation plan or arrangement maintained by Vector as of immediately before the Distribution.

“Vector Supplemental Retirement Plan” shall have the meaning ascribed thereto in Section 5.1 of this Agreement.

“Vector Time-Based Restricted Stock Award” shall have the meaning ascribed thereto in Section 7.2 of this Agreement.

Section 1.2 General Interpretive Principles. Words in the singular shall include the plural and vice versa, and words of one gender shall include the other gender, in each case, as the context requires. The words “hereof,” “herein,” “hereunder,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement and not to any particular provision of this Agreement, and references to Article, Section, paragraph and Exhibit are references to the Articles, Sections, paragraphs and Exhibits to this Agreement unless otherwise specified. The word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified. Any reference to any federal, state, local or non-U.S. statute or Law shall be deemed to also refer to all rules and regulations promulgated thereunder, unless the context otherwise requires.

ARTICLE II

GENERAL PRINCIPLES

Section 2.1 Employees. Except as set forth on Exhibit A attached hereto, (i) the Parties intend that there shall be continuity of employment with respect to the Vector Employees and Spinco Employees following the Distribution Date and (ii) each Vector Employee shall continue to be employed by the Vector Group on and after the Distribution Date, and each Spinco Employee shall continue to be employed by the Spinco Group on and after the Distribution Date.

-10-

Section 2.2 Assumption and Retention of Liabilities; Related Assets.

(a) As of the Distribution Date, except as otherwise expressly provided for in this Agreement, Vector shall, or shall cause one or more members of the Vector Group to, assume or retain and Vector hereby agrees to pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all Vector Plans, (ii) all Liabilities with respect to the employment, retirement, service, termination of employment or termination of service of all Vector Employees, Former Vector Employees, Vector Directors, their dependents and beneficiaries and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker of any member of the Vector Group or in any other employment, non-employment, or retainer arrangement or relationship with any member of the Vector Group), in each case to the extent arising in connection with or as a result of employment with or the performance of services for any member of the Vector Group, and (iii) any other Liabilities expressly assumed by or retained by Vector or any of its Subsidiaries under this Agreement. For purposes of clarification and the avoidance of doubt, the Liabilities assumed or retained by the Vector Group as provided for in this Section 2.2(a) are intended to be Vector Retained Liabilities as such term is defined in the Distribution Agreement.

(b) As of the Distribution Date, except as otherwise expressly provided for in this Agreement, Spinco shall, or shall cause one or more members of the Spinco Group to, assume or retain and Spinco hereby agrees to pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all Spinco Plans, (ii) all Liabilities with respect to the employment, service, retirement, termination of employment or termination of service of all Spinco Employees, Former Spinco Employees, their dependents and beneficiaries and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker of any member of the Spinco Group or in any other employment, non-employment, or retainer arrangement or relationship with any member of the Spinco Group), and (iii) any other Liabilities expressly assumed or retained by Spinco or any of its Subsidiaries under this Agreement. For purposes of clarification and the avoidance of doubt, the Liabilities assumed or retained by the Spinco Group as provided for in this Section 2.2(b) are intended to be Spinco Liabilities as such term is defined in the Distribution Agreement.

(c) From time to time after the Distribution, Spinco shall promptly reimburse Vector, upon Vector’s presentation of such substantiating documentation as Spinco shall reasonably request, for the cost of any Liabilities satisfied by Vector or its Subsidiaries that are, or that have been made pursuant to this Agreement, the responsibility of Spinco or any of its Subsidiaries.

(d) From time to time after the Distribution, Vector shall promptly reimburse Spinco, upon Spinco’s presentation of such substantiating documentation as Vector shall reasonably request, for the cost of any Liabilities satisfied by Spinco or its Subsidiaries that are, or that have been made pursuant to this Agreement, the responsibility of Vector or any of its Subsidiaries.

-11-

Section 2.3 Spinco Participation in Vector Plans.

(a) Except as otherwise expressly provided for in this Agreement, effective as of the Distribution Date, the Vector Group shall take any and all action as shall be necessary or appropriate so that participation in the Vector Plans by all Spinco Participants, if any, shall terminate as of the close of business on the date immediately prior to the Distribution Date and each member of the Spinco Group shall cease to be a Participating Company in the corresponding Vector Plans as of such time.

Section 2.4 Service Recognition. Spinco shall give each Spinco Participant full credit for purposes of eligibility, vesting, determination of level of benefits, and, to the extent applicable, benefit accruals under any Spinco Plan for such Spinco Participant’s service with any member of the Vector Group or Spinco Group prior to the Distribution Date to the same extent such service was recognized by the corresponding Vector Plans immediately prior to the Distribution Date; provided, however, that such service shall not be recognized to the extent that such recognition would result in the duplication of benefits.

ARTICLE III

U.S. QUALIFIED DEFINED BENEFIT PLAN

Section 3.1 Defined Benefit Pension Plans. As of the Distribution Date, Vector or a member of the Vector Group shall retain all of the assets in the trust underlying the Vector Retained Defined Benefit Pension Plans, and remain responsible for all Liabilities under the Vector Retained Defined Benefit Pension Plans.

ARTICLE IV

U.S. QUALIFIED DEFINED CONTRIBUTION PLANS

Section 4.1 Vector 401(k) Plan. As of the Distribution Date, Vector or a member of the Vector Group shall retain sponsorship of and responsibility for the Vector 401(k) Plan, including Liabilities associated with the accounts of each Vector Participant under the Vector 401(k) Plan. Each Vector Participant who immediately prior to the Distribution Date was a participant in, or entitled to future benefits under, the Vector 401(k) Plan shall continue to have such rights, privileges and obligations under the Vector 401(k) Plan as is provided thereunder following the Distribution Date.

Section 4.2 Spinco 401(k) Plan. As of the Distribution Date, Spinco or a member of the Spinco Group shall retain sponsorship of and responsibility for the Spinco 401(k) Plan, including Liabilities associated with the accounts of each Spinco Participant under the Spinco 401(k) Plan. Each Spinco Participant who immediately prior to the Distribution Date was a participant in, or entitled to future benefits under, the Spinco 401(k) Plan shall continue to have such rights, privileges and obligations under the Spinco 401(k) Plan as is provided thereunder following the Distribution Date.

-12-

ARTICLE V

NONQUALIFIED PLANS

Section 5.1 Vector Supplemental Retirement Plan. As of the Distribution Date, Vector or a member of the Vector Group shall assume or retain all Liabilities under the Vector Group Ltd. Supplemental Retirement Plan (as amended or restated, the “Vector Supplemental Retirement Plan”) relating to Vector Employees and Former Vector Employees.

Section 5.2 No Separation from Service. The transactions provided for under this Agreement shall not constitute a separation from service or a termination of employment under the Vector Supplemental Retirement Plan, and no distribution of retirement benefits shall be made to any Vector Employee or Spinco Employee on account of these transactions.

ARTICLE VI

U.S. HEALTH AND WELFARE PLANS

Section 6.1 Vector Health and Welfare Plans. Vector or one or more of its Subsidiaries maintain each of the health and welfare plans set forth on Exhibit B attached hereto (the “Vector Health & Welfare Plans”) for the benefit of eligible Vector Participants. Effective as of the Distribution Date, Vector shall, or shall cause one of its Subsidiaries to, retain sponsorship of and responsibility for the Vector Health & Welfare Plans and all of the Liabilities thereunder, including, without limitation, responsibility for compliance with the health care continuation coverage requirements of COBRA.

Section 6.2 Spinco Health & Welfare Plans. Spinco or one or more of its Subsidiaries maintain each of the health and welfare plans set forth on Exhibit C attached hereto (the “Spinco Health & Welfare Plans”) for the benefit of eligible Spinco Participants. Effective as of the Distribution Date, Spinco shall, or shall cause one of its Subsidiaries to, retain sponsorship of and responsibility for the Spinco Health & Welfare Plans and all of the Liabilities thereunder, including, without limitation, responsibility for compliance with the health care continuation

Section 6.3 Time-Off Benefits. Spinco shall credit each Spinco Participant with the amount of accrued but unused vacation time, sick time and other time-off benefits as such Spinco Participant had with the Vector Group or the Spinco Group, as applicable, as of the Distribution Date.

Section 6.4 Severance Pay Plans. The Parties acknowledge and agree that the transactions contemplated by the Distribution Agreement will not constitute a termination of employment of any Vector Participant or Spinco Participant for purposes of any policy, plan, program or agreement of Vector or Spinco or any member of the Vector Group or Spinco Group that provides for the payment of severance, separation pay, salary continuation or similar benefits in the event of a termination of employment.

-13-

ARTICLE VII

TREATMENT OF OUTSTANDING EQUITY AWARDS

Section 7.1 Vector Option Awards. In connection with the Distribution, each holder of a Vector Option Award, whether vested or unvested, that is outstanding on the Record Date will receive one share of Spinco Common Stock for every two shares of Vector Common Stock underlying such Vector Option Award. The Distribution will be made to such holder, less any required withholding Taxes, at the same time that the Distribution is made to the Vector stockholders. Except as set forth in the immediately preceding sentence, there will be no other actions or adjustments with respect to the existing Vector Option Awards in connection with the Distribution and the Vector Option Awards will continue to be governed by the same terms and conditions (including vesting terms, the number of shares of Vector Common Stock underlying the Vector Option Awards and the exercise price of such Vector Option Awards), as were applicable to the Vector Option Awards immediately prior to the Distribution.

Section 7.2 Vector Time-Based Restricted Stock Awards.

In connection with the Distribution, each holder of a Vector Restricted Stock Award subject to time vesting conditions (a “Vector Time-Based Restricted Stock Award”) that is outstanding on the Record Date will receive one share of Spinco Common Stock for every two shares of Vector Common Stock underlying such Vector Time-Based Restricted Stock Award. The Distribution will be made to such holder, less any required withholding Taxes, at the same time that the Distribution is made to the Vector stockholders. Except as set forth in the immediately preceding sentence, there will be no other actions or adjustments with respect to the Vector Time-Based Restricted Stock Awards in connection with the Distribution and the Vector Time-Based Restricted Stock Awards will continue to be governed by the same terms and conditions (including vesting terms and the number of shares of Vector Common Stock underlying the Vector Time-Based Restricted Stock Awards), as were applicable to the Vector Time-Based Restricted Stock Awards immediately prior to the Distribution.

Section 7.3 Vector Performance-Based Restricted Stock Awards.

In connection with the Distribution, each holder of a Vector Restricted Stock Award subject to performance vesting conditions (a “Vector Performance-Based Restricted Stock Award”) that is outstanding on the Record Date will receive one share of Spinco Common Stock for every two shares of Vector Common Stock underlying such Vector Performance-Based Restricted Stock Award, provided that (i) for the Vector Performance-Based Restricted Stock Award granted on November 10, 2015, the Distribution will be subject to the same restrictions as the underlying Vector Performance-Based Restricted Stock Award, and when the underlying Vector Performance-Based Restricted Stock Award vests, the Distribution will be made, less any required withholding Taxes and (ii) for the Vector Performance-Based Restricted Stock Award granted on February 24, 2021, the Distribution will be made to such holder, less any required withholding Taxes, at the same time that the Distribution is made to the Vector stockholders. Except as set forth in the immediately preceding sentence, there will be no other actions or adjustments with respect to the Vector Performance-Based Restricted Stock Awards in connection with the Distribution and the Vector Performance-Based Restricted Stock Awards will continue to be governed by the same terms and conditions (including vesting terms and the number of shares of Vector Common Stock underlying the Vector Performance-Based Restricted Stock Awards) as were applicable to the Vector Performance-Based Restricted Stock Awards immediately prior to the Distribution.

Section 7.4 Fractional Shares. No fractional shares of Spinco Common Stock will be issued in connection with the Distribution. If a holder of an outstanding Vector Equity Award would be entitled to receive a fractional share, such amount will be paid in cash at the time provided in Section 7.1, 7.2 or 7.3, as applicable, less any required withholding Taxes.

Section 7.5 Taxes and Withholding. Vector shall have sole responsibility for (i) ensuring the satisfaction of all applicable Tax payments (including the funding of any employer taxes) and withholding requirements relating to the Distribution made in respect of Vector Equity Awards and (ii) ensuring the collection and remittance of applicable Taxes to the applicable Governmental Entity. Vector shall claim any federal, state and/or local tax deductions in connection therewith, and Spinco shall not claim such deductions. The employee portion of applicable Taxes relating the Distribution in respect of Vector Equity Awards shall be satisfied by employees holding Vector Equity Awards via net share withholding. In connection therewith, a number of shares of Spinco Common Stock equal to each employee’s maximum Tax obligation will not be distributed to such employee, the shares of Spinco Common Stock so withheld shall not be issued by Spinco and Vector shall pay such employee’s Tax obligation to the applicable Governmental Entity.

-14-

ARTICLE VIII

ADDITIONAL COMPENSATION AND BENEFITS MATTERS

Section 8.1 Cash Incentive Awards.

(a) Effective as of the Distribution Date, Spinco shall assume or retain, as applicable, responsibilities for all Liabilities, and fully perform, pay and discharge all Liabilities when such Liabilities become due, relating to any annual cash incentive awards, or portion of any such incentive awards that any Spinco Participant is eligible to receive with respect to any performance period that ends after the Distribution Date and, effective as of the Distribution Date, Vector shall have no obligations with respect to any such incentive awards. Notwithstanding the foregoing, Vector shall retain all Liabilities, and fully perform, pay and discharge all Liabilities when such Liabilities become due, relating to any annual cash incentive award established with respect to the fiscal year ending December 31, 2021 to a Vector Participant or Spinco Participant who, immediately prior to the Distribution, was a “corporate” employee of Vector.

(b) Vector acknowledges and agrees that, except as otherwise provided herein, it shall have full responsibility with respect to any Liabilities and the payment or performance of any obligations arising out of or relating to any incentive, commission or other similar compensatory arrangement previously provided by any member of the Vector Group or Spinco Group to any Vector Participant.

(c) Spinco acknowledges and agrees that, except as otherwise provided herein, it shall have full responsibility with respect to any Liabilities and the payment or performance of any obligations arising out of or relating to any incentive, commission or other similar compensatory arrangement previously provided by any member of the Vector Group or Spinco Group to any Spinco Participant.

Section 8.2 Individual Arrangements.

(a) Vector Individual Arrangements. Vector acknowledges and agrees that, except as otherwise provided herein, it shall have full responsibility with respect to any Liabilities and the payment or performance of any obligations arising out of or relating to any employment, separation, severance, consulting, non-competition, retention or other compensatory arrangement previously provided by any member of the Vector Group or Spinco Group to any Vector Participant.

-15-

(b) Spinco Individual Arrangements. Spinco acknowledges and agrees that, except as otherwise provided herein, it shall have full responsibility with respect to any Liabilities and the payment or performance of any obligations arising out of or relating to any employment, separation, severance, consulting, non-competition, retention or other compensatory arrangement previously provided by any member of the Vector Group or Spinco Group to any Spinco Participant.

Section 8.3 Labor Matters. As of the Distribution Date, Vector or a member of the Vector Group shall assume or retain all Liabilities under the Vector Labor Agreements relating to Vector Employees and Former Vector Employees.

Section 8.4 Director Programs. Vector shall retain responsibility for the payment of any compensation payable in respect of service on the Vector Board that are payable but not yet paid as of the Distribution Date, and Spinco shall have no responsibility for any such payments (to an individual who is a member of the Spinco Board of Directors as of the Distribution Date or otherwise).

ARTICLE IX

INDEMNIFICATION

Section 9.1 Indemnification. All Liabilities retained or assumed by or allocated to Vector or the Vector Group pursuant to this Agreement shall be deemed to be “Vector Retained Liabilities” (as defined in the Distribution Agreement) for purposes of Article II of the Distribution Agreement, and all Liabilities retained or assumed by or allocated to Spinco or the Spinco Group pursuant to this Agreement shall be deemed to be “Spinco Liabilities” (as defined in the Distribution Agreement) for purposes of Article II of the Distribution Agreement.

ARTICLE X

GENERAL AND ADMINISTRATIVE

Section 10.1 Sharing of Information. Vector and Spinco (acting directly or through their respective Subsidiaries) shall provide to the other and their respective agents and vendors all Information as the other may reasonably request to enable the requesting Party to administer efficiently and accurately each of its Plans, to assist Spinco in obtaining its own insurance policies to provide benefits under Spinco Plans, and to determine the scope of, as well as fulfill, its obligations under this Agreement; provided, however, that, in the event that any Party reasonably determines that any such provision of Information could be commercially detrimental to such Party or any member of its Group, violate any Law or agreement to which such Party or member of its Group is a party, or waive any attorney-client privilege applicable to such Party or member of its Group, the Parties shall provide any such Information and the Parties shall take all reasonable measures to comply with the obligations pursuant to this Section 10.1 in a manner that mitigates any such harm or consequence to the extent practicable, and the Parties agree to cooperate with each other and take such commercially reasonable steps as may be practicable to preserve the attorney-client privilege with respect to the disclosure of any such Information. Such Information shall, to the extent reasonably practicable, be provided in the format and at the times and places requested, but in no event shall the Party providing such Information be obligated to incur any out-of-pocket expenses not reimbursed by the Party making such request or make such Information available outside of its normal business hours and premises. Any Information shared or exchanged pursuant to this Agreement shall be subject to the same confidentiality requirements set forth in Section 8.5 of the Distribution Agreement.

-16-

Section 10.2 Reasonable Efforts/Cooperation. Each of the Parties hereto will use its commercially reasonable efforts to promptly take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws and regulations to consummate the transactions contemplated by this Agreement, including adopting plans or plan amendments. Each of the Parties hereto shall cooperate fully on any issue relating to the transactions contemplated by this Agreement for which the other Party seeks a determination letter or private letter ruling from the IRS, an advisory opinion from the DOL or any other filing, consent or approval with respect to or by a Governmental Authority.

Section 10.3 Non-Termination of Employment; No Third-Party Beneficiaries. No provision of this Agreement or the Distribution Agreement shall be construed to create any right, or accelerate entitlement, to any compensation or benefit whatsoever on the part of any Vector Employee or Spinco Employee or other future, present, or former employee of any member of the Vector Group or Spinco Group under any Vector Plan or Spinco Plan or otherwise. This Agreement is solely for the benefit of the Parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other person or persons (including any employee or former employee of Vector or Spinco or either of their respective Subsidiaries or any beneficiary or dependent thereof) any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. No provision in this Agreement shall modify or amend any other agreement, plan, program, or document unless this Agreement explicitly states that the provision “amends” that other agreement, plan, program, or document. This shall not prevent the Parties entitled to enforce this Agreement from enforcing any provision in this Agreement, but no other person shall be entitled to enforce any provision in this Agreement on the grounds that it is an amendment to another agreement, plan, program, or document unless the provision is explicitly designated as such in this Agreement, and the person is otherwise entitled to enforce the other agreement, plan, program, or document. If a person not entitled to enforce this Agreement brings a lawsuit or other action to enforce any provision in this Agreement as an amendment to another agreement, plan, program, or document, and that provision is construed to be such an amendment despite not being explicitly designated as one in this Agreement, that provision in this Agreement shall be void ab initio, thereby precluding it from having any amendatory effect. Furthermore, nothing in this Agreement is intended to confer upon any employee or former employee of Vector, Spinco or either of their respective Subsidiaries any right to continued employment, or any recall or similar rights to an individual on layoff or any type of approved leave.

Section 10.4 Consent of Third Parties. If any provision of this Agreement is dependent on the consent of any third party and such consent is withheld, the Parties hereto shall use their reasonable best efforts to implement the applicable provisions of this Agreement to the fullest extent practicable. If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, the Parties hereto shall negotiate in good faith to implement the provision in a mutually satisfactory manner.

-17-

Section 10.5 Access to Employees. Following the Distribution Date, Vector and Spinco shall, or shall cause each of their respective Subsidiaries to, make available to each other those of their employees who may reasonably be needed in order to defend or prosecute any legal or administrative action (other than a legal action between any member of the Vector Group and any member of the Spinco Group) to which any employee, director or Plan of the Vector Group or Spinco Group is a party and which relates to their respective Plans prior to the Distribution Date.

Section 10.6 Beneficiary Designation/Release of Information/Right to Reimbursement. To the extent permitted by applicable Law and except as otherwise provided for in this Agreement, all beneficiary designations, authorizations for the release of information and rights to reimbursement made by or relating to Spinco Participants under Vector Plans shall be transferred to and be in full force and effect under the corresponding Spinco Plans until such beneficiary designations, authorizations or rights are replaced or revoked by, or no longer apply to, the relevant Spinco Participant.

Section 10.7 Not a Change in Control. The Parties hereto acknowledge and agree that the transactions contemplated by the Distribution Agreement and this Agreement do not constitute a “change in control” for purposes of any Vector Plan or Spinco Plan.

ARTICLE XI

MISCELLANEOUS

Section 11.1 Effect If Distribution Does Not Occur. Notwithstanding anything in this Agreement to the contrary, if the Distribution Agreement is terminated prior to the Distribution Date, then all actions and events that are, under this Agreement, to be taken or occur effective immediately prior to or as of the Distribution Date, or otherwise in connection with the Distribution, shall not be taken or occur except to the extent specifically agreed to in writing by Vector and Spinco and neither Party shall have any Liability to the other Party under this Agreement.

Section 11.2 Complete Agreement; Construction. This Agreement, including the Exhibits, shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter.

Section 11.3 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Party.

Section 11.4 Survival of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the Parties contained in this Agreement shall survive the Distribution Date.

Section 11.5 Notices. All notices and other communications hereunder shall be in writing, shall reference this Agreement and shall be hand delivered or mailed by registered or certified mail (return receipt requested) to the Parties at the following addresses (or at such other addresses for a Party as shall be specified by like notice) and will be deemed given on the date on which such notice is received:

-18-

To Vector:

Vector Group Ltd.

4400 Biscayne Boulevard

Miami, Florida 33137

Attention: General Counsel

To Spinco:

Douglas Elliman Inc.,

4400 Biscayne Boulevard

Miami, Florida 33137

Attention: General Counsel

Section 11.6 Waivers. The failure of any Party to require strict performance by any other Party of any provision in this Agreement will not waive or diminish that Party’s right to demand strict performance thereafter of that or any other provision hereof.

Section 11.7 Amendments. Subject to the terms of Section 11.8 and 11.10 hereof, this Agreement may not be modified or amended except by an agreement in writing signed by each of the Parties.

Section 11.8 Assignment. This Agreement shall not be assignable, in whole or in part, directly or indirectly, by any Party without the prior written consent of the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void; provided that either Party may assign this Agreement to a purchaser (by merger, sale of assets or otherwise) of all or substantially all of the properties and assets of such Party so long as such purchaser expressly assumes, in a written instrument in form reasonably satisfactory to the non-assigning Party, the due and punctual performance or observance of every agreement and covenant of this Agreement on the part of the assigning Party to be performed or observed. Any arrangement in violation of the provisions of this Section 11.8 shall be void.

Section 11.9 Successors and Assigns. The provisions to this Agreement shall be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns.

Section 11.10 Subsidiaries. Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any entity that is contemplated to be a Subsidiary of such Party after the Distribution Date.

Section 11.11 Title and Headings. Titles and headings to Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

Section 11.12 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any conflict of law or other rule that would result in the application of the law of a different jurisdiction.

-19-

Section 11.13 Waiver of Jury Trial. The Parties hereby irrevocably waive any and all right to trial by jury in any legal proceeding arising out of or related to this Agreement.

Section 11.14 Specific Performance. From and after the Distribution, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Parties agree that the Party to this Agreement who is or is to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief of its rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that, from and after the Distribution, the remedies at law for any breach or threatened breach of this Agreement, including monetary damages, are inadequate compensation for any Loss, that any defense in any action for specific performance that a remedy at law would be adequate is hereby waived, and that any requirements for the securing or posting of any bond with such remedy are hereby waived.

Section 11.15 Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The Parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

[signature page follows]

-20-

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first above written.


VECTOR GROUP LTD.

By:
Name:
Title:


DOUGLAS ELLIMAN INC.

By:
Name:
Title:

[Signature Page to Employee Matters Agreement]

Exhibit A

Certain Employees

Exhibit B

Vector Health & Welfare Plans

Exhibit C

Spinco Health & Welfare Plans

Exhibit 3.1

CERTIFICATE OF INCORPORATION OF

DOUGLAS ELLIMAN INC.

FIRST. The name of the corporation is Douglas Elliman Inc. (hereinafter, the “Corporation”).

SECOND. The address of the Corporation’s registered office and registered agent for service of process in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle.

THIRD. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

FOURTH. The total number of shares which the Corporation shall have authority to issue is 1,000 shares of Common Stock, and the par value of each of such shares is $0.10.

FIFTH. The name and mailing address of the incorporator is James B. Kirkland III, Vector Group Ltd., 4400 Biscayne Boulevard, Miami, Florida 33137.

SIXTH. The board of directors of the Corporation is expressly authorized to adopt, amend or repeal by-laws of the Corporation.

SEVENTH. Elections of directors need not be by written ballot except and to the extent provided in the by-laws of the Corporation.

EIGHTH. A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Law as currently in effect or as the same may hereafter be amended. No amendment, modification or repeal of this Article EIGHTH shall adversely affect any right or protection of a director that exists at the time of such amendment, modification or repeal.

NINTH. The Corporation shall, to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, as the same may be amended and supplemented, or by any successor thereto, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section. Such right to indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. The indemnification provided for herein shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise. No amendment, modification or repeal of this Article NINTH shall adversely affect any right or protection of a person that exists at the time of such amendment, modification or repeal.

IN WITNESS WHEREOF, I have signed this certificate of incorporation this 13th day of August, 2021.


/s/ James B. Kirkland III
James B. Kirkland III
Sole Incorporator

[Signature Page to Douglas Elliman Inc. Certificate of Incorporation]

Exhibit 3.2

Form of

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

DOUGLAS ELLIMAN INC.

[•], 2021

Douglas Elliman Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY AS FOLLOWS:

1. The name of the Corporation is “Douglas Elliman Inc.” The original certificate of incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on August 13, 2021 (the “Original Certificate”).

2. This Amended and Restated Certificate of Incorporation (this “Amended and Restated Certificate”), which both restates and amends the provisions of the Original Certificate, was duly adopted in accordance with Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware (as amended from time to time, the “DGCL”).

3. This Amended and Restated Certificate shall become effective on the date of filing with the Secretary of State of Delaware.

4. Certain capitalized terms used in this Amended and Restated Certificate are defined where appropriate herein.

The text of the Original Certificate is hereby restated and amended in its entirety to read as follows:

Article I. The name of the Corporation is Douglas Elliman Inc.

Article II. The address of the Corporation’s registered office and registered agent for service of process in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle.

Article III. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.

Article IV. The total number of shares of capital stock which the Corporation shall have authority to issue is 250,000,000 shares of Common Stock, par value $0.01 per share (the “Common Stock”), and 10,000,000 share of Preferred Stock, par value $0.01 per share (the “Preferred Stock”). The shares of Common Stock of the Corporation issued and outstanding under the Original Certificate immediately before the effectiveness of this Amended and Restated Certificate shall be modified to reduce the par value of such shares of Common Stock to $0.01 per share from $0.10 per share.

-1-

The powers, preferences and rights of the shares of Preferred Stock and the shares of Common Stock, and the qualifications, limitations or restrictions thereof are as follows:

A. Preferred Stock.

The board of directors of the Corporation (the “Board of Directors”) is authorized, subject to any limitations prescribed by the DGCL, by resolution or resolutions adopted from time to time, to provide for the issuance of shares of Preferred Stock in one or more series, and, by filing a certificate of designation pursuant to the DGCL (“Certificate of Designation”), to establish from time to time the number of shares to be included in each such series, to fix the designation, powers (including voting powers), preferences and relative, participating, optional or other special rights (and the qualifications, limitations or restrictions thereof) of the shares of each such series and, except where otherwise provided in the applicable Certificate of Designation, to increase (but not above the total number of authorized shares of the Preferred Stock) or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of a majority of the voting power of all the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, irrespective of the provisions of Section 242(b)(2) of the DGCL, unless a separate vote of the holders of one or more series is required pursuant to the terms of any Certificate of Designation.

Except as otherwise expressly provided in this Amended and Restated Certificate (including any Certificate of Designation designating any series of Preferred Stock pursuant to the foregoing provisions of this Article IV), (i) any new series of Preferred Stock may be designated, fixed and determined as provided herein by the Board of Directors without approval of the holders of the Common Stock, or the holders of Preferred Stock, or any series thereof, and (ii) any such new series may have powers, preferences and rights, including, without limitation, voting powers, dividend rights, liquidation rights, redemption rights and conversion rights, senior to, junior to or pari passu with the rights of the Common Stock, any series of the Preferred Stock, or any future class or series of capital stock of the Corporation.

B. Common Stock.

1. Dividends. Subject to the preferential rights of the Preferred Stock, the holders of shares of Common Stock shall be entitled to receive, when and if declared by the Board of Directors, out of the assets of the Corporation which are by law available therefor, dividends payable either in cash, in property, or in shares of Common Stock and shall share equally on a per share basis in such dividends and distributions.

2. Voting Rights. At every annual or special meeting of stockholders of the Corporation, every holder of Common Stock shall be entitled to one vote, in person or by proxy, for each share of Common Stock standing in his name on the books of the Corporation.

3. No Conversion, Redemption, or Preemptive Rights. The holders of Common Stock shall not have any conversion, redemption, or preemptive rights.

-2-

4. Dissolution, Liquidation or Winding-Up. In the event of any dissolution, liquidation or winding-up of the affairs of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, and of the amounts to which the holders of all outstanding shares of Preferred Stock shall be entitled, the holders of all outstanding shares of Common Stock shall be entitled to share ratably in the remaining net assets of the Corporation.

5. Number of Authorized Shares. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of the majority of the voting power of the issued and outstanding Common Stock irrespective of the provisions of Section 242(b)(2) of the DGCL.

Article V. The Board of Directors shall have the power to adopt, amend or repeal the Bylaws of the Corporation (as the same may be amended and/or restated from time to time, the “Bylaws”). Any adoption, amendment or repeal of the Bylaws by the Board of Directors shall require the approval of a majority of the Whole Board. For purposes of this Amended and Restated Certificate (including any Certificate of Designation), the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships. The stockholders shall also have power to adopt, amend or repeal the Bylaws; provided, however, that, notwithstanding any other provision of this Amended and Restated Certificate (including any Certificate of Designation) or any provision of law that might otherwise permit a lesser or no vote, but in addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Amended and Restated Certificate, the affirmative vote of the holders of at least two-thirds (2/3) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required for the stockholders to adopt, amend or repeal any provision of the Bylaws.

Article VI. Elections of directors need not be by written ballot except and to the extent provided in the Bylaws. The number of directors may be fixed, from time to time, by the affirmative vote of a majority of the Whole Board. The Board of Directors shall be divided into three (3) classes, designated as Class I, Class II, and Class III. Each class shall consist, as nearly as possible, of one-third of the Whole Board. The initial term of Class I directors will expire at the annual meeting of stockholders to be held in 2022. The initial term of Class II directors will expire at the annual meeting of stockholders to be held in 2023. The initial term of Class III directors will expire at the annual meeting of stockholders to be held in 2024.Following such initial term, each director will serve for a term of three years. Any decrease in the number of directors shall be effective at the time of the next succeeding annual meeting of stockholders unless there shall be vacancies in the Board, in which case such decrease may become effective at any time prior to the next succeeding annual meeting to the extent of the number of such vacancies. Directors need not be stockholders. Except as otherwise provided by the DGCL or this Amended and Restated Certificate (including any Certificate of Designation), the directors shall be elected at the annual meeting of stockholders at which such director’s term expires. No stockholder entitled to vote at an election for directors of the Corporation may cumulate votes. Each director shall hold office until his or her successor shall have been elected and qualified, or until his or her death, or until he or she shall have resigned, or have been removed, as provided in the Bylaws.

Article VII. Any director or the entire Board of Directors may be removed, only with cause, by the holders of two-thirds of shares at the time entitled to vote at any election of directors, whether or not the Board of Directors is classified as provided in subsection (d) of Section 141 of Title 8 of the Delaware Code.

-3-

Article VIII.

A. Special Meetings of Stockholders. Special meetings of stockholders, unless otherwise prescribed by the DGCL, may be called at any time by, and only by, (i) the Board of Directors, (ii) the Chairperson of the Board of Directors or (iii) the Chief Executive Officer of the Corporation.

B. No Action by Written Consent of Stockholders. No action shall be taken by stockholders of the Corporation except at an annual or special meeting of stockholders duly called in accordance with the Bylaws, and no action shall be taken by the stockholders by written consent.

C. Advance Notice of Stockholder Nominations and Business Transacted at Special Meetings. Advance notice of stockholder nominations for the election of directors of the Corporation and of business to be brought by stockholders before any meeting of stockholders of the Corporation shall be given in the manner provided in the Bylaws. Business transacted at special meetings of stockholders shall be limited to the purpose or purposes stated in the notice of meeting.

Article IX. To the fullest extent permitted by law, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for (i) any breach of the director’s duty of loyalty to the Corporation or its stockholders; (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) payments of unlawful dividends or unlawful stock repurchases or redemptions; or (iv) any transaction from which the director derived an improper personal benefit. Without limiting the effect of the preceding sentence, if the DGCL is hereafter amended to authorize the further elimination or limitation of the liability of a director, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL. Neither any amendment nor repeal of this Article IX, nor the adoption of any provision of this Restated Certificate inconsistent with this Article IX, shall eliminate, reduce or otherwise adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such amendment, repeal or adoption of such an inconsistent provision.

Article X. Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such a manner as the said courts directs. If a majority in number representing three-

-4-

fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which said application has been made, be binding on all the creditors or class of creditors, and/or on all of the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.

Article XI. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another state court located within the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action arising pursuant to any provision of the DGCL or this Amended and Restated Certificate or the Bylaws (in each case, as may be amended from time to time), (d) any action to interpret, apply, enforce, or determine the validity of this Amended and Restated Certificate or the Bylaws or (e) any action asserting a claim governed by the internal affairs doctrine, except for, as to each of (a) through (e) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten (10) days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction.

This Article XI shall not apply to suits brought to enforce a duty or liability created by the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts have exclusive jurisdiction. Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder; provided, however, that if the foregoing provisions of this Article XI are, or the application of such provisions to any person or entity or any circumstance is, illegal, invalid or unenforceable, the sole and exclusive forum for any action asserting a cause of action arising under the Securities Act of 1933, as amended, or any rule or regulation promulgated thereunder shall be the Court of Chancery of the State of Delaware.

If any action the subject matter of which is within the scope of this Article XI is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce this Article XI (an “Enforcement Action”) and (ii) having service of process made upon such stockholder in any such Enforcement Action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.

-5-

Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article XI.

Article XII.

A. Certain Acknowledgements; Definitions.

It is recognized that (a) certain directors and officers of the Corporation and its subsidiaries (the “Overlap Persons”) have served and may serve as directors, officers, employees and agents of Vector Group Ltd. and its respective subsidiaries and successors (each of the foregoing is an “Other Entity”), (b) the Corporation and its subsidiaries, directly or indirectly, may engage in the same, similar or related lines of business as those engaged in by any Other Entity and other business activities that overlap with or compete with those in which such Other Entity may engage, (c) the Corporation or its subsidiaries may have an interest in the same areas of business opportunity as an Other Entity, (d) the Corporation will derive substantial benefits from the service as directors or officers of the Corporation and its subsidiaries of Overlap Persons, and (e) it is in the best interests of the Corporation that the rights of the Corporation, and the duties of any Overlap Persons, be determined and delineated as provided in this Article XII in respect of any Potential Business Opportunities (as defined below) and in respect of the agreements and transactions referred to herein. The provisions of this Article XII will, to the fullest extent permitted by law, regulate and define the conduct of the business and affairs of the Corporation and its officers and directors who are Overlap Persons in connection with any Potential Business Opportunities and in connection with any agreements and transactions referred to herein. Any person purchasing or otherwise acquiring any shares of capital stock of the Corporation, or any interest therein, will be deemed to have notice of and to have consented to the provisions of this Article XII. References in this Article XII to “directors,” “officers,” “employees” and “agents” of any person will be deemed to include those persons who hold similar positions or exercise similar powers and authority with respect to any other entity that is a limited liability company, partnership, joint venture or other non-corporate entity.

B. Duties of Directors and Officers Regarding Potential Business Opportunities; Renunciation of Interest in Potential Business Opportunities.

The Corporation hereby renounces, on behalf of itself and its subsidiaries, to the fullest extent permitted by law, any interest or expectancy in any Potential Business Opportunity that is not a Restricted Potential Business Opportunity. If a director or officer of the Corporation who is an Overlap Person is presented or offered, or otherwise acquires knowledge of, a potential transaction or matter that may constitute or present a business opportunity for the Corporation or any of its subsidiaries, in which the Corporation or any of its subsidiaries could, but for the provisions of this Article XII, have an interest or expectancy (any such transaction or matter, and any such actual or potential business opportunity, a “Potential Business Opportunity”), (i) such Overlap Person will, to the fullest extent permitted by law, have no duty or obligation to refrain from referring such Potential Business Opportunity to any Other Entity and, if such Overlap Person refers such Potential Business Opportunity to an Other Entity, such Overlap Person shall have no duty or obligation to refer such Potential Business Opportunity to the Corporation or to any of its subsidiaries or to give any notice to the Corporation or to any of its subsidiaries regarding such

-6-

Potential Business Opportunity (or any matter related thereto), (ii) if such Overlap Person refers a Potential Business Opportunity to an Other Entity, such Overlap Person, to the fullest extent permitted by law, will not be liable to the Corporation as a director, officer, stockholder or otherwise, for any failure to refer such Potential Business Opportunity to the Corporation, or for referring such Potential Business Opportunity to any Other Entity, or for any failure to give any notice to the Corporation regarding such Potential Business Opportunity or any matter relating thereto; (iii) any Other Entity may participate, engage or invest in any such Potential Business Opportunity notwithstanding that such Potential Business Opportunity may have been referred to such Other Entity by an Overlap Person, and (iv) if a director or officer who is an Overlap Person refers a Potential Business Opportunity to an Other Entity, then, as between the Corporation and/or its subsidiaries, on the one hand, and such Other Entity, on the other hand, the Corporation and its subsidiaries shall be deemed to have renounced any interest, expectancy or right in or to such Potential Business Opportunity or to receive any income or proceeds derived therefrom solely as a result of such Overlap Person having been presented or offered, or otherwise acquiring knowledge of, such Potential Business Opportunity, unless in each case referred to in clause (i), (ii), (iii) or (iv), such Potential Business Opportunity satisfies all of the following conditions (any Potential Business Opportunity that satisfies all of such conditions, a “Restricted Potential Business Opportunity”): (A) such Potential Business Opportunity was expressly presented or offered to the Overlap Person solely in his or her capacity as a director or officer of the Corporation and (B) the Overlap Person believed that the Corporation possessed, or would reasonably be expected to be able to possess, the resources necessary to exploit such Potential Business Opportunity; provided, however, that the Corporation or any of its subsidiaries is directly engaged in such business at the time the Potential Business Opportunity is presented or offered to the Overlap Person. In the event the Corporation’s board of directors declines to pursue a Restricted Potential Business Opportunity, Overlap Persons shall be free to refer such Restricted Potential Business Opportunity to an Other Entity.

C. Certain Agreements and Transactions Permitted.

No contract, agreement, arrangement or transaction (or any amendment, modification or termination thereof) entered into between the Corporation and/or any of its subsidiaries, on the one hand, and an Other Entity, on the other hand, before the Corporation ceased to be a direct, wholly-owned subsidiary of Vector Group Ltd. shall be void or voidable or be considered unfair to the Corporation or any of its subsidiaries solely because an Other Entity is a party thereto, or because any directors, officers or employees of an Other Entity were present at or participated in any meeting of the board of directors, or a committee thereof, of the Corporation, or the board of directors, or committee thereof, of any subsidiary of the Corporation, that authorized the contract, agreement, arrangement or transaction (or any amendment, modification or termination thereof), or because his, her or their votes were counted for such purpose. The Corporation may from time to time enter into and perform, and cause or permit any of its subsidiaries to enter into and perform, one or more contracts, agreements, arrangements or transactions (or amendments, modifications or supplements thereto) with an Other Entity. To the fullest extent permitted by law, no such contract, agreement, arrangement or transaction (nor any such amendments, modifications or supplements), nor the performance thereof by the Corporation, any subsidiary of the Corporation or an Other Entity, shall be considered contrary to any fiduciary duty owed to the Corporation (or to any subsidiary of the Corporation, or to any stockholder of the Corporation or any of its subsidiaries) by any director or officer of the Corporation (or by any

-7-

director or officer of any subsidiary of the Corporation) who is an Overlap Person. To the fullest extent permitted by law, no director or officer of the Corporation or any subsidiary of the Corporation who is an Overlap Person thereof shall have or be under any fiduciary duty to the Corporation (or to any subsidiary of the Corporation, or to any stockholder of the Corporation or any of its subsidiaries) to refrain from acting on behalf of the Corporation, any subsidiary of the Corporation or an Other Entity in respect of any such contract, agreement, arrangement or transaction or performing any such contract, agreement, arrangement or transaction in accordance with its terms and each such director or officer of the Corporation or any subsidiary of the Corporation who is an Overlap Person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation and its subsidiaries, and shall be deemed not to have breached his or her duties of loyalty to the Corporation or any of its subsidiaries or any of their respective stockholders, and not to have derived an improper personal benefit therefrom.

D. Amendment of Article XII.

No alteration, amendment or repeal of, or adoption of any provision inconsistent with, any provision of this Article XII will have any effect upon (a) any agreement between the Corporation or a subsidiary thereof and any Other Entity, that was entered into before the time of such alteration, amendment or repeal or adoption of any such inconsistent provision (the “Amendment Time”), or any transaction entered into in connection with the performance of any such agreement, whether such transaction is entered into before or after the Amendment Time, (b) any transaction entered into between the Corporation or a subsidiary thereof and any Other Entity, before the Amendment Time, (c) the allocation of any business opportunity between the Corporation or any subsidiary thereof and any Other Entity before the Amendment Time, or (d) any duty or obligation owed by any director or officer of the Corporation or any subsidiary of the Corporation (or the absence of any such duty or obligation) with respect to any Potential Business Opportunity which such director or officer was offered, or of which such director or officer otherwise became aware, before the Amendment Time (regardless of whether any proceeding relating to any of the above is commenced before or after the Amendment Time).

Article XIII. If any provision of this Amended and Restated Certificate shall be held to be invalid, illegal, or unenforceable, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of this Amended and Restated Certificate (including without limitation, all portions of any section of this Amended and Restated Certificate containing any such provision held to be invalid, illegal, or unenforceable, which is not invalid, illegal, or unenforceable) shall remain in full force and effect.

Article XIV. To the fullest extent permitted by Section 145 of the DGCL, as the same may be amended and supplemented, or by any successor thereto, the Corporation will indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section. Such right to indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. The right to indemnification provided under this Amended and Restated Certificate is not exclusive of any other rights to which a person seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. No amendment, modification or repeal of this Article XIV shall adversely affect any right or protection of a person that exists at the time of such amendment, modification or repeal.

-8-

Article XV. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate in the manner now or hereafter prescribed by the laws of the State of Delaware and all rights conferred upon stockholders herein are granted subject to this reservation; provided, however, that, notwithstanding any provision of this Amended and Restated Certificate (including any Certificate of Designation) or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of the Corporation required by law or by this Amended and Restated Certificate (including any Certificate of Designation), the affirmative vote of the holders of at least two-thirds (2/3) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, shall be required to amend or repeal, or adopt any provision inconsistent with, Section A of Article IV, or Article V, Article VI, Article VII, Article VIII, Article IX, Article XIII, Article XIV or this Article XV.

-9-

IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate to be duly executed and acknowledged in its name and on its behalf by an authorized officer as of the date first set forth above.


DOUGLAS ELLIMAN INC.

By:
		Name:
		Title:

[Signature Page to Amended and Restated Certificate of Incorporation]

Exhibit 3.3

BY-LAWS

DOUGLAS ELLIMAN INC.

Stockholders

Section 1.1 Annual Meetings. If required by applicable law, an annual meeting of stockholders for the election of directors and the transaction of any other proper business shall be held at such date, time and place (a) either within or without the State of Delaware, and/or (b) by means of remote communication, in each case, as may be determined by the Board of Directors (the “Board”) of the Corporation from time to time.

Section 1.2 Special Meetings.

(a) A special meeting of stockholders may be called at any time by the Board, the chairperson of the Board (the “Chairperson”), the vice chairperson of the Board (the “Vice Chairperson”) or the president of the Corporation (the “President”), to be held at such date, time and place (A) either within or without the State of Delaware, and/or (B) by means of remote communication, in each case, as may be determined by the Board and stated in the notice of the meeting.

Section 1.3 Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting of stockholders, a notice of the meeting, which may be in writing, shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting of stockholders, if such date is different from the record date for determining stockholders entitled to notice of the meeting of stockholders, and, in the case of a special meeting of stockholders, the purpose or purposes for which the meeting of stockholders is called. Unless otherwise provided by law, the notice of any meeting of stockholders shall be given not less than ten nor more than 60 days before the date of the meeting of stockholders to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting of stockholders.

Section 1.4 Adjournments and Postponements.

(a) Any meeting of stockholders may be adjourned or recessed from time to time for any reason, whether or not a quorum is present, by the Board, the Chairperson or the presiding person of a meeting of stockholders, to reconvene at the same or some other place, and notice need not be given of any such adjourned or recessed meeting of stockholders if the time, place, if any, thereof, and the means of remote communications, if any, thereof are announced at the meeting of stockholders at which the adjournment or recess is taken. At the adjourned or recessed meeting of stockholders, the Corporation may transact any business which might have been transacted at the original meeting of stockholders. If the adjournment or recess is for more than 30 days, or if after the adjournment the Board fixes a new record date for determining the stockholders entitled to vote at the adjourned or recessed meeting of stockholders, a notice of the adjourned or recessed meeting shall be given to each stockholder of record as of the new record date for determining the stockholders entitled to notice of the adjourned or recessed meeting of stockholders under Section 1.3.

(b) In addition, subject to applicable law, any meeting of stockholders may be postponed by the Board at any time before such meeting has been convened. Notice of the postponed meeting of stockholders shall be given to each stockholder of record entitled to vote at the meeting.

Section 1.5 Quorum. At each meeting of stockholders, except where otherwise provided by law, the certificate of incorporation of the Corporation (the “Certificate of Incorporation”) or these By-laws, the holders of a majority of the outstanding shares of capital stock of the Corporation entitled to vote on a matter at the meeting, present in person or represented by proxy, shall constitute a quorum. For purposes of the foregoing, where a separate vote by class or classes is required for any matter, the holders of a majority of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum to take action with respect to that vote on that matter. Two or more classes or series of capital stock shall be considered a single class if the holders thereof are entitled to vote together as a single class at the meeting. In the absence of a quorum of the holders of any class of capital stock entitled to vote on a matter the Board, the Chairperson or the presiding person of the meeting may on his or her own motion adjourn, recess or postpone the meeting from time to time in the manner provided by Section 1.4 until a quorum of such class shall be so present and represented without the approval of the stockholders who are present in person or represented by proxy and entitled to vote.

Section 1.6 Organization.

(a) Meetings of stockholders shall be presided over by the Chairperson, or in the absence of the Chairperson by the Vice Chairperson, or in the absence of the Vice Chairperson, by the President, or in the absence of the President, by any officer or director designated by the Chairperson. The Secretary, or in the absence of the Secretary, an assistant secretary of the Corporation (an “Assistant Secretary”), shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary, any officer or director designated by the Chairperson shall act as secretary of the meeting.

