FACTORING AND SECURITY AGREEMENT

 

THIS FACTORING AND SECURITY AGREEMENT is made as of 2/4/2019 by and between
Eastside Distilling, Inc., a Nevada Corporation (“Seller”) and ENGS COMMERCIAL
CAPITAL, LLC (“Purchaser”).

 

1. Definitions and Index to Definitions. The following terms used herein shall
have the following meaning. All capitalized terms not herein defined shall have
the meaning set forth in the Uniform Commercial Code:

 

1.1 “Active Account Debtor” - An Account Debtor of Seller which owes a Purchased
Account to Purchaser.

 

1.2 “Affiliate” - With respect to any Person, each other Person that owns or
controls directly or indirectly the Person, any Person that controls or is
controlled by or is under common control with the Person, and each of that
Person’s senior executive officers, directors, partners and, for any Person that
is a limited liability company, that Person’s managers and members.

 

1.3 “Avoidance Claim” - Any claim that any payment received by Purchaser is
avoidable under the Bankruptcy Code or any other debtor relief statute.

 

1.4 “Balance Subject to Discount” - The difference between the unpaid Face
Amount of Purchased Accounts and the Reserve Account.

 

1.5 “Business Day” - A day on which a bank is open for business in the Chosen
State.

 

1.6 “Chosen State: - Alabama.

 

1.7 “Clearance Days” - Three Business Days for checks drawn on banks located
within the Chosen State and for electronic funds transfers, and five Business
Days for all other payments.

 

1.8 “Closed” - A Purchased Account is closed upon receipt of full payment by
Purchaser from a Payor or from the Seller (including its being charged to the
Reserve account).

 

1.9 “Collateral”- All Seller’s now owned and hereafter acquired Accounts,
Chattel Paper, Inventory, Equipment, Instruments, Investment Property,
Documents, Letter of Credit Rights, Commercial Tort Claims and General
Intangibles.

 

1.10 “Collection Services” — See Section 10.1.2. hereof.

 

1.11 “Complete Termination” — Complete Termination occurs upon satisfaction of
the following conditions:

 

1.11.1 Payment in full of all Obligations of Seller to Purchaser;

 

1.11.2 If Purchaser has issued or caused to be issued guarantees, promises, or
letters of credit on behalf of Seller, acknowledgement from any beneficiaries
thereof that Purchaser or any other issuer has no outstanding direct or
contingent liability therein.

 

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1.11.3 Seller has executed and delivered to Purchaser a general release in the
form of Exhibit 1.11.3. attached hereto.

 

1.12 “Default Discount Rate” — The Discount Rate plus the Default Spread.

 

1.13 “Default Spread” — 5.0%.

 

1.14 “Discount” - The product of the Discount Rate multiplied by the average
daily Balance Subject to Discount.

 

1.15 “Discount Rate” -The Prime Rate plus the Spread.

 

1.16 “Early Termination Date” - The earlier of:

 

1.16.1 The Termination Date set forth in a Notice of Termination; or

 

1.16.2 At the option of Purchaser, the date on which Seller commits an Event of
Default.

 

1.17 “Early Termination Fee” - 2.0% of the Maximum Amount.

 

1.18 “Eligible Account” - An Account that is acceptable for purchase as
determined by Purchaser in the exercise of its reasonable sole credit or
business judgment.

 

1.19 “Events of Default” - See Section 16.1.

 

1.20 “Exposed Payments” - With respect to an Account which Seller has
repurchased or could be required to repurchase hereunder, payments received by
Purchaser from or for the account of a Payor that has become subject to a
bankruptcy proceeding, to the extent such payments cleared the Payor’s deposit
account within ninety days of the commencement of said bankruptcy case.

 

1.21 “Face Amount” - The face amount due on an Account at the time of purchase.

 

1.22 “Initial Term” - A one year period, computed from the date on which
Purchaser first purchases an Account hereunder.

 

1.23 “Invoice” - The document that evidences or is intended to evidence an
Account. Where the context so requires, reference to an Invoice shall be deemed
to refer to the Account to which it relates.

 

1.24 “Late Payment Date” - Ninety days from the date on which a Purchased
Account was Purchased.

 

1.25 “Maximum Amount” - $2,000,000

 

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1.26 “Minimum Monthly Net Funds Employed Balance “- $500,000

 

1.27 “Misdirected Payment Fee”-

 

1.27.1. 15% of the amount of any payment (but in no event less than $1,000) on
account of a Purchased Account (and, after the occurrence of an Event of
Default, payments on accounts of any Account) which has been received by Seller
or a third party and not paid by Seller to Purchaser, as the case may be, on the
next Business Day following the date of receipt by Seller or the date of
Seller’s knowledge of receipt by such third party; or

 

1.27.2. 30% of the amount of any such payment which has been received by Seller
or any third party as a result of any action taken by Seller to cause such
payment to be made to Seller or any third party.

