Turning Point Brands, Inc. (Form: 8-K, Received: 12/02/2016 13:20:13)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): November 30, 2016

TURNING POINT BRANDS, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-37763	20-0709285
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

5201 Interchange Way, Louisville, KY 40229

(Address of principal executive offices)

(502) 778-4421

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report.)

Check the appropriate box below if the Form 8–K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01

Entry into a Material Definitive Agreement.

The information set forth below in "Item 2.01 Completion of Acquisition or Disposition of Assets" of this Current Report on Form 8-K is incorporated into this Item 1.01 by reference.

Item 2.01

Completion of Acquisition or Disposition of Assets.

On November 30, 2016, National Tobacco Company, L.P. (the “Company”), a subsidiary of Turning Point Brands, Inc. (the “Registrant”), completed the acquisition of Smoke Free Technologies, Inc. (“Vapor Beast”) pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”) dated as of November 17, 2016 by and among the Company, Vapor Beast, and Vapor Beast’s shareholders, Timothy B. Campbell, Thomas J. Metzler, Timothy B. Cady, Mark M. Howard, and Sheilla V. Andrin (collectively, the “Sellers”). The Company’s entry into the Stock Purchase Agreement was previously reported on a Current Report on Form 8-K, as amended, dated November 17, 2016.

As previously reported, under the Stock Purchase Agreement, the Company purchased all of the issued and outstanding shares of Vapor Beast’s capital stock from the Sellers for an aggregate purchase price of $27 million, of which $4 million was paid to the Sellers in cash at the closing and $2 million (the “Holdback Amount”) will be retained by the Company for 18 months for purposes of satisfying Sellers’ indemnification obligations under the Purchase Agreement. The remainder of the purchase price was paid by the Company’s issuance to the Sellers of (i) short-term installment promissory notes (the “Installment Notes”) in the aggregate face principal amount of $19 million and (ii) 18-month promissory notes (the “18-Month Notes,” and together with the Installment Notes, the “Notes”) in the aggregate face principal amount of $2 million.

The Installment Notes bear simple interest at the short-term Applicable Federal Rate of 0.68% and have a maturity date of December 14, 2016. The 18-Month Notes bear interest at a rate equal to 6% per annum, compounded monthly, and have a maturity date of May 30, 2018.

The Notes may be prepaid at any time without penalty and are subject to a late payment penalty of 5% and a default rate of 13% per annum. The Notes are subject to customary defaults, including defaults for nonpayment, nonperformance, any material breach under the Stock Purchase Agreement by the Company and bankruptcy or insolvency of the Company. Upon an event of default and notice by a Seller, the obligations under the applicable Note may accelerate and become immediately due and payable.

In connection with the Stock Purchase Agreement, the Registrant entered into a Guaranty (collectively, the “Guaranties”) with each Seller under which the Registrant unconditionally guaranteed the Company’s obligations under the Notes and the payment to each Seller of its pro rata portion of the Holdback Amount, subject to any defenses the Company may have for any nonperformance.

The foregoing descriptions of the Installment Notes, the 18-Month Notes and the Guaranties are qualified in their entirety by reference to the full text of the forms of the Installment Notes, the 18-Month Notes and the Guaranties attached as Exhibits 10.1, 10.2 and 10.3 to this Current Report on Form 8-K, respectively.

Item 2.03

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of Registrant.

The information set forth above in "Item 2.01 Completion of Acquisition or Disposition of Assets" of this Current Report on Form 8-K is incorporated into this Item 2.03 by reference.

Item 9.01

Financial Statements and Exhibits.

(a) Financial Statements of Vapor Beast.

The financial statements required by this Item will be filed by amendment to this Current Report on Form 8-K no later than 71 calendar days after the date this report is required to be filed.

(b) Pro forma financial information.

The pro forma financial information required by this Item will be filed by amendment to this Current Report on Form 8-K no later than 71 calendar days after the date this report is required to be filed.

(d) Exhibits

Exhibit	Description

10.1	Form of Installment Note

10.2	Form of 18-Month Note

10.3	Form of Guaranty

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	TURNING POINT BRANDS, INC.

Dated: December 2, 2016	By:	/s/ James Dobbins
		James Dobbins
		Senior Vice President, General Counsel and Secretary

EXHIBIT INDEX

Exhibit	Description

10.1	Form of Installment Note

10.2	Form of 18-Month Note

10.3	Form of Guaranty

Exhibit 10.1

UNSECURED PROMISSORY NOTE

November 30, 2016

FOR VALUE RECEIVED, the undersigned National Tobacco Company, L.P., a Delaware limited partnership (the “ Borrower ”), promises to pay to the order of ______________________ (the “ Seller ”), the principal sum of ______________________________________________Dollars ($____________).

