Exhibit 10.6

 

SHAREHOLDER INDEMNIFICATION AGREEMENT

 

This INDEMNIFICATION AGREEMENT, dated as of May 10, 2016 (this “Agreement”), is
between Turning Point Brands, Inc., a Delaware corporation (the “Company”), and
Standard General Master Fund L.P., a limited partnership organized under the
laws of the Cayman Islands (“Standard General”).

 

RECITALS

 

A.                The Company intends to effect an initial public offering (the
“IPO”) of its common stock, pursuant to a registration statement on Form S-1
filed with the U.S. Securities and Exchange Commission; and

 

B.                 The parties hereto recognize the possibility that claims
might be made against, and liabilities incurred by, Standard General or related
Persons or Affiliates under applicable securities laws or otherwise in
connection with the IPO, and the parties hereto accordingly wish to provide for
Standard General and related Persons and Affiliates to be indemnified in respect
of any such claims and liabilities.

 

NOW, THEREFORE, in consideration of the foregoing premises, and the mutual
agreements and covenants and provisions herein set forth, the parties hereto
hereby agree as follows:

 

1.                  Definitions.

 

(a)                “Affiliate” means, with respect to any Person, (i) any other
Person directly or indirectly Controlling, Controlled by or under common Control
with, such Person (ii) any Person directly or indirectly owning or
Controlling 10% or more of any class of outstanding voting securities of such
Person or (iii) any officer, director, general partner, special limited partner
or trustee of any such Person described in clause (i) or (ii).

 

(b)               “Claim” means (i) any threatened, asserted, pending or
completed claim, demand, action, suit or proceeding, whether civil, criminal,
administrative, arbitrative, investigative or other, and whether made pursuant
to federal, state or other law; and (ii) any inquiry or investigation, whether
made, instituted or conducted, by the Company or any other Person, including
without limitation any federal, state or other governmental entity, that
Indemnitee determines might lead to the institution of any such claim, demand,
action, suit or proceeding. For the avoidance of doubt, the Company intends
indemnity to be provided hereunder in respect of acts or failure to act prior
to, on or after the date hereof.

 

(c)                “Commission” means the United States Securities and Exchange
Commission or any successor entity thereto.

 

(d)                “Company Group” means the Company and each of its
subsidiaries.

 

 

 

 

(e)               “Control” of any Person means the power to direct the
management and policies of such Person (whether through the ownership of voting
securities, by contract, as trustee or executor, as general partner, or
otherwise).

 

(f)                “Exchange Act” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

 

(g)               “Expenses” means all attorneys’ and experts’ fees and expenses
and all other costs and expenses paid or payable in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to investigate, defend, be a witness in or participate in
(including on appeal), any Claim.

 

(h)                “Indemnifiable Claim” means, with respect to any Indemnitee,
any Claim by or against such Indemnitee involving any Losses with respect to
which such Indemnitee may be entitled to be indemnified by the Company under
this Agreement.

 

(i)                “Indemnitee” means Standard General, its Affiliates (other
than any member of the Company Group), and the directors, officers, partners,
members, employees, agents, advisors, consultants, representatives and
controlling persons (within the meaning of the Securities Act) of each of them,
in each case irrespective of the capacity in which such person acts.

 

(j)               “Losses” means any and all Expenses, damages, losses,
liabilities, judgments, fines, penalties (whether civil, criminal or other),
ERISA excise taxes or penalties and amounts paid or payable in settlement,
including without limitation all interest, assessments and other charges paid or
payable in connection with or in respect of any of the foregoing.

 

(k)               “Person” means any individual, entity, or group, within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act.