 

1.28 “Notice of Termination” - A notice sent by the Seller to the Purchaser in
the form of Exhibit 1.28. evidencing Seller election to terminate this
Agreement.

 

1.29 “Obligations” - All present and future obligations owing by Seller to
Purchaser whether arising hereunder or otherwise, and whether arising before,
during or after the commencement of any bankruptcy case in which Seller is a
Debtor.

 

1.30 “Parties” - Seller and Purchaser.

 

1.31 “Payor” - An Account Debtor or other obligor on an Account, or entity
making payment thereon for the account of such party.

 

1.32 “Permitted Termination Period” - The period between sixty days and ninety
days immediately prior to the end of a Term.

 

1.33 “Person” - Any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

 

1.34 “Prime Rate” - The lesser of (i) 5%; and (ii) the “prime rate” as published
in the Wall Street Journal.

 

1.35 “Purchase Date” - The date on which Seller has been advised in writing that
Purchaser has agreed to purchase an Account.

 

1.36 “Purchased Accounts” - Accounts purchased hereunder which have not been
Closed.

 

1.37 “Renewal Term” - 1 year.

 

1.38 “Repurchased” - An Account has been repurchased when Seller has paid to
Purchaser the then unpaid Face Amount.

 

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1.39 “Required Reserve Amount” - The Reserve Percentage multiplied by the unpaid
balance of Purchased Accounts.

 

1.40 “Reserve Account” - A bookkeeping account on the books of the Purchaser
representing the portion of the Purchase Price which has not been paid by
Purchaser to Seller, maintained by Purchaser to ensure Seller’s performance with
the provisions hereof.

 

1.41 “Reserve Percentage” - 15%.

 

1.42 “Reserve Shortfall” - The amount by which the Reserve Account is less than
the Required Reserve Amount.

 

1.43 “Schedule of Accounts” - A form supplied by Purchaser from time to time
wherein Seller lists such of its Accounts as it requests that Purchaser purchase
under the terms of this Agreement.

 

1.44 “Servicing Fee” - The product of the Service Fee Rate multiplied by the
Balance Subject to Discount.

 

1.45 “Service Fee Rate” - 0.60% charged monthly in arrears on the average
monthly NFE.

 

1.46 “Spread” - 2.0%.

 

1.47 “Term” - The Initial Term or a Renewal Term, as the case may be.

 

1.48 “Termination Date” - The earlier of (i) the Early Termination Date, or (ii)
the end of the last Term which was not extended under Section 19 hereof.

 

1.49 “UCC” - The Uniform Commercial Code as adopted in the Chosen State.

 

2. Sale; Purchase Price; Billing

 

2.1 Assignment and Sale.

 

2.1.1 Seller shall offer to sell to Purchaser as absolute owner, with full
recourse, such of Seller’s Accounts as are listed from time to time on Schedules
of Accounts.

 

2.1.2 Purchaser will advise Seller, in writing, as to which of Seller’s Accounts
have become Purchased Accounts.

 

2.1.3 Each Schedule of Accounts shall be accompanied by such documentation
supporting and evidencing the Account, as Purchaser shall from time to time
request.

 

2.1.4 Purchaser may, but need not purchase from Seller such Accounts as
Purchaser determines to be Eligible Accounts.

 

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2.1.5 Purchaser does not intend to purchase any Account which will cause the
unpaid balance of Purchased Accounts to exceed the Maximum Amount.

 

2.1.6 Purchaser shall pay the Purchase Price, of any Purchased Account, less any
amounts due to Purchaser from Seller, within two Business Days of the Purchase
Date, whereupon the Accounts shall be deemed purchased hereunder.

 

2.2 Billing.

 

2.2.1 Purchaser may send a monthly statement to all Payors itemizing their
account activity during the preceding billing period. All Payors will be
instructed to make payments to Purchaser.

 

3. Reserve Account.

 

3.1 Seller shall pay to Purchaser on demand the amount of any Reserve Shortfall.

 

3.2 Except during any period in which an Event of Default remains uncured,
Purchaser shall, upon Seller’s request, pay to Seller any amount by which the
Reserve Account exceeds the Required Reserve Amount (“Excess Reserves”).

