UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.03 Creation of a Direct Financial Obligation
Item 1.02 Termination of a Material Definitive Agreement
On October 7, 2022, Eastside Distilling, Inc. (“Eastside”) and its subsidiary, Craft Canning + Bottling LLC (“Craft”), entered into a Note Purchase Agreement dated as of October 6, 2022 with Aegis Security Insurance Company (“Aegis”). Pursuant to the Note Purchase Agreement, Aegis purchased from Eastside a secured promissory note in the principal amount of $4,500,000 (the “Note”). Aegis paid for the Note a total of $4,500,000, consisting of $3,297,568.48 paid to TQLA, LLC and the remaining $1,202,431.52 paid in cash to Eastside. At the same time, Craft executed a Note Guaranty in which it guaranteed payment and performance of the obligations of Eastside pursuant to the Note. Within the Note Purchase Agreement, Eastside and Craft each pledged substantially all of their assets to secure their respective obligations to Aegis under the Note and the Note Guaranty.
The Note bears interest at 9.25% per annum, payable every three months. The principal amount of the Note and a Commitment Fee of $45,000 will be payable on October 6, 2023. Eastside has a conditional right to twice extent the maturity date of the Note by six months upon payment on each occasion of an extension fee of one percent of the principal balance.
The aforesaid payment by Aegis to TQLA, LLC fully satisfied the Secured Line of Credit Promissory Note that Eastside issued to TQLA, LLC on March 21, 2022 and subsequently amended.
The controlling owner of Aegis is Patrick Kilkenny. The controlling owners of TQLA, LLC are Patrick Kilkenny and Stephanie Kilkenny. Stephanie Kilkenny is a member of the Board of Directors of Eastside.
Item 8.01 Other Events
On October 13, 2022, Eastside entered into an Amendment Agreement with Bigger Capital Fund, LP and District 2 Capital Fund LP. The Amendment Agreement changed the Maturity Date from October 18, 2022 to November 18, 2022 in each of the four Secured Convertible Promissory Notes issued in 2021 by Eastside to Bigger Capital Fund and District 2 Capital Fund. In consideration of the extension, Eastside agreed to issue 96,153 shares of its common stock to each of the Note-Holders.
Item 9.01 Financial Statements and Exhibits
Exhibits
SIGNATURE
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.
| Date: October 13, 2022 | EASTSIDE DISTILLING, INC. | |
| By: | /s/ Geoffrey Gwin | |
| Geoffrey Gwin | ||
| Chief Executive Officer | ||
Exhibit 10.1
NOTE PURCHASE AGREEMENT
Date: October 6, 2022
Parties:
| “Aegis” | Aegis Security Insurance Company 4431 N. Front Street, Suite 200, Harrisburg, PA 17110 |
| “Eastside” | Eastside Distilling, Inc., a Nevada corporation 2321 NE Argyle Street, Unit D, Portland, Oregon 97211 |
| “Craft Canning” | Craft Canning + Bottling LLC, an Oregon limited liability company 2321 NE Argyle Street, Unit D, Portland, Oregon 97211 |
Agreement:
| 1. | Definitions. |
| a. | Unless otherwise defined herein, the following terms are used herein as defined in the UCC: Accounts, Account Debtor, Certificated Security, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, Farm Products, Fixtures, General Intangibles, Goods, Health-Care-Insurance Receivables, Instruments, Inventory, Letter-of-Credit Rights, Proceeds, Supporting Obligations and Tangible Chattel Paper. |
| b. | As used in this Agreement, the following terms have the following meanings: |
“Bankruptcy Code” means the United States Bankruptcy Code (11 U.S.C. § 101 et seq.).
“Collateral” means all property and interests in property in or upon which a security interest, mortgage, pledge or other lien is granted pursuant to this Agreement.
“Loan Parties” means Eastside and Craft Canning.
“Obligations” means all present and future debts, liabilities, fees, expenses, obligations, guaranties, covenants, duties and indebtedness at any time owing by either Loan Party to Aegis, whether evidenced by this Agreement, the Note, the Note Guaranty or otherwise, whether arising from an extension of credit, guaranty, indemnification or otherwise, whether direct or indirect, whether absolute or contingent, whether due or to become due, and whether arising before or after the commencement of a proceeding under the Bankruptcy Code or any similar statute.
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“Permitted Liens” means (a) purchase money security interests in specific items of Equipment; (b) liens for taxes, fees, assessments, or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings (which proceedings have the effect of preventing the enforcement of such lien) for which adequate reserves in accordance with GAAP are being maintained, provided, that the same have no priority over any of Aegis’ security interests; (c) liens of materialmen, mechanics, carriers, or other similar liens arising in the ordinary course of business and securing obligations which are not delinquent or are being contested in good faith by appropriate proceedings (which proceedings have the effect of preventing the enforcement of such lien) for which adequate reserves in accordance with GAAP are being maintained; (d) liens which constitute banker’s liens, rights of set-off, or similar rights as to deposit accounts or other funds maintained with a bank or other financial institution (but only to the extent such banker’s liens, rights of set-off or other rights are in respect of customary service charges relative to such deposit accounts and other funds, and not in respect of any loans or other extensions of credit by such bank or other financial institution to any Loan Party); (e) cash deposits or pledges of an aggregate amount not to exceed $10,000 to secure the payment of worker’s compensation, unemployment insurance, or other social security benefits or obligations, public or statutory obligations, surety or appeal bonds, bid or performance bonds, or other obligations of a like nature incurred in the ordinary course of business; and (f) the specific lien of Engs Commercial Capital LLC and the specific lien of First Interstate Bank as to each of which Aegis is on this date executing a subordination agreement.
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any governmental authority, including any interest, additions to tax or penalties applicable thereto.