1. Interest. The unpaid principal balance of this Note shall bear simple interest at the short-term Applicable Federal Rate ("AFR") of 0.68% published by the Internal Revenue Service in Rev. Rul. 2016-26 for the month of November 2016.

2. Maturity. Borrower shall pay all principal and accrued interest on December 14, 2016 (the “ Maturity Date ”).

3. Late Payment Fee. If payment is not made on or before the Maturity Date, the Seller may collect a delinquency charge of 5% of the unpaid amount. Collection of the late payment fee shall not be deemed to be a waiver of the Seller’s right to declare a default hereunder.

4. Calculation of Interest. Interest will be computed for the actual number of days principal is unpaid, using a daily factor obtained by dividing the stated interest rate by 365.

5. Default Interest Rate. Principal amounts remaining unpaid after the maturity thereof, whether at the Maturity Date or by reason of acceleration of maturity, shall bear interest from and after maturity until paid at a rate of 13% per annum.

6. Maximum Rate. In no event will the interest rate hereunder exceed that permitted by applicable law. If any interest or other charge is finally determined by a court of competent jurisdiction to exceed the maximum amount permitted by law, the interest or charge shall be reduced to the maximum permitted by law, and the Seller may credit any excess amount collected against the balance due or refund the amount to the Borrower.

7. Prepayment. This Note may be prepaid in full or in part at any time without premium.

8. Financial Information. The Borrower will (i) maintain accounting records in accordance with generally recognized and accepted principles of accounting consistently applied throughout the accounting periods involved; and (ii) provide the Seller with the annual audited financial statements of its ultimate parent company, Turning Point Brands, Inc., on Form 10-K.

9. Payments. Payments due under this Note shall be made in lawful money of the United States. All payments may be applied by the Seller to principal, interest and other amounts due under the Note in any order which the Seller elects.

10. Defaults. Notwithstanding any cure periods described below, the Borrower shall immediately notify the Seller in writing when the Borrower obtains knowledge of the occurrence of any default specified below. Regardless of whether the Borrower has given the required notice, the occurrence of one or more of the following shall constitute a default:

(a) Nonpayment. The Borrower shall fail to pay this Note within 2 calendar days of the Maturity Date.

(b) Nonperformance. The Borrower or any guarantor of the Borrower’s obligations to the Seller (“ Guarantor ”) shall fail to perform or observe any agreement, term, provision condition, or covenant (other than a default occurring under (a), (c), (d), (e), or (f) of this paragraph 10) required to be performed or observed by the Borrower or any Guarantor hereunder.

(c) Misrepresentation. Any financial information, statement, certificate, representation or warranty given to the Seller by the Borrower or any Guarantor (or any of their representatives) in connection with entering into this Note and/or any borrowing thereunder, or required to be furnished under the terms thereof, shall prove untrue or misleading in any material respect as of the time when given.

(d) Breach under the Purchase Agreement. Any material breach by Borrower under the Purchase Agreement (as defined below).

(e) Judgments. Any final, non-appealable judgment shall be obtained against the Borrower or any Guarantor which, together with all other outstanding unsatisfied, final, non-appealable judgments against the Borrower (or any Guarantor), shall exceed the sum of $100,000 and shall remain unvacated, unbonded or unstayed for a period of 30 days following the date of entry thereof.

(f) Inability to Perform; Bankruptcy/Insolvency. (i) the Borrower or any Guarantor shall die or cease to exist; (ii) any Guarantor shall attempt to revoke any guaranty of the obligations described herein, or any guaranty becomes unenforceable in whole or in part for any reason; (iii) any Bankruptcy, insolvency or receivership proceedings, or an assignment for the benefit of creditors, shall be commenced under any Federal or state law by or against the Borrower or any Guarantor, which is not dismissed or vacated within 60 days; (iv) the Borrower or any Guarantor shall become the subject of any out‑of‑court settlement with its creditors; or (v) the Borrower or any Guarantor is unable or admits in writing its inability to pay its debts as they mature.