 

(l)                 “Related Document” means any agreement, certificate,
instrument or other document to which any member of the Company Group may be a
party or by which it or any of its properties or assets may be bound or affected
from time to time relating in any way to the Offering or any of the transactions
contemplated thereby, including without limitation, in each case as the same may
be amended from time to time, (i) any registration statement filed by or on
behalf of any member of the Company Group with the Commission in connection with
the Offering, including all exhibits, financial statements and schedules
appended thereto, and any submissions to the Commission in connection therewith,
(ii) any prospectus, preliminary, final, free writing or otherwise, included in
such registration statements or otherwise filed by or on behalf of any member of
the Company Group in connection with the Offering, (iii) any private placement
or offering memorandum or circular, information statement or other information
or materials distributed by or on behalf of any member of the Company Group or
any placement agent or underwriter in connection with the Offering, (iv) any
federal, state or foreign securities law or other governmental or regulatory
filings or applications made in connection with any Offering or any of the
transactions contemplated thereby, (v) any dealer-manager, underwriting,
subscription, purchase, stockholders, option or registration rights agreement or
plan entered into or adopted by any member of the Company Group in connection
with the Offering, or (vi) any quarterly, annual or current reports or other
filing filed, furnished or supplementally provided by any member of the Company
Group with or to the Commission or any securities exchange, including all
exhibits, financial statements and schedules appended thereto, and any
submission to the Commission or any securities exchange in connection therewith.

 

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(m)                 “Securities Act” means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.

 

2.                  Indemnification.

 

(a)                The Company agrees to indemnify, defend and hold harmless
each Indemnitee, to the fullest extent permitted by law, from and against any
and all Losses in any way resulting from, arising out of or in connection with,
based upon or relating to (i) the Securities Act, the Exchange Act or any other
applicable securities or other laws, in connection with the IPO, any Related
Document or any of the transactions contemplated thereby, (ii) any other action
or failure to act of any member of the Company Group or any of their
predecessors, whether such action or failure has occurred or is yet to occur,
(iii) the fact that such Indemnitee is or was a stockholder of any member of the
Company Group, (iv) any breach or alleged breach by such Indemnitee of any duty
imposed on a stockholder, officer or director, or (v) any transaction described
in the registration statement on Form S-1 for the IPO under the heading “Certain
Relationships and Transactions” to which Standard General or any Affiliate
thereof is a party; provided, however, that no Indemnitee shall have a right to
indemnification, advancement of expenses or exculpation from liability hereunder
in respect of the Company Group’s rights or remedies under any Indemnitee’s
contractual obligation to the Company Group.

 

(b)               Without in any way limiting the foregoing Section 2(a), the
Company agrees to indemnify, defend and hold harmless each Indemnitee from and
against any and all Losses resulting from, arising out of or in connection with,
based upon or relating to liabilities under the Securities Act, the Exchange Act
or any other applicable securities or other laws, rules or regulations in
connection with (i) the inaccuracy or breach of or default under any
representation, warranty, covenant or agreement in any Related Document, or any
allegation thereof, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any Related Document or (iii) any omission or alleged
omission to state in any Related Document a material fact required to be stated
therein or necessary to make the statements therein not misleading.
Notwithstanding the foregoing, the Company shall not be obligated to indemnify
such Indemnitee from and against any such Losses to the extent that such Losses
arise out of or are based upon an untrue statement or omission made in any
Related Document in reliance upon and in conformity with written information
furnished to the Company by such Indemnitee in an instrument duly executed by
such Indemnitee and specifically stating that it is for use in the preparation
of any Related Document.

 

(c)                Subject to Section 2(d), without in any way limiting the
foregoing, in the event that any Claim is initiated by an Indemnitee, any member
of the Company Group or any other Person to enforce or interpret this Agreement,
any rights of such Indemnitee to indemnification or advancement of Expenses (or
related obligations of such Indemnitee) under any member of the Company Group’s
certificate of incorporation or bylaws or other similar organizational document
(collectively, the “Constituent Documents”), any other agreement to which
Indemnitee and any member of the Company Group are party, any vote of directors
of any member of the Company Group, the Delaware General Corporation Law or any
other applicable law or any liability insurance policy, the Company shall
indemnify such Indemnitee against all Expenses incurred by such Indemnitee or on
such Indemnitee’s behalf in connection with such Claim, whether or not such
Indemnitee is successful in such Claim, except to the extent that the Person
presiding over such Claim determines that material assertions made by such
Indemnitee in such proceeding were in bad faith or were frivolous.

