CREDIT AND SECURITY AGREEMENT

 

THIS CREDIT AND SECURITY AGREEMENT, dated as of May 10, 2018 (this “Agreement”),
is by and between EASTSIDE DISTILLING, INC., a Nevada corporation (“Borrower”)
and The KFK Children’s Trust, Jeffrey Anderson - Trustee (the “Lender”).

 

In consideration of the mutual agreements herein contained, the parties hereto
agree as follows:

 

ARTICLE 1.
DEFINITIONS

 

1.1       Certain Definitions. As used herein the following terms shall have the
following respective meanings:

 

“Borrowing Base” means an amount equal to 80% of the Borrower’s cost of the
Specified Inventory of the Borrower.

 

“Business Day” means any day other than a Saturday, a Sunday, or a federal
holiday, on which the Lender is open for business.

 

“Collateral” has the meaning ascribed thereto in Article 7.

 

“Commitment” means the commitment of the Lender to make Loans pursuant to
Section 2.1 in an amount not exceeding $3,000,000 in aggregate principal amount
outstanding at any time (excluding interest, if any, added to the principal
balance of the Loans pursuant to Section 3.2), as reduced from time to time
pursuant to the terms of this Agreement.

 

“Default” means any event or condition which might become an Event of Default
with notice or lapse of time or both.

 

“Default Rate” means a rate per annum that is equal to the sum of 14.00% per
annum plus the Loan Rate.

 

“Dollars” and “$” means the lawful money of the U.S.

 

“Event of Default” means any of the events or conditions described in Section
6.1.

 

“Existing Investor Notes” means currently outstanding promissory notes owed by
the Borrower to various investors.

 

“Interest Payment Date” means the last Business Day of each March, June,
September and December.

 

“Loan” shall mean any loan made pursuant to Section 2.1(a); and “Loans” shall
mean all of such loans.

 

“Loan Documents” means, collectively, this Agreement and the Note.

 

“Loan Rate” shall mean seven percent (7%) per annum.

 

 

 

 

“Note” means the promissory note of Borrower evidencing the Loans, in the form
Exhibit A attached hereto, as amended or modified from time to time.

 

“Person” means any individual, sole proprietorship, partnership, corporation,
business trust, joint stock company, trust, unincorporated organization,
association, limited liability company, institution, public benefit corporation,
joint venture, entity or governmental body.

 

“Subordinated Debt” means indebtedness of Borrower that is expressly subordinate
and junior in right and priority of payment to the Loans in manner and by
agreement among the holder of such indebtedness, the Borrower and the Lender
that is reasonably satisfactory in form and substance to the Lender.

 

“Specified Inventory” means bulk whiskey, bourbon and rye inventory of the
Borrower from time to time held in third-party storage facilities.

 

“Termination Date” means the earlier to occur of (a) date 37 months after the
effective date hereof and (b) the date on which the Commitment shall be
terminated pursuant to Section 2.1 or 6.2.

 

“U.S.” means the United States of America (excluding any territories of the
United States of America).

 

ARTICLE 2.
THE COMMITMENT AND THE LOANS

 

2.1       Commitment. The Lender agrees, subject to the terms and conditions of
this Agreement, to make Loans to Borrower, from time to time from and including
the date of this Agreement to but excluding the Termination Date, not to exceed
in aggregate principal amount at any time outstanding the lesser of (a) the
amount of the Borrowing Base as of the close of business on the last Business
Day of the last March, June, September or December next preceding the date any
such Loan is made for which Borrower has provided to the Lender a certified,
written calculation of the Borrowing Base within thirty (30) days thereof, and
(b) the amount of the Commitment as of the date any such Loan is made. Borrower
will use the proceeds of each Loan to purchase bulk whiskey, bourbon and rye
inventory for use in distilling and producing Borrower’s spirits products, and
for no other purpose. Borrower shall have the right to terminate or reduce the
Commitment at any time and from time to time, provided that Borrower shall give
notice of such termination or reduction to the Lender specifying the amount and
effective date thereof and each partial reduction of the Commitment shall be in
a minimum amount of $250,000 and in an integral multiple of $100,000.