11. Acceleration of Obligations. Upon the occurrence of any of the events identified in paragraph 10(a) through 10(e), and the passage of any applicable cure periods, the Seller may at any time thereafter, by written notice to the Borrower, declare the unpaid principal balance of any obligations, together with the interest accrued thereon and other amounts accrued hereunder, to be immediately due and payable; and the unpaid balance shall thereupon be due and payable, all without presentation, demand, protest or further notice of any kind, all of which are hereby waived, and notwithstanding anything to the contrary contained herein. Upon the occurrence of any event under paragraph 10(f), the unpaid principal balance of any obligations, together with all interest accrued thereon and other amounts accrued hereunder, shall thereupon be immediately due and payable, all without presentation, demand, protest or notice of any kind, all of which are hereby waived, and notwithstanding anything to the contrary contained herein.

12. Additional Seller Rights. Without affecting the liability of any Borrower, endorser, surety or guarantor, the Seller may, without notice, renew or extend the time for payment, accept partial payments, or agree not to sue any party liable on it.

13. Warranties. The Borrower makes the following warranties: (a) Borrower is a validly existing limited partnership, in good standing under the laws of the State of Delaware, and has all requisite power and authority, corporate or otherwise, and possesses all licenses necessary, to conduct its business and own its properties; (b) the execution, delivery and performance of this Note (i) are within the Borrower’s power; (ii) have been duly authorized by proper corporate action; (iii) do not require the approval of any governmental agency; and (iv) will not violate any law, agreement or restriction by which the Borrower is bound; and (c) this Note is the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms.

14. Waivers; Relationship to Other Documents. All Borrowers, endorsers, sureties and guarantors waive presentment, protest, demand, and notice of dishonor. The warranties, covenants and other obligations of the Borrower (and rights and remedies of the Seller) in this Note and all related documents are intended to be cumulative and to supplement each other.

15. Expenses and Attorneys’ Fees. The Borrower will reimburse the Seller for all reasonable attorneys’ fees and all other costs, fees and out‑of‑pocket disbursements incurred by the Seller in connection with the administration, defense and enforcement of this Note, including fees and costs related to any waivers or amendments with respect thereto. The Borrower will also reimburse the Seller for all costs of collection before and after judgment.

16. Applicable Law and Jurisdiction; Interpretation. This Note shall be governed by and interpreted in accordance with the internal laws of the State of Delaware, except to the extent superseded by Federal law. Invalidity of any provisions of this Note shall not affect any other provision. THE BORROWER AND THE SELLER HEREBY CONSENT TO THE JURISDICTION OF THE STATE OF DELAWARE OR FEDERAL COURT SITUATED IN THE COUNTY OR FEDERAL JURISDICTION IN DELAWARE AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS , WITH REGARD TO ANY ACTIONS, CLAIMS, DISPUTES OR PROCEEDINGS RELATING TO THIS NOTE, OR ANY TRANSACTIONS ARISING THEREFROM, OR ENFORCEMENT AND/OR INTERPRETATION OF ANY OF THE FOREGOING. Nothing herein shall affect the Seller’s rights to serve process in any manner permitted by law.

17. Waiver of Jury Trial. THE BORROWER AND THE SELLER HEREBY JOINTLY AND SEVERALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS THEREUNDER, ANY COLLATERAL SECURING THE OBLIGATIONS, OR ANY TRANSACTION ARISING THEREFROM OR CONNECTED THERETO. THE BORROWER AND THE SELLER EACH REPRESENTS TO THE OTHER THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN.

18. Purchase Agreement . This Note is executed pursuant to that Stock Purchase Agreement among Borrower and Seller, ________________________________________________________, and Smoke Free Technologies Inc. dated as of the date hereof (the “Purchase Agreement”).

(Signature Page Follows)

IN WITNESS WHEREOF, the undersigned has executed this Note as of the date and year first written above.

	NATIONAL TOBACCO COMPANY, L.P., a Delaware limited partnership

	By:
	Name:
	Title:

	Address:	5201 Interchange Way
		Louisville, Kentucky

Signature Page to Installment Note

Exhibit 10.2

UNSECURED PROMISSORY NOTE

November 30, 2016

FOR VALUE RECEIVED, the undersigned National Tobacco Company, L.P., a Delaware limited partnership (the “ Borrower ”), promises to pay to the order of ______________________ (the “ Seller ”), the principal sum of______________________________________Dollars ($________).

1. Interest. Interest will accrue on the unpaid principal balance at a rate equal to 6% per annum, compounded monthly.

2. Maturity. Borrower shall pay all principal and accrued interest on May 30, 2018 (the “ Maturity Date ”).

4. Calculation of Interest. Interest will be computed for the actual number of days principal is unpaid, using a daily factor obtained by dividing the stated interest rate by 365.