 

3.3 Upon termination of this Agreement or upon the occurrence of any Event of
Default, these payments by Purchaser to Seller shall be made no more frequently
than once a month.

 

3.4 Purchaser may charge the Reserve Account with any Obligation.

 

3.5 Purchaser may pay any amounts due Seller hereunder by a credit to the
Reserve Account.

 

3.6 Except as provided in Section 3.2. Purchaser may retain the Reserve Account
until Complete Termination.

 

4. Exposed Payments.

 

4.1 Upon termination of this Agreement Seller shall pay to Purchaser (or
Purchaser may retain with notice to Seller), to hold in a non-segregated
non-interest bearing account the amount of all Exposed Payments (the “Preference
Reserve”).

 

4.2 Purchaser may charge the Preference Reserve with the amount of any Exposed
Payments that Purchaser pays to the bankruptcy estate of the Payor that made the
Exposed Payment, on account of a claim asserted under Section 547 of the
Bankruptcy Code.

 

4.3 Purchaser shall refund to Seller from time to time that balance of the
Preference Reserve for which a claim under Section 547 of the Bankruptcy Code
can no longer be asserted due to the passage of the statute of limitations,
settlement with the bankruptcy estate of the Payor or otherwise.

 

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5. Authorization for Purchases.

 

5.1 Subject to the terms and conditions of this Agreement, Purchaser is
authorized to purchase Accounts upon telephonic, facsimile or other instructions
received from anyone purporting to be an officer, employee or representative of
Seller.

 

6. Fees and Expenses.

 

6.1 Seller shall pay to Purchaser:

 

6.1.1 Discount. The Discount, on the first day of the month following the month
in which it accrues.

 

6.1.2 Servicing Fee. The Servicing Fee, on the first day of the month following
the month in which such it accrues.

 

6.1.3 Origination Fee. The Origination Fee, on the first of the Initial Term and
each Renewal Term.

 

6.1.4 Minimum Monthly Fee. Any amount by which the fees earned in any month
(prorated for partial months) are less than the Minimum Monthly Balance subject
to Discount pursuant to Sections 6.1.1 and 6.1.2, to be paid on the first day of
the following month.

 

6.1.5 Misdirected Payment Fee. Any Misdirected Payment Fee immediately upon its
accrual. It is recognized that the costs imposed upon Purchaser by the Seller’s
action or inaction resulting in the imposition of this fee are difficult to
ascertain, and this fee represents the good faith effort to compensate Purchaser
without imposing upon the parties the expensive burden of litigating that cost,
and is the agreed liquidated damages with result therefrom.

 

6.1.6 Early Termination Fee. The Early Termination Fee, in the event that the
Early Termination Date is earlier than the Permitted Termination Period, whether
or not Seller actually terminates this Agreement on the Early Termination Date
shall be payable on the Early Termination Date.

 

6.1.7 Out-of-pocket Expenses. The out-of-pocket expenses directly incurred by
Purchaser in the administration of this Agreement such as wire transfer fees,
postage and audit fees. Seller shall not be required to pay for more than four
audits per twelve-month period.

 

6.1.8 Payment by Credit Card. In the event a Payor makes a payment to Purchaser
using a credit card, Purchaser shall credit to the obligation of the Account
Debtor the amount credited to Purchaser by Purchaser’s credit card processor,
net of any processing fees.

 

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7. Repurchase Of Accounts.

 

7.1 Seller shall repurchase, by payment of the then unpaid Face Amount thereof,
together with any unpaid fees relating to the Purchased Account on demand, or,
at Purchaser’s option, by Purchaser’s charge to the Reserve Account:

 

7.1.1 Any Purchased Account, the payment of which has been disputed by the Payor
or the Account Debtor obligated thereon, Purchaser being under no obligation to
determine the bona fides of such dispute;

 

7.1.2 Any Purchased Account regarding which Seller has breached any warranty as
set forth in the Section 14.4.

 

7.1.3 Any Purchased Account owing from an Account Debtor or Payor which (i) in
Purchaser’s reasonable credit judgment has become insolvent or (ii) which has
indicated an inability or unwillingness to pay the Purchased Account when due;

 

7.1.4 All Purchased Accounts upon the occurrence of an Event of Default, or upon
the Termination Date of this Agreement; and

 

(a) Any Purchased Account that remains unpaid beyond the Late Payment Date.

 

8. Security Interest.

 

8.1 As collateral securing the Obligations, with respect to the Collateral:

 

8.1.1 Grants to Purchaser a continuing first priority security interest in the
Collateral.

 

9. Clearance Days.

 

9.1 For all purposes under this Agreement, Clearance Days will be added to the
date on which Purchaser receives any payment.