“UCC” means, at any given time, the Uniform Commercial Code as adopted and in effect at such time in the State of Oregon or such other applicable jurisdiction.
| 2. | Purchase of Note. |
| a. | On the Closing Date, Aegis will purchase from Eastside and Eastside will execute and deliver to Aegis a Secured Promissory Note in the principal amount of Four Million Five Hundred Thousand Dollars ($4,500,000) in the form annexed hereto as Appendix A (the “Note”). |
| b. | The “Purchase Price” for the Note will be Four Million Five Hundred Thousand Dollars ($4,500,000) payable as follows: |
| i. | Payment shall be made to TQLA, LLC, a California limited liability company (“TQLA”), in full satisfaction of the Amended and Restated Secured Line of Credit Promissory Note dated August 4, 2022, which payment shall be in the amount designated as “Loan Payoff” on the Loan Payoff Schedule annexed hereto as Appendix B. Payment shall be wired to TQLA in accordance with the instructions for payment set forth on the Loan Payoff Schedule. |
| ii. | The balance of the Purchase Price will be wired to the account of Eastside designated by Eastside for this purpose. |
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| 3. | Closing Date. The “Closing Date” will be the first date on which all of the following conditions have been satisfied, unless the Parties designate a subsequent date: |
| i. | Aegis shall have completed its business and legal due diligence pertaining to the Loan Parties, with results satisfactory to Aegis in its sole discretion. | |
| ii. | California Bank and Trust shall have issued to Aegis an irrevocable letter of credit (the “ILOC”) securing payment of the balance of principal on the Note, including standard terms for such instruments as well as the specific terms set forth on Appendix C hereto. Aegis shall be entitled to draw upon the ILOC to the extent of any principal amount of the Note that is due, payable, and unpaid. | |
| iii. | Craft Canning shall have signed and delivered to Aegis the Note Guaranty in the form annexed hereto as Appendix D. | |
| iv. | Each of Aegis, First Interstate Bank and Craft Canning shall have entered into a subordination agreement on mutually agreeable terms providing for subordination of Aegis’ lien on the assets of Craft Canning to the lien of First Interstate Bank on specific assets of Craft Canning. | |
| v. | Each of Aegis, ENGS Commercial Capital LLC and Craft Canning shall have entered into a subordination agreement on mutually agreeable terms providing for subordination of Aegis’ lien on the assets of Craft Canning to the lien of ENGS Commercial Capital LLC on specific assets of Craft Canning. |
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| 4. | Grant of Security Interest. |
| a. | To secure the full payment and performance of all of the Obligations, each Loan Party hereby assigns to Aegis and grants to Aegis a continuing security interest in all property of such Loan Party, whether tangible or intangible, real or personal, now or hereafter owned, existing, acquired or arising and wherever now or hereafter located, and whether or not eligible for lending purposes, including: (a) all Accounts and all Goods whose sale, lease or other disposition by such Loan Party has given rise to Accounts and have been returned to, or repossessed or stopped in transit by, such Loan Party; (b) all Chattel Paper (including Electronic Chattel Paper), Instruments, Documents, and General Intangibles (including all patents, patent applications, trademarks, trademark applications, trade names, trade secrets, goodwill, copyrights, copyright applications, registrations, licenses, software, franchises, customer lists, tax refund claims, claims against carriers and shippers, guarantee claims, contracts rights, payment intangibles, security interests, security deposits and rights to indemnification); (c) all Inventory; (d) all Goods (other than Inventory), including Equipment, Farm Products, Health-Care-Insurance Receivables, vehicles, and Fixtures; (e) all Investment Property, including, without limitation, all rights, privileges, authority, and powers of such Loan Party as an owner or as a holder of Pledged Equity, including, without limitation, all economic rights, all control rights, authority and powers, and all status rights of such Loan Party as a member, equity holder or shareholder, as applicable, of each Issuer; (f) all Deposit Accounts, bank accounts, deposits and cash; (g) all Letter-of-Credit Rights; (h) all Commercial Tort Claims; (i) all Supporting Obligations; (j) any other property of such Loan Party now or hereafter in the possession, custody or control of Aegis or any agent of Aegis, for any purpose (whether for safekeeping, deposit, collection, custody, pledge, transmission or otherwise), and (k) all additions and accessions to, substitutions for, and replacements, products and Proceeds of the foregoing property, including proceeds of all insurance policies insuring the foregoing property, and all of such Loan Party’s books and records relating to any of the foregoing and to such Loan Party’s business. Notwithstanding the foregoing, no Loan Party shall pledge, and the Collateral shall not include, (i) Equipment or other property owned by any Loan Party on the date hereof or hereafter acquired that is subject to a lien securing capitalized leases and purchase money indebtedness to the extent and for so long as the documentation providing for such capitalized leases and purchase money indebtedness prohibits the creation of a lien on such assets (other than to the extent that any such term or prohibition would be rendered ineffective after giving effect to Section 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) or any other applicable law (including the Bankruptcy Code), (ii) any United States intent-to-use trademark applications to the extent that the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable Federal law, and (iii) assets and property to the extent such assets and property are subject to a term or a rule of law, statute or regulation that restricts, prohibits, or requires a consent (that has not been obtained) of a Person (other than such Loan Party) to, the creation, attachment or perfection of the security interest granted herein, and any such restriction, prohibition and/or requirement of consent is effective and enforceable under applicable law and is not rendered ineffective by applicable law (including, without limitation, pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC); provided, that with respect to any such limitation described in the foregoing clauses (i) and (iii), immediately upon the ineffectiveness, lapse or termination of any such restriction, the Collateral shall include, and such Loan Party shall be deemed to have granted a lien on such property under this Agreement as if such restriction had never been in effect. |