-2-

(b) The order of business at each such meeting shall be as determined by the presiding person of the meeting. The presiding person of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, (i) establishing procedures for the maintenance of order and safety, (ii) establishing limitations on the time allotted for questions or comments, (iii) establishing restrictions on entry to such meeting after the time prescribed for the commencement thereof, (iv) establishing limitations on attendance and participation at the meeting to stockholders of record, their duly authorized proxies and such other individuals as the presiding person of the meeting may determine, (v) establishing the opening and closing of the voting polls, for each item on which a vote is to be taken, (vi) determining and declaring that a matter, business or nomination was not properly brought before the meeting, (vii) removing any stockholder or any other individual who refuses to comply with meeting rules, regulations and procedures as set forth by the presiding person of the meeting, (viii) concluding the meeting or adjourning or recessing the meeting, whether or not a quorum is present, to a later date or time and at a place and (ix) restricting the use of audio/video recording devices and cell phones at the meeting.

Section 1.7 Voting; Proxies.

(a) Unless otherwise provided in the Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of capital stock of the Corporation held by such stockholder which has voting power upon the matter in question.

(b) Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power, regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally.

(c) At all meetings of stockholders for the election of directors, a plurality of the votes cast shall be sufficient to elect the directors. With respect to other matters, unless otherwise provided by law or by the Certificate of Incorporation or these by-laws, the affirmative vote of the holders of a majority of the shares of all classes of capital stock present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, provided that (except as otherwise required by law or by the Certificate of Incorporation) the Board of Directors may require a larger vote upon any such matter. Where a separate vote by class is required, the affirmative vote of the holders of a majority of the shares of each class present in person or represented by proxy at the meeting shall be the act of such class, except as otherwise provided by law or by the certificate of incorporation or these by-laws.

-3-

Section 1.8 Fixing Date for Determination of Stockholders of Record.

(a) In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than 60 nor less than ten days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

(b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be the close of business on the day on which the Board adopts the resolution relating thereto.

Section 1.9 List of Stockholders Entitled to Vote Secretary shall prepare and make available, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting; provided, however, if the record date for determining the stockholders entitled to vote is less than ten days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Nothing in this Section 1.9 shall require the Corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least ten days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal executive offices of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders. If the meeting is to be held at a place, then a list of stockholders entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the whole time thereof and may be examined by any stockholder who is present. If the meeting is to be held by means of remote communication, then such list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

-4-

ARTICLE II

Board of Directors

Section 2.1 Powers; Qualifications. The business and affairs of the Corporation shall be managed by or under the direction of the Board, except as may be otherwise provided by law or in the Certificate of Incorporation.

Section 2.2 Number of Directors. The Board shall consist of one or more members, each of whom shall be a natural person, the number thereof to be determined from time to time by the Board.

Section 2.3 Election and Term of Office. Directors elected at each meeting of stockholders shall hold office until the next annual meeting of stockholders, and until their successors are elected and qualified or until their earlier resignation or removal.

Section 2.4 Resignation. Any director may resign at any time by giving notice in writing to the Board, the Chairperson, the President or the Secretary. Such resignation shall take effect at the time it is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events, in which case the resignation shall be effective at such later date or upon the happening of such event or events, and unless otherwise specified therein, no acceptance of such resignation shall be necessary to make it effective.

Section 2.5 Removal. Any director or the entire Board may be removed, with or without cause, by the holders of a majority of the shares of capital stock of the Corporation then entitled to vote at an election of directors.

Section 2.6 Newly Created Directorships and Vacancies. Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board for any reason, whether because of death, resignation, disqualification or any other reason, may only be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director. A director elected to fill a newly created directorship or a vacancy shall hold office until the next annual meeting of stockholders, and until his or her successor has been elected and qualified or until his or her earlier resignation or removal.

Section 2.7 Regular Meetings. Regular meetings of the Board may be held at such date, time and place (a) either within or without the State of Delaware, and/or (b) by means of remote communication.

Section 2.8 Special Meetings. Special meetings of the Board may be called by the Chairperson or by any two directors and shall be held at such place (a) either within or without the State of Delaware, and/or (b) by means of remote communication, on such date, and at such time as the Chairperson or the directors calling the meeting shall fix.

-5-

Section 2.9 Notice and Place of Meetings. Meetings of the Board may be held at the principal office of the Corporation, or at any other place as is stated in the notice of such meeting. Notice of any special meeting, and except as the Board may otherwise determine by resolution, notice of any regular meeting, will be (a) delivered personally by hand, by courier or by telephone, (b) sent by United States first-class mail, postage prepaid, or (c) sent by electronic mail directed to each director at that director’s address, telephone number or electronic mail address, as the case may be, as shown on the Corporation’s records at least 24 hours before the time at which the meeting is to commence; provided, however, that if the Chairperson or determines that it is otherwise necessary or advisable to hold the meeting sooner, the Chairperson may prescribe a shorter notice to be given. Any business may be transacted and any corporate action may be taken at any regular or special meeting of the Board at which a quorum is present, whether or not the business or proposed action is stated in the notice of that meeting, unless special notice of such business or proposed action is required by statute.

Section 2.10 Participation in Meetings by Electronic Means Permitted. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone, electronic or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 2.10 shall constitute presence in person at such meeting.

Section 2.11 Quorum; Vote Required for Action. At all meetings of the Board one-third of the entire Board shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board unless the Certificate of Incorporation or these By-laws shall require a vote of a greater number. In case at any meeting of the Board a quorum shall not be present, the members of the Board present may adjourn the meeting from time to time until a quorum shall be present.

Section 2.12 Organization. Meetings of the Board shall be presided over by the Chairperson, or in the absence of the Chairperson, by a presiding person chosen at the meeting. The Secretary, or in the absence of the Secretary, the presiding person of the meeting may appoint any person to act as secretary of the meeting.

Section 2.13 Action by Directors Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

-6-

Section 2.14 Compensation of Directors. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, the Board shall have the authority to fix the compensation of directors.

ARTICLE III

Committees

Section 3.1 Committees. The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these By-laws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (a) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by law to be submitted to stockholders for approval, (b) adopting, amending or repealing these By-laws or (c) removing or indemnifying directors.

Section 3.2 Committee Rules. Unless the Board otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the directors then serving on such committee shall constitute a quorum for the transaction of business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present or the unanimous written consent of all members thereof shall be the act of such committee, any one or more members of such committee may participate in a meeting of such committee by means of a conference telephone or other communications equipment allowing all persons participating in the meeting to hear each other at the same time and participation by such means shall constitute presence in person at such meeting, and in other respects each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II.

-7-

ARTICLE IV

Officers

Section 4.1 Officers; Election. From time to time, the Board shall elect a President and a Secretary, and it may, if it so determines, elect from among its members a Chairperson and a Vice Chairperson. The Board may also elect one or more vice presidents (“Vice Presidents”), one or more assistant secretaries (“Assistant Secretaries”), a treasurer (“Treasurer”) or one or more assistant treasurers (“Assistant Treasurers”) or such other officers of the Corporation as the Board may deem desirable and may give any of them such further designations or alternate titles as it considers desirable. Any number of offices of the Corporation may be held by the same person unless the Certificate of Incorporation or these By-laws provide otherwise.

Section 4.2 Term of Office; Resignation; Removal; Vacancies. Unless otherwise provided in the resolution of the Board electing any officer, each such officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board, the President, the Chairperson or the Secretary. Such resignation shall take effect at the time it is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events, in which case it shall be effective at such later date or upon the happening of such event or events, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, and the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise, may be filled by the Board at any regular or special meeting.

Section 4.3 Powers and Duties. The officers of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in these By-laws or in a resolution of the Board which is not inconsistent with these By-laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board. The Secretary shall have the duty to record the proceedings of the meetings of the stockholders, the Board and any committees in a book to be kept for that purpose. Unless otherwise required by applicable law, all contracts or other agreements, understandings, arrangements or instruments of the Corporation shall be executed on behalf of the Corporation by the President or any Vice President, such other employee of the Corporation authorized in writing by the President or any Vice President, with such limitations or restrictions as may be authorized by the Board. In case any officer is absent, or for any other reason that the Board may deem necessary or desirable, the President or the Board may delegate for the time being the powers or duties of such officer to any other officer or to any director. The Board may require any employee of the Corporation (including, without limitation, any officer of the Corporation) or any agent of the Corporation to give security for the faithful performance of his or her duties.

-8-

ARTICLE V

Stock

Section 5.1 Stock Certificates and Uncertificated Shares. The shares of capital stock of the Corporation shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation’s stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate theretofore issued until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution or resolutions by the Board, every holder of stock represented by certificates shall be entitled to have a certificate signed by or in the name of the Corporation by any two authorized officers of the Corporation (it being understood that each of the Chairperson, the Vice Chairperson, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer and any Assistant Treasurer shall be an authorized officer for such purpose), representing the number of shares of capital stock of the Corporation registered in certificate form owned by such holder. The signatures of the officers upon a certificate may be by electronic signature as permitted under the Delaware General Corporation Law. If such certificate is manually signed by one officer or manually countersigned by a transfer agent or by a registrar, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The Corporation may not issue stock certificates in bearer form. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.

Section 5.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

ARTICLE VI

Miscellaneous

Section 6.1 Fiscal Year. The fiscal year of the Corporation shall be determined by the Board.

Section 6.2 Seal. The Board may adopt a corporate seal; alter such seal at pleasure, and authorize it to be used by causing it or a reproduction of such seal to be affixed or impressed or reproduced in any other manner

Section 6.3 Waiver of Notice of Meetings of Stockholders, Directors and Committees. Whenever notice is required to be given by law or under any provision of the Certificate of Incorporation or these By-laws, a written waiver thereof, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these By-laws.

-9-

Section 6.4 Indemnification of Directors, Officers, and Employees.

(a) Except as provided in this Section 6.4, the Corporation shall indemnify to the full extent permitted by Delaware law any person made or threatened to be made a party or otherwise involved in any threatened, pending or completed civil, criminal, administrative or investigative action, suit or proceeding (a “Proceeding”) by reason of the fact that such person or such person’s testator or intestate is or was a director, officer, or employee of the Corporation or serves or served at the request of the Corporation at any corporation, limited liability company, public limited company, partnership, joint venture, trust, employee benefit plan, fund or other enterprise as a director, officer, or employee (each, an “Indemnitee”) against all Expenses, judgments, fines, penalties, amounts paid in settlement, liabilities and other losses, in each case, reasonably incurred or suffered by such Indemnitee in connection therewith.

(b) All rights conferred to an Indemnitee in this Section 6.4, as to indemnification, advancement of Expenses and otherwise, shall not be exclusive of any other rights to which such Indemnitee seeking indemnification or advancement of Expenses may be entitled or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-laws, agreement, vote of stockholders or the Board or otherwise. No amendment of the Certificate of Incorporation or these By-laws shall impair or otherwise adversely affect any rights of indemnification, advancement of Expenses or other rights of any Indemnitee conferred to such Indemnitee in the Certificate of Incorporation or these By-laws arising at any time with respect to events or omissions occurring prior to such amendment.

(c) The Corporation may maintain insurance to protect itself and any Indemnitee against any Expenses, judgments, fines, amounts paid in settlement, liabilities and other losses, whether or not the Corporation would have the power to indemnify such Indemnitee against such Expenses, judgments, fines, amounts paid in settlement, liabilities and other losses under applicable law.

Section 6.5 Interested Directors; Quorum. No contract or other agreement, understanding, arrangement, instrument or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or other agreement, understandings arrangement, instrument or transaction, or solely because such director’s or officer’s votes are counted for such purpose, if:

-10-

(a) the material facts as to the director’s or officer’s relationship or interest and as to the contract or other agreement, understanding, arrangement or instrument, transaction are disclosed or are known to the Board or the committee thereof, and the Board or committee thereof in good faith authorizes the contract or other agreement, understanding, arrangement, instrument or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum;

(b) the material facts as to the director’s or officer’s relationship or interest and as to the contract or other agreement, understanding, arrangement or instrument, transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or other agreement, understanding, arrangement, instrument or transaction is specifically approved in good faith by vote of the stockholders; or

(c) the contract or other agreement, understanding, arrangement or instrument, transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders.

Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or other agreement, understanding, arrangement, instrument or transaction.

Section 6.6 Amendment of By-laws.

(a) By the Stockholders. Subject to applicable law and the Certificate of Incorporation, these By-laws may be altered, amended or repealed, or new By-laws enacted, (i) at any special meeting of the stockholders if duly called for that purpose (provided that in the notice of such special meeting, notice of such purpose shall be given), (ii) at any annual meeting or (iii) by written consent of the stockholders, in each case, by the affirmative vote of a majority of the voting power of all the then outstanding capital stock of the Corporation, voting together as a single class.

(b) By the Board. Subject to applicable law and the Certificate of Incorporation, these By-laws may be altered, amended or repealed, or new By-laws enacted, by the Board at any meeting or by written consent of the Board.

-11-

Exhibit 3.4

AMENDED AND RESTATED

BYLAWS

DOUGLAS ELLIMAN INC.

EFFECTIVE [•], 2021

(a Delaware corporation)

ARTICLE I

OFFICES

SECTION 1. Registered Office. The address of the Corporation’s registered office and registered agent for service of process in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle.

SECTION 2. Other Offices. The Corporation may also have an office or offices other than said registered office at such place or places, either within or without the State of Delaware, as the Board of Directors (“Board”) shall from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCK

HOLDERS

SECTION 1. Place of Meetings. All meetings of the stockholders for the election of directors or for any other purpose shall be held at any such place, either within or without the State of Delaware, as shall be designated from time to time by the Board and stated in the notice of meeting or in a duly executed waiver thereof. In lieu of holding a meeting of stockholders at a designated place, the Board may, in its sole discretion, determine that any meeting of stockholders may be held solely by means of remote communication.

SECTION 2. Annual Meeting. The annual meeting of stockholders shall be held at such date and time as shall be designated from time to time by the Board and stated in the notice of meeting or in a duly executed waiver thereof. At such annual meeting, the stockholders shall elect, by a plurality vote, a Board and transact such other business as may properly be brought before the meeting.

SECTION 3. Special Meetings. (a) Special meetings of stockholders, unless otherwise prescribed by statute, may be called at any time by, and only by, (i) the Board or by the Chairman of the Board or the President.

SECTION 4. Notice of Meetings. (a) The Corporation shall give notice of any annual or special meeting of stockholders. Notices of meetings of the stockholders shall state the place, if any, date, and hour of the meeting, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting. In the case of a special meeting, the notice shall state the purpose or purposes for which the meeting is called. No business other than that specified in the notice thereof shall be transacted at any special meeting. Unless otherwise provided by applicable law or the Certificate of Incorporation of the Corporation (as the same may be amended and/or restated from time to time, the “Certificate of Incorporation”), notice shall be given to each stockholder entitled to vote at such meeting not fewer than 10 days nor more than 60 days before the date of the meeting.

-1-

(b) Notice to stockholders may be given by personal delivery, mail, or, with the consent of the stockholder entitled to receive notice, by facsimile or other means of electronic transmission. If mailed, such notice shall be delivered by postage-prepaid envelope directed to each stockholder at such stockholder’s address as it appears in the records of the Corporation and shall be deemed given when deposited in the United States mail. Notice shall be deemed to have been given to all stockholders of record who share an address if notice is given in accordance with the “householding” rules set forth in the rules of the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 233 of the Delaware General Corporation Law. Notice given by electronic transmission pursuant to this subsection shall be deemed given: (i) if by facsimile, when directed to a facsimile number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the stockholder. An affidavit of the Secretary of the Corporation (the “Secretary”), Assistant Secretary, the Corporation’s transfer agent or other agent of the Corporation that the notice has been given by personal delivery, mail, or a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

(c) Notice of any meeting of stockholders need not be given to any stockholder if (i) waived by such stockholder either in a writing signed by such stockholder or by electronic transmission, whether such waiver is given before or after such meeting is held, or (ii) if such stockholder shall attend such meeting, except when he or she shall attend for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. If such a waiver is given by electronic transmission, the electronic transmission must either set forth or be submitted with information from which it can be reasonably determined that the electronic transmission was authorized by the stockholder. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or these Bylaws.

SECTION 5. List of Stockholders. The Corporation’s transfer agent or the officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before each meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each stockholder. Nothing contained in this section shall require the Corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least 10 days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting; or (b) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an

-2-

electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting for the duration thereof and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder for the duration of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

SECTION 6. Quorum, Adjournments. The holders of a majority of the voting power of the issued and outstanding stock of the Corporation entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of stockholders, except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented by proxy at any meeting of stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented by proxy. Any meeting of stockholders, annual or special, may be adjourned from time to time (and the chairman of a meeting may do so without the vote of stockholders), to reconvene in the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, any business may be transacted which might have been transacted at the meeting as originally called. If the adjournment is for more than 30 days, or, if after adjournment a new record date is set, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

SECTION 7. Organization. At each meeting of stockholders, the Chairman of the Board or, in his or her absence, the President, or such other executive officer of the Corporation designated by the Chairman or the President, shall act as chairman of the meeting. The Secretary or, in his or her absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting, shall act as secretary of the meeting and keep the minutes thereof.

SECTION 8. Order of Business. The order of business at all meetings of the stockholders shall be as determined by the chairman of the meeting. The chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the establishment of procedures for the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Corporation, restrictions on entry to such meeting after the time prescribed for the commencement thereof and the opening and closing of the voting polls, for each item on which a vote is to be taken.

-3-

SECTION 9. Voting. Except as otherwise provided by statute or the Certificate of Incorporation, each stockholder of the Corporation shall be entitled at each meeting of stockholders to one vote for each share of capital stock of the Corporation standing in his or her name in the record of stockholders of the Corporation:

(a) on the date fixed pursuant to the provisions of Section 7 of ARTICLE V as the record date for the determination of the stockholders who shall be entitled to notice of and to vote at such meeting; or

(b) if no such record date shall have been so fixed, then at the close of business on the day next preceding the day on which notice thereof shall be given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

Each stockholder entitled to vote at any meeting of stockholders may authorize another person or persons to act for him or her by a proxy signed by such stockholder or his or her attorney-in-fact, but no proxy shall be voted after three years from its date, unless the proxy provides for a longer period. Any such proxy shall be delivered to the secretary of the meeting prior to the time designated in the order of business for so delivering such proxies. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power, regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary. When a quorum is present at any meeting, the vote of the holders of a majority of the voting power of the issued and outstanding stock of the Corporation entitled to vote thereon that is present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of statute or of the Certificate of Incorporation or of these Bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question. For purposes of this Bylaw, to the extent permitted by the listing rules of the New York Stock Exchange, votes cast “for” or “against” with respect to a given matter shall be counted as shares of stock of the Corporation entitled to vote on such matter, while “abstentions” with respect to a given matter and “broker nonvotes” (or other shares of stock of the Corporation similarly not entitled to vote) shall not be counted as shares entitled to vote on such matter. Unless required by statute, or determined by the chairman of the meeting to be advisable, the vote on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his or her proxy, if by such proxy, and shall state the number of shares voted.

SECTION 10. Inspectors. The Board may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If any of the inspectors so appointed shall fail to appear or act, the chairman of the meeting shall, or if inspectors shall not have been appointed, the chairman of the meeting may, appoint one or more inspectors. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his or her ability. The inspectors shall determine the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting, the inspectors shall make a report

-4-

in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as an inspector of an election of directors. Inspectors need not be stockholders. The inspectors may appoint or retain other persons to assist them in the performance of their duties. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxy or vote, nor any revocation thereof or change thereto, shall be accepted by the inspectors after the closing of the polls. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted therewith, any information provided by a stockholder who submits a proxy by electronic transmission from which it can be determined that the proxy was authorized by the stockholder, any written ballot or, if authorized by the Board, a ballot submitted by electronic transmission together with any information from which it can be determined that the electronic transmission was authorized by the stockholder, any information provided in a record of a vote if such vote was taken at the meeting by means of remote communication along with any information used to verify that any person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder, ballots and the regular books and records of the corporation, and they may also consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for such purpose, they shall, at the time they make their certification, specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.

SECTION 11. Remote Communication. For the purposes of these Bylaws, if authorized by the Board in its sole discretion, and subject to such guidelines and procedures as the Board may adopt, stockholders and proxyholders may, by means of remote communication:

(a) participate in a meeting of stockholders; and

(b) be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the Corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the Corporation.

SECTION 12. Action by Consent. No action shall be taken by stockholders of the Corporation except at an annual or special meeting of stockholders duly called in accordance with these Bylaws, and no action shall be taken by the stockholders by written consent.

-5-

SECTION 13. Advance Notice of Stockholder Nominees for Director and Other Stockholder Proposals. (a) The matters to be considered and brought before any annual or special meeting of stockholders of the Corporation shall be limited to only such matters, including the nomination and election of directors, as shall be brought properly before such meeting in compliance with the procedures set forth in this Section 13 of ARTICLE II.

(b) For any matter to be brought properly before the annual meeting of stockholders, the matter must be (i) specified in the notice of the annual meeting given by or at the direction of the Board, (ii) otherwise brought before the annual meeting by or at the direction of the Board or (iii) brought before the annual meeting by a stockholder who is a stockholder of record of the Corporation on the date the notice provided for in this Section 13 of ARTICLE II is delivered to the Secretary, who is entitled to vote at the annual meeting and who complies with the procedures set forth in this Section 13 of ARTICLE II.

In addition to any other requirements under applicable law and the Certificate of Incorporation and these Bylaws, written notice (the “Stockholder Notice”) of any nomination or other proposal must be timely and any proposal, other than a nomination, must constitute a proper matter for stockholder action. To be timely, the Stockholder Notice must be delivered to the Secretary at the principal executive office of the Corporation not less than 90 nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding year; provided, however, that if (and only if) the annual meeting is not scheduled to be held within a period that commences 30 days before such anniversary date and ends within 60 days after such anniversary date (an annual meeting date outside such period being referred to for the purposes of this Section 13 of ARTICLE II as an “Other Meeting Date”), the Stockholder Notice shall be given in the manner provided herein by the later of the close of business on (i) the date 90 days prior to such Other Meeting Date or (ii) the 10^th day following the date such Other Meeting Date is first publicly announced or disclosed.

A Stockholder Notice must contain the following information: (i) whether the stockholder is providing the notice at the request of a beneficial holder of shares, whether the stockholder, any such beneficial holder or any nominee has any agreement, arrangement or understanding with, or has received any financial assistance, funding or other consideration from, any other person with respect to the investment by the stockholder or such beneficial holder in the Corporation or the matter the Stockholder Notice relates to, and the details thereof, including the name of such other person (the stockholder, any beneficial holder on whose behalf the notice is being delivered, any nominees listed in the notice and any persons with whom such agreement, arrangement or understanding exists or from whom such assistance has been obtained are hereinafter collectively referred to as “Interested Persons”), (ii) the name and address of all Interested Persons, (iii) a complete listing of the record and beneficial ownership positions (including number or amount) of all equity securities and debt instruments, whether held in the form of loans or capital market instruments, of the Corporation or any of its subsidiaries held by all Interested Persons, (iv) whether and the extent to which any hedging, derivative or other transaction is in place or has been entered into within the prior 6 months preceding the date of delivery of the Stockholder Notice by or for the benefit of any Interested Person with respect to the Corporation or its subsidiaries or any of their respective securities, debt instruments or credit ratings, the effect or intent of which transaction is to give rise to gain or loss as a result of changes in the trading price of such securities or debt instruments or changes in the credit ratings

-6-

for the Corporation, its subsidiaries or any of their respective securities or debt instruments (or, more generally, changes in the perceived creditworthiness of the Corporation or its subsidiaries), or to increase or decrease the voting power of such Interested Person, and if so, a summary of the material terms thereof, and (v) a representation that the stockholder is a holder of record of stock of the Corporation that would be entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to propose the matter set forth in the Stockholder Notice. As used herein, “beneficially owned” has the meaning provided in Rules 13d-3 and 13d-5 under the Exchange Act. The Stockholder Notice shall be updated not later than 10 days after the record date for the determination of stockholders entitled to vote at the meeting to provide any material changes in the foregoing information as of the record date.

Any Stockholder Notice relating to the nomination of directors must contain (i) the information regarding each nominee required by paragraphs (a), (e) and (f) of Item 401 of Regulation S-K adopted by the Securities and Exchange Commission (or the corresponding provisions of any successor regulation), (ii) each nominee’s signed consent to serve as a director of the Corporation if elected, and (iii) whether each nominee is eligible for consideration as an independent director under the relevant standards contemplated by Item 407(a) of Regulation S-K (or the corresponding provisions of any successor regulation). The Corporation may also require any proposed nominee to furnish such other information, including completion of the Corporation’s directors questionnaire, as it may reasonably require to determine whether the nominee would be considered “independent” as a director or as a member of the audit committee of the Board under the various rules and standards applicable to the Corporation.

Any Stockholder Notice with respect to a matter other than the nomination of directors must contain (i) the text of the proposal to be presented, including the text of any resolutions to be proposed for consideration by stockholders and (ii) a brief written statement of the reasons why such stockholder favors the proposal.

Notwithstanding anything in this Section 13(b) of ARTICLE II to the contrary, in the event that the number of directors to be elected to the Board is increased and either all of the nominees for director or the size of the increased Board is not publicly announced or disclosed by the Corporation at least 100 days prior to the first anniversary of the preceding year’s annual meeting, a Stockholder Notice shall also be considered timely hereunder, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive office of the Corporation not later than the close of business on the 10^th day following the first date all of such nominees or the size of the increased Board shall have been publicly announced or disclosed.

(c) For any matter to be brought properly before a special meeting of stockholders, the matter must be set forth in the Corporation’s notice of the meeting given by or at the direction of the Board. In the event that the Corporation calls a special meeting of stockholders for the purpose of electing one or more persons to the Board, any stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of the meeting, if the Stockholder Notice required by Section 13(b) of ARTICLE II shall be delivered to the Secretary at the principal executive office of the Corporation not later than the close of business on the 10^th day following the day on which the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting is publicly announced or disclosed.

-7-

(d) For purposes of this Section 13 of ARTICLE II, a matter shall be deemed to have been “publicly announced or disclosed” if such matter is disclosed in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission.

(e) Only persons who are nominated in accordance with the procedures set forth in this Section 13 of ARTICLE II shall be eligible for election as directors of the Corporation. In no event shall the postponement or adjournment of an annual meeting already publicly noticed, or any announcement of such postponement or adjournment, commence a new period (or extend any time period) for the giving of notice as provided in this Section 13 of ARTICLE II. This Section 13 of ARTICLE II shall not apply to stockholders proposals made pursuant to Rule 14a-8 under the Exchange Act.

(f) The person presiding at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall have the power and duty to determine whether notice of nominees and other matters proposed to be brought before a meeting has been duly given in the manner provided in this Section 13 of ARTICLE II and, if not so given, shall direct and declare at the meeting that such nominees and other matters are not properly before the meeting and shall not be considered. Notwithstanding the foregoing provisions of this Section 13 of ARTICLE II, if the stockholder or a qualified representative of the stockholder does not appear at the annual or special meeting of stockholders of the Corporation to present any such nomination, or make any such proposal, such nomination or proposal shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Corporation.

SECTION 14. Stockholder Nominations Included in the Corporation’s Proxy Materials.

(a) Inclusion of Nominees in Proxy Statement. Subject to the provisions of this Section 14 of ARTICLE II, if expressly requested in the relevant Nomination Notice (as defined below), the Corporation shall include in its proxy statement for any annual meeting of stockholders:

(1)

the names of any person or persons nominated for election, which shall also be included on the Corporation’s form of proxy and ballot, by any Eligible Holder (as defined below) or group of up to 20 Eligible Holders that has (individually and collectively, in the case of a group) satisfied, as determined by the Board, all applicable conditions and complied with all applicable procedures set forth in this Section 14 (such Eligible Holder or group of Eligible Holders being a “Nominating Stockholder” and each person so nominated, a “Nominee”);

-8-

(2)

disclosure about each Nominee and the Nominating Stockholder required under the rules of the SEC or other applicable law to be included in the proxy statement;

(3)

any statement in support of the Nominee’s (or Nominees’, as applicable) election to the Board included by the Nominating Stockholder in the Nomination Notice for inclusion in the proxy statement (subject, without limitation, to Section 14(e)(2) of ARTICLE II), provided that such statement does not exceed 500 words and fully complies with Section 14 of the Exchange Act and the rules and regulations thereunder, including Rule 14a-9 (the “Statement”); and

(4)

any other information that the Corporation or the Board determines, in their discretion, to include in the proxy statement relating to the nomination of the Nominee(s), including, without limitation, any statement in opposition to the nomination, any of the information provided pursuant to this Section 14 of ARTICLE II and any solicitation materials or related information with respect to the Nominees(s).

For purposes of this Section 14 of ARTICLE II, any determination to be made by the Board may be made by the Board, a committee of the Board or any officer of the Corporation designated by the Board or a committee of the Board, and any such determination shall be final and binding on the Corporation, any Eligible Holder, any Nominating Stockholder, any Nominee and any other person so long as made in good faith (without any further requirements).

(b) Maximum Number of Nominees.

(1)

The Corporation shall not be required to include in the proxy statement for an annual meeting of stockholders more Nominees than that number of directors constituting the greater of (i) two and (ii) 20% of the total number of directors of the Corporation on the last day on which a Nomination Notice may be submitted pursuant to this Section 14 of ARTICLE II (rounded down to the nearest whole number) (the “Maximum Number”). The Maximum Number for a particular annual meeting of stockholders shall be reduced by: (i) the number of Nominees who are subsequently withdrawn or that the Board itself decides to nominate for election at such annual meeting of stockholders and (ii) the number of incumbent directors who had been Nominees with respect to any of the preceding two annual meetings of stockholders and whose reelection at the upcoming annual meeting of stockholders is being recommended by the Board. In the event that one or more vacancies for any reason occurs on the Board after the deadline for submitting a Nomination Notice as set forth in Section 14(d) of ARTICLE II but before the date of the Corporation’s applicable annual meeting of stockholders, and the Board resolves to reduce the size of the Board in connection therewith, the Maximum Number shall be calculated based on the number of directors in office as so reduced.

-9-

(2)

If the number of Nominees pursuant to this Section 14 of ARTICLE II for any annual meeting of stockholders exceeds the Maximum Number then, promptly upon notice from the Corporation, each Nominating Stockholder will select one Nominee for inclusion in the proxy statement until the Maximum Number is reached, going in order of the amount (largest to smallest) of the ownership position as disclosed in each Nominating Stockholder’s Nomination Notice, with the process repeated if the Maximum Number is not reached after each Nominating Stockholder has selected one Nominee. If, after the deadline for submitting a Nomination Notice as set forth in Section 14(d) of ARTICLE II, a Nominating Stockholder ceases to satisfy the eligibility requirements in this Section 14 of ARTICLE II, as determined by the Board, or withdraws its nomination or a Nominee ceases to satisfy the eligibility requirements in this Section 14 of ARTICLE II, as determined by the Board, or becomes unwilling or unable to serve on the Board, whether before or after the mailing of the Corporation’s proxy statement for such annual meeting of stockholders, then the nomination shall be disregarded, and the Corporation: (i) shall not be required to include in its proxy statement for such annual meeting of stockholders or on any ballot or form of proxy for such annual meeting of stockholders the disregarded Nominee or any successor or replacement nominee proposed by the applicable Nominating Stockholder or by any other Nominating Stockholder and (ii) may otherwise communicate to its stockholders, including without limitation by amending or supplementing its proxy statement or ballot or form of proxy, that the Nominee will not be included as a Nominee in the proxy statement or on any ballot or form of proxy for such annual meeting of stockholders and will not be voted on at such annual meeting of stockholders.

(1)

An “Eligible Holder” is a person who has either (i) been a record holder of the shares of the Corporation’s common stock used to satisfy the eligibility requirements in this Section 14(c) of ARTICLE II continuously for the three-year period specified in Subsection (2) below or (ii) provides to the Secretary, within the time period referred to in Section 14(d) of ARTICLE II, evidence of continuous ownership of such shares for such three-year period from one or more securities intermediaries in a form that the Board determines would be deemed acceptable for purposes of a shareholder proposal under Rule 14a-8(b)(2) under the Exchange Act (or any successor rule).

-10-

(2)

An Eligible Holder or group of up to 20 Eligible Holders may submit a nomination in accordance with this Section 14 of ARTICLE II only if the person or group (in the aggregate) has continuously owned at least the Minimum Number (as defined below) of shares of the Corporation’s common stock throughout the three-year period preceding and including the date of submission of the Nomination Notice, and continues to own at least the Minimum Number of such shares through the date of the Corporation’s applicable annual meeting of stockholders. Two or more funds or accounts that are (i) under common management and investment control, (ii) under common management and funded primarily by the same employer (or by a group of related employers that are under common control) or (iii) a “group of investment companies,” as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended, shall be treated as one Eligible Holder if such Eligible Holder shall provide together with the Nomination Notice documentation reasonably satisfactory to the Board that demonstrates the satisfaction of any of the foregoing criteria. For the avoidance of doubt, in the event of a nomination by a group of Eligible Holders, any and all requirements and obligations for an individual Eligible Holder that are set forth in this Section 14 of ARTICLE II, including the minimum holding period, shall apply to each member of such group; provided, however, that the Minimum Number shall apply to the ownership of the group in the aggregate. Should any stockholder cease to satisfy the eligibility requirements in this Section 14 of ARTICLE II, as determined by the Board, or withdraw from a group of Eligible Holders at any time prior to the applicable annual meeting of stockholders, the group of Eligible Stockholders shall only be deemed to own the shares held by the remaining members of the group. As used in this Section 14 of ARTICLE II, any reference to a “group” or “group of Eligible Holders” refers to any Nominating Stockholder that consists of more than one Eligible Holder and to all the Eligible Holders that make up such Nominating Stockholder.

(3)

The “Minimum Number” of shares of the Corporation’s common stock means 3% of the number of outstanding shares of common stock calculated as of the most recent date for which the total number of outstanding shares of common stock of the Corporation is given in any filing by the Corporation with the SEC prior to the submission of the Nomination Notice.

(4)

For purposes of this Section 14 of ARTICLE II, an Eligible Holder “owns” only those outstanding shares of the Corporation as to which the Eligible Holder possesses both: (i) the full voting and investment rights pertaining to the shares and (ii) the full economic interest in (including the opportunity for profit and risk of loss on) such shares; provided that the number of shares calculated in accordance with

-11-

clauses (i) and (ii) shall not include any shares: (A) sold by such Eligible Holder or any of its affiliates in any transaction that has not yet been settled or closed, (B) purchased by such Eligible Holder or any of its affiliates in a transaction that has not yet been settled or closed, (C) borrowed by such Eligible Holder or any of its affiliates for any purpose or purchased by such Eligible Holder or any of its affiliates pursuant to an agreement to resell or subject to any other obligation to resell to another person, or (D) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such Eligible Holder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of outstanding shares of the Corporation, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of: (x) reducing in any manner, to any extent or at any time in the future, such Eligible Holder’s or any of its affiliates’ full right to vote or direct the voting of any such shares, and/or (y) hedging, offsetting, or altering to any degree, gain or loss arising from the full economic ownership of such shares by such Eligible Holder or any of its affiliates. An Eligible Holder “owns” shares held in the name of a nominee or other intermediary so long as the Eligible Holder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. An Eligible Holder’s ownership of shares shall be deemed to continue during any period in which the Eligible Holder has delegated any voting power by means of a proxy, power of attorney, or other similar instrument or arrangement that is revocable at any time by the Eligible Holder. An Eligible Holder’s ownership of shares shall be deemed to continue during any period in which the Eligible Holder has loaned such shares provided that the Eligible Holder has the power to recall such loaned shares on not more than five business days’ notice and has recalled such loaned shares as of (i) the record date for the Corporation’s applicable annual meeting of stockholders and (ii) the date of the Corporation’s applicable annual meeting of stockholders (it being understood that the Eligible Holder shall be entitled to loan such shares during the period that falls between the dates referenced in clauses (i) and (ii)). The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of the Corporation are “owned” for these purposes shall be determined by the Board.

(5)

No Eligible Holder shall be permitted to be in more than one group constituting a Nominating Stockholder, and if any Eligible Holder appears as a member of more than one group, it shall be deemed to be a member of the group that has the largest net long position as reflected in the Nomination Notice.

-12-

(d) Nomination Notice. To nominate a Nominee, the Nominating Stockholder must, no earlier than 150 calendar days and no later than the close of business 120 calendar days before the anniversary of the date that the Corporation mailed its proxy statement for the prior year’s annual meeting of stockholders, submit to the Secretary at the principal executive office of the Corporation all of the following information and documents (collectively, the “Nomination Notice”); provided, however, that if (and only if) the applicable annual meeting of stockholders is not scheduled to be held within a period that commences 30 days before such anniversary date and ends 30 days after such anniversary date (an annual meeting date outside such period being referred to for the purposes of this Section 14 of ARTICLE II as an “Other Meeting Date”), the Nomination Notice shall be given in the manner provided in this Section 14(d) of ARTICLE II by the later of the close of business on the date that is 180 days prior to such Other Meeting Date or the tenth day following the date such Other Meeting Date is first publicly announced or disclosed:

(1)

a Schedule 14N (or any successor form) relating to the Nominee, completed and filed with the SEC by the Nominating Stockholder as applicable, in accordance with SEC rules;

(2)

a written notice, in a form deemed satisfactory by the Board, of the nomination of such Nominee that includes the following additional information, agreements, representations and warranties by the Nominating Stockholder (including, in the case of a group, each Eligible Holder included in the group):

(i)

all information relating to the Nominee that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act and/or Rule 14a-11 (as if such rule were still in effect) thereunder (including such Nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected);

(ii)

as to the Nominating Stockholder: (A) the name and address of such Nominating Stockholder, as they appear on the Corporation’s books, and of such beneficial owner; (B) the class and number of shares of capital stock of the Corporation which are owned beneficially and of record by such Nominating Stockholder; (C) a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among such Nominating Stockholder, any of its respective affiliates or associates, and any others acting in concert with any of the foregoing; (D) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, warrants, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the Nominating Stockholder’s notice by, or on behalf of,

-13-

such Nominating Stockholder, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such Nominating Stockholder, with respect to shares of stock of the Corporation; and (E) a representation that the Nominating Stockholder is a holder of record of the stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such nomination;

(iii)

the details of any relationship that existed within the past three years and that would have been described pursuant to Item 6(e) of Schedule 14N (or any successor item) if it existed on the date of submission of the Schedule 14N;

(iv)

a representation and warranty that the Nominating Stockholder acquired the securities of the Corporation in the ordinary course of business and did not acquire, and is not holding, securities of the Corporation for the purpose or with the effect of influencing or changing control of the Corporation;

(v)

a representation and warranty that the Nominee’s candidacy or, if elected, membership on the Board would not violate applicable state or federal law or the rules of the principal national securities exchange on which the Corporation’s shares of common stock are traded;

(vi)

a representation and warranty that the Nominee: (A) does not have any direct or indirect relationship with the Corporation that will cause the Nominee to be deemed not independent pursuant to the Corporation’s Corporate Governance Principles as most recently published on its website and otherwise qualifies as independent under the rules of the principal national securities exchange on which the Corporation’s shares of common stock are traded; (B) meets the audit committee independence requirements under the rules of the principal national securities exchange on which the Corporation’s shares of common stock are traded; (C) is a “non-employee director” for the purposes of Rule 16b-3 under the Exchange Act (or any successor rule); (D) is an “outside director” for the purposes of Section 162(m) of the Internal Revenue Code (or any successor provision); and (E) is not and has not been subject to any event specified in Rule 506(d)(1) of Regulation D (or any successor rule) under the Securities Act of 1933 or Item 401(f) of Regulation S-K (or any successor rule) under the Exchange Act, without reference to whether the event is material to an evaluation of the ability or integrity of the Nominee;

-14-

(vii)

a representation and warranty that the Nominating Stockholder satisfies the eligibility requirements set forth in Section 14(c) of ARTICLE II and has provided evidence of ownership to the extent required by Section 14(c)(1) of ARTICLE II;

(viii)

a representation and warranty that the Nominating Stockholder intends to continue to satisfy the eligibility requirements described in Section 14(c) of ARTICLE II through the date of the applicable annual meeting of stockholders;

(ix)

a statement as to the Nominating Stockholder’s intentions with respect to maintaining qualifying ownership of the Minimum Number of shares for at least one year following the applicable annual meeting of stockholders;

(x)

details of any position of the Nominee as an officer or director of any competitor (that is, any entity that produces products or provides services that compete with or are alternatives to the principal products produced or services provided by the Corporation or its affiliates) of the Corporation, within the three years preceding the submission of the Nomination Notice;

(xi)

details of any shares of the Corporation owned by the Nominee that are (A) pledged by the Nominee or otherwise subject to a lien, charge or other encumbrance or (B) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such Nominee, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of outstanding shares of the Corporation, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of (x) reducing in any manner, to any extent or at any time in the future, such Nominee’s full right to vote or direct the voting of any such shares, and/or (y) hedging, offsetting, or altering to any degree, gain or loss arising from the full economic ownership of such shares by such Nominee;

(xii)

a representation and warranty that the Nominating Stockholder has not nominated and will not nominate for election to the Board at the applicable annual meeting of stockholders any person other than its Nominee(s);

(xiii)

a representation and warranty that the Nominating Stockholder will not engage in a “solicitation” within the meaning of Rule 14a-1(l) (without reference to the exception in Section 14a-1(l)(2)(iv)) (or any successor rules) under the Exchange Act in support of the election of any individual as a director at the applicable annual meeting of stockholders, other than its Nominee(s) or any nominee of the Board;

-15-

(xiv)

a representation and warranty that the Nominating Stockholder will not use any proxy card other than the Corporation’s proxy card in soliciting stockholders in connection with the election of a director of the Corporation at the applicable annual meeting of stockholders;

(xv)

if desired, a Statement; and

(xvi)

in the case of a nomination by a group, the designation by all Eligible Holders included in the group of one such Eligible Holder that is authorized to act on behalf of all Eligible Holders included in the group with respect to matters relating to the nomination, including withdrawal of the nomination;

(3)

an executed agreement, in a form deemed satisfactory by the Board, pursuant to which the Nominating Stockholder (in the case of a group, including, and binding upon, each Eligible Holder included in the group) agrees:

(i)

to comply with all applicable laws, rules and regulations in connection with the nomination, solicitation and election of a Nominee;

(ii)

to file any written solicitation or other communication with the Corporation’s stockholders relating to one or more of the Corporation’s directors or director nominees or any Nominee with the SEC, regardless of whether any such filing is required under any rule or regulation or whether any exemption from filing is available for such materials under any rule or regulation;

(iii)

to assume all liability stemming from an action, suit or proceeding concerning any actual or alleged legal or regulatory violation arising out of any communication by the Nominating Stockholder or any of its Nominees with the Corporation, its stockholders or any other person in connection with the nomination or election of one or more of the Corporation’s directors, including, without limitation, the Nomination Notice;

(iv)

to indemnify and hold harmless the Corporation and each of its directors, officers and employees individually against any liability, loss, damages, expenses or other costs (including attorneys’ fees) incurred in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers or employees arising out of or relating to a failure or alleged failure of the Nominating Stockholder or any of its Nominees to comply with, or any breach or alleged breach of, its respective obligations, agreements or representations under this Section 14 of ARTICLE II; and

-16-

(v)

in the event that (A) any information included in the Nomination Notice or in any other communication by the Nominating Stockholder (including with respect to any Eligible Holder included in a group), any of its Nominees or any of their respective agents or representatives with the Corporation, its stockholders or any other person in connection with the nomination or election of a Nominee ceases to be true and accurate in all material respects (or omits a material fact necessary to make the statements made not misleading) or (B) the Nominating Stockholder (including any Eligible Holder included in a group) has failed to continue to satisfy the eligibility requirements described in Section 14(c) of ARTICLE II, to promptly (and in any event within 48 hours of discovering such misstatement, omission or failure) notify the Corporation and, in the case of clause (A), any other recipient of such communication (together with the information required to correct the misstatement or omission); and

(4)

an executed agreement, in a form deemed satisfactory by the Board, by the Nominee:

(i)

to provide to the Corporation such other information, including completion of the Corporation’s director questionnaire, as it may reasonably request;

(ii)

that the Nominee has read and agrees, if elected, to adhere to the Corporation’s Corporate Governance Guidelines and Code of Conduct and Ethics and any other Corporation policies and guidelines applicable to directors, in each case as in effect from time to time (including, but not limited to, any provision therein requiring a director to offer his or her resignation in specified circumstances); and

(iii)

that the Nominee is not and will not become a party to (A) any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity other than the Corporation in connection with service or action as a director of the Corporation that has not been disclosed to the Corporation, (B) any agreement, arrangement or understanding with any person or entity as to how the Nominee would vote or act on any issue or question as a director (a “Voting Commitment”) that has not been disclosed to the Corporation or (C) any Voting Commitment that could reasonably be expected to limit or interfere with the Nominee’s ability to comply, if elected as a director of the Corporation, with its fiduciary duties under applicable law.

-17-

(5)

an irrevocable letter of resignation, in a form deemed satisfactory by the Board, executed by the Nominee in advance of the Corporation’s applicable annual meeting of stockholders resigning his or her candidacy for director election and, if applicable at the time the determination set forth in either of clauses (i) and (ii) below is made by the Board, resigning from his or her position as a director, which shall in each case become effective upon a determination by the Board that (i) the information provided to the Corporation with respect to such Nominee pursuant to this Section 14 of ARTICLE II was untrue in any material respect or omitted to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading or (ii) that such Nominee, or the Nominating Stockholder who nominated such Nominee, committed a material violation or breach of any obligation, agreement, representation or warranty of such Nominee or Nominating Stockholder under this Section 14 of ARTICLE II; provided that such resignation letter shall expire upon the certification of the voting results of the Corporation’s applicable annual meeting of stockholders.

The information and documents required by this Section 14(d) of ARTICLE II to be provided by the Nominating Stockholder shall be: (i) provided with respect to and executed by each Eligible Holder, in the case of information applicable to group members; and (ii) provided with respect to the persons specified in Instruction 1 to Item 6(c) and (d) of Schedule 14N (or any successor item) in the case of a Nominating Stockholder or Eligible Holder included in a group that is an entity. The Nomination Notice shall be deemed submitted on the date on which all of the information and documents referred to in this Section 14(d) of ARTICLE II (other than such information and documents contemplated to be provided after the date the Nomination Notice is provided) have been delivered to or, if sent by mail, received by the Secretary.

(e) Exceptions.

(1)

Notwithstanding anything to the contrary contained in this Section 14 of ARTICLE II, the Corporation may omit from its proxy statement any Nominee and any information concerning such Nominee (including a Nominating Stockholder’s Statement) and no vote on such Nominee will occur (notwithstanding that proxies in respect of such vote may have been received by the Corporation), and the Nominating Stockholder may not, after the last day on which a Nomination Notice would be timely, cure in any way any defect preventing the nomination of the Nominee, if:

-18-

(i)

the Corporation receives a notice, whether or not subsequently withdrawn, that a stockholder intends to nominate a candidate for director at the applicable annual meeting of stockholders;

(ii)

another person is engaging in a “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the applicable annual meeting of stockholders other than a nominee of the Board and other than as permitted by this Section 14 of ARTICLE II;

(iii)

the Nominating Stockholder or the Eligible Holder that is designated to act on behalf of a group of Eligible Holders, as applicable, or any qualified representative thereof, does not appear at the applicable annual meeting of stockholders to present the nomination submitted pursuant to this Section 14 of ARTICLE II or the Nominating Stockholder withdraws its nomination;

(iv)

the Board determines that such Nominee’s nomination or election to the Board would result in the Corporation violating or failing to be in compliance with the Corporation’s bylaws or certificate of incorporation or any applicable law, rule or regulation to which the Corporation is subject, including any rules or regulations of the principal national securities exchange on which the Corporation’s shares of common stock are traded;

(v)

the Nominee was nominated for election to the Board pursuant to this Section 14 of ARTICLE II at one of the Corporation’s two preceding annual meetings of stockholders and either (A) withdrew or became ineligible or (B) received a vote of less than 20% of the Corporation’s shares of common stock entitled to vote for such Nominee;

(vi)

the Nominee has been, within the past three years, an officer or director of a competitor, as defined for purposes of Section 8 of the Clayton Antitrust Act of 1914, as amended; or

(vii)

the Corporation is notified, or the Board determines, that a Nominating Stockholder or such Nominee has failed to continue to satisfy the eligibility requirements described in this Section 14 of ARTICLE II, any of the representations and warranties made in the Nomination Notice ceases to be true and accurate in all material respects (or omits a material fact necessary to make the statements made not misleading), the Nominee becomes unwilling or unable to serve on the Board or any material violation or breach occurs of the obligations, agreements, representations or warranties of the Nominating Stockholder or the Nominee under this Section 14 of ARTICLE II.