 

10. Authorization to Purchaser.

 

10.1 Seller irrevocably authorizes Purchaser at Seller’s expense, to exercise at
any time any of the following powers until all of the Obligations have been paid
in full:

 

10.1.1 Receive, take, endorse, assign, deliver, accept and deposit, in the name
of Purchaser or Seller, proceeds of any Collateral;

 

10.1.2 Take or bring, in the name of Purchaser or Seller, all steps, actions,
suits or proceedings deemed by Purchaser necessary or desirable to effect
collection of or other realization upon Purchaser’s Accounts in accordance with
applicable law;

 

10.1.3 With respect to any of the following established or issued for the
benefit of Seller, either individually or as a member of a class or group, file
any claim under (i) any bond or (ii) under any trust fund.

 

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10.1.4 Pay any sums necessary to discharge any lien or encumbrance which is
senior to Purchaser’s security interest in any Collateral, which sums shall be
included as Obligations hereunder, and in connection with which sums the Default
Discount Rate shall accrue and shall be immediately due and payable on the
Balance Subject to Discount;

 

10.1.5 Reserved

 

10.1.6 Notify any Payor obligated with respect to any Account, that the
underlying Account has been assigned to Purchaser by Seller and that payment
thereof is to be made to the order of and directly and solely to Purchaser;

 

10.1.7 Communicate directly with Seller’s Payors to verify the amount and
validity of any Account created by Seller.

 

10.1.8 During the continuation of an Event of Default:

 

(a) Reserved;

 

(b) Settlement of Claims:

 

(i) In its own name or on behalf of Seller, with Seller to be bound thereby,
extend the time of payment of, compromise or settle for cash, credit, return of
merchandise, and upon any terms or conditions (collectively, a “Settlement”),
any and all Accounts and discharge or release any Account Debtor or other
obligor (including filing of any public record releasing any lien granted to
Seller by such Account Debtor), without affecting any of the Obligations;

 

All Settlements shall be presumed to be commercially reasonable, and the burden
of proof shall be on Seller with respect thereto.

 

10.1.9 File any initial financing statements and amendments thereto that:

 

(a) Indicate the collateral as all Accounts, including but not limited to
Accounts consisting of Proceeds of Inventory, or words of similar effect;

 

(b) Contain any other information required by part 5 of Article 9 of the UCC for
the sufficiency or filing office acceptance of any financing statement or
amendment, including (i) whether the Seller is an organization, the type of
organization, and any organization identification number issued to the Seller
and, (ii) in the case of a financing statement filed as a fixture filing or
indicating collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the collateral relates

 

10.2 Seller authorizes Purchaser to accept, endorse and deposit on behalf of
Seller any checks tendered by an Account Debtor “in full payment” of its
obligation to Seller. Seller shall not assert against Purchaser any claim
arising therefrom, irrespective of whether such action by Purchaser effects an
accord and satisfaction of Seller’s claims, under §3-311 of the Uniform
Commercial Code, or otherwise.

 

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10.3 Purchaser shall, upon Seller’s written request with respect to specific
Account Debtors, and immediately after the occurrence of an Event of Default
Purchaser may without Seller’s request, perform Accounts collection services on
Seller’s behalf, which services may include, but are not limited to, (1)
communicating with Account Debtors, (2) reviewing public records and credit
reports, and (3) the bringing (in Purchaser’s or Seller’s name at Seller’s sole
expense), actions deemed appropriate by Purchaser to effect collection of
Seller’s Accounts (“Collection Services”). Upon such request, or immediately
after the occurrence of an Event of Default, Seller shall be deemed to have
authorized Purchaser to perform Collection Services.

 

11. ACH Authorization.

 

11.1 In order to satisfy any of the Obligations, Seller authorizes Purchaser to
initiate electronic debit or credit entries through the ACH system to any
deposit account maintained by Seller.

 

12. Covenants By Seller.

 

12.1 After written notice by Purchaser to Seller, and automatically, without
notice, after an Event of Default, Seller shall not (a) grant any extension of
time for payment of any of its Accounts, (b) compromise or settle any of its
Accounts for less than the full amount thereof, (c) release in whole or in part
any Payor, or (d) grant any credits, discounts, allowances, deductions, return
authorizations or the like with respect to any of the Accounts.

 

12.2 Books and Records; Inspection; Audits.

 

12.2.1 Seller shall at all times maintain complete, accurate and current books
and records, including a general ledger and subsidiary ledgers, cash receipts
and disbursement journals, sales journals, and such other records as a business
such as Seller shall reasonably maintain, in accordance with the standards set
forth in Section 727(a)(3) of the United States Bankruptcy Code.

