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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