-19-

(2)

Notwithstanding anything to the contrary contained in this Section 14 of ARTICLE II, the Corporation may omit from its proxy statement, or may supplement or correct, any information, including all or any portion of the statement in support of the Nominee(s) included in the Nomination Notice, if the Board determines that:

(i)

such information is not true in all material respects or omits a material statement necessary to make the statements made not misleading;

(ii)

such information directly or indirectly impugns the character, integrity or personal reputation of, or directly or indirectly makes charges concerning improper, illegal or immoral conduct or associations, without factual foundation, with respect to any person; or

(iii)

the inclusion of such information in the proxy statement would otherwise violate the SEC proxy rules or any other applicable law, rule or regulation.

The Corporation may solicit against, and include in the proxy statement its own statement relating to, any Nominee.

ARTICLE III

BOARD OF DIRECTORS

SECTION 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board. The Board may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by statute or the Certificate of Incorporation directed or required to be exercised or done by the stockholders.

SECTION 2. Number, Qualifications, Election and Term of Office. The number of directors may be fixed, from time to time, by the affirmative vote of a majority of the entire Board. The Board shall be divided into three (3) classes, designated as Class I, Class II, and Class III. Each class shall consist, as nearly as possible, of one-third of the entire Board. The initial term of Class I directors will expire at the annual meeting of stockholders to be held in 2022. The initial term of Class II directors will expire at the annual meeting of stockholders to be held in 2023. The initial term of Class III directors will expire at the annual meeting of stockholders to be held in 2024. Following each such initial term, each director will serve for a term of three years. All vacancies occurring in the Board and any newly created directorships resulting from any increase in the authorized number of directors shall be filled in the manner set forth in the Certificate of Incorporation.

-20-

SECTION 3. Place of Meetings. Meetings of the Board shall be held at such place or places, within or without the State of Delaware, as the Board may from time to time determine or as shall be specified in the notice of any such meeting.

SECTION 4. Annual Meeting. The Board shall meet for the purpose of the election of officers and the transaction of other business, as soon as practicable after each annual meeting of stockholders. In the event such annual meeting is not so held, the annual meeting of the Board may be held at such other time or place (within or without the State of Delaware) as shall be specified in a notice thereof given as hereinafter provided in Section 7 of ARTICLE III.

SECTION 5. Regular Meetings. Regular meetings of the Board shall be held at such time and place as the Board may fix. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day. Notice of regular meetings of the Board need not be given except as otherwise required by statute or these Bylaws.

SECTION 6. Special Meetings. Special meetings of the Board may be called by the Chairman of the Board or by two or more directors of the Corporation or by the President.

SECTION 7. Notice of Meetings. Notice of each special meeting of the Board (and of each regular meeting for which notice shall be required) shall be given by the Secretary as hereinafter provided in this Section 7, in which notice shall be stated the time and place of the meeting. Except as otherwise required by these Bylaws, such notice need not state the purposes of such meeting. Notice of each such meeting shall be mailed, postage prepaid, to each director, addressed to him or her at his or her residence or usual place of business, by first class mail, at least two days before the day on which such meeting is to be held, or shall be sent addressed to him or her at such place by facsimile, electronic mail or other similar means, or be delivered to him or her personally or be given to him or her by telephone, at least 24 hours before the time at which such meeting is to be held. Notice of any such meeting need not be given to any director who shall, either before or after the meeting, submit a signed waiver of notice or who shall attend such meeting, except when he or she shall attend for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board or members of a committee of the Board need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or these Bylaws.

SECTION 8. Quorum and Manner of Acting. A majority of the entire Board shall constitute a quorum for the transaction of business at any meeting of the Board and, except as otherwise expressly required by statute or the Certificate of Incorporation or these Bylaws, the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board. In the absence of a quorum at any meeting of the Board, a majority of the directors present thereat may adjourn such meeting to another time and place. Notice of the time and place of any such adjourned meeting shall be given to all of the directors unless such time and place were announced at the meeting at which the adjournment was taken, in which case such notice shall only be given to the directors who were not present thereat. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. The directors shall act only as a Board and the individual directors shall have no power as such.

-21-

SECTION 9. Organization. At each meeting of the Board, the Chairman of the Board or, in the absence of the Chairman of the Board, the President (or, in his or her absence, another director chosen by a majority of the directors present) shall act as chairman of the meeting and preside thereat. The Secretary or, in his or her absence, any person appointed by the Chairman of the Board shall act as secretary of the meeting and keep the minutes thereof.

SECTION 10. Resignations. Any director of the Corporation may resign at any time by giving notice in writing or by electronic transmission of his or her resignation to the Corporation; provided, however, that if such notice is given by electronic transmission, such electronic transmission must either set forth or be submitted with information from which it can be reasonably determined that the electronic transmission was authorized by the director. Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 11. Vacancies. Any vacancy in the Board, whether arising from death, resignation, removal (with cause), an increase in the number of directors or any other cause, may be filled by the vote of a majority of the directors then in office, though less than a quorum, or by the sole remaining director. Each director so elected shall hold office until his or her successor shall have been elected and qualified.

SECTION 12. Removal of Directors. Any director may be removed, only with cause, at any time, by the holders of two-thirds of the voting power of the issued and outstanding capital stock of the Corporation entitled to vote at an election of directors.

SECTION 13. Compensation. The Board shall have authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Corporation in any capacity.

SECTION 14. Committees. The Board may, by resolution passed by a majority of the entire Board, designate one or more committees, including an executive committee, an audit committee, a compensation and human capital committee, and a corporate governance and nominating committee, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In addition, in the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Except to the extent restricted by statute or the Certificate of Incorporation, each such committee, to the extent provided in the resolution creating it, shall have and may exercise all the powers and authority of the Board and may authorize the seal of the Corporation to be affixed to all papers which require

-22-

it; but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by law to be submitted to stockholders for approval, (ii) adopting, amending or repealing these Bylaws or (iii) indemnifying directors. Each such committee shall serve at the pleasure of the Board and have such name as may be determined from time to time by resolution adopted by the Board. Each committee shall keep regular minutes of its meetings and report the same to the Board. Unless the Board otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a quorum for the transaction of business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee, and in other respects each committee shall conduct its business in the same manner as the Board conducts its business pursuant to ARTICLE II.

SECTION 15. Action by Consent. Unless restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken by the Board or any committee thereof may be taken without a meeting if all members of the Board or such committee, as the case may be, consent thereto in writing or electronic transmission, and the writing or electronic transmission are filed with the minutes of the proceedings of the Board or such committee, as the case may be; provided, however, that such electronic transmission must either set forth or be submitted with information from which it can be reasonably determined that the electronic transmission was authorized by the director. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

SECTION 16. Telephonic Meeting. Unless restricted by the Certificate of Incorporation or these Bylaws, any one or more members of the Board or any committee thereof may participate in a meeting of the Board or such committee telephonically or by similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation by such means shall constitute presence in person at a meeting.

ARTICLE IV

OFFICERS

SECTION 1. Number and Qualifications. The officers of the Corporation shall be elected by the Board and shall include the Chairman of the Board (who may be designated Executive Chairman of the Board if serving as an employee of the Corporation), the President, one or more Vice Presidents (any one or more of whom may be designated Executive Vice President or Senior Vice President), the Secretary and the Treasurer. If the Board wishes, it may also elect other officers (including one or more Assistant Treasurers and one or more Assistant Secretaries) as may be necessary or desirable for the business of the Corporation. Any two or more offices may be held by the same person, and no officers except the Chairman of the Board and the President need be a director. Each officer shall hold office until his or her successor shall have been duly elected and shall have qualified, or until his or her death, or until he or she shall have resigned or have been removed, as hereinafter provided in these Bylaws. The Board may give any officer such further designations or alternate titles as it considers desirable. Any number of offices may be held by the same person and directors may hold any office unless the Certificate of Incorporation or these Bylaws otherwise provide.

-23-

SECTION 2. Resignations. Any officer of the Corporation may resign at any time by giving written notice of his or her resignation to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon receipt. Unless otherwise specified therein, the acceptance of any such resignation shall not be necessary to make it effective.

SECTION 3. Removal Any officer of the Corporation may be removed, either with or without cause, at any time, by the Board at any meeting thereof. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights.

SECTION 4. Chairman of the Board. The Chairman of the Board, if present, shall preside at each meeting of the Board or the stockholders. He or she shall perform all duties incident to the office of Chairman of the Board, and shall perform such other duties as may from time to time be assigned to him or her by the Board.

SECTION 5. The President. The President shall be the chief executive officer of the Corporation. He or she shall, in the absence of the Chairman of the Board, preside at each meeting of the Board or the stockholders. He or she shall perform all duties incident to the office of President and chief executive officer of the Corporation and such other duties as may from time to time be assigned to him or her by the Board. During the absence or disability of the Chairman of the Board, the President shall, except as otherwise directed by the Board, perform the duties and exercise the powers of the Chairman of the Board.

SECTION 6. Vice President. Each Vice President shall perform all such duties as from time to time may be assigned to him or her by the Board, the Chairman of the Board or the President. The Board may add to the title of any Vice President such distinguishing designation as may be desirable, which may reflect seniority, duties or responsibilities of such Vice President. During the absence or disability of the Chairman of the Board and the President, one or more Vice Presidents may be designated by the Board, Chairman of the Board or President to perform the duties and exercise the powers of the Chairman of the Board and the President.

SECTION 7. Treasurer. The Treasurer shall:

(a) have charge and custody of, and be responsible for, all the funds and securities of the Corporation;

(b) keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation;

(c) deposit or cause to be deposited all moneys and other valuables to the credit of the Corporation in such depositories as may be designated by the Board or pursuant to its direction;

-24-

(d) receive, and give receipts for, moneys due and payable to the Corporation from any source whatsoever;

(e) disburse the funds of the Corporation and supervise the investments of its funds, taking proper vouchers therefor;

(f) render to the Board, whenever the Board may require, an account of the financial condition of the Corporation; and

(g) in general, perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her by the Board.

SECTION 8. Secretary. The Secretary shall:

(a) keep or cause to be kept in one or more books provided for the purpose, the minutes of all meetings of the Board, the committees of the Board and the stockholders;

(b) see that all notices are duly given in accordance with the provisions of these Bylaws and as required by law;

(c) be custodian of the records and the seal of the Corporation and affix and attest the seal to all certificates for shares of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal;

(d) see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and

(e) in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the Board.

SECTION 9. The Assistant Treasurer. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as from time to time may be assigned by the Board.

SECTION 10. The Assistant Secretary. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties as from time to time may be assigned by the Board.

SECTION 11. Officers’ Bonds or Other Security. If required by the Board, any officer of the Corporation shall give a bond or other security for the faithful performance of his or her duties, in such amount and with such surety as the Board may require.

-25-

SECTION 12. Compensation. The compensation of the officers of the Corporation for their services as such officers shall be fixed from time to time by the Board. An officer of the Corporation shall not be prevented from receiving compensation by reason of the fact that he or she is also a director of the Corporation.

ARTICLE V

STOCK CERTIFICATES AND THEIR TRANSFER

SECTION 1. Certificates; Uncertificated Shares. The shares of the stock in the Corporation shall be uncertificated shares. Notwithstanding the foregoing, the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be certificated shares. Every holder of stock represented by certificates shall be entitled to have a certificate, signed by, or in the name of the Corporation by, the Chairman of the Board or the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares registered in certificate form owned by him or her in the Corporation. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restriction of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation may issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the Delaware General Corporation Law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation may issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.

SECTION 2. Facsimile Signatures. Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

SECTION 3. Lost Certificates. The Board may direct a new certificate or uncertificated shares to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed. When authorizing such issue of a new certificate or uncertificated shares, the Board may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate, or his or her legal representative, to give the Corporation a bond in such sum as it may direct sufficient to indemnify it against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

-26-

SECTION 4. Transfers of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate or evidence of the issuance of uncertificated shares to the person entitled thereto, cancel the old certificate and record the transaction upon its records; provided, however, that the Corporation shall be entitled to recognize and enforce any lawful restriction on transfer. Upon the receipt of proper transfer instructions from the registered owner of uncertificated shares, such uncertificated shares shall be cancelled, issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded in the books of the Corporation; provided, however, that the Corporation shall be entitled to recognize and enforce any lawful restriction on transfer. Whenever any transfer of stock shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of transfer if, when the certificates or evidence of uncertificated shares are presented to the Corporation for transfer, both the transferor and the transferee request the Corporation to do so.

SECTION 5. Transfer Agents and Registrars. The Board may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars.

SECTION 6. Regulations. The Board may make such additional rules and regulations, not inconsistent with these Bylaws, as it may deem expedient concerning the issue, transfer and registration of certificated or uncertificated shares of stock of the Corporation, and may authorize its transfer agent and registrar to make such additional rules and regulations deemed expedient concerning the issue, transfer and registration of certificated or uncertificated shares of stock of the Corporation.

SECTION 7. Fixing the Record Date. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than 60 or fewer than 10 days before the date of such meeting. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with the provisions of this Section 7 of ARTICLE V at the adjourned meeting.

(b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution, or allotment of any rights, or the stockholders entitled to exercise any rights in respect of any change, conversion, or exchange of capital stock, or for the purpose of any other lawful action, except as may otherwise be provided in these Bylaws, the Board may fix a record date. Such record date shall not precede the date upon which the resolution fixing such record date is adopted, and shall not be more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be the close of business on the day on which the Board adopts the resolution relating thereto.

-27-

SECTION 8. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered in its records as the owner of shares of stock to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments a person registered in its records as the owner of shares of stock, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES

SECTION 1. General. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was or has agreed to become a director, officer, employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, service as a trustee or administrator of an employee benefit plan of the Corporation) or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges, expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

SECTION 2. Derivative Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was or has agreed to become a director, officer, employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, service as a trustee or administrator of an employee benefit plan of the Corporation), or by reason or any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorneys’ fees) actually and reasonably incurred by him or her or on his or her behalf in connection with the

-28-

defense or settlement of such action or suit and any appeal therefrom, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such costs, charges and expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper.

SECTION 3. Indemnification in Certain Cases. Notwithstanding the other provisions of ARTICLE VI, to the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of ARTICLE VI, or in defense of any claim, issue or matter therein, he or she shall be indemnified against all costs, charges and expenses (including attorneys’ fees) actually and reasonably incurred by him or her or on his or her behalf in connection therewith.

SECTION 4. Procedure. Any indemnification under Sections 1 and 2 of ARTICLE VI (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Sections 1 and 2. Such determination shall be made, with respect to a person who is a director, officer, or employee of the Corporation at the time of such determination: (a) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum; (b) by a committee of such directors designated by majority vote of such directors, even though less than a quorum; (c) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion; or (d) by the stockholders. Such determination shall be made, with respect to any person who is not a director, officer, employee or agent of the Corporation at the time of such determination, in the manner determined by the Board (including in such manner as may be set forth in any general or specific action of the Board applicable to indemnification claims by such person) or in the manner set forth in any agreement to which such person and the Corporation are parties.

SECTION 5. Advances for Expenses. Costs, charges and expenses (including attorneys’ fees) incurred by a person referred to in Sections 1 and 2 of ARTICLE VI in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay all amounts so advanced in the event that it shall ultimately be determined that such director, officer, employee or agent is not entitled to be indemnified by the Corporation as authorized in ARTICLE VI. Such costs, charges and expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board deems appropriate. The Board may, in the manner set forth above, and upon approval of such director, officer, employer, employee or agent of the Corporation, authorize the Corporation’s counsel to represent such person, in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding.

-29-

SECTION 6. Procedure for Indemnification. Any indemnification under Sections 1, 2 and 3, or advance of costs, charges and expenses under Section 5 of ARTICLE VI, shall be made promptly, and in any event within 60 days upon the written request of the director, officer, employee or agent. The right to indemnification or advances as granted by ARTICLE VI shall be enforceable by the director, officer, employee or agent in any court of competent jurisdiction, if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within 60 days. Such person’s costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charge and expenses under Section 5 of ARTICLE VI where the required undertaking, if any, has been received by the Corporation) that the claimant has not met the standard of conduct set forth in Sections 1 or 2 of ARTICLE VI, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Sections 1 or 2 of ARTICLE VI, nor the fact that there has been an actual determination by the Corporation (including its Board, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met such applicable standard of conduct.

SECTION 7. Other Rights; Continuation of Right to Indemnification. The indemnification and advancement of expenses provided by ARTICLE VI shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), bylaw, agreement, vote of stockholders, or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the Corporation, and shall continue as to a person who has ceased to be a director, officer, employee or agent, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. If the Delaware General Corporation Law is hereafter amended to permit the Corporation to indemnify directors and officers to a greater extent than otherwise permitted by ARTICLE VI, the Corporation shall indemnify directors and officers to such greater extent. All rights to indemnification under ARTICLE VI shall be deemed to be a contract between the Corporation and each director, officer, employee or agent of the Corporation who serves or served in such capacity at any time while ARTICLE VI is in effect. Any repeal or modification of ARTICLE VI or any repeal or modification of relevant provisions of Delaware General Corporation Law or any other applicable laws shall not in any way diminish any rights to indemnification of such director, officer, employee or agent of the Corporation who serves or served in such capacity at any time while ARTICLE VI is in effect. Any repeal or modification of ARTICLE VI or any repeal or modification of relevant provisions of Delaware General Corporation Law or any other applicable laws shall not in any way diminish any rights to indemnification of such director, officer, employee or agent or the obligations of the Corporation arising hereunder with respect to any action, suit or proceeding arising out of, or relating to, any actions, transactions or facts occurring prior to the final adoption of such modification or repeal. For the purposes of ARTICLE VI, references to the “Corporation” include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving

-30-

corporation, so that any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions of ARTICLE VI, with respect to the resulting or surviving corporation, as he or she would have if the separate existence of the constituent corporation had continued.

SECTION 8. Insurance. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her or on his or her behalf in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of ARTICLE VI; provided, however, that such insurance is available on acceptable terms, which determination shall be made by a vote of the Board.

SECTION 9. Savings Clause. If ARTICLE VI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director, officer, employee and agent of the Corporation as to costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the full extent permitted by any applicable portion of ARTICLE VI that shall not have been invalidated and to the full extent permitted by applicable law.

ARTICLE VII

GENERAL PROVISIONS

SECTION 1. Dividends. Subject to the provisions of statute and the Certificate of Incorporation, dividends upon the shares of capital stock of the Corporation may be declared by the Board at any regular or special meeting. Dividends may be paid in cash, in property or in shares of stock of the Corporation, unless otherwise provided by statute or the Certificate of Incorporation.

SECTION 2. Reserves. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board may, from time to time, in its absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation or for such other purpose as the Board may think conducive to the interests of the Corporation. The Board may modify or abolish any such reserves in the manner in which it was created.

SECTION 3. Seal. The seal of the Corporation, which shall have the name of the Corporation inscribed thereon, shall be in such form as shall be approved by the Board. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

-31-

SECTION 4. Fiscal Year. The fiscal year of the Corporation shall be fixed, and once fixed, may thereafter be changed, by resolution of the Board.

SECTION 5. Checks, Notes, Drafts, Etc. All checks, notes, drafts or other orders for the payment of money of the Corporation shall be signed, endorsed or accepted in the name of the Corporation by such officer, officers, person or persons as from time to time may be designated by the Board or by an officer or officers authorized by the Board to make such designation.

SECTION 6. Execution of Contracts, Deeds, Etc. The Board may authorize any officer or officers, agent or agents, in the name and on behalf of the Corporation to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances.

SECTION 7. Voting of Stock in Other Corporations Etc. Unless otherwise provided by resolution of the Board, the Chairman of the Board, the President, any Vice President or the Secretary, from time to time, may (or may appoint one or more attorneys or agents to) cast the votes or give the consents which the Corporation may be entitled to cast or give as a shareholder, member, partner or otherwise in any other corporation, limited liability company, partnership or other entity, any of whose shares, securities or interests may be held by the Corporation, whether at meetings of the holders of the shares, securities or interests of such other corporation, limited liability company, partnership or other entity, or otherwise. In the event one or more attorneys or agents are appointed, the Chairman of the Board, the President, any Vice President or the Secretary may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent. The Chairman of the Board, the President, any Vice President or the Secretary may, or may instruct the attorneys or agents appointed, to execute or cause to be executed in the name and on behalf of the Corporation and under its seal or otherwise, such written proxies, consents, waivers or other instruments as may be necessary or proper in the circumstances.

SECTION 8. Electronic Transmission. For purposes of these Bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

SECTION 9. Interested Directors; Quorum. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because such director’s or officer’s votes are counted for such purpose, if: (a) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith

-32-

authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (b) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.

SECTION 10. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or by means of, or be in the form of, any information storage device, or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records in accordance with law.

SECTION 11. Laws and Regulations; Close of Business. (a) For purposes of these Bylaws, any reference to a statute, rule or regulation of any governmental body means such statute, rule or regulation (including any successor thereto) as the same may be amended from time to time.

(b) Any reference in these Bylaws to the close of business on any day shall be deemed to mean 5:00 P.M. New York time on such day, whether or not such day is a business day.

ARTICLE VIII

AMENDMENTS

Notwithstanding any other provision of these Bylaws, any alteration, amendment or repeal of these Bylaws, and any adoption of new Bylaws, shall require the approval of the Board or the stockholders of the Corporation as expressly provided in the Certificate of Incorporation.

-33-

IN WITNESS WHEREOF, the Corporation has caused these Amended and Restated Bylaws to be duly executed and acknowledged in its name and on its behalf by an authorized officer as of the date first set forth above.



CORPORATE SEAL

-34-

Exhibit 5.1

December 7, 2021

Douglas Elliman Inc.,

4400 Biscayne Boulevard,

Miami, Florida 33137.

Ladies and Gentlemen:

In connection with the registration under the Securities Act of 1933 (the “Act”) of 77,720,631 shares (the “Securities”) of common stock, par value $0.01 per share, of Douglas Elliman Inc., a Delaware corporation (the “Company”), we, as your counsel, have examined such corporate records, certificates and other documents, and such questions of law, as we have considered necessary or appropriate for the purposes of this opinion. Upon the basis of such examination, it is our opinion that when the registration statement relating to the Securities (the “Registration Statement”) has become effective under the Act, the terms of the distribution of the Securities have been duly established in conformity with the Company’s amended and restated certificate of incorporation, and the Securities have been duly issued and distributed as contemplated by the Registration Statement, the Securities will be validly issued, fully paid and nonassessable.

In rendering the foregoing opinion, we are not passing upon, and assume no responsibility for, any disclosure in any registration statement or any related prospectus or other document relating to the distribution of the Securities.

The foregoing opinion is limited to the Federal laws of the United States and the General Corporation Law of the State of Delaware, and we are expressing no opinion as to the effect of the laws of any other jurisdiction.

We have relied as to certain factual matters on information obtained from public officials, officers of the Company and other sources believed by us to be responsible.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us in the first sentence under the heading “Legal Matters” in the Prospectus. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act.

Very truly yours,

/s/ Sullivan & Cromwell LLP

Exhibit 8.1

[ ], 20[ ]

Vector Group Ltd.,

4400 Biscayne Boulevard,

Miami, FL 33137.

Ladies and Gentlemen:

We have acted as U.S. tax counsel to Vector Group Ltd., a Delaware corporation (“Vector”), in connection with the Distribution as described in the officer’s certificate to us from Vector, dated [ ], 20[ ] (the “Officer’s Certificate”). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Officer’s Certificate.

In rendering our opinion, we have examined and relied upon the accuracy and completeness of the facts set forth in the Officer’s Certificate and such other documents as we have deemed necessary or appropriate. In connection with this opinion, we have assumed that the Contribution and the Distribution will be consummated in the manner described in the Officer’s Certificate.

In rendering our opinion, we have considered the applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated thereunder, pertinent judicial authorities, interpretive rulings of the Internal Revenue Service, and such other authorities as we have deemed appropriate under the circumstances. All such authorities are subject to change, and any of such changes could apply retroactively.

Based upon the foregoing, we are of the opinion that under current law,

(1) The Contribution and Distribution, taken together, will qualify as a reorganization under Section 368(a)(1)(D) of the Code;

(2) Neither Vector nor Douglas Elliman Inc., a Delaware corporation (“Spinco”), will recognize gain or loss upon the Contribution;

(3) Vector will not recognize gain or loss upon the Distribution under Section 355(c) or Section 361(c) of the Code; and

(4) Stockholders of Vector will not recognize gain or loss upon the Distribution under Section 355(a) of the Code, and no amount will be included in such stockholders’ income, except in respect of cash received in lieu of fractional shares of Spinco.

Our opinion is expressly conditioned upon the assumptions and statements of reliance set forth above. Our opinion and the above discussed consequences do not apply to the distribution of Spinco common stock with respect to Vector stock option awards and restricted stock awards. We express no other opinion as to the tax consequences (including any applicable state, local or foreign tax consequences) of the transactions referred to herein or in the Officer’s Certificate.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement on Form S-1 filed by Spinco and to the reference to us in the second sentence under the heading “Legal Matters” in the Prospectus. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act.

Very truly yours,

[Remainder of this page intentionally left blank.]

Exhibit 10.1

Form of

TRANSITION SERVICES AGREEMENT

by and between

VECTOR GROUP LTD.

and

DOUGLAS ELLIMAN INC.

Dated as of [•], 2021

TABLE OF CONTENTS


ARTICLE I
DEFINITIONS

Section 1.1.	General	1
Section 1.2.	Reference; Interpretation	3

ARTICLE II
SERVICES

Section 2.1.	Services	3
Section 2.2.	Standard of Service	4
Section 2.3.	Additional Services	4

ARTICLE III
LICENSES AND PERMITS

ARTICLE IV
PAYMENT

Section 4.1.	General	4
Section 4.2.	Additional Expenses	4
Section 4.3.	Adjustments	5
Section 4.4.	Invoices	5
Section 4.5.	Failure to Pay	5
Section 4.6.	Termination of Services	6

ARTICLE V
INDEMNIFICATION

Section 5.1.	Indemnification of Party Receiving Services	6
Section 5.2.	Indemnification of Party Providing Services	6
Section 5.3.	Third Party Claims	6
Section 5.4.	Indemnification Payments	8
Section 5.5.	Survival	8

ARTICLE VI
COOPERATION; CONFIDENTIALITY; TITLE

Section 6.1.	Services Cooperation	8
Section 6.2.	Distribution Cooperation	8
Section 6.3.	Confidentiality	9
Section 6.4.	Internal Use; Title, Copies, Return	9

ARTICLE VII
TERM

Section 7.1.	Duration	9
Section 7.2.	Early Termination by Spinco	10
Section 7.3.	Early Termination by Vector	10
Section 7.4.	Suspension Due to Force Majeure	10
Section 7.5.	Consequences of Termination	10


ARTICLE VIII
RECORDS; DATA SECURITY

Section 8.1.	Records Retention	10
Section 8.2.	Data Security	10

ARTICLE IX
DISPUTE RESOLUTION

Section 9.1.	Negotiation	11
Section 9.2.	Mediation	11
Section 9.3.	Arbitration	11
Section 9.4.	Arbitration Period	12
Section 9.5.	Treatment of Negotiations, Mediation and Arbitration	12
Section 9.6.	Continuity of Service and Performance	12
Section 9.7.	Consolidation	12

ARTICLE X
NOTICES

ARTICLE XI
MISCELLANEOUS

Section 11.1.	Taxes	13
Section 11.2.	Relationship of Parties	13
Section 11.3.	Complete Agreement; Construction	13
Section 11.4.	Other Agreements	13
Section 11.5.	Counterparts	13
Section 11.6.	Survival of Agreements	13
Section 11.7.	Waivers and Consents	13
Section 11.8.	Amendments	13
Section 11.9.	Assignment	13
Section 11.10.	Successors and Assigns	14
Section 11.11.	No Circumvention	14
Section 11.12.	Subsidiaries	14
Section 11.13.	Third Party Beneficiaries	14
Section 11.14.	Titles and Headings	14
Section 11.15.	Exhibits and Schedules	14
Section 11.16.	Governing Law	14
Section 11.17.	Consent to Jurisdiction	14
Section 11.18.	Specific Performance	14
Section 11.19.	WAIVER OF JURY TRIAL	15
Section 11.20.	Severability	15
Section 11.21.	Interpretation	15
Section 11.22.	No Duplication; No Double Recovery	15
Section 11.23.	DISCLAIMER OF WARRANTIES	15

TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT, dated as of [•], 2021 (this “Agreement”), between Vector Group Ltd., a Delaware corporation (“Vector”), and Douglas Elliman Inc., a Delaware corporation (“Spinco”). Each of Vector and Spinco is referred to herein as a “Party” and, collectively, as the “Parties”.

WITNESSETH:

WHEREAS, Vector and Spinco have entered into a Distribution Agreement, dated as of the date hereof (the “Distribution Agreement”), which sets forth the terms pursuant to which Vector will transfer certain assets to Spinco and Vector will distribute the common stock of Spinco to the holders of Vector common stock on a pro rata basis (including Vector common stock underlying outstanding stock option awards and restricted stock awards) (the “Distribution”); and

WHEREAS, in connection with the Distribution, and in order to ensure an orderly transition under the Distribution Agreement, it will be necessary for each of the Parties to provide to the other the Services described herein for a transitional period.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements, provisions and covenants contained in this Agreement, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1. General. As used in this Agreement, the following terms have the respective meanings set forth below:

“AAA” shall have the meaning set forth in Section 9.2.

“Additional Services” shall have the meaning set forth in Section 2.3.

“Affiliate” shall, subject to the next succeeding sentence, have the meaning assigned to that term in the Distribution Agreement. For clarity, unless the context otherwise requires, a reference to a Person’s “Affiliates” shall be deemed to mean such Person’s Affiliates following the Distribution; provided that, for the avoidance of doubt, for purposes of this Agreement Spinco and Vector shall not be considered Affiliates.

“Agreement” shall have the meaning set forth in the preamble.

“Agreement Disputes” shall have the meaning set forth in Section 9.1.

“Applicable Privacy Laws” shall have the meaning set forth in Section 8.2.

“Applicable Rate” shall mean the Prime Rate plus three percent (3%) per annum.

“Bankruptcy Event” with respect to a Party shall mean the filing of an involuntary petition in bankruptcy or similar proceeding against such Party seeking its reorganization, liquidation or the appointment of a receiver, trustee or liquidator for it or for all or substantially all of its assets, whereupon such petition shall not be dismissed within sixty (60) days after the filing thereof, or if such Party shall (i) apply for or consent in writing to the appointment of a receiver, trustee or liquidator of all or substantially all of its assets, (ii) file a voluntary petition or admit in writing its inability to pay its debts as they become due, (iii) make a general assignment for the benefit of creditors, (iv) file a petition or an answer seeking reorganization or an arrangement with its creditors or take advantage of any insolvency law with respect to itself as debtor, or (v) file an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization, insolvency proceedings or any similar proceedings.

“Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banks in New York City, New York are authorized or obligated by law or executive order to close.

“Change of Control” of a company shall mean an event or series of events by which any person or group (so long as such “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) beneficially owns (within the meaning of Rule 13d-3 (as in effect on the effective date of this Agreement) promulgated under the Exchange Act), in the aggregate, more than fifty percent (50%) of the shares of the capital stock of such company, having sufficient votes to elect (or otherwise designate) at such time a majority of the members of the board of directors of such company.

“Commencement Date” shall have the meaning ascribed to that term in Section 7.1 of this Agreement.

“Dispute Notice” shall have the meaning set forth in Section 9.1.

“Distribution” shall have the meaning set forth in the preamble.

“Distribution Agreement” shall have the meaning set forth in the preamble.

“Existing Services” shall have the meaning set forth in Section 4.3.

“Fees” shall have the meaning set forth in Section 4.3.

“Indemnifying Party” shall have the meaning set forth in Section 5.3.

“Indemnitee” shall have the meaning set forth in Section 5.3.

“Information Security Incident” shall have the meaning set forth in Section 8.2.

“Loss” shall mean shall mean any and all damages, losses, deficiencies, Liabilities, obligations, penalties, judgments, settlements, claims, payments, fines, interest, costs and expenses (including the costs and expenses of any and all Actions and demands, assessments, judgments, settlements and compromises relating thereto and the reasonable costs and expenses of attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense thereof or the enforcement of rights hereunder), excluding special, consequential, indirect and/or punitive damages (other than special, consequential, indirect and/or punitive damages awarded to any third party against an Indemnitee).

“Mediation Period” shall have the meaning set forth in Section 9.2.

“New York Courts” shall have the meaning set forth in Section 11.15.

“Outside Notice Date” shall have the meaning set forth in Section 5.3.

“Overlap Individuals” shall mean Persons who are directors of both Vector and Spinco or employees of both Vector and Spinco if such employee is compensated by both companies.

“Party” shall have the meaning set forth in the preamble.

“Person” shall mean any natural person, corporation, business trust, limited liability company, joint venture, association, company, partnership or government, or any agency or political subdivision thereof.

“Personal Information” shall mean any information that (i) identifies, relates to, describes, is reasonably capable of being associated with or could reasonably be linked, directly or indirectly, with, an individual, browser, device or household, or (ii) is considered “personally identifiable information,” “personal data” or a similar term under applicable law.

-2-

“Prime Rate” shall mean the rate per annum publicly announced by Citibank, N.A. (or successor thereto) from time to time as its prime rate in effect at its principal office in New York City. For purposes of this Agreement, any change in the Prime Rate shall be effective on the date such change in the Prime Rate is publicly announced as effective.

“Rules” shall have the meaning set forth in Section 9.3.

“Services” shall mean, collectively, the Spinco Services and the Vector Services.

“Spinco” shall have the meaning set forth in the preamble.

“Spinco Services” shall mean those transitional services, including any Additional Services, to be provided by Spinco to Vector set forth on Schedule A hereto to assist Vector in operating Vector’s business following the Distribution. Services or actions of Overlap Individuals shall not be considered to be Spinco Services under this Agreement unless expressly agreed in writing by both Parties.

“Third Party” shall mean any Person who is not a Party.

“Third Party Claim” shall have the meaning set forth in Section 5.3.

“Vector” shall have the meaning set forth in the preamble.

“Vector Services” shall mean those transitional services, including any Additional Services, to be provided by Vector to Spinco set forth on Schedule B hereto to assist Spinco in operating Spinco’s business following the Distribution. Services or actions of Overlap Individuals shall not be considered to be Vector Services under this Agreement unless expressly agreed in writing by both Parties.

Section 1.2. Reference; Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. The words “include”, “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation.” Unless the context otherwise requires, references in this Agreement to Articles, Sections and Schedules shall be deemed references to Articles and Sections of, and Schedules to, this Agreement. Unless the context otherwise requires, the words “hereof”, “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement. Any capitalized terms used but not defined in this Agreement have the meanings given to them in the Distribution Agreement.

ARTICLE II

SERVICES

Section 2.1. Services. (a) Spinco shall provide to Vector each Spinco Service for the term set forth opposite the description of such Spinco Service in Schedule A. Upon conclusion of the term set forth opposite the description of such Spinco Service, this Agreement shall be deemed terminated with respect to such Spinco Service. Additional Services may be provided by Spinco to Vector as provided in Section 2.3. At its option, (i) Spinco may cause any Spinco Service it is required to provide hereunder to be provided by a Third Party that is providing, or may from time to time provide, the same or similar services for Spinco and/or (ii) to the extent any Spinco Service is already provided by a Third Party, Spinco shall have the right to change the Third Party that is providing such Spinco Service to any Third Party that is providing, or may from time to time provide, the same or similar services for Spinco, at any time upon reasonable notice to Vector. In the event of such a change as permitted in clauses (i) or (ii) above results in a change in cost of Spinco for the provision of such Spinco Service, the applicable schedules to this agreement shall be updated to reflect the revised fees as allocated to Vector, provided that if such a change results in an increase over 10% of the costs then currently contemplated by Schedule A such an amendment will require the consent (which consent shall not be unreasonably withheld, conditioned or delayed) of Vector.

-3-

(b) Vector shall provide to Spinco each Vector Service for the term set forth opposite the description of such Vector Service in Schedule B. Upon conclusion of the term set forth opposite the description of such Vector Service, this Agreement shall be deemed terminated with respect to such Vector Service. Additional Services may be provided to Spinco by Vector as provided in Section 2.3. At its option, (i) Vector may cause any Vector Service it is required to provide hereunder to be provided by a Third Party that is providing, or may from time to time provide, the same or similar services for Vector and/or (ii) to the extent any Vector Service is already provided by a Third Party, Vector shall have the right to change the Third Party that is providing such Vector Service to any Third Party that is providing, or may from time to time provide, the same or similar services for Vector, at any time upon reasonable notice to Spinco. In the event of such a change as permitted in clauses (i) or (ii) above results in a change in cost of Vector for the provision of such Vector Service, the applicable schedules to this agreement shall be updated to reflect the revised fees as allocated to Spinco, provided that if such a change results in an increase over 10% of the costs then currently contemplated by Schedule B such an amendment will require the consent (which consent shall not be unreasonably withheld, conditioned or delayed) of Spinco.

Section 2.2. Standard of Service. Spinco and Vector shall maintain sufficient resources to perform their respective obligations hereunder. In performing the Services, Spinco and Vector shall provide substantially the same level of service and use substantially the same degree of care as their respective personnel provided and used in providing such Services prior to completion of the Distribution for itself (but in no event less than a reasonable degree of care), subject in each case to any provisions set forth on Schedule A or Schedule B with respect to each such Service. Each Party shall provide reasonable assistance to the other Party in migrating the applicable Services to the recipient of such Services.

Section 2.3. Additional Services. From time to time after the date hereof, the Parties may identify additional services that one Party will provide to the other Party in accordance with the terms of this Agreement (the “Additional Services”). The Parties shall cooperate and act in good faith to agree on the terms pursuant to which any such Additional Service shall be provided and to amend Schedule A or Schedule B, as applicable, in accordance with such terms.

ARTICLE III

LICENSES AND PERMITS

Each Party warrants and covenants that all duties and obligations (including with respect to Spinco, all Spinco Services, and with respect to Vector, all Vector Services) to be performed hereunder shall be performed in compliance with all material applicable federal, state and local laws, rules and regulations. Each Party shall obtain and maintain all material permits, approvals and licenses necessary or appropriate to perform its duties and obligations (including with respect to Spinco, the Spinco Services, and with respect to Vector, the Vector Services) hereunder and shall at all times comply with the terms and conditions of such permits, approvals and licenses.

ARTICLE IV

PAYMENT

Section 4.1. General. (a) In consideration for the provision of each of the Spinco Services, Vector shall pay to Spinco the fee set forth for such Spinco Service on Schedule A.

(b) In consideration for the provision of each of the Vector Services, Spinco shall pay to Vector the fee as set forth for such Vector Service on Schedule B.

Section 4.2. Additional Expenses. (a) In addition to the fees payable in accordance with Section 4.1(a), Vector shall reimburse Spinco for all reasonable and necessary out-of-pocket costs and expenses incurred by Spinco with respect to Third Parties in connection with the provision of Spinco Services to Vector pursuant to the terms of this Agreement or paid by Spinco on behalf of Vector that are not already contemplated by Schedule A; provided that if Spinco expects to incur in respect of a Third Party in any month costs and expenses in excess of $25,000 and not already contemplated by Schedule A, Spinco shall use commercially reasonable efforts to provide to Vector prior to the first day of such month a written notice setting forth Spinco’s reasonable estimate of the expenses it expects to incur.

-4-

(b) In addition to the fees payable for expenses in accordance with Section 4.1(b), Spinco shall reimburse Vector for all reasonable and necessary out-of-pocket costs and expenses incurred by Vector with respect to Third Parties in connection with the provision of Vector Services to Spinco pursuant to the terms of this Agreement or paid by Vector on behalf of Spinco that are not already contemplated by Schedule B; provided that if Vector expects to incur in respect of a Third Party in any month costs and expenses in excess of $25,000 and not already contemplated by Schedule B, Vector shall use commercially reasonable efforts to provide to Spinco prior to the first day of such a month written notice setting forth Vector’s reasonable estimate of the expenses it expects to incur.

Section 4.3. Adjustments. Spinco and Vector shall review and evaluate the fees payable in accordance with Section 4.1 (the “Fees”) for existing services contemplated on Schedule A or Schedule B (the “Existing Services”) for reasonableness annually and work in good faith to equitably adjust such Fees for Existing Services as appropriate to reflect among other things changes in compensation due to promotions or replacement of personnel at a lower or higher compensation level, increases or decreases in the percentage of labor-based allocation based on increased or decreased efforts of a particular individual, or adjustments to percentage of non-labor allocations tied to headcounts or other reasonable metrics. Spinco and Vector shall work together in good faith to determine an appropriate date for such adjustments to take effect (which may be retroactive to the date of such changes).

Section 4.4. Invoices. (a) Spinco will invoice Vector in U.S. dollars: (i) as of the last day of each calendar month for any fees payable by Vector in accordance with Section 4.1(a) for Spinco Services listed on Schedule A provided pursuant to the terms of this Agreement during such month; (ii) as of the last day of each calendar month for any amounts payable by Vector in accordance with Section 4.2(a) (and enclosing invoices from the relevant Third Parties); and (iii) as of the last day of each calendar month for any taxes (excluding income taxes) accrued with respect to the provision of Spinco Services to Vector during such month. Spinco shall deliver or cause to be delivered to Vector each such invoice within thirty (30) days following the last day of the calendar month to which such invoice relates. Vector shall pay each such invoice received by electronic funds transfer as follows: in the case of clauses (i) and (ii), within forty-five (45) Business Days of the date on which such invoice was received, and in the case of clause (iii), not later than one (1) Business Day prior to the due date for such tax payments; provided that Spinco delivers such invoice not less than three (3) Business Days prior to the due date for such tax payments.

(b) Vector will invoice Spinco in U.S. dollars: (i) as of the last day of each calendar month for any fees payable by Spinco in accordance with Section 4.1(b) for Vector Services listed on Schedule B provided pursuant to the terms of this Agreement during such month; (ii) as of the last day of each calendar month for any amounts payable by Spinco in accordance with Section 4.2(b) (and enclosing invoices from such Third Parties); and (iii) as of the last day of each calendar month for any taxes (excluding income taxes) accrued with respect to the provision of Vector Services to Spinco during such month. Vector shall deliver or cause to be delivered to Spinco each such invoice within thirty (30) days following the last day of the calendar month to which such invoice relates. Spinco shall pay each such invoice received by electronic funds transfer: in the case of clauses (i) and (ii), within forty-five (45) Business Days of the date on which such invoice was received, and in the case of clause (iii), not later than one (1) Business Day prior to the due date for such tax payments; provided that Vector delivers such invoice not less than three (3) Business Days prior to the due date for such tax payments.

Section 4.5. Failure to Pay. Any undisputed amount not paid when due shall be subject to a late payment fee computed daily at a rate equal to the Applicable Rate from the due date of such amount to the date such amount is paid. Each Party agrees to pay the other Party’s reasonable attorneys’ fees and other costs incurred in collection of any amounts owed to such other Party hereunder and not paid when due. Notwithstanding anything to the contrary contained herein, in the event either Party fails to make a payment of any undisputed amount when due hereunder, and such failure continues for a period of thirty (30) days following delivery of notice to such non-paying Party of such failure, the other Party shall have the right to cease provision of such Services to such non-paying Party until such overdue payment (and any applicable late payment fee accrued with respect thereto) is paid in full. Such right of the Party providing services shall not in any manner limit or prejudice any of such Party’s other rights or remedies in the event of the non-paying Party’s failure to make payments when due hereunder, including without limitation any rights or remedies pursuant to Sections 5, 7 and 9.

-5-

Section 4.6. Termination of Services. In the event of a termination of Services pursuant to Article VII, with respect to the calendar month in which such Services cease to be provided, the recipient of such Services shall be obligated to pay a fee for such Services calculated as set forth on Schedule A or Schedule B, as applicable for the portion of the month prior to the termination. Where possible, the Parties agree to work together cooperatively to seek to have terminations occur as of month ends, but this Agreement shall not limit a Party’s right to effect a termination in accordance with this Agreement other than as of a month end.

ARTICLE V

INDEMNIFICATION

Section 5.1. Indemnification of Party Receiving Services. (a) Spinco agrees to indemnify, defend and hold Vector harmless from and against any Loss to which Vector may become subject arising out of, by reason of or otherwise in connection with the provision hereunder by Spinco of Spinco Services, other than Losses resulting from Vector’s gross negligence, willful misconduct or breach of its obligations pursuant to this Agreement. Notwithstanding any provision in this Agreement to the contrary, Spinco shall not be liable under this Section 5.1 for any consequential, special or punitive damages (including but not limited to lost profits), except to the extent that such consequential, special or punitive damages relate to a Loss resulting from a Third Party Claim (as defined below).

(b) Vector agrees to indemnify, defend and hold Spinco harmless from and against any Loss to which Spinco may become subject arising out of, by reason of or otherwise in connection with the provision hereunder by Vector of Vector Services, other than Losses resulting from Spinco’s gross negligence, willful misconduct or breach of its obligations pursuant to this Agreement. Notwithstanding any provision in this Agreement to the contrary, Vector shall not be liable under this Section 5.1 for any consequential, special or punitive damages (including but not limited to lost profits), except to the extent that such consequential, special or punitive damages relate to a Loss resulting from a Third Party Claim (as defined below).

Section 5.2. Indemnification of Party Providing Services. (a) Vector agrees to indemnify, defend and hold Spinco harmless from and against any Loss to which Spinco may become subject arising out of, by reason of or otherwise in connection with, the provision hereunder by Spinco of Spinco Services to Vector where such Losses resulted from Vector’s gross negligence, willful misconduct or breach of its obligations pursuant to this Agreement. Notwithstanding any provision in this Agreement to the contrary, Vector shall not be liable under this Section 5.2 for any consequential, special or punitive damages (including but not limited to lost profits), except to the extent that such consequential, special or punitive damages relate to a Loss resulting from a Third Party Claim (as defined below).

(b) Spinco agrees to indemnify, defend and hold Vector harmless from and against any Loss to which Vector may become subject arising out of, by reason of or otherwise in connection with the provision hereunder by Vector of Vector Services to Spinco where such Losses resulted from Spinco’s gross negligence, willful misconduct or breach of its obligations pursuant to this Agreement. Notwithstanding any provision in this Agreement to the contrary, Spinco shall not be liable under this Section 5.2 for any consequential, special or punitive damages (including but not limited to lost profits), except to the extent that such consequential, special or punitive damages relate to a Loss resulting from a Third Party Claim (as defined below).