 

2.2       Disbursement of Loans. Borrower shall give the Lender notice of its
request for each Loan, in a form reasonably acceptable to the Lender, not later
than 3:00 p.m. eastern time on the Business Day such Loan is to be made. The
initial Loan shall be in a minimum amount of $1,000,000. Thereafter, except for
Loans that exhaust the entire remaining amount of the Commitments, each Loan
shall be in a minimum amount of $500,000 and in an integral multiple of
$250,000. Subject to the terms and conditions of this Agreement, the proceeds of
each Loan shall be made available to Borrower by depositing the proceeds thereof
in immediately available funds in the following account maintained by Borrower:
a First Republic Bank account designated by Borrower. All Loans shall be
evidenced by the Note, and all Loans shall be due and payable and bear interest
as provided in Article 3. Subject to the terms and conditions of this Agreement,
Borrower may borrow under this Section 2.2, prepay Loans pursuant to Section 3.1
and reborrow Loans under this Section 2.2.

 

 -2- 

 

 

2.3       Standby Commitment Fee. Borrower agrees to pay to the Lender a standby
commitment fee on the daily average unused amount of the Commitment, for the
period from the date of this Agreement to but excluding the Termination Date, at
a rate equal to the A1/P1 commercial paper rate as of the last Business Day of
the immediately preceding month plus five (5) basis points per annum. Accrued
standby commitment fees shall be payable monthly in arrears on the last Business
Day of each month, commencing on the first such Business Day occurring after the
date of this Agreement.

 

2.4       Conditions for First Loan. The obligation of the Lender to make the
first Loan hereunder is subject to receipt by the Lender of the following
documents and completion of the following matters, in form and substance
reasonably satisfactory to the Lender:

 

(a)       Charter Documents. A certificate of recent date of the appropriate
authority or official of Borrower’s state of organization (listing all charter
documents of Borrower on file in that office if such listing is available) and
certifying as to the good standing and corporate existence of Borrower, together
with copies of such charter documents of Borrower, certified as of a recent date
by such authority or official and certified as true and correct as of the date
of this Agreement by a duly authorized officer of Borrower;

 

(b)       By-Laws and Authorization. A copy of the by-laws of Borrower, together
with all authorizing resolutions and evidence of other corporate action taken by
Borrower to authorize the execution, delivery and performance by Borrower of
this Agreement and the other Loan Documents to which it is a party and the
consummation by Borrower of the transactions contemplated hereby and thereby,
certified as true and correct as of the date of this Agreement by a duly
authorized officer of Borrower;

 

(c)       Incumbency Certificate. A certificate of incumbency of Borrower,
containing, and attesting to the genuineness of, the signatures of those
officers authorized to act on behalf of Borrower in connection with the Loan
Documents and the consummation by Borrower of the transactions contemplated
hereby, certified as true and correct as of the date of this Agreement by a duly
authorized officer of such Borrower; and

 

(d)       Loan Documents. This Agreement and the Note duly executed on behalf of
Borrower.

 

2.5       Further Conditions for Loans. The obligation of the Lender to make any
Loan (including the first Loan) is further subject to the satisfaction of the
following conditions precedent:

 

(a)       the representations and warranties contained in Article 4 hereof shall
be true and correct in all material respects on and as of the date such Loan is
made (both before and after such Loan is made) as if such representations and
warranties were made on and as of such date; and

 

(b)       no Default or Event of Default shall exist or shall have occurred and
be continuing on the date such Loan is made (whether before or after such Loan
is made).

 

 -3- 

 

 

ARTICLE 3.
PAYMENTS

 

3.1       Principal Payments and Prepayments. Unless earlier payment is required
under this Agreement, Borrower hereby unconditionally promises to pay to the
Lender on the Termination Date the entire outstanding principal amount of the
Loans. Borrower may prepay the Loans or any portion thereof at any time, and
from time to time, without premium or penalty.

