DEF 14A
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SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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o  Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
þ
Definitive Proxy Statement
o
Definitive Additional Materials
o 
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Vector Group Ltd.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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þ  No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
 
 
 
 
 
 
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)
 
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)
 
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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TABLE OF CONTENTS



Table of Contents

VECTOR GROUP LTD.
4400 Biscayne Blvd.
Miami, Florida 33137
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 28, 2016
To the Stockholders of Vector Group Ltd.:
The Annual Meeting of Stockholders of Vector Group Ltd., a Delaware corporation (the “Company” or "Vector"), will be held at the JW Marriott Marquis Miami, 255 Biscayne Blvd Way, Miami, FL 33131 on Thursday, April 28, 2016 at 11:00 a.m., and at any postponement or adjournment thereof, for the following purposes:
1. To elect seven directors to hold office until the next annual meeting of stockholders and until their successors are elected and qualified;
2.  To hold an advisory vote on executive compensation (the “say on pay vote”);
3.  To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2016; 
4.  To consider a non-binding stockholder proposal that requests the Company adopt a "Proxy Access" By-Law; and,
5.  To transact such other business as properly may come before the meeting or any adjournments or postponements of the meeting.
Every holder of record of Common Stock of the Company at the close of business on March 1, 2016 is entitled to notice of the meeting and any adjournments or postponements thereof and to vote, in person or by proxy, one vote for each share of Common Stock held by such holder. A list of stockholders entitled to vote at the meeting will be available to any stockholder for any purpose germane to the meeting during ordinary business hours from April 14, 2016 to April 28, 2016, at the headquarters of the Company located at 4400 Biscayne Boulevard, 10th Floor, Miami, Florida 33137. A proxy statement, form of proxy and the Company's Annual Report on Form 10-K for the year ended December 31, 2015 are enclosed herewith.


By Order of the Board of Directors,
HOWARD M. LORBER
President and Chief Executive Officer



Miami, Florida
March 25, 2016

IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.  THEREFORE, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE.


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VECTOR GROUP LTD.
4400 Biscayne Boulevard
Miami, Florida 33137
_______________________________________________________

PROXY STATEMENT
_______________________________________________________

INTRODUCTION
The board of directors of Vector Group Ltd., a Delaware corporation (the “Company” or "Vector") is soliciting the proxy accompanying the proxy statement for use at the annual meeting of stockholders to be held at the JW Marriott Marquis Miami, 255 Biscayne Blvd Way, Miami, FL 33131 on Thursday, April 28, 2016, at 11:00 a.m., and at any postponement or adjournment. The Company’s offices are located at 4400 Biscayne Boulevard, 10th Floor, Miami, Florida 33137, and its telephone number is (305) 579-8000.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Every holder of record of Common Stock of the Company at the close of business on March 1, 2016 is entitled to notice of the meeting and any adjournments or postponements and to cast, in person or by proxy, one vote for each share of Common Stock held by such holder. At the record date, the Company had outstanding 123,792,329 shares of Common Stock. This proxy statement, accompanying notice and proxy and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 are first being mailed to stockholders on or about March 31, 2016.
Any stockholder who has given a proxy has the power to revoke the proxy prior to its exercise. A proxy can be revoked by an instrument of revocation delivered at, or prior to the annual meeting, to Marc N. Bell, the secretary of the Company, by a duly executed proxy bearing a date or time later than the date or time of the proxy being revoked, or at the annual meeting if the stockholder is present and elects to vote in person. Mere attendance at the annual meeting will not serve to revoke a proxy. A stockholder whose shares are held in a brokerage or bank account will need to obtain a legal proxy from the broker, bank or other intermediary in order to vote at the meeting.
The presence, in person or represented by proxy, of the holders of a majority of the issued and outstanding shares of Common Stock will constitute a quorum for the transaction of business at the annual meeting. The affirmative vote of holders of a plurality of the shares represented and entitled to vote is required for the election of each director. The affirmative vote of the holders of a majority of the shares represented and entitled to vote at the meeting is required for the advisory approval of the say on pay vote, the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm and the stockholder's non-binding proposal, and abstentions will have the effect of votes against each such matter.
Except for the ratification of the auditors, shares that are held by brokers in retail accounts may only be voted if the broker receives voting instructions from the beneficial owner of the shares. Otherwise, the “broker non-votes” may only be counted toward a quorum and, in the broker’s discretion, voted regarding the ratification of auditors. Broker non-votes will have no effect on any of the other matters presented at the annual meeting.
All proxies received and not revoked will be voted as directed. If no directions are specified, proxies which have been signed and returned will be voted “FOR” the election of the board’s nominees as directors, “FOR” the advisory say on pay vote, “FOR” the ratification of Deloitte & Touche LLP as the Company’s independent registered public accounting firm and "AGAINST" the stockholder's non-binding proposal requesting the Company adopt a "Proxy Access" By-Law.


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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the record date, the beneficial ownership of the Company’s Common Stock, the only class of voting securities, by:
•
each person known to the Company to own beneficially more than five percent of the 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.

Name and Address of
Beneficial Owner
 
Number of
Shares
 
Percent of
Class
 
 
 
 
 
 
 
Dr. Phillip Frost (1)
4400 Biscayne Boulevard
Miami, FL 33137
 
18,777,735

 
15.2
%
Bennett S. LeBow (2) (4)
  667 Madison Avenue; 14th Floor
   New York, NY 10065
 
8,980,081

 
7.3
%
Howard M. Lorber (3) (4) (5)
4400 Biscayne Boulevard
Miami, FL 33137
 
7,459,241

 
5.9
%
The Vanguard Group, Inc.
   100 Vanguard Blvd.
   Malvern, PA 19355 (6)
 
6,764,240

 
5.5
%
Stanley S. Arkin (4)
 
19,675

 
(*)

Henry C. Beinstein (4) (7)
 
99,332

 
(*)

Jeffrey S. Podell (4)
 
82,304

 
(*)

Jean E. Sharpe (4) (8)
 
104,228

 
(*)

Richard J. Lampen (5) (9) (10)
 
468,128

 
(*)

J. Bryant Kirkland III (5) (11)
 
217,457

 
(*)

Marc N. Bell (5) (11)
 
142,302

 
(*)

Ronald J. Bernstein (4) (5) (12)
 
81,440

 
(*)

All directors and executive officers as a group (10 persons)
 
17,654,188

 
14.0
%
___________________________
(*) The percentage of shares beneficially owned does not exceed 1% of the outstanding Common Stock.

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(1)
Based upon Amendment No. 6 to Schedule 13D filed by Dr. Frost on February 4, 2015, which reports ownership of 14,085,808 shares of Common Stock owned by Frost Gamma Investments Trust (“Frost Gamma Trust”), a trust organized under Florida law and 4,677,859 shares held by Frost Nevada Investments Trust (“Frost Nevada Trust”), a trust organized under Florida law. Dr. Frost is the sole trustee of Frost Gamma Trust and Frost Nevada Trust. As the sole trustee, Dr. Frost may be deemed the beneficial owner of all shares owned by Frost Gamma Trust and Frost Nevada 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. The sole shareholder of Frost Gamma, Inc. is Frost-Nevada Corporation. Frost-Nevada Limited Partnership (“Frost Nevada LP”) is the sole and exclusive beneficiary of the Frost Nevada Trust. Dr. Frost is one of five limited partners of Frost-Nevada LP. The general partner of Frost Nevada LP is Frost-Nevada Corporation. Dr. Frost is the sole shareholder of Frost-Nevada Corporation. Includes 14,068 shares owned by Dr. Frost’s spouse, as to which shares Dr. Frost disclaims beneficial ownership.
(2)
Includes 1,627,241 shares held directly by Mr. LeBow, 6,283,576 shares of Common Stock held by LeBow Gamma Limited Partnership, a Delaware limited partnership, 667,237 shares of Common Stock held by LeBow Epsilon 2001 Limited Partnership, a Delaware limited partnership, and 402,027 shares of Common Stock held by LeBow Alpha LLLP, a Delaware limited liability limited partnership. There are 1,552,500 common shares held by Mr. LeBow that are pledged to collateralize a demand loan as well as 100,883 common shares held by Mr. LeBow that are pledged to collateralize a margin loan. Furthermore, there are 150,000 shares owned by LeBow Epsilon 2011 Limited Partnership that are pledged to collateralize a bank loan. 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. LeBow Holdings LLC is the general partner of LeBow Alpha LLLP, which is the controlling member of LeBow Epsilon 2001 LLC, which is the general partner of LeBow Epsilon 2001 Limited Partnership. Mr. LeBow is trustee of LeBow 2011 Management Trust, a director and officer of LeBow Gamma, Inc. and a manager of LeBow Epsilon 2001 LLC.
(3)
Includes 2,846,568 shares of Common Stock held directly by Mr. Lorber, 2,685,432 shares held by Lorber Alpha II Limited Partnership, a Nevada limited partnership, 344,635 shares held by Lorber Gamma Limited Partnership, a Nevada limited partnership, and 19 shares in an Individual Retirement Account. Mr. Lorber's beneficial ownership also includes 1,582,587 shares of Common Stock that may be acquired by him within 60 days upon exercise of options. Mr. Lorber exercises sole voting power and sole dispositive power over the shares of Common Stock held by the partnerships and by himself. Lorber Alpha II, Inc., a Nevada corporation, is the general partner of Lorber Alpha II Limited Partnership. Lorber Gamma, Inc., a Nevada corporation, is the general partner of Lorber Gamma Limited Partnership. Mr. Lorber is a director, officer and controlling shareholder of each of Lorber Alpha II, Inc. and Lorber Gamma, Inc. Mr. Lorber disclaims beneficial ownership of 19,393 shares of 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.
(4)
The named individual is a director of the Company.
(5)
The named individual is an executive officer of the Company.
(6)
Based on Schedule 13-G filed by The Vanguard Group, Inc. (“Vanguard”) with the Securities and Exchange Commission on February 11, 2016.  Includes 184,313 shares, where Vanguard has sole voting and dispositive power, owned by Fiduciary Trust Company ("VFTC"), a wholly-owned Vanguard, and 15,379 shares, where Vanguard has sole voting power, owned by Vanguard Investments Australia, Ltd. ("VIA"), a wholly-owned subsidiary of Vanguard.
(7)
Includes 724 shares beneficially owned by Mr. Beinstein’s spouse, as to which shares Mr. Beinstein disclaims beneficial ownership.
(8) Includes 100,370 shares held by Wisdom Living Trust, of which Ms. Sharpe is a trustee and primary beneficiary.
(9)  Includes 330 shares held by Mr. Lampen's spouse, as to which Mr. Lampen disclaims beneficial ownership.
(10)
Includes 214,415 shares issuable upon exercise of outstanding options to purchase Common Stock exercisable within 60 days of the record date.
(11)
Includes 107,207 shares issuable upon exercise of outstanding options to purchase Common Stock exercisable within 60 days of record date.
(12)
The named individual is an executive officer of the Company’s subsidiaries Liggett Vector Brands LLC and Liggett Group LLC.

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EXECUTIVE OFFICERS OF THE COMPANY
Information regarding each of the executive officers of the Company, including name, age, positions and offices held with the Company, and term of office as an officer of the Company, is provided in Item 5 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

BOARD PROPOSAL 1 — NOMINATION AND ELECTION OF DIRECTORS
The by-laws of the Company provide, among other things, that the board, from time to time, shall determine the number of directors of the Company. The size of the board is presently set at seven. The present term of office of all directors will expire at the 2016 annual meeting. Seven directors are to be elected at the 2016 annual meeting to serve until the next annual meeting of stockholders and until their respective successors are duly elected and qualified or until their earlier resignation or removal.
It is intended that proxies received will be voted “FOR” election of the nominees named below unless marked to the contrary. In the event any such person is unable or unwilling to serve as a director, proxies may be voted for substitute nominees designated by the present board. The board has no reason to believe that any of the persons named below will be unable or unwilling to serve as a director if elected.
The affirmative vote of the holders of a plurality of the shares represented at the annual meeting and entitled to vote on the election of directors is required to elect each director.
The Board of Directors recommends that stockholders vote “FOR” election of the nominees named below.
Information with Respect to Nominees
The following table sets forth certain information, as of the record date, with respect to each of the nominees. Each nominee is a citizen of the United States.

Name and Address
Age
 
Principal Occupation
Bennett S. LeBow
78

 
Chairman of the Board; Private Investor
Howard M. Lorber

67

 
President and Chief Executive Officer
Ronald J. Bernstein

62

 
President and Chief Executive Officer,
Liggett Group LLC and Liggett Vector Brands LLC
Stanley S. Arkin 
78

 
Founding and Senior Partner,
Arkin Solbakken LLP and
Chairman of The Arkin Group LLC
Henry C. Beinstein

73

 
Partner, Gagnon Securities LLC
Jeffrey S. Podell

75

 
Private Investor
Jean E. Sharpe

69

 
Private Investor


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Business Experience and Qualifications of Nominees
The Company believes that the combination of the various qualifications, skills and experiences of its directors contribute to an effective and well-functioning board and that individually and, as a whole, the directors possess the necessary qualifications to provide effective oversight of the business, and provide quality advice to the Company’s management. Details regarding the experience and qualifications of the directors are set forth below.
Bennett S. LeBow is the Chairman of the Company’s Board of Directors and has been a director of the Company since October 1986. Mr. LeBow, currently a private investor, served as the Company's Chairman and Chief Executive Officer from June 1990 to December 2005 and Executive Chairman from January 2006 until his retirement on December 30, 2008. He has served as Chairman of the Board of Signal Genetics Inc. (NASDAQ: SGNL) since January 2010. Mr. LeBow served as Chairman of the Board of Directors of Borders Group Inc. from May 2010 until January 2012 and, from June 2010 until January 2012, as Chief Executive Officer of Borders Group Inc., which filed for protection under Chapter 11 of Title 11 of the United States Bankruptcy Code in February 2011. Mr. LeBow was Chairman of the Board of New Valley Corporation (“New Valley”) from January 1988 to December 2005 and served as its Chief Executive Officer from November 1994 to December 2005. New Valley Corporation was a majority-owned subsidiary of the Company until December 2005, when the Company acquired the remaining minority interest, became engaged in the real estate business and began seeking to acquire additional operating companies and real estate properties. Mr. LeBow’s pertinent experience, qualifications, attributes and skills include his decades of experience as an investor and the knowledge and experience in the cigarette industry he has attained through his service as the Company's Chief Executive Officer from 1990 to 2005 and as Chairman of the Board since 1990.
Howard M. Lorber has been President and Chief Executive Officer of the Company since January 2006. He served as President and Chief Operating Officer of the Company from January 2001 to December 2005 and has served as a director of the Company since January 2001. He has also served as 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; Chairman of the Board of Ladenburg Thalmann Financial Services (NYSE MKT: LTS) from May 2001 to July 2006 and Vice Chairman since July 2006 and a member of the Board of Directors since March 2015 and Chairman since May 2015 of Morgans Hotel Group Co. (NASDAQ: MHGC). Mr. Lorber was a Director of Borders Group Inc. from May 2010 until January 2012 and has been a director since 1991 of United Capital Corp., a real estate investment and diversified manufacturing company, which ceased to be a public reporting company in 2011. From November 1994 to December 2005, Mr. Lorber served as President and Chief Operating Officer of New Valley, where he also served as a director. 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 to December 2004 and has been a consultant to these entities since January 2005. He is also a trustee of Long Island University. Mr. Lorber's pertinent experience, qualifications, attributes and skills include the knowledge and experience in the real estate and cigarette 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.
Ronald J. Bernstein has served as President and Chief Executive Officer of Liggett Group LLC, an indirect subsidiary of the Company, since September 1, 2000 and of Liggett Vector Brands LLC, an indirect subsidiary of the Company, since March 2002 and has been a director of the Company since March 2004. From July 1996 to December 1999, Mr. Bernstein served as General Director and, from December 1999 to September 2000, as Chairman of Liggett-Ducat Ltd., the Company’s former Russian tobacco business sold in 2000. Prior to that time, Mr. Bernstein served in various positions with Liggett commencing in 1991, including Executive Vice President and Chief Financial Officer. Mr. Bernstein’s pertinent experience, qualifications, attributes and skills include the knowledge and experience in the cigarette industry he has attained through his employment by our tobacco and real estate subsidiaries since 1991.
Stanley S. Arkin has been a director since November 2011. Mr. Arkin is the founding member and the senior partner of the law firm of Arkin Solbakken LLP and is Chairman of The Arkin Group, a private intelligence agency. Mr. Arkin was a member of the Board of Directors of Authentic Fitness Corp, a fitness apparel company that ceased to be publicly traded in 1999, from 1995 to 1998. He is a member of the Council on Foreign Relations, and has served on or chaired numerous committees in other professional organizations, such as the American College of Trial Lawyers, the Judicial Conference of the State of New York, the Association of the Bar of the City of New York, the American Bar Association, the New York State Bar Association, and the New York County Lawyers Association. Mr. Arkin’s pertinent experience, qualifications, attributes and skills include his managerial experience, financial literacy and the knowledge and experience he has attained through his career in the legal profession as well as his service as a director of a publicly-traded corporation.