Section 5.3. Third Party Claims. (a) If a claim or demand is made against Vector or Spinco (each, an “Indemnitee”) by any Third Party (a “Third Party Claim”) as to which such Indemnitee is entitled to indemnification pursuant to this Agreement, such Indemnitee shall notify the Party which is or may be required pursuant to Section 5.1 or Section 5.2 hereof to make such indemnification (the “Indemnifying Party”) in writing, and in reasonable detail, of the Third Party Claim promptly and in any event by the date (the “Outside Notice Date”) that is the fifteenth (15th) Business Day after receipt by such Indemnitee of written notice of the Third Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure (except that the Indemnifying Party shall not be liable for any expenses incurred during the period beginning immediately after the Outside Notice Date and ending on the date that the Indemnitee gives the required notice). Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly (and in any event within ten Business Days) after the Indemnitee’s receipt thereof, copies of all notices and documents (including court papers) received by the

-6-

Indemnitee relating to the Third Party Claim. Notwithstanding anything to the contrary contained herein, neither Party shall be required to provide notice to the other Party for Third Party Claims for which a Party is providing legal support as part of the Services to the extent that such Party has received notice in such capacity.

(b) If a Third Party Claim is made against an Indemnitee, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses and acknowledges in writing its obligation to indemnify the Indemnitee therefor, to assume the defense thereof with counsel selected by the Indemnifying Party, provided, however, that such counsel is not reasonably objected to by the Indemnitee. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party shall, within thirty (30) days (or sooner if the nature of the Third Party Claim so requires), notify the Indemnitee of its intent to do so, and the Indemnifying Party shall thereafter not be liable to the Indemnitee for legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that such Indemnitee shall have the right to employ counsel to represent such Indemnitee if, in such Indemnitee’s reasonable judgment, a conflict of interest between such Indemnitee and such Indemnifying Party exists in respect of such claim which would make representation of both such parties by one counsel inappropriate, and in such event the fees and expenses of such separate counsel shall be paid by such Indemnifying Party. If the Indemnifying Party assumes such defense, the Indemnitee shall have the right to participate in the defense thereof and to employ counsel, subject to the proviso of the preceding sentence, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party shall control such defense. The Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnitee for any period during which the Indemnifying Party has failed to assume the defense thereof (other than during the period prior to the time the Indemnitee shall have given notice of the Third Party Claim as provided above). If the Indemnifying Party so elects to assume the defense of any Third Party Claim, all of the Indemnitees shall cooperate with the Indemnifying Party in the defense or prosecution thereof, including by providing or causing to be provided agreements, documents, books, records, files and witnesses as soon as reasonably practicable after receiving any request therefor from or on behalf of the Indemnifying Party, except to the extent that providing or causing the foregoing to be provided would constitute a waiver of any Indemnitee’s attorney-client privilege.

(c) If the Indemnifying Party acknowledges in writing responsibility under this Article V for a Third Party Claim, then in no event will the Indemnitee admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without the Indemnifying Party’s prior written consent; provided, however, that the Indemnitee shall have the right to settle, compromise or discharge such Third Party Claim without the consent of the Indemnifying Party if the Indemnitee releases the Indemnifying Party from its indemnification obligation hereunder with respect to such Third Party Claim and such settlement, compromise or discharge would not otherwise adversely affect the Indemnifying Party. If the Indemnifying Party acknowledges in writing liability for a Third Party Claim, the Indemnitee will agree to any settlement, compromise or discharge of a Third Party Claim that the Indemnifying Party may recommend and that by its terms obligates the Indemnifying Party to pay the full amount of the liability in connection with such Third Party Claim and releases the Indemnitee completely in connection with such Third Party Claim and that would not otherwise adversely affect the Indemnitee. If an Indemnifying Party elects not to assume the defense of a Third Party Claim, or fails to notify an Indemnitee of its election to do so as provided herein, such Indemnitee may compromise, settle or defend such Third Party Claim.

(d) Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim (and shall be liable for the fees and expenses of counsel incurred by the Indemnitee in defending such Third Party Claim) if the Third Party Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the Indemnitee which the Indemnitee reasonably determines, after conferring with its counsel, cannot be separated from any related claim for money damages. If such equitable relief or other relief portion of the Third Party Claim can be so separated from that for money damages, the Indemnifying Party shall be entitled to assume the defense of the portion relating to money damages.

-7-

(f) Spinco and Vector shall cooperate as may reasonably be required in connection with the investigation, defense and settlement of any Third Party Claim. In furtherance of this obligation, the Parties agree that if an Indemnifying Party chooses to defend or to compromise or settle any Third Party Claim, Vector or Spinco, as the case may be, shall use its commercially reasonable efforts to make available to the other Party, upon written request, their former and then current directors, officers, employees and agents and those of their subsidiaries as witnesses and any records or other documents within its control or which it otherwise has the ability to make available, to the extent that (i) any such Person, records or other documents may reasonably be required in connection with such defense, settlement or compromise and (ii) making such Person, records or other documents so available would not constitute a waiver of the attorney-client privilege of Vector or Spinco, as the case may be. At the request of an Indemnifying Party, an Indemnitee shall enter into a reasonably acceptable joint defense agreement.

(g) The remedies provided in this Article V shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party.

Section 5.4. Indemnification Payments. (a) Indemnification required by this Article V shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or any Loss is incurred. If the Indemnifying Party fails to make an indemnification payment required by this Article V within thirty (30) days after receipt of a bill therefor or notice that a Loss has been incurred, the Indemnifying Party shall also be required to pay interest on the amount of such indemnification payment, from the date of receipt of the bill or notice of the Loss to, but not including the date of payment, at the Applicable Rate.

(b) The amount of any claim by an Indemnitee under this Agreement shall be (i) reduced to reflect any actual tax savings or insurance proceeds received by any Indemnitee that result from the Losses that gave rise to such indemnity, and (ii) increased by an amount equal to any tax cost incurred by any Indemnitee that results from receipt of payments under this Article V.

Section 5.5. Survival. The Parties’ obligations under this Article V shall survive the termination of this Agreement.

ARTICLE VI

COOPERATION; CONFIDENTIALITY; TITLE

Section 6.1. Services Cooperation. Each Party shall use commercially reasonable efforts to cooperate with the other Party in all matters relating to the provision and receipt of the Services. Such cooperation shall include, but not be limited to, exchanging information, providing electronic access to systems used in connection with the Services, performing true-ups and adjustments and obtaining all consents, licenses, sublicenses or approvals necessary to permit each Party to perform its obligations hereunder. Vector and Spinco shall maintain reasonable documentation related to the Services and cooperate with each other in making such information available to the other Party as needed.

Section 6.2. Distribution Cooperation. For a period of up to two (2) years after the Commencement Date, except as otherwise set forth in the Distribution Agreement or a Commercial Arrangement, the Parties shall, and shall cause each of their respective Affiliates and employees to (i) provide reasonable cooperation and assistance to the other Party in connection with the completion of the Plan of Reorganization, (ii) provide knowledge transfer regarding its applicable Business or Vector’s historical business and (iii) assist the other Party in the orderly and efficient transition in becoming an independent company; in each case, except as may otherwise be agreed to by the Parties in writing, at no additional cost to the Party requesting such assistance other than for the actual out-of-pocket costs [(which shall not include the costs of salaries and benefits of employees of such Party or any pro rata portion of overhead or other costs of employing such employees which would have been incurred by such employees’ employer regardless of the employees’ service with respect to the foregoing) incurred by any such Party, if applicable]. The cooperation and assistance provided for in this Section shall not be required to the extent such cooperation and assistance would result in an undue burden on any Party or would unreasonably interfere with any of its employees normal functions and duties. [In furtherance of, and without limiting, the foregoing, each Party shall make reasonably available those employees with particular knowledge of any function or service of which another Party was not allocated the employees, agents or consultants involved in such function or service in connection with the Plan of Reorganization (including, employee benefits functions, risk management, etc.)].

-8-

Section 6.3. Confidentiality. Each Party shall keep confidential from Third Parties the Schedules to this Agreement and all non-public information received from the other Party regarding the Services, including, without limitation, any information received with respect to products and services of Vector or Spinco, and to use such information only for the purposes set forth in this Agreement unless (i) otherwise agreed to in writing by the Party from which such information was received or (ii) required by applicable law, regulation or any securities exchange (in which case the Parties shall cooperate in seeking to obtain a protective order or other arrangement pursuant to which the confidentiality of such information is preserved). The covenants in this Article VI shall survive any termination of this Agreement for a period of three (3) years from the date such termination becomes effective.

Section 6.4. Internal Use; Title, Copies, Return. Except to the extent inconsistent with the express terms of the Distribution Agreement and any Ancillary Agreement other than this Agreement, each Party agrees that:

(a) title to all systems used in performing any Service provided hereunder shall remain with the Party providing such Service or its Third Party vendors; and

(b) to the extent the provision of any Service involves intellectual property, including without limitation software programs or patented or copyrighted material, or material constituting trade secrets, the recipient of such Service shall not copy, modify, reverse engineer, decompile or in any way alter any of such material, or otherwise use such material in a manner inconsistent with the terms and provisions of this Agreement, without the express written consent of the Party providing such Service; and upon the termination of any Service, the recipient of such Service shall return to the Party providing such Service, as soon as practicable, any equipment or other property of the Party providing such Service relating to such Service which is owned or leased by the Party providing such Service and is or was in its possession or control.

ARTICLE VII

TERM

Section 7.1. Duration. (a) Except as provided in Sections 4.6, 5.5, 6.2, 6.3, 7.2, 7.3, 7.4 and 7.5, the term of this Agreement shall commence on the date hereof (the “Commencement Date”) and shall continue in full force and effect until the earlier of (i) the date that is the day prior to the third (3rd) anniversary of the Commencement Date, unless otherwise mutually agreed by the Parties and (ii) the earlier termination of all Services in accordance with Section 4.5 or 7.1(b).

(b) Vector shall be entitled to release Spinco from providing any or all of the Spinco Services hereunder by delivering a written notice thereof to Spinco at least twenty (20) Business Days prior to the effective date of release of such Spinco Service(s). At the end of such twenty (20) Business Day period (or such shorter period as may be agreed by the Parties), Spinco shall discontinue the provision of the Spinco Services specified in such notice and any such Spinco Services shall be excluded from this Agreement, Schedule A shall be deemed to be amended accordingly, and this Agreement shall be deemed to be terminated with respect to such Spinco Service. Spinco shall also be entitled to release Vector from providing any or all of the Vector Services hereunder by delivering a written notice thereof to Vector at least twenty (20) Business Days prior to the effective date of release of such Vector Service(s). At the end of such twenty (20) Business Day period (or such shorter period as may be agreed by the Parties), Vector shall discontinue the provision of the Vector Services specified in such notice and any such Vector Services shall be excluded from this Agreement, Schedule B shall be deemed to be amended accordingly, and this Agreement shall be deemed to be terminated with respect to such Vector Service.

-9-

Section 7.2. Early Termination by Spinco. Spinco may terminate this Agreement by giving written notice to Vector under the following circumstances:

(a) if Vector shall default in the performance of any of its material obligations under this Agreement, and such default or breach shall continue and not be remedied for a period of thirty (30) days after Spinco has given written notice to Vector specifying such default and requiring it to be remedied;

(b) if a Bankruptcy Event has occurred with respect to Vector; or

Section 7.3.Early Termination by Vector. Vector may terminate this Agreement by giving written notice to Spinco under the following circumstances:

(a) if Spinco shall default in the performance of any of its material obligations under this Agreement and such default shall continue and not be remedied for a period of thirty (30) days after Vector has given written notice to Spinco specifying such default and requiring it to be remedied;

(b) if a Bankruptcy Event has occurred with respect to Spinco; or

Section 7.4. Suspension Due to Force Majeure. In the event the performance by either Vector or Spinco of its duties or obligations hereunder is interrupted or interfered with by reason of any Force Majeure, the Party affected by such Force Majeure shall not be deemed to be in default of this Agreement by reason of its non-performance due to such Force Majeure, but shall give notice to the other Party of the Force Majeure and the fee provided for in Section 4.1 shall be equitably adjusted to reflect the reduced performance. In such event, the Party affected by such Force Majeure shall resume the performance of its duties and obligations hereunder as soon as reasonably practicable after the end of the Force Majeure.

Section 7.5. Consequences of Termination. In the event this Agreement expires or is terminated in accordance with this Article VII, then (a) all Services to be provided will promptly cease, (b) each of Spinco and Vector shall, upon request of the other Party, promptly return or destroy all non-public confidential information and Personal Information received from the other Party in connection with this Agreement (including the return of all information received with respect to the Services or products of Vector or Spinco, as the case may be), without retaining a copy thereof (other than one copy for file purposes), and (c) each of Spinco and Vector shall honor all credits and make any accrued and unpaid payment to the other Party as required pursuant to the terms of this Agreement, and no rights already accrued hereunder shall be affected.

ARTICLE VIII

RECORDS; DATA SECURITY

Section 8.1. Records Retention. Each of the Parties shall create and maintain full and accurate books in connection with the provision of the Services, and all other records relevant to this Agreement, and upon reasonable notice from the other Party shall make available for inspection and copy by such other Party’s agents such records during reasonable business hours.

Section 8.2. Data Security. In their respective provision of the Services, each Party shall comply with all applicable federal, state, local and international laws, regulations and directives governing the collection, use, storage, processing, transmission, transfer, disclosure and protection of Personal Information (“Applicable Privacy Laws”) and shall immediately inform the other Party if they believe that processing Personal Information as contemplated by this Agreement would violate Applicable Privacy Laws. Each Party shall process Personal Information only as instructed by the other Party as required to provide the applicable Services or as otherwise required by applicable law, and will not sell the Personal Information or process it for any other purpose. The Parties shall ensure that all personnel authorized to process Personal Information have agreed to maintain the confidentiality

-10-

of the Personal Information and that access to Personal Information is limited to only those who need to know the Personal Information in order perform the specific Vector Services or Spinco Services under this Agreement. Each Party shall implement reasonable administrative, physical, technical and organizational measures designed to protect Personal Information from any unauthorized access to or acquisition, disclosure, disposal, loss or use of such Personal Information (an “Information Security Incident”). Each Party shall notify the other Party within 72 hours following the discovery of any actual or suspected Information Security Incident and assist the other Party in any efforts to contain, investigate or remediate such Information Security Incident. Each Party shall assist the other Party in fulfilling its obligations to respond to data subjects’ requests for exercising their rights under Applicable Privacy Laws and shall make available all information necessary to demonstrate compliance with Applicable Privacy Laws. The Parties agree to enter into any further privacy or data security agreements as required to comply with Applicable Privacy Laws.

ARTICLE IX

DISPUTE RESOLUTION

Section 9.1. Negotiation. In the event of a controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any way related to this Agreement or the transactions contemplated hereby, including any claim based on contract, tort, statute or constitution (but excluding any controversy, dispute or claim arising out of any agreement relating to the use or lease of real property if any Third Party is a necessary party to such controversy, dispute or claim) (collectively, “Agreement Disputes”), the Party claiming such Agreement Dispute shall give written notice to the other Party setting forth the Agreement Dispute and a brief description thereof (a “Dispute Notice”) pursuant to the terms of the notice provisions of Article X hereof. Following delivery of a Dispute Notice, the general counsel of the other Party and/or such other executive officer designated by the other Party shall negotiate for a reasonable period of time to settle such Agreement Dispute; provided, however, that such reasonable period shall not, unless otherwise agreed by the Parties in writing, exceed forty-five (45) calendar days from the time of receipt by a Party of a Dispute Notice; provided, further, that in the event of any arbitration in accordance with Section 9.3 hereof, the Parties shall not assert the defenses of statute of limitations and laches arising during the period beginning after the date of receipt of the Dispute Notice, and any contractual time period or deadline under this Agreement to which such Agreement Dispute relates occurring after the Dispute Notice is received shall not be deemed to have passed until such Agreement Dispute has been resolved.

Section 9.2. Mediation. If, within forty-five (45) calendar days (or such longer period as may be agreed in writing between the Parties) after receipt by a Party of a Dispute Notice, the Parties have not succeeded in negotiating a resolution of the Agreement Dispute, the Parties agree to submit the Agreement Dispute at the earliest possible date to mediation conducted in accordance with the Commercial Mediation Rules of the American Arbitration Association (“AAA”), and to bear equally the costs of the mediation; provided, however, that each Party shall bear its own costs in connection with such mediation. The Parties agree to participate in good faith in the mediation and negotiations related thereto for a period of thirty (30) days or such longer period as they may mutually agree following the initial mediation session (the “Mediation Period”).

Section 9.3. Arbitration. If the Agreement Dispute has not been resolved for any reason after the Mediation Period, such Agreement Dispute shall be determined, at the request of either Party, by arbitration conducted in New York City, New York, before and in accordance with the then-existing Commercial Arbitration Rules of the AAA, except as modified herein (the “Rules”). There shall be three arbitrators. Each Party shall appoint one arbitrator within twenty (20) calendar days of receipt by respondent of a copy of the demand for arbitration. The two party-appointed arbitrators shall have twenty (20) calendar days from the appointment of the second arbitrator to agree on a third arbitrator who shall chair the arbitral tribunal. Any arbitrator not timely appointed by the Parties under this Section 9.3 shall be appointed by the AAA in accordance with the listing, ranking and striking method in the Rules, and in any such procedure, each Party shall be given a limited number of strikes, excluding strikes for cause. Any controversy concerning whether an Agreement Dispute is an arbitrable Agreement Dispute, whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the interpretation of enforceability of this Article IX shall be determined by the arbitrators. In resolving any Agreement Dispute, the Parties intend that the arbitrators shall apply the substantive laws of the State of New York, without regard to any choice of law principles thereof that would mandate the application of the laws of another jurisdiction. The Parties

-11-

intend that the provisions to arbitrate set forth herein be valid, enforceable and irrevocable, and any award rendered by the arbitrators shall be final and binding on the Parties. The Parties agree to comply with any award made in any such arbitration proceedings and agree to enforcement of or entry of judgment upon such award in the United States District Court for the Southern District of New York. The arbitrators shall be entitled, if appropriate, to award any remedy in such proceedings, including monetary damages, specific performance and all other forms of legal and equitable relief; provided, however, the arbitrators shall not be entitled to award punitive, exemplary, treble or any other form of non-compensatory damages except in connection with indemnification for a Third Party Claim (and in such a case, only to the extent awarded in such Third Party Claim).

Section 9.4. Arbitration Period. Any arbitration proceeding shall be concluded in a maximum of six (6) months from the commencement of the arbitration. The Parties may agree in writing to extend the arbitration period if necessary to appropriately resolve the Agreement Dispute.

Section 9.5. Treatment of Negotiations, Mediation and Arbitration. Without limiting the provisions of the Rules, unless otherwise agreed in writing by the Parties or permitted by this Agreement, the Parties shall keep confidential all matters relating to and any negotiation, mediation, conference, arbitration, discussion or arbitration award pursuant to this Article IX shall be treated as compromise and settlement negotiations for purposes of Rule 408 of the Federal Rules of Evidence and comparable state rules; provided, however, that such matters may be disclosed (i) to the extent reasonably necessary in any proceeding brought to enforce the award or for entry of a judgment upon the award and (ii) to the extent otherwise required by Law or stock exchange rules. Nothing said or disclosed, nor any document produced, in the course of any negotiations, conferences and discussions that is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current or future arbitration. Nothing contained herein is intended to or shall be construed to prevent any Party from applying to any court of competent jurisdiction for interim measures or other provisional relief in connection with the subject matter of any Agreement Disputes. Without prejudice to such provisional remedies as may be available under the jurisdiction of a court, the arbitral tribunal shall have full authority to grant provisional remedies and to direct the parties to request that any court modify or vacate any temporary or preliminary relief issued by such court, and to award damages for the failure of any Party to respect the arbitral tribunal’s orders to that effect.

Section 9.6. Continuity of Service and Performance. Except as provided in Sections 4.5, 7.4 or 7.5 or otherwise agreed in writing, the Parties will continue to provide Services and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Article IX with respect to all matters not subject to such dispute resolution.

Section 9.7. Consolidation. The arbitrators may consolidate any Agreement Disputes under this Agreement if the subject of the Agreement Disputes thereunder arise out of or relate essentially to the same set of facts or transactions. Such consolidated arbitration shall be determined by the arbitrator appointed for the arbitration proceeding that was commenced first in time.

ARTICLE X

NOTICES

All notices and other communications hereunder shall be in writing, shall reference this Agreement and shall be emailed, hand delivered or mailed by registered or certified mail (return receipt requested) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice) and will be deemed given on the date on which such notice is received:

To Vector:

Vector Group Ltd.

4400 Biscayne Boulevard

Miami, Florida 33137

Attention: General Counsel

-12-

To Spinco:

Douglas Elliman Inc.

4400 Biscayne Boulevard

Miami, Florida 33137

Attention: General Counsel

ARTICLE XI

MISCELLANEOUS

Section 11.1. Taxes. Except as may otherwise be specifically provided herein, each party shall bear all taxes, duties and other similar charges (and any related interest and penalties) imposed as a result of its receipt of Services under this Agreement.

Section 11.2. Relationship of Parties. Nothing in this Agreement shall be deemed or construed by the Parties or any Third Party as creating the relationship of principal and agent, partnership or joint venture between the Parties, it being understood and agreed that no provision contained herein, and no act of the Parties, shall be deemed to create any relationship between the Parties other than the relationship of independent contractor nor be deemed to vest any rights, interest or claims in any Third Parties.

Section 11.3. Complete Agreement; Construction. This Agreement, including the Schedules hereto, shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. In the event of any inconsistency between this Agreement and any Schedule hereto, the Schedule shall prevail. The rights and remedies of the Parties herein provided shall be cumulative and in addition to any other or further remedies provided by law or equity.

Section 11.4. Other Agreements. This Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the Distribution Agreement or the other Ancillary Agreements.

Section 11.5. Counterparts. This Agreement may be executed in more than one counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Party. This Agreement may be executed and delivered by electronic means, including “.pdf” or “.tiff” files, and any electronic signature shall constitute an original for all purposes.

Section 11.6. Survival of Agreements. Except as otherwise contemplated by this Agreement, the Distribution Agreement or any other Ancillary Agreement, all covenants and agreements of the Parties contained in this Agreement, the Distribution Agreement and each Ancillary Agreement shall survive the Distribution and remain in full force and effect in accordance with their applicable terms.

Section 11.7. Waivers and Consents. The failure of any Party to require strict performance by the other Party of any provision in this Agreement will not waive or diminish that Party’s right to demand strict performance thereafter of that or any other provision hereof. Any consent required or permitted to be given by any Party to the other Party under this Agreement shall be in writing and signed by the Party giving such consent.

Section 11.8. Amendments. This Agreement may not be modified or amended except by an agreement in writing signed by a duly authorized representative of each of the Parties.

Section 11.9. Assignment. This Agreement shall not be assignable, in whole or in part, directly or indirectly, by any Party without the prior written consent of the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void; provided, however, that a Party may assign this Agreement in connection with a merger transaction in which such Party is not the surviving entity or the sale by such Party of all or substantially all of its Assets; provided, however, that the surviving entity of such merger or the transferee of such Assets shall agree in writing, reasonably satisfactory to the other Party, to be bound by the terms of this Agreement as if named as a “Party” hereto.

-13-

Section 11.10. Successors and Assigns. The provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective successors and permitted transferees and assigns.

Section 11.11. No Circumvention. The Parties agree not to directly or indirectly take any actions, act in concert with any Person who takes an action (including the failure to take a reasonable action) such that the resulting effect is to materially undermine the effectiveness of any of the provisions of this Agreement or any Ancillary Agreement (including adversely affecting the rights or ability of any Party to successfully pursue indemnification, contribution or payment pursuant to Article V).

Section 11.12. Subsidiaries. Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such Party or by any entity that becomes a Subsidiary of such Party on and after the effective Commencement Date.

Section 11.13. Third Party Beneficiaries. This Agreement is solely for the benefit of the Parties and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

Section 11.14. Titles and Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

Section 11.15. Exhibits and Schedules. The Exhibits and Schedules shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein.

Section 11.16. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any conflict-of-laws or other rule that would result in the application of the laws of a different jurisdiction.

Section 11.17. Consent to Jurisdiction. Subject to the provisions of Article IX hereof, each of the Parties irrevocably submits to the jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan (and if the courts of the State of New York shall be unavailable, any New York State court or federal court sitting in the City and County of New York, Borough of Manhattan) (the “New York Courts”), for the purposes of any suit, Action or other proceeding to compel arbitration or for provisional relief in aid of arbitration in accordance with Article IX or to prevent irreparable harm, and to the non-exclusive jurisdiction of the New York Courts for the enforcement of any award issued thereunder. Each of the Parties further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth above shall be effective service of process for any Action, suit or proceeding in the New York Courts with respect to any matters to which it has submitted to jurisdiction in this Section. Each of the Parties irrevocably and unconditionally waives any objection to the laying of venue of any Action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the New York Courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

Section 11.18. Specific Performance. The Parties agree that irreparable damage would occur in the event that the provisions of this Agreement were not performed in accordance with their specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled to an injunction or injunctions to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.

-14-

Section 11.19. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 11.20. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

Section 11.21. Interpretation. The Parties have participated jointly in the negotiation and drafting of this Agreement. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.

Section 11.22. No Duplication; No Double Recovery. Nothing in this Agreement is intended to confer to or impose upon any Party a duplicative right, entitlement, obligation or recovery with respect to any matter arising out of the same facts and circumstances (including with respect to the rights, entitlements, obligations and recoveries that may arise out of Section 5.1 or Section 5.2).

Section 11.23. DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR THE SCHEDULES ATTACHED HERETO, THE PARTIES ACKNOWLEDGE AND AGREE THAT THE SERVICES ARE PROVIDED AS-IS, THAT EACH RECIPIENT ASSUMES ALL RISKS AND LIABILITIES ARISING FROM OR RELATING TO ITS USE OF AND RELIANCE UPON THE SERVICES AND EACH PROVIDER, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT THERETO. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH PROVIDER HEREBY EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICES, WHETHER EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, INCLUDING ANY REPRESENTATION OR WARRANTY IN REGARD TO QUALITY, PERFORMANCE, NONINFRINGEMENT, COMMERCIAL UTILITY, MERCHANTABILITY OR FITNESS OF ANY SERVICE FOR A PARTICULAR PURPOSE.

-15-

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered on behalf of the Parties as of the date first herein above written.


VECTOR GROUP LTD.

By:
		Name:
		Title:

DOUGLAS ELLIMAN INC.

By:
		Name:
		Title:

[Signature Page to Transition Services Agreement]

Exhibit 10.2

TAX DISAFFILIATION AGREEMENT

BETWEEN

VECTOR GROUP LTD.

AND

DOUGLAS ELLIMAN INC.

dated as of [ ], 2021

TABLE OF CONTENTS


SECTION 1.	Definition of Terms	2

SECTION 2.	Allocation of Taxes and Tax-Related Losses	10

	2.1 Allocation of Taxes	10

	2.2 Special Allocation of Certain Taxes	11

	2.3 Tax Payments	12

SECTION 3.	Preparation and Filing of Tax Returns	12

	3.1 Combined Returns	12

	3.2 Separate Returns	12

	3.3 Agent	12

	3.4 Provision of Information	13

	3.5 Special Rules Relating to the Preparation of Tax Returns	13

	3.6 Refunds, Credits, Offsets, Tax Benefits	13

	3.7 Carrybacks	14

	3.8 Amended Returns	14

SECTION 4.	Tax Payments	15

	4.1 Payment of Taxes to Tax Authority	15

	4.2 Indemnification Payments	15

	4.3 Interest on Late Payments	15

	4.4 Tax Consequences of Payments	15

	4.5 Adjustments to Payments	16

	4.6 Section 336(e) Election	16

	4.7 Certain Final Determinations	17

SECTION 5.	Cooperation and Tax Contests	17

	5.1 Cooperation	17

	5.2 Notices of Tax Contests	17

	5.3 Control of Tax Contests	18

	5.4 Cooperation Regarding Tax Contests	18

SECTION 6.	Tax Records	18

	6.1 Retention of Tax Records	18

	6.2 Access to Tax Records	19

	6.3 Confidentiality	19

SECTION 7.	Representations and Covenants	19

	7.1 Covenants of Parent and Spinco	19



	7.2 Covenants of Spinco	20

	7.3 Covenants of Parent	20

	7.4 Exceptions	21

	7.5 Injunctive Relief	22

	7.6 Further Assurances	22

SECTION 8.	General Provisions	22

	8.1 General Provisions	21

	8.2 Third-Party Beneficiaries	21

TAX DISAFFILIATION AGREEMENT

THIS TAX DISAFFILIATION AGREEMENT (the “Agreement”) is dated as of [ ], by and between Vector Group Ltd., a Delaware corporation (“Parent”), and Douglas Elliman Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Spinco” and, together with Parent, the “Parties”, and each, a “Party”). Unless otherwise indicated, all “Section” references in this Agreement are to sections of the Agreement.

RECITALS

WHEREAS, the Board of Directors of Parent determined that, based on the Corporate Business Purposes, it is in the best interests of Parent and its stockholders to separate the businesses of Spinco, all as more fully described in Spinco’s registration statement on Form S-1, from Parent’s other businesses on the terms and conditions set forth in the Distribution Agreement between Parent and Spinco dated on or about the date hereof (the “Distribution Agreement”);

WHEREAS, pursuant to the Distribution Agreement, Parent intends to complete (or cause to be completed) the Contribution;

WHEREAS, the Board of Directors of Parent has authorized the distribution to the holders (as of the record date) of the issued and outstanding shares of common stock, par value $0.01 per share, of Parent (collectively, the “Parent Shares”) of the issued and outstanding shares of common stock, par value $0.01 per share, of Spinco (each, a “Spinco Share” and collectively, the “Spinco Shares”), on the basis of one Spinco Share for every two Parent Shares (the “Distribution”);

WHEREAS, Parent and Spinco intend the Contribution and Distribution to qualify for the Tax-Free Status;

WHEREAS, the Boards of Directors of Parent and Spinco have each determined that the Distribution and the other transactions contemplated by the Distribution Agreement and the Ancillary Agreements are in furtherance of and consistent with the Corporate Business Purposes and, as such, are in the best interests of their respective companies and stockholders or sole stockholder, as applicable, and have approved the Distribution Agreement and each of the Ancillary Agreements;

WHEREAS, the Parties set forth in the Distribution Agreement the principal arrangements between them regarding the separation of the Spinco Group from the Parent Group; and

WHEREAS, the Parties desire to provide for and agree upon the allocation between the Parties of liabilities for Taxes arising prior to, as a result of, and subsequent to the Distribution, and to provide for and agree upon other matters relating to Taxes;

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, the Parties hereby agree as follows:

SECTION 1. Definition of Terms. For purposes of this Agreement (including the recitals hereof), the following terms have the following meanings:

“Affiliate” has the meaning set forth in the Distribution Agreement. For the avoidance of doubt, the term “Affiliate” as it applies to Spinco shall include members of the Spinco Group.

“Agreed Treatment” means the treatment of the Contribution and the Distribution in accordance with the Tax-Free Status.

“Agreement” has the meaning set forth in the preamble hereof.

“Ancillary Agreements” means the agreements encompassed by such term in the Distribution Agreement but excluding, for the avoidance of doubt, the reference therein to the “Tax Disaffiliation Agreement”.

“Business Day” has the meaning set forth in the Distribution Agreement.

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

“Combined Return” means a consolidated, combined or unitary Tax Return that includes, by election or otherwise, one or more members of the Parent Group and one or more members of the Spinco Group.

“Companies” means Parent and Spinco.

“Company” means Parent or Spinco, as the context requires.

“Compensatory Equity Interests” means options, stock appreciation rights, restricted stock, restricted stock units or other rights with respect to Parent Shares or Spinco Shares that are granted by Parent, Spinco or any of their respective Subsidiaries in connection with employee or director compensation or other employee benefits.

“Compensatory Equity Net Share Settlements” means “net share settlement” transactions with respect to Compensatory Equity Interests between either Party (or any of their respective Subsidiaries) on the one hand and the employee (or director, as the case may be) of such Party or the other Party (or any of their respective Subsidiaries) on the other hand, in each case pursuant to the terms of the relevant agreement with respect to such Compensatory Equity Interests.

“Contribution” means the contribution of Assets to, and the Assumption of Liabilities by (each as defined in the Distribution Agreement), Spinco.

“Controlling Party” means, with respect to a Tax Contest, the Person that has responsibility, control and discretion in handling, defending, settling or contesting such Tax Contest.

“Corporate Business Purposes” means the Corporate Business Purposes as set forth in the Tax Opinion Representations (including any appendices thereto) and the “Reasons for the Distribution” in Spinco’s registration statement on Form S-1, as amended.

“Deconsolidation Taxes” means any Taxes imposed on any member of the Parent Group or the Spinco Group as a result of or in connection with the Contribution and the Distribution (or any portion thereof), but excluding any Transfer Taxes, Distribution Taxes, and, for the avoidance of doubt, Taxes arising from the Equity Award Transfer.

“Disclosing Party” has the meaning set forth in Section 6.3.

“Distribution” has the meaning set forth in the recitals hereof, it being understood that, for the avoidance of doubt, the Distribution excludes the Equity Award Transfer.

“Distribution Agreement” has the meaning set forth in the recitals hereof.

“Distribution Date” has the meaning set forth in the Distribution Agreement.

“Distribution Taxes” means any Taxes arising from a Final Determination that the Contribution and the Distribution failed to be tax-free to Parent in accordance with the requirements of section 355 or section 368(a)(1)(D) of the Code (including any Taxes resulting from the application of section 355(d) or (e) of the Code to the Distribution), or that any stock of Spinco failed to qualify as “qualified property” within the meaning of section 355(c)(2) or 361(c)(2) of the Code (including as a result of the application of section 355(d) or 355(e) of the Code to the Distribution) or where applicable, failed to be stock permitted to be received without recognition of gain or loss under section 361(a) of the Code, and shall include any Taxes resulting from an election under section 336(e) of the Code in the circumstances set forth in Section 4.6 hereof. For the avoidance of doubt, “Distribution Taxes” does not include any Taxes arising from the Equity Award Transfer.

“Due Date” has the meaning set forth in Section 4.3.

“Effective Time” means 11:59 p.m., New York City time, on the Distribution Date.

“Employee Matters Agreement” means the Employee Matters Agreement by and between Parent and Spinco entered into on or about the date hereof.

“Equity Award Transfer” means the transfer of Spinco Shares with respect to Parent Equity Awards, which transfer shall not exceed 3.5% of the total outstanding shares of Spinco.

“Escheat Liability” means any unclaimed property or escheat liability, including any interest, penalty, administrative charge, or addition thereto and further including all costs of responding to or defending against an audit, examination, or controversy with respect to such liability, imposed by or on behalf of a governmental entity with respect to any property or obligation (including, without limitation, uncashed checks to vendors, customers, or employees and non-refunded overpayments).

“Excess Taxes” means the excess of (x) the Taxes for which Parent Group is liable if an election is made pursuant to section 336(e) of the Code under Section 4.6 of this Agreement, over (y) the Taxes for which Parent Group is liable if such an election is not made, in each case taking into account the allocation of Taxes that is otherwise applicable in this Agreement but without regard to Section 4.6 hereof.

“Expert Law Firm” means a law firm nationally recognized for its expertise in the matter for which its opinion is sought.

“Thirty-Five-Percent Equity Interest” means, in respect of any corporation (within the meaning of the Code), stock or other equity interests of such corporation possessing (i) at least thirty-five percent (35%) of the total combined voting power of all classes of stock or equity interests entitled to vote, or (ii) at least thirty-five percent (35%) of the total value of shares of all classes of stock or of the total value of all equity interests.

“Filer” means the Company that is responsible for filing the applicable Tax Return pursuant to Sections 3.1 or 3.2.

“Final Determination” means a determination within the meaning of section 1313 of the Code or any similar provision of state or local Tax Law.

“Group” means the Parent Group or the Spinco Group, as the context requires.

“Income Tax” or “Income Taxes” means any Tax that is imposed on or measured by or referred to as income, gross income, gross receipts, profits, capital stock, franchise or other similar Tax.

“Indemnified Party” has the meaning set forth in Section 4.5.

“Indemnifying Party” has the meaning set forth in Section 4.5.

“Interest Rate” means (x) the “Prime Rate” as set forth in the Distribution Agreement, or (y) if higher and if with respect to a payment to indemnify for a Tax to which the “large corporate underpayment” provision within the meaning of section 6621(c) of the Code applies, such interest rate that would be applicable at such time to such “large corporate underpayment.”

“IRS” means the Internal Revenue Service.

“Parent” has the meaning set forth in the preamble hereof.

“Parent Business” has the meaning ascribed to the term “Distributing Business” in the Tax Opinion Representations that constitutes an active trade or business (within the meaning of section 355(b) of the Code) of the separate affiliated group (as defined in section 355(b)(3)(B) of the Code) of Parent.

“Parent Equity Award” has the meaning ascribed to the term “Vector Equity Award” in the Employee Matters Agreement.

“Parent Group” has the meaning ascribed to the term “Parent Group” in the Distribution Agreement.

“Parent Indemnified Party” includes each member of the Parent Group, each of their representatives and Affiliates, each of their respective directors, officers, managers and employees, and each of their heirs, executors, trustees, administrators, successors and assigns.

“Parent Restricted Action” means any action by Parent or any of its Subsidiaries inconsistent with the covenants set forth in Section 7.4(a); and, for the avoidance of doubt, an action shall be and remain a Parent Restricted Action even if Parent or any of its Subsidiaries is permitted to take such an action pursuant to Section 7.5(b).

“Parent Shares” has the meaning set forth in the recitals to this Agreement.

“Parent Tainting Act” means any breach of a representation or covenant made by Parent in Section 7.1 of this Agreement or the taking of a Parent Restricted Action, if as a result of such breach or taking of a Parent Restricted Action a Final Determination is made that the Contribution and the Distribution (excluding, for the avoidance of doubt, the Equity Award Transfer) failed to be tax-free by reason of (i) failing to qualify as a transaction described in section 355 and section 368(a)(1)(D) of the Code, or (ii) any stock of Spinco failing to qualify as “qualified property” within the meaning of section 355(c)(2) or 361(c)(2) of the Code (including as a result of the application of section 355(d) or 355(e) of the Code to the Distribution) or where applicable, failing to be stock permitted to be received without recognition of gain or loss under section 361(a) of the Code. It is understood and agreed that the Equity Award Transfer does not constitute, by itself, a Parent Restricted Action or a Parent Tainting Act, although it may be taken into account in determining whether some other Parent Tainting Act has resulted.

“Non-Controlling Party” has the meaning set forth in Section 5.3(a).

“Non-Filer” means any Company that is not responsible for filing the applicable Tax Return pursuant to Sections 3.1 or 3.2.

“Non-Income Tax” or “Non-Income Taxes” means any Tax that is not an Income Tax.

“Other Party” has the meaning set forth in Section 4.6(b).

“Party” has the meaning set forth in the preamble hereof.

“Parties” has the meaning set forth in the preamble hereof.

“Payment Date” means (x) with respect to any U.S. federal income tax return, the date on which any required installment of estimated taxes determined under section 6655 of the Code is due, the date on which (determined without regard to extensions) filing the return determined under section 6072 of the Code is required, and the date the return is filed, and (y) with respect to any other Tax Return, the corresponding dates determined under the applicable Tax Law.

“Periodic Taxes” means Taxes imposed on a periodic basis that are not based upon or related to income or receipts. Periodic Taxes include property Taxes and similar Taxes.

“Permitted Acquisition” means any acquisition (as a result of the Distribution but excluding, for the avoidance of doubt, as a result of the Equity Award Transfer) of Spinco Shares solely by reason of holding Parent Shares, but does not include such an acquisition if such Parent Shares, before such acquisition, were themselves acquired in a manner to which the flush language of section 355(e)(3)(A) of the Code applies (thus causing, for the avoidance of doubt, section 355(e)(3)(A)(i), (ii), (iii) or (iv) of the Code not to apply).

“Person” means any individual, corporation, company, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind.

“Post-Distribution Period” means any Tax Year or other taxable period beginning after the Distribution Date and, in the case of any Straddle Period, that part of the Tax Year or other taxable period that begins at the beginning of the day after the Distribution Date.

“Pre-Distribution Period” means any Tax Year or other taxable period that ends on or before the Distribution Date and, in the case of any Straddle Period, that part of the Tax Year or other taxable period through the end of the day on the Distribution Date.

“Preparer” means the Company that is responsible for the preparation and filing of the applicable Tax Return pursuant to Sections 3.1 or 3.2.

“Receiving Party” has the meaning set forth in Section 6.3.

“Responsible Party” has the meaning set forth in Section 4.6(b).

“Restriction Period” means the period beginning on the Distribution Date and ending twenty-four (24) months after the Distribution Date.

“Satisfactory Guidance” means either a ruling from the IRS or an Unqualified Opinion, in either case reasonably satisfactory to Parent or Spinco (as the context dictates) in both form and substance.

“Separate Return” means (a) in the case of any Tax Return required under relevant Tax Law to be filed by any member of the Parent Group (including any consolidated, combined or unitary Tax Return), any such Tax Return that does not include any member of the Spinco Group, and (b) in the case of any Tax Return required under relevant Tax Law to be filed by any member of the Spinco Group (including any consolidated, combined or unitary Tax Return), any such Tax Return that does not include any member of the Parent Group.

“Spinco” has the meaning set forth in the preamble hereof.

“Spinco Business” has the meaning ascribed to the term “Controlled Business” in the Tax Opinion Representations that constitutes an active trade or business (within the meaning of section 355(b) of the Code) of the separate affiliated group (as defined in section 355(b)(3)(B) of the Code) of Spinco.

“Spinco Share” or “Spinco Shares” has the meaning set forth in the recitals to this Agreement.

“Spinco Group” has the meaning ascribed to the term “Spinco Group” in the Distribution Agreement.

“Spinco Indemnified Party” includes each member of the Spinco Group, each of their representatives and Affiliates, each of their respective directors, officers, managers and employees, and each of their heirs, executors, trustees, administrators, successors and assigns.

“Spinco Restricted Action” means any action by Spinco or any of its Subsidiaries inconsistent with the covenants set forth in Section 7.3; and, for the avoidance of doubt, an action shall be and remain a Spinco Restricted Action even if Spinco or any of its Subsidiaries is permitted to take such an action pursuant to Section 7.5(a).

“Spinco Shares” has the meaning set forth in the recitals to this Agreement.

“Spinco Tainting Act” means any breach of a representation or covenant made by Spinco in Section 7.1 of this Agreement or the taking of a Spinco Restricted Action, if as a result of such breach or taking of a Spinco Restricted Action a Final Determination is made that the Contribution and the Distribution (excluding, for the avoidance of doubt, the Equity Award Transfer) failed to be tax-free by reason of (i) failing to qualify as a transaction described in section 355 and section 368(a)(1)(D) of the Code, or (ii) any stock of Spinco failing to qualify as “qualified property” within the meaning of section 355(c)(2) or 361(c)(2) of the Code (including as a result of the application of section 355(d) or 355(e) of the Code to the Distribution) or where applicable, failing to be stock permitted to be received without recognition of gain or loss under section 361(a) of the Code. It is understood and agreed that the Equity Award Transfer does not constitute, by itself, a Spinco Restricted Action or a Spinco Tainting Act, although it may be taken into account in determining whether some other Spinco Tainting Act has resulted.

“Straddle Period” means any taxable period beginning on or prior to, and ending after, the Distribution Date.

“Subsidiary” when used with respect to any Person, means (i)(A) a corporation a majority in voting power of whose share capital or capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, (B) a partnership or limited liability company in which such Person or a Subsidiary of such Person is, at the date of determination, (1) in the case of a partnership, a general partner of such partnership with the power affirmatively to direct the policies and management of such partnership or (2) in the case of a limited liability company, the managing member or, in the absence of a managing member, a member with the power affirmatively to direct the policies and management of such limited liability company, or (C) any other Person (other than a corporation) in which such Person, one or more Subsidiaries of such Person or such

Person and one or more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof, has or have (1) the power to elect or direct the election of a majority of the members of the governing body of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, or (2) in the absence of such a governing body, at least a majority ownership interest or (ii) any other Person of which an aggregate of 50% or more of the equity interests are, at the time, directly or indirectly, owned by such Person and/or one or more Subsidiaries of such Person. For the avoidance of doubt, the term “Subsidiary” as it applies to Spinco shall include the members of the Spinco Group.

“Tax” or “Taxes” means any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers’ compensation, employment, unemployment, disability, property, ad valorem, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, value added, alternative minimum, estimated or other similar tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax) imposed by any Tax Authority, any Escheat Liability, abandoned, or unclaimed property law, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing, together with any reasonable expenses, including attorneys’ fees, incurred in defending against any such tax.

“Tax Adjustment” has the meaning set forth in Section 4.7.

“Tax Authority” means, with respect to any Tax, the governmental entity or political subdivision, agency, commission or authority thereof that imposes such Tax, and the agency, commission or authority (if any) charged with the assessment, determination or collection of such Tax for such entity or subdivision.

“Tax Benefit” means a reduction in the Tax liability of a taxpayer (or of the Group of which it is a member) for any taxable period. Except as otherwise provided in this Agreement, a Tax Benefit shall be deemed to have been realized or received from a Tax Item in a taxable period only if and to the extent that the Tax liability of the taxpayer (or of the Group of which it is a member) for such period, after taking into account the effect of the Tax Item on the Tax liability of such taxpayer in the current period and all prior periods, is less than it would have been if such Tax liability were determined without regard to such Tax Item.

“Tax Contest” means an audit, review, examination, or any other administrative or judicial proceeding with the purpose, potential or effect of redetermining Taxes of any member of either Group (including any administrative or judicial review of any claim for refund).

“Tax Counsel” means Sullivan & Cromwell LLP.

“Tax-Free Status” means the qualification of the Contribution and the Distribution (a) as a transaction described in section 355 and section 368(a)(1)(D) of the Code, (b) as a transaction in which the stock of Spinco distributed by Parent is “qualified property” for purposes of sections 355(c)(2), 355(d), 355(e) and 361(c) of the Code, and (c) a transaction in which shareholders of Parent will not recognize income, gain or loss upon the Distribution under section 355(a) of the Code (except with respect to cash received in lieu of fractional shares). For the avoidance of doubt, “Tax-Free Status” does not relate to (x) any Taxes arising from the Equity Award Transfer or (y) any qualification of the Equity Award Transfer for any particular tax treatment.

“Tax Item” means, with respect to any Tax, any item of income, gain, loss, deduction, credit, adjustment in basis, or other attribute that may have the effect of increasing or decreasing any Tax.

“Tax Law” means the law of any governmental entity or political subdivision thereof, and any controlling judicial or administrative interpretations of such law, relating to any Tax.

“Tax Opinion” means the opinion (or opinions) to be delivered by Tax Counsel to Parent in connection with the Distribution to the effect that (i) Parent will not recognize gain or loss upon the Distribution (excluding, for the avoidance of doubt, the Equity Award Transfer) under section 355(c) or section 361(c) of the Code, and (ii) shareholders of Parent will not recognize gain or loss upon the Distribution (excluding, for the avoidance of doubt, the Equity Award Transfer) under section 355(a) of the Code, and no amount will be included in such shareholders’ income, except in respect of cash received in lieu of fractional Spinco Shares.

“Tax Opinion Representations” means the written and signed representations delivered to Tax Counsel in connection with the Tax Opinion.

“Tax Records” means Tax Returns, Tax Return work papers, documentation relating to any Tax Contests, and any other books of account or records required to be maintained under applicable Tax Laws (including but not limited to section 6001 of the Code) or under any record retention agreement with any Tax Authority.

“Tax Return” means any report of Taxes due, any claims for refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration, or document filed or required to be filed (by paper, electronically or otherwise) under any applicable Tax Law, including any attachments, exhibits, or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing.

“Tax Year” means, with respect to any Tax, the year, or shorter period, if applicable, for which the Tax is reported as provided under applicable Tax Law.

“Transactions” means the transactions contemplated by the Distribution Agreement (excluding the Equity Award Transfer) and includes, for the avoidance of doubt, (i) the Contribution and (ii) the Distribution.

