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): February 7, 2017

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 5.02.
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e) Under the 2006 Equity Incentive Plan (the “2006 Plan”) of Turning Point Brands, Inc. (the “Company”), the Board of Directors (the “Board”) previously granted to 2006 Plan participants options to purchase 514,314 shares of Company common stock expiring on September 18, 2017.

On February 7, 2017, the Board and the Compensation Committee of the Board adopted an amendment (the “Plan Amendment”) to the 2006 Plan authorizing the Board to cancel stock options issued under the 2006 Plan by paying the option holder cash equal to the fair market value of the shares underlying the option, less the exercise price per share.

Also on February 7, 2017, in accordance with the Plan Amendment, the Board approved stock option cash-out agreements (the “Cash-Out Agreements”) with three Company officers and a director for the cancellation of 83,400 expiring stock options in exchange for payments to the option holders of $11.99 per share, or an aggregate $999,966. Of the 83,400 options cancelled, the Company cancelled 12,510 expiring stock options owned by the Company’s General Counsel for aggregate consideration of $149,994.90.

In adopting the Plan Amendment and determining to cancel a portion of the expiring stock options, the Board and the Compensation Committee considered that under the Company’s securities trading policy certain participants exercising options could only sell shares to satisfy withholding and other tax obligations during limited windows between the date of the adoption of the Plan Amendment and the expiration date of the stock options. The cancellation of the stock options provides for mitigation of the downward market pressure from the potential sale of stock to satisfy withholding and other tax obligations.

The descriptions of the Plan Amendment and the Cash-Out Agreements are qualified in their entirety by Amendment No. 3 to the Plan and the Form of Cash-Out Agreement attached as Exhibits 10.1 and 10.2 to this Current Report on Form 8-K, respectively.

Item 9.01.
Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.
 
Description
 
       
10.1
 
Amendment No. 3 to the 2006 Equity Incentive Plan of North Atlantic Holding Company, Inc.
 
       
10.2
 
Form of Cash-Out Agreement.
 
 

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: February 9, 2017
By: 
/s/ James Dobbins
 
   
James Dobbins
 
   
Senior Vice President, General Counsel and Secretary
 
 

EXHIBIT INDEX

Exhibit No.
 
Description
 
       
 
Amendment No. 3 to the 2006 Equity Incentive Plan of North Atlantic Holding Company, Inc.
 
       
 
Form of Cash-Out Agreement.
 

 
Exhibit 10.1
 
THIRD AMENDMENT TO THE
TURNING POINT BRANDS , INC.
2006 EQUITY INCENTIVE PLAN

This is the Third Amendment to the 2006 Equity Incentive Plan maintained by Turning Point Brands, Inc. (the "Plan"), which amendment shall be effective as of the date of its adoption as set forth below.

Section 6 of the Plan is hereby amended by adding the following new subsection (f) thereto:

(f)           Cash-Out. The Board of Directors may force the exercise of and cancel all or part of any outstanding Option by paying the holder thereof in cash or stock with a Fair Market Value equal to the difference between the Option's Exercise Price and the Fair Market Value of each share underlying such Option as of the date the Company and the Option holder enter into an amended Award Agreement allowing for same.

To record its adoption by the Board of Directors, the Company has caused this Amendment to be executed below by its authorized officer.

 
Turning Point Brands, Inc.
 
       
 
By:
 
 
       
 
Title:
 
 
       
 
Date:
 
 

Exhibit 10.2
 
STOCK OPTION CASH-OUT AGREEMENT

THIS STOCK OPTION CASH-OUT AGREEMENT (this " Agreement ") is made by and between TURNING POINT BRANDS, INC., a Delaware corporation (the " Company "), and the undersigned employee who has an outstanding stock option to purchase Company stock (" Optionee ") .

Recitals

A.
Optionee has been granted option(s) (the " Option(s) ") to purchase shares of common stock in the Company (the " Shares ") pursuant to the terms of the Turning Point Brands, Inc. 2006 Equity Incentive Plan, as amended (the " 2006 Stock Plan ") and a Stock Option Agreement between the Company and Optionee (the " Option Agreement ").

