EXHIBIT 10.27


                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of July 2, 1997,
and effective as of July 28, 1997, between NORTH ATLANTIC TRADING COMPANY, INC.
(the "Company") and JEFFREY S. HAY (the "Executive").


                                    AGREEMENT
                                    ---------

         1.  Employment, Duties and Acceptance. (a) The Company shall
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employ the Executive during the Term (as hereinafter defined) as an Executive
Vice President and General Counsel of the Company.

         (b) The Executive hereby accepts such employment and agrees to
render his services to the Company on a full-time basis. The Executive further
agrees to accept election and to serve during all or any part of the Term or any
Renewal Term as an officer, director or representative of any subsidiary or
affiliate of the Company, without any compensation therefor other than that
specified in this Agreement. The Executive shall report directly to the Chief
Executive Officer of the Company.

         (c) The duties to be performed by the Executive hereunder shall be
performed primarily in New York, New York, subject to reasonable travel
requirements on behalf of the Company. The Executive acknowledges that he may be
required to spend a significant amount of time periodically in the Company's
Louisville facility. The Company agrees that the Executive may reside in
Charlotte, North Carolina and that the Company shall not require the Executive
to relocate outside of Charlotte, North Carolina, without his prior written
consent, which may be withheld in the Executive's discretion. The Executive
shall be reimbursed for his reasonable travel expenses. The Executive shall be
entitled to four (4) weeks of paid vacation time annually.

         2.  Term of Employment. As used herein, the "Term" means the 
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period commencing as of July 28, 1997, and ending on July 31, 1999, and shall
automatically renew thereafter for successive periods of one (1) year (each a
"Renewal Term") unless either party gives written notice of termination of the
Agreement at least ninety (90) days prior to the end of the Term or any Renewal
Term. Unless otherwise specified, further references in this Agreement to the
Term shall include any applicable Renewal Term.

<PAGE>



         3.  Compensation. (a) During the Term, the Company agrees to pay to the
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Executive a salary in cash (the "Salary") as compensation for the services to be
performed by him as provided herein. The Salary shall be paid at the rate of
$250,000 per annum (it being understood that the Salary for 1997 shall be in
proportion to the number of days remaining in the year), less such deductions or
amounts to be withheld as shall be required by applicable law and regulations.
The Salary shall be paid in equal monthly installments or more frequently in
accordance with the Company's salaried payroll payment policy. The Salary shall
be reviewed annually and may be increased at the sole discretion of the
Compensation Committee of the Management Committee; provided, however, that
assuming that the Company has met its EBITDA budget and Executive's performance
is deemed satisfactory by the Company's Chief Executive Officer, The Chief
Executive Officer will propose to the Compensation Committee that the Salary be
increased by not less than 10% on the first anniversary of the date hereof.

         (b) In addition to the Salary, the Executive shall also be eligible
throughout the Term to receive cash bonuses (each a "Bonus") as a member of
Group A in accordance with the Company's Bonus Plan (as in effect from time to
time) based on the Company's audited financial statements for the applicable
year and payable after delivery of such financial statements. The Executive's
bonus for 1997 shall be prorated because Executive was not employed for a full
year. In addition, Executive shall be paid a one time payment upon commencement
of the Term in an amount equal to $70,000.00, which payment shall be made on or
before January 10, 1998.

         (c) In addition to the foregoing, the Executive shall be entitled to
all rights and benefits for which he shall be eligible under any other incentive
program, retirement, retirement savings, profit-sharing, pension or welfare
plan, life, disability, health, dental, hospitalization and other forms of
insurance and all other so-called "fringe" benefits or perquisites, including
reimbursement of the monthly dues of one club membership, in each case at the
highest level which the Company shall from time to time provide for any of its
senior executives of the same or similar stature. The Executive shall be
entitled to receive stock options for 2.5% of the Company's Common Stock, except
as set forth below, on the same price terms and other conditions provided to
other senior executives of the Company. Such options shall vest one-third on the
effective date of this Agreement and one-fifth of the remaining options shall
vest on each of the first five anniversaries of the effective date of this
Agreement. Such options shall vest automatically on any change of control or
upon the termination of the Executive's employment without Cause or by the
Executive with Good Reason. In addition, to the extent obtainable at reasonable
premiums, the Company shall provide the Executive with a term life insurance
policy in an amount equal to $1,000,000.00, with Executive's estate being the
beneficiary.