“Transfer Taxes” means all U.S. federal, state, local or foreign sales, use, privilege, transfer, documentary, gains, stamp, duties, recording, and similar Taxes and fees (including any penalties, interest or additions thereto) imposed upon any Party hereto or any of its Affiliates in connection with the Distribution.

“Transition Services Agreement” means the transition services agreement between Parent and Spinco dated on or about the date hereof.

“Treasury Regulations” means the regulations promulgated from time to time under the Code as in effect for the relevant Tax Year.

“Unqualified Opinion” means an unqualified “will” opinion of an Expert Law Firm that permits reliance by Parent or Spinco (as the context dictates). For the avoidance of doubt, an Unqualified Opinion must be based on factual representations and assumptions that are reasonably satisfactory to Parent or Spinco (as the context dictates).

SECTION 2. Allocation of Taxes and Tax-Related Losses.

2.1 Allocation of Taxes. Except as provided in Section 2.2, Taxes shall be allocated as follows:

(a) Parent shall be liable for and shall be allocated (i) any Taxes attributable to members of the Parent Group for all periods, and (ii) any Taxes attributable to members of the Spinco Group for any Pre-Distribution Period.

(b) Spinco shall be liable for and shall be allocated any Taxes attributable to members of the Spinco Group for any Post-Distribution Period.

(i) Any Taxes, other than Periodic Taxes, in respect of a Straddle Period shall be allocated between the Pre-Distribution Period and the Post-Distribution Period on a “closing of the books” basis by assuming that the books of the members of the Parent Group and the members of the Spinco Group were closed on the Distribution Date. For purposes of the foregoing, depreciation and amortization deductions with respect to property placed in service after the Distribution Date shall be allocated to the Post-Distribution Period, and all other depreciation and amortization deductions shall be allocated on a per diem basis.

(ii) Any Periodic Taxes in respect of a Straddle Period shall be allocated to the Pre-Distribution Period in an amount equal to such Periodic Taxes for the entire Straddle Period multiplied by a fraction the numerator of which is the number of calendar days in the period ending on the Distribution Date and the denominator of which is the number of calendar days in the entire period. The portion of any Periodic Taxes in respect of a Straddle Period not allocated to the Pre-Distribution Period shall be allocated to the Post-Distribution Period. For the avoidance of doubt, if a Party has prepaid Periodic Taxes that are allocated to the other Party under any provisions of this Agreement, the second Party shall reimburse the first Party to the extent so allocated.

(iii) Taxes attributable to any transaction or action taken by or with respect to any member of the Spinco Group before the Effective Time on the Distribution Date shall be allocated to the Pre-Distribution Period, and Taxes attributable to any transaction or action taken by or with respect to any member of the Spinco Group after the Effective Time on the Distribution Date shall be allocated to the Post-Distribution Period.

(iv) In determining the allocation of any Escheat Liability, the liability shall be allocated to the Party whose Group members actually hold (or are required to hold) the property subject to the Escheat Liability at the time a payment or remittance in respect of such liability is required to be made to the applicable governmental entity.

(v) Any Taxes arising from the Equity Award Transfer shall be treated as Taxes described in Section 2.1(a) hereof, except to the extent such Taxes are specifically addressed by the Employee Matters Agreement.

2.2 Special Allocation of Certain Taxes. Notwithstanding any other provision of this Agreement:

(a) Any and all Deconsolidation Taxes shall be borne by Parent.

(b) Spinco shall indemnify and hold harmless each Parent Indemnified Party from and against any liability of Parent for Distribution Taxes to the extent such Distribution Taxes are attributable to a Spinco Tainting Act, provided, however, that Spinco shall have no obligation to indemnify any Parent Indemnified Party hereunder if there has occurred, prior to such Spinco Tainting Act, a Parent Tainting Act and such Distribution Taxes are attributable to such Parent Tainting Act. It is understood and agreed that, in determining the amounts payable under this Section 2.2(b), there shall be included all costs, expenses and damages associated with shareholders litigation or controversies and any amount paid by Parent in respect of the liability of its shareholders, whether paid to its shareholders or to any Tax Authority, in connection with liability that may arise to shareholders as a result of receiving or accruing an amount payable under this Section 2.2(b), and all reasonable costs and expenses associated with such payments.

(c) Parent shall indemnify and hold harmless each Spinco Indemnified Party from and against any liability of Spinco for Distribution Taxes to the extent that Spinco is not liable for such Taxes pursuant to Section 2.2(b).

(d) The Companies shall cooperate with each other and use their commercially reasonable efforts to reduce and/or eliminate any Transfer Taxes. If any Transfer Tax remains payable after application of the first sentence of this Section 2.2(d) and notwithstanding any other provision in this Section 2, all Transfer Taxes shall be allocated to Parent.

2.3 Tax Payments. Each Company shall be liable for and shall pay the Taxes allocated to it by this Section 2 either to the applicable Tax Authority or to the other Company in accordance with Section 4 and the other applicable provisions of this Agreement.

SECTION 3. Preparation and Filing of Tax Returns.

3.1 Combined Returns.

(a) Parent shall be responsible for preparing and filing (or causing to be prepared or filed) all Combined Returns for any Tax Year. For any such return, Spinco shall furnish any relevant information, including pro forma returns, disclosures, apportionment data and supporting schedules, relating to any member of the Spinco Group necessary for completing any such return in a format suitable for inclusion in such return, provided that Spinco shall have the right to review and approve items on such returns if and to the extent such items directly relate to Taxes for which Spinco would be liable under Section 2, such approval not to be unreasonably delayed, conditioned or withheld by Spinco.

(b) For the period in which the Transition Services Agreement is in effect, Spinco shall assist in the preparation of any Tax Returns which may be requested by Parent in accordance with the terms of the Transition Services Agreement (even if, for the avoidance of doubt, the responsibility for preparation such Tax Return may be allocated to Parent under other provisions of this Agreement). Nothing in this Section 3.1(b) shall be construed to affect Parent’s right or responsibility to file the Tax Returns whose filing is allocated to Parent under other provisions of this Agreement.

3.2 Separate Returns.

(a) Tax Returns to be Prepared by Parent. Parent shall be responsible for preparing and filing (or causing to be prepared and filed) all Separate Returns which relate to one or more members of any Group and for which Spinco is not responsible under Section 3.2(b), provided, however, that in the case of such returns which relate to one or more members of the Spinco Group for any Pre-Distribution Period or Straddle Period, Spinco shall have the right to review and approve such returns, such approval not to be unreasonably delayed, conditioned or withheld by Spinco.

(b) Tax Returns to be Prepared by Spinco. Spinco shall be responsible for preparing and filing (or causing to be prepared and filed) all Separate Returns which relate to one or more members of the Spinco Group for any Post-Distribution Period.

3.3 Agent. Subject to the other applicable provisions of this Agreement (including, without limitation, Section 5), Parent and Spinco (and their respective Affiliates) shall designate the other Party as its agent and attorney-in-fact to take such action (including execution of documents) as such other Party may deem reasonably appropriate in matters relating to the preparation or filing of any Tax Return described in Sections 3.1 and 3.2.

3.4 Provision of Information.

(a) Parent shall provide to Spinco, and Spinco shall provide to Parent, any information about members of the Parent Group or the Spinco Group, respectively, that the Preparer reasonably requires to determine the amount of Taxes due on any Payment Date with respect to a Tax Return for which the Preparer is responsible pursuant to Section 3.1 or 3.2 and to properly and timely file all such Tax Returns.

(b) If a member of the Spinco Group supplies information to a member of the Parent Group, or a member of the Parent Group supplies information to a member of the Spinco Group, and an officer of the requesting member intends to sign a statement or other document

under penalties of perjury in reliance upon the accuracy of such information, then a duly authorized officer of the member supplying such information shall certify, to the best of such officer’s knowledge, the accuracy of the information so supplied.

3.5 Special Rules Relating to the Preparation of Tax Returns.

(a) In General. All Tax Returns that include any members of the Parent Group or Spinco Group, or any of their respective Affiliates, shall be prepared in a manner that is consistent with the Tax Opinion (including, for the avoidance doubt, the Tax Opinion Representations). Except as otherwise set forth in this Agreement, all Tax Returns for which Parent has the right to prepare, review, approve or file under Sections 3.1 and 3.2 shall be prepared (x) in accordance with elections, Tax accounting methods and other practices used with respect to such Tax Returns filed prior to the Distribution Date (unless such past practices are not permissible under applicable law), or (y) to the extent any items are not covered by past practices (or in the event such past practices are not permissible under applicable Tax Law), in any reasonable manner, in accordance with the preparation, review, approval and filing responsibilities of Sections 3.1 and 3.2; provided, however, that in each case of (x) and (y) to the extent that a change in such elections, methods or practices could not reasonably be expected to result in any adverse impact on Parent and would not be inconsistent with applicable law, such Tax Returns shall be prepared in accordance with reasonable practices selected by Spinco.

(b) Election to File Consolidated, Combined or Unitary Tax Returns. Subject to Spinco’s reasonable approval, Parent shall elect to file any Tax Return on a consolidated, combined or unitary basis, if such Tax Return would include at least one member of each Group and the filing of such Tax Return is elective under the relevant Tax Law.

3.6 Refunds, Credits, Offsets, Tax Benefits

(a) Any refunds, credits, or offsets with respect to Taxes allocated to Parent pursuant to this Agreement shall be for the account of Parent. Any refunds, credits or offsets with respect to Taxes allocated to Spinco pursuant to this Agreement shall be for the account of Spinco.

(b) Parent shall forward to Spinco, or reimburse Spinco for, any such refunds, credits or offsets, plus any interest received thereon, net of any Taxes incurred with respect to the receipt or accrual thereof and any expenses incurred in connection therewith, that are for the account of Spinco within fifteen (15) Business Days from receipt thereof by Parent or any of its Affiliates. Spinco shall forward to Parent, or reimburse Parent for, any refunds, credits or offsets, plus any interest received thereon, net of any Taxes incurred with respect to the receipt or accrual thereof and any expenses incurred in connection therewith, that are for the account of Parent within fifteen (15) Business Days from receipt thereof by Spinco or any of its Affiliates. Any refunds, credits or offsets, plus any interest received thereon, or reimbursements not forwarded or made within the fifteen (15) Business Day period specified above shall bear interest from the date received by the refunding or reimbursing party (or its Affiliates) through and including the date of payment at the Interest Rate (treating the date received as the Due Date for purposes of determining such interest). If, subsequent to a Tax Authority’s allowance of a refund, credit or offset, such Tax Authority reduces or eliminates such allowance, any refund,

credit or offset, plus any interest received thereon, forwarded or reimbursed under this Section 3.6 shall be returned to the party who had forwarded or reimbursed such refund, credit or offset and interest upon the request of such forwarding party in an amount equal to the applicable reduction, including any interest received thereon.

3.7 Carrybacks. To the extent permitted under applicable Tax Laws, the Spinco Group shall make the appropriate elections in respect of any Tax Returns to waive any option to carry back any net operating loss, any credits or any similar item from a Post-Distribution Period to any Pre-Distribution Period or to any Straddle Period. Any refund of or credit for Taxes resulting from any such carryback by a member of the Spinco Group that cannot be waived shall be payable to Spinco net of any Taxes incurred with respect to the receipt or accrual thereof and any expenses incurred in connection therewith.

3.8 Amended Returns. Any amended Tax Return or claim for Tax refund, credit or offset with respect to any member of the Parent Group or Spinco Group may be made only by the Company (or its Affiliates) responsible for filing the original Tax Return with respect to such member pursuant to Sections 3.1 or 3.2 (and, for the avoidance of doubt, subject to the same preparation, review, approval and filing rights set forth in Sections 3.1 or 3.2, to the extent applicable). Such Company (or its Affiliates) shall not, without the prior written consent of the other Company (which consent shall not be unreasonably withheld or delayed), file, or cause to be filed, any such amended Tax Return or claim for Tax refund, credit or offset to the extent that such filing, if accepted, is likely to increase the Taxes allocated to, or the Tax indemnity obligations under this Agreement of, such other Company for any Tax Year (or portion thereof).

SECTION 4. Tax Payments.

4.1 Payment of Taxes to Tax Authority. Parent shall be responsible for remitting to the proper Tax Authority the Tax shown on any Tax Return for which it is responsible for filing pursuant to Section 3.1 or Section 3.2, and Spinco shall be responsible for remitting to the proper Tax Authority the Tax shown on any Tax Return for which it is responsible for filing pursuant to Section 3.2.

4.2 Indemnification Payments.

(a) Tax Payments Made by the Parent Group. If any member of the Parent Group is required to make a payment to a Tax Authority for Taxes allocated to Spinco under this Agreement, Spinco will pay the amount of Taxes allocated to it to Parent not later than the later of (i) five (5) Business Days after receiving notification requesting such amount, and (ii) five (5) Business Days prior to the date such payment is required to be made to such Tax Authority. Notwithstanding the preceding sentence, if any member of the Parent Group has made a prepayment of Periodic Taxes that are allocated to Spinco under this Agreement, Spinco will pay the amount of such Taxes allocated to it to Parent not later than thirty (30) Business Days after the Distribution Date.

(b) Tax Payments Made by the Spinco Group. If any member of the Spinco Group is required to make a payment to a Tax Authority for Taxes allocated to Parent under this Agreement, Parent will pay the amount of Taxes allocated to it to Spinco not later than the later

of (i) five (5) Business Days after receiving notification requesting such amount, and (ii) five (5) Business Days prior to the date such payment is required to be made to such Tax Authority. Notwithstanding the preceding sentence, if any member of the Spinco Group has made a prepayment of Periodic Taxes that are allocated to Parent under this Agreement, Parent will pay the amount of such Taxes allocated to it to Spinco not later than thirty (30) Business Days after the Distribution Date.

4.3 Interest on Late Payments. Payments pursuant to this Agreement that are not made by the date prescribed in this Agreement or, if no such date is prescribed, not later than five (5) Business Days after demand for payment is made (the “Due Date”) shall bear interest for the period from and including the date immediately following the Due Date through and including the date of payment at the Interest Rate. Such interest will be payable at the same time as the payment to which it relates. Interest will be calculated on the basis of a year of 365 days and the actual number of days for which due. Any payments of interest made under this Section 4.3 shall be treated as taxable or deductible, as the case may be, to the Party entitled under this Agreement to retain such payment or required under this Agreement to make such payment, in either case except as otherwise required by applicable law.

4.4 Tax Consequences of Payments. For all Tax purposes and to the extent permitted by applicable Tax Law, and pursuant to Arrowsmith v. Commissioner, 344 U.S. 6 (1952), the parties hereto shall treat any payment (except as provided in Section 4.3) made pursuant to this Agreement as a capital contribution or a distribution, as the case may be, immediately prior to the Distribution or as payments of an assumed or retained liability.

4.5 Adjustments to Payments. The amount of any payment made pursuant to this Agreement shall be adjusted as follows:

(a) If the receipt or accrual of any indemnity amounts for which any Party hereto (the “Indemnifying Party”) is required to pay another Party (the “Indemnified Party”) under this Agreement causes, directly or indirectly, an increase in the taxable income of the Indemnified Party under one or more applicable Tax Laws, such payment shall be increased so that, after the payment of any Taxes with respect to the payment, the Indemnified Party shall have realized the same net amount it would have realized had the payment not resulted in taxable income. For the avoidance of doubt, any liability for Taxes due to an increase in taxable income described in the immediately preceding sentence shall be governed by this Section 4.5(a) and not by Section 2.2.

(b) To the extent that Taxes for which the Indemnifying Party is required to pay to the Indemnified Party pursuant to this Agreement gives rise to a deduction, credit or other Tax Benefit (including as a result of any election set forth in Section 4.6) to the Indemnified Party or any of its Affiliates, the amount of any payment made to the Indemnified Party by the Indemnifying Party shall be decreased by taking into account any resulting reduction in Taxes actually realized by the Indemnified Party or any of its Affiliates resulting from such Tax Benefit (including as a result of any election set forth in Section 4.6). If such a reduction in Taxes of the Indemnified Party occurs following the payment made to the Indemnified Party with respect to the relevant indemnified Taxes, the Indemnified Party shall promptly repay the Indemnifying Party the amount of such reduction when actually realized. If the Tax Benefit arising from the

foregoing reduction of Taxes described in this Section 4.5(b) is subsequently decreased or eliminated, then the Indemnifying Party shall promptly pay the Indemnified Party the amount of the decrease in such Tax Benefit. This Section 4.5(b) shall not apply to the extent that Section 3.6(b) would also apply to cause recovery of the same amounts to the Indemnifying Party.

4.6 Section 336(e) Election.

(a) Upon request by Parent, Spinco shall join with Parent in making a protective election under section 336(e) of the Code (and any similar election under state or local law) (collectively, a “Section 336(e) Election”) with respect to the Distribution in accordance with Treasury Regulations section 1.336-2(h) and (j) (and any applicable provisions under state and local law), provided that Spinco shall indemnify Parent for any cost to the Parent Group of making such an election (but it being understood that any such cost arising from Taxes shall be limited to Excess Taxes). Parent and Spinco shall cooperate in the timely completion and/or filings of such elections and any related filings or procedures (including filing or amending any Tax Returns to implement an election that becomes effective).

(b) If the Contribution and/or the Distribution fails to qualify (in whole or in part) for the Tax-Free Status and Spinco or any member of the Spinco Group realizes an increase in Tax basis as a result of the Section 336(e) Election (the “Section 336(e) Tax Basis”), then the cash Tax savings realized by Spinco and each member of the Spinco Group as a result of the Section 336(e) Tax Basis shall be shared between Parent and Spinco in the same proportion as the Taxes giving rise to the Section 336(e) Tax Basis were borne by Parent and Spinco (after giving effect to the indemnification obligations in this Agreement).

4.7 Certain Final Determinations. If an adjustment (a “Tax Adjustment”) pursuant to a Final Determination in a Tax Contest initiated by a Tax Authority results in a Tax greater than the Tax shown on the relevant Tax Return for any Pre-Distribution Period, the Indemnified Party shall pay to the Indemnifying Party an amount equal to any Tax Benefit as and when actually realized by such Indemnified Party as a result of such Tax Adjustment. The Parties agree that if an Indemnified Party is required to make a payment to an Indemnifying Party pursuant to this Section 4.7, the Parties shall negotiate in good faith to set off the amount of such payment against any indemnity payments owed by the Indemnifying Party to the Indemnified Party, taking into account time value and similar concepts as appropriate.

SECTION 5. Cooperation and Tax Contests.

5.1 Cooperation. In addition to the obligations enumerated in Sections 3.4 and 5.4, Parent and Spinco will cooperate (and cause their respective Subsidiaries and Affiliates to cooperate) with each other and with each other’s agents, including accounting firms and legal counsel, in connection with Tax matters, including provision of relevant documents and information in their possession and making available to each other, as reasonably requested and available, personnel (including officers, directors, employees and agents of the Parties or their respective Subsidiaries or Affiliates) responsible for preparing, maintaining, and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceedings relating to Taxes.

5.2 Notices of Tax Contests. Each Company shall provide prompt notice to the other Company of any pending or threatened Tax audit, assessment or proceeding or other Tax Contest of which it becomes aware relating to (i) Taxes for which it is or may be indemnified by such other Company hereunder or (ii) Tax Items that may affect the amount or treatment of Tax Items of such other Company. Such notice shall contain factual information (to the extent known) describing any asserted Tax liability in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Tax Authority in respect of any such matters; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except, and only to the extent that, the indemnifying Company shall have been actually prejudiced as a result of such failure. Thereafter, the indemnified Company shall deliver to the indemnifying Company such additional information with respect to such Tax Contest in its possession that the indemnifying Company may reasonably request.

5.3 Control of Tax Contests.

(a) Controlling Party. Subject to the limitations set forth in Section 5.3(b), each Filer (or the appropriate member of its Group) shall, at its own cost and expense, be the Controlling Party with respect to any Tax Contest involving a Tax reported (or that, it is asserted, should have been reported) on a Tax Return for which such Company is responsible for filing (or causing to be filed) pursuant to Section 3 of this Agreement (it being understood, for the avoidance of doubt but subject to the other provisions of this Section 5.3(a), that Parent shall be the Controlling Party with respect to any Tax Contest involving Distribution Taxes), in which case any Non-Filer that could have liability under this Agreement for a Tax to which such Tax Contest relates shall be treated as the “Non-Controlling Party.” Notwithstanding the immediately preceding sentence, if a Non-Filer (x) acknowledges to the Filer in writing its full liability under this Agreement to indemnify for any Tax, and (y) provides to the Filer evidence (that is satisfactory to the Filer as determined in the Filer’s reasonable discretion) of the Non-Filer’s financial readiness and capacity to make such indemnity payment, then thereafter with respect to the Tax Contest relating solely to such Tax the Non-Filer shall be the Controlling Party (subject to Section 5.3(b)) and the Filer shall be treated as the Non-Controlling Party.

(b) Non-Controlling Party Participation Rights. With respect to a Tax Contest of any Tax Return that could result in a Tax liability that is allocated under this Agreement, (i) the Non-Controlling Party shall, at its own cost and expense, be entitled to participate in such Tax Contest and to provide comments and suggestions to the Controlling Party, such comments and suggestions not to be unreasonably rejected, (ii) the Controlling Party shall keep the Non-Controlling Party updated and informed, and shall consult with the Non-Controlling Party, (iii) the Controlling Party shall act in good faith with a view to the merits in connection with the Tax Contest, and (iv) the Controlling Party shall not settle or compromise such Tax Contest without the prior written consent of the Non-Controlling Party (which consent shall not be unreasonably withheld).

5.4 Cooperation Regarding Tax Contests. The Parties shall provide each other with all information relating to a Tax Contest which is needed by the other Party or Parties to handle,

participate in, defend, settle or contest the Tax Contest. At the request of any party, the other Parties shall take any action (e.g., executing a power of attorney) that is reasonably necessary in order for the requesting Party to exercise its rights under this Agreement in respect of a Tax Contest. Spinco shall assist Parent, and Parent shall assist Spinco, in taking any remedial actions that are necessary or desirable to minimize the effects of any adjustment made by a Tax Authority. The Indemnifying Party or Parties shall reimburse the Indemnified Party or Parties for any reasonable out-of-pocket costs and expenses incurred in complying with this Section 5.4.

SECTION 6. Tax Records.

6.1 Retention of Tax Records. Each of Parent and Spinco shall preserve, and shall cause their respective Subsidiaries to preserve, all Tax Records that are in their possession, and that could affect the liability of any member of the other Group for Taxes, for as long as the contents thereof may become material in the administration of any matter under applicable Tax Law, but in any event until the later of (x) the expiration of any applicable statute of limitations, as extended, and (y) seven years after the Distribution Date.

6.2 Access to Tax Records. Spinco shall make available, and cause its Subsidiaries to make available, to members of the Parent Group for inspection and copying the portion of any Tax Record in their possession that relates to a Pre-Distribution Period or Post-Distribution Period and which is reasonably necessary for the preparation, review, approval or filing of a Tax Return by a member of the Parent Group or any of their Affiliates or with respect to any Tax Contest with respect to such return. Parent shall make available, and cause its Subsidiaries to make available, to members of the Spinco Group for inspection and copying the portion of any Tax Record in their possession that relates to a Pre-Distribution Period and which is reasonably necessary for the preparation, review, approval or filing of a Tax Return by a member of the Spinco Group or any of their Affiliates or with respect to any Tax Contest with respect to such return.

6.3 Confidentiality. Each party hereby agrees that it will hold, and shall use its reasonable best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence all records and information prepared and shared by and among the Parties in carrying out the intent of this Agreement, except as may otherwise be necessary in connection with the filing of Tax Returns or any administrative or judicial proceedings relating to Taxes or unless disclosure is compelled by a governmental authority. Information and documents of one Party (the “Disclosing Party”) shall not be deemed to be confidential for purposes of this Section 6.3 to the extent that such information or document (i) is previously known to or in the possession of the other Party or Parties (the “Receiving Party”) and is not otherwise subject to a requirement to be kept confidential, (ii) becomes publicly available by means other than unauthorized disclosure under this Agreement by the Receiving Party or (iii) is received from a third party without, to the knowledge of the Receiving Party after reasonable diligence, a duty of confidentiality owed to the Disclosing Party.

SECTION 7. Representations and Covenants.

7.1 Covenants of Parent and Spinco.

(a) Parent hereby covenants that, to the fullest extent permissible under U.S. federal income and state Tax Laws, it will, and will cause the members of the Parent Group to, treat the applicable Transactions in accordance with the Agreed Treatment. Spinco hereby covenants that, to the fullest extent permissible under U.S. federal income and state Tax Laws, it will, and will cause each Subsidiary of Spinco to, treat the applicable Transactions in accordance with the Agreed Treatment.

(b) Parent further covenants that, as of and following the date hereof, Parent shall not and shall cause the members of the Parent Group not to take any action that (or fail to take any action the omission of which) would be inconsistent with the applicable Transactions qualifying for the Agreed Treatment or that would preclude the applicable Transactions from qualifying for the Agreed Treatment.

(c) Spinco further covenants that, as of and following the date hereof, Spinco shall not and shall cause its Subsidiaries not to take any action that (or fail to take any action the omission of which) would be inconsistent with the applicable Transactions qualifying for the Agreed Treatment or that would preclude the applicable Transactions from qualifying for the Agreed Treatment.

7.2 Covenants of Spinco.

(a) Without limiting the generality of the provisions of Section 7.1, Spinco, on behalf of itself and its Subsidiaries, agrees and covenants that Spinco and each of its Subsidiaries will not, directly or indirectly, during the Restriction Period, (i) take any action that would result in Spinco’s ceasing to be engaged in the active conduct of the Spinco Business with the result that Spinco is not engaged in the active conduct of a trade or business within the meaning of section 355(b)(2) of the Code, (ii) redeem or otherwise repurchase (directly or through an Affiliate of Spinco) any of Spinco’s outstanding stock, other than through stock purchases meeting the requirements of section 4.05(1)(b) of Revenue Procedure 96-30, 1996-1 C.B. 696 (but it being understood, for the avoidance of doubt, that no agreement or covenant under this Section 7.2(a)(ii) is being entered with respect to Compensatory Equity Net Share Settlements), (iii) amend the certificate of incorporation (or other organizational documents) of Spinco that would convert one class of Spinco’s stock into another class of its stock or affect the relative voting rights of any class of Spinco’s stock, (iv) liquidate or partially liquidate Spinco, (v) merge Spinco with any other corporation (other than in a transaction that does not affect the relative shareholding of Spinco shareholders), sell or otherwise dispose of (other than in the ordinary course of business) the assets of Spinco and its Subsidiaries, or take any other action or actions if such merger, sale, other disposition or other action or actions in the aggregate would have the effect that one or more Persons acquire (or have the right to acquire), directly or indirectly, as part of a plan or series of related transactions, assets representing one-half or more of the asset value of the Spinco Group, or (vi) take any other action or actions that in the aggregate would have the effect that one or more Persons acquire (or have the right to acquire), directly or indirectly, as part of a plan or series of related transactions, stock of Spinco (including by virtue of the Equity Award Transfer) representing a Thirty-Five-Percent Equity Interest in Spinco (as determined for purposes of section 355(e) of the Code), other than a Permitted Acquisition.

7.3 Covenants of Parent.

(a) Without limiting the generality of the provisions of Section 7.1, Parent, on behalf of itself and each member of the Parent Group, agrees and covenants that Parent and each member of the Parent Group will not, directly or indirectly, during the Restriction Period, (i) take any action that would result in Parent’s ceasing to be engaged in the active conduct of the Parent Business with the result that Parent is not engaged in the active conduct of a trade or business within the meaning of section 355(b)(2) of the Code, (ii) redeem or otherwise repurchase (directly or through an Affiliate of Parent) any of Parent’s outstanding stock, other than through stock purchases meeting the requirements of section 4.05(1)(b) of Revenue Procedure 96-30, 1996-1 C.B. 696 (but it being understood, for the avoidance of doubt, that no agreement or covenant under this Section 7.3(a)(ii) is being entered with respect to Compensatory Equity Net Share Settlements), (iii) amend the certificate of incorporation (or other organizational documents) of Parent that would convert one class of Parent’s stock into another class of its stock or affect the relative voting rights of any class of Parent’s stock, (iv) liquidate or partially liquidate Parent, (v) merge Parent with any other corporation (other than in a transaction that does not affect the relative shareholding of Parent shareholders), sell or otherwise dispose of (other than in the ordinary course of business) the assets of Parent and its Subsidiaries, or take any other action or actions if such merger, sale, other disposition or other action or actions in the aggregate would have the effect that one or more Persons acquire (or have the right to acquire), directly or indirectly, as part of a plan or series of related transactions, assets representing one-half or more of the asset value of the Parent Group, or (vi) take any other action or actions that in the aggregate would have the effect that one or more Persons acquire (or have the right to acquire), directly or indirectly, as part of a plan or series of related transactions, stock of Parent representing a Thirty-Five-Percent Equity Interest in Parent (as determined for purposes of section 355(e) of the Code).

(b) Nothing in this Section 7 shall be construed to give Spinco or any Affiliates of Spinco any right to remedies other than indemnification for any increase in the actual Tax liability (and/or decrease in Tax Benefit) of Spinco or any Affiliate of Spinco that results from Parent Group’s failure to comply with the covenants and representations in this Section 7.

7.4 Exceptions.

(a) Exceptions with Respect to Spinco.

(i) Notwithstanding Section 7.2 above, Spinco or any of its Subsidiaries may take a Spinco Restricted Action if Parent consents in writing to such Spinco Restricted Action, or if Spinco provides Parent with Satisfactory Guidance concluding that such Spinco Restricted Action will not alter the Tax-Free Status of the Distribution in respect of Parent and Parent’s shareholders.

(ii) Spinco and each of its Subsidiaries agree that Parent and each Parent Affiliate are to have no liability for any Tax resulting from any Spinco Restricted Actions permitted pursuant to this Section 7.4(a) and, subject to Section 2.2, agree to indemnify and hold harmless each Parent Indemnified Party

against any such Tax. Spinco shall bear all costs incurred by it, and all reasonable costs incurred by Parent, in connection with requesting and/or obtaining any Satisfactory Guidance.

(b) Exceptions with Respect to Parent.

(i) Notwithstanding Section 7.3 above, Parent or any of its Subsidiaries may take a Parent Restricted Action if Spinco consents in writing to such Parent Restricted Action, or if Parent provides Spinco with Satisfactory Guidance concluding that such Parent Restricted Action will not alter the Tax-Free Status of the Distribution in respect of Spinco and Spinco’s shareholders.

(ii) Parent and each of its Subsidiaries agree that Spinco and each Spinco Affiliate are to have no liability for any Tax resulting from any Parent Restricted Actions permitted pursuant to this Section 7.4(b) and, subject to Section 2.2, agree to indemnify and hold harmless each Spinco Indemnified Party against any such Tax. Parent shall bear all costs incurred by it, and all reasonable costs incurred by Spinco, in connection with requesting and/or obtaining any Satisfactory Guidance.

7.5 Injunctive Relief. For the avoidance of doubt, Parent shall have the right to seek injunctive relief to prevent Spinco or any of its Subsidiaries from taking any action that is not consistent with the covenants of Spinco or any of its Subsidiaries under Section 7.1 or 7.2.

7.6 Further Assurances. For the avoidance of doubt, (i) neither Parent nor a member of the Parent Group shall take any action on the Distribution Date that would result in an increase of the actual Tax liability (and/or decrease of any Tax Benefit) of Spinco or any of its Subsidiaries, other than in the ordinary course of business, except for actions undertaken in connection with the Distribution, which actions are described in the Tax Opinion or the Tax Opinion Representations, and (ii) neither Spinco nor any of its Subsidiaries shall take any action on the Distribution Date that would result in an increase of the actual Tax liability (and/or decrease of any Tax Benefit) of Parent or a member of the Parent Group, other than in the ordinary course of business, except for actions undertaken in connection with the Distribution, which actions are described in the Tax Opinion or the Tax Opinion Representations.

SECTION 8. General Provisions.

8.1 General Provisions. Without limiting any provision of this Agreement, the provisions of Article IX of the Distribution Agreement, except for Sections 9.12 (Payment Terms), 9.15 (Third-Party Beneficiaries), and 9.20 (Specific Performance) thereof, shall apply to this Agreement, mutatis mutandis.

8.2 Third-Party Beneficiaries. Except with respect to Parent Indemnified Parties and Spinco Indemnified Parties, and in each case, only where and as indicated herein, this Agreement is solely for the benefit of the Parties and their respective Subsidiaries and Affiliates and should not be deemed to confer upon any other Person any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement. Notwithstanding anything in this Agreement to the contrary, this Agreement is not intended to

confer upon any Spinco Indemnified Parties any rights or remedies against Spinco hereunder, and this Agreement is not intended to confer upon any Parent Indemnified Parties any rights or remedies against Parent hereunder.

[Signature page follows]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by the respective officers as of the date set forth above.


Vector Group Ltd.

By:
		Name:
		Title:

Douglas Elliman Inc.

By:
		Name:
		Title:

[Signature page to Tax Disaffiliation Agreement]

Exhibit 10.3

Form of

TRANSITIONAL TRADEMARK LICENSE AGREEMENT

This TRANSITIONAL TRADEMARK LICENSE AGREEMENT (this “Agreement”) is made and entered into as of [•]by and between New Valley LLC, a Delaware limited liability company (“Licensor”), and New Valley Ventures LLC, a Delaware limited liability company (“Licensee” and collectively with Licensor, the “Parties”).

WHEREAS, Vector Group Ltd. (“Licensor Parent”) and Douglas Elliman Inc. (“Licensee Parent”) have entered into a Distribution Agreement, dated as of the date hereof (the “Distribution Agreement”) and certain ancillary agreements, pursuant to which Licensor Parent and Licensee Parent will separate into independent, publicly traded companies;

WHEREAS, pursuant to the Distribution Agreement, Licensor Parent intends to distribute and certain ancillary agreements, pursuant to which Licensor Parent and Licensee Parent will separate into independent, publicly traded companies;

WHEREAS, Licensor Parent will, pursuant to the Distribution Agreement, transfer certain assets to Licensee Parent and Licensor Parent will distribute the common stock of Licensee Parent to the holders of Licensor Parent common stock on a pro rata basis (including Licensor Parent common stock underlying outstanding stock option awards and restricted stock awards) (the “Distribution” and, the date of the Distribution, the “Effective Date”);

WHEREAS, in connection with the transactions contemplated under the Distribution Agreement, Licensor Parent and Licensor will transfer to Licensee and Licensee Parent certain assets relating to, and Licensee will operate, the real estate brokerage and services business previously indirectly owned by Licensor Parent and the PropTech Business (as defined below); and

WHEREAS, the PropTech Business is operated under certain Licensed Marks (as defined below) that are also used in certain separate retained businesses of Licensor Parent and its subsidiaries (including Licensor and its subsidiaries), and, in connection with the Distribution Agreement and the transactions contemplated thereunder, Licensee wishes to receive, and Licensor wishes to grant, for a limited term during which Licensee intends to rebrand PropTech Business to other marks, the exclusive right to use the Licensed Marks solely for the purpose of operating the PropTech Business, subject to and in accordance with the terms and conditions set forth under this Agreement.

NOW, THEREFORE, in consideration of the premises and mutual promises contained herein and under the Distribution Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

1. Definitions. When used in this Agreement, the following terms have the meaning set forth below. Capitalized terms used herein that are not defined below are defined in the Distribution Agreement.

(a) “Licensed Marks” means the trademarks, logos, service marks and trade names set forth on Schedule A hereto, all rights thereto throughout arising anywhere in the world, and all goodwill symbolized by any of the foregoing.

(b) “Licensor Retained Business” means the Vector Retained Business, including, for the avoidance of doubt, any ongoing or future assessment, development or management of, or investment in, real estate properties and projects, including fundraising, sales and similar ancillary activities in connection therewith.

(c) “PropTech Business” means the business of investing in real estate service technology companies, including fundraising for, sourcing, monitoring and management of such investments; provided that for the avoidance of doubt, the “PropTech Business” shall exclude the Licensor Retained Business.

2. License Grant.

(a) License. Subject to the terms and conditions set forth herein, Licensor hereby grants to Licensee, solely during the Term (as set forth in Section 6), a royalty-free, fully paid-up, worldwide, non-sublicensable (except as expressly set forth in Section 2(b)), exclusive (even with respect to Licensor) license to use, reproduce and display the Licensed Marks in its PropTech Business, including the right to incorporate the Licensed Marks in Licensee’s corporate name and to use, reproduce and display its corporate name solely in connection with the PropTech Business; provided that the license and rights granted under this Agreement shall not include the right to use, reproduce or display any of the Licensed Marks, including as incorporated into Licensee’s corporate name, within the scope of the Licensor Retained Business. For the avoidance of doubt, the license granted under this Agreement is exclusive only within the scope of the PropTech Business and only during the Term, and nothing in this Agreement shall restrict Licensor’s rights, including the right to use, reproduce or display the Licensed Marks for any purpose, either outside of the PropTech Business or following the Term, including with respect to the Licensor Retained Business.

(b) Sublicensing. Subject to the terms and conditions set forth in this Agreement, Licensee may sublicense the rights granted to it under Section 2(a), solely within the scope of the license granted thereunder, to (i) any of its affiliates, provided that any sublicense granted to such an affiliate shall automatically and immediately terminate once such Person ceases to be an affiliate of Licensee, and (ii) third parties solely in connection with providing products or services to or on behalf of Licensee or its applicable affiliates in connection with the PropTech Business (each such affiliate or third party, a “Sublicensee”).

(c) Retention of Rights. As between the Parties, all right, title and interest in and to the Licensed Marks, other than the rights expressly granted to Licensee by this Agreement, are hereby reserved to Licensor. Any and all goodwill associated with Licensee’s or its Sublicensees’ use, reproduction or display of the Licensed Marks shall inure to the exclusive benefit of Licensor. Except as expressly set forth in this Agreement, Licensee shall not use, reproduce or display any of the Licensed Marks.

-2-

3. Quality Control; Obligations.

(a) Quality Standards; Restrictions. Licensee shall, and shall cause its Sublicensees to: (i) use, reproduce and display the Licensed Marks at all times in a manner that is consistent with the standards that Licensor maintains as of the date of this Agreement in connection with the Licensed Marks, and in compliance with reasonable quality standards and trademark use guidelines established by Licensor and provided to Licensee in writing from time to time; and (ii) not commit any act or omission in connection with the Licensed Marks, or the products, services and activities sold, provided or conducted, as applicable, in connection therewith, that Licensee knows, or reasonably should know, conflicts with any applicable laws or is likely to materially impair the value of any of any of the Licensed Marks.

(b) Audit Right and Obligation to Cure. Upon the reasonable request of Licensor, Licensee shall provide to Licensor, at Licensee’s expense, for quality audit purposes, representative samples of marketing materials used by or on behalf of Licensee or its Sublicensees and which use or display the Licensed Marks. Licensor agrees that it shall limit such requests for samples from Licensee to once per fiscal quarter, unless Licensor reasonably believes that Licensee is not complying with the terms of this Agreement or Licensor has identified a material breach of this Agreement during its immediately prior inspection of Licensee’s uses of the Licensed Marks. If Licensor reasonably determines that any such samples or other materials used or displayed by or on behalf of Licensee or any of its Sublicensees do not comply with the quality standards described in this Section 3, Licensee shall use its commercially reasonable efforts to promptly implement corrective measures to cure such non-compliance and provide Licensor with detailed information concerning its corrective measures, including any samples reasonably requested by Licensor in connection therewith.

(c) Corporate Name. If and to the extent Licensee continues to incorporate any of the Licensed Marks in any of its corporate names or trade names at the applicable time, Licensee shall use its commercially reasonable efforts to, at least six months prior to the expiration of the Term, or, as applicable, within 15 days following any earlier termination of this Agreement, Licensee shall make any and all filings necessary with any office, agency or other authority of any applicable jurisdiction as is necessary to remove such Licensed Marks therefrom.

4. Ownership, Maintenance and Enforcement of the Licensed Marks.

(a) Ownership. Licensee agrees that, as between Licensor and Licensee and each of their respective affiliates, Licensor is and will remain the sole and exclusive owner of all right, title and interest in and to the Licensed Marks (including any and all goodwill symbolized thereby). If any rights in the Licensed Marks are deemed to accrue to Licensee for any reason other than by express written agreement between the Parties, Licensee hereby assigns, and agrees to assign, such rights to Licensor.

-3-

(b) Prosecution and Maintenance.

(i) Licensor has and shall retain the sole right, but not the obligation, to apply for, maintain and prosecute the Licensed Marks in the United States Patent and Trademark Office, or any other federal, state or local agency or foreign equivalent, and to prosecute any such application and to maintain and renew any registration that issues from any such application. At Licensor’s request, and at Licensor’s sole cost and expense, Licensee shall execute any documents that Licensor reasonably requests to confirm Licensor’s ownership of its rights in and to the Licensed Marks. Licensee shall reasonably cooperate with Licensor’s reasonable requests in connection with the filing, maintenance, renewal and protection of all applications and registrations for the Licensed Marks, at Licensor’s sole cost and expense.

(ii) Except as expressly set forth in this Agreement, Licensee shall not, and shall cause its Sublicensees not to apply for, register, or seek to enforce any trademark or service mark that incorporates or is confusingly similar to any of the Licensed Marks.

(c) Infringement and Enforcement. Licensee agrees to notify Licensor in writing promptly after it becomes aware of any actual or threatened unauthorized use, reproduction or display of the Licensed Marks. Licensor shall have the sole right, but not the obligation, to assert or file any Action in a connection with such use (an “Infringement Action”). Upon Licensor’s request, Licensee shall reasonably cooperate with Licensor, at Licensor’s cost, in any such Infringement Action. Licensor shall be entitled to any and all proceeds and damages arising from any such Infringement Action.

5. Limitation of Liability.

THE PARTIES EXPRESSLY WAIVE AND FOREGO ANY RIGHT TO RECOVER PUNITIVE, EXEMPLARY, INDIRECT, CONSEQUENTIAL OR SIMILAR DAMAGES OR LOST PROFITS IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, EVEN IF AN AUTHORIZED REPRESENTATIVE OF SUCH PARTY IS ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF THE SAME.

6. Term and Termination.

(a) Term. Except as otherwise agreed between the Parties, the term of this Agreement (the “Term”) shall begin on the Effective Date and expire on the earlier of (i) the date that is three years after the Effective Date, and (ii) the date of termination described in Section 6(b).

(b) Termination. Licensor may terminate this Agreement if Licensee commits a material breach of this Agreement that remains uncured for a period of 90 days following Licensee’s receipt of written notice from Licensor of such material breach; provided that, without limiting any other remedy available under this Agreement (including as set forth in Section 7(o)), if Licensee reasonably disputes whether such breach has occurred or remains uncured, this Agreement shall continue in effect until a court of competent jurisdiction (selected in accordance with Section 7(n)) determines that such material breach has occurred and remained uncured for a continuous period of 90 days or more, after which the license granted under Section 2 shall terminate 30 days following receipt of such determination.

-4-

(c) Effect of Termination; Survival. Sections 2(c), 3(c), 5, 6 and 7 of this Agreement shall survive expiration or termination of this Agreement. All other terms of this Agreement, including the license granted under Section 2(a), shall terminate upon expiration of the Term or earlier termination of this Agreement in accordance with Section 6(b). For the avoidance of doubt, nothing in this Agreement, including the expiration or termination hereof, shall prohibit Licensee’s continued use of Licensed Marks for its internal, archival purposes, or for any other use that would not, in the absence of a license, constitute trademark infringement.

7. Miscellaneous.

(a) Notices. All notices and other communications hereunder shall be in writing, shall reference this Agreement and shall be emailed, hand delivered or mailed by registered or certified mail (return receipt requested) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice) and will be deemed given on the date on which such notice is received:

To Licensor:

New Valley LLC

c/o Vector Group Ltd.

4400 Biscayne Boulevard

Miami, Florida 33137

Attention: Marc N. Bell

Senior Vice President, Secretary and General Counsel

To Licensee:

New Valley Ventures LLC

c/o Douglas Elliman Inc.,

4400 Biscayne Boulevard

Miami, Florida 33137

Attention: James B. Kirkland

Senior Vice President, Treasurer and Chief Financial Officer

(b) Complete Agreement; Construction. This Agreement, including the Schedule hereto, together with the Distribution Agreement and Ancillary Agreements shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. In the event of any inconsistency regarding any Licensed Marks between this Agreement, the Distribution Agreement, any Ancillary Agreement, or any other agreement in existence as of the Effective Date, the terms of this Agreement shall prevail. The rights and remedies of the Parties herein provided shall be cumulative and in addition to any other or further remedies provided by law or equity.

(c) Other Agreements. This Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the Distribution Agreement or the other Ancillary Agreements.

-5-

(d) Counterparts. This Agreement may be executed in more than one counterpart, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Party. This Agreement may be executed and delivered by electronic means, including “.pdf” or “.tiff” files, and any electronic signature shall constitute an original for all purposes.

(e) Waivers and Consents. The failure of any Party to require strict performance by the other Party of any provision in this Agreement will not waive or diminish that Party’s right to demand strict performance thereafter of that or any other provision hereof. Any consent required or permitted to be given by any Party to the other Party under this Agreement shall be in writing and signed by the Party giving such consent.

(f) Amendments. This Agreement may not be modified or amended except by an agreement in writing signed by a duly authorized representative of each of the Parties.

(g) Assignment. This Agreement shall not be assignable, in whole or in part, directly or indirectly, by any Party without the prior written consent of the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void; provided, however, that a Party may assign this Agreement in connection with a merger transaction in which such Party is not the surviving entity or the sale by such Party of all or substantially all of its Assets; provided, however, that the surviving entity of such merger or the transferee of such Assets shall agree in writing, reasonably satisfactory to the other Party, to be bound by the terms of this Agreement as if named as a “Party” hereto.

(h) Successors and Assigns. The provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective successors and permitted transferees and assigns.

(i) No Circumvention. The Parties agree not to directly or indirectly take any actions, act in concert with any Person who takes an action (including the failure to take a reasonable action) such that the resulting effect is to materially undermine the effectiveness of any of the provisions of this Agreement or any Ancillary Agreement.

(j) Third Party Beneficiaries. This Agreement is solely for the benefit of the Parties and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

(k) References; Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. Unless the context otherwise requires, the words “include”, “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation”. Unless the context otherwise requires, references in this Agreement to Sections and Schedules shall be deemed references to Sections of, and Schedules to, this Agreement. Unless the context otherwise requires, the words “hereof”, “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement.

-6-

(l) Titles and Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

(m) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any conflict-of-laws or other rule that would result in the application of the laws of a different jurisdiction.

(n) Consent to Jurisdiction. Each Party irrevocably submits to the jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan (and if the courts of the State of New York shall be unavailable, any New York State court or federal court sitting in the City and County of New York, Borough of Manhattan) (the “New York Courts”), for the purposes of any suit, Action or other proceeding to compel arbitration or for provisional relief in aid of arbitration or to prevent irreparable harm, and to the non-exclusive jurisdiction of the New York Courts for the enforcement of any award issued thereunder. Each Party further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth above shall be effective service of process for any Action, suit or proceeding in the New York Courts with respect to any matters to which it has submitted to jurisdiction in this Section. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any Action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the New York Courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

(o) Specific Performance. The Parties agree that the Licensed Marks are valuable to Licensor, and irreparable damage would occur in the event that the provisions of this Agreement were not performed in accordance with their specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled to an injunction or injunctions to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.

(p) Waiver of Jury Trial. EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HEREBY (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (ii) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

-7-

(q) Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

(r) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.

(s) No Duplication; No Double Recovery. Nothing in this Agreement is intended to confer to or impose upon any Party a duplicative right, entitlement, obligation or recovery with respect to any matter arising out of the same facts and circumstances.