 

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(d)               Notwithstanding the foregoing, indemnification shall not be
available to the extent that it is finally determined by a court, in a final
judgment from which no further appeal may be taken, that such Losses arises out
of, or is primarily based upon, the gross negligence or willful misconduct of
the Indemnitee.

 

(e)                Notwithstanding anything in this Section 2 to the contrary,
it is understood and agreed that nothing in this Agreement is intended to
provide for indemnification in respect of taxes imposed on the basis of income
of an Indemnitee.

 

3.                  Contribution.

 

(a)                If for any reason the indemnity specifically provided for in
Section 2 is unavailable or is insufficient to hold harmless any Indemnitee from
any Losses covered by such indemnity, then the Company, shall contribute to the
amount paid or payable by such Indemnitee as a result of such Losses in such
proportion as is appropriate to reflect (i) the relative fault of each of the
members of the Company Group, on the one hand, and such Indemnitee, on the
other, in connection with the state of facts giving rise to such Losses,
(ii) the relative benefits received by the members of the Company Group, on the
one hand, and such Indemnitee, on the other, from the IPO or other circumstances
giving rise to such Losses and (iii) if required by applicable law, any other
relevant equitable considerations.

 

(b)               For purposes of Section 3(a), the relative fault of each
member of the Company Group, on the one hand, and of an Indemnitee, on the
other, shall be determined by reference to, among other things, (i) their
respective relative intent, knowledge, access to information and opportunity to
correct the state of facts giving rise to such Losses, (ii) in the case of
Section 2(b), whether the information whose inclusion in or omission from any
Related Document resulted in the actual or alleged inaccuracy or breach of or
default under any representation, warranty, covenant or agreement therein, or
which is or is alleged to be untrue, required to be stated therein or necessary
to make the statements therein not misleading, was supplied or should have been
supplied by the members of the Company Group, on the one hand, or by such
Indemnitee, on the other, and (iii) applicable law, and the relative benefits
received by each member of the Company Group, on the one hand, and an
Indemnitee, on the other, shall be determined by weighing the direct monetary
proceeds to the Company Group, on the one hand, and such Indemnitee, on the
other, from the IPO or other circumstances giving rise to such Losses.

 

(c)                The parties hereto acknowledge and agree that it would not be
just and equitable if the Company’s contributions pursuant to Section 3 were
determined by pro rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to in such Section.
No Indemnitee shall be entitled to contribution from the Company with respect to
any Losses covered by the indemnity specifically provided for in Section 2(b) in
the event that such Indemnitee is finally determined to be guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) in
connection with such Losses and the Company is not guilty of such fraudulent
misrepresentation.

 

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4.                  Indemnification Procedures.

 

