EAST Eastside Distilling Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): September 4, 2024

 

EASTSIDE DISTILLING, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		001-38182		20-3937596
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

2321 NE Argyle Street, Unit D

Portland, Oregon 97211

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (971) 888-4264

 

Securities registered pursuant to Section 12(b) of the Act:

 

Common Stock, $0.0001 par value		EAST		The Nasdaq Stock Market LLC
(Title of Each Class)		(Trading Symbol)		(Name of Each Exchange on Which Registered)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (CFR §230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (CFR §240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 1.01 Entry into a Material Definitive Agreement: Merger Agreement

 

On September 4, 2024, Eastside Distilling, Inc. (“Eastside”) entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with East Acquisition Inc. (“Merger Sub”) and Beeline Financial Holdings, Inc. (“Beeline”). Beeline is a privately-held mortgage technology company that operates an end-to-end, all-digital, AI-enhanced platform for homeowners and property investors. The Merger Agreement contemplates that at a closing on a future date (the “Merger Closing”) Beeline will be merged into Merger Sub and become a wholly-owned subsidiary of Eastside. Among the conditions that must be satisfied before the Merger Closing can occur are: approval of the Merger by the stockholders of Beeline, execution and closing of the Debt Exchange Agreement described below, conversion of outstanding Beeline debentures into Beeline common stock, completion by Eastside of a private securities offering for proceeds of at least $3,000,000 from which at least $2,000,000 will be advanced to Beeline, and negotiation of an amendment to Eastside’s employment agreement with Geoffrey Gwin, its CEO.

 

At the Merger Closing, the capital stock of Beeline will be converted into common stock and convertible preferred stock of Eastside that will equal on a fully-diluted basis 82.5% of the post-merger capital stock of Eastside (excluding from calculation of capital stock of Eastside the Series E Preferred Stock described below).

 

Item 1.01 Entry into a Material Definitive Agreement: Debt Exchange Agreement

 

On September 4, 2024, Eastside and its subsidiary, Craft Canning & Bottling, LLC (“Craft”) entered into a Debt Exchange Agreement (the “Debt Agreement”) with The B.A.D. Company, LLC (the “SPV”), Aegis Security Insurance Company (“Aegis”), Bigger Capital Fund, LP (“Bigger”), District 2 Capital Fund, LP (“District 2”), LDI Investments, LLC (“LDI”), William Esping ((“Esping”), WPE Kids Partners (“WPE”) and Robert Grammen (“Grammen”). The eight parties to the Debt Agreement with Eastside and Craft are referred to in this Report collectively as the “Investors”. The SPV is a special purpose vehicle whose equity is shared 50% by Bigger and District 2 and 50% by Aegis and LDI.

 

The Debt Agreement contemplates that at a closing that will be simultaneous with the Merger Closing (the “Debt Closing”), the Investors will surrender debt and equity instruments issued by Eastside as follows:

 

●

The SPV will surrender 104,800 shares of Eastside Series C Preferred Stock;

●

Bigger will surrender unsecured promissory notes in the aggregate principal amount of $3,006,987 and will surrender secured promissory notes in the aggregate principal amount of $474,645;

●

District 2 will surrender unsecured promissory notes in the aggregate principal amount of $4,510,480 and will surrender secured promissory notes in the aggregate principal amount of $474,645;

●

LDI will surrender a secured promissory note in the principal amount of $550,000;

●

Aegis will surrender a secured promissory note in the principal amount of $2,638,291;

●

Esping will surrender an unsecured promissory note in the principal amount of $228,174;

●

WPE will surrender an unsecured promissory note in the principal amount of $257,970;

●

Grammen will surrender an unsecured promissory note in the principal amount of $91,740; and

●

Each of the Investors will release Eastside from liability for any accrued interest or other unpaid liability arising from the aforesaid debt instruments.