| b. | Each Loan Party will, and will cause the other Loan Party to, at any time upon the reasonable request of Aegis, execute or deliver to Aegis any and all financing statements, fixture filings, security agreements, pledges, assignments, mortgages, deeds of trust, opinions of counsel, and all other documents (the “Additional Documents”) that Aegis may reasonably request in form and substance reasonably satisfactory to Aegis, to create, perfect, and continue to be perfected or to better perfect Aegis’s liens in all of the assets of each of the Loan Parties (whether now owned or hereafter arising or acquired, tangible or intangible, real or personal), and in order to fully consummate all of the transactions contemplated hereby. To the maximum extent permitted by applicable law, if any Loan Party refuses or fails to execute or deliver any reasonably requested Additional Documents within a reasonable period of time following the request to do so, each Loan Party hereby authorizes Aegis to execute any such Additional Documents in the applicable Loan Party’s name and authorizes Aegis to file such executed Additional Documents in any appropriate filing office |
| c. | Each Loan Party authorizes Aegis to file, transmit, or communicate, as applicable, from time to time, Uniform Commercial Code financing statements, along with amendments and modifications thereto, in all filing offices selected by Aegis, listing such Loan Party as the debtor and Aegis as the secured party, and describing the collateral covered thereby in such manner as Aegis may elect, including using descriptions such as “all personal property of debtor” or “all assets of debtor” or words of similar effect. Each Loan Party also hereby ratifies its authorization for Aegis to have filed in any filing office any financing statements filed prior to the date hereof. |
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| 5. | Covenants of Loan Parties. |
| a. | Hinterkopf D240.2 Printer. Until all Obligations are satisfied, without the written consent of Aegis, Craft Canning will neither sell nor lease nor encumber the Hinterkopf D240.2 can printer now owned by Craft Canning. |
| b. | Barrel Inventory. Eastside pledges in this Agreement its inventory of barreled whiskey, inter alia, to secure payment of the Note. Attached hereto as Appendix E is an independent report stating that the 2,229 units of barreled whiskey owned by Eastside as of February 17, 2022 had a net orderly liquidation value of $5,466,373 on that date. Until all obligations are satisfied, without the written consent of Aegis, Eastside will not sell barrel inventory in bulk. “In bulk” shall be 10 barrels in a 6-month period. Resale in bulk by Eastside of barrels repurchased from Ultrapure during 2022 shall not be considered a breach of this covenant. |
| c. | Taxes. Each Loan Party will timely pay all applicable Taxes, assessments, deposits and contributions owing by such Loan Party in the future as they became due and payable. Each Loan Party may, however, defer payment of any contested Taxes; provided, that such Loan Party (i) in good faith contests its obligation to pay such Taxes by appropriate proceedings promptly and diligently instituted and conducted; (ii) notifies Aegis in writing of the commencement of, and any material development in, the proceedings; (iii) posts bonds or takes any other commercially reasonable steps required to keep the contested taxes from becoming a lien upon any of the Collateral and (iv) maintains adequate reserves therefor in conformity with GAAP. |
| 6. | Negative Covenants of Loan Parties. No Loan Party shall, without Aegis’ prior written consent: |
| a. | merge or consolidate with another Person; |
| b. | acquire any assets except in the ordinary course of business; |
| c. | enter into any transaction outside the ordinary course of business; |
| d. | sell, transfer, return, or dispose of any Collateral or other assets with an aggregate value in excess of $10,000 in any calendar month, other than: |
| i. | the sale by Loan Parties of Inventory in the ordinary course of its business; |
| ii. | the sale of Accounts Receivable by Craft Canning pursuant to its Factoring and Security Agreement with Engs Commercial Capital LLC dated August 16, 2022 and amended on September 6, 2022, or |
| iii. | any sale, disposition, or transfer of obsolete, worn-out or unneeded Equipment; |
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| e. | create, incur, assume or suffer to exist any lien or other encumbrance of any nature whatsoever, other than in favor of Aegis to secure the Obligations, on any of the Collateral whether now or hereafter owned, other than Permitted Liens; |
| f. | guaranty or otherwise become liable with respect to the obligations of any Person other than (i) the Obligations; |
| g. | pay or declare any dividends or other distributions on any Loan Party’s Equity Interests (except for (x) dividends payable solely in capital stock or other Equity Interests of such Loan Party and (y) dividends or distributions to Eastside by Subsidiaries of Eastside); |
| h. | redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Loan Party’s equity interests; or |
| i. | pay any principal or other amount on any indebtedness that is contractually subordinated to Aegis in violation of the applicable subordination or intercreditor agreement or optionally prepay, redeem, defease, purchase, or otherwise acquire any indebtedness of any Loan Party. |
| 7. | Termination. This Agreement will terminate and have no further force or effect if the Closing Date does not occur within five business days after the date of this Agreement first written above. |
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IN WITNESS WHEREOF, the Parties have signed this Agreement as of the date first set forth above.
| EASTSIDE DISTILLING, INC. | ||
| By: | /s/ Geoffrey Gwin | |
| Name: | Geoffrey Gwin | |
| Title: | Chief Executive Officer | |
| CRAFT CANNING + BOTTLING, LLC | ||
| By: | /s/ Geoffrey Gwin | |
| Name: | Geoffrey Gwin | |
| Title: | Manager | |
| AEGIS SECURITY INSURANCE COMPANY | ||
| By: | /s/ W.J. Wollyung III | |
| Name: | W.J. Wollyung III | |
| Title: | CEO/President | |
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Appendices
| A. | Secured Promissory Note |
| B. | Loan Payoff Schedule – TQLA |
| C. | Terms of ILOC |
| D. | Note Guaranty |
| E. | Valuation of Barreled Whiskey |
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Exhibit 10.2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE LAW, AND NO INTEREST OR PARTICIPATION HEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR AN EXEMPTION THEREFROM.
