Document:

Exhibit 10.18

 

SCHOLAR ROCK HOLDING CORPORATION

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”) is made as of the 11th day of May, 2018, between Scholar Rock Holding Corporation, a Delaware corporation (the “Company”), and Elan Z. Ezickson (the “Employee”) and is effective as of the closing of the Company’s first underwritten public offering of its equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Effective Date”).

 

WHEREAS, the Company and the Employee are parties to an offer letter, dated July 17, 2014, (the “Prior Agreement”); and

 

WHEREAS, the parties intend to replace the Prior Agreement with this Agreement, effective as of the Effective Date.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

 

1.                                      Employment.

 

(a)                                 Term.  The term of this Agreement shall commence on the Effective Date and continue until terminated in accordance with the provisions hereof (the “Term”).  The Employee’s employment with the Company will continue to be “at will,” meaning that the Employee’s employment may be terminated by the Company or the Employee at any time and for any reason subject to the terms of this Agreement.

 

(b)                                 Position and Duties.  During the Term, the Employee shall serve as the Chief Operating Officer and Head of Corporate Development of the Company, and shall have such duties and authorities as may from time to time be prescribed by the Chief Executive Officer of the Company (the “CEO”).  The Employee shall devote his full working time and efforts to the business and affairs of the Company.  Notwithstanding the foregoing, the Employee may serve on other boards of directors, with the approval of the CEO, or engage in religious, charitable or other community activities as long as such services and activities do not materially interfere with the Executive’s performance of his duties to the Company as provided in this Agreement.

 

2.                                      Compensation and Related Matters.

 

(a)                                 Base Salary.  During the Term, the Employee’s annual base salary shall be $380,000.  The Employee’s base salary shall be reviewed annually by the Compensation Committee of the Board (the “Compensation Committee”) or the CEO.  The base salary in effect at any given time is referred to herein as “Base Salary.”  The Base Salary shall be payable in a manner that is consistent with the Company’s usual payroll practices.

 

 

(b)                                 Incentive Compensation.  During the Term, the Employee shall be eligible to receive cash incentive compensation as determined by the Board or the Compensation Committee from time to time.  The Employee’s initial target annual incentive compensation shall be thirty-five percent (35%) of his Base Salary (the “Target Annual Incentive Compensation”).  Except as otherwise provided herein, to earn incentive compensation, the Employee must be employed by the Company on the day such incentive compensation is paid.

 

(c)                                  Expenses.  The Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him during the Term in performing services hereunder, in accordance with the policies and procedures then in effect and established by the Company.

 

(d)                                 Other Benefits.  During the Term, the Employee shall be eligible to participate in or receive benefits under the Company’s employee benefit plans in effect from time to time, subject to the terms of such plans.

 

(e)                                  Vacations.  During the Term, the Employee shall be entitled to paid vacation in accordance with the Company’s policies and procedures.  The Employee shall also be entitled to all paid holidays given by the Company in accordance with the policies and procedures then in effect and established by the Company.

 

3.                                      Termination.  During the Term, the Employee’s employment hereunder may be terminated without any breach of this Agreement under the following circumstances:

 

(a)                                 Death.  The Employee’s employment hereunder shall terminate upon his death.

 

(b)                                 Termination by Company for Cause.  The Company may terminate the Employee’s employment hereunder for Cause.  For purposes of this Agreement, “Cause” shall mean:  (i) conduct by the Employee constituting a material act of misconduct in connection with the performance of his duties, including, without limitation, misappropriation of funds or property of the Company or any of its subsidiaries or affiliates other than the occasional, customary and de minimis use of Company property for personal purposes; (ii) the commission by the Employee of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or any conduct by the Employee that would reasonably be expected to result in material injury or reputational harm to the Company or any of its subsidiaries or affiliates if he were retained in his position; (iii) continued non-performance by the Employee of his duties hereunder (other than by reason of the Employee’s physical or mental illness, incapacity or disability) which has continued for more than 30 days following written notice of such non-performance from the CEO; (iv) a breach by the Employee of any of the provisions contained in Section 7 of this Agreement; (v) a material violation by the Employee of the Company’s written employment policies; or (vi) failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigation.