 

3.2       Interest Payments. The Borrower shall pay interest to the Lender on
the unpaid principal amount of the Loans, for the period commencing on the date
each such Loan is made until such Loan is paid in full, on each Interest Payment
Date, commencing on the first Interest Payment Date occurring after the date of
this Agreement, and at maturity (whether at stated maturity, by acceleration or
otherwise), at the Loan Rate. Unless Borrower elects to pay all of the interest
due and payable on such Interest Payment Date in cash, then interest accrued on
the outstanding principal amount of the Loans (including interest accrued on all
principal representing interest previously added to the principal balance of the
Loans prior to such Interest Payment Date pursuant to this Section 3.2) shall be
paid and discharged, without the taking of further action, by adding such
accrued interest to the principal balance of the Loans on such Interest Payment
Date. Notwithstanding the foregoing, Borrower shall pay interest on demand by
the Lender at the Default Rate on the outstanding principal amount of the Loans
(including interest accrued on all principal representing interest previously
added to the principal balance of the Loans prior to such Interest Payment Date
pursuant to this Section 3.2) and any other amount payable by Borrower hereunder
(other than interest not yet so added to principal) upon the demand of the
Lender at any time an Event of Default has occurred and is continuing.

 

3.3       Payment Method. All payments to be made by Borrower hereunder will be
made to the Lender in Dollars and in immediately available, freely transferable,
cleared funds not later than 3:00 p.m. at JP Morgan Chase Bank. Payments
received after 3:00 p.m. at the place for payment shall be deemed to be payments
made prior to 3:00 p.m. at the place for payment on the next succeeding Business
Day. At the time of making each such payment, Borrower shall, subject to the
other terms and conditions of this Agreement, specify to the Lender that Loan or
other obligation of Borrower hereunder to which such payment is to be applied.

 

3.4       No Setoff or Deduction. All payments of principal of and interest on
the Loans and other amounts payable by Borrower hereunder shall be made by
Borrower without setoff or counterclaim, and free and clear of, and without
deduction or withholding for, or on account of, any present or future taxes,
levies, imposts, duties, fees, assessments, or other charges of whatever nature,
imposed by any governmental authority, or by any department, agency or other
political subdivision or taxing authority.

 

3.5       Payment on Non-Business Day; Payment Computations. Except as otherwise
provided in this Agreement to the contrary, whenever any installment of
principal of, or interest on, any Loan or any other amount due hereunder becomes
due and payable on a day which is not a Business Day, the maturity thereof shall
be extended to the next succeeding Business Day and, in the case of any
installment of principal, interest shall be payable thereon at the rate per
annum determined in accordance with this Agreement during such extension.
Computations of interest and other amounts due under this Agreement shall be
made on the basis of a year of 365 or 366 days, as the case may be.

 

 -4- 

 

 

ARTICLE 4.
REPRESENTATIONS AND WARRANTIES

 

The Borrower represents and warrants to the Lender that:

 

4.1       Existence and Power. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the state of its jurisdiction of
incorporation. Borrower has all requisite power to own or lease the properties
used in its business and to carry on its business as now being conducted and as
proposed to be conducted, and to execute and deliver the Loan Documents and to
engage in the transactions contemplated by the Loan Documents.

 

4.2       Corporate Authority. The execution, delivery and performance by
Borrower of the Loan Documents have been duly authorized by all necessary
corporate action and are not in contravention of any law, rule or regulation, or
any judgment, decree, writ, injunction, order or award of any arbitrator, court
or governmental authority, or of the terms of any of Borrower’s articles or
certificate of incorporation or bylaws, or of any material contract or material
undertaking to which Borrower is a party or by which Borrower or any of its
property may be bound or affected and will not result in the imposition of any
lien on any of its property.

 

4.3       Binding Effect. The Loan Documents are the legal, valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, subject to bankruptcy, insolvency and similar laws affecting
creditors’ rights in general and to the availability of equitable remedies.