 

12.2.2 From time to time as requested by Purchaser, at the sole expense of
Seller, Purchaser shall have access, during reasonable business hours if prior
to an Event of Default and at any time if on or after of an Event of Default, to
all premises where Collateral is located for the purposes of inspecting (and
removing, if after the occurrence of an Event of Default) any of the Collateral,
including Seller’s books and records, and Seller shall permit Purchaser to make
copies of such books and records or extracts therefrom as Purchaser may request.

 

12.2.3 Seller irrevocably authorizes all accountants and third parties employed
by Seller to disclose and deliver to Purchaser at Seller’s expense all financial
information, books and records, work papers, management reports and other
information in their possession relating to Seller.

 

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12.3 Before sending any Invoice to an Account Debtor, Seller shall mark same
with such notice of assignment as Purchaser may require.

 

12.4 Seller shall pay when due all payroll and other taxes, and shall provide
proof thereof to Purchaser in such form as Purchaser shall reasonably require.

 

12.5 Seller may create, incur, assume or permit to exist any lien upon or with
respect to any assets in which Purchaser now or hereafter holds a security
interest on either of the following conditions:

 

12.5.1 With the prior written consent of Purchaser, which consent will not be
unreasonably withheld so long as the subordinate secured party and Purchaser
enter into a consent agreement acceptable to Purchaser, or

 

12.5.2 [Reserved

 

12.6 Notwithstanding Seller’s obligation to pay the Misdirected Payment Fee,
Seller shall pay to Purchaser on the next banking day following the date of
receipt by Seller the amount of:

 

12.6.1 Any payment on account of a Purchased Account.

 

12.6.2 After the occurrence of an Event of Default, any payment on account of
any Account.

 

12.7 The funds received by Seller as described in Section 12.6. shall be held by
Seller in trust for Purchaser and shall not be commingled with any funds of
Seller.

 

12.8 Avoidance Claims.

 

12.8.1 Seller shall indemnify Purchaser from any loss arising out of the
assertion of any Avoidance Claim and shall pay to Purchaser on demand the amount
thereof

 

12.8.2 Seller shall notify Purchaser within two Business Days of it becoming
aware of the assertion of an Avoidance Claim.

 

12.8.3 This provision shall survive termination of this Agreement.

 

12.9 In the event that Purchaser sends a notice of assignment to a Payor
obligated with respect to any Account pursuant to Section 10.1.6. :

 

12.9.1 Seller shall not direct such Payor to pay such Account to Seller or any
other entity or individual, or undermine or interfere with such notice of
assignment in any manner.

 

12.9.2 Seller agrees that a violation of this Section 12.9. will put the value
of the Collateral at risk and will cause irreparable harm to Purchaser and,
therefore, Purchaser shall be entitled to temporary and permanent injunctive
relief to prevent such violation without the necessity of proving that actual
damages are not an adequate remedy and Purchaser will be entitled to any
proceeds of a Accounts received by Seller as a result of such violation.

 

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13. Account Disputes.

 

13.1 Seller shall notify Purchaser promptly of and, if requested by Purchaser,
will settle all disputes concerning any Purchased Account, at Seller’s sole cost
and expense. Purchaser may, but is not required to, attempt to settle,
compromise, or litigate (collectively, “Resolve”) the dispute upon such terms,
as Purchaser in its sole discretion deem advisable, for Seller’s account and
risk and at Seller’s sole expense. Upon the occurrence of an Event of Default
Purchaser may Resolve such issues with respect to any Account of Seller.

 

14. Representation and Warranties. Seller represents and warrants that: 14.1. It
is fully authorized to enter into this Agreement and to perform hereunder; 14.2.
This Agreement constitutes its legal, valid and binding obligation; and 14.3.
Seller is solvent and in good standing in the jurisdiction of its organization.
14.4. The Purchased Accounts are and will remain:

 

14.1.1 Bona fide existing obligations created by the sale and delivery of goods
or the rendition of services in the ordinary course of Seller’s business;

 

14.1.2 To the best of Seller’s knowledge, unconditionally owed and will be paid
to Purchaser without defenses, disputes, offsets, counterclaims, or rights of
return or cancellation.

 

14.1.3 Not sales to any Affiliate of Seller.

 

14.1.4 “Arm’s length” transactions.

 

14.2 Seller has not received notice or otherwise learned of actual or imminent
bankruptcy, insolvency, or material impairment of the financial condition of any
applicable Account Debtor regarding Purchased Accounts.