7. Prepayment. This Note may be prepaid in full or in part at any time without premium.

(a) Nonpayment. The Borrower shall fail to pay this Note within 2 calendar days of the Maturity Date.

(d) Breach under the Purchase Agreement. Any material breach by Borrower under the Purchase Agreement (as defined below).

18. Purchase Agreement . This Note is executed pursuant to that Stock Purchase Agreement among Borrower and Seller, __________________________________________________, and Smoke Free Technologies Inc. dated as of the date hereof (the “Purchase Agreement”).

(Signature Page Follows)

IN WITNESS WHEREOF, the undersigned has executed this Note as of the date and year first written above.

	NATIONAL TOBACCO COMPANY, L.P., a Delaware limited partnership

	By:
	Name:
	Title:

	Address:	5201 Interchange Way
		Louisville, Kentucky

Signature Page to Note

Exhibit 10.3

GUARANTY

This GUARANTY (this " Guaranty "), dated as of November 30, 2016, is made by Turning Point Brands, Inc., a Delaware corporation (" Guarantor "), in favor and for the benefit of [Name of Seller], a [State] resident (" Beneficiary ").

RECITALS

WHEREAS , reference is made to that certain Stock Purchase Agreement (the " Underlying Agreement "), dated as of November 17, 2016, by and among National Tobacco Company, L.P., a Delaware limited partnership (" Obligor "), Beneficiary, [Name and State of Residence], and Smoke Free Technologies Inc. d/b/a Vapor Beast, a California corporation (the “ Company ”). Any capitalized terms used but not defined herein shall have the meaning assigned to such term in the Underlying Agreement; and

WHEREAS , Obligor is a subsidiary of North Atlantic Trading Company, Inc. (“ Trading ”), a Delaware corporation, which owns 99% of the ownership interest of Buyer, with the other 1% owned by National Tobacco Finance Corp. which is a wholly-owned subsidiary of Trading, and Trading is a wholly-owned subsidiary of NATC Holding Company, Inc., a Delaware corporation and a wholly-owned subsidiary of the Guarantor.

NOW, THEREFORE , in consideration of the substantial direct and indirect benefits derived by Guarantor from the transactions under the Underlying Agreement, and in order to induce Beneficiary to sells its equity interests in the Company to Obligor in accordance with the terms of the Underlying Agreement, Guarantor, the parent company of the Obligor, hereby agrees as follows:

1. Guaranty . Subject to the terms of the Underlying Agreement and any applicable Transaction Documents, Guarantor absolutely, unconditionally and irrevocably guarantees to Beneficiary the full and punctual payment to Beneficiary of: (a) the Beneficiary’s Pro Rata Share of the Holdback Amount; (b) the Beneficiary’s Pro Rata Share of the Installment Payment, as evidenced by that certain Installment Note (the “ Installment Note ”), executed by Obligor for the benefit of Beneficiary; (c) the Beneficiary’s Pro Rata Share of the Deferred Payment, as evidenced by that certain Note (the “ Note ”), executed by Obligor for the benefit of Beneficiary; (d) any liability of Beneficiary for post-closing obligations of the Company arising under any Sellers’ Guaranties (as described in Section 5.12 of the Underlying Agreement), (e) all interests and other charges, and (f) costs and expenses of collection or enforcement (collectively, the " Obligations ").

2. Guaranty Absolute and Unconditional . Guarantor agrees that its Obligations under this Guaranty are irrevocable, continuing, absolute and unconditional and shall not be discharged or impaired or otherwise affected by, and Guarantor hereby irrevocably waives any defenses to enforcement it may have (now or in the future) by reason of:

(a) Any default, failure or delay, willful or otherwise, in the performance of the Obligations.

(b) Any change, restructuring or termination of the corporate structure, ownership or existence of Guarantor or Obligor or any insolvency, bankruptcy, reorganization or other similar proceeding affecting Obligor or its assets or any resulting restructuring, release or discharge of any Obligations.

(c) Any failure of Beneficiary to disclose to Guarantor any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of Obligor now or hereafter known to Beneficiary, Guarantor waiving any duty of Beneficiary to disclose such information.

(d) The failure of Beneficiary to assert any claim or demand or to exercise or enforce any right or remedy under the provisions of any Underlying Agreement, the Installment Note, the Note, or otherwise.