B.
Given that the right to exercise many of the Options granted under the 2006 Stock Plan will reach their term during 2017 and therefore are likely to be exercised, and given the Company's right under its current Credit Agreement to expend up to a certain amount for repurchase of shares or option stock, the Company desires to cash out the Optionee's rights under the Option Agreement, in lieu of its exercise.

Agreement

NOW, THEREFORE, for good and valuable consideration including the promises herein, the parties agree as follows:

1.             Termination of Option and Option Agreement . As of the date of this Agreement, the Company and Optionee agree to cancel the Option Agreement dated as stated below Optionee's signature on this Agreement, for that number of Shares and at exercise price(s) per Share, both as stated below Optionee's signature this Agreement, in exchange for payment equal to the difference between Fair Market Value for each share underlying such Option, as determined in accordance with the Plan as of the close of the market on the date before this Agreement is executed, less the Exercise Price of the Option as stated below (the " Option Consideration "), and less any taxes or other withholding required to be withheld from such payment. With respect to the number of shares underlying the Option set forth below the Optionee’s name, the Option and the Option Agreement hereby terminate and no longer have any force or effect. Upon such termination and payment as described herein, the Optionee releases and discharges the Company and its successors and assigns from any and all obligations and liabilities under the Option Agreement with respect to that number of shares underlying the Option set forth below the Optionee’s name, and, in lieu of such rights, Optionee's rights shall be solely those rights set out in this Agreement. Except to the extent set forth in the previous sentence, the Optionee’s Option Agreement remains in full force and effect as amended hereby.

2.            Covenants, Representations and Warranties of the Optionee . The Optionee covenants, represents and warrants to the Company as follows:

(a)           The Optionee has full authority to exercise or cancel the Options, free and clear of all liens, charges, encumbrances, conditional sales agreements or other obligations relating to the Option, and the Option is not subject to any adverse claim.
 
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(b)           The Optionee has had a reasonable opportunity to ask questions of and receive information and answers from persons acting on behalf of the Company concerning the Options, the Option Agreement, and this Agreement as the Optionee may deem necessary. All such questions have been answered and all such information has been provided to the full satisfaction of the Optionee.

(c)           No oral or written representations have been made, nor has any oral or written information been furnished, to the Optionee in connection with the Options, the Option Agreement, or this Agreement that were in any way inconsistent with the information provided in the above documents.

3.             Tax Treatment of Termination Payments; Withholding . The Optionee acknowledges that the payment of the Option Consideration in cash (a) will be treated for tax purposes as compensation paid to the Optionee if the Optionee provided services to the Company or its subsidiary as an officer or employee, (b) will be reduced by all applicable payroll deductions and withholding taxes required by applicable law, if any, and (c) will be taxed to the Optionee at ordinary income tax rates whether or not withholding applies.

4.            Further Assurances . The Optionee agrees to execute and deliver, after the date of this Agreement, without additional consideration, such further assurances, instruments and documents, and to take such other actions, as the Company may reasonably request in order to fulfill the intent of this Agreement and the transactions contemplated hereby.

5.            Miscellaneous . This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof, superseding any prior understandings and agreements between the parties. No amendment or modification of this Agreement shall be binding unless made in a writing duly executed by the Optionee and the Company. This Agreement shall be binding upon the parties hereto and their respective heirs, personal representatives, successors and assigns. This Agreement shall be governed by and construed in accordance with the laws of the State of Kentucky, excluding any conflicts of law principle that would apply the law of another jurisdiction.

 7.            Defined Terms . All capitalized words used in this Agreement and not defined in the Recitals or text of this Agreement shall have the meanings given in the 2006 Stock Plan.

[signature page follows]
 
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date set forth below.

 
OPTIONEE:
 
       
       
 
Signature
   
       
 
Printed Name: 
   
       
 
Date:
     

Date of Option Agreement
No. of option shares cancelled pursuant to this Agreement that have not previously been exercised or expired/lapsed
Exercise Price per share
   
$1.06

TURNING POINT BRANDS, INC.
 
     
By
   
     
Title:
   
     
Date:
   

 
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