(a)                To obtain indemnification under this Agreement in respect of
an Indemnifiable Claim or Loss, Indemnitee shall submit to the Company a written
request therefor, including a brief description (based upon information then
available to Indemnitee) of such Indemnifiable Claim or Loss. The failure by
Indemnitee to timely notify the Company of any Indemnifiable Claim or Loss shall
not relieve the Company from any liability hereunder unless, and only to the
extent that, the Company did not otherwise learn of such Indemnifiable Claim or
Loss and such failure results in forfeiture by the Company of substantial
defenses, rights or insurance coverage. The Company shall be entitled to
participate in the defense of any Indemnifiable Claim or to assume or lead the
defense thereof with counsel reasonably satisfactory to the Indemnitee; provided
that if Indemnitee determines, after consultation with counsel selected by
Indemnitee, that (i) the use of counsel chosen by the Company to represent
Indemnitee would present such counsel with an actual or potential conflict,
(ii) the named parties in any such Indemnifiable Claim (including any impleaded
parties) include both the Company and Indemnitee and Indemnitee shall conclude
that there may be one or more legal defenses available to him or her that are
different from or in addition to those available to the Company or
(iii) Indemnitee has interests in the claim or underlying subject matter that
are different from or in addition to those of other Persons against whom the
Indemnifiable Claim has been made or might reasonably be expected to be made,
then Indemnitee shall be entitled to retain separate counsel (but not more than
one law firm plus, if applicable, local counsel in respect of any particular
Indemnifiable Claim for all indemnitees in Indemnitee’s circumstances) at the
Company’s expense. The Company shall not be liable to Indemnitee under this
Agreement for any amounts paid in settlement of any threatened or pending
Indemnifiable Claim effected without the Company’s prior written consent. The
Company shall not, without the prior written consent of the Indemnitee, effect
any settlement of any threatened or pending Indemnifiable Claim which the
Indemnitee is or could have been a party unless such settlement solely involves
the payment of money and includes a complete and unconditional release of the
Indemnitee from all liability on any claims that are the subject matter of such
Indemnifiable Claim.

 

(b)               Indemnitee shall have the right to advancement by the Company
prior to the final disposition of any Indemnifiable Claim of any and all
Expenses relating to, arising out of or resulting from any Indemnifiable Claim
paid or incurred by Indemnitee or which Indemnitee determines in good faith are
reasonably likely to be paid or incurred by Indemnitee and as to which
Indemnitee’s counsel provides supporting documentation. Without limiting the
generality or effect of the foregoing, within 20 days after any request by
Indemnitee that is accompanied by supporting documentation for specific Expenses
to be reimbursed or advanced, the Company shall, in accordance with such request
(but without duplication), (i) pay such Expenses on behalf of Indemnitee,
(ii) advance to Indemnitee funds in an amount sufficient to pay such Expenses,
or (iii) reimburse Indemnitee for such Expenses; provided that Indemnitee shall
repay, without interest any amounts actually advanced to Indemnitee that, at the
final disposition of the Indemnifiable Claim to which the advance related, were
in excess of amounts paid or payable by Indemnitee in respect of Expenses
relating to, arising out of or resulting from such Indemnifiable Claim. In
connection with any such payment, advancement or reimbursement, at the request
of the Company, Indemnitee shall execute and deliver to the Company an
undertaking, which need not be secured and shall be accepted without reference
to Indemnitee’s ability to repay the Expenses, by or on behalf of the
Indemnitee, to repay any amounts paid, advanced or reimbursed by the Company in
respect of Expenses relating to, arising out of or resulting from any
Indemnifiable Claim in respect of which it shall have been determined, following
the final disposition of such Claim that Indemnitee is not entitled to
indemnification hereunder.

 

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(c)                Presumptions; Burden and Standard of Proof. In connection
with any determination regarding the entitlement of any Indemnitee to be
indemnified, or any review of any such determination, by any Person:

 

(i)                 It shall be a presumption that such Indemnitee has met any
applicable standard of conduct and that indemnification of such Indemnitee is
proper in the circumstances.

 

(ii)               The burden of proof shall be on the Company to overcome the
presumption set forth in the preceding clause (i), and such presumption shall
only be overcome only by the Company adducing clear and convincing evidence to
the contrary.

 

(iii)             The termination of any Claim by judgment, order, finding,
award, settlement (whether with or without court approval) or conviction, or
upon a plea of nolo contendere, or its equivalent, shall not create a
presumption that indemnification is not proper or that an Indemnitee did not
meet any applicable standard of conduct or that a court has determined that
indemnification is not permitted by this Agreement or otherwise.