[Signature Page Follows]

-8-

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date and year first written above.


NEW VALLEY LLC

By:


Name:
Title:


NEW VALLEY VENTURES LLC

By:


Name:
Title:

[Signature Page to Trademark License Agreement]

Schedule A

All of Licensor’s rights under the “New Valley” or “NewValley” marks arising anywhere in the world, whether under federal, state, common law or otherwise, including the following registered trademarks:


Trademark	Jurisdiction	Registration Number	Registration Date
NEW VALLEY	U.S.	4979694	6/14/2016
	U.S.	4979695	6/14/2016

A-1

Exhibit 10.4

DOUGLAS ELLIMAN INC.

2021 MANAGEMENT INCENTIVE PLAN

1. Establishment, Purpose and Duration. Douglas Elliman Inc. (referred to below as the “Company”) hereby establishes an incentive compensation plan to be known as the 2021 Management Incentive Plan (the “Plan”), effective as of the Distribution date (the “Effective Date”). The Plan was adopted by the Company’s Board on [•], 2021 and approved by the Company’s stockholders on [•], 2021. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Shares, Restricted Stock Units, Performance Share Awards, Other Stock-Based Awards and Cash-Based Awards. The purpose of the Plan is to attract and retain Employees, Non-Employee Directors, Consultants and Independent Contractors and to provide additional incentives for these persons consistent with the long-term success of the Company’s business. Unless sooner terminated as provided herein, the Plan shall terminate ten (10) years from the Effective Date. After the Plan is terminated, no further Awards may be granted but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan’s terms and conditions.

2. Definitions. As used in the Plan, the following terms shall be defined as set forth below:

2.1 “Act” means the Securities Exchange Act of the 1934, as amended.

2.2 “Affiliate” means any corporation or any other entity (including, but not limited to, a partnership) that is affiliated with the Company through stock ownership or otherwise. For avoidance of doubt, an Affiliate shall include a Subsidiary.

2.3 “Award” or “Awards” means, individually or collectively, except where referring to a particular category of grant under the Plan, a grant under the Plan of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Shares, Restricted Stock Units, Performance Share Awards, Cash-Based Awards, or Other Stock-Based Awards, in each case subject to the terms of the Plan.

2.4 “Award Agreement” means an agreement, certificate, resolution or other form of writing or other evidence approved by the Committee which sets forth the terms and conditions of an Award. An Award Agreement may be in an electronic medium, may be limited to a notation on the Company’s books and records and, if approved by the Committee, need not be signed by a representative of the Company or a Participant.

2.5 “Base Price” means the price to be used as the basis for determining the Spread upon the exercise of a Stock Appreciation Right.

2.6 “Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Act.

2.7 “Board” means the Board of Directors of the Company.

2.8 “Cash-Based Award” means an Award granted to a Participant as described in Section 11.

2.10 “Change in Control” shall have the meaning given to it in Section 13.5.

2.11 “Code” means the Internal Revenue Code of 1986, as amended from time to time.

2.12 “Committee” means the committee of the Board described in Section 4.

2.13 “Consultant” means any natural person, including an advisor, engaged by the Company or any Subsidiary to render bona fide services to such entity (other than in connection with the offer or sale of securities in a capital-raising transaction or to promote or maintain a market for the Company’s securities).

2.14 “Company” means Douglas Elliman Inc. or its successor.

2.15 “Deferred Stock Unit” means an Award that is vested on the Grant Date and entitles the recipient to receive Shares after a designated period of time. Deferred Stock Units shall be subject to such restrictions and conditions as set forth in the Award Agreement, which shall be consistent with the provisions for Restricted Stock Units set forth in Section 8 below except for the requirement to have a Restricted Period or Performance Goals.

2.16 “Effective Date” shall have the meaning set forth in Section 1 above.

2.17 “Employee” means any person designated as an employee of the Company, any of its Affiliates, and/or any of its or their Subsidiaries on the payroll records thereof.

2.18 “Executive Officer” means an “executive officer” of the Company as defined by Rule 3b-7 under the Act. To the extent that the Board takes action to designate the persons who are the “executive officers” of the Company, the persons so designated (and no others) shall be deemed to be the “executive officers” of the Company for all purposes of the Plan.

2.19 “Family Member” means a Participant’s spouse, parents, children and grandchildren.

2.20 “Fair Market Value” means a price that is based on the opening, closing, actual, high, low, or average selling prices of a Share reported on the New York Stock Exchange or other established stock exchange (or exchanges) on the applicable date, the preceding trading day, the next succeeding trading day, an average of trading days or on any other basis consistent with the requirements of the stock rights exemption under Section 409A of the Code using actual transactions involving Shares, as determined by the Committee in its discretion. In the event Shares are not publicly traded at the time a determination of their value is required to be made hereunder, the determination of their Fair Market Value shall be made by the Committee in such manner as it deems appropriate. Such definition(s) of Fair Market Value shall be specified in each Award Agreement and may differ depending on whether Fair Market Value is in reference to the grant, exercise, vesting, settlement, or payout of an Award; provided, however, that upon a broker-assisted exercise of an Option, the Fair Market Value shall be the price at which the Shares are sold by the broker.

2.22 “Grant Date” means the date specified by the Committee on which a grant of an Award shall become effective, which shall not be earlier than the date on which the Committee takes action with respect thereto.

2.23 “Independent Contractor” means any natural person who provides services to the Company or any Subsidiary pursuant to a written agreement as a non-Employee, including, without limitation, real-estate agents.

2.24 “Incentive Stock Option” means any Option that is intended to qualify as an “incentive stock option” under Section 422 of the Code or any successor provision.

2.25 “Non-Employee Director” means a member of the Board who is not an Employee.

2.26 “Nonqualified Stock Option” means an Option that is not intended to qualify as an Incentive Stock Option.

2.27 “Option” means any option to purchase Shares granted under Section 5.

2.28 “Option Price” means the purchase price payable upon the exercise of an Option.

2.29 “Other Stock-Based Awards” means an equity-based or equity-related Award not otherwise described by the terms of this Plan granted under Section 10.

2.30 “Participant” means an Employee, Non-Employee Director, Consultant or Independent Contractor who is selected by the Committee to receive benefits under the Plan, provided that only Employees shall be eligible to receive grants of Incentive Stock Options.

2.31 “Performance Cycle” means one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Criteria will be measured for the purpose of determining a grantee’s right to and the payment of a Restricted Share Award, Restricted Stock Unit, Performance Share Award or Cash-Based Award. A Performance Cycle shall not be less than 12 months.

2.32 “Performance Criteria” means the criteria that the Committee selects for purposes of establishing the Performance Goal or Performance Goals for a Participant with respect to the Performance Cycle for a Performance Share Award. The Performance Criteria may be described in terms of Company-wide objectives or objectives that are related to the performance of the individual Participant or an organizational level specified by the Committee, including, but not limited to, a Subsidiary or unit, division, group of the Company or a Subsidiary. Performance Criteria may be measured on an absolute or relative basis, including but not limited to performance as measured against a group of peer companies or by a financial market index. The Performance Criteria that will be used to establish such Performance Goal(s) may be, but is not required to be, based on any one of, or combination of, the following financial and non-financial metrics with respect to the entire Company or a business unit, as determined by the Committee: net sales or revenue, unit sales, return measures (including, but not limited to, return on invested capital, assets, net assets, capital, equity and sales), gross or net profit margin, operating expense ratios, operating expense targets, productivity ratios, operating income or earnings, gross or operating margins, adjusted earnings before or after taxes, interest, depreciation and/or amortization, net earnings or net income (before or after taxes), earning per share, cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment, funds from operations or similar measures, capital expenditures, share price (including, but not limited to, growth measures and total stockholder return), appreciation in the fair market value or book value of the Shares, cash dividends declared per Share, stockholder returns, dividends and other distributions, economic value added (net operating profit after tax minus the sum of capital multiplied by the cost of the capital), debt to equity ratio, debt levels, budget achievement, expense reduction or cost savings, operating margins, quantitative measures of customer satisfaction, quantitative measures of employee satisfaction/engagement, environmental, social and/or governance-related metrics, market share and/or new or expanded market penetration, acquisitions, strategic transactions or business expansion, product line diversification, employee retention/attrition, productivity improvements and inventory control/efficiency.

2.33 “Performance Goals” means, with respect to a Restricted Share Award, a Restricted Stock Unit Award, a Performance Share Award or a Cash-Based Award, the specific goal or goals established in writing by the Committee for the Performance Cycle applicable to such Award, which may be based upon one or more Performance Criteria.

2.34 “Performance Share Award” means an Award denominated in either Shares or share units granted pursuant to Section 9.

2.35 “Plan” shall have the meaning set forth in Section 1 above.

2.36 “Restricted Period” means a period of time established under Section 8 with respect to Restricted Stock Units.

2.37 “Restricted Shares” means Shares granted under Section 7 subject to a substantial risk of forfeiture.

2.38 “Restricted Stock Units” means an Award pursuant to Section 8 of the right to receive Shares at the end of a specified period.

2.39 “Share Authorization” means the maximum number of Shares available for grant under the Plan, as described in Section 3.

2.40 “Shares” means the common stock of the Company.

2.41 “Spread” means, in the case of a Stock Appreciation Right, the amount by which the Fair Market Value on the date when any such right is exercised exceeds the Base Price specified in such right.

2.42 “Stock Appreciation Right” means a right granted under Section 6.

2.43 “Subcommittee” means a subcommittee of the Board which shall be composed of at least two directors who are “outside directors” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended.

2.44 “Subsidiary” means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary interest of more than fifty percent (50%) by reason of stock ownership or otherwise.

2.45 “Substitute Award” means any Award granted or issued to a Participant in assumption or substitution of either outstanding awards or the right or obligation to make future awards by an entity acquired by the Company or a Subsidiary or with which the Company or a Subsidiary combines.

2.46 “Unrestricted Shares” means a grant of Shares free of any Restricted Period, Performance Goals or any substantial risk of forfeiture. Unrestricted Shares may be granted in respect of past services or other valid consideration, or in lieu of cash compensation due to an Employee.

3. Award Limits Under the Plan.

3.1 Number of Shares Reserved for Awards.

(a) Subject to adjustments as provided in Section 12, the Share Authorization shall be 10,000,000 Shares, plus an annual increase on the first day of each year beginning in 2023 and ending in 2031, equal to the lesser of (A) four percent (4%) of the Shares outstanding on the last day of the immediately preceding fiscal year and (B) such smaller number of Shares as determined by the Board or the Committee.

(b) The aggregate value of all compensation granted or paid, as applicable, to a Non-Employee Director with respect to any calendar year, including Awards granted and cash fees paid by the Company to such Non-Employee Director, will not exceed $500,000, calculating the value of any equity awards based on the grant date fair value of such equity awards for financial reporting purposes.

3.2 Share Usage.

(a) Any Shares related to Awards that terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, are settled in cash in lieu of Shares, or are exchanged with the Committee’s permission, prior to the issuance of Shares, for Awards not involving Shares, shall be available again for grant under the Plan. In addition, Restricted Shares that are forfeited shall again be available for grant under the Plan.

(b) The full number of Nonqualified Stock Options, Incentive Stock Options and Stock Appreciation Rights granted that are to be settled by the issuance of Shares shall be counted against the number of Shares available for award under the Plan, regardless of the number of Shares actually issued upon settlement of any such Award.

(c) Any Shares withheld to satisfy tax withholding obligations on an Award issued under the Plan, Shares tendered to pay the exercise price of an Award under the Plan, and Shares repurchased on the open market with the proceeds of an Option exercise will not be eligible to be again available for grant under the Plan.

(d) Substitute Awards shall not be counted against the Shares available for granting Awards under the Plan.

4. Plan Administration.

4.1 Board Committee Administration. The Plan shall be administered by the Compensation Committee (the “Committee”) appointed by the Board from among its members, provided that the full Board may at any time act as the Committee. In the case of Awards intended to qualify for the exemption from Section 16(b) of the Exchange Act that is available under Rule 16b-3 of the Exchange Act, references in this Plan to the Committee shall mean the Subcommittee, unless the functions of the Subcommittee have been assumed by the Committee. The interpretation and construction by the Committee of any provision of the Plan or of any Award Agreement and any determination by the Committee pursuant to any provision of the Plan or any such agreement, notification or document shall be final and conclusive. No member of the Committee or the Subcommittee shall be liable to any person for any such action taken or determination made in good faith.

4.2 Terms and Conditions of Awards. The Committee shall have final discretion, responsibility, and authority to:

(a) grant Awards;

(b) determine the Participants to whom and the times at which Awards shall be granted;

(c) determine the type and number of Awards to be granted, the number of Shares to which an Award may relate, and the applicable terms, conditions, and restrictions, including the length of time for which any restriction shall remain in effect;

(d) establish and administer Performance Goals and Performance Cycles relating to any Award;

(e) determine the rights of Participants with respect to an Award upon termination of employment or service as a director;

(f) determine whether, to what extent, and under what circumstances an Award may be settled, cancelled, forfeited, exchanged, or surrendered;

(g) accelerate the vesting of an Award;

(h) interpret the terms and provisions of Award Agreements;

(i) provide for forfeiture of outstanding Awards and recapture of realized gains and other realized value in such events as determined by the Committee; and

(j) make all other determinations deemed necessary or advisable for the administration of the Plan.

The Committee may solicit recommendations from the Company’s Chief Executive Officer with respect to the grant of Awards under the Plan. The Committee (or, as permitted under Section 4.3, the Company’s Chief Executive Officer) shall determine the terms and conditions of each Award at the time of grant. No Participant or any other person shall have any claim to be granted an Award under the Plan at any time, and the Company is not obligated to extend uniform treatment to Participants under the Plan. The terms and conditions of Awards need not be the same with respect to each Participant.

4.3 Committee Delegation. The Committee may delegate to the Company’s Chief Executive Officer the authority to grant Awards to Participants who are not Non-Employee Directors or Executive Officers and to interpret and administer Awards for such Non-Employee Directors and Executive Officers. Any such delegation shall be subject to the limitations of Section 157(c) of the Delaware General Corporate Law. The Committee may also delegate the authority to grant Awards to any subcommittee(s) consisting of members of the Board.

4.4 Awards to Non-Employee Directors. Notwithstanding any other provision of the Plan to the contrary, all Awards to Non-Employee Directors must be authorized by the Board.

4.5 Employee’s Service as Non-Employee Director, Consultant or Independent Contractor. An Employee who receives an Award, terminates employment, and immediately thereafter begins performing service as a Non-Employee Director, Consultant or Independent Contractor shall have such service treated as service as an Employee for purposes of the Award. The previous sentence shall not apply when (a) the Award is an Incentive Stock Option or (b) prohibited by law.

5. Options. The Committee may authorize grants to Participants of Options to purchase Shares upon such terms and conditions as the Committee may determine in accordance with the following provisions:

5.1 Number of Shares. Each grant shall specify the number of Shares to which it pertains. Subject to adjustments as provided in this Section 12, the maximum number of shares that may be issued pursuant to the exercise of an Incentive Stock Option is 10,000,000 Shares.

5.2 Option Price. Each grant shall specify an Option Price per Share, which shall be equal to or greater than the Fair Market Value per Share on the Grant Date, except in the case of Substitute Awards as provided in Section 12. In the event of Awards that are contingent on stockholder approval of the Plan, the Committee shall provide for adjustment to the Option Price or Base Price to ensure that that price is not lower than the closing selling price of a Share reported on the New York Stock Exchange on the date of stockholder approval of the Plan.

5.3 Consideration. Each grant shall specify the form of consideration to be paid in satisfaction of the Option Price and the manner of payment of such consideration, which may include in the Committee’s sole discretion: (a) cash in the form of currency or check or other cash equivalent acceptable to the Company, (b) non-forfeitable, unrestricted Shares owned by the Participant which have a value at the time of exercise that is equal to the Option Price, (c) a reduction in Shares issuable upon exercise which have a value at the time of exercise that is equal to the Option Price (a “net exercise”), (d) to the extent permitted by applicable law, the proceeds of sale from a broker-assisted cashless exercise, (e) any other legal consideration that the Committee may deem appropriate on such basis as the Committee may determine in accordance with the Plan or (f) any combination of the foregoing. For the avoidance of doubt, Participants who receive Options to purchase Shares shall have no legal right to own or receive Shares withheld from delivery upon exercise pursuant to Section 5.3(c), and otherwise shall have no rights in respect of such Shares whether as a stockholder or otherwise.

5.4 Vesting. Any grant may specify (a) a waiting period or periods before Options shall become exercisable and (b) permissible dates or periods on or during which Options shall be exercisable, and any grant may provide for the earlier exercise of such rights in the event of a termination of employment. Vesting may be further conditioned upon the attainment of Performance Goals established by the Committee.

5.5 Dividend Equivalents and Other Ownership Rights. During the period prior to exercise of an Option, the Participant shall not have any right to transfer any rights under the subject Award and shall not have any rights of ownership in the Shares underlying the Option, including the right to vote such Shares, but the Committee may on or after the Grant Date authorize the payment of dividend equivalents on such Shares in cash or securities (including securities of another issuer) on a current, deferred or contingent basis with respect to any or all dividends or other distributions paid by the Company. Unless otherwise provided by the Committee, any dividend equivalents paid or adjustments made with respect to dividends paid in Shares shall be subject to the same restrictions as the underlying Award.

5.6 Provisions Governing ISOs. Options granted under the Plan may be Incentive Stock Options, Nonqualified Stock Options or a combination of the foregoing, provided that only Nonqualified Stock Options may be granted to Non-Employee Directors. Each grant shall specify whether (or the extent to which) the Option is an Incentive Stock Option or a Nonqualified Stock Option. Notwithstanding any such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by an Participant during any calendar year (under all plans of the Company) exceeds $100,000, such Options shall be treated as Nonqualified Stock Options. Options failing to qualify as Incentive Stock Options for any reason will be treated as Nonqualified Stock Options, rather than being forfeited.

5.7 Exercise Period.

(a) Subject to Section 17.9, no Option granted under the Plan may be exercised more than ten years from the Grant Date.

(b) If the Fair Market Value exceeds the Option Price on the last day that an Option may be exercised under an Award Agreement, the affected Participant shall be deemed to have exercised the vested portion of such Option in a net exercise under Section 5.3(c) above without the requirement of any further action.

5.8 Award Agreement. Each grant shall be evidenced by an Award Agreement containing such terms and provisions as the Committee may determine consistent with the Plan.

6. Stock Appreciation Rights. The Committee may authorize grants to Participants of Stock Appreciation Rights. A Stock Appreciation Right is the right of the Participant to receive from the Company an amount, which shall be determined by the Committee and shall be expressed as a percentage (not exceeding 100 percent) of the Spread at the time of the exercise of such right. Any grant of Stock Appreciation Rights under the Plan shall be upon such terms and conditions as the Committee may determine in accordance with the following provisions:

6.1 Payment in Cash or Shares. Any grant may specify that the amount payable upon the exercise of a Stock Appreciation Right will be paid by the Company in cash, Shares or any combination thereof or may grant to the Participant or reserve to the Committee the right to elect among those alternatives.

6.2 Vesting. Any grant may specify (a) a waiting period or periods before Stock Appreciation Rights shall become exercisable and (b) permissible dates or periods on or during which Stock Appreciation Rights shall be exercisable, and any grant may provide for the earlier exercise of such rights in the event of a termination of employment. Vesting may be further conditioned upon the attainment of Performance Goals established by the Committee.

6.3 Exercise Period. Subject to Section 17.9, no Stock Appreciation Right granted under the Plan may be exercised more than ten years from the Grant Date. If a Spread exists on the last day that a Stock Appreciation Right may be exercised under an Award Agreement, the affected Participant shall be deemed to have exercised the vested portion of such Stock Appreciation Right without the requirement of any further action.

6.4 Award Agreement. Each grant shall be evidenced by an Award Agreement containing such terms and provisions as the Committee may determine consistent with the Plan.

7. Restricted Shares. The Committee may authorize grants to Participants of Restricted Shares upon such terms and conditions as the Committee may determine in accordance with the following provisions:

7.1 Transfer of Shares. Each grant shall constitute an immediate transfer of the ownership of Shares to the Participant in consideration of the performance of services, subject to the substantial risk of forfeiture and restrictions on transfer hereinafter referred to.

7.2 Consideration. To the extent permitted by Delaware law, each grant may be made without additional consideration from the Participant or in consideration of a payment by the Participant that is less than the Fair Market Value on the Grant Date.

7.3 Substantial Risk of Forfeiture. Each grant shall provide that the Restricted Shares covered thereby shall be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Code for a period to be determined by the Committee on the Grant Date, and any grant or sale may provide for the earlier termination of such risk of forfeiture in the event of a termination of employment.

7.4 Dividend, Voting and Other Ownership Rights. During the period for which a substantial risk of forfeiture is to continue, the Participant shall not have any right to transfer any rights under the subject Award but the Participant shall have voting and other ownership rights (except for any rights to a liquidating distribution). The Committee may on or after the Grant Date authorize the payment of dividend equivalents on such Restricted Shares in cash or securities (including securities of another issuer) on a current, deferred or contingent basis with respect to any or all dividends or other distributions paid by the Company. Unless otherwise provided by the Committee, any dividend equivalents paid or adjustments made respect to dividends or other distributions paid in Shares shall be subject to the same restrictions as the underlying Award.

7.5 Performance-Based Restricted Shares. Any grant or the vesting thereof may be further conditioned upon the attainment of Performance Goals established by the Committee in accordance with the applicable provisions of Section 9 regarding Performance Share Awards.

7.6 Award Agreement; Certificates. Each grant shall be evidenced by an Award Agreement containing such terms and provisions as the Committee may determine consistent with the Plan. Unless otherwise directed by the Committee, all certificates representing Restricted Shares, together with a stock power that shall be endorsed in blank by the Participant with respect to such Shares, shall be held in custody by the Company until all restrictions thereon lapse.

8. Restricted Stock Units. The Committee may authorize grants of Restricted Stock Units to Participants upon such terms and conditions as the Committee may determine in accordance with the following provisions:

8.1 Restricted Period. Each grant shall provide that the Restricted Stock Units covered thereby shall be subject to a Restricted Period, which shall be fixed by the Committee on the Grant Date, and any grant or sale may provide for the earlier termination of such period in the event of a termination of employment.

8.2 Dividend Equivalents and Other Ownership Rights. During the Restricted Period, the Participant shall not have any right to transfer any rights under the subject Award and shall not have any rights of ownership in the Shares underlying the Restricted Stock Units, including the right to vote such Shares, but the Committee may on or after the Grant Date authorize the payment of dividend equivalents on such shares in cash or securities (including securities of another issuer) on a current, deferred or contingent basis with respect to any or all dividends or other distributions paid by the Company. Unless otherwise provided by the Committee, any dividend equivalents paid or adjustments made with respect to dividends paid in Shares shall be subject to the same restrictions as the underlying Award.

8.3 Performance-Based Restricted Share Units. Any grant or the vesting thereof may be further conditioned upon the attainment of Performance Goals established by the Committee in accordance with the applicable provisions of Section 9 regarding Performance Share Awards.

8.4 Award Agreement. Each grant shall be evidenced by an Award Agreement containing such terms and provisions as the Committee may determine consistent with the Plan.

9. Performance Share Awards. The Committee shall determine whether and to whom Performance Share Awards shall be granted and such terms, limitations and conditions as it deems appropriate in its sole discretion in accordance with the following provisions:

9.1 Number of Performance Share Awards. Each grant shall specify the number of Shares or share units to which it pertains, which may be subject to adjustment to reflect changes in compensation or other factors.

9.2 Performance Cycle. The Performance Cycle with respect to each Performance Share Award shall be determined by the Committee and set forth in the Award Agreement and may be subject to earlier termination in the event of a termination of employment.

9.3 Performance Goals. Each grant shall specify the Performance Goals that are to be achieved by the Participant and a formula for determining the amount of any payment to be made if the Performance Goals are achieved.

9.4 Payment of Performance Share Awards. Each grant shall specify the time and manner of payment of Performance Share Awards that shall have been earned.

9.5 Dividend Equivalents and Other Ownership Rights. Prior to payment of a Performance Share Award, the Participant shall not have any right to transfer any rights under the subject Award and shall not have any rights of ownership in the Shares underlying the Award, including the right to vote such Shares, but the Committee may on or after the Grant Date authorize the payment of dividend equivalents on such Shares in cash or securities (including securities of another issuer) on a current, deferred or contingent basis with respect to any or all dividends or other distributions paid by the Company. Unless otherwise provided by the Committee, any dividend equivalents paid or adjustments made with respect to dividends paid in Shares shall be subject to the same restrictions as the underlying Award.

9.6 Determination of Performance Goals. Following the completion of a Performance Cycle, the Committee shall meet to determine whether, and to what extent, the Performance Goals for the Performance Cycle have been achieved and, if so, to also calculate and determine the amount of the Performance Share Award earned for the Performance Cycle.

9.7 Adjustments. If the Committee determines after the Performance Goals have been established that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances render the Performance Goals unsuitable, the Committee shall have sole discretion to modify such Performance Goals, in whole or in part, as the Committee deems appropriate and equitable. The Committee shall also have the right in its sole discretion to increase or decrease the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the Performance Cycle.

9.8 Award Agreement. Each grant shall be evidenced by an Award Agreement containing such terms and provisions as the Committee may determine consistent with the Plan.

10. Other Equity Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of the Plan (including the grant or offer for sale of unrestricted Shares and grant of Deferred Stock Units) in such amounts and subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.

11. Cash-Based Awards. The Committee may, in its sole discretion, grant Cash-Based Awards in such amounts and upon such terms, and subject to such conditions, as the Committee shall determine at the time of grant. The Committee shall determine the maximum duration of the Cash-Based Award, the amount of cash to which the Cash-Based Award pertains, the conditions upon which the Cash-Based Award shall become vested or payable, and such other provisions as the Committee shall determine.. Each Cash-Based Award shall specify a cash-denominated payment amount, formula or payment ranges as determined by the Committee. Payment, if any, with respect to a Cash-Based Award shall be made in accordance with the terms of the Award and shall be made in cash.

12. Adjustments. The Committee shall make or provide for such adjustments in the (a) aggregate limitations specified in Section 3, (b) number of Shares covered by outstanding Awards, (c) Option Price or Base Price applicable to outstanding Options and Stock Appreciation Rights, and (d) kind of shares available for grant and covered by outstanding Awards (including shares of another issuer), as the Committee in its sole discretion may in good faith determine to be equitably required in order to prevent dilution or enlargement of the rights of Participants that would otherwise result from (x) any stock dividend, stock split, combination or exchange of Shares, recapitalization, extraordinary cash dividend, or other change in the capital structure of the Company, (y) any merger, consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial or complete liquidation or other distribution of assets (other than a normal cash dividend), issuance of rights or warrants to purchase securities, or (z) any other corporate transaction or event having an effect similar to any of the foregoing. However, in the event that such transaction or event results in the distribution to the Company’s stockholders of securities of another issuer, the Committee may provide with respect to any Award that includes the right to dividend equivalents that, instead of an adjustment to that Award, that holder of such Award will receive the number of securities of the other issuer that they would have been entitled to if they held the Shares underlying their Award. In addition, in the event of any such transaction or event, the Committee may provide in substitution for any or all outstanding Awards under the Plan such alternative consideration as it may in good faith determine to be equitable under the circumstances and may require in connection therewith the cancellation or surrender of all Awards so replaced. In the case of Substitute Awards, the Committee may make such adjustments, not inconsistent with the terms of the Plan, in the terms of Awards as it shall deem appropriate in order to achieve reasonable comparability or other equitable relationship between the assumed awards and the Awards granted under the Plan as so adjusted.

13. Change in Control.

13.1 General Rule. Except as otherwise provided in an Award Agreement, in the event of a Change in Control, the Committee may, but shall not be obligated to do any one or more of the following, in each case without Participant consent: (a) accelerate, vest or cause the restrictions to lapse with respect to, all or any portion of an Award, (b) cancel Awards for a cash payment equal to their fair value (as determined in the sole discretion of the Committee) which, in the case of Options and Stock Appreciation Rights, shall be deemed to be equal to the excess, if any, of the consideration to be paid in connection with the Change in Control to holders of the same number of Shares subject to such Options or Stock Appreciation Rights (or, if no consideration is paid in any such transaction, the Fair Market Value of the Shares subject to such Options or Stock Appreciation Rights) over the aggregate Option Price (in the case of Options) or Base Price (in the case of Stock Appreciation Rights), (c) provide for the issuance of replacement awards that will substantially preserve the otherwise applicable terms of any affected Awards previously granted hereunder as determined by the Committee in its sole discretion, (d) terminate Options without providing accelerated vesting or (e) take any other action with respect to the Awards the Committee deems appropriate. For avoidance of doubt, the treatment of Awards upon a Change in Control may vary among Participants and Types of Awards in the Committee’s sole discretion.

13.2 Settlement of Awards Subject to Performance Goals Upon a Change in Control. Awards subject to satisfying a Performance Goal or Goals shall be settled upon a Change in Control. The settlement amount shall be determined by the Committee in its sole discretion based upon the extent to which the Performance Goals for any such Awards have been achieved after evaluating actual performance from the start of the Performance Cycle until the date of the Change in Control and the level of performance anticipated with respect to such Performance Goals as of the date of the Change in Control.

13.3 Change in Control shall mean the earliest to occur of the following events:

(a) Any holder acquires Beneficial Ownership of any securities of the Company which generally entitles the holder thereof to vote for the election of directors of the Company (the “Voting Securities”), which, when added to the Voting Securities then Beneficially Owned by such holder, would result in such holder Beneficially Owning forty percent (40%) or more of the combined voting power of the Company’s then outstanding Voting Securities; provided, however, that for purposes of this paragraph (a), a holder shall not be deemed to have made an acquisition of Voting Securities if such holder: (i) acquires Voting Securities as a result of a stock split, stock dividend or other corporate restructuring in which all stockholders of the class of such Voting Securities are treated on a pro rata basis; (ii) acquires the Voting Securities directly from the Company; (iii) becomes the Beneficial Owner of more than the permitted percentage of Voting Securities solely as a result of the acquisition of Voting Securities by the Company, which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by such holder; (iv) is the Company or any corporation or other holder of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Company (a “Controlled Entity”); or (e) acquires Voting Securities in connection with a “Non-Control Transaction” (as defined in subparagraphs (c)(i)(1)-(3) below); or

(b) The individuals who, as of the Distribution date are members of the Board (the “Incumbent Board”), cease for any reason to constitute at least two-thirds of the Incumbent Board, provided, however, that if either the election of any new director or the nomination for election of any new director was approved by a vote of more than two-thirds of the Incumbent Board, such new director shall be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened “Election Contest” (as described in Rule 14a-11 promulgated under the Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a “Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or

(c) The consummation of a merger, share exchange, consolidation or reorganization involving the Company (a “Business Combination”), unless:

(1) the stockholders of the Company immediately before the Business Combination, own, directly or indirectly immediately following the Business Combination, at least fifty-one percent (51%) of the combined voting power of the outstanding Voting Securities of the corporation resulting from the Business Combination (the “Surviving Corporation”), and

(2) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for the Business Combination constitute at least a majority of the members of the Board of Directors of the relevant Surviving Corporation, and

(3) no holder (other than the Company, or any Controlled Entity, a trustee or other fiduciary holding securities under one or more employee benefit plans or arrangements (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation or any Controlled Entity, or any Person who, immediately prior to the Business Combination, had Beneficial Ownership of forty percent (40%) or more of the then outstanding Voting Securities) has Beneficial Ownership of forty percent (40%) or more of the combined voting power of the Surviving Corporation’s then outstanding voting securities (a transaction described in these subparagraphs (c)(i)(1)-(3) shall be referred to as a “Non-Control Transaction”);

(d) Stockholder approval of complete liquidation or dissolution of the Company; or

(e) The consummation of a sale or other disposition of all or substantially all of the assets of the Company to any holder (other than a transfer to a Controlled Entity).

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because forty percent (40%) or more of the then outstanding Voting Securities is Beneficially Owned by (A) a trustee or other fiduciary holding securities under one or more employee benefit plans or arrangements (or any trust forming a part thereof) maintained by the Company or any Controlled Entity or (B) any corporation which, immediately prior to its acquisition of such interest, is owned directly or indirectly by the stockholders of the Company in the same proportion as their ownership of stock in the Company, immediately prior to such acquisition.

14. Withholding.

14.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the maximum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan prior to making any payments hereunder.

14.2 Share Withholding. With respect to withholding required upon the exercise of Options or Stock Appreciation Rights, upon the lapse of restrictions on Restricted Shares and Restricted Stock Units, or upon the achievement of performance goals related to Performance Share Awards, or any other taxable event arising as a result of an Award granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the maximum statutory total tax that could be imposed on the transaction. All such elections shall be irrevocable, made in writing or electronically, and signed or acknowledged electronically by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

15. Certain Terminations of Employment, Hardship and Approved Leaves of Absence. Notwithstanding any other provision of the Plan to the contrary, in the event of a Participant’s termination of employment (including by reason of death, disability or retirement) or in the event of hardship or other special circumstances, the Committee may in its sole discretion take any action that it deems to be equitable under the circumstances or in the best interests of the Company, including, without limitation, waiving or modifying any limitation or requirement with respect to any Award under the Plan. The Committee shall have the discretion to determine whether and to what extent the vesting of Awards shall be tolled during any leave of absence, paid or unpaid; provided however, that in the event of military leave, vesting shall toll during any unpaid portion of such leave, provided that, upon a Participant’s returning from military leave (under conditions that would entitle him or her to protection upon such return under the Uniform Services Employment and Reemployment Rights Act), he or she shall be given vesting credit with respect to the Award to the same extent as would have applied had the Participant continued to provide services to the Company throughout the leave on the same terms as he or she was providing services immediately prior to such leave. Any actions taken by the Committee shall be taken consistent with the requirements of Section 409A of the Code.

16. Authorization of Sub-Plans. The Committee may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable blue sky, securities, and/or tax laws of various jurisdictions. The Committee shall establish such sub-plans by adopting supplements to the Plan containing (a) such limitations as the Committee deems necessary or desirable, and (b) such additional terms and conditions not otherwise inconsistent with the Plan as the Committee shall deem necessary or desirable. All sub-plans adopted by the Committee shall be deemed to be part of the Plan, but each sub-plan shall apply only to Participants within the affected jurisdiction and the Company shall not be required to provide copies of any sub-plans to Participants in any jurisdiction which is not the subject of such sub-plan.

17. Amendments and Other Matters.

17.1 Plan Amendments. The Board may amend, suspend or terminate the Plan or the Committee’s authority to grant Awards under the Plan at any time. Notwithstanding the foregoing, no amendments shall be effective without approval of the Company’s stockholders if (a) stockholder approval of the amendment is then required pursuant to the Code, the rules of the primary stock exchange or stock market on which the Shares are then traded, applicable U.S. state corporate laws or regulations, applicable U.S. federal laws or regulations, and the applicable laws of any foreign country or jurisdiction where Awards are, or shall be, granted under the Plan, or (b) such amendment would (i) modify Section 17.4, (ii) materially increase benefits accruing to Participants, (iii) increase the aggregate number of Shares issued or issuable under the Plan, (iv) increase any limitation set forth on the number of Shares which may be issued or the aggregate value of Awards under Section 3 except as provided in Section 12, (v) modify the eligibility requirements for Participants in the Plan, or (vi) reduce the minimum Option Price and Base Price as set forth in Sections 5 and 6, respectively. Notwithstanding any other provision of the Plan to the contrary, except as provided in Section 17.8, no termination, suspension or amendment of the Plan may adversely affect any outstanding Award without the consent of the affected Participant.

17.2 Award Deferrals. The Committee may permit Participants to elect to defer the issuance of Shares or the settlement of Awards in cash under the Plan pursuant to such rules, procedures or programs as it may establish for purposes of the Plan. However, any Award deferrals which the Committee permits must comply with the provisions of Section 21 and the requirements of Section 409A of the Code.

17.3 Conditional Awards. The Committee may condition the grant of any award or combination of Awards under the Plan on the surrender or deferral by the Participant of his or her right to receive a cash bonus or other compensation otherwise payable by the Company or any Affiliate to the Participant, provided that any such grant must comply with the provisions of Section 21 and the requirements of Section 409A of the Code.

17.4 Repricing. The terms of outstanding Awards may not be amended to reduce the Option Price of outstanding Options or Base Price of outstanding Stock Appreciation Rights or cancel outstanding Options or Stock Appreciation Rights in exchange for cash, other Awards or Options or Stock Appreciation Rights with an Option Price or Base Price that is less than the Option Price or Base Price of the original Options or Stock Appreciation Rights without stockholder approval, provided that nothing herein shall prevent the Committee from taking any action provided for in Section 12 above.

17.5 No Employment Rights. Nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, its Affiliates, and/or its Subsidiaries to terminate any Participant’s employment or service on the Board or to the Company at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue his employment or service as a director for any specified period of time. Neither an Award nor any benefits arising under the Plan shall constitute an employment contract with the Company, its Affiliates, and/or its Subsidiaries and, accordingly, subject to Section 17.1, the Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company, its Affiliates, and/or its Subsidiaries.

17.6 Tax Qualification. To the extent that any provision of the Plan would prevent any Option that was intended to qualify under particular provisions of the Code from so qualifying, such provision of the Plan shall be null and void with respect to such Option, provided that such provision shall remain in effect with respect to other Options, and there shall be no further effect on any provision of the Plan.

17.7 Leave of Absence or Transfer. A transfer between the Company and any Affiliate or between Affiliates, or a leave of absence duly authorized by the Company, shall not be deemed to be a termination of employment. Periods of time while on a duly authorized leave of absence shall be disregarded for purposes of determining whether a Participant has satisfied a Restricted Period or Performance Cycle under an Award.

17.8 Amendments to Comply with Laws, Regulations or Rules. Notwithstanding any other provision of the Plan or any Award Agreement to the contrary, in its sole and absolute discretion and without the consent of any Participant, the Board may amend the Plan, and the Committee may amend any Award Agreement, to take effect retroactively or otherwise as it deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement to any present or future law, regulation or rule applicable to the Plan, including, but not limited to, Section 409A of the Code.

17.9 Tolling. In the event a Participant is prevented from exercising an Option or the Company is unable to settle an Award due to either any trading restrictions applicable to the Company’s Shares, the Participant’s physical infirmity or administrative error by the Company relied upon and not caused by the Participant, then unless otherwise determined by the Committee, the length of time applicable to any such restriction, condition or event shall toll any exercise period (i) until such restriction lapses, (ii) until the Participant (or his representative) is able to exercise the Award or (iii) until such error is corrected, as applicable.

17.10 No Duty to Inform Regarding Exercise Rights. Neither the Company, any Affiliate, the Committee nor the Board shall have any duty to inform a Participant of the pending expiration of the period in which a Stock Appreciation right may be exercised or in which an Option may be exercised.

18. Issuance of Shares; Fractional Shares.

18.1 Form for Issuing Shares; Legends. Shares may be issued on a certificated or uncertificated basis. Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer of such Shares.

18.2 Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under the Plan prior to: (i) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and (ii) completing any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable.

18.3 Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

18.4 Investment Representations. The Committee may require any individual receiving Shares pursuant to an Award under the Plan to represent and warrant in writing that the individual is acquiring the Shares for investment and without any present intention to sell or distribute such Shares,

18.5 Fractional Shares. The Company shall not be required to issue any fractional Shares pursuant to the Plan. The Committee may provide for the elimination of fractions or for the settlement thereof in cash.

19. Limitations Period. Any person who believes he or she is being denied any benefit or right under the Plan may file a written claim with the Committee. Any claim must be delivered to the Committee within forty-five (45) days of the specific event giving rise to the claim. Untimely claims will not be processed and shall be deemed denied. The Committee, or its designated agent, will notify the Participant of its decision in writing as soon as administratively practicable. Claims not responded to by the Committee in writing within ninety (90) days of the date the written claim is delivered to the Committee shall be deemed denied. The Committee’s decision shall be final, conclusive and binding on all persons. No lawsuit relating to the Plan may be filed before a written claim is filed with the Committee and is denied or deemed denied, and any lawsuit must be filed within one year of such denial or deemed denial or be forever barred. The venue for any lawsuit shall be Wilmington, Delaware.

20. Governing Law. The validity, construction and effect of the Plan and any Award hereunder will be determined in accordance with the State of Delaware except to the extent governed by applicable federal law.

21. Compliance with Section 409A.

21.1 In General. The Plan is intended to be administered in a manner consistent with the requirements, where applicable, of Section 409A. For avoidance of doubt, Stock Options and Stock Appreciation Rights are intended to qualify for the stock rights exemptions from Section 409A. Where reasonably possible and practicable, the Plan shall be administered in a manner to avoid the imposition on Participants of immediate tax recognition and additional taxes pursuant to such Section 409A. Notwithstanding the foregoing, neither the Company nor the Committee shall have any liability to any person in the event Section 409A applies to any such Award in a manner that results in adverse tax consequences for the Participant or any of his or her transferees.

21.2 Elective Deferrals. No elective deferrals or re-deferrals other than in regard to Restricted Stock Units are permitted under the Plan.

21.3 Applicable Requirements. To the extent any of the Awards granted under the Plan are deemed “deferred compensation” and hence subject to Section 409A, the following rules shall apply to such Awards:

(a) Mandatory Deferrals. If the Company decides that the payment of compensation under the Plan shall be deferred within the meaning of Section 409A, then, except as provided under Treas. Reg. Section 1.409A-1(b)(4)(ii), on granting of the Award to which such compensation payment relates, the Company shall specify the date(s) at which such compensation will be paid in the Award Agreement.

(b) Initial Deferral Elections. For Awards of RSUs where the Committee provides the opportunity to elect the timing and form of the payment of the underlying Shares at some future time once any requirements have been satisfied, the Participant must make his or her initial deferral election for such Award in accordance with the requirements of Section 409A, i.e., within thirty (30) days of first becoming eligible to receive such award or prior to the start of the year in which the Award is granted to the Participant, in each case pursuant to the requirements of Section 409A and Treas. Reg. Section 1.409A-2.

(c) Subsequent Deferral Elections. To the extent the Company or Committee decides to permit compensation subject to Section 409A to be re-deferred pursuant to Treas. Reg. Section 1.409A-2(b), then the following conditions must be met: (i) such election will not take effect until at least 12 months after the date on which it is made; (ii) in the case of an election not related to a payment on account of disability, death or an unforeseeable emergency, the payment with respect to which such election is made must be deferred for a period of not less than five years from the date such payment would otherwise have been paid; and (iii) any election related to a payment at a specified time or pursuant to a fixed schedule (within the meaning of Treas. Reg. Section 1.409A-3(a)(4)) must be made not less than 12 months before the date the payment is scheduled to be paid.

(d) Timing of Payments. Payment(s) of compensation that is subject to Section 409A shall only be made upon an event or at a time set forth in Treas. Reg. Section 1.409A-3, i.e., the Participant’s separation from service, the Participant’s becoming disabled, the Participant’s death, at a time or a fixed schedule specified in the Plan or an Award Agreement, a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, or the occurrence of an unforeseeable emergency.

(e) Certain Delayed Payments. Notwithstanding the foregoing, to the extent an amount was intended to be paid such that it would have qualified as a short-term deferral under Section 409A and the applicable regulations, then such payment is or could be delayed if the requirements of Treas. Reg. 1.409A-1(b)(4)(ii) are met.

(f) Acceleration of Payment. Any payment made under the Plan to which Section 409A applies may not be accelerated, except in accordance with Treas. Reg. 1.409A-3(j)(4), i.e., upon a Participant’s separation from service, the Participant becoming disabled, the Participant’s death, a change of ownership or effective control, or in the ownership of a substantial portion of the assets, or upon an unforeseeable emergency (all as detailed in Treas. Reg. Section 1.409A-3(a)).

(g) Payments upon a Change in Control. Notwithstanding any provision of the Plan to the contrary, to the extent an Award subject to Section 409A shall be deemed to be vested or restrictions lapse, expire or terminate upon the occurrence of a Change in Control and such Change in Control does not constitute a “change in the ownership or effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A(a)(2)(A)(v), then even though such Award may be deemed to be vested or restrictions lapse, expire or terminate upon the occurrence of the Change in Control or any other provision of the Plan, payment will be made, to the extent necessary to comply with the provisions of Section 409A, to the Participant on the earliest of (i) the Participant’s “separation from service” with the Company (determined in accordance with Section 409A), (ii) the date payment otherwise would have been made pursuant to the regular payment terms of the Award in the absence of any provisions in the Plan to the contrary (provided such date is permissible under Section 409A) or (iii) the Participant’s death.

(h) Payments to Specified Employees. Payments due to a Participant who is a “specified employee” within the meaning of Section 409A on account of the Participant’s “separation from service” with the Company (determined in accordance with Section 409A) shall be made on the date that is six months after the date of the Participant’s separation from service or, if earlier, the Participant’s date of death.

21.4 Determining “Controlled Group”. In order to determine for purposes of Section 409A whether a Participant or eligible individual is employed by a member of the Company’s controlled group of corporations under Section 414(b) of the Code (or by a member of a group of trades or businesses under common control with the Company under Section 414(c) of the Code) and, therefore, whether the Shares that are or have been purchased by or awarded under the Plan to the Participant are shares of “service recipient” stock within the meaning of Section 409A, a Participant or eligible employee of a Subsidiary shall be considered employed by the Company’s controlled group (or by a member of a group of trades or businesses under common control with the Company, as applicable). Notwithstanding the above, to the extent that the Company finds that legitimate business criteria exist within the meaning of Treas. Reg. Section 1.409A-1(b)(5)(iii)(E)(1), then, solely for purposes of this Section 21.4, “at least 50 percent” in the definition of “Subsidiary” shall instead be “at least 20 percent”.

22. Transferability.

22.1 Transfer Restrictions. Except as provided in Sections 22.2 and 22.4, no Award granted under the Plan shall be transferable by a Participant other than upon death by will or the laws of descent and distribution, and Options and Stock Appreciation Rights shall be exercisable during a Participant’s lifetime only by the Participant or, in the event of the Participant’s legal incapacity, by his guardian or legal representative acting in a fiduciary capacity on behalf of the Participant under state law. Any attempt to transfer an Award in violation of the Plan shall render such Award null and void.

22.2 Limited Transfer Rights. The Committee may expressly provide in an Award Agreement that a Participant may transfer such Award (other than an Incentive Stock Option), in whole or in part, to a Family Member, a trust for the exclusive benefit of Family Members, a partnership or other entity in which all the beneficial owners are Family Members, or any other entity affiliated with the Participant that may be approved by the Committee. Subsequent transfers of Awards shall be prohibited except in accordance with this Section 22.2. All terms and conditions of the Award, including provisions relating to the termination of the Participant’s employment or service with the Company or a Subsidiary, shall continue to apply following a transfer made in accordance with this Section 22.2.

22.3 Additional Restrictions on Transfer. Any Award made under the Plan may provide that all or any part of the Shares that are to be issued or transferred by the Company upon exercise, vesting or settlement shall be subject to further restrictions upon transfer.

22.4 Domestic Relations Orders. Notwithstanding the foregoing provisions of this Section 22, any Award made under the Plan may be transferred as necessary to fulfill any domestic relations order as defined in Section 414(p)(1)(B) of the Code.

23. Forfeiture and Recoupment. Without limiting in any way the generality of the Committee’s power to specify any terms and conditions of an Award consistent with law, and for greater clarity, the Committee may specify in an Award Agreement that the Participant’s rights, payments and benefits with respect to an Award, including any payment of Shares received upon exercise or in satisfaction of an Award under the Plan shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions, without limit as to time. Such events shall include, but not be limited to, failure to accept the terms of the Award Agreement, termination of service under certain or all circumstances, violation of material Company policies, misstatement of financial or other material information about the Company, fraud, misconduct, breach of noncompetition, confidentiality, nonsolicitation, noninterference, corporate property protection, or other agreements that may apply to the Participant, or other conduct by the Participant that the Committee determines is detrimental to the business or reputation of the Company and its Affiliates, including facts and circumstances discovered after termination of service. Awards granted under the Plan shall be subject to any compensation recovery policy or minimum stock holding period requirement as may be adopted or amended by the Company from time to time.