SECURED PROMISSORY NOTE
| $4,500,000.00 | October 6, 2022 | |
| Portland, Oregon |
FOR VALUE RECEIVED, EASTSIDE DISTILLING, INC., a Nevada corporation (the “Company”), hereby promises to pay to the order of Aegis Security Insurance Company (“Holder”), the aggregate principal amount of Four Million Five Hundred Thousand Dollars ($4,500,000.00), together with the Commitment Fee described herein, together with interest on the aggregate principal balance (which shall not include the Commitment Fee), all as set forth in this Secured Promissory Note (this “Note”). This Note is issued pursuant to the Note Purchase Agreement among the Company, the Holder and Craft Canning + Bottling LLC (the “Note Purchase Agreement”), which contains covenants applicable to the obligation under this Note.
| 1. | Payments and Advances. |
(a) Interest Rate. The unpaid principal balance of this Note will bear interest at 9.25% per annum. Interest shall commence with the date of the Note (i.e. October 6, 2022, the “Loan Date”) and shall continue on the outstanding principal amount of this Note until this Note is paid or otherwise satisfied in full. Interest shall be paid every three (3) months after the interest commence date, except that interest for the three month period ending January 6, 2023 shall not be payable until February 7, 2023. Interest will be computed based on a 365-day year and the actual days elapsed and will be compounded annually. If any Event of Default, as defined in Section 2, occurs, then during the continuance of the Event of Default, all principal under this Note shall bear interest on each day outstanding at the lesser of (i) eighteen percent (18%) per annum compounded quarterly or (ii) the highest lawful rate in effect on such day (the “Default Rate”).
(b) Commitment Fee. In consideration of undertakings by Holder herein, Company will pay to Holder a fee in the amount of Forty-Five Thousand Dollars ($45,000) (the “Commitment Fee”). The Commitment Fee will be due and payable in full on the Maturity Date of this Note.
(c) Repayment of Principal and Interest. All payments of interest and principal on the Note and the Commitment Fee shall be in lawful money of the United States of America by wire transfer of immediately available funds to the Holder’s account at a bank specified by Holder in writing to the Payor from time to time. All payments on this Note under this Section 1(c) will be applied to accrued and unpaid interest that is due and payable, then to the Commitment Fee, then to accrued and unpaid interest not yet payable, and thereafter to outstanding principal. Whenever any payment hereunder shall be stated to be due on a day other than a business day, such payment will be made on the next succeeding business day, and such extension of time will in such case be included in the computation of payment of interest.
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(i) All unpaid principal, together with any then unpaid and accrued interest, and the Commitment Fee will be due and payable in cash on the first anniversary of the Loan Date (the “Maturity Date”). Accrued interest will be paid in arrears in cash on the last business day of every three calendar months from the Loan Date commencing on the first such date to occur after the Loan Date.
(ii) Company may obtain a 6-month extension of the Maturity Date by paying an extension fee equal to one percent (1%) of the then principal balance. Company may obtain a second 6-month extension (i.e. an extension to the second anniversary of the Loan Date) by paying a second extension fee equal to one percent (1%) of the then principal balance. However, Holder shall have no obligation to extend the Maturity Date on either occasion if: (a) the Company is in default under the terms of this Note; (b) the Company has committed a material breach of any covenant in this Note or in the Note Purchase Agreement; or (c) the Holder in good faith believes itself insecure.
(d) Prepayment. The Company may prepay this Note at any time in whole or in part, without the consent of Holder and without premium or penalty.
| 2. | Default. |
(a) Event of Default. The occurrence of any of the following will constitute an “Event of Default” under this Note:
(i) The Company fails to pay timely amounts when due under this Note, and such failure continues for ten (10) days following written notice of non-payment; provided that notice of non-payment shall not be required as a condition to an Event of Default if the Company fails to pay Holder the entire amount of outstanding principal, the Commitment Fee, and any remaining accrued interest in full on or prior to the Maturity Date;
(ii) The Company files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any assignment for the benefit of creditors;
(iii) An involuntary petition is filed against the Company (unless such petition is dismissed or discharged within sixty (60) days under any bankruptcy statute now or hereafter in effect), or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or control of any property of the Company;
(iv) Company breaches any representation or warranty in any material respect or otherwise fails to perform or observe any covenant or agreement in any material respect set forth in this Note or in the Note Purchase Agreement and such failure continues for twenty (20) days following written notice from Holder;
(v) The sale, transfer, pledge, hypothecation or liquidation of all or subsequently all of the assets or equity securities of Company;
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(vi) The merger of Company with another corporation or other legal entity if (a) the Company is not the surviving entity or (b) there is a transfer of 15% or more of Company’s outstanding shares to another owner or owners within a 6-month period of time or (c) there is a change in 50% or more of the existing Board of Directors of Company within one year of the Loan Date; or
(vii) Company is liquidated or winds up its affairs.