 

5.                  Certain Covenants. The rights of each Indemnitee to be
indemnified under any other agreement, document, certificate or instrument,
by-laws or other organizational agreement or instrument, insurance policy or
applicable law (collectively, “Other Indemnity Provisions”) are independent of
and in addition to any rights of such Indemnitee to be indemnified under this
Agreement, provided that to the extent that an Indemnitee is entitled to be
indemnified by the Company under this Agreement and by any other Indemnitee
under any other agreement, document, certificate, by-law or other organizational
agreement or instrument, or by any insurer under a policy maintained by any
other Indemnitee, the obligations of the Company hereunder shall be primary, and
the obligations of such other Indemnitee or insurer secondary, and the Company
shall not be entitled to contribution or indemnification from or subrogation
against such other Indemnitee or insurer. Notwithstanding the foregoing, any
Indemnitee may choose to seek indemnification from any potential source of
indemnification regardless of whether such indemnitor is primary or secondary.
An Indemnitee’s election to seek advancement of indemnified sums from any
secondary indemnifying party will not limit the right of such Indemnitee, or any
secondary indemnitor proceeding under subrogation rights or otherwise, from
seeking indemnification from the Company to the extent that the obligations of
the Company are primary, and the Company agrees to indemnify each Indemnitee
from and against, and to pay to each Indemnitee, any amount paid or reimbursed
by such Indemnitee to or on behalf of another indemnitee, pursuant to
indemnification arrangements or otherwise, in respect of the Losses referred to
in Section 2. The rights of each Indemnitee and the obligations of the Company
hereunder shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnitee. Following the Offering, each member of
the Company Group, and each of their corporate successors, shall implement and
maintain in full force and effect any and all corporate charter and by-law (or
similar organizational document or instrument) provisions that may be necessary
or appropriate to enable it to carry out its obligations hereunder to the
fullest extent permitted by applicable law, including without limitation a
provision of its certificate of incorporation (or comparable organizational
document under its jurisdiction of incorporation) eliminating liability of a
director for breach of fiduciary duty to the fullest extent permitted by
applicable law, as amended from time to time. The Company shall not seek or
agree to any order of any court or other governmental authority that would
prohibit or otherwise interfere, and shall not take or fail to take any other
action if such action or failure would reasonably be expected to have the effect
of prohibiting or otherwise interfering, with the performance of the Company’s
indemnification, advancement or other obligations under this Agreement.

 

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6.                  No Duplication of Payments. The Company shall not be liable
under this Agreement to make any payment to Indemnitee in respect of any Losses
to the extent Indemnitee has otherwise already actually received payment (net of
Expenses incurred in connection therewith) under any insurance policy, the
Constituent Documents and Other Indemnity Provisions or otherwise in respect of
such Losses otherwise indemnifiable hereunder.

 

7.                  Notices. For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder must be in writing and
shall be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile or other electronic transmission (with receipt thereof
orally confirmed), or one business day after having been sent for next day
delivery by a nationally recognized overnight courier service as follows:

 

(a)                If to the Company, to:

 

Turning Point Brands, Inc.
5201 Interchange Way
Louisville, Kentucky 40229
Attention: James Dobbins
Facsimile: (●)
Email: jdobbins@natcinc.net

 

with a copy to (which shall not constitute notice):

 

Milbank, Tweed, Hadley & McCloy LLP
28 Liberty Street
New York, New York 10005
Attention: David Zeltner
Facsimile: (212) 822-5003
Email: dzeltner@milbank.com

 

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(b)               If to Standard General, to:

 

     

 

or to such other address as either party may have furnished to the other in
writing and in accordance herewith, except that notices of changes of address
will be effective only upon receipt.