 

ARTICLE 5.
COVENANTS

 

5.1       Affirmative Covenants. Borrower covenants and agrees that, until the
Termination Date, and thereafter until payment in full of the Loans, unless the
Lender shall otherwise consent in writing, it shall:

 

(a)       Preservation of Corporate Existence, Etc. Do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence, and its qualification as a foreign corporation in good standing in
each jurisdiction in which such qualification is necessary under applicable law,
and the rights, licenses, permits, franchises, patents, copyrights, trademarks
and trade names material to the conduct of its businesses; and defend all of the
foregoing against all claims, actions, demands, suits or proceedings at law or
in equity or by or before any governmental instrumentality or other agency or
regulatory authority.

 

(b)       Compliance with Laws, Payment of Taxes, Etc. Comply in all material
respects with all applicable laws, rules, regulations and orders of any
governmental authority, whether federal, state, local or foreign, in effect from
time to time; and pay and discharge promptly when due all taxes, assessments and
governmental charges or levies imposed upon it or upon its income, revenues or
property, before the same shall become delinquent or in default, as well as all
lawful claims for labor, materials and supplies or otherwise, which, if unpaid,
could give rise to liens upon such properties or any portion thereof, except to
the extent that payment of any of the foregoing is then being contested in good
faith by appropriate legal proceedings and with respect to which adequate
financial reserves have been established on the books and records of Borrower in
accordance with generally accepted accounting principles.

 

 -5- 

 

 

(c)       Maintenance of Properties; Insurance. Reasonably maintain, preserve
and protect all property that is material to the conduct of the business of
Borrower and keep such property in orderly repair, working order and condition
and from time to time make, or cause to be made all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order
that the business carried on in connection therewith may be properly conducted
at all times in accordance with customary and prudent business practices for
similar businesses; and maintain in full force and effect insurance with
responsible and reputable insurance companies or associations in such amounts,
on such terms and covering such risks, including fire and other risks insured
against by extended coverage, as is usually carried by companies engaged in
similar businesses and owning similar properties similarly situated and maintain
in full force and effect public liability insurance against claims for personal
injury or death or property damage occurring in connection with any of its
activities or any properties owned, occupied or controlled by it, in such amount
as it shall reasonably deem necessary, and maintain such other insurance as may
be required by law.

 

(d)       Further Assurances. Execute and deliver promptly after the request
therefor by the Lender all further instruments and documents and take all
further action that may be necessary, or that the Lender may reasonably request,
in order to give effect to, and to aid in the exercise and enforcement of the
rights and remedies of the Lender under this Agreement and the other Loan
Documents.

 

5.2       Negative Covenants. Until the Termination Date, and thereafter until
payment in full of the Loans, Borrower agrees that, unless the Lender shall
otherwise consent in writing, it shall not:

 

(a)       Indebtedness. Create, incur, assume or in any manner become liable in
respect of, or suffer to exist, any indebtedness other than (i) the Loans, (ii)
the Existing Investor Notes, (iii) trade debt incurred in the ordinary course of
business that is not more than thirty (30) days past due, (iv) other
indebtedness of Borrower in aggregate outstanding principal or capitalized, as
the case may be, amount not exceeding $100,000,000, which is secured by purchase
money liens on the respective fixed assets financed with such indebtedness or
constitutes obligations of Borrower as lessee under one or more capital leases
and (v) Subordinated Debt.

 

ARTICLE 6.
DEFAULT

 

6.1       Events of Default. The occurrence of any one of the following events
or conditions shall be deemed an “Event of Default” hereunder unless waived
pursuant to Section 8.1:

 

(a)       Nonpayment. The Borrower shall fail to pay when due any principal of
or interest on the Loans or any other amount payable hereunder, which failure
continues for a period of ten (10) days; or

 

(b)       Misrepresentation. Any representation or warranty made by Borrower in
Article 4 hereof or in any other Loan Document shall prove to have been
incorrect in any material respect when made; or

 

(c)       Other Failures. Borrower shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement or in any other Loan
Document (other than those covered by Sections 6.1(a)), and any such failure
shall continue for thirty (30) calendar days; or

 

(d)       Insolvency, Etc. Borrower shall be dissolved or liquidated (or any
judgment, order or decree therefor shall be entered), or shall generally not pay
its debts as they become due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit of
creditors, or shall institute, or there shall be instituted against Borrower any
proceeding or case seeking to adjudicate Borrower a bankrupt or insolvent or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of Borrower or Borrower’s debts under any law
relating to bankruptcy, insolvency or reorganization or relief or protection of
debtors or seeking the entry of an order for relief, or the appointment of a
receiver, trustee, custodian or other similar official for Borrower or for any
substantial part of Borrower’s assets, rights, revenues or property, and, if
such proceeding is instituted against Borrower and is being contested by
Borrower in good faith by appropriate proceedings, such proceeding shall remain
undismissed or unstayed for a period of 60 days; or Borrower shall take any
action (corporate or other) to authorize or further any of the actions described
above in this subsection.