(b) Rights of Holder Upon Default. If there shall be any Event of Default under Section 2(a)(i), after the expiration of any required notice or cure period, this Note shall accelerate and all unpaid principal and interest, if any, shall become immediately due and payable upon notice of acceleration from Holder to the Company. If there shall be any Event of Default under Sections 2(a)(ii), 2(a)(iii), or (2(a)(v)-(vii) this Note shall immediately accelerate and all unpaid principal, the Commitment Fee and interest, if any, shall become immediately due and payable without any requirement of notice from Holder to the Company. Upon an Event of Default, Holder may exercise any right, power or remedy permitted to it by law or this Note, including foreclosure of the Collateral identified in the Note Purchase Agreement.
| 3. | Restriction on Further Indebtedness. The Company agrees that. unless Holder shall otherwise consent in writing, it shall cause Craft Canning not to create, incur, assume or in any manner become liable in respect of, or suffer to exist, any indebtedness other than (a) indebtedness incurred or guaranteed by Craft Canning in effect as of the date hereof, (b) trade debt incurred in the ordinary course of business, (c) capital leases of digital can printers specifically described in the Security Guaranty dated as of the Loan Date, and (d) indebtedness that is expressly subordinate and junior in right and priority of payment to the Note that is reasonably satisfactory in form and substance to Holder. |
| 4. | Other Provisions. |
(a) Cancellation. After all principal and interest and the Commitment Fee owed on this Note have been paid in full, this Note will automatically be deemed canceled, will be surrendered to the Company for cancellation, and will not be re-issued.
(b) Waivers and Amendments. This Note may not be amended or modified, nor may any of its terms be waived, except by a written instrument signed by the Company and Holder.
(c) Severability. If any provision of this Note is determined to be invalid, illegal or unenforceable, in whole or in part, the validity, legality and enforceability of any of the remaining provisions or portions of this Note will not in any way be affected or impaired thereby and this Note will nevertheless be binding between the Company and Holder.
(d) Governing Law. This Note will be governed by and interpreted in accordance with the internal laws of the Commonwealth of Pennsylvania. In any action brought or arising out of this Note, the Company and Holder hereby consent to the jurisdiction of any federal or state court having proper venue within the County of Dauphin, Commonwealth of Pennsylvania and also consent to the service of process by any means authorized by Pennsylvania law.
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(e) Collateral. The Holder shall have the right to request an updated description of the Company’s collateral and the value of the collateral securing this loan monthly upon seven (7) days’ Notice.
(f) Attorney Fees.
(i) Company agrees to pay Holder’s collection expenses, attorney fees and paralegal fees which may be incurred in the collection of any amount due hereunder or enforcement or interpretation of any or all of Company’s duties hereunder or any guaranty related to Company’s duties hereunder, or any part hereof or thereof, whether or not suit is instituted, and if suit is instituted, to pay all such collection expenses, court costs, attorney fees and paralegal fees as may be determined by the trial court or any appellate courts. Company further agrees to pay any attorney fees, paralegal fees or costs incurred by Holder with respect to Company’s obligations hereunder in connection with any action or proceeding to enforce any creditor’s rights associated with any collateral securing this Note, or with respect to any bankruptcy, receivership or insolvency proceedings of Company or any guarantor of Company’s obligations hereunder, whether judicial or otherwise, including but not limited to fees incurred in litigating issues peculiar to federal bankruptcy law;
(ii) Company agrees to reimburse Holder for all costs, reasonable attorney fees, and paralegal fees incurred by Holder in the research, review, negotiation, and drafting of the Note, the Note Purchase Agreement, the Note Guaranty and any other documents or matters related to this $4,500,000 loan transaction. Company shall reimburse Holder by payment in cash or certified check within seven (7) days of written request, including via email.
(g) Jury Trial Waiver. Holder and the Company each hereby waive any right to trial by jury of any claim (including crossclaims and counterclaims) it may have against each other under, in connection with, or related to this Note or the Note Purchase Agreement.
(h) Binding Effect. This Note will be binding upon, and will inure to the benefit of, the Company and Holder and their respective successors and assigns.
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(i) Notices. Any notice required or desired to be served, given, or delivered hereunder must be in writing and in the form and manner specified below, and must be addressed to the party to be notified as follows:
If to the Company:
With a copy to: |
EASTSIDE DISTILLING, INC. 2321 NE Argyle Street, Unit D Portland, OR 97211 Attention: Controller Email: TMilton@eastsidedistilling.com
Robert Brantl, Esq. 181 Dante Ave. Tuckahoe , NY 10707 Email: rbrantl21@gmail.com |
If to Holder:
With a copy to: |
AEGIS SECURITY INSURANCE COMPANY 4431 N. Front Street, Suite 200 Harrisburg, PA 17110 Email: wwollyung@aegisinsco.com
Russell R. Kilkenny Scarborough, McNeese, Oelke & Kilkenny PC 5 Centerpointe Drive, Suite 240 Lake Oswego, OR 97035 Email: rrk@smoklaw.com |
or to such other address as each party designates to the other by notice in the manner herein prescribed. Any notice given under this Note shall be in writing and delivered in person, via email, or other form of electronic delivery, sent by documented overnight delivery service or mailed by certified or registered mail, postage prepaid, to the appropriate party or parties at the addresses referenced above or the electronic email address, or to such other address as the parties may hereinafter designate. Unless otherwise specified in this Note, all such notices and other written communications shall be effective (and considered received for purposes of this Note) (a) if delivered by hand, upon delivery, (b) if by email or other form of electronic delivery, on the next business day, or (c) if sent by documented overnight delivery service, on the date delivered.
(j) Transfer of Note. This Note has not been registered under the Securities Act of 1933 or applicable state law, and no interest or participation herein may be sold, distributed, assigned, offered, pledged or otherwise transferred unless there is an effective registration statement under the Act and applicable state securities laws covering any such transaction or an exemption therefrom and upon approval by the Company. In the event this Note is transferred in accordance with this Section 3(j), the new holder shall be deemed to be the “Holder” with respect to the provisions of this Note.