 

8.                  Governing Law. The validity, interpretation, construction
and performance of this Agreement shall be governed by and construed in
accordance with the substantive laws of the State of Delaware, without giving
effect to the principles of conflict of laws of such State. The Company and
Indemnitee each hereby irrevocably consent to the jurisdiction of the Chancery
Court of the State of Delaware for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement, waive all
procedural objections to suit in that jurisdiction, including without limitation
objections as to venue or inconvenience, agree that service in any such action
may be made by notice given in accordance with Section 7 and also agree that any
action instituted under this Agreement shall be brought only in the Chancery
Court of the State of Delaware.

 

9.                  Severability. If any provision of this Agreement or the
application of any provision hereof to any Person or circumstance is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement and
the application of such provision to any other Person or circumstance shall not
be affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent, and only to the extent, necessary to
make it enforceable, valid or legal. In the event that any court or other
adjudicative body shall decline to reform any provision of this Agreement held
to be invalid, unenforceable or otherwise illegal as contemplated by the
immediately preceding sentence, the parties thereto shall take all such action
as may be necessary or appropriate to replace the provision so held to be
invalid, unenforceable or otherwise illegal with one or more alternative
provisions that effectuate the purpose and intent of the original provisions of
this Agreement as fully as possible without being invalid, unenforceable or
otherwise illegal.

 

10.              Successors; Binding Effect. The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business or
assets of the Company expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Company would be required to perform
if no such succession had taken place. This Agreement shall be binding upon and
inure to the benefit of each party hereto and its successors and permitted
assigns, and each other Indemnitee, but neither this Agreement nor any right,
interest or obligation hereunder shall be assigned, by the Company without the
prior written consent of Standard General. Insofar as any Indemnitee transfers
all or substantially all of its assets to a third party, such third party shall
thereupon be deemed an additional Indemnitee for all purposes of this Agreement,
with the same effect as if it were a signatory to this Agreement in such
capacity.

 

11.              Miscellaneous. No provision of this Agreement may be waived,
modified or discharged unless such waiver, modification or discharge is agreed
to in writing signed by such Indemnitee and the Company. No waiver by either
party hereto at any time of any breach by the other party hereto or compliance
with any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, expressed or implied with respect to the
subject matter hereof have been made by either party that are not set forth
expressly in this Agreement. This Agreement constitutes the entire agreement,
and supersede all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter of this Agreement.
Any prior agreements or understandings between the parties hereto with respect
to indemnification are hereby terminated and of no further force or effect. This
Agreement may be executed in one or more counterparts, each of which will be
deemed to be an original but all of which together shall constitute one and the
same agreement.

 

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12.              Certain Interpretive Matters. Unless the context of this
Agreement otherwise requires, (a) “it” or “its” or words of any gender include
each other gender, (b) words using the singular or plural number also include
the plural or singular number, respectively, (c) the terms “hereof,” “herein,”
“hereby” and derivative or similar words refer to this entire Agreement, (d) the
terms “Article,” “Section,” “Annex” or “Exhibit” refer to the specified Article,
Section, Annex or Exhibit of or to this Agreement, (e) the terms “include,”
“includes” and “including” will be deemed to be followed by the words “without
limitation” (whether or not so expressed), and (f) the word “or” is disjunctive
but not exclusive. Whenever this Agreement refers to a number of days, such
number will refer to calendar days unless business days are specified and
whenever action must be taken (including the giving of notice or the delivery of
documents) under this Agreement during a certain period of time or by a
particular date that ends or occurs on a non-business day, then such period or
date will be extended until the immediately following business day. As used
herein, “business day” means any day other than Saturday, Sunday or a United
States federal holiday.

 

[SIGNATURES ON NEXT PAGE]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement by
their authorized representatives as of the date first above written.

 

  TURNING POINT BRANDS, INC.           By: /s/ James Dobbins     Name: James
Dobbins     Title: Senior Vice President, General Counsel and Secretary      
STANDARD GENERAL MASTER FUND L.P.           By: /s/ Soohyung Kim     Name:
Soohyung Kim     Title: Managing Partner

 

[Signature Page to Shareholder Indemnification Agreement]

 

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