 

At the Debt Closing, in consideration of the aforesaid surrender of debt and equity instruments and other consideration recited in the Debt Exchange Agreement, the Investors will receive the following:

 

●

The SPV, Bigger, District 2, LDI, Aegis, Esping, WPE and Grammen will receive all of the equity in Craft, which will cease to be a subsidiary of Eastside;

●

Bigger and District 2 will receive 255,474 shares of Series D Preferred Stock to be issued by Eastside (description below);

●

Bigger and District 2 will receive 200,000 shares of Series E Preferred Stock to be issued by Eastside (description below);

 

 

●

The SPV, Bigger, District 2, Esping, WPE and Grammen will receive 47% of the outstanding shares of Spirits, Inc., a newly-formed subsidiary of Eastside into which Eastside will transfer all of its assets relating to Eastside’s spirits business; and

●

Esping, WPE and Grammen will receive 190,000 shares of Eastside common stock.

 

In anticipation of the Debt Closing, Eastside intends to file with the Nevada Secretary of State a Certificate of Designation of 255,474 shares of Series D Preferred Stock and a Certificate of Designation of 200,000 shares of Series E Preferred Stock. The material terms of the Preferred Stock classes will be:

 

Series D Preferred Stock. Each share will have a stated value of $10.00. The holder of Series D Preferred Stock has no voting rights by reason of those shares, except that the approval by holders of more than 50% of the outstanding Series D Preferred Stock will be required for any corporate action that would adversely affect the preferences, privileges or rights of the Series D Preferred Stock. In the event that the Company declares a dividend payable in cash or stock to holders of any class of the Company’s stock, the holder of a share of Series D Preferred Stock will be entitled to receive an equivalent dividend on an as-converted basis. Each share of Series D Preferred Stock will be convertible into common stock by a conversion ratio equal to the stated value of the Series D share divided by the Series D Conversion Price. The initial Series D Conversion Price is $1.80 per common share, which is subject to equitable adjustment. The number of shares of common stock into which a holder may convert Series D Preferred Stock is limited by a Beneficial Ownership Limitation, which restricts the portion of the cumulative voting power in the Company that the holder and its affiliates may own after the conversion to 9.99%.

 

Series E Preferred Stock. Each share will have a stated value of $10.00. The holder of Series E Preferred Stock has no voting rights by reason of those shares, except that the approval by holders of more than 50% of the outstanding Series E Preferred Stock will be required for any corporate action that would adversely affect the preferences, privileges or rights of the Series E Preferred Stock. In the event that the Company declares a dividend payable in cash or stock to holders of any class of the Company’s stock, the holder of a share of Series E Preferred Stock will be entitled to receive an equivalent dividend on an as-converted basis. Commencing 390 days after the Debt Closing (the “Measurement Date”), each share of Series E Preferred Stock will be convertible into common stock by a conversion ratio equal to the stated value of the Series E share divided by the Series E Conversion Price. The Series E Conversion Price on and after the Measurement Date will equal the average of the VWAPs for the five trading days immediately preceding the Measurement Date, but will be subject to equitable adjustment. The number of shares of common stock into which a holder may convert Series E Preferred Stock is limited by a Beneficial Ownership Limitation, which restricts the portion of the cumulative voting power in the Company that the holder and its affiliates may own after the conversion to 9.99%.

 

Item 7.01 Regulation FD Disclosure.

 

On September 5, 2024, Eastside issued a press release, the text of which is furnished as Exhibit 99.1 to this current report. The press release contained information relating to the events described under Item 1.01 above.

 

The information in this Item 7.01 and Exhibit 99.1 hereto shall not be deemed “filed” for the purposes of or otherwise subject to the liabilities under Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Unless expressly incorporated into a filing of Eastside under the Securities Act of 1933, as amended, or the Exchange Act, the information contained in this Item 7.01 and Exhibit 99.1 hereto shall not be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

Item 9.01 Financial Statements and Exhibits

 

Exhibits

 

10-a	Agreement and Plan of Merger and Reorganization by and Among Eastside Distilling, Inc., East Acquisition Inc. and Beeline Financial Holdings, Inc. dated September 4, 2024
10-b	Debt Exchange Agreement dated September 4, 2024 among Eastside Distilling, Inc., Craft Canning & Bottling, LLC, The B.A.D. Company, LLC, Aegis Security Insurance Company, Bigger Capital Fund, LP, District 2 Capital Fund, LP, LDI Investments, LLC, William Esping, WPE Kids Partners and Robert Grammen
99	Press Release dated September 5, 2024
104	Cover page interactive data file (embedded within the iXBRL document)

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: September 5, 2024

 

	EASTSIDE DISTILLING, INC.
	By:	/s/ Geoffrey Gwin
		Geoffrey Gwin
		Chief Executive Officer

 

 

 

Exhibit 10.a

 

Execution Copy

 

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

 

BY AND AMONG

 

EASTSIDE DISTILLING, INC.

 

EAST ACQUISITION INC.,

 

AND

 

BEELINE FINANCIAL HOLDINGS, INC.

 

Dated as of September 4, 2024

 

 

TABLE OF CONTENTS

 

MERGER			1
	1.1	The Merger	1
	1.2.	The Effective Time of the Merger	2
	1.3.	Effect of Merger	2
	1.4.	Certificate of Incorporation and By-Laws of Surviving Company	2
	1.5.	Taking of Necessary Action	2
CONVERSION AND EXCHANGE OF SECURITIES			2
	2.1.	Conversion of Shares	2
	2.2	Dissenting Shares	3
	2.3.	Exchange of Stock Certificates	3
REPRESENTATIONS AND WARRANTIES OF BEELINE			5
	3.1.	Organization, Good Standing and Qualification of Beeline; Certificate of Incorporation and By-Laws	5
	3.2.	Authorization	5
	3.3.	Subsidiaries	5
	3.4.	Capitalization	6
	3.5.	No Conflicts	6
	3.6.	Financial Information	6
	3.7.	Absence of Undisclosed Liabilities	6
	3.8.	Absence of Certain Changes	7
	3.9.	Taxes	7
	3.10.	Contracts; Insurance	8
	3.11.	Litigation	9
	3.12.	Title to Properties; Liens and Encumbrances	9
	3.13.	Compliance	9
	3.14.	Compliance with Environmental Laws	10
	3.15.	Brokers or Finders	10
	3.16.	Permits and Licenses	10
	3.17.	Intentionally Omitted	10
	3.18.	Interest in Assets	10
	3.19.	Employee Benefit Plans	11
	3.20.	Labor Discussions	11
	3.21.	Intentionally Omitted	11
	3.22.	Untrue or Omitted Facts	11
	3.23.	Related Party Disclosure	11
	3.24.	Beeline Stockholders	11
REPRESENTATIONS AND WARRANTIES OF EASTSIDE AND MERGER SUB			12
	4.1.	Organization, Good Standing and Qualification	12
	4.2.	Articles of Incorporation and By-Laws	12
	4.3.	Subsidiaries	12
	4.4.	Capitalization	13

 

 

	4.5.	Issuance of the Securities	13
	4.6.	Corporate Authority; Binding Nature of Agreement	13
	4.7.	No Conflicts	14
	4.8.	Eastside SEC Reports; Sarbanes-Oxley Act	14
	4.9.	Financial Information	15
	4.10.	Issuance of Merger Shares	15
	4.11.	Brokers or Finders	15
	4.12.	Consents	16
	4.13	Litigation	16
	4.14.	Absence of Undisclosed Liabilities	16
	4.15.	Absence of Certain Changes	16
	4.16.	Taxes	17
	4.17.	Contracts; Insurance	18
	4.18.	Title to Properties; Liens and Encumbrances	19
	4.19.	Intellectual Property	19
	4.20.	Compliance	19
	4.21.	Compliance with Environmental Laws	20
	4.22.	Intentionally Omitted	20
	4.23.	Permits and Licenses	20
	4.24.	Interest in Assets	20
	4.25.	Employee Benefit Plans	20
	4.26.	Labor Discussions	21
	4.27	Intentionally Omitted	21
	4.28	IT Systems	21
	4.29	Data Privacy and Protection; Cybersecurity	22
	4.30	Investment Company	22
	4.31	Foreign Corrupt Practices	22
	4.32	Accountants	23
	4.33	Stock Plans	23
	4.34	Money Laundering	23
	4.35	Application of Takeover Protections	23
	4.36	Registration Rights	23
	4.37	Listing and Maintenance Requirements	24
	4.38	Private Placement	24
	4.39	No Disqualification Events	24
	4.40	Other Covered Persons	24
	4.41	Notice of Disqualification Events	24
	4.42	Related Party Disclosure	24
	4.43	Untrue or Omitted Facts	25
ADDITIONAL AGREEMENTS OF THE PARTIES			25
	5.1.	Conduct of Business	25
	5.2	No Solicitation	25
	5.3	Beeline Stockholders’ Approval	27
	5.4	Access to Information	28
	5.5	Listing	28

 

 

	5.6	Confidentiality	29
	5.7.	Publicity	29
	5.8.	Accounting Cooperation	29
	5.9.	Further Assurances	29
	5.10	Tax Matters	29
	5.11	Voting Agreements	30
	5.12	Eastside Stockholder Approval	30
CONDITIONS			30
	6.1.	Conditions to the Obligations of Eastside, Merger Sub and Beeline	30
	6.2.	Conditions Specific to the Obligations of Eastside and Merger Sub	31
	6.3	Conditions Specific to the Obligations of Beeline	33
CLOSING			34
	7.1.	Place and Date of Closing	34
	7.2.	Items to be Delivered by Beeline	34
	7.3	Items to be Delivered by Eastside	34
TERMINATION OF AGREEMENT			35
	8.1.	Termination	35
	8.2.	Payments	36
DEFINITIONS			36
	9.1.	Definitions	36
MISCELLANEOUS			42
	10.1.	Non-Assignability; Binding Effect	42
	10.2.	Non-survival of Representations and Warranties	42
	10.3.	Waiver	42
	10.4.	Entire Agreement	42
	10.5.	Modifications and Amendments	42
	10.6.	Governing Law	42
	10.7.	Disclosure Schedules	43
	10.8	Interpretation; Construction	43
	10.9.	Parties in Interest	44
	10.10	Notices	44

 

 

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

 

This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the “Agreement”) is made and entered into as of September 4, 2024 by and among EASTSIDE DISTILLING, INC., a Nevada corporation (“Eastside”), EAST ACQUISITION INC., a Delaware corporation and wholly owned Subsidiary of Eastside (“Merger Sub”), and BEELINE FINANCIAL HOLDINGS, INC., a Delaware corporation (“Beeline”). As used in this Agreement, the word “Parties” means each of Eastside, Merger Sub and/or Beeline, as applicable and the word “Party” means any of the Parties.

 

R E C I T A L S:

 

WHEREAS, Eastside, Merger Sub and Beeline intend to effect the Merger (as defined below) of Beeline with and into Merger Sub pursuant to this Agreement and in accordance with the Delaware General Corporation Law (the “DGCL”);

 

WHEREAS, the Board of Directors of Eastside has (i) determined that it is in the best interests of, Eastside and the stockholders of Eastside, and declared it advisable, to enter into this Agreement providing for the Merger, and (ii) approved this Agreement and the transactions, including the Merger, on the terms and subject to the conditions of this Agreement;

 

WHEREAS, the Beeline Board of Directors has (i) determined that it is in the best interests of Beeline and its stockholders, and declared it advisable, to enter into this Agreement providing for the Merger, (ii) approved this Agreement and the transactions, including the Merger, on the terms and subject to the conditions of this Agreement, and (iii) adopted a resolution recommending that this Agreement and the transactions, including the Merger, be adopted by the Beeline stockholders (the “Beeline Board Recommendation”); and

 

WHEREAS, it is intended that for federal income tax purposes the Merger qualify as a tax-free reorganization within the meaning of Section 368(a) (2)(D) of the United States Internal Revenue Code of 1986, as amended (the “Code”), and that, for accounting purposes, the Merger will be treated as a purchase.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual benefits to be derived from this Agreement and the representations, warranties, covenants, agreements, conditions and promises contained herein, the Parties hereto hereby agree as follows:

 

ARTICLE I

 

MERGER

 

1.1 The Merger. In accordance with the provisions of, and subject to the terms and conditions of, this Agreement and DGCL, at the Effective Time (defined below), Beeline shall be merged with and into Merger Sub (the “Merger”), and MergerSub shall continue as the surviving corporation of the Merger (the “Surviving Corporation”). MergerSub shall change its name to Beeline Financial Holdings, Inc. . Merger Sub and Beeline are sometimes herein referred to as the “Constituent Corporations.”

 

 

1.2. The Effective Time of the Merger. Subject to the provisions of this Agreement and DGCL, a certificate of merger with respect to the Merger shall be executed, delivered and filed (the “Certificate of Merger”) with the Secretary of State of the State of Delaware by each of the Constituent Corporations on the Closing Date (as hereinafter defined). The Merger shall become effective on the date and time of such filing (the “Effective Time”).

 

1.3. Effect of Merger. At the Effective Time, the separate existence of Beeline shall cease, and Beeline shall be merged with and into MergerSub, and the Surviving Corporation shall possess all of the rights, privileges, powers and franchises, and be subject to all the restrictions, disabilities and duties of each of the Constituent Corporations and shall have such other effects as provided by DGCL. As a result of the foregoing, effective immediately upon the Closing of the Merger the Surviving Corporation shall continue its existence as a wholly-owned Subsidiary of Eastside.

 

1.4. Certificate of Incorporation and By-Laws of Surviving Company. From and after the Effective Time: (a) the Certificate of Incorporation (the “Certificate”) of MergerSub shall be the Certificate of the Surviving Corporation; (b) the By-Laws of MergerSub shall be the By-Laws of the Surviving Corporation, and (c) the officers and members of the Board of Directors of Beeline shall be the officers and members of the Board of Directors of the Surviving Corporation, unless and until removed, or until their respective terms of office shall have expired, in accordance with the Certificate and the By-Laws, as applicable.

 

1.5. Taking of Necessary Action. Prior to the Effective Time, the Parties hereto shall do or cause to be done all such acts and things as may be necessary or appropriate in order to effectuate the Merger as expeditiously as reasonably practicable, in accordance with this Agreement.

 

ARTICLE II

 

CONVERSION AND EXCHANGE OF SECURITIES

 

2.1. (a) Share Conversion. At the Effective Time, the outstanding Debentures of Beeline shall be exchanged for Beeline Common Stock and then the issued and outstanding shares of capital stock consisting of Common Stock and Preferred Stock of Beeline (together, the “Beeline Capital Stock”) shall be converted into a number of shares of Common Stock and Series F Convertible Preferred Stock (the “Series F”) of Eastside (together, the “Merger Shares”) that, when issued, will equal eighty-two and one-half percent (82.5%) of the aggregate outstanding capital stock of Eastside on a fully-diluted basis, (excluding from the calculation of Eastside capital stock the Series E Preferred Stock and common stock issuable on conversion thereof). For the purposes of this Agreement, the issuance of Series G Convertible Preferred Stock of Eastside to certain Beeline stockholders in connection with a private placement of Eastside securities shall be deemed to be part of the 82.5% of Eastside capital stock issuable to Beeline stockholders. Attached as Schedule 2.1 is a breakdown between the Merger Shares and the formula for determining the allocation among holders of Beeline Capital Stock. The number of outstanding shares of Eastside Common Stock on a “fully diluted basis” will include shares issuable upon conversion of outstanding Preferred Stock, but will not include shares issuable upon exercise of outstanding options or warrants.

 

 

(b) Effect of Share Conversion. At the Effective Time, each share of Beeline Capital Stock, issued and outstanding immediately prior to the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof, shall be converted into that number of Merger Shares equal to 82.5% of the outstanding Eastside capital stock on a fully diluted basis (subject to Section 2.1(a) and prior to adjustments for fractional shares) as of the Closing, as defined in Section 7.1 and assuming the that the Series F may be immediately converted into Eastside Common Stock. The Beeline stockholders by their acceptance of the Merger Shares are deemed to acknowledge that the Series F may not convert into Eastside Common Stock until the Eastside stockholders have approved the issuance of the underlying Common Stock. At the Closing, Eastside shall issue to Beeline stockholders a number of shares of Eastside Common Stock equal to 19.9% of outstanding Eastside Common Stock immediately after the issuance of the Merger Shares. Any fractional Merger Share that results from the aforesaid conversion shall be eliminated by rounding the fraction down to the nearest whole Merger Share as reflected on Schedule 2.1.

 

(c) No Further Rights in Beeline Capital Stock. On and after the Effective Time, holders of Beeline Capital Stock shall cease to have any rights as stockholders of Beeline, except the right to receive the consideration set forth in this Article II.

 

(d) Conversion of Merger Sub Shares. Each share of Common Stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of Common Stock of the Surviving Corporation.

 

(e) Assumption of Outstanding Warrants. Upon the Closing, Eastside shall assume all existing Beeline warrants in the amounts, with the exercise price and termination dates as reflected on Schedule 2.1(e).

 

2.2 Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, Beeline Capital Stock that is issued and outstanding immediately prior to the Effective Time and which is held by holders of Beeline Capital Stock who have not voted in favor of or consented to the Merger and who have properly demanded and perfected their rights to be paid the fair value of such shares in accordance with Section 262 of the DGCL (the “Dissenting Shares”) shall not be converted into the right to receive Merger Shares, and the holders thereof shall be entitled to only such rights as are granted by Section 262 of the DGCL; provided, however, that if any such holder shall fail to perfect or shall effectively waive, withdraw or lose such holder’s rights under Section 262 of the DGCL, such holder’s shares of Beeline Capital Stock shall thereupon be deemed to have been converted, at the Effective Time, into the right to receive Merger Shares, as set forth in Section 2.1 of this Agreement, without any interest thereon.

 

2.3. Exchange of Stock Certificates.

 

(a) Closing of Beeline’s Transfer Books. At or after the Effective Time, there shall be no transfers on the transfer books of Beeline of Beeline Capital Stock that was outstanding immediately prior to the Effective Time.

 

 

(b) Delivery of Merger Share Certificates. Promptly after the Effective Time, Eastside shall cause its Transfer Agent to mail to each record holder, as of the Effective Time, of (Beeline Capital Stock a notice from Eastside’s Transfer Agent reflecting the issuance of the Merger Shares in book-entry form and a form of letter of transmittal (which shall be in customary form and shall specify that delivery shall be effected, and risk of loss and title to the Merger Shares shall pass, only upon proper delivery of (i) the Beeline stock certificates to the Transfer Agent or, in the case of Beeline Capital Stock issued in book-entry form, upon adherence to the procedures set forth in the letter of transmittal and (ii) a medallion guaranty required by the Transfer Agent in exchange for the Merger Shares, unless delivery of a medallion guarantee has been waived and such waiver is acceptable to the Eastside Transfer Agent. If Merger Shares are to be issued to a Person other than the Person in whose name the surrendered Beeline Capital Stock is registered, it shall be a condition of such issuance that the certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer with the medallion guarantee and that the Person requesting such issuance shall have paid any transfer and other Taxes required by reason of the issuance of the Merger Shares to a Person other than the registered holder of the Beeline Capital Stock surrendered or shall have established to the satisfaction of the Transfer Agent that such Tax either has been paid or is not applicable. Until surrendered as contemplated by this Section 2.3(b), each share of Beeline Capital Stock shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the applicable Merger Shares as contemplated by this Article II.

 

(c) In the event that any certificate for Beeline Capital Stock shall have been lost, stolen or destroyed, upon the holder’s compliance with the replacement requirements established by the Transfer Agent, including, if necessary, the posting by the holder of a bond in customary amount as indemnity against any claim that may be made against it with respect to the Certificate, the Transfer Agent will deliver in exchange for the lost, stolen or destroyed certificate the applicable Merger Shares issuance payable in respect of the Beeline Capital Stock represented by such certificate pursuant to this Article II.

 

(d) Effect of Escheat Laws. Neither Eastside, the Surviving Corporation, nor any other Party hereto shall be liable to a holder of Beeline Capital Stock for any consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.