 

 -6- 

 

 

(e)       Insufficient Collateral. The Borrower shall fail to hold bulk whiskey,
bourbon and rye inventories held in third-party storage facilities at its then
current market value, whether now existing or hereafter acquired (collectively,
the “Collateral”) in an amount less than 120% (One Hundred Twenty percent) of
the outstanding Loan balance.

 

(f)       Lapse of Insurance Coverage. The Borrower shall fail to maintain
valid, outstanding and enforceable insurance policies covering loss, theft or
damage of the Collateral (as defined in Section 7(b)).

 

(g)       Fraudulent Conveyance. Under Nevada Revised Statutes (NRS 205.330),
any attempt by Borrower to sell, give away, conceal, or otherwise move assets
held as Collateral under this Agreement; for the purpose of preventing access to
the Collateral; or using this same Collateral for any other purpose; prior to
the payment in full of the Loans under this Agreement, unless the Lender shall
otherwise consent in writing.

 

6.2       Remedies.

 

(a)       Upon the occurrence and during the continuance of any Event of
Default, the Lender may by written notice to Borrower (i) terminate the
Commitment or (ii) declare the outstanding principal of, and accrued interest
on, the Note and all other amounts owing under this Agreement to be immediately
due and payable or (iii) both, whereupon the Commitment shall terminate
forthwith and all such amounts shall become immediately due and payable,
provided that in the case of any event or condition described in Section 6.1(d),
the Commitment shall automatically terminate forthwith and all such amounts
shall automatically become immediately due and payable without notice; in all
cases without demand, presentment, protest, diligence, notice of dishonor or
other formality, all of which are hereby expressly waived.

 

(b)       Upon the occurrence and during the continuance of any Event of
Default, the Lender, may, in addition to the remedies provided in Section
6.2(a), exercise and enforce any and all other rights and remedies available to
it, whether arising under any Loan Document or under applicable law, in any
manner deemed appropriate by the Lender, including suit in equity, action at
law, or other appropriate proceedings, whether for the specific performance (to
the extent permitted by law) of any covenant or agreement contained in any Loan
Document or in aid of the exercise of any power granted in any Loan Document.

  

 -7- 

 

 

ARTICLE 7.
SECURITY

 

(a)       To secure the Loans, the Borrower hereby assigns and grants to the
Lender a security interest in all bulk whiskey, bourbon and rye inventory of the
Borrower from time to time held in third-party storage facilities, whether now
existing or hereafter acquired, and all proceeds thereof (collectively, the
“Collateral”). The Borrower will properly preserve the Collateral, defend the
Collateral against any adverse claims and demands, and maintain and keep in
force insurance covering the Collateral in accordance with customary practices
for businesses similarly situated and assets of the type of the Collateral.

 

(b) “Evidence of Insurance”, APPENDIX __ attached hereto, contains an accurate
and complete description of all material policies of fire, liability, and other
forms of insurance owned or held by the Borrower as of the date of this
Agreement. As of such date, all such policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the date
of this Agreement have been paid, and no notice of cancellation or termination
has been received with respect to any such policy. Such policies are sufficient
for compliance with all requirements of law and of the terms of this Agreement;
are valid, outstanding and enforceable policies; will remain in full force and
effect until the Termination Date and thereafter until payment in full of the
Loans, without the payment of additional premiums; and will not in any way be
affected by, or terminate or lapse by reason of, the transactions contemplated
by this Agreement. APPENDIX __ identifies all material risks, if any, as to
which the Borrower has the Collateral as being insured as of the date of this
Agreement.