 

15. Disclaimer of Liability.

 

15.1 In no event will Purchaser be liable to Seller for any lost profits, lost
savings or other consequential, incidental or special damages resulting from or
arising out of or in connection with this agreement, the transactions or
relationships contemplated hereby or purchaser’s performance or failure to
perform hereunder, even if purchaser has been advised of the possibility of such
damages.

 

16. Default.

 

16.1 Events of Default.

 

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16.1.1 The following events will constitute an Event of Default hereunder:

 

(a) Seller defaults in the payment of any Obligations or in the performance of
any provision hereof or of any other agreement now or hereafter entered into
with Purchaser, or any warranty or representation contained herein proves to be
false in any material way. Seller shall have a period of five (5) business days
after notice from Purchaser in which to cure such Event of Default only if such
Event of Default is capable of being cured. If Seller fails to completely cure
such Event of Default within the five day period, Seller shall have no right to
cure thereafter absent Purchaser’s written consent;

 

(b) Seller or any guarantor of the Obligations voluntarily initiates any
debtor-relief proceedings or involuntarily becomes subject to any debtor-relief
proceedings not discharged in 30 days; or

 

(c) Any such guarantor fails to perform or observe any of such Guarantor’s
obligations to Purchaser or shall notify Purchaser of its intention to rescind,
modify, terminate or revoke any guaranty of the Obligations, or any such
guaranty shall cease to be in full force and effect for any reason whatever.

 

16.2 Waiver of Notice. PURCHASER’S FAILURE TO CHARGE OR ACCRUE INTEREST OR FEES
AT ANY “DEFAULT” OR “PAST DUE” RATE SHALL NOT BE DEEMED A WAIVER BY PURCHASER OF
ITS CLAIM THERETO.

 

16.3 Effect of Default.

 

16.3.1 Upon the occurrence of any Event of Default:

 

(a) Purchaser may immediately terminate this Agreement, at which time all
Obligations shall immediately become due and payable without notice;

 

(b) Discount shall accrue and be payable at the Default Discount Rate on the
Balance Subject to Discount.

 

(c) The Early Termination Fee shall become immediately due and payable without
notice.

 

17. Account Stated.

 

17.1 Purchaser shall render to Seller a statement, either in tangible form or
available on line, setting forth the transactions arising hereunder.

 

17.2 Each statement shall be considered correct and binding upon Seller as an
account stated, except to the extent that Purchaser receives, within sixty days
after the mailing of such statement or its becoming available on line, written
notice from Seller of any specific exceptions by Seller to that statement, and
then it shall be binding against Seller as to any items to which it has not
objected.

 

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18. Amendment and Waiver.

 

18.1 Only a writing signed by all parties hereto may amend this Agreement. No
failure or delay in exercising any right hereunder shall impair any such right
that Purchaser may have, nor shall any waiver by Purchaser hereunder be deemed a
waiver of any default or breach subsequently occurring. Purchaser’s rights and
remedies herein are cumulative and not exclusive of each other or of any rights
or remedies that Purchaser would otherwise have.

 

19. Termination; Effective Date.

 

19.1 This Agreement will be effective on the date it is signed by the Parties,
shall continue until the end of the Initial Term, and shall be automatically
extended for successive Renewal Terms unless Seller shall provide a Notice of
Termination at least sixty days prior to the intended termination date,
whereupon this Agreement shall terminate on the end of the then existing Initial
Term or Renewal Term, as applicable.

 

19.2 This Agreement will also terminate if Seller delivers a Notice of
Termination to Purchaser, subject to Sections 19.3 and 19.4 and payment of the
Early Termination Fee.

 

19.3 The Notice of Termination shall not be effective unless all Obligations
have been paid to Purchaser on or before the termination date set forth therein.

 

19.4 Any attempted termination of this Agreement other than as set forth herein
shall be ineffective, and this Agreement shall continue in full force and effect
as if such attempted termination was not made.

 

20. No Lien Termination without Release.

 

20.1 In recognition of the Purchaser’s right to have its attorneys’ fees and
other expenses incurred in connection with this Agreement secured by the
Collateral, notwithstanding payment in full of all Obligations by Seller,
Purchaser shall not be required to record any terminations or satisfactions of
any of Purchaser’s liens on the Collateral unless and until Complete Termination
has occurred. Seller understands that this provision constitutes a waiver of its
rights under §9513 of the UCC.

 

21. Conflict.

 

21.1 Unless otherwise expressly stated in any other agreement between Purchaser
and Seller, if a conflict exists between the provisions of this Agreement and
the provisions of such other agreement, the provisions of this Agreement shall
control.