[Remainder of Page Left Intentionally Blank; Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Secured Promissory Note to be executed as of the day and year first written above.
| HOLDER: AEGIS SECURITY INSURANCE COMPANY | COMPANY: EASTSIDE DISTILLING, INC. | |||
| By: | /s/ W.J. Wollyung III | By: | /s/ Geoffrey Gwin | |
| Name: | W.J. Wollyung III | Name: | Geoffrey Gwin | |
| Title: | CEO/President | Title: | Chief Executive Officer | |
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Exhibit 10.3
NOTE GUARANTY
October 6, 2022
In order to induce Aegis Security Insurance Company (the “Creditor”) to grant to Eastside Distilling, Inc., a Nevada corporation (“Debtor”) a loan of Four Million Dollars ($4,500,000) pursuant to a Secured Promissory Note (the “Note”) dated the date of this Guaranty (this “Guaranty”), the undersigned guarantor Craft Canning + Bottling, LLC (“Craft Canning”) (the “Guarantor”), as of the date hereof, for value received, unconditionally, irrevocably and absolutely guarantees to Creditor, payment and performance when due of all obligations of Debtor pursuant to the Note (the “Obligations”) now or hereafter owing to Creditor by Debtor, which Obligations, together with all costs of collection thereof, including, without limitation, interest and attorneys’ fees directly related to the collection thereof, are hereinafter collectively called the “Guaranteed Obligations.” Guarantor represents it is not prohibited under its Articles of Organization and Operating Agreement from serving as a Guarantor. This Guaranty is a guaranty of payment and performance when due and not of collection.
This Guaranty is issued pursuant to the Note Purchase Agreement among Debtor, Guarantor and Creditor, which contains covenants applicable to the obligation under this Note.
Pursuant to the Note Purchase Agreement, Creditor is granted a security interest in all of Guarantor’s assets as security for the Guaranteed Obligations (the “Collateral”). The Creditor shall have all of the rights and remedies of a secured party under the Oregon Uniform Commercial Code and all other applicable law, all of which rights and remedies shall be cumulative and nonexclusive to the extent permitted by law. Guarantor additionally guarantees all costs of collection and other costs incurred by the Creditor to protect its interest in the Collateral and to enforce any of its rights hereunder, including reasonable attorneys’ fees related to the collection thereof.
Creditor agrees that Guarantor may enter into up to $2,500,000 in capital leases on a second digital can printer and accessories if Guarantor shows Creditor a budget with details of revenue and expenses acceptable to Creditor.
Guarantor waives notice of acceptance of this Guaranty, and presentment, demand, protest, notice of protest, notice of default and diligence in collecting any Guaranteed Obligations, and agrees that Creditor may modify the terms of, compromise, extend, increase, accelerate, renew or forbear to enforce payment or performance of, any part or all any Guaranteed Obligations, or permit the Debtor to incur additional Guaranteed Obligations, all without notice to Guarantor and without affecting in any manner the unconditional obligation of the Guarantor under this Guaranty. Guarantor acknowledges and agrees that the liabilities created by this Guaranty are direct and are not conditioned upon pursuit by Creditor of any remedy Creditor may have against the Debtor or any other person or any security. No invalidity, irregularity, or unenforceability by reason of any bankruptcy, insolvency or other similar law, or any law or order of any government or agency thereof purporting to reduce, amend or otherwise affect the Guaranteed Obligations shall impair, affect or be a defense to the obligations of the Guarantor under this Guaranty.
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Guarantor delivers this Guaranty based solely on such Guarantor’s independent investigation of the financial condition of the Debtor and is not relying on any information furnished by Creditor with respect to Debtor’s financial condition. Guarantor assumes full responsibility for obtaining any further information concerning the Debtor’s financial condition, the status of the Guaranteed Obligations or any other matter which Guarantor may deem necessary or appropriate from time to time. Guarantor hereby waives any duty on the part of Creditor and agrees that it is not relying upon or expecting Creditor to disclose to the Guarantor any fact now or hereafter known by Creditor, whether relating to the operations or condition of the Debtor, the occurrence of any default with respect to the Guaranteed Obligations, or otherwise, notwithstanding any effect such fact may have upon Guarantor’s risk hereunder or Guarantor’s rights against Debtor. Guarantor knowingly accepts the full range of risk encompassed in this Guaranty, which risk includes, but is not limited to, the possibility that Debtor may incur Guaranteed Obligations to Creditor after the financial condition of Debtor, or its ability to pay its debts as they mature, has deteriorated.
Guarantor agrees that no security now or hereafter held by Creditor for the payment of any Guaranteed Obligations, whether from Debtor, any guarantor, or otherwise, and whether in the nature of a security interest, pledge, lien, assignment, setoff, suretyship, guaranty, indemnity, insurance or otherwise, shall affect in any manner the unconditional obligation of the Guarantor under this Guaranty, and Creditor, in its sole discretion, without notice to Guarantor, may release, exchange, enforce and otherwise deal with any such security, including the Collateral, without affecting in any manner the unconditional obligation of the Guarantor under this Guaranty. Guarantor acknowledges and agrees that Creditor has no obligation to acquire or perfect any lien on or security interest in any asset or assets, whether realty or personalty, including the Collateral, to secure payment of the Guaranteed Obligations.
Until such time as the Guaranteed Obligations shall be indefeasibly paid and performed in full, Guarantor hereby agrees not to exercise any rights to be subrogated to the position of Creditor or to have the benefit of any lien, security interest or other guaranty hereafter held by Creditor for the Guaranteed Obligations. Until such time as the Guaranteed Obligations shall be indefeasibly paid and performed in full, Guarantor agrees not to assert any right of reimbursement, indemnity, contribution, or other right of recourse to or with respect to Debtor. Creditor shall have no duty to enforce or protect any rights which Guarantor may have against Debtor, and Guarantor assumes full responsibility for enforcing and protecting any such rights.