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Henry C. Beinstein has been a director of the Company since March 2004. Since January 2005, Mr. Beinstein has been a partner of Gagnon Securities LLC, a broker-dealer and FINRA member firm, and has been a money manager and registered representative at such firm since August 2002. He retired in August 2002 as the Executive Director of Schulte Roth & Zabel LLP, a New York-based law firm, a position he had held since August 1997. Before that, Mr. Beinstein had served as the Managing Director of Milbank, Tweed, Hadley & McCloy LLP, a New York-based law firm, commencing November 1995. Mr. Beinstein was the Executive Director of Proskauer Rose LLP, a New York-based law firm, from April 1985 through October 1995. Mr. Beinstein is a certified public accountant in New York and prior to joining Proskauer was a partner and National Director of Finance and Administration at Coopers & Lybrand. Mr. Beinstein also serves as a director of Ladenburg Thalmann Financial Services Inc. (NYSE MKT: LTS) and Castle Brands Inc. (NYSE MKT: ROX). Mr. Beinstein has been licensed as a Certified Public Accountant in the state of New York since 1968. Mr. Beinstein’s pertinent experience, qualifications, attributes and skills include financial literacy and expertise, managerial experience through his years at Coopers & Lybrand, Proskauer Rose LLP, Milbank, Tweed, Hadley & McCloy LLP and Schulte Roth & Zabel LLP, and the knowledge and experience he has attained through his service as a director of the Company and other publicly-traded corporations.
Jeffrey S. Podell has been a director of the Company since November 1993 and is a private investor. Mr. Podell also serves as a director of Ladenburg Thalmann Financial Services Inc. (NYSE MKT: LTS). Mr. Podell was a member of the New York State Bar Association from 1965 until March 2010. Mr. Podell’s pertinent experience, qualifications, attributes and skills include managerial experience and the knowledge and experience he has attained through his service as a director of the Company and other publicly-traded corporations.
Jean E. Sharpe has been a director of the Company since May 1998. Ms. Sharpe is a private investor and has engaged in various philanthropic activities since her retirement in September 1993 as Executive Vice President and Secretary of the Company and as an officer of various of its subsidiaries. Ms. Sharpe previously served as a director of the Company from July 1990 until September 1993. Ms. Sharpe has been a member of the New York State Bar Association since 1979. Ms. Sharpe’s pertinent experience, qualifications, attributes and skills include the knowledge and managerial experience she has attained as serving as our general counsel from 1988 until 1993 and her service as a director of the Company.
Board of Directors and Committees
The board of directors, which held eight meetings in 2015, currently has seven members. Each director attended at least 75% of the aggregate number of meetings of the board and of each committee on which the director served as a member, during such period. To ensure free and open discussion and communication among the independent directors of the board, the independent directors meet in executive sessions periodically, with no members of management present. The chair of the corporate governance and nominating committee presides at the executive sessions.
The Company’s Corporate Governance Guidelines provide that the board shall be free to choose its chair in any way it deems best for the Company at any time. The board believes that it is desirable to have the flexibility to decide whether the roles of Chairman of the Board and Chief Executive Officer should be combined or separate in light of the Company’s circumstances from time to time. The roles of Chief Executive Officer and Chairman of the Board are presently held by two different directors. The Chief Executive Officer is responsible for setting the strategic direction of the Company and the day-to-day leadership and performance of the Company, while the Chairman of the Board provides guidance to the Chief Executive Officer, reviews the agenda for board meetings and presides over meetings of the full board.
The board of directors oversees the risks that could affect the Company through its committees and reports from officers responsible for particular risks within the Company.
The board of directors has four committees established in accordance with the Company’s bylaws: an executive committee, an audit committee, a compensation committee, and a corporate governance and nominating committee. The board has determined that the Company’s non-employee directors (Stanley S. Arkin, Henry C. Beinstein, Bennett S. LeBow, Jeffrey S. Podell and Jean E. Sharpe) have no material relationship with the Company and meet the New York Stock Exchange listing standards for independence. Each of the members of the audit committee, compensation committee, and corporate governance and nominating committee meets the New York Stock Exchange listing standards for independence.
The executive committee, whose members are presently Messrs. LeBow, chairman, and Lorber, did not meet in 2015. 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.

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The audit committee, whose members are presently Messrs. Beinstein, chairman, and Podell and Ms. Sharpe, met 23 times in 2015. The 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 periodically reviews 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 considers 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. Although the board’s primary risk oversight has been assigned to the audit committee, the full board also receives regular reports from members of senior management on areas of material risk to the Company, including operational, financial, competitive and legal risks. In addition to an ongoing compliance program, the board encourages management to promote a corporate culture that understands risk management and incorporates it into the overall corporate strategy and day-to-day business operations. The Company’s board of directors and its audit committee regularly discuss with management the Company’s major risk exposures, their potential financial impact on the Company, and the steps (both short-term and long-term) the Company takes to manage them. The audit committee oversees the Company’s financial statements, system of internal controls, and auditing, accounting and financial reporting processes and risks related thereto; the audit committee appoints, compensates, evaluates and, where appropriate, replaces the Company’s independent accountants; reviews annually the audit committee charter; and reviews and pre-approves audit and permissible non-audit services. See “Audit Committee Report.” Each of the members of the audit committee is financially literate as required of audit committee members by the New York Stock Exchange and independent as defined by the rules of the New York Stock Exchange and the Securities and Exchange Commission. The board of directors has determined that Mr. Beinstein is an “audit committee financial expert” as defined by the rules of the Securities and Exchange Commission.
The compensation committee, whose members are presently Messrs. Podell, chairman, and Arkin, and Ms. Sharpe, met 9 times in 2015. Mr. Arkin replaced Mr. Beinstein as a member of the Compensation Committee in May 2016. The committee is governed by a written charter. The compensation committee is responsible for risks relating to employment policies and the Company’s compensation and benefits systems. To aid the compensation committee with its responsibilities, the compensation committee retains an independent consultant, as necessary, to understand the implications of compensation decisions being made. See “Compensation Discussion and Analysis” for a discussion of the consulting services provided to the compensation committee by GK Partners. The compensation committee has assessed the independence of GK Partners pursuant to Securities and Exchange Commission and New York Stock Exchange rules and concluded that GK Partners' work for the compensation committee does not raise any conflict of interest. The compensation committee reviews, approves and administers management compensation and executive compensation plans. The compensation committee also administers the Company’s 1998 Long-Term Incentive Plan, the Amended and Restated 1999 Long-Term Incentive Plan (the “1999 Plan”) and the Senior Executive Incentive Compensation Plan (the “Bonus Plan”) and the 2014 Management Incentive Plan (the “2014 Plan”). See “Compensation Discussion and Analysis.” In March 2009, the compensation committee formed a Performance-Based Compensation Subcommittee (the “Subcommittee”), consisting of Messrs. Arkin and Podell, and delegated to the Subcommittee the authority to grant compensation to executive officers that is intended to qualify as “performance-based compensation” exempt from the $1,000,000 deduction limitation of Section 162(m) of the Internal Revenue Code. The Subcommittee administers the participation of named executive officers in the Bonus Plan, the 1999 Plan and the 2014 Plan.
The corporate governance and nominating committee, whose members are presently Ms. Sharpe, chair, and Messrs. Arkin and Beinstein, met twice in 2015. The committee is governed by a written charter. This committee is responsible for the oversight of risks relating to the management and board succession planning. The committee assists the board of directors in identifying individuals qualified to become board members and recommends to the board the nominees for election as directors at the next annual meeting of stockholders, develops and recommends to the board the corporate governance guidelines applicable to the Company, and oversees the evaluation of the board and management. In recommending candidates for the board, the committee takes into consideration applicable to independence criteria and the following criteria established by the board in the Company’s corporate governance guidelines:
•
personal qualities and characteristics, accomplishments and reputation in the business community;
•
current knowledge and contacts in the communities in which the Company does business and in the Company’s industry or other industries relevant to the Company’s business;
•
ability and willingness to commit adequate time to board and committee matters;
•
the fit of the individual’s skills and personality with those of other directors and potential directors in building a board that is effective, collegial and responsive to the needs of the Company; and
•
diversity of viewpoints, background, experience and other demographics.
The committee also considers such other factors as it deems appropriate, including judgment, skill, diversity, experience with businesses and other organizations of comparable size, the interplay of the candidate’s experience with the experience of other board members, and the extent to which the candidate would be a desirable addition to the board and any committees of the

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board. The committee does not assign specific weights to particular criteria and no particular criteria is necessarily applicable to all nominees. The Company believes that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the board to fulfill its responsibilities. The committee will consider nominees recommended by stockholders, which nominations should be submitted by directing an appropriate letter and resume to Marc N. Bell, the secretary of the Company, 4400 Biscayne Boulevard, 10th Floor, Miami, Florida 33137. If the Company were to receive recommendations of candidates from the Company’s stockholders, the committee would consider such recommendations in the same manner as all other candidates.
Corporate Governance Materials
The Company’s Corporate Governance Guidelines, Codes of Business Conduct and Ethics, Equity Retention and Hedging Policy, Stock Ownership Guidelines, Executive Compensation Clawback Policy and current copies of the charters of the Company’s audit committee, compensation committee, and corporate governance and nominating committee are all available in the investor relations section of the Company’s website (http://www.vectorgroupltd.com/investor-relations/corporate-governance/) and are also available in print to any stockholder who requests them.

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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Overview
The compensation program for Vector’s executives is designed to maximize stockholder return and intended to do so in a tax-efficient manner. Executive compensation is largely at-risk and contingent upon the Company meeting various performance goals. The Company's compensation committee recognizes, and its policies reflect, that Vector is a complex and diversified company that operates in two challenging industries - tobacco and real estate.
Vector’s Board of Directors has overseen significant value creation for its stockholders. As demonstrated below, the Company has consistently outperformed the S&P 500 index and relative peer groups by delivering robust total stockholder returns, and executive compensation is commensurate with Vector’s record of substantial value creation.
In 2014 and 2015, Vector meaningfully enhanced its stockholder outreach program to engage in productive discussions on a variety of corporate and governance-related matters. The Company is committed to sound governance policies and practices, values stockholder input, and takes into consideration the views of its stockholders as it assesses and refines its approach to best incentivize management to enhance stockholder value.
Compensation Objectives
The primary objectives of the compensation committee of the board of directors with respect to executive compensation are:
•
to base a meaningful portion of management’s pay on achievement of the Company’s goals;
•
to provide incentives to enhance stockholder value;
•
to provide competitive levels of compensation;
•
to recognize individual initiative and achievement; and
•
to assist the Company in attracting talented executives to a challenging and demanding environment and to retain such executives for the benefit of the Company and its subsidiaries.

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The Company strives to achieve these objectives through its compensation plans that put a substantial portion of the executives’ overall compensation at risk so that compensation is only paid if the Company's financial performance goals are met. While the compensation of the Company’s executives is largely the result of negotiated agreements, which are reviewed annually, the Company’s compensation philosophy is intended to reward its executives with competitive compensation, while rewarding outstanding performance with above-average total compensation.
The Company's compensation committee has recognized Vector is a complex and diversified company that operates in two challenging industries - tobacco and real estate. The compensation committee has also recognized that the Company's diversification creates difficulties in establishing "peer groups". In establishing executive compensation, the compensation committee considers Vector's well-established record of consistently creating value for stockholders by posting high stockholder returns that exceed comparable indices in the tobacco and real estate segments. The compensation committee believes these high returns have been the result of the Company's strong operating performance in both the tobacco and real estate segments as well as an increase in the market perception of the Company.
The Company has recently taken measures to discourage excessive risk-taking by adopting a Clawback Policy and prohibition on hedging and has increased the long-term focus by adopting an Equity Retention Policy and Stock Ownership Guidelines as well as by awarding stock options with four-year cliff vesting as a substantial portion of 2013 and 2014 direct compensation. Under the 2014 Plan, the Company is able to make vesting of equity awards contingent upon corporate performance.
Independent compensation consultants may be retained by the compensation committee from time to time for advice and guidance in assessing whether our compensation program is reasonable and competitive. The compensation committee engaged GK Partners to render advice as to the option awards in 2013, 2014 and 2015 and restricted stock awards in 2013 and 2014. The compensation committee also engaged GK Partners to render advice related to the drafting of the Vector Group Ltd. Equity Retention and Hedging Policy, which was adopted in January 2013, the amendment of the terms of Mr. Bernstein's employment agreement in October 2013, the adoption of the 2014 Plan as well as the Executive Compensation Clawback Policy and Stock Ownership Guidelines adopted in March 2014. See “Base Salary,” “Equity Compensation” and the policies described in “Prohibition on Hedging,” “Equity Retention Policy,” “Stock Ownership Guidelines” and “Executive Compensation Clawback Policy.” GK Partners only provides services to the compensation committee.

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Compensation Mix
Beginning in 2013, Vector’s executive compensation mix has become increasingly performance-based and aligned with stockholder interests. The following charts illustrate the mix between direct compensation elements (base salary, annual cash and stock bonus, and long-term equity incentives) for Vector's Chief Executive Officer and other named executive officers for the years ended December 31, 2012 and 2015, respectively. These charts demonstrate that the Company's performance-based direct compensation has increased as a percentage of direct compensation for these officers since the year ended December 31, 2012.

Most Recent Say on Pay Vote Results
At the 2015 annual meeting of stockholders, the Company held its fifth stockholder advisory (say on pay) vote on the compensation of its named executive officers and 57% of the Company's stockholders voted “for” the compensation of the Company's named executive officers. The Company and its compensation committee considered the result of the 2015 vote in conducting the ongoing review and administration of management compensation. The compensation committee has noted Vector is a unique company and it is difficult to reference a "peer group"; however, as reflected in the charts above, the Company has consistently outperformed indices of real estate and tobacco companies and, as a result, the compensation committee continues to believe its compensation model is appropriate. In 2013 and 2014, the Company undertook several governance initiatives summarized above. In 2015, senior members of the Company's management also met with current, former and prospective stockholders, many of whom have commended the Company's leadership team, to enhance its understanding of stockholder perspectives related to executive compensation. Management explained the Company's core compensation practices and sought stockholder feedback during these meetings related to key elements of the Company's compensation program. See the discussion of this year's say on pay vote at “Board Proposal 2 - Advisory Vote on Executive Compensation” for further discussion.

