NOTES PAYABLE, LONG-TERM DEBT AND OTHER OBLIGATIONS

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



	June 30, 2016			December 31, 2015
Vector:
7.75% Senior Secured Notes due 2021, including premium of $15,391 and $8,014	$	850,391		$	608,014
7.5% Variable Interest Senior Convertible Notes due 2019, net of unamortized discount of $121,788 and $132,119*	108,212			97,881
5.5% Variable Interest Senior Convertible Debentures due 2020, net of unamortized discount of $79,010 and $86,136*	179,740			172,614
Liggett:
Revolving credit facility	12,808			3,213
Term loan under credit facility	3,147			3,269
Equipment loans	6,866			9,716
Other	354			461
Notes payable, long-term debt and other obligations	1,161,518			895,168
Less:
Debt issuance costs	(34,172		)	(30,141		)
Total notes payable, long-term debt and other obligations	1,127,346			865,027
Less:
Current maturities	(16,615		)	(8,919		)
Amount due after one year	$	1,110,731		$	856,108

______________________

* The fair value of the derivatives embedded within the 7.5% Variable Interest Senior Convertible Notes ($61,998 at June 30, 2016 and $72,083 at December 31, 2015, respectively) and the 5.5% Variable Interest Senior Convertible Debentures ($64,934 at June 30, 2016 and $71,959 at December 31, 2015, respectively), is separately classified as a derivative liability in the condensed consolidated balance sheets.

7.75% Senior Secured Notes due 2021 - Vector:

On May 9, 2016, the Company completed the sale of an additional $235,000 principal amount of its 7.75% Senior Secured Notes due 2021 for a price of 103.50% in a private offering to qualified institutional investors in accordance with Rule 144A of the Securities Act of 1933 (the "Securities Act"). The Company received net proceeds of approximately $236,900 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 will amortize the deferred costs and debt premium related to the additional Senior Secured Notes over the estimated remaining life of the debt.

In August 2016, the Company completed an offer to exchange the 7.75% Senior Secured Notes issued in May 2016 for an equal amount of newly issued 7.75% Senior Secured Notes due 2021. The new 7.75% Senior Secured Notes have substantially the same terms as the original notes, except that the new 7.75% Senior Secured Notes have been registered under the Securities Act.

6.75% Variable Interest Senior Convertible Note due 2015 - Vector:

On February 3, 2015, the holder of the 6.75% Variable Interest Senior Convertible Note due 2015, converted the remaining $25,000 principal balance of the $50,000 Note into 2,338,930 of the Company's common shares. The debt conversion resulted in a reduction of debt and an increase to equity in the amount of $25,000.

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

As of June 30, 2016, a total of $15,955 was outstanding under the revolving and term loan portions of the credit facility. Availability, as determined under the facility, was approximately $44,000 based on eligible collateral at June 30, 2016.

Shares of Common Stock per $1,000 Principal Amount due on Convertible Notes:

The conversion rates for all convertible debt outstanding as of June 30, 2016 and December 31, 2015, are summarized below:



	June 30, 2016			December 31, 2015
	Conversion Price		Shares per $1,000	Conversion Price		Shares per $1,000

7.5% Variable Interest Senior Convertible Notes due 2019	$	15.98	62.5743	$	15.98	62.5743
5.5% Variable Interest Senior Convertible Debentures due 2020	$	24.64	40.5891	$	24.64	40.5891

Non-Cash Interest Expense - Vector:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Amortization of debt discount, net	$	8,653	$	6,213	$	16,609	$	11,840
Amortization of debt issuance costs	1,401		1,022		2,569		1,988
	$	10,054	$	7,235	$	19,178	$	13,828

Fair Value of Notes Payable and Long-Term Debt:



	June 30, 2016					December 31, 2015
	Carrying			Fair		Carrying			Fair
	Value			Value		Value			Value
Notes payable and long-term debt	$	1,161,518	(1)	$	1,513,012	$	895,168	(1)	$	1,297,875

______________________

⁽¹⁾The carrying value does not include the carrying value of the embedded derivative. See Note 11.

Notes payable and long-term debt are carried on the condensed consolidated balance sheet at amortized cost. The fair value determinations disclosed above are classified as Level 2 under the fair value hierarchy disclosed in Note 11 if such liabilities were recorded on the condensed consolidated 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. The Company used the quoted market prices as of June 30, 2016 to determine the fair value of its publicly-traded notes and debentures. The carrying value of the credit facility and term loan is equal to the fair value. The fair value of the equipment loans and other obligations was determined by calculating the present value of the required future cash flows. 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.