3. Certain Waivers; Acknowledgments . Guarantor further acknowledges and agrees as follows:

(a) Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Obligations, until the complete, irrevocable and indefeasible payment and satisfaction in full of the Obligations.

(b) Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of non-performance, default, acceleration, protest or dishonor and any other notice with respect to any of the Obligations and this Guaranty and any requirement that Beneficiary protect, secure, perfect or insure any lien or any property subject thereto.

(c) Notwithstanding anything contained herein to the contrary, the Obligations of Guarantor shall be limited to the maximum amount so as to not constitute a fraudulent transfer or conveyance for purposes of the United States Bankruptcy Code or any applicable state law or otherwise to the extent applicable to this Guaranty and the Obligations of Guarantor hereunder.

(d) This Guaranty shall be reinstated if at any time payment of any of the Obligations is rescinded or must otherwise be restored or returned by any party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of Obligor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, Obligor or any substantial part of their property, or otherwise, all as though such payment had not been made.

4. Representations and Warranties . To induce Beneficiary to enter into the Underlying Agreement, Guarantor represents and warrants that: (a) Guarantor is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its organization; (b) this Guaranty constitutes Guarantor's valid and legally binding agreement in accordance with its terms; (c) the execution, delivery and performance of this Guaranty have been duly authorized by all necessary action and will not violate any order, judgment or decree to which Guarantor or any of its assets may be subject; and (d) Guarantor is currently solvent and will not be rendered insolvent by providing this Guaranty.

5. Notices . All notices, requests, consents, demands and other communications hereunder (each, a " Notice ") shall be in writing and delivered to the parties at the addresses set forth in the Underlying Agreement or to such other address as may be designated by the receiving party in a Notice given in accordance with this section. All Notices shall be delivered in accordance with Section 10.2 of the Underlying Agreement.

6. Assignment . This Guaranty shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns; provided, however, that neither Guarantor nor Beneficiary may, without the prior written consent of the other party, assign this Guaranty or any rights, powers or obligations hereunder. Any attempted assignment in violation of this section shall be null and void.

7. Applicable Law and Jurisdiction; Interpretation . This Guaranty shall be governed by and interpreted in accordance with the internal laws of the State of Delaware, except to the extent superseded by Federal law. Invalidity of any provisions of this Guaranty shall not affect any other provision. GUARANTOR AND BENEFICIARY HEREBY CONSENT TO THE JURISDICTION OF THE STATE OF DELAWARE OR FEDERAL COURT SITUATED IN THE COUNTY OR FEDERAL JURISDICTION IN DELAWARE AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, WITH REGARD TO ANY ACTIONS, CLAIMS, DISPUTES OR PROCEEDINGS RELATING TO THIS GUARANTY, OR ANY TRANSACTIONS ARISING THEREFROM, OR ENFORCEMENT AND/OR INTERPRETATION OF ANY OF THE FOREGOING. Nothing herein shall affect Beneficiary’s rights to serve process in any manner permitted by law.

8. Waiver of Jury Trial . GUARANTOR AND BENEFICIARY HEREBY JOINTLY AND SEVERALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS GUARANTY. GUARANTOR AND BENEFICIARY EACH REPRESENTS TO THE OTHER THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN.

9. Cumulative Rights . Each right, remedy and power hereby granted to Beneficiary or allowed it by applicable law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by Beneficiary at any time or from time to time.

10. Severability . If any provision of this Guaranty is to any extent determined by final decision of a court of competent jurisdiction to be unenforceable, the remainder of this Guaranty shall not be affected thereby, and each provision of this Guaranty shall be valid and enforceable to the fullest extent permitted by law.

11. Entire Agreement; Amendments; Headings; Effectiveness . This Guaranty constitutes the sole and entire agreement of Guarantor and Beneficiary with respect to the subject matter hereof and supersedes all previous agreements or understandings, oral or written, with respect to such subject matter. No amendment or waiver of any provision of this Guaranty shall be valid and binding unless it is in writing and signed, in the case of an amendment, by both parties, or in the case of a waiver, by the party against which the waiver is to be effective. Section headings are for convenience of reference only and shall not define, modify, expand or limit any of the terms of this Guaranty. Delivery of this Guaranty by facsimile or in electronic (i.e., pdf or tif) format shall be effective as delivery of a manually executed original of this Guaranty.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the day and year first above written.

	GUARANTOR:

	TURNING POINT BRANDS, INC.

	By:

	Name:

	Title: