Item
1.01. Entry into a Material Definitive Agreement.
On
January 15, 2020, Eastside Distilling, Inc. (the “Eastside”) entered into a loan agreement (the “Loan
Agreement”) between Eastside and its wholly-owned subsidiaries MotherLode LLC, an Oregon limited liability company,
Big Bottom Distilling, LLC, an Oregon limited liability company, Craft Canning + Bottling, LLC, an Oregon limited liability company,
Redneck Riviera Whiskey Co., LLC, a Tennessee limited liability company, and Outlandish Beverages LLC, an Oregon limited liability
company (collectively, the “Borrowers” and each a “Borrower”) and Live Oak Banking Company,
a North Carolina banking corporation (“Lender”) to refinance existing debt of the Borrowers and to provide
funding for general working capital purposes. Under the Loan Agreement, Lender has committed to make up to two loan advances to
the Borrowers in an aggregate principal amount not to exceed the lesser of (i) $8,000,000 and (ii) a borrowing base equal to 85%
of the appraised value of the Borrowers’ eligible inventory of whisky in barrels or totes less an amount equal to all service
fees or rental payments owed by Borrowers during the 90 day period immediately succeeding the date of determination to any warehouses
or bailees holding eligible inventory (the “Loan”).
The
Loan matures on January 14, 2021 (the “Maturity Date”). On the Maturity Date, all amounts outstanding under
the Loan will become due and payable. The Lender may at any time demand repayment of the Loan in whole or in part, in which case
the Borrowers will be obligated to repay the Loan (or portion thereof for which repayment is demanded) within 30 days following
the date of demand. The Borrowers may prepay the Loan, in whole or in part, at any time without penalty or premium.
The
Loan bears interest at a rate equal to the prime rate plus a spread of 2.49%, adjusted quarterly. Accrued interest is payable
monthly, with the final installment of interest being due and payable on the Maturity Date. The Borrowers are also obligated to
pay a servicing fee, unused commitment fee and origination fee in connection with the Loan.
The
Loan Agreement contains affirmative and negative covenants that include covenants restricting each Borrower’s ability to,
among other things, incur indebtedness, grant liens, dispose of assets, merge or consolidate, make investments, or enter into
restrictive agreements, subject to certain exceptions.
The obligations of the Borrowers under the Loan Agreement are secured
by substantially all of their respective assets, except for accounts receivable and certain other specified excluded property.
The
Loan Agreement includes customary events of default that include among other things, non-payment defaults, covenant defaults,
inaccuracy of representations and warranties, cross default to material indebtedness, bankruptcy and insolvency defaults and change
in control defaults. Under certain circumstances, a default interest rate will apply on all obligations during the existence of
an event of default under the Loan Agreement at a per annum rate equal to 2.00% above the applicable interest rate.
In
connection with the Loan Agreement, Eastside issued to Lender a warrant to purchase up to 100,000 shares of Eastside’s common
stock at an initial exercise price of $3.9425 per share (the “Warrant”). The Warrant expires on January 15,
2025. In connection with the issuance of the Warrant, Eastside granted the Lender piggy-back registration rights with respect
to the shares of common stock issuable upon exercise of the Warrant, subject to certain exceptions.
The
foregoing summary of the Loan Agreement and Warrant is qualified in its entirety by reference to the Loan Agreement and Warrant,
copies of which will be filed as exhibits to Eastside’s Annual Report on Form 10-K for the year ended December 31, 2019.