If after receipt of any payment of all or any part of the Guaranteed Obligations, Creditor is for any reason compelled to surrender such payment to any person or entity, because such payment is determined to be void or voidable as a preference, impermissible setoff, diversion of trust funds or for any other reason, then to the extent of that payment, the Guaranteed Obligations shall be revived and the obligations under this Guaranty shall be continued in effect without reduction or discharge for that payment, and this Guaranty shall continue in full force notwithstanding any contrary action which may have been taken by Creditor, Debtor or Guarantor in reliance upon such payment, and any such contrary action so taken shall be without prejudice to Creditor’s rights under this Guaranty and shall be deemed to have been conditioned upon such payment having become final and irrevocable.
Anything contained in this Guaranty to the contrary notwithstanding, the obligations of Guarantor hereunder shall be limited to a maximum aggregate amount equal to the largest amount that would not render Guarantor’s obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any applicable provisions of comparable state law (collectively, the “Fraudulent Transfer Laws”), after giving effect to all other liabilities of Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws and after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation or contribution of Guarantor pursuant to (i) applicable law or (ii) any agreement providing for an equitable allocation among Guarantor and other affiliates of the Debtor (if any) of obligations under guaranties by such parties.
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This Guaranty constitutes the entire agreement of Guarantor and Creditor with respect to the subject matter hereof. No waiver, consent, modification or change of the terms of this Guaranty shall bind Guarantor or Creditor unless in writing and signed by the waiving party or an authorized officer of the waiving party, and then such waiver, consent, modification, or change shall be effective only in the specific instance and for the specific purpose given. This Guaranty shall be binding on Guarantor and the Guarantor’s successors and assigns including, without limiting the generality of the foregoing, any debtor-in-possession or trustee-in-bankruptcy for Guarantor. Guarantor, as a subsidiary of Debtor, will receive direct and indirect benefit from the extension of credit by Creditor to Debtor. Guarantor acknowledges that the terms hereof are reasonable. If any provision of this Guaranty is unenforceable in whole or in part for any reason, the remaining provisions shall continue to be effective.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
GUARANTOR WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR CLAIM ARISING OUT OF THIS GUARANTY.
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IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date first written above.
| CRAFT CANNING + BOTTLING, LLC | ||
| By: | /s/ Geoffrey Gwin | |
| Name: | Geoffrey Gwin | |
| Title: | Manager | |
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Exhibit 10.4
AMENDMENT AGREEMENT
Date: October 13, 2022
Parties:
| Eastside | Eastside Distilling, Inc. | |
| Bigger | Bigger Capital Fund, LP | |
| District 2 | District 2 Capital Fund LP |
Premises:
| A. | Bigger and District 2 (collectively, the “Bigger Funds”) hold the following Secured Convertible Promissory Notes issued by Eastside (the “Bigger Notes”), which Bigger Notes were issued pursuant to that certain Securities Purchase Agreement dated as of April 19, 2021, by and among Eastside and the Bigger Funds (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”): |
| (i) | that certain Secured Convertible Promissory Note dated as of April 19, 2021 made by Eastside, as maker, in favor of Bigger, as payee, in the principal amount of $1,500,000; | |
| (ii) | that certain Secured Convertible Promissory Note dated as of May 13, 2021 made by Eastside, as maker, in favor of Bigger, as payee, in the principal amount of $150,000; | |
| (iii) | that certain Secured Convertible Promissory Note dated as of April 19, 2021 made by Eastside, as maker, in favor of District 2, as payee, in the principal amount of $1,500,000; and | |
| (iv) | that certain Secured Convertible Promissory Note dated as of May 13, 2021 made by Eastside, as maker, in favor of District 2, as payee, in the principal amount of $150,000. |
| B. | The Bigger Funds hold the following Warrants issued by Eastside (the “Bigger Warrants”): |
| (i) | that certain Warrant No. 2021-005 dated as of July 29, 2021 issued by Eastside in favor of Bigger; and | |
| (ii) | that certain Warrant No. 2021-006 dated as of July 29, 2021 issued by Eastside in favor of District 2. |
| C. | The Parties executed the following letter agreements (the “Reload Offer Letters): |
| (i) | that certain letter agreement Re: Reload Offer of Common Stock Purchase Warrants, dated as of July 29, 2021, by and between Bigger and Eastside; and | |
| (ii) | that certain letter agreement Re: Reload Offer of Common Stock Purchase Warrants, dated as of July 29, 2021, by and between District 2 and Eastside. |
| D. | The Parties executed an Accommodation Agreement dated April 1, 2022 (the “Accommodation Agreement”, and together with the Bigger Notes, the Bigger Warrants, the Purchase Agreement, the Transaction Documents (as defined in the Purchase Agreement) and the Reload Offer Letters collectively, the “Documents”) |
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| E. | The Parties are engaged in good faith negotiations towards a restructuring of their relationship and agree that relief from the imminent Maturity Date of the Bigger Notes and certain other provisions of the Documents would facilitate a mutually favorable resolution of the negotiations. |
Agreement:
| 1. | The Bigger Notes are hereby amended to change the “Maturity Date” of the Bigger Notes to November 18, 2022 by eliminating the final sentence of the introductory paragraph in each Bigger Note and replacing that sentence with the following text: The entire principal amount hereunder shall be due and payable in full on November 18, 2022 (the “Maturity Date”), or on such earlier date as such principal amount may earlier become due and payable pursuant to the terms hereof. |
| 2. | The Bigger Notes are further hereby amended by adding to the definition of “Excluded Securities” in Section 17 of each Bigger Note the following final clause: and (ix) securities issuable pursuant to the Amendment Agreement dated October 13, 2022. |