24. No Constraint on Corporate Action. Nothing in the Plan shall be construed to: (i) limit, impair, or otherwise affect the Company’s or an Affiliate’s or a Subsidiary’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or, (ii) limit the right or power of the Company or an Affiliate or a Subsidiary to take any action which such entity deems to be necessary or appropriate.

25. Effect of Disposition of Operating Unit. If the Company or any of its Affiliates diminishes or eliminates ownership interests in any operating unit of the Company or any of its Affiliates so that such operating unit ceases to be majority owned by the Company or any of its Affiliates then, with respect to Awards held by Participants who subsequent to such event will not be Employees, the Committee may, to the extent consistent with Section 409A (if applicable), take any of the actions described in Section 13.1 with respect to a Change in Control. If the Committee takes no special action with respect to any disposition of a facility or an operating unit, then the Participant shall be deemed to have terminated his or her employment with the Company and its Subsidiaries and Affiliates and the terms and conditions of the Award Agreement and the other terms and conditions of the Plan shall control.

26. Indemnification. Subject to requirements of applicable state law, each individual who is or shall have been a member of the Board, or a Committee appointed by the Board, or an officer of the Company to whom authority was delegated in accordance with Section 3, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Company’s approval, or paid by him in satisfaction of any judgment in any such action, suit, or proceeding against him, provided he shall give the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf, unless such loss, cost, liability, or expense is a result of his own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such individuals may be entitled under the Company’s Certificate of Incorporation or by-laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

27. Non-exclusivity of the Plan. The adoption of the Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.

28. Miscellaneous.

28.1 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

28.2 Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

28.3 Requirements of Law. The granting of Awards and the issuance of Shares under this Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

28.4 Successors. All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

28.5 Payment Following a Participant’s Death. Any remaining vested rights or benefits under the Plan upon a Participant’s death shall be paid or provided to the Participant’s legal spouse or, if no such spouse survives the Participant, to the Participant’s estate.

28.6 Rights as a Stockholder. Except as otherwise provided herein, a Participant shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.

Exhibit 10.5

Douglas Elliman Inc.

2021 Employee Stock Purchase Plan

(As approved by stockholders on [•], 2021)

1. Purpose.

The purpose of the 2021 Employee Stock Purchase Plan of Douglas Elliman Inc., as amended from time to time (the “Plan”), is to promote the financial interests of Douglas Elliman Inc. (the “Company”), including its growth and performance, by providing eligible employees of the Company and its subsidiaries the opportunity to purchase an ownership position in the Company. This Plan is intended to qualify as an “employee stock purchase plan” as defined in Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations issued thereunder, and shall be interpreted consistent therewith.

2. Shares Available for Purchase.

Subject to adjustment as provided in Section 17, eligible employees may purchase in the aggregate up to a maximum of 1,600,000 common shares, par value $0.01 per share, of beneficial interest in the Company (the “Shares”), plus an annual increase on the first day of each year beginning in 2023, equal to the lesser of (A) one (1%) percent of the Shares outstanding as of the last day of the immediately preceding fiscal year and (B) such smaller number of Shares as determined by the Board of Directors of the Company (the “Board”) or the Compensation and Human Capital Committee of the Board (the “Committee”). Shares may be issued upon exercise of an Option from authorized but unissued Shares, from Shares held in the treasury of the Company, or from any other proper source. If the total number of Shares specified in elections to be purchased under any Offering (as defined below) plus the number of Shares purchased under previous Offerings under this Plan exceeds the maximum number of Shares issuable under this Plan, the Committee will allot the Shares then available on a pro-rata basis.

3. Administration.

The Plan shall be administered by the Committee. A majority of the Committee shall constitute a quorum, and the acts of a majority shall be the acts of the Committee. Notwithstanding anything to the contrary contained herein, the Board may, in its sole discretion, at any time and from time to time, grant awards or administer the Plan. In any such case, the Board will have all of the authority and responsibility granted to the Committee herein.

The Committee shall have the authority to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any agreements entered into hereunder, and to make all other determinations necessary or advisable for the administration of the Plan, based on, among other things, information made available to the Committee by the management of the Company. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent it shall deem desirable to carry it into effect. The determinations of the Committee in its administration of the Plan, as described herein, shall be final and conclusive.

4. Eligibility.

All employees of the Company and all employees of any subsidiary (as defined in Section 424(f) of the Code) of the Company designated by the Committee from time to time (a “Designated Subsidiary”), are eligible to participate in any one or more of the offerings of Options (as defined in Section 11) to purchase Shares under the Plan provided that:

(a) they are customarily employed by the Company or a Designated Subsidiary for more than twenty (20) hours a week on a regular basis;

(b) they are employees of the Company or a Designated Subsidiary on the first day of the applicable Offering Period (as defined below); and

An employee of the Company or a Designated Subsidiary who meets the requirements set forth above is eligible to participate in any offerings of Options that commence after the month in which the employee commences employment with the Company or a Designated Subsidiary. No employee may be granted an Option hereunder if such employee, immediately after the Option is granted, owns 5% or more of the total combined voting power or value of all classes of shares of the Company or any subsidiary. For purposes of the preceding sentence, the attribution rules of Section 424(d) of the Code shall apply in determining the share ownership of an employee, and all shares that the employee has a contractual right to purchase shall be treated as shares owned by the employee.

The Company retains the discretion to determine which eligible employees may participate in an offering pursuant to and consistent with Treasury Regulation Sections 1.423-2(e) and (f).

5. Offerings.

The Plan shall be implemented by offering of Options (“Offerings”) that are six (6) months in duration or such other duration as determined by the Committee (the period during which an Offering is effective, the “Offering Period”). Offering Periods shall commence on January 1 and July 1 of each year (or if such dates are not business days, the first business day thereafter) (the “Offering Commencement Dates”) and end six (6) months thereafter, on the following June 30 and December 31 (or if such dates are not business days, the first business day thereafter), respectively. Notwithstanding the foregoing, the Committee may establish a different duration (not to exceed twenty-seven (27) months) for one or more future Offering Periods or different commencing or ending dates for such Offering Periods (including for the initial Offering Period under the Plan).

6. Participation.

An employee eligible to participate in the Plan on the Offering Commencement Date of any Offering may participate in such Offering by completing and forwarding either a written or electronic payroll deduction authorization form to the employee’s appropriate payroll office at least fifteen (15) calendar days prior to the applicable Offering Commencement Date. The form will authorize a regular payroll deduction from the Compensation received by the employee during the Offering Period. Unless an employee files a new form or withdraws from the Plan, the employee’s deductions and purchases will continue at the same rate for future Offerings under the Plan as long as the Plan remains in effect. The term “Compensation” means the employee’s base salary or wages (including overtime and shift differentials) and cash incentive or bonus awards that are actually paid to the employee and that are subject to withholding for Federal income tax purposes, and does not include allowances and reimbursements for expenses such as relocation allowances for travel expenses, income recognized from the grant or vesting of restricted stock, income or gains on the exercise of stock options or stock appreciation rights, and similar items.

7. Deductions.

The Company will maintain payroll deduction accounts for all participating employees. With respect to any Offering made under this Plan, an employee may authorize a payroll deduction from 1% to up to a maximum of 15% of the Compensation the employee receives during the Offering Period or such shorter period during which deductions from payroll are made (such deductions to be in whole percentages). The Committee may, at its discretion, designate a lower maximum contribution rate for any Offering.

8. Deduction Changes.

An employee may decrease or increase his or her payroll deduction at any time by filing either a written or electronic new payroll deduction authorization form. Any such change will only be effective for the immediately succeeding Offering Period. Notwithstanding the immediately preceding sentence, the Committee may, at its discretion, provide that changes to payroll deductions will be effective during the Offering Period then outstanding. Any employee may discontinue his or her payroll deductions at any time by filing either a written or electronic new payroll deduction authorization form. If an employee elects to discontinue his or her payroll deductions during an Offering Period, but does not elect to withdraw his or her funds pursuant to Section 10 hereof, funds deducted prior to the election to discontinue will be applied to the purchase of Shares on the Exercise Date (as defined below).

9. Interest.

Interest will not be paid on any employee accounts, except to the extent that the Committee, in its sole discretion, elects to credit employee accounts with interest at such rate as it may from time to time determine.

10. Withdrawal of Funds.

An employee may at any time at least fourteen (14) calendar days prior to the close of business on the last business day in an Offering Period, and for any reason, permanently draw out the balance accumulated in the employee’s account and thereby withdraw from participation in an Offering. Partial withdrawals are not permitted. The employee may not begin participation again during the remainder of the Offering Period during which the employee withdrew the employee’s balance. The employee may participate in any subsequent Offering in accordance with terms and conditions established by the Committee.

11. Purchase of Shares.

(a) Number of Shares. On the Offering Commencement Date of each Offering Period, the Company will grant to each eligible employee who is then a participant in the Plan an option (an “Option”) to purchase on the last business day of such Offering Period (the “Exercise Date”) at the applicable purchase price (the “Option Price”) up to a maximum number of Shares to be determined by the Committee; provided, however, that no employee may be granted an

Option which permits the employee’s rights to purchase Shares under this Plan and any other employee stock purchase plan (as defined in Section 423(b) of the Code) of the Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the fair market value of such Shares (determined at the date such Option is granted) for each calendar year in which the Option is outstanding at any time.

(b) Option Price. The Committee shall determine the Option Price for each Offering Period, including whether such Option Price shall be determined based on the lesser of the closing price of the Shares on (i) the first business day of the Offering Period or (ii) the Exercise Date, or shall be based solely on the closing price of the Shares on the Exercise Date; provided, however, that such Option Price shall be at least 85% of the applicable closing price. In the absence of a determination by the Committee, the Option Price will be 85% of the lesser of the closing price of the Shares on (i) the first business day of the Offering Period or (ii) the Exercise Date. The closing price shall be (a) the closing price (for the primary trading session) on any national securities exchange on which the Shares are listed or (b) the average of the closing bid and asked prices in the over-the-counter market, whichever is applicable, as published in The Wall Street Journal or another source selected by the Committee. If no sales of Shares were made on such a day, the price of the Shares shall be the reported price for the next preceding day on which sales were made.

(c) Exercise of Option. Each employee who continues to be a participant in the Plan on the Exercise Date shall be deemed to have exercised his or her Option at the Option Price on such date and shall be deemed to have purchased from the Company the number of whole Shares reserved for the purpose of the Plan that his or her accumulated payroll deductions on such date will pay for, but not in excess of the maximum numbers determined in the manner set forth above.

(d) Return of Unused Payroll Deductions. Any balance remaining in an employee’s payroll deduction account at the end of an Offering Period will be automatically refunded to the employee, except that any balance that is less than the purchase price of one Share will be carried forward into the employee’s payroll deduction account for the following Offering, unless the employee elects not to participate in the following Offering under the Plan, in which case the balance in the employee’s account shall be refunded.

12. Issuance of Certificates.

Certificates representing Shares purchased under the Plan may be issued only in the name of the employee, in the name of the employee and another person of legal age as joint tenants with rights of survivorship, or (in the Company’s sole discretion) in the name of a brokerage firm, bank, or other nominee holder designated by the employee. The Company may, in its sole discretion and in compliance with applicable laws, authorize the use of book entry registration of Shares in lieu of issuing stock certificates.

13. Rights on Retirement, Death or Termination of Employment.

If a participating employee’s employment ends before the last business day of an Offering Period, no payroll deduction shall be taken from any pay then due and owing to the employee and the balance in the employee’s account shall be paid to the employee. In the event of the employee’s death before the last business day of an Offering Period, the Company shall, upon notification of such death, pay the balance of the employee’s account (a) to the executor or administrator of the employee’s estate or (b) if no such executor or administrator has been appointed to the knowledge of the Company, to such other person(s) as the Company may, in its discretion, designate. If, before the last business day of the Offering Period, the Designated Subsidiary by which an employee is employed ceases to be a subsidiary of the Company, or if the employee is transferred to a subsidiary of the Company that is not a Designated Subsidiary, the employee shall be deemed to have terminated employment for the purposes of this Plan.

14. Optionees Not Stockholders.

Neither the granting of an Option to an employee nor the deductions from the employee’s pay shall make such employee a stockholder of the Shares covered by an Option under this Plan until the employee has purchased and received such Shares.

15. Options Not Transferable; Notification of Sale of Shares.

Options under this Plan are not transferable by a participating employee other than by will or the laws of descent and distribution, and are exercisable during the employee’s lifetime only by the employee. Each employee agrees, by participating in the Plan, to promptly give the Company notice of any disposition of Shares purchased under the Plan where such disposition occurs within two years after the date of grant of the Option pursuant to which such Shares were purchased and within one year of the date of acquisition of such Shares. For the avoidance of doubt, Shares purchased under the Plan by any employee shall be subject to all policies of the Company or any of its subsidiaries applicable to such employee as in effect from time to time, including any insider trading policy.

16. Application of Funds.

All funds received or held by the Company under this Plan may be combined with other corporate funds and may be used for any corporate purpose.

17. Adjustment for Changes in Shares and Certain Other Events.

(a) Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of Shares other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the share limitations set forth in Section 11, and (iii) the Option Price shall be equitably adjusted to the extent determined by the Committee.

(b) Reorganization Events.

(1) Definition. A “Reorganization Event” shall mean a Change in Control as defined in the Company’s 2021 Management Incentive Plan.

(2) Consequences of a Reorganization Event on Options. In connection with a Reorganization Event, the Committee may take any one or more of the following actions as to outstanding Options on such terms as the Committee determines: (i) provide that Options shall be assumed, or substantially equivalent Options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), (ii) upon written notice to employees, provide that all outstanding Options will be terminated immediately prior to the consummation of such Reorganization Event and that all such outstanding Options will become exercisable to the extent of accumulated payroll deductions as of a date specified by the Committee in such notice, which date shall not be less than ten (10) calendar days preceding the effective date of the Reorganization Event, (iii) upon written notice to employees, provide that all outstanding Options will be cancelled as of a date prior to the effective date of the Reorganization Event and that all accumulated payroll deductions will be returned to participating employees on such date, (iv) in the event of a Reorganization Event under the terms of which holders of Shares will receive upon consummation thereof a cash payment for each share surrendered in the Reorganization Event (the “Acquisition Price”), change the last day of the Offering Period to be the date of the consummation of the Reorganization Event and make or provide for a cash payment to each employee equal to (A) (i) the Acquisition Price times (ii) the number of Shares that the employee’s accumulated payroll deductions as of immediately prior to the Reorganization Event could purchase at the Option Price, where the Acquisition Price is treated as the fair market value of the Shares on the last day of the applicable Offering Period for purposes of determining the Option Price under Section 11(b) hereof, and where the number of Shares that could be purchased is subject to the limitations set forth in Section 11(a), minus (B) the result of multiplying such number of Shares by such Option Price, (v) provide that, in connection with a liquidation or dissolution of the Company, Options shall convert into the right to receive liquidation proceeds (net of the Option Price thereof) and (vi) any combination of the foregoing.

(3) For purposes of clause (i) above, an Option shall be considered assumed if, following consummation of the Reorganization Event, the Option confers the right to purchase, for each Share subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Shares for each Share held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if the consideration received as a result of the Reorganization Event is not solely shares of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of such number of shares of the acquiring or succeeding corporation (or an affiliate thereof) that the Committee determines to be equivalent in value (as of the date of such determination or another date specified by the Committee) to the per share consideration received by holders of outstanding Shares as a result of the Reorganization Event.

18. Amendment and Termination of the Plan.

The Committee may at any time, and from time to time, amend or suspend this Plan or any portion thereof, except that (a) if the approval of any such amendment by the stockholders of the Company is required by Section 423 of the Code, or if the amendment would increase the maximum number of shares issuable under the Plan, such amendment shall not be effected without such shareholder approval, and (b) in no event may any amendment be made that would cause the Plan to fail to comply with Section 423 of the Code. This Plan may be terminated at any time by the Committee. Upon termination of this Plan all amounts in the accounts of participating employees shall be promptly refunded.

19. Governmental Regulations.

The Company’s obligation to sell and deliver Shares under this Plan is subject to listing on a national stock exchange (to the extent the Shares are then so listed or quoted) and the approval of all governmental authorities required in connection with the authorization, issuance or sale of such stock.

20. Governing Law.

The Plan shall be governed by Delaware law except to the extent that such law is preempted by federal law.

21. Authorization of Sub-Plans.

The Committee may from time to time establish one or more sub-plans under the Plan with respect to one or more Designated Subsidiaries, provided that such sub-plan complies with Section 423 of the Code.

22. Withholding.

If applicable tax laws impose a tax withholding obligation, each affected employee shall, no later than the date of the event creating the tax liability, make provision satisfactory to the Committee for payment of any taxes required by law to be withheld in connection with any transaction related to Options granted to or Shares acquired by such employee pursuant to the Plan. The Company may, to the extent permitted by law, deduct any such taxes from any payment of any kind otherwise due to an employee.

23. Effective Date and Approval of Stockholders.

The Plan was approved on [•], 2021 by the Board, subject to the approval of the Company’s stockholders, and shall be effective as of the date of approval by the stockholders of the Company as required by Section 423 of the Code, which approval must occur within twelve months of the adoption of the Plan.

Exhibit 10.6

Form of

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (this “Agreement”) is made as of ________________ by and between Douglas Elliman Inc., a Delaware corporation (the “Company”), and ______________, [a member of the Board of Directors/an officer/an employee/an agent/a fiduciary] of the Company (“Indemnitee”). This Agreement supersedes and replaces any and all previous agreements between the Company (and its predecessors and subsidiaries) and Indemnitee covering indemnification and advancement.

WHEREAS, the Board of Directors of the Company (the “Board”) believes that highly competent persons are reluctant to serve publicly-held corporations as directors, officers, or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification and advancement of expenses against claims and actions against them arising out of their service to and activities on behalf of such publicly-held corporations.

WHEREAS, the Board has determined that, in order to attract and retain qualified individuals, the Company will use commercially reasonable efforts to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are increasingly subject to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the company or business enterprise itself. The Certificate of Incorporation of the Company (as amended or amended and restated, the “Certificate of Incorporation”) permits, and the Bylaws of the Company (as amended or amended and restated, the “Bylaws”) require, indemnification of the directors and executive officers of the Company. The Bylaws and Section 145(f) of the General Corporation Law of the State of Delaware ( “Delaware Law”) expressly provide that the indemnification provisions set forth therein are not exclusive and thereby contemplate, and the Certificate of Incorporation expressly contemplates, that contracts be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification, advancement of expenses and reimbursement rights subject to the provisions of the Bylaws and the Certificate of Incorporation. In addition to such indemnification provided by the Certificate of Incorporation and Bylaws, Indemnitee may also be entitled to indemnification pursuant to Delaware Law.

WHEREAS, the uncertainties relating to such insurance, to indemnification and to advancement of expenses may increase the difficulty of attracting and retaining such persons to serve the Company.

WHEREAS, the Board has determined that the difficulty in attracting and retaining such persons is detrimental to the best interest of the Company and its stockholders and that the Company should act to assure such persons that there will be protection in the future.

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified.

WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws, the Certificate of Incorporation and any resolutions adopted pursuant thereto and Delaware Law, and is not a substitute therefor, nor diminishes or abrogates any rights of Indemnitee thereunder.

WHEREAS, Indemnitee does not regard the protection available under the Bylaws, the Certificate of Incorporation, Delaware Law and insurance as adequate in the present circumstances, and may not be willing to serve or continue to serve as [a/an] [director/officer/employee/agent/fiduciary] of the Company without adequate additional protection, and the Company desires Indemnitee to serve or continue to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that Indemnitee be so indemnified and be advanced expenses.

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

1. Services to the Company. Indemnitee agrees to serve as [a/an] [director/officer/employee /agent/fiduciary] of the Company. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law). This Agreement does not create any obligation on the Company to continue Indemnitee in such position and is not an employment contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee.

2. Definitions. As used in this Agreement:

(a) “Agent” means any person who is authorized by the Company or an Enterprise to act for or represent the interests of the Company or an Enterprise, respectively.

(b) A “Change in Control” means the occurrence of any of the following events:

(i) individuals who constitute the Board as of the date of the distribution by Vector Group Ltd. (“Vector”) to holders of record of shares of Vector common stock (including Vector common stock underlying outstanding stock option awards and restricted stock awards (the “Incumbent Directors”) cease for any reason to constitute at least two-thirds of the Board, provided that any person becoming a Director (as defined below) subsequent to the beginning of such period, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) will be an Incumbent Director; provided, however, that no individual initially elected or nominated as a Director of the Company as a result of an actual or publicly threatened election contest with respect to directors or as a result of any other actual or publicly threatened solicitation of proxies by or on behalf of any person other than the Board will be deemed to be an Incumbent Director;

(ii) any Person who becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company’s then-outstanding securities eligible to vote for the election of the Board (“Company Voting Securities”); provided, however, that the event described in this paragraph (ii) will not be deemed to be a Change in Control by virtue of the ownership, or acquisition, of Company Voting Securities: (A) as a result of a stock split, stock dividend or other corporate restructuring in which all stockholders of the class of such Company Voting Securities are treated on a pro rata basis, (B) directly from the Company, (C) if such Person is the Company or any corporation or other holder of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Company (a “Controlled Entity”) or (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii) of this definition);

-2-

(iii) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company that requires the approval of the Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (A) at least 51% of the total voting power of (x) the entity resulting from such Business Combination (the “Surviving Entity”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting power, is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Entity or the parent), is or becomes the beneficial owner, directly or indirectly, of 40% or more of the total voting power of the outstanding voting securities eligible to elect directors of the parent (or, if there is no parent, the Surviving Entity) and (C) at least a majority of the members of the board of directors of the parent (or, if there is no parent, the Surviving Entity) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) of this paragraph (iii) will be deemed to be a “Non-Qualifying Transaction”);

(iv) the consummation of a sale of all or substantially all of the Company’s assets (other than to an affiliate of the Company); or

(v) the Company’s stockholders approve a plan of complete liquidation or dissolution of the Company.

Notwithstanding the foregoing, a Change in Control will not be deemed to occur solely because any person acquires beneficial ownership of more than 40% of the Company Voting Securities as a result of (1) the acquisition by a trustee or other fiduciary holding securities under one or more employee benefit plans or arrangements (or any trust forming a part thereof) maintained by the Company or any Controlled Entity, (2) any corporation which, immediately prior to its acquisition of such interest, is owned directly or indirectly by the stockholders of the Company in the same proportion as their ownership of stock in the Company, immediately prior to such acquisition or (3) the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control will then occur.

(c) “Corporate Status” describes the status of a person who is or was acting as a director, officer, employee, fiduciary or Agent of the Company or an Enterprise.

(d) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(e) “Enterprise” means any other company, corporation, constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which the Company (or any of its wholly owned subsidiaries) is a party, limited liability company, partnership, joint venture, trust, employee benefit plan or other entity for which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, employee, or Agent.

-3-

(f) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder.

(g) “Expenses” includes all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts and other professionals, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding (as defined below). Expenses also include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedes bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 14(d) of the Exchange Act only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. The parties agree that for the purposes of any advancement of Expenses for which Indemnitee has made written demand to the Company in accordance with this Agreement, all Expenses included in such demand that are certified by affidavit of Indemnitee’s counsel as being reasonable in the good faith judgment of such counsel will be presumed conclusively to be reasonable. Expenses, however, do not include amounts paid in settlement by Indemnitee, the amount of judgments or fines against Indemnitee, or fees, salaries, wages or benefits owed to Indemnitee.

(h) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” does not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

(i) “Person” has the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that Person excludes (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

(j) “Proceeding” includes any threatened, pending or completed action, suit, claim, counterclaim, cross claim, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, legislative or investigative (formal or informal) nature, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of Indemnitee’s Corporate Status or by reason of any action taken by Indemnitee (or a failure to take action by Indemnitee) or of any action (or failure to act) on Indemnitee’s part while acting pursuant to Indemnitee’s Corporate Status, in each case whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification, reimbursement, or advancement of Expenses can be provided under this Agreement. A Proceeding also includes a situation Indemnitee believes in good faith may lead to or culminate in the institution of a Proceeding.

-4-

3. Indemnity in Third-Party Proceedings. The Company will indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, the Company will indemnify Indemnitee to the fullest extent permitted by applicable law against all Expenses, judgments, fines (including any excise taxes or penalties), liabilities and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interest of the Company and, in the case of a criminal Proceeding, had no reasonable cause to believe that Indemnitee’s conduct was unlawful; provided, however, that the Company will not be liable to indemnify Indemnitee for any settlement of any Proceeding or any claim, issue or matter therein without the Company’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed.

4. Indemnity in Proceedings by or in the Right of the Company. The Company will indemnify Indemnitee in accordance with the provisions of this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, the Company will indemnify Indemnitee to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interest of the Company. The Company will not indemnify Indemnitee for Expenses under this Section 4 related to any claim, issue or matter in a Proceeding for which Indemnitee has been finally adjudged by a court to be liable to the Company, unless, and only to the extent that, the Delaware Court of Chancery or any court in which the Proceeding was brought determines upon application by Indemnitee that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. To the fullest extent permitted by applicable law, the Company will indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee in connection with any Proceeding to the extent that Indemnitee is successful, on the merits or otherwise. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company will, to the fullest extent permitted by applicable law, indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with or related to each successfully resolved claim, issue or matter. For purposes of this Section 5 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, will be deemed to be a successful result as to such claim, issue or matter.

6. Indemnification for Expenses of a Witness. To the fullest extent permitted by applicable law, the Company will indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with any Proceeding to which Indemnitee is not a party but to which Indemnitee is a witness, deponent or interviewee or is otherwise asked to participate.

7. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company will indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

-5-

8. Additional Indemnification. Notwithstanding any limitation in Sections 3, 4, or 5, the Company will indemnify Indemnitee to the fullest extent permitted by applicable law (including but not limited to, Delaware Law and any amendments to or replacements of Delaware Law adopted after the date of this Agreement that expand the Company’s ability to indemnify its officers and directors) if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor).

9. Contribution in the Event of Joint Liability. The Company will not enter into any settlement of any Proceeding (in whole or in part) in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding), or if such settlement would impose any Expense, judgment, fine, penalty, or limitation on Indemnitee without Indemnitee’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

10. Exclusions. Notwithstanding any provision in this Agreement, the Company is not obligated under this Agreement to make any indemnification to Indemnitee in connection with any Proceeding:

(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except to the extent provided in Section 16(b) and except with respect to any excess beyond the amount paid under any insurance policy, contract, agreement or other indemnity or advancement provision or otherwise;

(b) for (i) an accounting or disgorgement of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act (as defined in Section 2(b) hereof) or similar provisions of state statutory law or common law, if Indemnitee is held liable for such accounting or disgorgement of profits or similar remedies (including pursuant to any settlement arrangements), (ii) any reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act) or (iii) any reimbursement of the Company by Indemnitee of any compensation pursuant to any compensation recoupment or clawback policy adopted by the Board or the compensation committee of the Board, including but not limited to any such policy adopted to comply with stock exchange listing requirements implementing Section 10D of the Exchange Act;

(c) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Proceeding or part of any Proceeding is to enforce Indemnitee’s rights to indemnification or advancement, of Expenses, including a Proceeding (or any part of any Proceeding) initiated pursuant to Section 15, (ii) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (iii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law; or

-6-

(d) for which a final court order or judgment by a court of competent jurisdiction, to which all rights of appeal have either lapsed or been exhausted, determines that the indemnification of Indemnitee for expenses in connection with such Proceeding is unlawful, or that such Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interest of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

11. Advances of Expenses.

(a) The Company will advance, to the fullest extent permitted by law, the Expenses incurred by Indemnitee in connection with any (i) Proceeding (or any part of any Proceeding) not initiated by Indemnitee or (ii) any Proceeding (or any part of any Proceeding) initiated by Indemnitee if (x) the Proceeding or part of any Proceeding is to enforce Indemnitee’s rights to obtain indemnification or advancement of Expenses from the Company or Enterprise, including a proceeding initiated pursuant to Section 15 or (y) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation. Notwithstanding the immediately preceding sentence, the payment of such Expenses incurred by any such Indemnitee prior to the final disposition of a Proceeding shall be made only upon delivery to the Company of (i) a statement or statements requesting such advances from time to time, (ii) a written confirmation by such Indemnitee of such Indemnitee’s good faith belief that he or she has met the standard of conduct necessary for indemnification under this Agreement, and (iii) a written undertaking, by or on behalf of such Indemnitee to repay the amounts advanced in accordance with Section 11(b) (such deliverables, collectively, the “Statements”). The Company will advance the Expenses within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding.

(b) Advances will be unsecured and interest free. Indemnitee undertakes to promptly repay the amounts advanced (without interest) to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company under the provisions of this Agreement, applicable law or otherwise, and thus Indemnitee qualifies for advances upon the execution of this Agreement and delivery to the Company. No other form of undertaking is required other than the execution of this Agreement. The Company will make advances without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement.

(c) Notwithstanding anything to the contrary in this Agreement, unless otherwise determined pursuant to Section 15, no advancement of Expenses shall be made under this Section 11, if a determination is reasonably and promptly made by (i) a majority vote of the Disinterested Directors, even though less than a quorum of the Board, or (ii) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, or (iii) if there are no Disinterested Directors, or if the Disinterested Directors so direct, by written opinion provided by Independent Counsel selected by the Board, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that Indemnitee acted in bad faith or in a manner that Indemnitee did not believe to be in or not opposed to the best interest of the Company.

12. Procedure for Notification of Claim for Indemnification or Advancement.

(a) Indemnitee will notify the Company in writing of any Proceeding with respect to which Indemnitee intends to seek indemnification or advancement of Expenses hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice thereof. Indemnitee will include in the written notification to the Company a description of the nature of the Proceeding and the facts underlying the Proceeding and provide such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such Proceeding. Indemnitee’s failure to

-7-

notify the Company will not relieve the Company from any obligation it may have to Indemnitee under this Agreement, and any delay in so notifying the Company will not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company will, promptly upon receipt of such a request for indemnification or advancement, advise the Board in writing that Indemnitee has requested indemnification or advancement.

(b) The Company will be entitled to participate in the Proceeding at its own expense.

13. Procedure Upon Application for Indemnification.

(a) Unless a Change in Control has occurred, the determination of Indemnitee’s entitlement to indemnification will be made:

(i) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board;

(ii) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board;

(iii) if there are no Disinterested Directors or, if the Disinterested Directors so direct, by written opinion provided by Independent Counsel selected by the Board; or

(iv) if so directed by the Board, by the stockholders of the Company.

(b) If a Change in Control has occurred, the determination of Indemnitee’s entitlement to indemnification will be made by written opinion provided by Independent Counsel selected by Indemnitee (unless Indemnitee requests such selection be made by the Board).

(c) The party selecting Independent Counsel pursuant to Section 13(a)(iii) or Section 13(b) will provide written notice of the selection to the other party. The notified party may, within ten (10) days after receiving written notice of the selection of Independent Counsel, deliver to the selecting party a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of Independent Counsel as defined in Section 2, and the objection will set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected will act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or the Delaware Court of Chancery has determined that such objection is without merit. If, within thirty (30) days after the later of submission by Indemnitee of a written request for indemnification pursuant to Section 12(a) hereof and the final disposition of the Proceeding, Independent Counsel has not been selected or, if selected, any objection to has not been resolved, either the Company or Indemnitee may petition the Delaware Court of Chancery for the appointment as Independent Counsel of a person selected by such court or by such other person as such court designates. Upon the due commencement of any judicial proceeding pursuant to Section 15(a), Independent Counsel will be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

(d) Indemnitee will cooperate with the person, persons or entity making the determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. The Company will advance and pay any Expenses incurred

-8-

by Indemnitee in so cooperating with the person, persons or entity making the indemnification determination irrespective of the determination as to Indemnitee’s entitlement to indemnification and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. The Company promptly will advise Indemnitee in writing of the determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which indemnification has been denied and providing a copy of any written opinion provided to the Board by Independent Counsel.

(e) If it is determined that Indemnitee is entitled to indemnification, the Company will make payment to Indemnitee within thirty (30) days after such determination.

14. Presumptions and Effect of Certain Proceedings.

(a) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination will, to the fullest extent permitted by law, presume Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 12(a), and the Company will, to the fullest extent permitted by law, have the burden of proof to overcome that presumption. Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, will be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b) If the determination of Indemnitee’s entitlement to indemnification has not been made pursuant to Section 13 within sixty (60) days after the later of (i) receipt by the Company of Indemnitee’s request for indemnification pursuant to Section 12(a) and (ii) the final disposition of the Proceeding for which Indemnitee requested indemnification (the “Determination Period”), the requisite determination of entitlement to indemnification will, to the fullest extent permitted by law, be deemed to have been made and Indemnitee will be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a final judicial determination that any or all such indemnification is prohibited under applicable law. The Determination Period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, the Determination Period may be extended an additional fifteen (15) days if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 13(a)(iv).

(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, will not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interest of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(d) For purposes of any determination of good faith, Indemnitee will be deemed to have acted in good faith if Indemnitee acted based on the records or books of account of the Company, its subsidiaries, or an Enterprise, including financial statements, or on information supplied to Indemnitee by

-9-

the directors or officers of the Company, its subsidiaries, or an Enterprise in the course of their duties, or on the advice of legal counsel for the Company, its subsidiaries, or an Enterprise or on information or records given or reports made to the Company or an Enterprise by an independent certified public accountant or by an appraiser, financial advisor or other expert selected with reasonable care by or on behalf of the Company, its subsidiaries, or an Enterprise. Further, Indemnitee will be deemed to have acted in a manner “not opposed to the best interest of the Company,” as referred to in this Agreement if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the best interest of the participants and beneficiaries of an employee benefit plan. The provisions of this Section 14(d) are not exclusive and do not limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(e) The knowledge and/or actions, or failure to act, of any director, officer, trustee, partner, managing member, fiduciary, agent or employee of the Enterprise may not be imputed to Indemnitee for purposes of determining Indemnitee’s right to indemnification under this Agreement.

15. Remedies of Indemnitee.

(a) Indemnitee may commence litigation against the Company in the Delaware Court of Chancery to obtain indemnification or advancement of Expenses provided by this Agreement in the event that (i) a determination is made pursuant to Section 13 that Indemnitee is not entitled to indemnification under this Agreement, (ii) the Company does not advance Expenses pursuant to Section 11, (iii) the determination of entitlement to indemnification is not made pursuant to Section 13 within the Determination Period, (iv) the Company does not indemnify Indemnitee pursuant to Section 5 or Section 6 or the second to last sentence of Section 13(d) within thirty (30) days after receipt by the Company of a written request therefor, (v) a contribution payment is not made in a timely manner pursuant to Section 8, (vi) the Company does not indemnify Indemnitee pursuant to Section 3, 4, 7, or 8 within thirty (30) days after a determination has been made that Indemnitee is entitled to indemnification, or (vii) in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding designed to deny, or to recover from, Indemnitee the benefits provided or intended to be provided to Indemnitee hereunder.

(b) If a determination is made pursuant to Section 13 that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 15 will be conducted in all respects as a de novo trial on the merits and Indemnitee may not be prejudiced by reason of that adverse determination. In any judicial proceeding commenced pursuant to this Section 15, Indemnitee shall be presumed to be entitled to be indemnified to receive advances of Expenses under this Agreement and the Company will have the burden of proving Indemnitee is not entitled to be indemnified and to receive advances, as the case may be, and will not introduce evidence of the determination made pursuant to Section 13. In connection with any claim by Indemnitee for advances of Expenses, the Company shall be entitled to raise a defense as to any such action by clear and convincing evidence that Indemnitee acted in bad faith or in a manner that Indemnitee did not believe to be in or not opposed to the best interest of the Company, or with respect to any criminal action or proceeding, that Indemnitee acted without reasonable cause to believe that his or her conduct was lawful.

(c) If a determination is made pursuant to Section 13 that Indemnitee is entitled to indemnification, the Company will be bound by such determination in any judicial proceeding commenced pursuant to this Section 15, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, (ii) a prohibition of such indemnification under applicable law, or (iii) a final decision by a court having jurisdiction in the matter that such Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interest of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

-10-

(d) The Company is, to the fullest extent permitted by law, precluded from asserting in any judicial proceeding commenced pursuant to this Section 15 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and will stipulate in any such court that the Company is bound by all the provisions of this Agreement.

(e) It is the intent of the Company that, to the fullest extent permitted by law, Indemnitee not be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to Indemnitee hereunder. The Company, to the fullest extent permitted by law, will (within thirty (30) days after receipt by the Company of a written request therefor) advance to Indemnitee such Expenses which are incurred by Indemnitee in connection with any action concerning this Agreement, Indemnitee’s right to indemnification or advancement of Expenses from the Company, or concerning any directors’ and officers’ liability insurance policies maintained by the Company, and will indemnify Indemnitee against any and all such Expenses unless the court finally determines that each of Indemnitee’s claims in such action were made in bad faith or were frivolous or are prohibited by law.

16. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.

(a) The indemnification and advancement of Expenses provided by this Agreement are not exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. The indemnification and advancement of Expenses provided by this Agreement may not be limited or restricted by any amendment, alteration or repeal of this Agreement in any way with respect to any action taken or omitted by Indemnitee in Indemnitee’s Corporate Status occurring prior to any amendment, alteration or repeal of this Agreement. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Bylaws, the Certificate of Incorporation, or this Agreement, it is the intent of the parties hereto that Indemnitee enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy is cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, will not prevent the concurrent assertion or employment of any other right or remedy.

(b) The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of Expenses and/or insurance provided by one or more other Persons with whom or which Indemnitee may be associated. The relationship between the Company and such other Persons, other than an Enterprise, with respect to Indemnitee’s rights to indemnification, advancement of Expenses, and insurance is described by this Section 16(b), subject to the provisions of Section 16(d) with respect to a Proceeding concerning Indemnitee’s Corporate Status with an Enterprise.

(i) The Company hereby acknowledges and agrees:

(A) the Company is the indemnitor of first resort with respect to any request for indemnification or advancement of Expenses made pursuant to this Agreement concerning any Proceeding;

-11-

(B) the Company is primarily liable to Indemnitee for all indemnification and indemnification or advancement of Expenses obligations for any Proceeding, whether created by law, organizational or constituent documents, contract (including this Agreement) or otherwise;

(C) any obligation of any other Persons with whom or which Indemnitee may be associated to indemnify Indemnitee and/or advance Expenses to Indemnitee in respect of any Proceeding are secondary to the obligations of the Company to indemnify Indemnitee as provided in this Agreement;

(D) the Company will indemnify Indemnitee and advance Expenses to Indemnitee hereunder to the fullest extent provided herein without regard to any rights Indemnitee may have against any other Person with whom or which Indemnitee may be associated or insurer of any such Person; and

(ii) the Company irrevocably waives, relinquishes and releases (A) any other Person with whom or which Indemnitee may be associated from any claim of contribution, subrogation, reimbursement, exoneration or indemnification, or any other recovery of any kind in respect of amounts paid by the Company to Indemnitee pursuant to this Agreement and (B) any right to participate in any claim or remedy of Indemnitee against any Person, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any Person, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right.

(iii) In the event any other Person with whom or which Indemnitee may be associated or their insurers advances or extinguishes any liability or loss for Indemnitee, the payor has a right of subrogation against the Company or its insurers for all amounts so paid which would otherwise be payable by the Company or its insurers under this Agreement. In no event will payment by any other Person with whom or which Indemnitee may be associated or their insurers affect the obligations of the Company hereunder or shift primary liability for the Company’s obligation to indemnify or advance Expenses to any other Person with whom or which Indemnitee may be associated.

(iv) Any indemnification or advancement of Expenses provided by any other Person with whom or which Indemnitee may be associated is specifically in excess over the Company’s obligation to indemnify and advance Expenses or any valid and collectible insurance (including but not limited to any malpractice insurance or professional errors and omissions insurance) provided by the Company.

(c) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, trustees, partners, managing members, fiduciaries, employees or agents of the Company, the Company will obtain a policy or policies covering Indemnitee to the maximum extent of the coverage available for any such director, officer, trustee, partner, managing member, fiduciary, employee or agent under such policy or policies, including coverage in the event the Company does not or cannot, for any reason, indemnify or advance Expenses to Indemnitee as required by this Agreement. If, at the time of the receipt of a notice of a claim pursuant to this Agreement, the Company has director and officer liability insurance in effect, the Company will give prompt notice of such claim or of the commencement of a Proceeding, as the case may be, to the insurers in accordance with the procedures set forth in the respective policies. The Company will thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies. Indemnitee agrees to assist the Company’s efforts to cause the insurers to pay such amounts and will comply with the terms of such policies, including selection of approved panel counsel, if required.

-12-

(d) The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee for any Proceeding concerning Indemnitee’s Corporate Status with an Enterprise will be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such Enterprise. The Company and Indemnitee intend that any such Enterprise (and its insurers) be the indemnitor of first resort with respect to indemnification and advancement of Expenses for any Proceeding related to or arising from Indemnitee’s Corporate Status with such Enterprise. The Company’s obligation to indemnify and advance Expenses to Indemnitee is secondary to the obligations the Enterprise or its insurers owe to Indemnitee. Indemnitee agrees to take all reasonably necessary and desirable action to obtain from an Enterprise indemnification and advancement of Expenses for any Proceeding related to or arising from Indemnitee’s Corporate Status with such Enterprise.

(e) In the event of any payment made by the Company under this Agreement, the Company will be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee from any Enterprise or insurance carrier. Indemnitee will execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

17. Duration of Agreement. This Agreement continues until and terminates upon the later of: (a) ten (10) years after the date that Indemnitee ceases to have a Corporate Status or (b) one (1) year after the final termination of any and all Proceedings then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any Proceeding commenced by Indemnitee pursuant to Section 15 relating thereto. The indemnification and advancement of Expenses rights provided by or granted pursuant to this Agreement are binding upon and inure to the benefit of and enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), spouse, heirs, devisees, executors and administrators and other legal representatives, and will continue as to an Indemnitee who has ceased to be a director, officer, employee, agent or fiduciary of the Company or of any other Enterprise.

18. Severability. If any provision or provisions of this Agreement is held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) will not in any way be affected or impaired thereby and remain enforceable to the fullest extent permitted by law; (b) such provision or provisions will be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) will be construed so as to give effect to the intent manifested thereby.

19. Interpretation. Any ambiguity in the terms of this Agreement will be resolved in favor of Indemnitee and in a manner to provide the maximum indemnification and advancement of Expenses permitted by law. The Company and Indemnitee intend that this Agreement provide to the fullest extent permitted by law for indemnification and advancement in excess of that expressly provided, without limitation, by the Certificate of Incorporation, the Bylaws, vote of the Company stockholders or Disinterested Directors, or applicable law.

-13-

20. Enforcement.

(a) The Company, for itself and on behalf of its successors or assigns, expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as [a/an] [director/officer/employee/agent/fiduciary] of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving or continuing to serve as [a/an] [director/officer/employee/agent/fiduciary] of the Company.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation, the Bylaws and applicable law (including, for the avoidance of doubt, Delaware Law), and is not a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

(c) The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

21. Modification and Waiver. No supplement, modification or amendment of this Agreement is binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement will be deemed or constitutes a waiver of any other provisions of this Agreement nor will any waiver constitute a continuing waiver.

22. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder except where prohibited by judicial process or the directive of a governmental agency. The failure of Indemnitee to so notify the Company does not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise.

23. Notices. All notices, requests, demands and other communications under this Agreement will be in writing and will be deemed to have been duly given if (a) delivered by hand to the other party, (b) sent by reputable overnight courier to the other party or (c) sent by facsimile transmission or electronic mail, with receipt of oral confirmation that such communication has been received:

(a) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee provides to the Company.

(b) If to the Company to:

Douglas Elliman Inc.

4400 Biscayne Boulevard

Miami, Florida 33137

Attention: Marc N. Bell, Senior Vice President, General

Counsel and Secretary

Email: [•]

or to any other address as may have been furnished to Indemnitee by the Company.

24. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, will contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

-14-

25. Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties are governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or Proceeding arising out of or in connection with this Agreement may be brought only in the Delaware Court of Chancery and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court of Chancery for purposes of any action or Proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action or Proceeding in the Delaware Court of Chancery and (iv) waive, and agree not to plead or to make, any claim that any such action or Proceeding brought in the Delaware Court of Chancery has been brought in an improper or inconvenient forum.

26. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which will for all purposes be deemed to be an original but all of which together constitutes one and the same Agreement. The exchange of a fully executed Agreement (in counterparts or otherwise) by electronic transmission in .pdf format or by facsimile shall be sufficient to bind the parties to the terms and conditions of this Agreement. Signatures to this Agreement transmitted by electronic mail in .pdf form, or by any other electronic means designed to preserve the original graphic and pictorial appearance of a document (including DocuSign), will be deemed to have the same effect as physical delivery of the paper document bearing the original signatures. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

27. Headings. The headings of this Agreement are inserted for convenience only and do not constitute part of this Agreement or affect the construction thereof.

[Signature Page Follows]

-15-

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.


COMPANY

By:
Name:
Title:

INDEMNITEE

By:
Name:
Address:

Exhibit 10.7

[Form of Non-exclusive Aircraft Lease Agreement]

This NON-EXCLUSIVE AIRCRAFT LEASE AGREEMENT (this “Agreement”) is entered into as of this [ ] day of [ ]2021 (the “Effective Date”), by and between [VECTOR GROUP MEMBER], a Delaware limited liability company (“Lessor”), and [DOUGLAS ELLIMAN GROUP MEMBER], a [Delaware] [corporation] (“Lessee”).

W I T N E S S E T H :

WHEREAS, title to the Aircraft described and referred to herein is held by Lessor; and

WHEREAS, Lessee desires to lease from the Lessor, and Lessor desires to lease to Lessee, the Aircraft, without crew, upon and subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the mutual promises herein contained and other good and valid consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1. DEFINITIONS

1.1.	The following terms shall have the following meanings for all purposes of this Agreement:

“Additional Non-exclusive Lessee” means any person or entity, other than Lessee, possessing a non-exclusive leasehold interest in the Aircraft.

“Aircraft” means the Airframe, the Engines, the Parts, and the Aircraft Documents. The Engines shall be deemed part of the “Aircraft” whether or not from time to time attached to the Airframe or removed from the Airframe.

“Aircraft Documents” means all flight records, maintenance records, historical records, modification records, overhaul records, manuals, logbooks, authorizations, drawings and data relating to the Airframe, any Engine, or any Part, or that are required by Applicable Law to be created or maintained with respect to the maintenance and/or operation of the Aircraft.

“Airframe” means that certain [ ] aircraft bearing U.S. registration number [ ], and manufacturer’s serial number [ ], together with any and all Parts (including, but not limited to, landing gear and auxiliary power unit but excluding Engines or engines) so long as such Parts shall be either incorporated or installed in or attached to the Airframe.

“Applicable Law” means, without limitation, all applicable laws, treaties, international agreements, decisions and orders of any court, arbitration or governmental agency or authority and rules, regulations, orders, directives, licenses and permits of any governmental body, instrumentality, agency or authority, including, without limitation, the FAR and 49 U.S.C. § 41101, et seq., as amended.

“Base Rent” means the base rent payable as consideration for the lease of the Aircraft.

“Business Day” means any day of the year in which banks are not authorized or required to close in the State of Florida.

“DOT” means the United States Department of Transportation or any successor agency.