 

ARTICLE 8.
MISCELLANEOUS

 

8.1       Amendments; Etc. No amendment, modification, termination or waiver of
any provision of this Agreement, nor any consent to any departure therefrom,
shall be effective unless the same shall be in writing and signed by the Lender
and Borrower.

 

8.2       Notices. Except as otherwise provided below, all notices and other
communications hereunder shall be in writing and shall be delivered or sent to
Borrower and the Lender at the respective addresses for notices set forth on the
signatures pages hereof, or to such other address as may be designated by
Borrower or the Lender by notice to the other party hereto. All notices and
other communications shall be deemed to have been given at the time of actual
receipt thereof at such address, (i) if sent by certified or registered mail,
postage prepaid, to such address, (ii) if sent by e-mail or telex, or (iii) if
sent by facsimile transmission. Any notice to be given by Borrower to the Lender
pursuant to Sections 2.2 may be given by telephone.

 

8.3       No Waiver By Conduct; Remedies Cumulative. No course of dealing on the
part of the Lender, nor any delay, omission or failure on the part of the Lender
in exercising any right, remedy, power, option or privilege hereunder, shall
operate as a waiver of such or any other right, remedy, power, option or
privilege or of any Default or Event of Default or otherwise prejudice the
Lender’s rights and remedies hereunder; nor shall any single or partial exercise
thereof preclude any further exercise thereof or the exercise of any other
right, power or privilege. No right or remedy conferred upon or reserved to the
Lender under any Loan Document is intended to be exclusive of any other right or
remedy, and every right and remedy shall be cumulative and in addition to every
other right or remedy granted thereunder or now or hereafter existing under any
applicable law. Every right and remedy granted by any Loan Document or by
applicable law to the Lender may be exercised from time to time and as often as
may be deemed expedient by the Lender.

 

8.4       Expenses. Borrower agrees to pay the reasonable out-of-pocket costs
and expenses in an aggregate amount not exceeding $5,000 incurred by Lender in
connection with entering into this Agreement and the other Loan Documents.

 

 -8- 

 

 

8.5       Successors and Assigns; Participations. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that neither Borrower nor the Lender may,
without the prior written consent of the other party, assign its rights or
obligations hereunder or under any of the other Loan Documents, and the Lender
shall not be obligated to make any Loan hereunder to any entity other than
Borrower. Notwithstanding the foregoing, the Lender may sell one or more
participation interests in the Loans to one or more participants acceptable to
Borrower in its sole discretion, provided, however, that (i) the Lender’s
obligations under this Agreement shall remain unmodified and fully effective and
enforceable against the Lender, (ii) the Lender shall remain solely responsible
to Borrower for the performance of such obligations, (iii) the Lender shall
remain the holder of the Note for all purposes of this Agreement and (iv)
Borrower shall continue to deal solely and directly with the Lender in
connection with this Agreement.

 

8.6       Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.

 

8.7       Governing Law. This Agreement is a contract made under, and shall be
governed by and construed in accordance with, the law of the State of Nevada
applicable to contracts made and to be performed entirely within such State and
without giving effect to choice of law principles of such State.

 

8.8       Headings. The headings of the various subdivisions hereof are for the
convenience of reference only and shall in no way modify any of the terms or
provisions hereof.

 

8.9       Integration and Severability. The Loan Documents embody the entire
agreement and understanding between Borrower and the Lender, and supersede all
prior agreements and understandings, relating to the subject matter hereof. In
case any one or more of the obligations of Borrower under any Loan Document
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining obligations of Borrower shall not
in any way be affected or impaired thereby, and such invalidity, illegality or
unenforceability in one jurisdiction shall not affect the validity, legality or
enforceability of the obligations of Borrower under any Loan Document in any
other jurisdiction.