 

22. Severability.

 

22.1 In the event any one or more of the provisions contained in this Agreement
is held to be invalid, illegal or unenforceable in any respect, then such
provision shall be ineffective only to the extent of such prohibition or
invalidity, and the validity, legality, and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.

 

 -13- 

 

 

23. Relationship of Parties.

 

23.1 Notwithstanding that the Purchaser has the rights of a Secured Party, the
relationship of the parties hereto shall not be that of lender and borrower.

 

23.2 Purchaser is and shall not be a fiduciary of the Seller, although Seller
may be a fiduciary of the Purchaser.

 

24. Attorneys’ Fees.

 

24.1 Seller agrees to reimburse Purchaser on demand for:

 

24.1.1 The actual amount of all costs and expenses, including attorneys’ fees,
which Purchaser has incurred or may incur in negotiating, preparing, or
administering this Agreement and any documents prepared in connection herewith;

 

24.1.2 The actual amount of all costs and expenses, including attorneys’ fees,
which Purchaser may incur in connection with any federal or state insolvency
proceeding commenced by or against Seller, including those:

 

(a) Arising out the automatic stay,

 

(b) Seeking dismissal or conversion of the bankruptcy proceeding, or

 

(c) Opposing confirmation of Seller’s plan thereunder.

 

24.2 In the event that any Party finds it necessary to retain counsel in
connection with the interpretation, defense, or enforcement of this agreement,
the prevailing Party shall recover its reasonable attorney’s fees and expenses
from the unsuccessful Party. It shall be presumed (subject to rebuttal only by
the introduction of competent evidence to the contrary) that the amount
recoverable is the amount billed to the prevailing Party by its counsel and that
such amount will be reasonable if based on the billing rates charged to the
prevailing party by its counsel in similar matters.

 

24.3 In the event that Seller asserts a claim against Purchaser hereunder, it
shall do so in writing prior to and as a condition of the commencement of any
litigation by Seller, setting forth the specific amount of Seller’s claim
against Purchaser (the “Damage Claim”). If any dispute resolution process
results in a judgment or award against Purchaser of less the Damage Claim, the
court is requested to find that Purchaser was the prevailing party for the
purposes of this Section.

 

25. Entire Agreement.

 

25.1 No promises of any kind have been made by Purchaser or any third party to
induce Seller to execute this Agreement. No course of dealing, course of
performance or trade usage, and no parole evidence of any nature, shall be used
to supplement or modify any terms of this Agreement.

 

 -14- 

 

 

26. Choice of Law.

 

26.1 This Agreement and all transactions contemplated hereunder and/or evidenced
hereby shall be governed by, construed under, and enforced in accordance with
the internal laws of the Chosen State.

 

27. Jury Trial Waiver.

 

27.1 IN RECOGNITION OF THE HIGHER COSTS AND DELAY WHICH MAY RESULT FROM A JURY
TRIAL, THE PARTIES HERETO WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION (A) ARISING HEREUNDER, OR (B) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF
THEM WITH RESPECT HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY
FURTHER WAIVES ANY RIGHT TO CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY TRIAL
HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

28. Venue; Jurisdiction.

 

28.1 Any suit, action or proceeding arising hereunder, or the interpretation,
performance or breach hereof, including an action in tort, shall, if Purchaser
so elects, be instituted in any court sitting in the Chosen State, in the city
in which Purchaser’s chief executive office is located, or if none, any court
sitting in the Chosen State (the “Acceptable Forums”). Seller agrees that the
Acceptable Forums are convenient to it, and irrevocably submits to the
jurisdiction of the Acceptable Forums and waives any and all objections to
jurisdiction or venue.

 

28.2 Should such proceeding be initiated in any other forum, Seller waives any
right to oppose any motion or application made by Purchaser to transfer such
proceeding to an Acceptable Forum.

 

29. Time of the Essence.

 

29.1 It is agreed that time is of the essence in all matters herein.

 

30. Service of Process.

 

30.1 Seller agrees that Purchaser may effect service of process upon Seller by
regular mail at the address set forth herein or at such other address as may be
reflected in the records of Purchaser, or at the option of Purchaser by service
upon Seller’s agent for the service of process.

 

 -15- 

 

 

31. Assignment.

 

31.1 Purchaser may assign its rights and delegate its duties hereunder. Upon
such assignment, Seller shall be deemed to have attorned to such assignee and
shall owe the same obligations to such assignee and shall accept performance
hereunder by such assignee as if such assignee were Purchaser.