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<PAGE>

         4. Termination. (a) If during the Term the Executive shall die, the
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Executive's legal representative shall be entitled to receive in cash an amount
calculated as the sum of (i) any accrued and unpaid Salary to the date of such
death and (ii) any accrued and unpaid Bonus to the date of such death, including
any Bonus for the year in which the termination occurs, calculated by reviewing
the Company's performances for such entire year and prorating any such Bonus for
the number of days elapsed during such year prior to such termination. In
addition, the Executive (or his legal representative) shall be entitled to
receive any insurance proceeds payable pursuant to any insurance provided
pursuant to Section 3(c) hereof.

         (b) If during the Term the Executive shall become physically or
mentally disabled, whether totally or partially, so that he is unable
substantially to perform his services hereunder for a period of at least 90 days
out of any twelve consecutive months (which condition is referred to herein as
the Executive becoming "Disabled"), the Company may at any time prior to the
90th day after the last day of such twelfth consecutive month, by written notice
to the Executive, terminate the Executive's employment, in which event the
Executive (or his legal representative) shall be entitled to receive in cash an
amount calculated as the sum of (i) any accrued and unpaid Salary to the date of
such notice and (ii) any accrued and unpaid Bonus to the date of such notice,
including any Bonus for the year in which the termination occurs, calculated by
reviewing the Company's performance for such entire year and prorating any such
Bonus for the number of days elapsed during such year prior to such termination.
In addition, the Executive (or his legal representative) shall be entitled to
receive any disability benefits payable pursuant to any plan referred to in
Section 3(c) hereof. Nothing herein contained shall be deemed to limit or
abrogate any insurance or other similar benefits available to the Executive.

         (c) The Executive's employment may be terminated by the Company during
the Term for Cause (as hereinafter defined). If during the Term the Executive's
employment shall be lawfully terminated by the Company for Cause or the
Executive shall voluntarily resign without Good Reason (as hereinafter defined),
the Company's obligation to pay Salary and Bonus for the benefit of the
Executive, and the Executive's obligation to render services hereunder for the
benefit of the Company, shall cease on the date of such termination or
resignation; provided, however, that within 30 days of the date of such
termination or resignation, the Company shall pay the Executive in cash (i) an
amount calculated as the sum of any accrued and unpaid Salary to such date and
(B) any accrued and unpaid Bonus for any year preceding such termination or
resignation and (ii) all business expenses, amounts payable under any benefit
plan or program or other amounts that were accrued or incurred but unpaid or
unreimbursed at such date.




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<PAGE>

         As used herein, the term "Cause" shall mean only (i) a felony
conviction of the Executive (as determined by a court of competent jurisdiction,
not subject to further appeal), (ii) the commission by the Executive of an act
of fraud or embezzlement against the Company or any of its affiliates (as
determined by a court of competent jurisdiction, not subject to further appeal),
(iii) gross misconduct which is demonstrably willful an deliberate on the
Executive's part and which is materially detrimental to the Company or any of
its affiliates, (iv) any material breach by the Executive of any agreement with
the Company or any affiliate thereof not cured within 10 days after receiving
written notice thereof or any material violation of any policies or procedures
of the Company if the Company has given Executive written notice of such
violation and Executive persists in such violation or (v) insubordination
consisting of the Executive's continued failure to take specific action which is
within his individual control and consistent with his status as a senior
executive of the Company and his duties and responsibilities hereunder after
written notice from the Chief Executive Officer of the Company of not less than
10 days; provided, however, Executive shall not be terminated for Cause if the
action required to be taken would constitute a breach of Executive's
responsibilities under the North Carolina State Bar Association's Rules of
Professional Conduct.

         As used herein, the term "Good Reason" means any of the following:

                         (i) the assignment to the Executive of any duties
         inconsistent with his status as Executive Vice President and General
         Counsel of the Company or a material adverse alteration in the nature
         or status of his responsibilities from those provided herein or the
         transfer of a significant portion of such responsibilities to one or
         more other persons;

                        (ii) the failure by the Company to pay or provide to the
         Executive, within 30 days of a written demand therefor, any amount of
         compensation or any benefit which is due, owing and payable pursuant to
         the terms hereof or of any applicable plan, program, arrangement or
         policy; or

                       (iii) the breach in any material respect by the Company
         of any of its other obligations or agreements set forth herein and the
         failure by the Company to cure such breach within 20 days after written
         notice thereof from the Executive.