 

8.10       Interest Rate Limitation. Notwithstanding any provisions of any Loan
Document, in no event shall the amount of interest paid or agreed to be paid by
Borrower exceed an amount computed at the highest rate of interest permissible
under applicable law. If, from any circumstances whatsoever, fulfillment of any
provision of any Loan Document at the time performance of such provision shall
be due, shall involve exceeding the interest rate limitation validly prescribed
by law which a court of competent jurisdiction may deem applicable hereto, then,
ipso facto, the obligations to be fulfilled shall be reduced to an amount
computed at the highest rate of interest permissible under applicable law, and
if for any reason whatsoever the Lender shall ever receive as interest an amount
which would be deemed unlawful under such applicable law such interest shall be
automatically applied to the payment of principal of the Loans outstanding
hereunder (whether or not then due and payable) and not to the payment of
interest, or shall be refunded to Borrower if such principal and all other
obligations of Borrower to the Lender have been paid in full.

 

8.11       Jury Waiver. The parties hereto acknowledge and agree that there may
be a constitutional right to a jury trial in connection with any claim, dispute
or lawsuit arising between or among them, but that such right may be waived.
Accordingly, the parties agree that, notwithstanding such constitutional right,
in this commercial matter the parties believe and agree that it shall be in
their best interests to waive such right, and, accordingly, hereby waive such
right to a jury trial, and further agree that the best forum for hearing any
claim, dispute, or lawsuit, if any, arising in connection with this Agreement,
the Loan Documents, or the relationship among the parties hereto, in each case
whether now existing or hereafter arising, or whether sounding in contract or
tort or otherwise, shall be a court of competent jurisdiction sitting without a
jury.

 

[The remainder of this page intentionally left blank. Signatures appear on next
page.]

 

 -9- 

 

 

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

 

EASTSIDE DISTILLING, INC.

 

By:______________________________________

Its: _________________________________

 

Address for Notices:

 

_________________________

_________________________

Attention: _________________

Facsimile No.:_____________________________

Telephone no.:_____________________________

e-mail: _____________________________

 

The KFK Children’s Trust, Jeffrey Anderson - Trustee

 

By:______________________________________

Its: _________________________________

 

Address for Notices:

 

_________________________

_________________________

Attention: _________________

Facsimile No.:_____________________________

Telephone no.:_____________________________

e-mail: ____________________________

 

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EXHIBIT A

 

PROMISSORY NOTE

  

$___________    May __, 2018

 

Eastside Distilling, Inc., a Nevada corporation (the “Borrower”), promises to
pay to the order of The KFK Children’s Trust, Jeffrey Anderson - Trustee (the
“Lender”) on or before the Termination Date (as defined in the Credit Agreement
identified below) the principal sum of ________________ ($_________) or the
aggregate unpaid principal amount of all Loans made by the Lender to the
Borrower pursuant to the Credit Agreement, whichever is less, in immediately
available funds to the Lender, together with interest on the unpaid principal
amount thereof, in like money and funds, for the period from the date hereof
until the Loans evidenced hereby shall be paid in full, at the rates and on the
dates provided in the Credit Agreement.

 

The Lender shall, and is hereby authorized to, maintain in accordance with its
usual practice an account or accounts evidencing the indebtedness of the
Borrower to the Lender resulting from each Loan made by the Lender, including
the amounts of principal and interest payable and paid to the Lender from time
to time hereunder, provided, however, that failure to do so shall not affect the
Borrower’s obligation to pay all amounts due hereunder.

 

The Borrower expressly waives any presentments, demand, protest or notice in
connection with this Promissory Note now, or hereafter, required by applicable
law.

 

This Promissory Note is issued pursuant to the provisions of the Credit and
Security Agreement dated as of May 10, 2018 between Borrower and the Lender, as
it may be amended, restated or otherwise modified from time to time (the “Credit
Agreement”), to which reference is hereby made for a statement of the terms and
conditions under which this Promissory Note may be prepaid or its maturity date
extended or accelerated and for a description of the collateral and security
securing this Promissory Note. Terms used but not otherwise defined herein shall
have the respective meanings ascribed thereto in the Credit Agreement.

 

THIS PROMISSORY NOTE IS A LOAN DOCUMENT AND SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAW OF THE STATE OF NEVADA.

  

EASTSIDE DISTILLING, INC.

 

By: _________________________________

Its: _________________________________

  

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