| 3. | The Bigger Warrants are hereby amended by adding to the definition of “Excluded Securities” in Section 1 of each Bigger Warrant the following final clause: and (ix) securities issuable pursuant to the Amendment Agreement dated October 13, 2022. |
| 4. | In addition, as consideration for the Bigger Funds’ agreement to enter into this Amendment Agreement, Eastside agrees to issue to each of the Bigger Funds ninety-six thousand, one hundred fifty-three (96,153) shares of Eastside common stock (the “Shares”). Certificates for the Shares shall be delivered to the Bigger Funds promptly after execution of this Amendment Agreement. Each of the Bigger Funds understands and agrees that the issuance of the Shares has not been registered under the 1933 Act or any applicable state securities laws, by reason of their issuance in a transaction that does not require registration under the 1933 Act, and that such Securities must be held indefinitely unless a subsequent disposition is registered under the 1933 Act or any applicable state securities laws or is exempt from such registration. |
| 5. | On any Trading Day in April of 2023, the Bigger Funds, jointly and not separately, may surrender their certificates for the Shares to counsel for Eastside accompanied by (a) a written representation that the Bigger Funds collectively are not beneficially the owners of ten percent or more of Eastside’s outstanding shares and (b) a written demand for reissue of the Shares to the Bigger Funds by crediting the accounts of the Bigger Funds or their designees’ balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”). The certificates must be endorsed for transfer with medallion signature guarantees. As used herein, the “FT Share Delivery Date” shall be the later of (a) April 17, 2023 if the certificates, the representation and the demand are received by counsel on or prior to Noon on April 13, 2023 or (b) three Trading Days after the Trading Day (later than Noon on April 13, 2023) on which the certificates and the demand are received by counsel. The certificates and the demand shall be deemed to have been “received by counsel” on the date on which they are physically delivered to Robert Brantl, Esq. at 181 Dante Avenue, Tuckahoe, NY 10707 (or the Trading Day thereafter, if delivery occurs after Noon), with email notice of the posting have been sent to rbrantl21@gmail.com at least one day prior to the delivery. On or before the FT Share Delivery Date, Eastside shall cause the Shares to be delivered via DWAC as demanded. If Eastside fails for any reason to deliver the Shares via DWAC as demanded on or prior to the FT Share Delivery Date, Eastside shall pay to the Bigger Funds, in cash, as liquidated damages and not as a penalty, for each $1,000 of Shares subject to such reissue instructions (based on the VWAP of the Common Stock on the FT Share Delivery Date), $5 per Trading Day (increasing to $10 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such FT Share Delivery Date until such Shares are delivered. Eastside agrees to maintain a transfer agent that is a participant in the FAST program through April 30, 2023. Eastside shall exclusively bear all expenses arising from its compliance with this Section 5. |
| 6. | Except as expressly modified hereby, the Parties agree that all terms, conditions, covenants, representations and warranties contained in the Documents and all rights of the Bigger Funds and all of the obligations of Eastside under the Documents (the “Obligations”), shall remain in full force and effect. Eastside hereby confirms that the Documents are in full force and effect and that Eastside has no right of setoff, recoupment or other offset or any defense, claim or counterclaim with respect to any of the Obligations or any Document. Except as expressly set forth herein, the execution, delivery and effectiveness of this Amendment Agreement shall not directly or indirectly (i) constitute a consent or waiver of any past, present or future violations of any provisions of any Document, (ii) amend, modify or operate as a waiver of any provision of the Documents or any right, power or remedy of Bigger or District 2, (iii) constitute a consent to any merger or other transaction or to any sale, restructuring or refinancing transaction, or (iv) constitute a course of dealing or other basis for altering any Obligations or any other contract or instrument. Except as expressly set forth herein, each of Bigger and District 2 reserves all of its rights, powers, and remedies under the Documents and applicable law. All of the provisions of the Documents are hereby reiterated, and if ever waived, are hereby reinstated. Eastside hereby agrees that this Amendment Agreement in no way acts as a release or relinquishment of the liens and rights securing payments of the Obligations and this Amendment Agreement shall not be deemed or construed to be a satisfaction, reinstatement, novation or release of any Document. |
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have executed this Accommodation Agreement as of the date first written above.
| EASTSIDE DISTILLING, INC. | ||||
| By: | ||||
| Geoffrey Gwin, CEO | ||||
| BIGGER CAPITAL FUND, LP | ||||
| By: | ||||
| Michael Bigger, Managing Member of the GP | ||||
| DISTRICT 2 CAPITAL FUND LP | ||||
| By: | ||||
| Michael Bigger, Managing Member of the GP | ||||
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Cover |
Oct. 07, 2022 |
|---|---|
| Cover [Abstract] | |
| Document Type | 8-K |
| Amendment Flag | false |
| Document Period End Date | Oct. 07, 2022 |
| Entity File Number | 001-38182 |
| Entity Registrant Name | EASTSIDE DISTILLING, INC. |
| Entity Central Index Key | 0001534708 |
| Entity Tax Identification Number | 20-3937596 |
| Entity Incorporation, State or Country Code | NV |
| Entity Address, Address Line One | 2321 NE Argyle Street |
| Entity Address, Address Line Two | Unit D |
| Entity Address, City or Town | Portland |
| Entity Address, State or Province | OR |
| Entity Address, Postal Zip Code | 97211 |
| City Area Code | (971) |
| Local Phone Number | 888-4264 |
| Written Communications | false |
| Soliciting Material | false |
| Pre-commencement Tender Offer | false |
| Pre-commencement Issuer Tender Offer | false |
| Trading Symbol | EAST |
| Security Exchange Name | NASDAQ |
| Title of 12(g) Security | Common Stock, $0.0001 par value |
| Entity Emerging Growth Company | false |
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