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Compensation Components
The key components of the Company’s executive compensation program consist of a base salary, an annual performance-based bonus pursuant to the 2014 Plan, equity awards under the 1999 Plan and the 2014 Plan and various benefits, including the Company’s Supplemental Retirement Plan, the Liggett Vector Brands Inc. Savings Plan (the “401(k) Plan ”) and the use of corporate aircraft by the President and Chief Executive Officer. The employment agreements with the Company’s named executive officers also provide for severance compensation in the event of termination other than for cause during the term of the agreement or, in certain cases, following a change in control of the Company during the term of the agreements.
Base Salary
Base salaries for the Company’s named executive officers are established based on their overall business experience and managerial competence in their respective executive roles, as well as their personal contributions to the Company and are intended to provide a competitive level of fixed compensation. The compensation committee believes that executive base salaries should be targeted at competitive levels while rewarding long-term outstanding performance with above-average total compensation. Base salaries are reviewed annually, based on recommendations by the Company’s Chief Executive Officer with respect to the salaries of executive officers other than himself, and may be increased from time to time based on review of Company and individual executive performance. An automatic cost of living adjustment to base salary is included under the terms of Mr. Lorber's employment agreement. Effective January 1, 2016, as a result of the cost of living provision, Mr. Lorber's base salary was increased to $3,132,401 and, as a result of a merit increase, Mr. Kirkland's base salary was increased from $425,000 to $500,000. The compensation committee did not adjust the salaries of the other named executive officers in 2015 as part of the annual compensation review process.
Annual Incentive Bonus Awards
The Company's executive officers are eligible to participate in incentive bonus awards on an annual basis under the 2014 Plan. The compensation committee has delegated to the Subcommittee, consisting of Messrs. Arkin and Podell, the authority to grant compensation to executive officers under the 2014 Plan that is intended to qualify as “performance-based compensation” exempt from the $1,000,000 deduction limitation of Section 162(m) of the Internal Revenue Code. Thus, with respect to these officers, the Subcommittee selects participants in the 2014 Plan, determines the amount of their award opportunities, selects the performance criteria and the performance goals for each year, determines whether the performance goals have been met and administers and interprets the 2014 Plan. An eligible executive may (but need not) be selected to participate in annual incentive bonus awards under the 2014 Plan.
In 2015, each of the Company's named executive officers participated in the annual incentive bonus program under the 2014 Plan. The annual incentive bonus performance criteria for 2015 varied among the participants depending upon the entity that employed the participant. For Messrs. Lorber, Lampen, Kirkland and Bell, as in previous years, the criteria for 2015 were based on: 37.5% on adjusted earnings before interest and taxes, or Adjusted EBIT, as defined in the 2014 Plan, of Liggett; 37.5% on distributions to stockholders of the Company; and 25% on adjusted earnings before interest, taxes and amortization, or Adjusted EBITA, as defined in the 2014 Plan, of Douglas Elliman Realty, LLC. For Mr. Bernstein, 50% is based on Liggett Adjusted EBIT, as defined, and 50% is based on Liggett Volume. These measures were chosen because Adjusted EBIT is commonly used as a measure of performance in the tobacco industry and Adjusted EBITA is commonly used to measure performance in the real estate brokerage industry and are, in each case, the drivers of the business and stockholder value in those industries.
Under the terms of their respective employment agreements, for 2015, Messrs. Lorber, Lampen, Kirkland, Bell and Bernstein were eligible to receive a target bonus of 100%, 50%, 25%, 25% and 100% of their respective base salaries.
Depending on the level of achievement of the performance criteria, the actual amounts of incentive bonuses could also exceed the target bonus amounts (see “Grants of Plan-Based Awards in 2015”). The Subcommittee may exercise negative discretion with respect to any award to reduce any amount that would otherwise be payable under the annual incentive bonuses granted under the 2014 Plan.
The 2015 performance necessary for Messrs. Lorber, Lampen, Kirkland, Bell and Bernstein to receive bonuses at the target level were set at levels which were believed to be reasonably achievable based on internal corporate plans.
For Messrs. Lorber, Lampen, Kirkland and Bell, the performance necessary to achieve the minimum, target or maximum bonus in 2015 was as follows:

 
•
percentages of target bonus based on Liggett Adjusted EBIT were $185,000,000 (50%), $215,000,000 (100%), and $220,000,000 and above (125%); the actual Liggett Adjusted EBIT for 2015 were $237,542,000;

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•
percentages of target bonus based on cash dividends per share of the Company were $1.40 (50%), $1.60 (100%), and $1.80 and above (125%); the actual cash dividends paid in 2015 were $1.60 per share; and,
•
percentages of target bonus based on Douglas Elliman Adjusted EBITA were $45,000,000 (50%), $52,500,000 (100%), and $60,000,000 and above (125%); the actual Douglas Elliman Adjusted EBITA for 2015 were $55,695,000.
Based on actual 2015 results compared to the established performance criteria, bonuses equal to 112.0375% of target bonus amounts were achieved and awarded to Messrs. Lorber, Lampen, Kirkland and Bell, and they were awarded bonuses of 112.0375% of their respective target bonus amounts.
For Mr. Bernstein, the performance necessary to achieve the minimum target or maximum bonus in 2015 were as follows:
•
percentages of target bonus based on Liggett Adjusted EBIT were $215,000,000 (50%) and $220,000,000 and above (100%); the actual Liggett Adjusted EBIT for 2015 were $237,542,000;
•
percentages of target bonus based on Liggett Volume of 8.0 billion units (50%) and 8.5 billion units (100%); the actual Liggett Volume for 2015 was 8.9 billion units.
Based on actual 2015 results compared to the established performance criteria, 100% of Mr. Bernstein’s target bonus was achieved and awarded to him.
Bonus amounts for achieving performance criteria in between the amounts listed above are determined by linear interpolation between the higher and lower amounts. The actual performance-based bonus payments made to the selected participants for the years ended December 31, 2013, 2014 and 2015 are set forth in the column labeled “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table. Performance bonus awards earned by named executive officers after February 26, 2014 are subject to the Company's Executive Compensation Clawback Policy.
Bonus Awards
In 2015, the compensation committee awarded Messrs. Bell and Kirkland bonuses of $250,000 and $39,664, respectively, in addition to the Annual Incentive Bonus Awards. Mr. Bell’s bonus related to his management of the Company's litigation matters and Mr. Kirkland’s bonus was related to his management of the Company's financial matters. Mr. Bell has been awarded an additional bonus of $250,000 in 2016 for his continued management of the Company's litigation matters.
Long-Term Incentive Award
In January 2011, a long-term incentive award for the five-year period ending December 31, 2015 was made under the Bonus Plan to seven key members of Liggett's management, including Mr. Bernstein, to provide a significant incentive to achieve Liggett's five-year plan. The total pool ranged from $10,000,000 (if the minimum Liggett Adjusted EBIT performance goal as defined in the long-term incentive award ($1.125 billion for the five-year period ending December 31, 2015) was achieved) to $20,000,000 (if the maximum Liggett Adjusted EBIT performance goal as defined in the long-term incentive award ($1.225 billion for the five-year period ending December 31, 2015) is achieved). Mr. Bernstein was eligible to be paid 50% of the amount earned by the selected group of Liggett executives under this long-term incentive award opportunity. Payments between the minimum and maximum Liggett Adjusted EBIT goals would be determined by linear interpolation. Awards would have been paid in cash by March 15, 2016 provided that, at the option of the Subcommittee, up to 50% of the awards may have been paid in shares of the Company's Common Stock valued at the average closing price for the 10 trading days preceding the payment date. GK Partners provided its opinion that the long-term award was reasonable and appropriate in the context of then current market practices. Liggett Adjusted EBIT was $964.1 million for the five-year period ended December 31, 2015; thus, no payments were made under this award.
Equity Compensation
Long-term equity compensation is intended to provide a variable pay opportunity that rewards long-term performance by the Company as a whole and serves as a significant incentive to remain with the Company. In establishing long-term equity compensation awards, the compensation committee has considered the above-market returns generated by the Company.
On February 29, 2016, the Subcommittee granted options to Messrs. Lorber (250,000 shares), Lampen (62,500 shares), Kirkland (37,500 shares) and Bell (37,500 shares) to recognize past and current performance and to serve as a means of incentivizing and retaining key employees. The options are non-qualified options with a ten-year term with cliff vesting on the fourth anniversary of grant and have an exercise price equal to the market price on the date of grant ($23.23). The options have dividend equivalent rights. Shares received upon exercise of the February 29, 2016 option grants will be subject to the Company's Equity Retention and Hedging Policy. See “Equity Retention Policy.”
On November 10, 2015, the Subcommittee granted 1,200,000 shares of restricted stock (the “2015 Award Shares”) to Mr. Lorber to recognize past and current performance and to serve as a means of providing a meaningful incentive for Mr. Lorber to continue to serve as CEO during the next seven years, even though he is eligible to retire now, and for him to enhance corporate

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value during that time. The maximum potential amount of the Award Shares reflects recognition of his contributions as CEO since January 1, 2006 and the value of his management and real estate expertise to the Company. The Award shares were issued pursuant to the terms of an agreement which provides that both a performance requirement and a continued employment requirement must be met during a stated performance period for the Award Shares to vest. The award will vest using the following schedule: 171,428 shares will vest on November 15, 2016 if the Vector Group Ltd. Adjusted EBITDA from October 1, 2015 to September 30, 2016 exceeds $175 million, 342,857 shares minus shares previously vested will vest on July 1, 2017 if cumulative Vector Group Ltd. Adjusted EBITDA from October 1, 2015 to December 31, 2016 exceeds $218.75 million, 514,285 shares minus shares previously vested will vest on July 1, 2018 if cumulative Vector Group Ltd. Adjusted EBITDA from October 1, 2015 to December 31, 2017 exceeds $393.75 million, 685,713 shares minus shares previously vested will vest on July 1, 2019 if cumulative Vector Group Ltd. Adjusted EBITDA from October 1, 2015 to December 31, 2018 exceeds $568.75 million, 857,141 shares minus shares previously vested will vest on July 1, 2020 if cumulative Vector Group Ltd. Adjusted EBITDA from October 1, 2015 to December 31, 2019 exceeds $743.75 million, 1,028,570 shares minus shares previously vested will vest on July 1, 2021 if cumulative Vector Group Ltd. Adjusted EBITDA from October 1, 2015 to December 31, 2020 exceeds $918.75 million; and 1,200,000 shares minus shares previously vested 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 Award Agreement to mean the Company’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. Shares received upon vesting of the restricted stock grant will be subject to the Company's Equity Retention and Hedging Policy. See “Equity Retention Policy.”
On February 24, 2015, the Subcommittee granted options to Messrs. Lorber (262,500 shares), Lampen (65,625 shares), Kirkland (39,375 shares) and Bell (39,375 shares) to recognize past and current performance and to serve as a means of incentivizing and retaining key employees. The options are non-qualified options with a ten-year term with cliff vesting on the fourth anniversary of grant and have an exercise price equal to the market price on the date of grant ($22.00). The options have dividend equivalent rights. The compensation committee believes equity grants that include dividend equivalents are a means of management compensation that are appropriate and consistent with the Company's strategy with respect to dividend policy (and the critical importance thereof). Shares received upon exercise of the February 24, 2015 option grants will be subject to the Company's Equity Retention and Hedging Policy. See “Equity Retention Policy.”
On July 23, 2014, the Subcommittee granted 1,102,500 shares of restricted stock (the “Award Shares”) to Mr. Lorber to recognize past and current performance and to serve as a means of providing a meaningful incentive for Mr. Lorber to continue to serve as CEO during the next seven years, even though he is eligible to retire now, and for him to enhance corporate value during that time. The maximum potential amount of the Award Shares reflects recognition of his contributions as CEO since January 1, 2006 and the value of his management and real estate expertise to the Company. The Award shares were issued pursuant to the terms of an agreement which provides that both a performance requirement and a continued employment requirement must be met during a stated performance period for the Award Shares to vest. 157,500 shares vested on August 15, 2015. The remaining 945,000 unvested shares will vest using the following schedule: 157,500 shares will vest on July 1, 2016 because cumulative Vector Group Ltd. Adjusted EBITDA from July 1, 2014 to December 31, 2015 exceeded $262.5 million, 315,000 shares minus shares previously vested will vest on July 1, 2017 if cumulative Vector Group Ltd. Adjusted EBITDA from July 1, 2014 to December 31, 2016 exceeds $437.5 million, 472,500 shares minus shares previously vested will vest on July 1, 2018 if cumulative Vector Group Ltd. Adjusted EBITDA from July 1, 2014 to December 31, 2017 exceeds $612.5 million, 630,000 shares minus shares previously vested will vest on July 1, 2019 if cumulative Vector Group Ltd. Adjusted EBITDA from July 1, 2014 to December 31, 2018 exceeds $787.5 million, 787,500 shares minus shares previously vested will vest on July 1, 2020 if cumulative Vector Group Ltd. Adjusted EBITDA from July 1, 2014 to December 31, 2019 exceeds $962.5 million; and 945,000 shares minus shares previously vested will vest on July 1, 2021 if cumulative Vector Group Ltd. Adjusted EBITDA from July 1, 2014 to December 31, 2020 exceeds $1.138 billion. “Vector Group Ltd. Adjusted EBITDA” is defined in the Award Agreement to mean the Company’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. Shares received upon vesting of the restricted stock grant will be subject to the Company's Equity Retention and Hedging Policy. See “Equity Retention Policy.”
Dividend Equivalents
Under the terms of various equity awards made to the Company’s named executive officers under the Company’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 and unvested portion of the equity awards and the terms of equity awards 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 the Company’s Common Stock. In 2015, named executive officers earned cash dividend equivalent payments on unexercised stock options (in the case of Messrs. Lorber, Lampen, Kirkland and Bell) and unvested restricted stock (in the case of Mr. Bernstein) as follows: Mr. Lorber — $4,164,982; Mr. Lampen —$761,630; Mr. Kirkland — $423,895; Mr. Bell — $379,245; and Mr.

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Bernstein - $46,778. 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 options grants which is reported in the table.
Supplemental Retirement Plan
Retirement benefits are designed to reward continuous service by providing post-employment security and are an essential component of a competitive compensation package.
The Company’s named executive officers and certain other management employees are eligible to participate in the Supplemental Retirement Plan, which was adopted by the board of directors in January 2002 to promote retention of key executives and to provide them with financial security following retirement. As described more fully and quantified in “Pension Benefits at 2015 Fiscal Year End,” 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 single life annuity amounts for the named executives were determined by the Company’s board of directors giving consideration to a variety of pertinent factors including (but not limited to) the executive’s level of annual compensation.
Other Benefits
The Company’s executive officers are eligible to participate in all of its employee benefit plans, such as medical, dental, vision, group life, disability and accidental death and dismemberment insurance and Liggett Vector Brands 401(k) plan. These benefits are designed to provide a safety net of protection against the financial catastrophes that can result from illness, disability or death. The Company also provides vacation and other paid holidays to its executive officers, as well as certain other perquisites further described below and in the Summary Compensation Table.
Perquisites
The Company provides the perquisites or personal benefits to its named executive officers discussed below. The Company’s corporate aircraft are made available for the personal use of Mr. Lorber and other executive officers at Mr. Lorber’s discretion. The Company’s corporate aircraft policy permits personal use of corporate aircraft by executives, subject to an annual limit of $200,000 for personal use by Mr. Lorber. For purposes of determining the amounts allowable under the 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 the Company, a $7,500 per month allowance for lodging and related business expenses and two club memberships. See the Summary Compensation Table for details regarding the value of perquisites received by the named executive officers.
Change in Control Provisions
The employment agreement entered into between the Company and Mr. Lorber contains change in control provisions. In the event of a change in control that results in a termination of employment without cause (a “double trigger” change in control provision), Mr. Lorber will receive severance benefits. The purpose of these provisions is to avoid the distraction and loss of key management personnel that may occur in connection with rumored or actual corporate transactions and/or other fundamental corporate changes and to provide adequate protection to key management personnel in the event that their employment is terminated following a change of control. A change in control provision protects stockholder interests by enhancing employee focus during rumored or actual change in control activity through incentives to remain with the Company despite uncertainties while a transaction is under consideration or pending and assurance of severance and benefits for terminated executives. A detailed summary of these provisions is set forth under the heading “Payments Made Upon a Change in Control.”
Inter-Relationship of Elements of Compensation Packages
The various elements of the compensation packages for the Company’s executive officers are not directly inter-related. For example, if it does not appear as though the target bonus will be achieved, the number of options that will be granted is not affected. If options that are granted in one year become underwater due to a decrease in the Company’s stock price, the amount of the bonus amount or compensation to be paid the executive officer for the next year is not impacted. Similarly, if options become extremely valuable due to a rising stock price, the amount of compensation or bonus to be awarded for the next year is not affected. However, the compensation committee does evaluate the total value of executive remuneration when making decisions with respect to any particular element thereof.

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Prohibition on Hedging
Under the Company's Equity Retention and Hedging Policy, adopted in January 2013, our executive officers are prohibited from hedging ownership of shares of Common Stock acquired under an incentive equity or option award granted after January 1, 2013 (the “Equity Award Shares”), including by trading in publicly traded options, puts, calls or other derivative instruments related to the Company's Common Stock.
Equity Retention Policy
Under its Equity Retention and Hedging Policy, the Company formalized its long-standing practice of significant share retention by senior management. Until normal retirement age as defined in the the Company's Supplemental Executive Retirement Plan, each executive officer is required to retain at least 25% (after taxes and exercise costs) of Equity Award Shares.
Stock Ownership Guidelines
In March 2014, the Company formalized its long-standing practice of significant share ownership by senior management by adopting Stock Ownership Guidelines. These guidelines are applicable to all named executive officers and each non-employee member of the Board. Under the guidelines, which are phased in within the later of five years after the adoption of the guidelines or the date that a covered person becomes a named executive officer of member of the Board, the following ownership requirements exist.
Title
 
Value of Shares Owned
 
 
 
 
 
Chief Executive Officer
 
3.0
X
Base Salary
Executive Vice Presidents
 
1.5
X
Base Salary
Other named executive officers
 
1.0
X
Base Salary
Non-employee directors
 
2.0
X
Annual Retainer
The valuation of shares includes all shares held beneficially or directly by any covered person or the person's family members or trusts but excludes pledged shares. Compliance is tested on the last day of each quarter.
Executive Compensation Clawback Policy
In March 2014, the Company adopted an Executive Compensation Clawback Policy, which states as a condition to receiving a bonus and incentive-based compensation from the Company, each named executive officer shall enter into an agreement with the Company providing that any performance-based compensation awarded, paid or payable by the Company or any of its subsidiaries subsequent to the date of adoption of the Policy shall be subject to recovery or “clawback” by the Company. Under the Clawback Policy, if the Company’s financial results are restated, the result of which is that any performance-based compensation would have been lower had it been calculated based on such restated results, the compensation committee shall review the performance-based compensation received by the named executive officers. If the compensation committee determines that the performance-based compensation would have been lower and that a named executive officer who received such compensation engaged in fraud, material financial or ethical misconduct or recklessness in the performance of the named executive officer's duties or intentional illegal conduct which materially contributed to the restatement, then the compensation committee may seek to recover the after-tax portion of the performance-based compensation. Under the policy, the compensation committee has the discretion to determine to seek recovery of the performance-based compensation after notice and an opportunity to be heard is provided to the named executive officer.

Tax and Accounting Implications
Deductibility of Executive Compensation
The compensation committee and Subcommittee review and consider the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), which generally provides that no publicly-held company may deduct compensation in excess of $1,000,000 paid in any taxable year to its chief executive officer or any of its three other highest compensated officers (other than the Chief Financial Officer) at year-end unless the compensation qualifies as “performance-based.”
Determinations with respect to compensation intended to be deductible under Section 162(m) are made by the Subcommittee, which consists of Messrs. Podell and Arkin, who qualify as “outside directors” under Section 162(m). In certain situations, the compensation committee or the Subcommittee has in the past and may in the future approve compensation that will not meet these deductibility requirements in order to ensure appropriate and competitive levels of total compensation for the Company’s executive

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officers. In this regard, compensation paid to Messrs. Lorber and Lampen in excess of $1,000,000 from base salary and dividend equivalent rights in 2015 was not deductible for federal income tax purposes under Section 162(m) of the Code.
Accounting for Stock-Based Compensation
The Company accounts for stock-based compensation, including stock option and restricted stock awards under the Plans, in accordance with the requirements of Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”).
Compensation Committee Report
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with management and, based on such review and discussion, has recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement.

 
THE COMPENSATION COMMITTEE
 
 
 
Jeffrey S. Podell, Chairman
 
Stanley S. Arkin
 
Jean E. Sharpe



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SUMMARY COMPENSATION TABLE FOR YEARS 2013 — 2015
The following table summarizes the compensation of the named executive officers for the years ended December 31, 2015, 2014 and 2013. The named executive officers are the Company’s Chief Executive Officer, Chief Financial Officer, and the three other most highly compensated executive officers ranked by their total compensation in the table below (not taking into account the amount in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column).

 
 
Salary
Bonus
Stock
Awards
 
Option
Awards
 
Non-Equity
Incentive Plan
Compensation
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
All Other
Compensation
 
Total
Name and Principal Position
Year
($)(1)
($) (2)
($) (3)
 
($) (3)
 
($)(4)
($)(5)
($)
 
($)
Howard M. Lorber
2015
$
3,110,009

—

$
28,374,000

 
$
1,617,199

 
$
3,484,376

$
5,562,312

$
393,834

(6)
$
42,541,730

President and Chief
2014
$
3,100,398

—

$
20,780,000

 
$
819,154

 
$
3,584,835

$
988,540

$
363,712

 
$
29,636,639

Executive Officer
2013
$
3,055,482

—

—

 
$
1,358,307

 
$
3,532,901

$
1,142,443

$
355,675

 
$
9,444,808

Richard J. Lampen
2015
$
900,000

—

—

 
$
404,300

 
$
504,169

$
508,515

$
7,950

(7)
$
2,324,934

Executive Vice
2014
$
900,000

—

—

 
$
357,950

 
$
520,313

$
130,243

$
7,800

 
$
1,916,306

President
2013
$
900,000

$
—

—

 
$
597,821

 
$
520,313

$
323,844

$
7,650

 
$
2,349,628

J. Bryant Kirkland III
2015
$
425,000

$
39,664

—

 
$
302,664

 
$
119,040

$
13,757

$
7,950

(7)
$
908,075

Vice President, Chief
2014
$
425,000

—

—

 
$
274,611

 
$
122,852

$
110,975

$
7,800

 
$
941,238

Financial Officer and Treasurer
2013
$
425,000

—

—

 
$
434,956

 
$
122,852

$
86,931

$
7,650

 
$
1,077,389

Marc N. Bell
2015
$
425,000

$
250,000

—

 
$
302,664

 
$
119,040

$
318,021

$
7,950

(7)
$
1,422,675

Vice President,
2014
$
425,000

—

—

 
$
274,611

 
$
122,852

$
150,317

$
7,800

 
$
980,580

General Counsel and Secretary
2013
$
425,000

—

—

 
$
289,970

 
$
122,852

$
126,694

$
7,650

 
$
972,166

Ronald J. Bernstein
2015
$
1,000,000

—

—

 
—

 
$
1,000,000

$
202,652

$
7,950

(7)
$
2,210,602

President and Chief
2014
$
1,000,000

—

—

 
—

 
$
500,000

$
234,733

$
7,800

 
$
1,742,533

Executive Officer of Liggett Vector Brands and Liggett
2013
$
908,719

—

$
458,425

 
—

 
$
855,514

$
482,574

$
7,650

 
$
2,712,882

___________________________
(1)
Reflects actual base salary amounts paid for 2015, 2014 and 2013.
(2)
Mr. Kirkland's bonus related to his management of the Company's financial matters and Mr. Bell’s bonus related to his management of the Company's litigation matters. Mr. Bell has been awarded an additional bonus of $250,000 in 2016 for his continued management of the Company's litigation matters.
(3)
Represents the aggregate grant date fair value of stock or stock options granted under the 2014 Plan and 1999 Plan, respectively, during the years ended December 31, 2015, 2014 and 2013 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 the Company’s audited financial statements for the year ended December 31, 2015 included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 8, 2016. These grants may be subject to certain continued service and performance conditions; consequently, FASB ASC Topic 718 amounts included in the table may never be realized by the named executive officer.
(4)
These amounts reflect performance-based cash awards under the 2014 Plan, and its predecessor plan, paid during 2016, 2015 and 2014 in respect of service performed in 2015, 2014 and 2013, respectively. This plan is discussed in further detail under the heading “Annual Incentive Bonus Awards.”
(5)
Amounts reported represent the increase in the actuarial present value of benefits associated with the Company’s pension plans. Assumptions for 2015 amounts are further described in “Pension Benefits at 2015 Fiscal Year End.” 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 the Company’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. For Mr. Bernstein, the reported amount also includes a negative change of $81 in 2015 in connection with Liggett Group Inc. Retirement Plan for Salaried Non-Bargaining Unit Employees. There can be no assurance that the amounts shown will ever be realized by the named executive officers.
(6)
Represents perquisites consisting of $295,884 for personal use of corporate aircraft in 2015 and a $90,000 allowance paid for lodging and related business expenses in 2015. Also includes $7,950 for 401(k) Plan matching contributions in 2015. For purposes of determining the value of corporate aircraft use, the personal use is calculated based on the aggregate incremental cost to the Company. For flights on corporate aircraft, aggregate incremental cost for purposes of this table is

18
Table of Contents

calculated based on a cost-per-flight-mile charge developed from internal Company 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.
(7)
Represents 401(k) plan matching contributions.
Employment Agreements and Severance Arrangements
Compensation arrangements, as reflected in the employment agreements with the Company’s executive officers, are usually negotiated on an individual basis between the Chief Executive Officer and each of the other executives. While the compensation 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 committee, the compensation committee and the board have final authority over all compensation matters.
On January 27, 2006, the Company and Howard M. Lorber entered into an amended and restated employment agreement (the “Amended Lorber Agreement”), which replaced his prior employment agreements with the Company and with New Valley Corporation. 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. Mr. Lorber’s salary is subject to an annual cost of living adjustment. As of January 1, 2016, Mr. Lorber’s annual base salary was $3,132,401. In addition, the Company’s board must periodically review his base salary and may increase but not decrease it from time to time in its sole discretion. Mr. Lorber is eligible on an annual basis to receive a target bonus of 100% of his base salary under the Company’s annual incentive bonus awards, During the period of his employment, Mr. Lorber is entitled to various benefits, including a Company-provided car and driver, 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 the Company’s Corporate Aircraft Policy. Following termination of his employment by the Company without cause (as defined in the Amended Lorber Agreement), termination of his employment by him for certain reasons 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 Agreement) or before a change of 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-of-control payments under Section 4999 of the Code.
On January 27, 2006, the Company entered into employment agreements (the “Other Executive Agreements”) with Richard J. Lampen, the Company’s Executive Vice President, J. Bryant Kirkland III, the Company’s Vice President and, effective April 1, 2006, Chief Financial Officer, and Marc N. Bell, the Company’s Vice President, General Counsel and Secretary. The Other Executive Agreements replaced prior employment agreements with the Company 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, 2016, the annual base salaries provided for in these Other Executive Agreements were $900,000 for Mr. Lampen, $500,000 for Mr. Kirkland and $425,000 for Mr. Bell. In addition, the board must periodically review these base salaries and may increase but not decrease them from time to time in its sole discretion. These executives are eligible to receive a target bonus of 50% for Mr. Lampen, 33.33% for Mr. Kirkland and 25% for Mr. Bell, of their base salaries under the Company’s non-equity incentive bonus plan. Following termination of their employment by the Company without cause (as defined in the Other Executive Agreements), termination of their employment by the executives for certain reasons specified 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 50% of base salary for Mr. Lampen, 33.33% of base salary for Mr. Kirkland and 25% of base salary for Mr. Bell).
On November 11, 2005, Liggett, a wholly-owned subsidiary of the Company, and Ronald J. Bernstein entered into an employment agreement (the “Bernstein Employment Agreement”), pursuant to which Mr. Bernstein serves as President and Chief Executive Officer of Liggett and affiliated companies. The Bernstein Employment Agreement had an initial term expiring December 31, 2008, with an automatic one-year extension on each anniversary of the effective date unless notice of non-extension is given by either party within six months before this date. On October 29, 2013, the Bernstein Employment Agreement was amended to increase Mr. Bernstein’s base salary, effective January 1, 2014, to $1,000,000 per annum and terminate a provision in Mr. Bernstein’s contract which granted him an automatic annual increase in base salary based on a cost of living adjustment. Under the terms of the Bernstein Employment Agreement, Mr. Bernstein is eligible on an annual basis to receive a target bonus

19
Table of Contents

of up to 100% of his base salary under the Company’s non-equity incentive bonus plan if Liggett meets certain pre-established operating goals. Following termination of his employment without cause, he would continue to receive his base salary for a period of 24 months. As of January 1, 2016, Mr. Bernstein’s annual base salary was $1,000,000.


GRANTS OF PLAN-BASED AWARDS IN 2015
The table below provides information with respect to incentive compensation granted to each of the named executive officers during the year ended December 31, 2015.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
All Other Stock Awards: Number of Shares of Stock (#)
 
All Other Option Awards: Number of Shares of Securities Underlying Options (#)
 
Exercise or Base Price of Option Awards ($) (3)
 
Grant Date Fair Value of Stock and Option Awards ($) (4)
 
 
 
Estimated Future Payouts Under Non-
Equity Incentive Plan Awards(1)
 
Estimated Future Payouts
Under Equity Incentive Plan Awards
 
 
 
 
 
 
 
Threshold
 
Target
 
Maximum
 
Threshold
 
Target
 
Maximum
 
 
 
 
Name
Grant Date
 
($)
 
($)
 
($)
 
(#)
 
(#) (2)
 
(#)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Howard M. Lorber
2/24/2015
 
—

 
—

 
—

 
—
 
—
 
—
 
—
 
262,500

 
$
22.00

 
$
1,617,199

 
3/9/2015
 
—

 
$
3,110,009

 
$
3,887,511

 
—
 
—
 
—
 
—
 
—

 
—

 
—

 
11/10/2015
 
—

 
—

 
—

 
—
 
1,200,000
 
—
 
—
 
—

 
—

 
$
28,374,000

Richard J. Lampen
2/24/2015
 
—

 
—

 
—

 
—
 
—
 
—
 
—
 
65,625

 
$
22.00

 
$
404,300

 
3/9/2015
 
—

 
$
450,000

 
$
562,500

 
—
 
—
 
—
 
—
 
—

 
—

 
—

J. Bryant Kirkland III
2/24/2015
 
—

 
—

 
—

 
—
 
—
 
—
 
—
 
39,375

 
$
22.00

 
$
302,664

 
3/9/2015
 
—

 
$
106,250

 
$
132,813

 
—
 
—
 
—
 
—
 
—

 
—

 
—

Marc N. Bell
2/24/2015
 
—

 
—

 
—

 
—
 
—
 
—
 
—
 
—

 
—

 
—

 
3/9/2015
 
—

 
$
106,250

 
$
132,813

 
—
 
—
 
—
 
—
 
39,375

 
$
22.00

 
$
302,664

Ronald J. Bernstein
3/9/2015
 
—

 
$
1,000,000

 
$
1,000,000

 
—
 
—
 
—
 
—
 
—

 
—

 
—

___________________________
(1)
Represents the awards made under the Bonus Plan on March 9, 2015. In 2015, target levels were equal to 100% of base salary for Messrs. Lorber and Bernstein, 50% of base salary for Mr. Lampen and 25% of base salary for Messrs. Kirkland and Bell. Effective January 1, 2016, Mr. Kirkland's target level was increased from 25% of base salary to 33.33% of base salary. The maximum amount is 125% of the target amount for Messrs. Lorber, Lampen, Kirkland and Bell and 100% of the target amount for Mr. Bernstein. There is no minimum or threshold amount. The Subcommittee approved the performance criteria for determining the award opportunities for each named executive officer under the Bonus Plan. The actual bonus amounts earned for 2015 have been determined and paid in 2016 and are reflected in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table.
(2)
Represents a grant of restricted stock to Mr. Lorber that will be earned only if both a performance requirement (Vector Group Ltd. Adjusted EBITDA from October 1, 2015 to December 31, 2021) and a continued employment requirement are met. There is no minimum or threshold amount, and the award cannot be earned above the target number of shares.
(3)
Represents the closing market price of the Company's Common Stock on the date of stockholder approval under which the options were granted.
(4)
Represents the aggregate grant date fair value of restricted stock or stock options granted under the 2014 Plan for the year ended December 31, 2015 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 the Company’s audited financial statements for the year ended December 31, 2015 included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 8, 2016. These grants may be subject to certain continued service or performance conditions; consequently, FASB ASC Topic 718 amounts included in the table may never be realized by the named executive officer.


20
Table of Contents

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2015
The table below provides information with respect to the outstanding equity awards of the named executive officers as of December 31, 2015.
 
Option Awards
 
Stock Awards
 
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 ($)
Name
 
 
 
 
 
 
 
 
Howard M. Lorber
1,072,076

 
—

 
—
 

$10.52

 
12/3/2019
 
—

 
—

 
—
 
—
 
510,512

 
—

 
—
 

$13.52

 
1/14/2021
 
—

 
—

 
—
 
—
 
—

 
578,812

(1)
—
 

$13.93

 
2/26/2023
 
—

 
—

 
—
 
—
 
—

 
275,625

(2)
—
 

$17.82

 
2/26/2024
 
945,000

(4)
$
22,292,550

 
—
 
—
 
—

 
262,500

(3)
—
 

$22.00

 
2/24/2025
 
1,200,000

(5)
$
28,308,000

 
—
 
—
Richard J. Lampen
214,415

 
—

 
—
 

$10.52

 
12/3/2019
 
—

 
—

 
—
 
—
 
—

 
144,702

(1)
—
 

$13.93

 
2/26/2023
 
—

 
—

 
—
 
—
 
—

 
68,906

(2)
—
 

$17.82

 
2/26/2024
 
—

 
—

 
—
 
—
 
—

 
65,625

(3)
—
 

$22.00

 
2/24/2025
 
—

 
—

 
—
 
—
J. Bryant Kirkland III
107,207

 
—

 
—
 

$10.52

 
12/3/2019
 
—

 
—

 
—
 
—
 
—

 
86,821

(1)
—
 

$13.93

 
2/26/2023
 
—

 
—

 
—
 
—
 
—

 
41,343

(2)
—
 

$17.82

 
2/26/2024
 
—

 
—

 
—
 
—
 
—

 
39,375

(3)
—
 

$22.00

 
2/24/2025
 
—

 
—

 
—
 
—
Marc N. Bell
107,207

 
—

 
—
 

$10.52

 
12/3/2019
 
—

 
—

 
—
 
—
 
—

 
57,881

(1)
—
 

$13.93

 
2/26/2023
 
—

 
—

 
—
 
—
 
—

 
41,343

(2)
—
 

$17.82

 
2/26/2024
 
—

 
—

 
—
 
—
 
—

 
39,375

(3)
—
 

$22.00

 
2/24/2025
 
—

 
—

 
—
 
—
Ronald J. Bernstein
—

 
—

 
—
 
—

 
10/28/2023
 
30,318

(6)
$
715,202

 
—
 
—
___________________________
(1)
These option grants vest on February 26, 2017.
(2)
These option grants vest on February 26, 2018.
(3)
These option grants vest on February 24, 2019.
(4)
157,500 shares of this restricted stock award vested on August 15, 2015. The remaining 945,000 unvested shares will vest using the following schedule: 157,500 shares will vest on July 1, 2016 because Vector Group Ltd. Adjusted EBITDA from July 1, 2014 to December 31, 2015 exceeded $262.5 million, 315,000 shares minus shares previously vested will vest on July 1, 2017 if cumulative Vector Group Ltd. Adjusted EBITDA from July 1, 2014 to December 31, 2016 exceeds $437.5 million, 472,500 shares minus shares previously vested will vest on July 1, 2018 if cumulative Vector Group Ltd. Adjusted EBITDA from July 1, 2014 to December 31, 2017 exceeds $612.5 million, 630,000 shares minus shares previously vested will vest on July 1, 2019 if cumulative Vector Group Ltd. Adjusted EBITDA from July 1, 2014 to December 31, 2018 exceeds $787.5 million, 787,500 shares minus shares previously vested will vest on July 1, 2020 if cumulative Vector Group Ltd. Adjusted EBITDA from July 1, 2014 to December 31, 2019 exceeds $962.5 million; and 945,000 shares minus shares previously vested will vest on July 1, 2021 if cumulative Vector Group Ltd. Adjusted EBITDA from July 1, 2014 to December 31, 2020 exceeds $1.138 billion. “Vector Group Ltd. Adjusted EBITDA” is defined in the Award Agreement to mean the Company’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)
This restricted stock award will vest using the following schedule: 171,428 shares will vest on November 15, 2016 if the Vector Group Ltd. Adjusted EBITDA from October 1, 2015 to September 30, 2016 exceeds $175 million, 342,857 shares minus shares previously vested will vest on July 1, 2017 if cumulative Vector Group Ltd. Adjusted EBITDA from October 1, 2015 to December 31, 2016 exceeds $218.75 million, 514,285 shares minus shares previously vested will vest on July 1, 2018 if cumulative Vector Group Ltd. Adjusted EBITDA from October 1, 2015 to December 31, 2017 exceeds $393.75 million, 685,713 shares minus shares previously vested will vest on July 1, 2019 if cumulative Vector Group Ltd. Adjusted EBITDA from October 1, 2015 to December 31, 2018 exceeds $568.75 million, 857,141 shares minus shares previously vested will vest on July 1, 2020 if cumulative Vector Group Ltd. Adjusted EBITDA from October 1, 2015 to December 31, 2019 exceeds $743.75 million, 1,028,570 shares minus shares previously vested will vest on July 1, 2021 if cumulative Vector Group Ltd. Adjusted EBITDA from October 1, 2015 to December 31, 2020 exceeds $918.75 million; and 1,200,000 shares minus shares previously vested 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 Award Agreement to mean the Company’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.

21
Table of Contents

(6)
This restricted stock award will vest upon the earlier of March 15, 2019, if Liggett's adjusted EBIT for the five years ended December 31, 2018, is more than $1.15 billion, or October 31, 2020 if the performance target is not achieved.
OPTION EXERCISES AND STOCK VESTED IN YEAR ENDED DECEMBER 31, 2015
The table below provides information with respect to options that were exercised or stock awards that vested during 2015, as well as, the value realized on the exercise or vesting date.

 
 
Option Awards
 
Stock Awards
 
 
Number of Shares
Acquired on
 
Value
Realized on
Exercise
 
Number of
Shares Acquired
 
Value Realized
on Vesting
Name
 
Exercise (#)
 
 ($)
 
on Vesting
 
 ($)
Howard M. Lorber
 
—

 
—

 
150,000

 
$
3,969,107

Richard J. Lampen
 
—

 
—

 
—

 
—

J. Bryant Kirkland III
 
—

 
—

 
—

 
—

Marc N. Bell
 
—

 
—

 
—

 
—

Ronald J. Bernstein
 
69,924

 
$
728,542

 
—

 
—


Retirement Benefits
PENSION BENEFITS AT 2015 FISCAL YEAR END
The table below quantifies the benefits expected to be paid from the Company’s Supplemental Retirement Plan and, in the case of Mr. Bernstein, also from Liggett’s Qualified Plan. The terms of the plans are described below the table.

 
 
 
 
Number of
Years of
Credited
 
Present Value of
Accumulated
 
Payments During
Name
 
Plan Name
 
Service (#)(1)
 
Benefit ($)(2),(3)
 
Last Fiscal Year ($)
Howard M. Lorber
 
Supplemental
 
11
 
$
32,886,248

 
$0
 
 
Retirement Plan
 
 
 
 

 
 
Richard J. Lampen
 
Supplemental
 
10
 
$
3,889,863

 
$0
 
 
Retirement Plan
 
 
 
 

 
 
J. Bryant Kirkland III
 
Supplemental
 
12
 
$
802,671

 
$0
 
 
Retirement Plan
 
 
 
 

 
 
Marc N. Bell
 
Supplemental
 
12
 
$
1,472,850

 
$0
 
 
Retirement Plan
 
 
 
 

 
 
Ronald J. Bernstein
 
Supplemental
 
12
 
$
6,136,917

 
$0
 
 
Retirement Plan
 
 
 
 

 
 
 
 
Qualified Plan
 
2
 
$
54,736

 
$0
___________________________
(1)
Equals number of years of credited service as of December 31, 2015. Credited service under the Supplemental Retirement Plan is based on a named executive officer’s period of full time continuous covered employment after commencing participation in the Supplemental Retirement Plan. Credited service under the Qualified Plan is based on service prior to January 1, 1994 when the Qualified Plan was frozen.
(2)
Represents actuarial present value in accordance with the same assumptions outlined in note 11 to the Company’s audited financial statements for the year ended December 31, 2015 included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 8, 2016.
(3)
Includes amounts which the named executive officer is not currently entitled to receive because such amounts are not vested.
Supplemental Retirement Plan

22
Table of Contents

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 Messrs. Lorber and Bernstein) or January 1, 2004 (in the case of Messrs. Lampen, Kirkland and Bell).
The following table sets forth for each named executive officer his hypothetical single life annuity, his normal retirement date and his projected lump sum payment at his normal retirement date.

 
 
Hypothetical
 
Normal
 
Lump-Sum
Name
 
Single Life Annuity
 
Retirement Date
 
Equivalent
Howard M. Lorber
 
$
1,051,875

 
January 1, 2010
 
$
10,855,666

 
 
$
735,682

 
January 1, 2013
 
$
7,121,988

Richard J. Lampen
 
$
250,000

 
January 1, 2014
 
$
2,625,275

J. Bryant Kirkland III
 
$
202,500

 
January 1, 2026
 
$
2,126,473

Marc N. Bell
 
$
200,000

 
January 1, 2021
 
$
2,100,220

Ronald J. Bernstein
 
$
438,750

 
January 1, 2014
 
$
4,607,358


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 the Company 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.
In April 2008, after consulting with GK Partners, the compensation committee of the board approved an amendment to the Supplemental Retirement Plan to provide Mr. Lorber with an additional benefit under the Supplemental Retirement Plan equal to a $735,682 lifetime annuity to provide an incentive for Mr. Lorber to remain with the Company past his then current retirement date under the Supplemental Retirement Plan, which was January 1, 2010. As a result of the additional benefit granted to him, Mr. Lorber was eligible to receive a total lump sum retirement benefit of $20,607,948 if he retired in 2013, an increase of $7,121,988 over the benefit he would have been entitled to receive under the Supplemental Retirement Plan prior to the amendment. As Messrs. Lorber, Lampen and Bernstein did not retire on their Normal Retirement Dates, their additional benefits are being increased by 7.5% per annum for each year they continue to be an employee of the Company after their Normal Retirement Dates listed in the table above.
In January 2006, the Company amended and restated the Supplemental Retirement Plan. The amendments to the Supplemental Retirement Plan were intended, among other things, to cause the plan to meet the applicable requirements of the “deferred compensation” provisions of Section 409A of the Code. The Supplemental Retirement Plan is intended to be unfunded for tax purposes, and payments under the Supplemental Retirement Plan will be made out of the Company’s general assets.
Qualified Plan
Liggett’s salaried employees are entitled to benefits payable under its Qualified Plan based on a formula that yields an annual amount payable over the participant’s life beginning at age 65. Liggett discontinued providing additional benefits under the Qualified Plan for service on and after January 1, 1994. As of December 31, 2015, none of the named executive officers was eligible to receive any benefits under the Qualified Plan, except for Mr. Bernstein who is entitled to a monthly benefit of $372 beginning at age 65.
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.

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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 award under the Plans or bonus under the Bonus Plan with respect to a completed performance period;
•
all accrued and vested benefits under the Company’s compensation and benefit programs, including the pension plan and the Supplemental Retirement Plan; and
•
with respect solely to Mr. Lorber, payment by the Company 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 a named executive officer by the Company without cause or by the named executive officer for good reason, or upon the death or disability of a named executive officer, in 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:
•
with respect to the named executive officers, payments for a specified period of either 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 (except for Mr. Bernstein) the most recent bonus paid to the executive (up to the amount of the executive’s target bonus under his employment agreement);
•
with respect to the named executive officers, continued participation, at the Company’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, the Company is required to pay an amount each quarter (not to exceed $35,000 per year in the case of Messrs. Lampen, Kirkland and Bell) to keep them in the same economic position on an after-tax basis as if they had continued in such plans);
•
with respect solely to Mr. Bernstein, a pro rata amount of any award under the Bonus Plan for which the performance period has not been completed based upon 100% of the target bonus amount for such period to the extent that Mr. Bernstein is terminated on or after July 1 of the applicable year and bonuses are otherwise paid to the management of Liggett for that year; and
•
acceleration of the vesting of his restricted shares upon death or disability.
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 without cause or by the executive 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 the Company’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;
•
full vesting of his outstanding equity awards; and
•
termination of certain restrictive covenants in his employment agreement, including covenants not to compete and non-solicitation covenants.

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Richard J. Lampen, J. Bryant Kirkland III, Marc N. Bell and Ronald J. Bernstein
While their respective employment agreements do not contain any change of control provisions, in the event of the termination of Messrs. Lampen, Kirkland, Bell and Bernstein by the Company without cause or by the named executive officer for good reason upon a change of control, such named executive officers would receive pursuant to their employment agreements the same severance benefits described in the section titled “Payments Made Upon Termination” and “Payments Made Upon Involuntary Termination of Employment Without Cause or for Good Reason, Death or Disability,” above.
Definition of Change in Control
Pursuant to the employment agreement between the Company and Mr. Lorber, a “change in control” is deemed to occur if:
•
a person unaffiliated with the Company acquires more than 40 percent control over its voting securities;
•
the individuals who, as of January 1, 2006, are members of the Company’s board of directors (the “Incumbent Board”), cease to constitute at least two-thirds of the Incumbent Board; however, a newly-elected board member that was elected or nominated by two-thirds of the Incumbent Board shall be considered a member of the Incumbent Board;
•
the Company’s stockholders approve a merger, consolidation or reorganization with an unrelated entity, unless the Company’s stockholders would own at least 51 percent of the voting power of the surviving entity; the individuals who were members of the Incumbent Board constitute at least a majority of the members of the board of directors of the surviving entity; and no person (other than one of the Company’s affiliates) has beneficial ownership of 40 percent or more of the combined voting power of the surviving entity’s then outstanding voting securities;
•
the Company’s stockholders approve a plan of complete liquidation or dissolution of the Company; or
•
the Company’s stockholders approve the sale or disposition of all or substantially all of the Company’s assets.
Definition of Termination for Cause
Under each of the employment agreements with Messrs. Lorber, Lampen, Kirkland and Bell, termination by the Company for “cause” is defined as:
•
the executive being convicted of or entering a plea of nolo contendere with respect to a criminal offense constituting a felony;
•
the executive committing in the performance of his duties under his employment agreement one or more acts or omissions constituting fraud, dishonesty or willful injury to the Company which results in a material adverse effect on the business, financial condition or results of operations of the Company;
•
the executive committing one or more acts constituting gross neglect or willful misconduct which results in a material adverse effect on the business, financial condition or results of operations of the Company;
•
the executive exposing the Company to criminal liability substantially and knowingly caused by the executive which results in a material adverse effect on the business, financial condition or results of operations of the Company; or
•
the executive failing to substantially perform his duties under his employment agreement (excluding any failure to meet any performance targets or to raise capital or any failure as a result of an approved absence or any mental or physical impairment that could reasonably be expected to result in a disability), after written warning from the board specifying in reasonable detail the breach(es) complained of.
Under the employment agreement between Liggett and Mr. Bernstein, “cause” is defined as:
•
a material breach by Mr. Bernstein of his duties and obligations under his employment agreement which breach is not remedied to the satisfaction of the board of directors of Liggett (“Liggett Board”), within 30 days after receipt by Mr. Bernstein of written notice of such breach from the Liggett Board;
•
Mr. Bernstein’s conviction or indictment for a felony;
•
an act or acts of personal dishonesty by Mr. Bernstein intended to result in personal enrichment of Mr. Bernstein at the expense of the Company or any of its affiliates or any other material breach or violation of Mr. Bernstein’s fiduciary duty owed to the Company or any of its affiliates;
•
material violation of any Company or Liggett policy or the Company’s Code of Business Conduct and Ethics; or
•
any grossly negligent act or omission or any willful and deliberate misconduct by Mr. Bernstein that results, or is likely to result, in material economic, or other harm, to the Company or any of its affiliates (other than any act or omission by

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Mr. Bernstein if it was taken or omitted to be done by Mr. Bernstein in good faith and with a reasonable belief that such action or omission was in the best interests of the Company).
Definition of Termination for Good Reason
Under each of the employment agreements with Messrs. Lorber, Lampen, Kirkland and Bell, termination by the executive for “good reason” is defined as:
•
a material diminution of the executive’s duties and responsibilities provided in his employment agreement, including, without limitation, the failure to elect or re-elect the executive to his position (including with respect solely to Mr. Lorber, his position as a member of the board) or the removal of the executive from any such position;
•
a reduction of the executive’s base salary or target bonus opportunity as a percentage of base salary or any other material breach of any material provision of his employment agreement by the Company;
•
relocation of the executive’s office from the Miami (or with respect solely to Mr. Lorber, Miami or New York City) metropolitan areas;
•
the change in the executive’s reporting relationship from direct reporting to the board, in the case of Mr. Lorber, to the Chairman and the Chief Executive Officer, in the case of Mr. Lampen, or to the Chairman, Chief Executive Officer or the Executive Vice President, in the case of Messrs. Kirkland and Bell; or
•
the failure of a successor to all or substantially all of the Company’s business or assets to promptly assume and continue his employment agreement obligations whether contractually or as a matter of law, within 15 days of such transaction.
Under the employment agreement with Mr. Bernstein, “good reason” exists if, without the prior written consent of Mr. Bernstein:
•
the Liggett Board removes Mr. Bernstein as President and Chief Executive Officer of Liggett, other than in connection with the termination of his employment;
•
Mr. Bernstein is not appointed as a member of the Liggett Board;
•
the Liggett Board reduces Mr. Bernstein’s rate of salary or bonus opportunity or materially reduces Mr. Bernstein’s welfare, perquisites or other benefits described in his employment agreement;
•
Mr. Bernstein’s duties and responsibilities at Liggett are significantly diminished or there are assigned to him duties and responsibilities materially inconsistent with his position;
•
Liggett fails to obtain a written agreement reasonably satisfactory to Mr. Bernstein from any successor of the Company to assume and perform his employment agreement; or
•
there occurs a change of control and Mr. Bernstein is required to relocate more than 50 miles from Mr. Bernstein’s current work location.
Assumptions Regarding Post-Termination Payment Tables
The following tables were prepared as though each named executive officer’s employment was terminated on December 31, 2015 (the last business day of 2015) using the closing price of the Company’s Common Stock as of that day ($23.59). The amounts under the columns which reflect a Change in Control assume that a change in control occurred on December 31, 2015. However, the executives’ employment was not terminated on December 31, 2015 and a change in control did not occur on that date. There can be no assurance that a termination of employment, a change in control or both would produce the same or similar results as those described if either or both of them occur on any other date or at any other price, or if any assumption is not correct in fact.
Equity-Based Assumptions
•
Stock options held by Messrs. Lorber, Lampen, Kirkland and Bell and restricted stock held by Messrs. Lorber and Bernstein would have vested on December 31, 2015 with respect to a change in control or termination by him on death or disability.
•
No other named executive officer held unvested options at that date.
•
Stock options that become vested due to a change in control are valued based on their “spread” (i.e., the difference between the stock’s fair market value and the exercise price).

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Table of Contents

•
It is possible that IRS rules would require these items to be valued using a valuation method such as the Black-Scholes model if they continued after a change in control. Using a Black-Scholes value in lieu of the “spread” would cause higher value for excise taxes and the related tax gross-up payment.

Incentive Plan Assumptions
•
All amounts under the Bonus Plan were deemed to have been earned for 2015 in full based on actual performance and are not treated as subject to the excise tax upon a change in control.
Retirement Benefit Assumptions
•
All benefits were assumed to be payable in a single lump sum at the participant’s assumed retirement date.

Howard M. Lorber

 
Termination by
Company without Cause
or by Named
Executive Officer
with Good Reason
 
Disability
 
Death
 
Termination by Company
for Cause or Voluntary
Termination by
Named Executive Officer
Without Good Reason
 
Termination by
Company without Cause
or by Named Executive
Officer with Good Reason
upon a
Change in Control
 
Cash Severance
$
18,631,221

(1)
$
18,631,221

(1)
$
18,631,221

(1)
—
 
$
18,569,117

(2)
Value of Accelerated Unvested Equity (3)
$
7,599,055

 
$
58,199,605

 
$
58,199,605

 
—
 
$
58,199,605

 
Benefits Continuation (4)
$
127,811

 
$
127,811

 
$
30,791

 
—
 
$
127,811

 
Value of Supplemental Retirement Plan (5)
$
25,524,731

 
$
25,524,731

 
$
25,524,731

 
$25,524,731
 
$
25,524,731

 
Excise Tax and Gross-Up
—

 
—

 
—

 
—
 
$
37,948,911

(6)
___________________________
(1)
Reflects the value of the sum of Mr. Lorber’s 2015 base salary ($3,110,009) and last paid bonus limited to 100% of base salary ($3,100,398) paid over a period of 36 months after termination.
(2)
Reflects the value of the sum of Mr. Lorber’s 2015 base salary ($3,110,009) and last paid bonus limited to 100% of base salary ($3,100,398) for a period of 2.99 years paid in a lump-sum payment commencing after termination.
(3)
Reflects the value of any unvested stock options or restricted stock and related dividends that would have vested upon the event using the closing price of the Company’s Common Stock on December 31, 2015 ($23.59). See “Outstanding Equity Awards at December 31, 2015.”
(4)
Reflects the value of premium payments for life insurance, medical, dental and disability plans for 36 months at the Company’s cost, based on 2015 premiums.
(5)
This amount includes amounts that the named executive officer accrued under the Supplemental Retirement Plan as of December 31, 2015, which are disclosed in “Pension Benefits at 2015 Fiscal Year End.”
(6)
This payment was estimated using a 70% combined state, federal, payroll and excise tax marginal effective rate and multiple other assumptions, which will likely differ from the relevant facts at the time of any actual change in control. As a result, the actual amount of this payment (if any) may be materially different from this estimate.



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Table of Contents

Richard J. Lampen

 
Termination by
Company without Cause
or by Named
Executive Officer
with Good Reason
 
Disability
 
Death
 
Termination by Company
for Cause or Voluntary
Termination by
Named Executive Officer
Without Good Reason
 
Termination by
Company without Cause
or by Named Executive
Officer with Good Reason
upon a
Change in Control
Cash Severance (1)
$
2,700,000

 
$
2,700,000

 
$
2,700,000

 
—

 
$
2,700,000

Value of Accelerated Unvested Equity (2)
$
1,899,753

 
$
1,899,753

 
$
1,899,753

 
—

 
$
1,899,753

Benefits Continuation (3)
$
63,247

 
$
63,247

 
$
20,654

 
—

 
$
63,247

Value of Supplemental Retirement Plan (4)
$
3,027,488

 
$
3,027,488

 
$
3,027,488

 
$
3,027,488

 
$
3,027,488

Excise Tax and Gross-Up
—

 
—

 
—

 
—

 
—

___________________________
(1)
Reflects the value of the sum of Mr. Lampen’s 2015 base salary ($900,000) and last paid bonus limited to 50% of base salary ($450,000) paid over a period of 24 months commencing after termination.
(2)
Reflects the value of any unvested stock options or restricted stock and related dividends that would have vested upon the event using the closing price of the Company’s Common Stock on December 31, 2015 ($23.59). See “Outstanding Equity Awards at December 31, 2015.”
(3)
Reflects the value of premium payments for life insurance, medical, dental and disability plans for 24 months at the Company’s cost, based on 2015 premiums.
(4)
This amount includes amounts that the named executive officer accrued under the Supplemental Retirement Plan as of December 31, 2015, which are disclosed in “Pension Benefits at 2015 Fiscal Year End.”
J. Bryant Kirkland III

 
Termination by
Company without Cause
or by Named
Executive Officer
with Good Reason
 
Disability
Death
 
Termination by Company
for Cause or Voluntary
Termination by
Named Executive Officer
Without Good Reason
 
Termination by
Company without Cause
or by Named Executive
Officer with Good Reason
upon a
Change in Control
Cash Severance (1)
$
1,062,500

 
$
1,062,500

$
1,062,500

 
—

 
$
1,062,500

Value of Accelerated Unvested Equity (2)
—

 
$
1,139,846

$
1,139,846

 
—

 
$
1,139,846

Benefits Continuation (3)
$
28,765

 
$
28,765

—

 
—

 
$
28,765

Value of Supplemental Retirement Plan (4)
$
557,621

 
$
557,621

$
1,022,306

 
—

 
$
557,621

Excise Tax and Gross-Up
—

 
—

—

 
—

 
—

___________________________
(1)
Reflects the value of the sum of Mr. Kirkland’s 2015 base salary ($425,000) and last paid bonus limited to 25% of base salary ($106,250) paid over a period of 24 months commencing after termination.
(2)
Reflects the value of any unvested stock options or restricted stock and related dividends that would have vested upon the event using the closing price of the Company’s Common Stock on December 31, 2015 ($23.59). See “Outstanding Equity Awards at December 31, 2015.”
(3)
Reflects the value of premium payments for life insurance, medical, dental and disability plans for 24 months at the Company’s cost, based on 2015 premiums.
(4)
This amount includes amounts that the named executive officer accrued under the Supplemental Retirement Plan as of December 31, 2015, which are disclosed in “Pension Benefits at 2015 Fiscal Year End.”

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Table of Contents

Marc N. Bell

 
Termination by
Company without Cause
or by Named
Executive Officer
with Good Reason
 
Disability
 
Death
 
Termination by Company
for Cause or Voluntary
Termination by
Named Executive Officer
Without Good Reason
 
Termination by
Company without Cause
or by Named Executive
Officer with Good Reason
upon a
Change in Control
Cash Severance (1)
$
1,062,500

 
$
1,062,500

 
$
1,062,500

 
—

 
$
1,062,500

Value of Accelerated Unvested Equity (2)
—

 
$
860,285

 
$
860,285

 
—

 
$
860,285

Benefits Continuation (3)
$
73,204

 
$
73,204

 
$
57,724

 
—

 
$
73,204

Value of Supplemental Retirement Plan (4)
$
1,031,925

 
$
1,031,925

 
$
1,461,893

 
—

 
$
1,031,925

Excise Tax and Gross-Up
—

 
—

 
—

 
—

 
—

___________________________
(1)
Reflects the value of the sum of Mr. Bell’s 2015 base salary ($425,000) and last paid bonus limited to 25% of base salary ($106,250) paid over a period of 24 months commencing after termination.
(2)
Reflects the value of any unvested stock options or restricted stock and related dividends that would have vested upon the event using the closing price of the Company’s Common Stock on December 31, 2015 ($23.59). See “Outstanding Equity Awards at December 31, 2015.”
(3)
Reflects the value of premium payments for life insurance, medical, dental and disability plans for 24 months at the Company’s cost, based on 2015 premiums.
(4)
This amount includes amounts that the named executive officer accrued under the Supplemental Retirement Plan as of December 31, 2015, which are disclosed in “Pension Benefits at 2015 Fiscal Year End.”

Ronald J. Bernstein

 
Termination by
Company without
Cause or by Named
Executive Officer
with Good Reason
 
Disability
 
Death
 
Termination by Company
for Cause or Voluntary
Termination by
Named Executive Officer
Without Good Reason
 
Termination by Company
without Cause or by
Named Executive Officer
with Good Reason
upon a
Change in Control
Cash Severance (1)
$
2,000,000

 
$
2,000,000

 
$
1,000,000

 
—

 
$
2,000,000

Value of Accelerated Unvested Equity (2)
—

 
$
715,202

 
$
715,202

 
—

 
$
715,202

Benefits Continuation (3)
$
60,917

 
$
60,917

 
$
19,440

 
—

 
$
60,917

Value of Retirement Benefits (4)
$
5,260,248

 
$
5,260,248

 
$
5,260,248

 
$
5,260,248

 
$
5,260,248

Excise Tax and Gross-Up
—

 
—

 
—

 
—

 
—

___________________________
(1)
Reflects the value of the sum of Mr. Bernstein’s 2015 base salary ($1,000,000) paid over a period of 24 months commencing after termination.
(2)
Reflects the value of any unvested stock options or restricted stock and related dividends that would have vested upon the event using the closing price of the Company’s Common Stock on December 31, 2015 ($23.59). See “Outstanding Equity Awards at December 31, 2015.”
(3)
Reflects the value of premium payments for life insurance, medical, dental and disability plans for 24 months at the Company’s cost, based on 2015 premiums.
(4)
This amount includes amounts that the named executive officer accrued under the Supplement Retirement Plan as of December 31, 2015, which are disclosed in “Pension Benefits at 2015 Fiscal Year End.” The amount does not include the value of Mr. Bernstein’s monthly payment of $372 at age 65 under the Qualified Plan, which is disclosed in “Pension Benefits at 2015 Fiscal Year End” because lump sum payments are not generally available to participants in the Qualified Plan. If the lump sum option had been available to Mr. Bernstein in the Qualified Plan, the amounts shown would have been increased by approximately $54,736.
Compensation of Directors
The compensation of the non-employee directors is designed to be simple and easy for stockholders to understand and to be fair based on the amount of work required of directors of the Company. Each of the non-employee directors receives:
•
annual cash retainer fee of $50,000;
•
$2,500 per annum for each committee membership ($5,000 for the committee chairman);

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Table of Contents

•
$1,000 per meeting for each board meeting attended in person or by telephone;
•
$500 per meeting for each committee meeting attended in person or by telephone;
•
periodic grants of restricted shares;
•
reimbursement for reasonable out-of-pocket expenses incurred in serving on the Company's board; and
•
access to the Company's health, dental and life insurance coverage.
No stock options to purchase Common Stock, shares of Common Stock or other equity-based awards were granted to the non-employee directors in 2015. During the second quarter of 2016, the Company intends to grant 10,000 restricted shares of Common Stock under the 2014 Plan to each of its non-employee directors in order to align the director's interests with the long-term interests of the stockholders. The stock grant is expected to vest in three equal annual installments commencing on the first anniversary of the date of grant based on continued service as a director, subject to earlier vesting upon death, disability or the occurrence of a change in control.
The table below summarizes the compensation the Company paid to the non-employee directors for the year ended December 31, 2015.

NON-EMPLOYEE DIRECTOR COMPENSATION IN FISCAL YEAR 2015

 
Fees
Earned
or Paid
in Cash
 
Stock
Awards
 
All Other
Compensation
 
 
 
Total
Name
($)
 
($)
 
($)
 
 
 
($)
Stanley S. Arkin (4)
$
65,375

 
—

 
$
3,312

 
(1)
 
$
68,687

Henry C. Beinstein (4)
$
83,125

 
—

 
$
2,497

 
(1)
 
$
85,622

Bennett S. LeBow (4)
$
61,500

 
—

 
$
55,734

 
(2)
 
$
117,234

Jeffrey S. Podell (4)
$
81,500

 
—

 
$
2,447

 
(1)
 
$
83,947

Jean E. Sharpe (4)
$
85,000

 
—

 
$
11,124

 
(3)
 
$
96,124

___________________________
(1)
Represents life insurance premiums paid by the Company.
(2)
Represents health and life insurance premiums of $35,043 and $20,691, respectively, paid by the Company.
(3)
Represents health and life insurance premiums paid by the Company.
(4)
Held 3,858 shares of unvested restricted stock at December 31, 2015.

Compensation Committee Interlocks and Insider Participation
No member of the Company’s compensation committee is, or has been, an employee or officer of the Company other than Ms. Sharpe who joined the compensation committee in March 2009. Ms. Sharpe retired as an officer of the Company in 1993. During 2015, (i) no member of the Company’s compensation committee had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K; and (ii) none of the Company’s executive officers served on the compensation committee (or equivalent) or board of directors of another entity whose executive officer(s) served on the Company’s compensation committee or board of directors.


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Audit Committee Report
The audit committee report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.
Management is responsible for the Company’s internal controls and the financial reporting process, including its financial statements and management’s assessment of the effectiveness of the Company’s internal control over financial reporting. Deloitte & Touche LLP ("Deloitte"), the Company's independent registered public accounting firm for the year ended December 31, 2015, and PricewaterhouseCoopers LLP ("PwC"), the Company’s independent registered certified public accounting firm for the years ended December 31, 2014 and 2013, issue opinions on the conformity of the Company’s audited financial statements with generally accepted accounting principles and on the effectiveness of the Company’s internal control over financial reporting. The audit committee reviews these processes on behalf of the board of directors. In this context, the committee has reviewed and discussed with management and Deloitte the audited financial statements for the year ended December 31, 2015, management’s assessment of the effectiveness of the Company’s internal control over financial reporting and the evaluation by Deloitte of the effectiveness of the Company’s internal control over financial reporting.
The audit committee has discussed with Deloitte and PwC the matters required to be discussed by Statement of Auditing Standards No. 61, Communication with Audit Committees, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Oversight Board in Rule 3200T, which includes, among other items, matters related to the conduct of the audit of the Company’s financial statements. The audit committee also has received written disclosures and the letter from Deloitte and PwC required by applicable requirements of the Public Company Accounting Oversight Board regarding Deloitte's and PwC's communications with the audit committee concerning independence, and has discussed with Deloitte and PwC its independence from the Company. The audit committee has also considered whether the provision of the services described under the caption “Audit Fees and Non-Audit Fees” is compatible with maintaining the independence of the independent auditors.
Based on the review and discussions referred to above, the audit committee recommended to the board of directors that the audited financial statements and management’s assessment of the effectiveness of the Company’s internal control over financial reporting be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission.
This report is submitted by the audit committee of the Company.

 
Henry C. Beinstein, Chairman
 
Jeffrey S. Podell
 
Jean E. Sharpe


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Audit and Non-Audit Fees
The audit committee reviews and approves audit and permissible non-audit services performed by Deloitte and PwC, as well as the fees charged by Deloitte and PwC for such services. In accordance with Section 10A(i) of the Securities Exchange Act, before Deloitte and PwC are engaged to render audit or non-audit services, the engagement is approved by the audit committee. All of the services provided and fees charged by Deloitte and PwC in 2015 and PwC in 2014 were pre-approved by the audit committee.
Audit Fees.  The aggregate fees billed by Deloitte for professional services for the audit of the annual financial statements of the Company and its consolidated subsidiaries, audit of effectiveness of internal control over financial reporting under Sarbanes-Oxley Section 404, audits of subsidiary financial statements, reviews of the financial statements included in the Company’s quarterly reports on Form 10-Q, comfort letters, consents and review of documents filed with the SEC were $2,949,196 for 2015. The aggregate fees billed by PwC for professional services for the audit of the annual financial statements of the Company and its consolidated subsidiaries, audit of effectiveness of internal control over financial reporting under Sarbanes-Oxley Section 404, audits of subsidiary financial statements, reviews of the financial statements included in the Company’s quarterly reports on Form 10-Q, comfort letters, consents and review of documents filed with the SEC were $965,000 for 2015 and $3,037,550 for 2014. The Company believes that additional amounts may be billed for audit services rendered in 2015 but no invoice has been submitted for approval to either the Company or the Audit Committee as of the date of this proxy statement.
Audit-Related Fees.  No fees were billed by Deloitte and PwC for audit-related professional services in 2015 and 2014.
Tax Fees.  No fees were billed by Deloitte and PwC for professional services for tax services in 2015. PwC billed $50,241 for professional services for tax services in 2014. The services were primarily for federal and state tax advice.
All Other Fees.  The aggregate fees billed for other services by Deloitte were $7,600 in 2015. The aggregate fees billed for other services by PwC were $3,600 in 2015 and 2014, respectively. The amounts consisted of licensing of accounting research software.
Pre-Approval Policies and Procedures
The audit committee has adopted a policy that requires advance approval of all audit, audit-related, tax and other services performed by the independent registered certified public accounting firms. The policy provides for pre-approval by the audit committee of specifically defined audit and non-audit services. Unless the specific service has been previously pre-approved with respect to that year, the audit committee must approve the permitted service before any independent registered certified public accounting firm is engaged to perform it. The audit committee approved all services provided by Deloitte and PwC in 2015.

Equity Compensation Plan Information
The following table summarizes information about the options, warrants and rights and other equity compensation under the Company’s equity plans as of December 31, 2015.

 
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
 
Weighted-average exercise
price of outstanding
options, warrants and rights
 
Number of securities remaining
available for future issuance
under equity compensation
plans (2)
Plan Category
 
 
Equity compensation plans approved by security holders (1)
3,745,631
 
$13.82
 
7,888,406
Equity compensation plans not approved by security holders
—
 
—
 
—
Total
3,745,631
 
$13.82
 
7,888,406
___________________________
(1)
Includes options to purchase shares of the Company’s Common Stock under the following stockholder-approved plans: 1999 Plan and 2014 Plan.
(2)
Excluding securities reflected in second column.


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Certain Relationships and Related Party Transactions
The board of directors has adopted a written policy for the review and approval of transactions between the Company and its directors, director nominees, executive officers, greater than five percent beneficial owners and their immediate family members. The policy covers any related party transaction that meets the minimum threshold for disclosure in the Company’s proxy statement under the relevant Securities and Exchange Commission rules. The audit committee is responsible for reviewing and, if appropriate, approving or ratifying any related party transactions. 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.
The related party transactions described in this proxy statement entered into before this policy was adopted were approved by the board of directors or the audit committee.
The Company beneficially owns approximately 8% of Ladenburg Thalmann Financial Services Inc. (“LTS”) and certain executive officers and directors of the Company serve as officers and members of the Board of Directors of LTS. Since September 2006, the Company has had an agreement with LTS, as subsequently amended, pursuant to which it agreed to make available to LTS the services of Mr. Lampen, the Company's Executive Vice President, to serve as the President and Chief Executive Officer of LTS and to provide certain other financial, accounting and tax services, including assistance with complying with Section 404 of the Sarbanes-Oxley Act of 2002 and assistance in the preparation of income tax returns. LTS paid the Company $850,000 in 2015 and the agreement has continued in 2016. The agreement is terminable by either party upon 30 days’ prior written notice. LTS paid bonus compensation for 2015 of $1,300,000 to each of Mr. Lorber, who serves as Vice Chairman of LTS, and Mr. Lampen, who serves as President, Chief Executive Officer and as a director of LTS. Mr. Lampen is being reimbursed by LTS for various automobile expenses and health and dental insurance premiums on an after-tax basis ($31,668 for 2015), and receives a salary of $150,000 from LTS in 2015, which is $200,000, effective January 1, 2016. Mr. Lorber also received customary director's fees of $36,000 from LTS in 2015. On November 4, 2011, the Company was part of a consortium, which included Dr. Frost and Mr. Lampen, that entered into a loan agreement with LTS. The total amount lent to LTS was $165,000,000 and Vector’s portion of the loan was $15,000,000. Interest on the loan is payable quarterly by LTS at 11% per annum, commenced on December 31, 2011, and is due November 4, 2016. The Company recorded interest income of $279,715 for the year ended December 31, 2015. At March 25, 2016, the balance of the Company’s portion of the loan was $1,680,000 from LTS. Dr. Phillip Frost, who is a more than 10% stockholder of the Company's Common Stock as of the record date, is Chairman of LTS's Board of Directors and beneficially owns more than 10% of LTS.

At December 31, 2014, the Company owned 14,191,205 LTS common shares and had warrants to purchase an additional 1,000,000 common shares of LTS at a price of $1.68 per common share. The Company also owns 240,000 shares of LTS 8% Series A Preferred Stock and received dividends of $132,918 from LTS Preferred Stock in 2015.

The Company beneficially owns approximately 8% of Castle. Mr. Lampen serves as Castle's President and Chief Executive Officer and Henry C. Beinstein, a member of the Company's Board of Directors, serves as a director of Castle. In October 2008, Vector entered into an agreement with Castle where the Company agreed to make available the services of Mr. Lampen to serve as the President and Chief Executive Officer of Castle as well as other financial, accounting and tax services. Vector recognized management fees of $100,000 in 2015 under the agreement and Castle is paying the Company management fees of $100,000 per year in 2016. The Company owns $200,000 of Castle convertible debt, which bears interest at 5% per annum, due in 2018. The Company recorded interest income of $10,000 from the notes for the year ended December 31, 2015. The notes are convertible into Castle shares at $0.90 per share.
In addition to its interests in LTS and Castle, the Company has investments in other entities where Dr. Frost has a relationship. These include: (i) five investments in 2006, 2008, 2009, 2011 and 2015 totaling approximately $19,493,322 in common stock of OPKO Inc. (NYSE: OPK) and another $5,000,000 in OPKO convertible bonds in 2013 (in OPKO convertible bonds through the Company’s Accommodations Acquisition Corp ("AAC") subsidiary); (ii) a $500,000 investment in 2008 for 2,259,796 shares in Tiger X Medical Inc. (formerly known as Cardo Medical Inc. (OTC BB: CDOM)); and (iii) a $250,000 investment in 2008, a $125,000 investment in 2010 and a $200,000 investment in 2015 in Cocrystal Discovery Inc. (OTC BB: COCP). Dr. Frost is a director, executive officer and/or more than 10% stockholder of OPKO and other entities in which the Company has invested as well such as LTS, Castle and CoCrystal. Additional investments in entities where Dr. Frost has a relationship may be made in the future.
In September 2012, the Company entered into an office lease with Frost Real Estate Holdings, LLC (“FREH”), an entity affiliated with Dr. Frost. The lease is for 12,390 square feet of space in an office building in Miami, Florida. The initial term of the lease is five years, subject to two optional five-year term extensions. Payments under the lease commenced in May 2013. The lease provides for payments of $30,975 per month in the first year increasing to $35,202 per month in the fifth year, plus applicable sales tax. The rent includes operating expenses, property taxes and parking. A $220,000 tenant improvement allowance will be

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credited to the rent pro-rata over the initial five-year term. In connection with the execution of the lease, the Company received the advice and opinion of a commercial real estate firm that the lease terms were fair and that the Company received terms favorable in the market. The Company recorded rent expense associated with the lease of $380,306 for the year ended December 31, 2015.
In May 2009, the Company issued in a private placement a 6.75% Variable Interest Senior Convertible Note due 2014 in the principal amount of $50,000,000 to an entity affiliated with Dr. Frost. In March 2014, the holder of the 6.75% Variable Interest Senior Convertible Note elected to convert $25,000,000 of the Note into 2,338,929 shares of the Company's common stock. On November 14, 2014, the Note was amended to extend the stated maturity date of the Note from November 15, 2014 to February 15, 2015. On February 3, 2015, the Note was converted into 2,338,930 shares of the Company's common stock. The Company recognized cash interest expense of $518,936 in 2015 related to notes owned by the entity affiliated with Dr. Frost.
Mr. Lorber serves as a consultant and a 50% owner of Open Acq LLC. During 2015, Mr. Lorber and Open Acq LLC and its affiliates received ordinary and customary insurance commissions aggregating approximately $225,290 on various insurance policies issued for the Company and its subsidiaries and investees. Open Acq LLC and its affiliates have continued to provide services to the Company in 2015.
One of Mr. Lorber’s sons is a real estate agent whose license is held at a subsidiary of Douglas Elliman Realty, LLC and he received commissions and other payments of $452,977 in accordance with brokerage activities in 2015.
Mr. Kirkland serves as Chairman of the Board of Directors and as President and Chief Executive Officer of Multi Solutions, II, Inc., an approximately 53%-owned subsidiary of the Company. The Company has entered into a $450,000 credit facility, as amended, with Multi Solutions II, Inc. and, as of December 31, 2015, had advanced $309,197 under the facility, which bears interest at 11% per annum. As of December 31, 2015, there was accrued interest on the facility due to the Company by Multi Solutions II, Inc. of $90,209.
Mr. Kirkland serves as Chairman of the Board of Directors and as President and Chief Executive Officer of Multi Soft, II, Inc. (OTC BB: MSOF), an approximately 54%-owned subsidiary of the Company. The Company has entered into a $450,000 credit facility, as amended, with Multi Soft II, Inc. and, as of December 31, 2015, had advanced $300,157 under the facility, which bears interest at 11% per annum. As of December 31, 2015, there was accrued interest on the facility due to the Company by Multi Soft II, Inc. of $85,357.

BOARD PROPOSAL 2 — ADVISORY VOTE ON EXECUTIVE COMPENSATION (THE SAY ON PAY VOTE)
Pursuant to Section 14A of the Securities Exchange Act of 1934, as amended, the Company is seeking a non-binding advisory vote from its stockholders regarding the compensation of its named executive officers as described in the “Compensation Discussion and Analysis” and the Summary Compensation Table. This proposal is also referred to as the say on pay vote.
The Company has designed its compensation programs to reward employees for producing sustainable growth and profitability, to attract and retain high caliber talent and to align compensation with the long-term interests of its stockholders. The Company believes that its compensation policies and procedures are centered on a pay-for-performance philosophy. In deciding how to vote on this proposal, the board urges you to consider the following factors, which are more fully discussed in the “Compensation Discussion and Analysis”:

•
A substantial portion of direct compensation shown in the Summary Compensation Table is variable (and therefore at risk) depending on performance (in 2015: 91.5% in the case of Mr. Lorber, 50.2% in the case of Mr. Lampen, 52.1% in the case of Mr. Kirkland, 61.2% in the case of Mr. Bell and 50.0% in the case of Mr. Bernstein). (Direct compensation includes total compensation reported in the Summary Compensation Table excluding the change in pension value.)
•
The Company mitigates the risks associated with incentive compensation by using multiple performance targets, caps on potential incentive payments and a clawback policy.
•
In 2013, the Company began to increase its focus on long-term incentives by awarding options with four-year cliff vesting and long-term performance based restricted stock. As a result, long-term equity compensation accounted for a significant portion of direct compensation shown in the Summary Compensation Table (70.5% in the case of Mr. Lorber, 17.4% in the case of Mr. Lampen, 33.3% in the case of Mr. Kirkland and 21.3% in the case of Mr. Bell.
•
In addition to promoting retention of equity by vesting equity over time, the Company requires executives to retain 25% of equity awards under its Equity Retention Policy and encourages the accumulation of equity through its Equity Ownership Guidelines, all of which works to align the interests of executives with those of stockholders.
•
The Company’s quarterly dividend (resulting in quarterly dividends of $0.40 per share in 2015) paid to all stockholders is contingent on strong financial performance achieved by the named executive officers, as well as the Company’s ability to receive dividends from its subsidiaries and investees. The incentive compensation of four of the five named executive officers is directly tied to the amount of dividends paid to stockholders: 37.5% of the performance criteria for earning the annual incentive bonus is based on distributions to stockholders.

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•
Executives are prohibited from hedging their company securities.
•
The Company does not reprice options or change performance targets for annual, long-term or equity-based awards after the awards are established.
•
The Company requires both a change in control and a termination of employment (a “double trigger”) before cash severance payments will be made as a result of a change in control.
•
The compensation committee considers the advice of an independent compensation consultant in making compensation determinations.
The Board recommends that stockholders vote FOR the following resolution:
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in the March 25, 2016 proxy statement, including the Compensation Discussion and Analysis, the executive compensation tables, and the related narrative.”
Because your vote is advisory, it will not be binding upon the board of directors of the Company, meaning that prior compensation determinations of the board will not be invalidated and the board will not be required to adjust executive compensation programs or policies as a result of the outcome of the vote. However, the board values stockholders’ opinions and the compensation committee will take into account the outcome of the vote when considering future executive compensation arrangements and corporate governance measures.
Approval of the say on pay resolution requires the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy at the annual meeting and entitled to vote on the matter.
The Company currently submits an advisory vote on executive compensation to stockholders annually. The next say-on-pay vote will occur at the 2017 annual meeting of stockholders.
The Board of Directors recommends that stockholders vote
“FOR”
advisory approval of the Company's executive compensation.


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BOARD PROPOSAL 3 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Change of Independent Registered Certified Public Accounting Firm in 2015
    
On June 8, 2015, the Company dismissed PwC as the Company’s independent registered certified public accounting firm, effective June 8, 2015, and notified Deloitte that it had been selected as its independent registered public accounting firm for the Company’s fiscal year ending December 31, 2015.

The decision to change principal accountants was approved by both the Company's audit committee and its Board of Directors. PwC’s audit reports on the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 2014 and December 31, 2013, and Deloitte's audit report on the Company's consolidated financial statements as of and for the fiscal year ended December 31, 2015, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle. During the fiscal year ended December 31, 2014 and in the interim subsequent period through June 8, 2015, there were (i) no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, any of which, if not resolved to PwC’s satisfaction, would have caused PwC to make reference thereto in their reports, and (ii) no “reportable events” as defined by Item 304(a)(1)(v) of Regulation S-K, except for the previously reported material weaknesses in the Company's internal control over financial reporting related to (a) the effectiveness of the Company’s monitoring activities of a business which became a consolidated subsidiary in December 2013 (Douglas Elliman Realty, LLC), which led to (b) deficiencies in the period-end financial reporting processes at the Douglas Elliman, including controls over the preparation, analysis and review of certain significant account reconciliations required to assess the appropriateness of account balances at period-end, as well as controls over the preparation and review of the interim and annual financial statements, (c) segregation of duties of finance and accounting personnel at Douglas Elliman being improperly designed and not effective because certain personnel were authorized to perform interrelated functions that could have resulted in either erroneous or inappropriate actions, (d) processing and recording of recurring and non-recurring journal entries at Douglas Elliman being improperly designed and not effective to ensure that journal entries were either prepared with sufficient documentation or reviewed and approved, and (e) controls over access to information technology systems at Douglas Elliman being improperly designed and not effective because certain personnel have inappropriate access. In 2015, PwC and the audit committee discussed the material weaknesses. Subsequent to the decision to change principal accountants, the Company authorized PwC to respond fully to the inquiries of Deloitte concerning the material weaknesses in the Company's Annual Report on Form 10-K for the fiscal year ended December 1, 2014.

During the fiscal years ended December 31, 2015 and December 31, 2014, and the subsequent interim period through the date of this filing, neither the Company nor anyone on its behalf has consulted with Deloitte regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was provided to the Company that Deloitte concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue, (ii) any matter that was the subject of a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K, or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of Regulation S-K.

Proposal to ratify the appointment of Deloitte as Independent Registered Public Accounting Firm in 2016
The Company asks that stockholders ratify the appointment of Deloitte & Touche LLP, which has been the independent registered public accounting firm for the Company since June 2015, as its independent registered public accounting firm for the year ending December 31, 2016. It is expected that one or more representatives of such firm will attend the annual meeting and be available to respond to any questions. These representatives will be given an opportunity to make statements at the annual meeting if they desire.
If the appointment is not ratified, the adverse vote will be considered as an indication to the audit committee that it should consider selecting another independent registered public accounting firm for the following fiscal year. Even if the selection is ratified, the Company’s audit committee, in its discretion, may select a new independent registered public accounting firm at any time during the year if it believes that such a change would be in its best interest.
Approval of the ratification of the appointment of Deloitte as the Company’s independent registered public accounting firm for the year ending December 31, 2016 requires the affirmative vote of the majority of shares of Common Stock present or represented, and entitled to vote thereon, at the annual meeting.
The Board of Directors recommends that stockholders vote “FOR” Proposal 3 to ratify the appointment of Deloitte & Touche LLP as the Company's independent registered public accounting firm for the year ending December 31, 2016.


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 PROPOSAL 4 - SHAREHOLDER PROXY ACCESS
 
The Company has received the following proposal from Kenneth Steiner, 14 Stoner Avenue, Apartment 2M, Great Neck, NY 11021. Mr. Steiner has owned more than 500 shares of our common stock for more than one year.

"RESOLVED: Shareholders ask our board of directors to adopt, and present for shareholder approval, a "proxy access" bylaw as follows:

Require the Company to include in proxy materials prepared for a shareholder meeting at which directors are to be elected the name, Disclosure and Statement (as defined herein) of any person nominated for election to the board by a shareholder or an unrestricted number of shareholders forming a group (the "Nominator") that meets the criteria established below.

Allow shareholders to vote on such nominee on the Company's proxy card.

The number of shareholder-nominated candidates appearing in proxy materials should not exceed one quarter of the directors then serving or two, whichever is greater. This bylaw should supplement existing rights under Company bylaws, providing that a Nominator must:

a) have beneficially owned 3% or more of the Company's outstanding common stock, including recallable loaned stock, continuously for at least three years before submitting the nomination;

b) give the Company, within the time period identified in its bylaws, written notice of the information required by the bylaws and any Securities and Exchange Commission (SEC) rules about (i) the nominee, including consent to being named in proxy materials and to serving as director if elected; and (ii) the Nominator, including proof it owns the required shares (the "Disclosure"); and

c) certify that (i) it will assume liability stemming from any legal or regulatory violation arising out of the Nominator's communications with the Company shareholders, including the Disclosure and Statement; (ii) it will comply with all applicable laws and regulations if it uses soliciting material other than the Company's proxy materials; and (iii) to the best of its knowledge, the required shares were acquired in the ordinary course of business, not to change or influence control at the Company.

The Nominator may submit with the Disclosure a statement not exceeding 500 words in support of the nominee (the "Statement"). The Board should adopt procedures for promptly resolving disputes over whether notice of a nomination was timely, whether the Disclosure and Statement satisfy the bylaw and applicable federal regulations, and the priority given to multiple nominations exceeding the one-quarter limit. No additional restrictions that do not apply to other board nominees should be placed on these nominations or re-nominations.

The Security and Exchange Commission's universal proxy access Rule 14a-11 was unfortunately vacated by 2011 a court decision. Therefore, proxy access rights must be established on a company-by-company basis.

Subsequently, Proxy Access in the United States: Revisiting the Proposed SEC Rule), a cost benefit analysis by the CFA Institute (Chartered Financial Analyst), found proxy access would "benefit both the markets and corporate boardrooms, with little cost or disruption," raising US market capitalization by up to $140 billion.

Please vote to enhance shareholder value Shareholder Proxy Access - Proposal 4"

BOARD OF DIRECTORS’ RESPONSE
THE BOARD OF DIRECTORS OPPOSES THE PROPOSED RESOLUTION AND UNANIMOUSLY RECOMMENDS A VOTE AGAINST ITEM 4 FOR THE FOLLOWING REASONS:
The Company is committed to sound corporate governance policies and practices that enhance stockholder returns. The board’s Corporate Governance and Nominating Committee has an existing and effective process for identifying and recommending qualified director nominees, including nominees who are recommended by stockholders. After careful consideration, the Company’s Board of Directors believes that the proposed form of “proxy access” is not in the best interests of stockholders for the following reasons:
•
Proxy access can result in an inexperienced, fragmented, and unstable board, which could have detrimental effects

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on the Company’s business and results of operations, especially given the complex and diversified nature of the Company’s tobacco and real estate businesses;
•
The existing corporate governance structure is best suited to evaluate qualified director candidates;
•
Proxy contests can result in unnecessary and substantial expense; and
•
Proxy access continues to be evaluated, and the proposed form of proxy access is beyond previous forms of proxy access that have been enacted by early adopters.
The Company’s existing corporate governance structure already provides the opportunity for stockholder input into the governance process. Stockholders can correspond directly with the board and its individual directors. Stockholders have the opportunity to solicit proxies for their own nominees for election of directors and present proposals for inclusion in the proxy and presentation at the annual meeting of stockholders.
Implementation of the Proposal May Result in an Inexperienced and Fragmented Board for a Complex and Diversified Company
The Company operates in two very complex industries - tobacco and real estate. The Company’s tobacco segment requires an understanding of, and the ability to provide management with direction on, an intensely competitive industry which faces both complex litigation and regulatory issues while managing declining unit sales. Similarly, the Company’s real estate segment requires a specialized knowledge of a cyclical business. The board believes that managing such a complex and diversified company requires identifying a diverse and highly skilled group of directors in order to effectively manage the Company’s businesses in light of the challenges the Company faces. However, the board believes that proxy access may lead to an inexperienced, fragmented and unstable board that is less efficient in managing the complexities of the Company’s businesses or less focused on creating long-term value for the Company’s stockholders.

Thus, implementation of proxy access on the terms of the proposal could threaten the Company’s focus on increasing stockholder value. The Company’s long-term approach on creating stockholder value has resulted in consistent and superior long-term stockholder returns. The following table reports the Company’s total annual stockholder returns (including share price appreciation and reinvestment of cash dividends and distributions) for the three, five and ten years ended December 31, 2015.


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Directors Proposed by Special Interests Do Not Represent the Long-Term Interests of All Stockholders
Proxy access could inject special interest politics, especially related to the Company’s tobacco segment, into the boardroom by allowing an individual stockholder (or a minority group of stockholders) with narrowly tailored special interests or short-term goals to use the proxy process to promote an agenda which favors the interests of the minority rather than the long-term interests of all of the stockholders. The Company’s current process allows the board and its Corporate Governance and Nominating Committee to evaluate the background, qualifications, potential contributions and interests of each candidate and determine whether the nomination of such candidate is in the best interests of stockholders. Thus, given the Company’s business operations in the tobacco segment, the board believes the risk of a stockholder seeking to take hold of the proxy process to achieve a social or political objective that is contrary to the goals of the Company is significant. Such a process could be detrimental to the Company’s business, results of operations or prospects because, unlike the board, stockholders who advance their nominees do not have a fiduciary duty to act in the best interests of the Company and protect fellow stockholders. As a result, stockholders are not obligated to consider the long-term interests of the Company – and its stockholders – when nominating directors and instead can use the proxy process for their political or social gain.

The Existing Corporate Governance Structure is Best Suited to Evaluate Qualified Director Candidates Without Significant Added Expenses
The board’s Corporate Governance and Nominating Committee already has an effective process for identifying, evaluating, and recommending qualified director nominees. Candidates identified by the board and those suggested by stockholders will be examined thoroughly for suitability. The process is designed to identify and nominate for consideration those director candidates who possess the training, experience, and diverse background necessary to manage and enhance the Company’s business and adhere to the highest standards of Corporate Governance. Proxy access would bypass the rigorous screening of director candidates and would allow a stockholder to nominate candidates who may lack the required mix of experience, skill and perspective needed to be an effective participant on the Company’s board. As noted above, electing such individuals to the Company’s board could have a detrimental effect on the Company’s business and results of operations by resulting in an inexperienced, fragmented and unstable board.
Proxy contests can result in unnecessary and substantial expense
With proxy access, there is an increased likelihood that director elections will be contested. Contested elections can (i) distract

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the board and management from their duties and responsibilities to the Company, (ii) encourage a more short-term focus at the expense of long-term stockholder value and (iii) reduce board cohesiveness. The proponents’ proxy access proposal could encourage expensive and disruptive proxy contests at the Company’s expense. Such expenses are unnecessary and not in the best interests of the Company’s stockholders.
Proxy access continues to be evaluated, and the proposed form of proxy access is beyond that which has been put in place by early adopters
To date, although a number of companies have adopted proxy access provisions, there are no known proxy access nominees in the United States. Hence the process is untested because there has not yet been a contest where a third-party stockholder has used proxy access. Consequently, a number of companies continue to evaluate the costs and benefits of its implementation, and the full impact is not yet known. While the board has identified many of the concerns in this response, the board believes that there may be other risks of proxy access that are not currently understood and appreciated.
The form of proxy access proposed to the Company in this Item 4 is also inconsistent with proxy access by-laws adopted by other companies, the vast majority of which (i) limit the number of stockholder nominated directors to no more than 20 percent of the board (a threshold that is lower than the 25 percent proposed to the Company in this Item 4) and (ii) limit the size of the group nominating the directors to 20 stockholders (as opposed to an unlimited size proposed to the Company in this Item 4). Further, many of the companies that have adopted a three percent (3%) minimum threshold for a stockholder or group of stockholders to qualify as a nominator have significantly higher market capitalizations than the Company. The board believes it is premature to conclude that a three percent (3%) threshold would be appropriate for a proxy access bylaw provision for a company with a market capitalization and stockholder base similar to the Company’s. The board believes adopting a proxy access provision that is beyond that which has been put in place by early adopters or is consistent with provisions of significantly larger companies only exacerbates the potential risks associated with adopting such a by-law provision – including the unknown implications of an untested system – and therefore believes it is not in the long-term best interest of the Company and its stockholders to adopt the stockholder proposal.
Adoption of this non-binding proposal requires the affirmative vote of the majority of shares of Common Stock present or represented, and entitled to vote thereon, at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEM 4.


MISCELLANEOUS
Annual Report

The Company has mailed, with this proxy statement, a copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 to each stockholder as of the record date. If a stockholder requires an additional copy of such Annual Report, the Company will provide one, without charge, on the written request of any such stockholder addressed to the Company’s Secretary, Marc N. Bell, at Vector Group Ltd., 4400 Biscayne Boulevard, 10th Floor, Miami, Florida 33137.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires directors and executive officers of the Company, as well as persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of initial beneficial ownership and changes in beneficial ownership on Forms 3, 4 and 5 with the SEC. These persons are also required by SEC regulations to furnish the Company with copies of all reports that they file. As a practical matter, the Company assists its directors and officers by monitoring transactions and completing and filing Section 16 reports on their behalf.
To the Company’s knowledge, based solely on review of the copies of such reports furnished to the Company and representations that no other reports were required, during and with respect to the fiscal year ended December 31, 2015, all reporting persons timely complied with all filing requirements applicable to them.
Communications with Directors
Any stockholder and other interested parties wishing to communicate with any of the Company’s directors regarding the Company may write to the director, c/o the Company’s Secretary, Marc N. Bell, at Vector Group Ltd., 4400 Biscayne Boulevard, 10th Floor, 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.

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Although the Company does not have a policy with regard to board members’ attendance at the annual meeting of stockholders, all of the directors are invited to attend such meeting. Three of the Company’s directors were in attendance at the Company’s 2015 annual meeting.

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Stockholder Proposals for the 2017 Annual Meeting
Proposals of stockholders intended to be presented at the 2017 annual meeting of stockholders of the Company and included in the Company’s proxy statement for that meeting pursuant to Rule 14a-8 of the Exchange Act must be received by the Company at its principal executive offices, 4400 Biscayne Boulevard, 10th Floor, Miami, Florida 33137, Attention: Marc N. Bell, Company Secretary, on or before November 25, 2016 in order to be eligible for inclusion in the Company’s proxy statement relating to that meeting. Notice of a stockholder proposal submitted outside the processes of Rule 14a-8 will be considered untimely unless submitted by February 14, 2017 .
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIAL FOR THE
STOCKHOLDER MEETING TO BE HELD ON April 28, 2016
A copy of this proxy statement, the enclosed proxy card and the 2015 Annual Report of Vector Group Ltd., together with directions to the meeting, can be found at the website address: www.vectorgroupltd.com/investor-relations/ .


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Householding of Annual Meeting Materials
Some banks, brokers, broker-dealers and other similar organizations acting as nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of this proxy statement and the Annual Report may have been sent to multiple stockholders in your household. If you would prefer to receive separate copies of a proxy statement or Annual Report for other stockholders in your household, either now or in the future, please contact your bank, broker, broker-dealer or other similar organization serving as your nominee. Upon written or oral request to Vector Group Ltd., 4400 Biscayne Boulevard, 10th Floor, Miami, Florida 33137, or via telephone at 305-579-8000, we will provide separate copies of the Annual Report and/or this proxy statement. If a stockholder receives multiple copies of the Annual Report and/or this proxy statement, he or she may request householding in the future by contacting the Company at 4400 Biscayne Boulevard, 10th Floor, Miami, Florida 33137 or calling 305-579-8000.
Other Matters
All information in this proxy statement concerning the Common Stock has been adjusted to give effect to the 5% stock dividends paid on an annual basis to the stockholders of the Company since September 1999 with the most recent stock dividend paid on September 29, 2015.
The cost of this solicitation of proxies will be borne by the Company. The Company has hired Georgeson Shareholder Communications Inc. (“Georgeson”) to solicit proxies. Georgeson will solicit by personal interview, mail, telephone and email, and will request brokerage houses and other custodians, nominees and fiduciaries to forward soliciting material to the beneficial owners of Common Stock held of record by such persons. The Company will pay Georgeson a customary fee, anticipated to be approximately $7,500, covering its services and will reimburse Georgeson for reasonable expenses incurred in forwarding soliciting material to the beneficial owners of Common Stock. In addition, some of the directors, officers and regular employees of the Company may, without additional compensation, solicit proxies personally or by telephone.
The Board knows of no other matters which will be presented at the annual meeting. If, however, any other matter is properly presented at the annual meeting, the proxy solicited by this proxy statement will be voted in accordance with the judgment of the person or persons holding such proxy.

By Order of the Board of Directors,
HOWARD M. LORBER
President and Chief Executive Officer
Dated: March 25, 2016


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VECTOR GROUP LTD.
PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE 2016 ANNUAL MEETING OF
STOCKHOLDERS OF VECTOR GROUP LTD.
The undersigned stockholder of Vector Group Ltd. (the “Company”) hereby constitutes and appoints each of Marc N. Bell and J. Bryant Kirkland III attorney and proxy of the undersigned, with power of substitution, to attend, vote and act for the undersigned at the 2016 Annual Meeting of Stockholders of the Company, a Delaware corporation, to be held at the JW Marriott Marquis Miami, 255 Biscayne Blvd Way, Miami, FL 33131 on Thursday, April 28, 2016 at 11:00 a.m. local time, and at any adjournments or postponements thereof, with respect to the following on the reverse side of this proxy card and, in their discretion, on such other matters as may properly come before the meeting and at any adjournments or postponements thereof.
(Continued and to be signed on the reverse side.)
The Board of Directors recommends a vote FOR Items 1, 2 and 3 and AGAINST Item 4. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE  R
The Board of Directors recommends you vote FOR the following proposals:
Item 1.  Election of Directors:
 
 
 
FOR ALL NOMINEES
 
o
 
 
 
WITHHOLD AUTHORITY FOR ALL NOMINEES
 
o
 
 
 
FOR ALL EXCEPT (See instructions below)
 
o
 
Nominees:     o Bennett S. LeBow,  o Howard M. Lorber,  o Ronald J. Bernstein,
o Stanley S. Arkin,  o Henry C. Beinstein,  o Jeffrey S. Podell and  o Jean E. Sharpe
 
INSTRUCTION:  To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here:  R
 
Item 2.  Advisory approval of executive compensation (say on pay):
 
 
 
FOR
 
o
 
 
 
AGAINST
 
o
 
 
 
ABSTAIN
 
o
 
 
Item 3.  Approval of ratification of Deloitte & Touche LLP as independent registered public accounting firm for the year ending December 31, 2016:
FOR
 
o
 
 
 
AGAINST
 
o
 
 
 
ABSTAIN
 
o
 
 
 
The Board of Directors recommends you vote AGAINST the following shareholder proposal:
Item 4.  Advisory approval of a shareholder proposal regarding the adoption of a shareholder "proxy access" by-law.
FOR
 
o
 
 
 
AGAINST
 
o
 
 
 
ABSTAIN
 
o

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The shares represented by this proxy will be voted in the manner directed by the undersigned stockholder. If not otherwise directed, this proxy will be voted FOR the election of the nominees, FOR the advisory say on pay vote, FOR the ratification of the independent registered public accounting firm and AGAINST the advisory shareholder proposal regarding the adoption of a shareholder "proxy access" by-law.
To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. [  ]
Signature of Stockholder            Date            Signature of Stockholder            Date           
NOTE:  Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.

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