 

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(c)                                  Termination Without Cause.  The Company may terminate the Employee’s employment hereunder at any time without Cause.  Any termination by the Company of the Employee’s employment under this Agreement which does not constitute a termination for Cause under Section 3(b) and does not result from the death of the Employee under Section 3(a) shall be deemed a termination without Cause.

 

(d)                                 Termination by the Employee.  The Employee may terminate his employment hereunder at any time for any reason, including but not limited to Good Reason.  For purposes of this Agreement, “Good Reason” shall mean that the Employee has complied with the “Good Reason Process” (hereinafter defined) following the occurrence of any of the following events:  (i) a material diminution in the Employee’s responsibilities, authority or duties, provided that the hiring by the Company of any Company officers with customary responsibilities, authority or duties (including any CBO, CFO or CMO), will not constitute any such material diminution; (ii) a material diminution in the Employee’s Base Salary except for across-the-board salary reductions based on the Company’s financial performance similarly affecting all or substantially all senior management employees of the Company; (iii) a material change in the geographic location at which the Employee provides services to the Company, except for required travel for the Company’s business; or (iv) the material breach of this Agreement by the Company.  “Good Reason Process” shall mean that (i) the Employee reasonably determines in good faith that a “Good Reason” condition has occurred; (ii) the Employee notifies the Company in writing of the first occurrence of the Good Reason condition within 60 days of the first occurrence of such condition; (iii) the Employee cooperates in good faith with the Company’s efforts, for a period not less than 30 days following such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) the Employee terminates his employment within 60 days after the end of the Cure Period.  If the Company cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.

 

(e)                                  Notice of Termination.  Except for termination as specified in Section 3(a), any termination of the Employee’s employment by the Company or any such termination by the Employee shall be communicated by written Notice of Termination to the other party hereto.  For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.

 

(f)                                   Date of Termination.  “Date of Termination” shall mean:  (i) if the Employee’s employment is terminated by his death, the date of his death; (ii) if the Employee’s employment is terminated by the Company under Section 3(c), the date on which a Notice of Termination is given; (iii) if the Employee’s employment is terminated by the Employee under Section 3(d) without Good Reason, 30 days after the date on which a Notice of Termination is given, and (iv) if the Employee’s employment is terminated by the Employee under Section 3(d) with Good Reason, the date on which a Notice of Termination is given after the end of the Cure Period.  Notwithstanding the foregoing, in the event that the Employee gives a Notice of Termination to the Company, the Company may unilaterally accelerate the Date of Termination and such acceleration shall not result in a termination by the Company for purposes of this Agreement.

 

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4.                                      Compensation Upon Termination.

 

(a)                                 Termination Generally.  If the Employee’s employment with the Company is terminated for any reason, the Company shall pay or provide to the Employee (or to his authorized representative or estate) (i) any Base Salary earned through the Date of Termination, unpaid expense reimbursements (subject to, and in accordance with, Section 2(c) of this Agreement) and unused vacation that accrued through the Date of Termination on or before the time required by law but in no event more than 30 days after the Employee’s Date of Termination; and (ii) any vested benefits the Employee may have under any employee benefit plan of the Company through the Date of Termination, which vested benefits shall be paid and/or provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Benefit”).

 

(b)                                 Termination by the Company Without Cause or by the Employee with Good Reason.  During the Term, if the Employee’s employment is terminated by the Company without Cause as provided in Section 3(c), or the Employee terminates his employment for Good Reason as provided in Section 3(d), then the Company shall pay the Employee his Accrued Benefit.  In addition, subject to the Employee signing a separation agreement containing, among other provisions, a general release of claims in favor of the Company and related persons and entities, confidentiality, return of property and non-disparagement, in a form and manner satisfactory to the Company (the “Separation Agreement and Release”) and the Separation Agreement and Release becoming irrevocable and fully effective, all within 60 days after the Date of Termination (or such shorter time period provided in the Separation Agreement and Release):

 

(i)                                     the Company shall pay the Employee an amount equal to 9 months of the Employee’s Base Salary (the “Severance Amount”). Notwithstanding the foregoing, if the Employee breaches any of the provisions contained in Section 7 of this Agreement, all payments of the Severance Amount shall immediately cease;

 

(ii)                                  RESERVED

 

(iii)                               if the Employee was participating in the Company’s group health plan immediately prior to the Date of Termination and elects COBRA health continuation, then the Company shall pay to the Employee a monthly cash payment for 9 months or the Employee’s COBRA health continuation period, whichever ends earlier, in an amount equal to the monthly employer contribution that the Company would have made to provide health insurance to the Employee if the Employee had remained employed by the Company; and

 

(iv)                              the amounts payable under Section 4(b)(i) and (iii) shall be paid out in substantially equal installments in accordance with the Company’s payroll practice commencing within 60 days after the Date of Termination; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, the Severance Amount shall begin to be paid in the second calendar year by the last day of such 60-day period; provided, further, that the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the Date of

 

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Termination.  Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).

