NOTES PAYABLE, LONG-TERM DEBT AND OTHER OBLIGATIONS

Notes payable, long-term debt and other obligations consist of:



	March 31, 2014			December 31, 2013
Vector:
7.75% Senior Secured Notes due 2021	$	450,000		$	450,000
6.75% Variable Interest Senior Convertible Note due 2014, net of unamortized discount of $7,504 and $19,311*	17,496			30,689
6.75% Variable Interest Senior Convertible Exchange Notes due 2014, net of unamortized discount of $19,615 and $25,944*	87,915			81,586
7.5% Variable Interest Senior Convertible Notes due 2019, net of unamortized discount of $153,886 and $155,817*	76,114			74,183
5.5% Variable Interest Senior Convertible Debentures due 2020, net of unamortized discount of $107,464 and $0*	151,286			—
Liggett:
Revolving credit facility	15,747			30,424
Term loan under credit facility	3,810			3,884
Equipment loans	17,029			17,252
Other	4,220			4,325
Total notes payable, long-term debt and other obligations	823,617			692,343
Less:
Current maturities	(132,791		)	(151,577		)
Amount due after one year	$	690,826		$	540,766

______________________

* The fair value of the derivatives embedded within the 6.75% Variable Interest Senior Convertible Note ($2,527 at March 31, 2014 and $6,607 at December 31, 2013, respectively), the 6.75% Variable Interest Senior Convertible Exchange Notes ($9,579 at March 31, 2014 and $12,521 at December 31, 2013, respectively), the 5.50% Variable Interest Senior Convertible Debentures ($83,573 at March 31, 2014 and $0 at December 31, 2013, respectively), and the 7.50% Variable Interest Senior Convertible Debentures ($98,296 at March 31, 2014 and $92,934 at December 31, 2013, respectively), is separately classified as a derivative liability in the condensed consolidated balance sheets.

7.75% Senior Secured Notes due 2021 - Vector:

On April 15, 2014, the Company completed the sale of $150,000 principal amount of its 7.75% Senior Secured Notes due 2021 for a price of 106.750% in a private offering to qualified institutional investors in accordance with Rule 144A of the Securities Act of 1933. The Company received net proceeds of approximately $156,000 and the net proceeds will be used for general corporate purposes, including additional investments in real estate and in its tobacco business. In connection with the issuance of the 7.75% Senior Secured Notes, the Company entered into a Registration Rights Agreement. The Company agreed to consummate a registered exchange offer for the 7.75% Senior Secured Notes within 360 days after the date of the initial issuance of the 7.75% Senior Secured Notes. The new 7.75% Senior Secured Notes to be issued in the exchange offer will have substantially the same terms as the original notes, except that the new 7.75% Senior Secured Notes will have been registered under the Securities Act. The Company will be required to pay additional interest on the 7.75% Senior Secured Notes if it fails to timely comply with its obligations under the Registration Rights Agreement until such time as it complies.

6.75% Variable Interest Senior Convertible Note due 2014 - Vector:

On March 14, 2014, the holder of the 6.75% Variable Interest Senior Convertible Note due 2014 converted $25,000 principal balance of the $50,000 Note into 2,121,479 of the Company's common shares. The Company recorded non-cash accelerated interest expense related to the converted debt of $3,679 for the three months ended March 31, 2014. The debt conversion resulted in a reduction of debt and an increase to equity in the amount of $25,000.

5.5% Variable Interest Senior Convertible Notes due 2020 - Vector:

On March 24, 2014, the Company completed the sale of $258,750 of its Variable Interest Convertible Senior Notes due 2020 (the "2020 Convertible Notes"). The 2020 Convertible Notes are the Company's senior unsecured obligations and are effectively subordinated to any of its secured indebtedness to the extent of the assets securing such indebtedness. The 2020 Convertible Notes are also structurally subordinated to all liabilities and commitments of the Company's subsidiaries.

The aggregate net proceeds from the sale of the 2020 Convertible Notes were approximately $250,300 after deducting underwriting discounts, commissions, fees and offering expenses. The net proceeds will be used for general corporate purposes, including for additional investments in real estate and in the Company's tobacco business. The Company may also consider using a portion of the net proceeds from the sale of the notes to address upcoming debt maturities.

The 2020 Convertible Notes pay interest (“Total Interest”) on a quarterly basis beginning April 15, 2014 at a rate of 1.75% per annum plus additional interest, which is based on the amount of cash dividends paid during the prior three-month period ending on the record date for such interest payment multiplied by the total number of shares of its common stock into which the debt will be convertible on such record date. Notwithstanding the foregoing, however, the interest payable on each interest payment date after April 15, 2014 shall be the higher of (i) the Total Interest and (ii) 5.5% per annum with the interest payment on April 15, 2014 being based on 5.5% per annum. The notes are convertible into the Company’s common stock at the holder’s option. The conversion price at March 31, 2014 was $27.16 per share (approximately 36.8155 shares of common stock per $1,000 principal amount of the note), and is subject to adjustment for various events, including the issuance of stock dividends. The notes will mature on April 15, 2020. If a fundamental change (as defined in the indenture) occurs, the Company will be required to offer to repurchase the notes at 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Revolving Credit Facility and Term Loan Under Credit Facility - Liggett:

As of March 31, 2014, a total of $19,557 was outstanding under the revolving and term loan portions of the credit facility. Availability as determined under the facility was approximately $30,443 based on eligible collateral at March 31, 2014.

Non-Cash Interest Expense - Vector:



	Three Months Ended
	March 31,
	2014		2013
Amortization of debt discount	$	12,456	$	7,348
Amortization of deferred finance costs	708		597
Loss on extinguishment of 11% Senior Secured Notes	—		3,638
Accelerated interest expense on 6.75% Variable Interest Senior Convertible Note converted	3,679		—
	$	16,843	$	11,583

Fair Value of Notes Payable and Long-Term Debt:



	March 31, 2014				December 31, 2013
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Notes payable and long-term debt	$	823,617	$	1,325,898	$	692,343	$	1,006,562

Notes payable and long-term debt are carried on the condensed balance sheet at amortized cost. The fair value determination disclosed above would be classified as Level 2 under the fair value hierarchy disclosed in Note 9 if such liabilities were recorded on the condensed balance sheet at fair value. The estimated fair value of the Company's notes payable and long-term debt has been determined by the Company using available market information and appropriate valuation methodologies including the evaluation of the Company's credit risk as described in the Company's Form 10-K. However, considerable judgment is required to develop the estimates of fair value and, accordingly, the estimate presented herein are not necessarily indicative of the amount that could be realized in a current market exchange.