“Engines” means [ ] engines bearing manufacturer’s serial numbers [ ], together with any and all Parts associated therewith so long as the same shall be either incorporated or installed in or attached to such Engine. Any engine which may be, from time to time, substituted for an Engine shall be deemed to be an Engine and subject to this Agreement for so long as it remains attached to the Airframe.

“FAA” means the Federal Aviation Administration or any successor agency.

“FAR” means collectively the Aeronautics Regulations of the FAA and the DOT, as codified at Title 14, Parts 1 to 399 of the United States Code of Federal Regulations.

“Flight Hour” means one (1) hour of use of the Aircraft in flight operations, measured in one-tenth (1/10th) of an hour increments from takeoff to landing, as recorded in the Aircraft records.

“Force Majeure Event” means an event that is out of the control of a party to this Agreement and that prevents such party from meeting an obligation arising under this Agreement (other than the payment of funds), including, without limitation, strikes, boycotts, labor disputes, embargoes, shortages of materials, acts of God, acts of a public enemy, terrorist acts, government regulation or authority, mechanical difficulty, war, civil commotion, weather conditions, weather conditions, floods, riots, rebellion, or public health crisis.

“FSDO Notice” means a FSDO Notification Letter in the form of Schedule B attached hereto.

“Lien” means any mortgage, security interest, lease, Lease or other charge or encumbrance or claim or right of others, including, without limitation, rights of others under any airframe or engine interchange or pooling agreement, except for mechanics liens to be discharged in the ordinary course of business.

“Operating Base” means [ ].

“Operational Control” has the same meaning given the term in Section 1.1 of the FAR.

-2-

“Parts” means all appliances, components, parts, instruments, appurtenances, accessories, furnishings or other equipment of whatever nature (other than complete Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine and includes replacement parts.

“Pilot in Command” has the same meaning given the term in Section 1.1 of the FAR.

“Reserved Use Period” means a period of time during which Lessee shall have a first priority right to use of the Aircraft for the purpose of performing one (1) or more flights.

“Schedule Keeper” means the person designated by Lessor to maintain the scheduling log of the Aircraft. The name, address, telephone number, and other contact information for the Schedule Keeper are set forth in Section 10.1.

“Lessee Event of Default” has the meaning ascribed to the term in Section 9.1.

“Lessor Event of Default” has the meaning ascribed to the term in Section 9.3.

“Taxes” means all taxes of every kind (excluding any tax measured by or assessed against a taxpayer’s income, including, without limitation, any income tax, gross income tax, net income tax, franchise tax, gross receipts tax, capital tax, net worth tax, “margin” tax, or capital gains tax) assessed or levied by any federal, state, county, local, airport, district, foreign, or other governmental authority, including, without limitation, sales taxes, use taxes, retailer taxes, federal air transportation excise taxes, federal aviation fuel excise taxes, and other similar duties, fees, and excise taxes.

“Term” has the meaning ascribed to the term in Section 3.1.1.

SECTION 2. LEASE AND DELIVERY OF THE AIRCRAFT

2.1.	Lease. Lessor hereby Leases to Lessee, and Lessee hereby Leases from Lessor, the Aircraft, on the terms and conditions of this Agreement.

2.2.

Quiet Enjoyment. Provided that Lessee pays all amounts payable hereunder and performs and complies with all of the other terms and conditions hereof, neither Lessor nor any person acting on behalf of Lessor or in its stead, nor any person with rights granted by Lessor, will interfere with the peaceful and quiet use and enjoyment of the Aircraft by Lessee during any Reserved Use Period.

2.3.

Non-Exclusivity. Lessee acknowledges that the Aircraft is leased to Lessee on a non-exclusive basis, and that during the Term the Aircraft may be otherwise subject to use by Lessor and/or Leased to one Additional Non-exclusive Lessee. Lessee shall have a right to possess and operate the Aircraft under this Agreement only during Reserved Use Periods and shall not have any right to possess or operate the Aircraft at any other time.

2.4.	Scheduling. Lessee shall submit all requests to schedule Reserved Use Periods to the Schedule Keeper. Schedule Keeper shall approve or deny any request to schedule a Reserved Use Period within one (1) Business Day of Schedule Keeper’s receipt thereof.

-3-

Failure of Schedule Keeper to respond to any such request shall constitute denial thereof. Approval of any request to schedule a Reserved Use Period shall be in Schedule Keeper’s reasonable discretion. Requests to schedule a Reserved Use Period shall be in a form, whether oral or written, specified by Schedule Keeper. Each request to schedule a Reserved Use Period shall include the date and time that the Reserved Use Period will commence and the date and time that the Reserved Use Period will terminate. In addition, for each flight to be performed during the Reserved Use Period, the request shall include the departure airport, the anticipated date and time of departure, the destination airport, the number of anticipated passengers, the nature and extent of luggage, and any other relevant information requested by Schedule Keeper.

2.5.

Delivery. At the commencement of each approved Reserved Use Period, the Aircraft shall be delivered to the Lessee at the Operating Base, or such other location as the parties may mutually agree. The Aircraft at the time of each delivery to Lessee shall have, and be in compliance with, a current valid certificate of airworthiness issued by the FAA and shall be airworthy according to manufacturer’s specifications and FAA regulations, shall have been maintained and repaired in accordance with the provisions of this Agreement. The foregoing notwithstanding, the Aircraft shall be delivered in “AS IS, WHERE IS” CONDITION, SUBJECT TO EACH AND EVERY DISCLAIMER OF WARRANTY AND REPRESENTATION AS SET FORTH IN SECTION 4 HEREOF. Lessor shall not be liable for any delay or failure to furnish the Aircraft pursuant to this Agreement when such failure is due to any Force Majeure Event.

2.6.

FSDO Notice. At least 48 hours prior to the first flight to be conducted under this Agreement, Lessee shall complete the FSDO Notice attached hereto as Schedule B and deliver the completed FSDO Notice by facsimile to the FAA Flight Standards District Office located nearest to the departure airport of said first flight. Lessee shall provide a copy of the FSDO notice together with a copy of the facsimile confirmation sheet to Lessor prior to such first flight.

SECTION 3. TERM, RENT, EXPENSES AND TAXES

3.1.

Term.

3.1.1.

This Agreement shall become effective on the Effective Date and shall continue in effect for an initial period of one (1) year, unless terminated sooner pursuant to the express provisions herein contained (such one (1) year term the “Initial Term”).

3.1.2.

At the end of the Initial Term or any subsequent Renewal Term, this Agreement shall automatically be renewed for an additional one (1) year period (each such additional one (1) year term a “Renewal Term”) unless either party shall have notified the other party at least thirty (30) prior to the last day of such Initial Term or Renewal Term, as the case may be, that this Agreement will not be renewed.

-4-

3.1.3.

Each party shall have the right to terminate this Agreement without cause on thirty (30) days written notice to the other party.

3.2.

Rent. Lessee shall pay rent in arrears in an amount equal to the Hourly Rent specified in Schedule A attached hereto for each Flight Hour of use of the Aircraft by Lessee. Within three (3) Business Days after the last day of each calendar month during the Term, Lessee shall provide to Lessor a written report of the total number of Flight Hours flown during the month just ended.

3.3.

Flight Crew Expenses; Fuel, Oil and Lubricants; and Incidental Expenses. Lessee shall obtain and pay the costs for all fuel, oil, and lubricants required for Lessee’s operations of the Aircraft. Lessee shall also obtain and pay for pilot services for Lessee’s own operations of the Aircraft, and any and all incidental operating costs and expenses arising from Lessee’s operations of the Aircraft, including, without limitation, airport fees, landing fees, ramp fees, handling fees, FBO fees, overnight hangar fees, de-icing costs, contaminant recovery costs, catering and commissary costs, in-flight entertainment and telecommunications charges, ground transportation, flight crew travel expenses (including accommodations, meals, travel expenses), local and state taxes, charts, manuals, and other publications obtained for the specific flight, and any other similar items.

3.4.

Fuel True-Up. The parties shall record the quantity of fuel in the Aircraft’s tanks at the beginning and end of each Reserved Use Period. If the quantity of fuel in the Aircraft’s tanks at the end of a Reserved Use Period is less than the quantity of fuel in the Aircraft’s tanks at the beginning of the Reserved Use Period, Lessee shall pay to Lessor the difference between the value of the fuel in the Aircraft’s tanks at the beginning of the Reserved Use Period and the value of the fuel at the end of the Reserved Use Period. If the quantity of fuel in the Aircraft’s tanks at the end of a Reserved Use Period is greater than the quantity of fuel in the Aircraft’s tanks at the beginning of the Reserved Use Period, Lessee shall be entitled to a credit in an amount equal to the difference between the value of the fuel in the Aircraft’s tanks at the beginning of the Reserved Use Period and the value of the fuel at the end of the Reserved Use Period, which credit shall be applied as an offset against future amounts payable by Lessee to Lessor. For purposes of this Section 3.7, fuel will be valued at Lessor’s cost of fuel at the Operating Base on the date that the Aircraft is returned to the Operating Base at the end of a Reserved Use Period.

3.5.

Taxes. Neither the Base Rent nor any other payments to be made by Lessee under this Agreement includes the amount of any Taxes which may be assessed or levied by any taxing jurisdictions as a result of the Lease of the Aircraft to Lessee, or the use of the Aircraft by Lessee, or the provision of a taxable transportation service by Lessee using the Aircraft. Lessee shall be responsible for, shall indemnify and hold harmless Lessor against, and Lessee shall pay all such Taxes when due. Without limiting the generality of the foregoing, Lessee shall pay to Lessor, together with each payment of Base Rent payment, any applicable Taxes due with respect to such payment. Except as expressly provided in this Section 3.3, as between Lessor and Lessee, Lessor shall be solely

-5-

responsible for payment of all taxes incurred by reason of ownership or operation of the Aircraft during the Term of this Agreement, including but not limited to any ad valorem taxes levied against the Aircraft and any outstanding sales and/or use tax liability arising out of Lessor’s lease or acquisition of the Aircraft.

3.6.

Excessive Wear and Tear. Lessee shall be responsible for, and shall indemnify and hold Lessor harmless from and against, and will pay to Lessor upon demand, all costs and expenses for the repair (including, where appropriate costs of replacement) of: any damage to the interior of the Aircraft (including, without limitation, deep scratches in the cabinetry; stains on seats, carpets or sidewalls; rips in the seats or other fabric-covered items) caused by Lessee or Lessee’s passengers.

3.7.

Payments. At the end of each calendar month during the Term, Lessor shall invoice Lessee for all Rent and any other amounts due and payable by Lessee under this Agreement with respect to the calendar month just ended. To the extent Lessor shall have paid any of the costs otherwise payable by Lessee under the terms of this Agreement (e.g., WIFI and flight phone charges), Lessor’s invoice shall include copies of invoices or receipts for such charges. Lessee shall pay the full amount of any invoice provided by Lessor within ten (10) business days of the date of such invoice. All payments of Base Rent, Maintenance Reserves, Taxes, and other amounts due hereunder shall be paid by wire transfer of free, clear and immediately available funds of the United States into an account designated by Lessor.

3.8.

Late Payments. In the event Lessee fails to pay promptly when due the full amount of any Base Rent, Maintenance Reserves, Taxes, or any other amounts payable hereunder, then, in addition to any other rights or remedies to which Lessor may be entitled: (i) Lessee shall pay interest on the unpaid portion of the overdue amount at the rate of the lesser of 18% per annum or the highest rate of interest permitted by Applicable Law, for the period from and after the due date of such amount as specified in the applicable invoice until the date such amount, or part thereof, and any interest thereon, are paid in full; and (ii) Lessee shall reimburse Lessor for any and all costs (including reasonable attorney’s fees) incurred by Lessor to collect such amounts and interest.

SECTION 4. REPRESENTATIONS AND WARRANTIES

4.1.	Representations and Warranties of Lessee. Lessee represents and warrants as of the date hereof as follows:

4.1.1.

Lessee is a validly organized limited liability company under the laws of the State of [ ], and the person executing on behalf of Lessor has full power and authority to execute this Agreement on behalf of Lessor and by such execution shall bind Lessor under this Agreement.

4.1.2.

No action, suit, or proceeding is currently pending or threatened against Lessee which may in any way adversely affect Lessee’s financial status as of the date thereof, or impair the execution, delivery, or performance by Lessee of this Agreement.

-6-

4.1.3.

The execution and delivery of this Agreement by Lessee and the performance of its obligations hereunder have been duly authorized by all necessary corporate or limited liability company action, and do not conflict with any provision of Lessee’s articles of organization, operating agreement, any governmental regulations, or any other agreements that Lessee may now have with other parties.

4.1.4.

Lessee is not subject to any restriction which, with or without the giving of notice, the passage of time, or both, prohibits or would be violated by or be in conflict with this Agreement.

4.1.5.

All pilots who operate the Aircraft for Lessee’s flights shall have at least the minimum total pilot hours required by any policy of insurance covering the Aircraft and will meet or exceed all requirements under any policy of insurance covering the Aircraft, and all Applicable Law.

4.1.6.

Lessee will not permit the Aircraft to be operated in any unsafe manner or contrary to any manual or instructions for the Aircraft or in violation of the terms or conditions of any insurance policy covering the Aircraft or any Applicable Law.

4.1.7.

This Agreement constitutes the legal, valid and binding obligation of Lessee, and is enforceable against Lessee in accordance with the terms herein contained.

4.2.	Representations and Warranties of Lessor. Lessor hereby represents and warrants as follows:

4.2.1.

Lessor is a validly organized limited liability company under the laws of the State of Delaware, and the person executing on behalf of Lessor has full power and authority to execute this Agreement on behalf of Lessor and by such execution shall bind Lessor under this Agreement.

4.2.2.

No action, suit, or proceeding is currently pending or threatened against Lessor which may in any material way adversely affect or impair the execution, delivery, or performance by Lessor of this Agreement.

4.2.3.

The execution and delivery of this Agreement by Lessor and the performance of its obligations hereunder have been duly authorized by all necessary organizational action, and do not conflict with any provision of Lessor’s articles of incorporation, bylaws, any governmental regulations, or any other agreements that Lessor may now have with other parties.

4.2.4.

Lessor is not subject to any restriction which, with or without the giving of notice, the passage of time, or both, prohibits or would be violated by or be in conflict with this Agreement.

-7-

4.2.5.

This Agreement constitutes the legal, valid and binding obligation of Lessor, and is enforceable against Lessor in accordance with the terms herein contained.

4.3.

DISCLAIMER OF WARRANTIES. THE AIRCRAFT IS BEING LEASED BY THE LESSOR TO THE LESSEE HEREUNDER ON A COMPLETELY “AS IS,” “WHERE IS,” BASIS, WHICH IS ACKNOWLEDGED AND AGREED TO BY THE LESSEE. THE WARRANTIES AND REPRESENTATIONS SET FORTH IN THIS SECTION 4 AND IN SECTION 12.16 ARE EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, AND LESSOR HAS NOT MADE AND SHALL NOT BE CONSIDERED OR DEEMED TO HAVE MADE (WHETHER BY VIRTUE OF HAVING LEASED THE AIRCRAFT UNDER THIS AGREEMENT, OR HAVING ACQUIRED THE AIRCRAFT, OR HAVING DONE OR FAILED TO DO ANY ACT, OR HAVING ACQUIRED OR FAILED TO ACQUIRE ANY STATUS UNDER OR IN RELATION TO THIS AGREEMENT OR OTHERWISE) ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR TO ANY PART THEREOF, AND SPECIFICALLY, WITHOUT LIMITATION, IN THIS RESPECT DISCLAIMS ALL REPRESENTATIONS AND/OR WARRANTIES AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, MERCHANTABILITY, COMPLIANCE WITH SPECIFICATIONS, CONSTRUCTION AND CONDITION OF THE AIRCRAFT, OR THE FITNESS FOR A PARTICULAR USE OF THE AIRCRAFT AND AS TO THE ABSENCE OF LATENT AND OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OR THE LIKE, HEREUNDER OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT OR ANY PART THEREOF OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED WARRANTY ARISING FROM A COURSE OF PERFORMANCE OR DEALING OR USAGE OF TRADE), WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF. THE LESSEE HEREBY WAIVES, RELEASES, DISCLAIMS AND RENOUNCES ALL EXPECTATION OF OR RELIANCE UPON ANY SUCH AND OTHER WARRANTIES, OBLIGATIONS AND LIABILITIES OF LESSOR AND RIGHTS, CLAIMS AND REMEDIES OF THE LESSEE AGAINST LESSOR, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, INCLUDING BUT NOT LIMITED TO (I) ANY IMPLIED WARRANTY OF MERCHANTABILITY OF FITNESS FOR ANY PARTICULAR USE, (II) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, (III) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER OR NOT ARISING FROM THE NEGLIGENCE OF LESSOR, ACTUAL OR IMPUTED, AND (IV) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR DAMAGE TO THE AIRCRAFT, FOR LOSS OF USE, REVENUE OR PROFIT WITH RESPECT TO THE AIRCRAFT, OR FOR ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.

-8-

SECTION 5. OPERATIONS

5.1

Use and Operation. Lessee shall operate the Aircraft in accordance with the provisions of Part 91 of the FAR and shall not operate the Aircraft in commercial service, as a common carrier, or otherwise for compensation or hire except to the limited extent permitted under Sections 91.321 and 91.501 of the FAR, if applicable. Lessee shall be solely and exclusively responsible for the use, operation and control of the Aircraft at all times during each Reserved Use Period. Lessee will not permit the Aircraft to be operated in any unsafe manner or contrary to any manual or instructions for the Aircraft or in violation of the terms or conditions of any insurance policy covering the Aircraft or any Applicable Law. All pilots who operate the Aircraft for Lessee’s flights shall possess current and valid Airline Transport Pilot and First-Class Medical Certificates issued by the FAA, shall have at least the minimum total pilot hours required by any policy of insurance covering the Aircraft, shall meet or exceed all requirements under any policy of insurance covering the Aircraft, and shall be fully competent, trained, experienced, and qualified to fly the Aircraft in accordance with all Applicable Law. Lessee agrees not to operate or locate the Airframe or any Engine or permit the Airframe or any Engine to be operated or located, in any area known to Lessee to be excluded from coverage by any insurance policy in effect or required to be maintained hereunder with respect to the Airframe or Engines, or in any war zone. Lessee agrees not to operate the Airframe or any Engine or permit the Airframe or any Engine to be operated during the Term except in operations for which Lessee is duly authorized, or to use or permit the Aircraft to be used for a purpose for which the Aircraft is not designed or reasonably suitable. Lessee will not permit the Airframe or any Engine to be maintained, used or operated during the Term in violation of any Applicable Law, or contrary to any manufacturer’s operating manuals or instructions. Lessee shall not knowingly permit the Aircraft to be used for the carriage of any persons or property prohibited by Applicable Law, nor shall Lessee permit the Aircraft to be used during the existence of any known defect except in accordance with the FAR. Lessee may carry on the Aircraft on all flights conducted under Lessee’s Operational Control such passengers, baggage, and cargo as Lessee in its sole but reasonable discretion shall determine; provided, however, that the number of passengers on any flight shall in no event exceed the number of seats legally available in the Aircraft, and the total load carried on any flight, including passengers, crew, baggage, and fuel and oil in such quantities as the Pilot in Command shall determine to be required, shall not exceed the maximum permissible load for the Aircraft. While the Aircraft is in the possession or under the control of Lessee, Lessee will abide by and conform to, be responsible for causing and cause others to abide by and conform to, all Applicable Laws now existing or hereafter enacted, that govern or in any way affect the operation, use, maintenance, or occupancy of the Aircraft, or the use of any airport by the Aircraft. Lessor acknowledges that Lessee may use the Aircraft for instruction to satisfy insurance requirements or other training to maintain FAR compliance and pilot proficiency.

-9-

5.2

Aircraft Leased without Services. The Aircraft is leased by Lessor to Lessee hereunder without any additional services of any kind, and Lessee, in coordination with the Additional Non-Exclusive Lessee(s) pursuant to Section 2.3 hereof, shall obtain or supply all services and supplies necessary to the operation, maintenance, and storage of the Aircraft. Without limiting the generality of the foregoing, Lessee, in coordination with the Additional Non-Exclusive Lessee(s) pursuant to Section 2.3 hereof, and at no cost or expense to Lessor, shall:

5.2.1

obtain all fuel, oil, lubricants, and other services and supplies required for Lessee’s operations of the Aircraft;

5.2.2

pay the fixed hourly cost of any maintenance service plans that may be in effect with respect to the Aircraft that become due and payable as a result of Lessee’s operations of the Aircraft;

5.2.3

maintain the Aircraft, or cause the Aircraft to be maintained, in a good and airworthy operating condition and in compliance with all applicable FAR and the Aircraft Operating Manual;

5.2.4

ensure that all mechanics assigned to the maintenance of the Aircraft are competent with respect to the type of aircraft, and fully familiar with applicable maintenance and preventative repair programs for the Aircraft’s specific type;

5.2.5

store the Aircraft when not in use in an appropriate and adequate indoor facility at the Operating Base;

5.2.6

obtain the services of pilots for all of Lessee’s operations of the Aircraft;

5.2.7

ensure that all pilots serving on any flight conducted by Lessee possess current and valid Airline Transport Pilot and First-Class Medical Certificates issued by the FAA, and are fully competent, trained, experienced, and qualified in accordance with Applicable Law and all insurance policies covering the Aircraft;

5.2.8

maintain and preserve, or cause to be maintained and preserved, in the English language, all Aircraft Documents in a complete, accurate, and up-to-date manner; and

5.2.9

maintain, or cause to be maintained, all insurance required by Section 8 of this Agreement.

5.3	Operational Control.

5.3.1

Lessee’s Flights. Lessee shall exercise Operational Control of the Aircraft during all flight operations conducted by Lessee. Further, at all times while the Aircraft is in the possession of Lessee, Lessee shall have exclusive possession, command, and control of the Aircraft, and the pilots of any flight by Lessee shall be under the exclusive command of Lessee. The parties acknowledge and agree that neither Lessor, nor any Additional Non-exclusive Lessee, shall have any right or obligation to exercise Operational Control of the Aircraft in connection with any flight conducted by Lessee.

-10-

5.3.2

Additional Non-exclusive Lessee’s Flights. An Additional Non-exclusive Lessee shall exercise Operational Control of the Aircraft during all flight operations conducted by such Additional Non-exclusive Lessee. Further, at all times while the Aircraft is in the possession of any Additional Non-exclusive Lessee, such Additional Non-exclusive Lessee shall have exclusive possession, command, and control of the Aircraft, and the pilots of any such flight by such Additional Non-exclusive Lessee shall be under the exclusive command of such Additional Non-exclusive Lessee. The parties acknowledge and agree that Lessee shall have no right or obligation to exercise Operational Control of the Aircraft in connection with any flight conducted by any Additional Non-exclusive Lessee.

5.4

Authority of Pilot in Command. Notwithstanding that Lessee shall have Operational Control of the Aircraft during any flight conducted by Lessee, the parties acknowledge that pursuant to Section 91.3 of the FAR, the Pilot in Command of such flight is responsible for, and is obligated and entitled to exercise final authority over, the safe operation of the flight, and the parties agree that the Pilot in Command may, in the exercise of such authority, refuse to commence such flight, terminate such flight, or take any other flight-related action that, in the judgment of the Pilot in Command, is required to ensure the safety of the Aircraft, the flight crew, the passengers, and any other persons and/or property.

5.5

Right to Inspect. Lessor and/or Lessor’s agents shall have the right to inspect the Aircraft or the Aircraft Documents at any reasonable time, upon giving Lessee reasonable notice, to ascertain the condition of the Aircraft and to satisfy Lessor that the Aircraft is being properly repaired and maintained in accordance with the requirements of this Agreement. All required repairs shall be performed as soon as practicable after such inspection.

5.5	Modification of Aircraft. Lessee shall not make or permit to be made any modification, alteration, improvement, or addition to the Aircraft without the express written consent of Lessor.

5.6	Fines, Penalties, and Forfeitures. Lessee shall be solely responsible for and shall indemnify and hold Lessor harmless from and against, any fines, penalties, or forfeitures relating in any manner to the operation, maintenance, or use of the Aircraft by Lessee under this Agreement.

5.7	No Pets. Pets and other animals are prohibited on the Aircraft.

5.8	No Smoking. Smoking is prohibited on the Aircraft.

-11-

SECTION 6. RETURN OF AIRCRAFT

6.1.

Return. At the end of each Reserved Use Period, Lessee shall return the Aircraft to Lessor by delivering the same at Lessee’s expense to Lessor at the Operating Base or such other location within the 48 contiguous United States as the parties may mutually agree, fully equipped with all Engines and Parts installed thereon.

6.2.

Condition of Aircraft. The Aircraft at the time of each return to Lessor shall have, and be in compliance with, a current valid certificate of airworthiness issued by the FAA and shall be airworthy according to manufacturer’s specifications and FAA regulations, shall have been maintained and repaired during the Reserved Use Period in accordance with the provisions of this Agreement, and shall be in the same condition as it was in at the commencement of the Reserved Use Period, ordinary wear and tear excepted. LESSEE SHALL INDEMNIFY AND HOLD LESSOR HARMLESS FROM AND AGAINST ANY AND ALL COSTS AND EXPENSES TO REPAIR ANY DAMAGE TO THE AIRCRAFT ARISING DURING ANY RESERVED USE PERIOD IN EXCESS OF ORDINARY WEAR AND TEAR TO THE EXTENT ANY SUCH DAMAGE IS NOT COVERED BY INSURANCE.

6.3.	Aircraft Documents. At the end of each Reserved Use Period, Lessee shall return or cause to be returned to Lessor all of the Aircraft Documents, updated and maintained by Lessee through the date of return of the Aircraft.

SECTION 7. REGISTRATION AND LIENS

7.1.

Title and Registration. Lessee acknowledges that Lessor owns all legal, beneficial, and equitable title to the Aircraft, and that said title shall remain vested in Lessor during the Term hereof. Lessee shall undertake, to the extent permitted by Applicable Law, to do all such further acts, deeds, assurances or things as may, in the opinion of the Lessor, be necessary or desirable in order to protect or preserve Lessor’s title to the Aircraft.

7.2.

Lessee Liens. Lessee shall ensure that no Liens are created or placed against the Aircraft by Lessee or third parties as a result of Lessee’s actions. Lessee shall notify Lessor promptly upon learning of any Liens not permitted by these terms. Lessee shall, at its own cost and expense, take all such actions as may be necessary to discharge and satisfy in full any such Lien promptly after the same becomes known to it.

SECTION 8. INSURANCE

8.1.

Aircraft Liability. Lessee, in coordination with the Additional Non-Exclusive Lessee(s) pursuant to Section 2.3 hereof, and at no cost or expense to Lessor, shall maintain, or cause to be maintained, bodily injury and property damage, liability insurance in an amount no less than Three Hundred Million United States Dollars (US$300,000,000.00) Combined Single Limit. Said policy shall be an occurrence policy naming Lessee, Lessor, and the Additional Non-Exclusive Lessee(s) as Named Insureds.

-12-

8.2.

Hull Physical Damage. Lessee, in coordination with the Additional Non-Exclusive Lessee(s) pursuant to Section 2.3 hereof, and at no cost or expense to Lessor, shall maintain, or cause to be maintained, all risks aircraft hull insurance in the amount of no less than Eight Million United States Dollars (US$8,000,000.00), and such insurance shall name Lessor and any first lien mortgage holder as loss payees as their interests may appear.

8.3.

Insurance Certificates. Lessor will provide Lessee and any Pilot Services Provider with a Certificate of Insurance upon execution of this Agreement and at each renewal of the insurance, to include a thirty (30) day written notice of cancellation, except ten (10) days for non-payment of premium or lesser notice between seven (7) days and forty-eight (48) hours for certain war, hi-jacking and other perils insurance.

8.4.

Conditions of Insurance. Each insurance policy required by this Section 8 shall be primary without any right of contribution from any insurance maintained by any other party and shall contain a standard clause as to cross liability or severability of interests among the insured parties providing that such insurance shall operate in all respects as if a separate policy had been issued covering each party insured, except for limits of liability. Each policy shall waive any right of set-off against Lessee and any Pilot Services Provider, and any right of subrogation against Lessee and/or any Pilot Services Provider. The geographic limits of such insurance shall be worldwide, except that in the case of war, hi-jacking and other perils coverage, the coverage area shall be subject to such excluded territories as is from time to time usual in the aviation industry. Any Pilot Services Provider that provides pilot services to Lessee in connection with Lessee’s operation of the Aircraft is an intended third-party beneficiary of the obligations of Lessor to under this Section 8.

8.5.

Insurance Companies. Each insurance policy required by this Section 8 shall be issued by a company or companies of recognized reputation and responsibility (but in no event having an A.M. Best or comparable agency rating of less than “A-”) which (a) are qualified to do business in the United States and the State of Virginia, (b) will submit to the jurisdiction of any competent state or federal court in the United States with regard to any dispute arising out of the policy of insurance or concerning Lessor, Lessee and/or any Pilot Services Provider; and (c) will respond to any claim or judgment against Lessee and/or any Pilot Services Provider in any competent state or federal court in the United States or its territories.

SECTION 9. DEFAULTS AND REMEDIES

9.1.

Lessee Event of Default. The occurrence of any of the following events shall constitute a “Lessee Event of Default”: (a) Lessee shall fail to make any payment due under this Agreement within five (5) days of when due, (b) Lessee shall fail to make any payment due under any agreement between Lessee and any third party relating to the Aircraft when due or within any grace period provided in any such agreement between Lessee and any third party, (c) Lessee shall fail to observe or perform any covenant, agreement, or obligation under this Agreement or any agreement between Lessee and any third party

-13-

relating to the Aircraft, (d) Lessee shall sell, transfer, encumber, assign, Let, sublicense or charter, or attempt to sell, transfer, encumber, assign, Let, sublicense or charter, the Aircraft or any part thereof, (e) Lessee shall use the Aircraft for, or permit the Aircraft to be used for, any illegal purpose, (f) Lessee shall fail to pay, or admit in writing its inability to pay, its debts as they become due, or (g) Lessee shall make a general assignment for the benefit of creditors or file a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (or any such proceeding shall be instituted against Lessee by any other party and shall not be vacated or set aside within sixty (60) days).

9.2.

Lessor’s Remedies. Upon the occurrence of any Lessee Event of Default, and at any time thereafter so long as such Lessee Event of Default shall be continuing, the Lessor may, at its option, declare in writing to the Lessee that this Agreement is in default, and may immediately terminate this Agreement. Upon any such termination hereof by Lessor, if such termination shall occur during a Reserved Use Period or if Lessee shall otherwise have possession of the Aircraft at the time of such termination, Lessee shall promptly return the Aircraft to Lessor in accordance with Section 6 hereof.

9.3.

Lessor Event of Default. The occurrence of any of the following events shall constitute a “Lessor Event of Default”: (a) Lessor shall fail to observe or perform any covenant, agreement, or obligation under this Agreement or any agreement between Lessee and any third party relating to the Aircraft, (b) Lessor shall fail to maintain any or all of the insurance required by this Agreement, (c) Lessor shall fail to pay, or admit in writing its inability to pay, its debts as they become due, or (d) Lessor shall make a general assignment for the benefit of creditors or file a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (or any such proceeding shall be instituted against Lessor by any other party and shall not be vacated or set aside within sixty (60) days).

9.4.

Lessee’s Remedies. Upon the occurrence of any Lessor Event of Default, and at any time thereafter so long as such Lessor Event of Default shall be continuing, the Lessee may, at its option, declare in writing to the Lessor that this Agreement is in default, and may immediately terminate this Agreement. Upon any such termination hereof by Lessee, if such termination shall occur during a Reserved Use Period or if Lessee shall otherwise have possession of the Aircraft at the time of such termination, Lessee shall promptly return the Aircraft to Lessor in accordance with Section 6 hereof.

SECTION 10. NOTICES

10.1.

All communications, declarations, demands, consents, directions, approvals, instructions, requests and notices required or permitted by this Agreement shall be in writing and shall be deemed to have been duly given or made when delivered personally, or in case of documented overnight delivery service or registered or certified mail, return receipt requested, delivery charge or postage prepaid, on the date shown on the receipt therefor, in each case at the address set forth below:

-14-


		If to Lessor:		________________________
				________________________
				________________________
				________________________
				Attn:________________ ___

		If to Schedule Keeper:
				________________________
				________________________
				________________________
				________________________
				Email:___________________

		If to Lessee:		[Douglas Elliman Group Member]
				c/o Douglas Elliman, Inc.
				4400 Biscayne Blvd.
				Miami, FL 33137
				Attn: Marc N. Bell

SECTION 11. EVENT OF LOSS AND INDEMNIFICATION

11.1.

Notification of Event of Loss. In the event any damage to, or destruction of, the Aircraft shall occur while the Aircraft is being operated by or in the possession of Lessee, or in the event of any whole or partial loss of the Aircraft, including, without limitation, any loss resulting from the theft, condemnation, confiscation or seizure of, or requisition of title to or use of, the Aircraft by private persons or by any governmental or purported governmental authority, while being operated by or in the possession of Lessee, Lessee shall immediately:

11.1.1.

report the event of loss to Lessor and to any and all applicable governmental agencies; and

11.1.2.

furnish such information to Lessor and the insurer of the Aircraft, and execute such documents, as may be required and necessary to collect the proceeds from any insurance policies.

11.2.

Repair or Termination. In the event the Aircraft is partially destroyed or damaged, Lessor shall have the option, in its sole discretion, to either (i) fully repair the Aircraft in order that it shall be placed in at least as good condition as it was prior to such partial destruction or damage; or (ii) terminate this Agreement. Within ten (10) Business Days after the date of such partial destruction or damage, Lessor shall give written notice to Lessee specifying whether Lessor has elected to fully repair the Aircraft or to terminate this Agreement, which termination shall be effective immediately upon such written notice from Lessor to Lessee setting forth Lessor’s election to so terminate this Agreement.

-15-

11.3.

Indemnification by Lessee. Lessor is only leasing the Aircraft under this Agreement and is not liable for the actions of Lessee or Lessee’s agents, employees, flight crew, guests or passengers. Lessor is not by this Agreement providing any charter, air taxi, air carrier or commercial operation services for hire. LESSEE HEREBY RELEASES, AND SHALL DEFEND, INDEMNIFY (ON AN AFTER TAX BASIS) AND HOLD HARMLESS LESSOR, LESSOR’S AFFILIATES, AND THEIR RESPECTIVE SHAREHOLDERS, MEMBERS, DIRECTORS, OFFICERS, MANAGERS, EMPLOYEES, SUCCESSORS AND ASSIGNS (EACH OF THE FOREGOING AN “INDEMNIFIED PARTY”), FROM AND AGAINST, ANY AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES, DEMANDS, SUITS, JUDGMENTS, CAUSES OF ACTION, CIVIL AND CRIMINAL LEGAL PROCEEDINGS, PENALTIES, FINES, AND OTHER SANCTIONS, AND ANY ATTORNEYS’ FEES AND DISBURSEMENTS AND OTHER REASONABLE COSTS AND EXPENSES OF INVESTIGATION OR DEFENSE, INCLUDING THOSE INCURRED UPON ANY APPEAL ARISING OUT OF OR RELATING TO THE AIRCRAFT OR THIS AGREEMENT, WHETHER ARISING IN LAW OR EQUITY, OR IN CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, CLAIMS INVOLVING WRONGFUL DEATH OR INJURY TO PERSONS AND/OR DAMAGE TO PROPERTY (EACH OF THE FOREGOING A “CLAIM”), TO THE EXTENT DIRECTLY OR INDIRECTLY ARISING FROM ANY BREACH, DEFAULT OR MISREPRESENTATION OF LESSEE UNDER THIS AGREEMENT AND/OR LESSEE’S USE, OPERATION OR MAINTENANCE OF THE AIRCRAFT, EXCEPT THAT LESSEE SHALL NOT BE OBLIGATED TO INDEMNIFY AN INDEMNIFIED PARTY FOR A CLAIM TO THE EXTENT SUCH CLAIM ARISES FROM AND IS ATTRIBUTED TO THE GROSS NEGLIGENCE, BAD FAITH OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY. LESSEE SHALL PAY TO EACH INDEMNIFIED PARTY ANY AND ALL AMOUNTS NECESSARY TO INDEMNIFY SUCH INDEMNIFIED PARTY FROM AND AGAINST ANY CLAIMS. LESSEE SHALL, UPON REQUEST, DEFEND ANY ACTIONS BASED ON, OR ARISING OUT OF, ANY OF THE FOREGOING.

11.4.

Indemnification by Lessor. LESSOR HEREBY RELEASES, AND SHALL DEFEND, INDEMNIFY (ON AN AFTER TAX BASIS) AND HOLD HARMLESS LESSEE, LESSEE’S AFFILIATES, AND THEIR RESPECTIVE SHAREHOLDERS, MEMBERS, DIRECTORS, OFFICERS, MANAGERS, EMPLOYEES, SUCCESSORS AND ASSIGNS (EACH OF THE FOREGOING A “LESSEE INDEMNIFIED PARTY”), FROM AND AGAINST, ANY AND ALL CLAIMS, TO THE EXTENT DIRECTLY OR INDIRECTLY ARISING FROM ANY BREACH, DEFAULT OR MISREPRESENTATION OF LESSOR UNDER THIS AGREEMENT AND/OR LESSOR’S USE, OPERATION OR MAINTENANCE OF THE AIRCRAFT, EXCEPT THAT LESSOR SHALL NOT BE OBLIGATED TO INDEMNIFY A LESSEE INDEMNIFIED PARTY FOR A CLAIM TO THE EXTENT SUCH CLAIM ARISES FROM AND IS ATTRIBUTED TO THE GROSS NEGLIGENCE, BAD FAITH OR WILLFUL MISCONDUCT OF A LESSEE INDEMNIFIED PARTY. LESSOR SHALL PAY TO EACH LESSEE INDEMNIFIED PARTY ANY AND ALL AMOUNTS NECESSARY TO INDEMNIFY SUCH LESSEE INDEMNIFIED PARTY FROM AND AGAINST ANY CLAIMS. LESSOR SHALL, UPON REQUEST, DEFEND ANY ACTIONS BASED ON, OR ARISING OUT OF, ANY OF THE FOREGOING.

-16-

11.5.

Limitations on Liability. IN NO EVENT SHALL ANY PARTY BE LIABLE FOR ANY SPECIAL, EXEMPLARY, PUNITIVE, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS, LOSS OF USE, LOSS OF TIME, INCONVENIENCE, OR COMMERCIAL LOSS.

SECTION 12. MISCELLANEOUS

12.1.

Entire Agreement. This Agreement, and all terms, conditions, warranties, and representations herein, are for the sole and exclusive benefit of the signatories hereto. This Agreement constitutes the entire agreement of the parties as of its Effective Date and supersedes all prior or independent, oral or written agreements, understandings, statements, representations, commitments, promises, and warranties made with respect to the subject matter of this Agreement. This Agreement is an Ancillary Agreement as defined in that certain Distribution Agreement, dated [ ], by and between Vector Group Ltd. and Douglas Elliman Inc.

12.2.

Other Transactions. Except as specifically provided in this Agreement, none of the provisions of this Agreement, nor any oral or written statements, representations, commitments, promises, or warranties made with respect to the subject matter of this Agreement shall be construed or relied upon by any party as the basis of, consideration for, or inducement to engage in, any separate agreement, transaction or commitment for any purpose whatsoever.

12.3.

Prohibited and Unenforceable Provisions. 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 To the extent permitted by Applicable Law, each of Lessor and Lessee hereby waives any provision of Applicable Law which renders any provision hereof prohibited or unenforceable in any respect.

12.4.

Enforcement. This Agreement, including all agreements, covenants, representations and warranties, shall be binding upon and inure to the benefit of, and may be enforced by Lessor, Lessee, and each of their agents, servants and personal representatives, successors and permitted assigns.

12.5.

Headings. The section and subsection headings in this Agreement are for convenience of reference only and shall not modify, define, expand, or limit any of the terms or provisions hereof.

12.6.

Counterparts. This Agreement may be executed by the parties hereto in two (2) separate counterparts, each of which when so executed and delivered shall be an original, and both of which shall together constitute but one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by facsimile transmission or by electronic photocopy (i.e., “pdf”) shall be effective as delivery of a manually executed counterpart of this Agreement only if receipt of such facsimile transmission or by electronic photocopy is affirmatively acknowledged by reply e-mail or other written confirmation.

-17-

12.7.

Amendments. No term or provision of this Agreement may be amended, changed, waived, discharged, or terminated orally, but only by an instrument in writing signed by Lessor and Lessee.

12.8.

No Waiver. No delay or omission in the exercise or enforcement or any right or remedy hereunder by either party shall be construed as a waiver of such right or remedy. All remedies, rights, undertakings, obligations, and agreements contained herein shall be cumulative and not mutually exclusive, and in addition to all other rights and remedies which either party possesses at law or in equity.

12.9.

Attorneys’ Fees. In the event a dispute arises regarding this Agreement, the prevailing party shall be entitled to its reasonable attorneys’ fees and expenses incurred in addition to any other relief to which it is entitled.

12.10.

Transaction Costs. Except as expressly provided in this Agreement, each party shall bear its own costs incurred in entering into this Agreement.

12.11.

Confidentiality. Each party (including, for purposes of this Section 12.11, its affiliates, employees and agents) shall treat all information relating to this Agreement, and all information relating to the other party obtained in connection with this Agreement, as confidential information (“Confidential Information”). No party shall at any time disclose in any manner or in any form or make use of Confidential Information, except as may be required by law (including without limitation, the application to the parties or their affiliates of the Securities Act of 1933, as amended, and the Exchange Act of 1934, as amended, and, in each case, the rules and regulations promulgated thereunder) or legal process, to its legal or financial advisors, or to enforce the terms of this Agreement. Each party acknowledges that the disclosure or use of Confidential Information may irreparably harm the other party and shall constitute a breach of this Agreement. Each party acknowledges that this provision constitutes a material provision of this Agreement, and that in the event of a breach of this Section 12.11, the non-disclosing party will have no adequate remedy at law. As a result, the non-disclosing party shall be entitled to seek the issuance by a court of competent jurisdiction of an injunction, restraining order or other equitable relief restraining the disclosing party, its agents or representatives from committing or continuing any such violation.

12.12.

No Assignments. Lessee shall not assign this Agreement or sell, transfer, assign, or encumber the Aircraft or any part thereof, or Let, sublicense, charter, or part with possession of, the Aircraft or any part thereof, or enter into any Time Sharing or Interchange Agreement (as such terms are defined in Section 91.501(c) of the FAR) involving the Aircraft.

-18-

12.13.

Governing Law. This Agreement has been negotiated and delivered in the State of Florida and shall in all respects be governed by, and construed in accordance with, the laws of the State of Florida, including all matters of construction, validity and performance, without giving effect to its conflict of laws provisions.

12.14.

Jurisdiction and Venue. Exclusive jurisdiction and venue over any and all disputes between the parties arising under this Agreement shall be in, and for such purpose each party hereby submits to the jurisdiction of, the state and federal courts serving the State of Florida.

12.15.

WAIVER OF JURY TRIAL. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTELLIGENTLY WAIVE THEIR RIGHTS TO A JURY TRIAL IN ANY ACTION, SUIT OR PROCEEDING RELATING TO, ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY OTHER DOCUMENT, AGREEMENT OR INSTRUMENT EXECUTED AND/OR DELIVERED IN CONNECTION WITH THE FOREGOING.

12.16.

OFAC. Each party represents and warrants to the other that neither it nor of its affiliates, nor any of their respective partners, members, shareholders or other equity owners, and none of their respective employees, officers, directors, representatives or agents is, nor will any of them become, a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action. Each party covenants to and with the other that it is not and will not engage in any dealings or transactions or be otherwise associated with such persons or entities. In the event of any violation of this section, the non-defaulting party shall be entitled to immediately terminate this Agreement without prior written notice to the defaulting party and to take such other actions as are permitted or required to be taken under law or in equity.

12.17.

Survival. Sections 3.2 through 3.10, 5.7, 6.2, 9.2, 9.4, 11.3, 11.4 and 11.5 shall survive the termination of this Agreement.

SECTION 13. TRUTH IN LEASING

TRUTH IN LEASING STATEMENT UNDER SECTION 91.23 OF THE FAR’s.

WITHIN THE TWELVE (12) MONTH PERIOD PRECEDING THE DATE OF THIS AGREEMENT, THE AIRCRAFT HAS BEEN INSPECTED AND MAINTAINED IN ACCORDANCE WITH THE PROVISIONS OF THE FAR 91.409(f).

LESSEE CERTIFIES THAT DURING THE TERM OF THIS AGREEMENT AND FOR OPERATIONS CONDUCTED HEREUNDER, THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED BY LESSEE IN ACCORDANCE WITH THE PROVISIONS OF THE FAR 91.409(f).

-19-

LESSEE ACKNOWLEDGES THAT WHEN IT OPERATES THE AIRCRAFT UNDER THIS AGREEMENT, IT SHALL BE KNOWN AS, CONSIDERED, AND IN FACT WILL BE THE OPERATOR OF SUCH AIRCRAFT. EACH PARTY HERETO CERTIFIES THAT IT UNDERSTANDS THE EXTENT OF ITS RESPONSIBILITIES, SET FORTH HEREIN, FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.

AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FEDERAL AVIATION ADMINISTRATION FLIGHT STANDARDS DISTRICT OFFICE.

THE PARTIES HERETO CERTIFY THAT A TRUE COPY OF THIS AGREEMENT SHALL BE CARRIED ON THE AIRCRAFT AT ALL TIMES AND SHALL BE MADE AVAILABLE FOR INSPECTION UPON REQUEST BY AN APPROPRIATELY CONSTITUTED IDENTIFIED REPRESENTATIVE OF THE ADMINISTRATOR OF THE FAA.

* * * Signature Page Follows * * *

-20-

IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this Non-Exclusive Aircraft Lease Agreement to be duly executed as of the Effective Date.


LESSOR:

[VECTOR GROUP MEMBER]

By:
Print:
Title:

LESSEE:

[DOUGLAS ELLIMAN GROUP MEMBER]

By:
Print:
Title:

NON-EXCLUSIVE AIRCRAFT LEASE AGREEMENT

Schedule A

Aircraft: [ ]

Base Rent: $[ ] per Flight Hour

NON-EXCLUSIVE AIRCRAFT LEASE AGREEMENT

Schedule B

FSDO Notification Letter

Date: _________________

Via Facsimile

Fax: __________________

Federal Aviation Administration

RE:

FAR Section 91.23 FSDO Notification

First Flight Under Lease of [ ],

U.S. registration number [ ], serial number [ ]

To whom it may concern:

Pursuant to the requirements of Federal Aviation Regulation Section 91.23(c)(3), please accept this letter as notification that the undersigned will acquire and take delivery of a leasehold interest in the above referenced aircraft, and that the first flight of the aircraft under the Lease will depart from [ ] Airport on the [ ] day of [ ], at approximately [ ] (am / pm) local time.


Sincerely,

[DOUGLAS ELLIMAN GROUP MEMBER]

By:
Print:
Title:

Exhibit 21.1

SUBSIDIARIES OF DOUGLAS ELLIMAN INC.


ENTITY NAME	JURISDICTION OF ORGANIZATION
DER Holdings LLC		DE
Douglas Elliman of California, Inc.		CA
Douglas Elliman Realty, LLC		NY
Douglas Elliman Florida LLC d/b/a Douglas Elliman Real Estate		FL
Douglas Elliman of LI, LLC d/b/a Douglas Elliman Real Estate		NY
Douglas Elliman, LLC d/b/a Douglas Elliman Real Estate		DE

Not included above are other subsidiaries which, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary, as such term is defined by Rule 1-02(w) of Regulation S-X.

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Registration Statement on Form S-1 of our report dated August 24, 2021, relating to the financial statements of Douglas Elliman Inc. We also consent to the reference to us under the heading “Experts” in such Registration Statement.

/s/ Deloitte & Touche LLP

Miami, Florida

December 7, 2021