 

5.                                      Change in Control Payment.  The provisions of this Section 5 set forth certain terms of an agreement reached between the Employee and the Company regarding the Employee’s rights and obligations upon the occurrence of a Change in Control of the Company.  These provisions are intended to assure and encourage in advance the Employee’s continued attention and dedication to his assigned duties and his objectivity during the pendency and after the occurrence of any such event.  These provisions shall apply in lieu of, and expressly supersede, the provisions of Section 4(b) regarding severance pay and benefits upon a termination of employment, if such termination of employment occurs within 18 months after the occurrence of the first event constituting a Change in Control.  These provisions shall terminate and be of no further force or effect beginning 18 months after the occurrence of a Change in Control.

 

(a)                                 Change in Control.  During the Term, if within 18 months after a Change in Control, the Employee’s employment is terminated by the Company without Cause as provided in Section 3(c) or the Employee terminates his employment for Good Reason as provided in Section 3(d), then, subject to the signing of the Separation Agreement and Release by the Employee and the Separation Agreement and Release becoming irrevocable and fully effective, all within 60 days after the Date of Termination (or such shorter time period provided in the Separation Agreement and Release):

 

(i)                                     the Company shall pay the Employee a lump sum in cash in an amount equal to 1 times the sum of (A) the Employee’s current Base Salary (or the Employee’s Base Salary in effect immediately prior to the Change in Control, if higher) plus (B) the Employee’s Average Incentive Compensation (For purposes of this Agreement, “Average Incentive Compensation” shall mean the Target Annual Incentive Compensation the Employee would have been entitled to receive in the fiscal year of termination (or the Employee’s Target Annual Incentive Compensation in the fiscal year immediately prior to the Change in Control, if higher).  In no event shall “Average Incentive Compensation” include any sign-on bonus, retention bonus or any other special bonus.);

 

(ii)                                  notwithstanding anything to the contrary in any applicable option agreement or stock-based award agreement, all time-based stock options and other time-based stock-based awards held by the Employee shall immediately accelerate and become fully exercisable or nonforfeitable as of the Date of Termination;

 

(iii)                               if the Employee was participating in the Company’s group health plan immediately prior to the Date of Termination and elects COBRA health continuation, then the Company shall pay to the Employee a monthly cash payment for 12 months or the Employee’s COBRA health continuation period, whichever ends earlier, in an amount equal to the monthly employer contribution that the Company would have made to provide health insurance to the Employee if the Employee had remained employed by the Company; and

 

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(iv)                              The amounts payable under Section 5(a)(i) and (iii) shall be paid or commence to be paid within 60 days after the Date of Termination; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, such payment shall be paid or commence to be paid in the second calendar year by the last day of such 60-day period.

 

(b)                                 Additional Limitation.

 

(i)                                     Anything in this Agreement to the contrary notwithstanding, in the event that the amount of any compensation, payment or distribution by the Company to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, calculated in a manner consistent with Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and the applicable regulations thereunder (the “Aggregate Payments”), would be subject to the excise tax imposed by Section 4999 of the Code, then the Aggregate Payments shall be reduced (but not below zero) so that the sum of all of the Aggregate Payments shall be $1.00 less than the amount at which the Employee becomes subject to the excise tax imposed by Section 4999 of the Code; provided that such reduction shall only occur if it would result in the Employee receiving a higher After Tax Amount (as defined below) than the Employee would receive if the Aggregate Payments were not subject to such reduction.  In such event, the Aggregate Payments shall be reduced in the following order, in each case, in reverse chronological order beginning with the Aggregate Payments that are to be paid the furthest in time from consummation of the transaction that is subject to Section 280G of the Code: (1) cash payments not subject to Section 409A of the Code; (2) cash payments subject to Section 409A of the Code; (3) equity-based payments and acceleration; and (4) non-cash forms of benefits; provided that in the case of all the foregoing Aggregate Payments all amounts or payments that are not subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c).

 

(ii)                                  For purposes of this Section 5(b), the “After Tax Amount” means the amount of the Aggregate Payments less all federal, state, and local income, excise and employment taxes imposed on the Employee as a result of the Employee’s receipt of the Aggregate Payments.  For purposes of determining the After Tax Amount, the Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual taxation in each applicable state and locality, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.

 

(iii)                               The determination as to whether a reduction in the Aggregate Payments shall be made pursuant to Section 5(b)(i) shall be made by a nationally recognized accounting firm selected by the Company (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and the Employee within 15 business days of the Date of Termination, if applicable, or at such earlier time

 

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as is reasonably requested by the Company or the Employee.  Any determination by the Accounting Firm shall be binding upon the Company and the Employee.

 

(c)                                  Definitions.  For purposes of this Section 5, the following terms shall have the following meanings:

 

“Change in Control” shall mean any of the following:

 

(i)                                     any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Act”) (other than the Company, any of its subsidiaries, or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its subsidiaries), together with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the Act) of such person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 50 percent or more of the combined voting power of the Company’s then outstanding securities having the right to vote in an election of the Board (“Voting Securities”) (in such case other than as a result of an acquisition of securities directly from the Company); or

 

(ii)                                  the date a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or

 

(iii)                               the consummation of (A) any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more than 50 percent of the voting shares of the Company issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any), or (B) any sale or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company and its affiliates on a consolidated basis.

 

Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred for purposes of the foregoing clause (i) solely as the result of an acquisition of securities by the Company which, by reducing the number of shares of Voting Securities outstanding, increases the proportionate number of Voting Securities beneficially owned by any person to 50 percent or more of the combined voting power of all of the then outstanding Voting Securities; provided, however, that if any person referred to in this sentence shall thereafter become the beneficial owner of any additional shares of Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction or as a result of an acquisition of securities directly from the Company) and immediately thereafter beneficially owns 50 percent or more of the combined voting power of all of the then outstanding Voting Securities, then a “Change in Control” shall be deemed to have occurred for purposes of the foregoing clause (i).

 

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6.                                      Section 409A.

 

(a)                                 Anything in this Agreement to the contrary notwithstanding, if at the time of the Employee’s separation from service within the meaning of Section 409A of the Code, the Company determines that the Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Employee becomes entitled to under this Agreement on account of the Employee’s separation from service would be considered deferred compensation otherwise subject to the 20 percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Employee’s separation from service, or (B) the Employee’s death.  If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.

 

(b)                                 All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by the Employee during the time periods set forth in this Agreement.  All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred.  The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses).  Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

 

(c)                                  To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Employee’s termination of employment, then such payments or benefits shall be payable only upon the Employee’s “separation from service.”  The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).

 

(d)                                 The parties intend that this Agreement will be administered in accordance with Section 409A of the Code.  To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code.  Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).  The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.

 

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(e)                                  The Company makes no representation or warranty and shall have no liability to the Employee or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.

 

7.                                      Confidential Information, Noncompetition and Cooperation. The terms of the Employee Non-Competition, Non-Solicitation, Confidentiality and Assignment Agreement (the “Restrictive Covenant Agreement”), between the Company and the Employee, attached hereto as Exhibit A, shall continue to be in full force and effect and are incorporated by reference in this Agreement.  The Employee hereby reaffirms the terms of the Restrictive Covenant Agreement as material terms of this Agreement.

 

(a)                                 Litigation and Regulatory Cooperation.  During and after the Employee’s employment, the Employee shall cooperate fully with the Company in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while the Employee was employed by the Company.  The Employee’s full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times.  During and after the Employee’s employment, the Employee also shall cooperate fully with the Company in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Employee was employed by the Company.  The Company shall reimburse the Employee for any reasonable out-of-pocket expenses incurred in connection with the Employee’s performance of obligations pursuant to this Section 7(a).

 

(b)                                 Relief.  The Employee agrees that it would be difficult to measure any damages caused to the Company which might result from any breach by the Employee of the promises set forth in this Section 7, and that in any event money damages would be an inadequate remedy for any such breach.  Accordingly, subject to Section 8 of this Agreement, the Employee agrees that if the Employee breaches, or proposes to breach, any portion of this Agreement, the Company shall be entitled, in addition to all other remedies that it may have, to an injunction or other appropriate equitable relief to restrain any such breach without showing or proving any actual damage to the Company. In addition, in the event the Employee breaches this Section 7 during a period when he is receiving severance payments pursuant to Section 4 or Section 5 hereof, the Company shall have the right to suspend or terminate such severance payments.  Such suspension or termination shall not limit the Company’s other options with respect to relief for such breach and shall not relieve the Employee of his duties under this Agreement.

 

(c)                                  Protected Disclosures and Other Protected Action.  Nothing contained in this Agreement limits the Employee’s ability to communicate with any federal, state or local governmental agency or commission, including to provide documents or other information, without notice to the Company.

 

8.                                      Arbitration of Disputes.  Any controversy or claim arising out of or relating to this Agreement or the breach thereof or otherwise arising out of the Employee’s employment or the

 

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termination of that employment (including, without limitation, any claims of unlawful employment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American Arbitration Association (“AAA”) in Boston, Massachusetts in accordance with the Employment Dispute Resolution Rules of the AAA, including, but not limited to, the rules and procedures applicable to the selection of arbitrators.  In the event that any person or entity other than the Employee or the Company may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person or entity’s agreement.  Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.  This Section 8 shall be specifically enforceable.  Notwithstanding the foregoing, this Section 8 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through an arbitration proceeding pursuant to this Section 8.

 

9.                                      Consent to Jurisdiction.  To the extent that any court action is permitted consistent with or to enforce Section 8 of this Agreement, the parties hereby consent to the jurisdiction of the Superior Court of the Commonwealth of Massachusetts and the United States District Court for the District of Massachusetts.  Accordingly, with respect to any such court action, the Employee (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.

 

10.                               Integration.  This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements between the parties concerning such subject matter, including the Prior Agreement.

 

11.                               Withholding.  All payments made by the Company to the Employee under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law.

 

12.                               Successor to the Employee.  This Agreement shall inure to the benefit of and be enforceable by the Employee’s personal representatives, executors, administrators, heirs, distributees, devisees and legatees.  In the event of the Employee’s death after his termination of employment but prior to the completion by the Company of all payments due to him under this Agreement, the Company shall continue such payments to the Employee’s beneficiary designated in writing to the Company prior to his death (or to his estate, if the Employee fails to make such designation).

 

13.                               Enforceability.  If any portion or provision of this Agreement (including, without limitation, any portion or provision of any section of this Agreement) shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

 

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14.                               Survival.  The provisions of this Agreement shall survive the termination of this Agreement and/or the termination of the Employee’s employment to the extent necessary to effectuate the terms contained herein.

 

15.                               Waiver.  No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party.  The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

 

16.                               Notices.  Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by a nationally recognized overnight courier service or by registered or certified mail, postage prepaid, return receipt requested, to the Employee at the last address the Employee has filed in writing with the Company or, in the case of the Company, at its main offices, attention of the Board.

 

17.                               Amendment.  This Agreement may be amended or modified only by a written instrument signed by the Employee and by a duly authorized representative of the Company.

 

18.                               Governing Law.  This is a Massachusetts contract and shall be construed under and be governed in all respects by the laws of the Commonwealth of Massachusetts without giving effect to the conflict of laws principles thereof.

 

19.                               Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

 

20.                               Successor to Company.  The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no succession had taken place.  Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a material breach of this Agreement.

 

21.                               Gender Neutral.  Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement effective on the date and year first above written.

 

	
 
    	
SCHOLAR   ROCK HOLDING CORPORATION
    
	
 
    	
 
    
	
 
    	
/s/   Nagesh K. Mahanthappa
    
	
 
    	
By:
    	
Nagesh   K. Mahanthappa, Ph.D.
    
	
 
    	
Its:
    	
President   and Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
EMPLOYEE
    
	
 
    	
 
    
	
 
    	
/s/   Elan Z. Ezickson
    
	
 
    	
Elan Z. Ezickson
    

 

12CREDIT
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:
____________________________

 

    	 	-10-	 

    	 

    

 

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:
_________________________________

  

    	 	-11-

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