 

32. Counterparts.

 

32.1 This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if all signatures were upon the
same instrument.

 

32.2 Delivery of an executed counterpart of the signature page to this Agreement
by facsimile shall be effective as delivery of a manually executed counterpart
of this Agreement, and any party delivering such an executed counterpart of the
signature page to this Agreement by facsimile to any other party shall
thereafter also promptly deliver a manually executed counterpart of this
Agreement to such other party, provided that the failure to deliver such
manually executed counterpart shall not affect the validity, enforceability, or
binding effect of this Agreement.

 

33. Notice.

 

33.1 All notices required to be given to any party other than Purchaser shall be
deemed given upon the first to occur of:

 

33.1.1 Transmittal by electronic means to a receiver under the control of such
party, or

 

33.1.2 Actual receipt by such party or an employee or agent of such party.

 

33.2 All notices to Purchaser shall be deemed given upon actual receipt by a
responsible officer of Purchaser.

 

33.3 For the purposes hereof, notices hereunder shall be sent to the following
addresses, or to such other addresses as each such party may in writing
hereafter indicate:

 

SELLER     Address: 1001 SE Water Avenue   Suite 390   Portland, OR 97214
Officer: Lawrence Firestone, CEO Email address:
lfirestone@eastsidedistilling.com     PURCHASER Address: 3000 Riverchase
Galleria   Suite 800   Birmingham, AL 35244 Officer: Tania Daniel Email address:
tdaniel@engscapital.com

 

IN WITNESS WHEREOF, the Parties have executed this agreement on the day and year
first above written.

 

SELLER:   EASTSIDE DISTILLING, INC.   By: /s/ Lawrence Firestone   Name:
Lawrence Firestone   Title: CEO PURCHASER:   ENGS COMMERCIAL CAPITAL, LLC   By:
/s/ Tania Daniel   Name: Tania Daniel   Title: Managing Director

 

 -16- 

 

 

EXHIBIT 1.11.3.

 

GENERAL RELEASE

 

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are
hereby acknowledged, the undersigned and each of them (collectively “Releasor”)
hereby forever releases, discharges and acquits ENGS COMMERCIAL CAPITAL, LLC
(“Releasee”), its parent, directors, shareholders, agents and employees, of and
from any and all claims of every type, kind, nature, description or character,
and irrespective of how, why, or by reason of what facts, whether heretofore
existing, now existing or hereafter arising, or which could, might, or may be
claimed to exist, of whatever kind or name, whether known or unknown, suspected
or unsuspected, liquidated or unliquidated, each as though fully set forth
herein at length, to the extent that they arise out of or are in way connected
to or are related to that certain Factoring and Security Agreement
dated________________.

 

Releasor agrees that the matters released herein are not limited to matters
which are known or disclosed, and the Releasor waives any and all rights and
benefits which it now has, or in the future may have.

 

Releasor acknowledges that factual matters now unknown to it may have given or
may hereafter give rise to Claims which are presently unknown, unanticipated and
unsuspected, and it acknowledges that this Release has been negotiated and
agreed upon in light of that realization and that it nevertheless hereby intends
to release, discharge and acquit the Releasee from any such unknown Claims.

 

Acceptance of this Release shall not be deemed or construed as an admission of
liability by any party released.

 

In the event of any litigation arising out of or related to this Release, the
prevailing party shall recover its reasonable attorney’s fees and expenses from
the unsuccessful party. It shall be presumed (subject to rebuttal only by the
introduction of competent evidence to the contrary) that the amount recoverable
is the amount billed to the prevailing party by its counsel and that such amount
will be reasonable if based on the billing rates charged to the prevailing party
by its counsel in similar matters.

 

Releasor acknowledges that either (a) it has had advice of counsel of its own
choosing in negotiations for and the preparation of this release, or (b) it has
knowingly determined that such advice is not needed.

 

DATED:     Entity Releasor: Eastside Distilling, Inc.   By:     Name:          
Title:  

 

 -17- 

 

 

EXHIBIT 1.28.

 

Engs Commercial Capital, LLC

3000 Riverchase Galleria, Suite 800

Birmingham, AL 35244

 

  Re: Factoring And Security Agreement Dated__________________(the “Agreement”)

 

Ladies and Gentlemen:

 

Please be advised that we are exercising our option to terminate the Agreement
on __(date to be supplied in original) and this shall be the Early Termination
Date set forth in the Agreement. As a consequence of such election, we are
obligated to pay to you the Early Termination Fee as set forth in the Agreement.

 

  Very truly yours,         Eastside Distilling, Inc.         By:               
Title:  

 

 -18-