         (d) If during the Term the Executive's employment shall be terminated
by the Company without Cause (and other than pursuant to Section 4(b)) or by the
Executive for Good Reason, the Executive shall be entitled to receive in cash
severance pay equal to 12 months of the Executive's then current Salary, payable
in monthly installments. The



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<PAGE>

Executive shall also receive any benefits under any benefit plan or program of
the Company to which the Executive would otherwise be entitled pursuant to the
terms of such plan or program through the Term, or pursuant to any applicable
state or federal law; provided, that the Executive shall only be entitled to
receive a Bonus for the year in which the termination occurs, prorated and
calculated as provided in Sections 4(a) and (b).

         (e) During the term of the Executive's employment with Company and for
twelve months after the date of termination of Executive's employment (the
"Noncompetition Period"), Executive hereby agrees not to Compete with the
Company. For purposes of this section, the term Compete means:

                         (i) soliciting or counseling, personally or by or on
         behalf of any person, firm or corporation, the employment of any
         employee of Company, or requesting, inducing or attempting to influence
         any employee of the Company to terminate his employment with Company;
         or

                        (ii) directly or indirectly (A) requesting, inducing or
         attempting to influence any supplier of goods or services to Company to
         curtail or cancel any business it transacts with Company; or (B)
         requesting, inducing or attempting to influence any customer of Company
         to curtail or cancel any business they may transact with Company; or
         (C) engaging in any business that the Company is engaged in as of the
         date of such termination (whether as an officer, director, partner,
         employee or other owner).

         Notwithstanding the foregoing, the provisions of this Section 4(e)
shall be effective only during such period for which the Executive receives
severance pay pursuant to Section 4(d) hereof.

         (f) The Company acknowledges and agrees that the Executive shall have
no duty at any time to seek other employment or to mitigate his damages
hereunder. The amounts payable to the Executive under this Agreement shall be
paid regardless of whether the Executive obtains other employment.

         5. Expenses. In the event that the Executive institutes any legal
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action to enforce his rights under, or to recover damages from breach of, this
Agreement, the Executive, if he is the prevailing party, shall be entitled to
recover from the Company any actual expenses for attorney's fees and
disbursements reasonably incurred by him.


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<PAGE>

         6. Assignment. This Agreement is binding upon and shall inure to the
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benefit of the parties hereto and their respective successors and assigns.
Notwithstanding the foregoing, neither party shall assign or transfer any rights
or obligations hereunder, except that the Company may assign or transfer this
Agreement to (a) a successor corporation in the event of a merger,
consolidation, or transfer or sale of all or substantially all of the assets, of
the Company or (b) an affiliate of the Company; provided that no such assignment
referred to in the foregoing clause (a) or (b) shall relieve the Company from
liability for its obligations hereunder. Any purported assignment, other than as
provided above, shall be null and void.

         7. Indemnification. The Company shall indemnify the Executive in
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accordance with its Certificate of Incorporation and Bylaws, copies of which
have been delivered to the Executive, against all costs, charges and expenses
incurred or sustained by him in connection with any action, suit or proceeding
to which he may be made a party by reason of his being an officer, director or
employee of the Company or of any subsidiary or affiliate of the Company. The
Company's obligations under this Section 7 shall survive any termination of this
Agreement or the Executive's employment hereunder.

         8. Notices. All notices, requests, consents and other communications,
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required or permitted to be given hereunder, shall be in writing and shall be
delivered personally or sent by prepaid telegram, telex, facsimile transmission,
overnight courier or mailed, first-class, postage prepaid by registered or
certified mail, as follows:

          If to the Company:                     National Tobacco Company, L.P.
                                                 257 Park Avenue South
                                                 New York, New York 10016

          If to the Executive:                   Jeffrey S. Hay
                                                 1827 Belvedere Ave.
                                                 Charlotte, North Carolina 28205

or such other address as either party shall designate by notice in writing to
the other in accordance herewith. Any such notice shall be deemed given when so
delivered personally, by telex, facsimile transmission or telegram, or if sent
by overnight courier, one day after delivery to such courier by the sender or if
mailed, five days after deposit by the sender in the U.S. mails.




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<PAGE>

         9. Waiver. No waiver of any provision of this Agreement or modification
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or amendment of the same shall be effective, binding or enforceable unless in
writing and signed by the party to be charged therewith.

         10. Governing Law. This Agreement shall be governed by and construed
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and enforced in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.


                                        NORTH ATLANTIC TRADING COMPANY, INC.



                                        By: /s/ Thomas F. Helms, Jr.
                                            ------------------------------------
                                        Name:   Thomas F. Helms, Jr.
                                        Title:  President and CEO



                                            /s/  Jeffrey S. Hay
                                            ------------------------------------
                                                 Jeffrey S. Hay





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