 

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF BEELINE

 

Beeline makes the following representations and warranties to Eastside, which shall be true and correct on the date hereof and at the Effective Time (and Eastside, in executing, delivering and consummating this Agreement, has relied and will rely upon the correctness and completeness of each of such representations and warranties):

 

3.1. Organization, Good Standing and Qualification of Beeline; Certificate of Incorporation and By-Laws. Beeline and each of its Subsidiaries is an entity incorporated, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither Beeline nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of this Agreement, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of Beeline and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on Beeline’s ability to perform in any material respect on a timely basis its obligations under this Agreement(any of (i), (ii) or (iii), a “Material Adverse Effect”) on Beeline, and no action or proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

3.2. Authorization; Valid and Binding. Beeline has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation by Beeline of the Merger and the other transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Beeline and no other corporate proceedings on the part of Beeline are necessary to authorize the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, other than, with respect to the Merger, the adoption of this Agreement by the holders of at least a majority of the outstanding shares (or voting power) of each class of Beeline Capital Stock (the “Beeline Stockholder Approval”). Subject to Beeline Stockholder Approval, this Agreement has been duly and validly executed and delivered by Beeline and, assuming the due execution and delivery by Eastside and Merger Sub, constitutes the valid and binding obligation of Beeline, enforceable against Beeline in accordance with its terms, (i) subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, rehabilitation, liquidation, preferential transfer, moratorium and similar Laws now or hereafter affecting creditors’ rights generally (ii) as limited by Laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable Law.

 

3.3. Subsidiaries. All of the direct and indirect Subsidiaries of Beeline are set forth on Schedule 3.3. Beeline owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary, free and clear of any Liens, except for Liens created under this Agreement or imposed by Law, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

 

 

3.4. Capitalization. Schedule 3.4 sets forth all of the current holders of each class of Beeline Capital Stock issued and outstanding as of the date of this Agreement. All the issued and outstanding Beeline Capital Stock has been duly authorized and validly issued, are fully paid and nonassessable. Except as set forth in Schedule 3.4, as of the date hereof, Beeline does not have outstanding any options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, Beeline Capital Stock or any such options, rights, convertible securities or obligations. To Beeline’s Knowledge there are no existing voting trusts or similar agreements to which Beeline is a party with respect to the voting of Beeline Capital Stock.

 

3.5. No Conflicts. Except for: (a) the filing of the Certificate of Merger; (b) applicable requirements of U.S. securities Laws; (c) applicable requirements under the securities or “blue sky” Laws of various states; and (d) matters specifically described in this Agreement (the “Required Approvals”), neither the execution, delivery and performance by Beeline of this Agreement and the other Transaction Documents to which it is a party, and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of Beeline’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) require Beeline to issue any authorization, license, consent or approval of or require notice to or filing with, any Governmental Authority; (iii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of Beeline or any Subsidiary, or give to others any rights of termination, amendment, anti-dilution or similar adjustments, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Beeline or Subsidiary debt or otherwise) or other understanding to which Beeline or any Subsidiary is a party or by which any property or asset of Beeline or any Subsidiary is bound or affected, or (iv) subject to complying with all applicable securities Laws, conflict with or result in a violation of any Law to which Beeline or a Subsidiary is subject , or by which any property or asset of Beeline or a Subsidiary is bound or affected; except in the case of each of clauses (iii) and (iv), such as could not have or reasonably be expected to result in a Material Adverse Effect on Beeline.

 

3.6. Financial Information. Prior to the Closing, Beeline shall deliver true and complete copies of its audited financial statements for years ending December 31, 2023 and 2022 and unaudited financial statements for the six months ended June 30, 2024 (the “Beeline Financial Statements”), which it has delivered to Eastside for review. Except as noted therein, and subject to re-audits by a firm registered with the Public Company Accounting Oversight Board (“PCAOB”), the Beeline Financial Statements will fairly represent, in all material respects, the financial position of Beeline as of the dates thereof and the results of its operations and cash flows for the periods then ended, except as may be otherwise specified in such financial statements or the footnotes thereto and except that unaudited financial statements may not contain all footnotes required by generally accepted accounting principles (“GAAP”), and fairly present in all material respects the financial position of Beeline and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

3.7. Absence of Undisclosed Liabilities. When delivered with the Beeline Financial Statements, Schedule 3.7 will set forth all debts, liabilities, or obligations, contingent or absolute (“Liabilities”), of Beeline, except for liabilities or obligations (i) disclosed on the Beeline Financial Statements, (ii) not required under GAAP to be disclosed on the Beeline Financial Statements, and (iii) which would not have a Material Adverse Effect on Beeline.

 

 

3.8. Absence of Certain Changes. Except as reflected on Schedule 3.8, since June 30, 2024 (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect on Beeline, (ii) Beeline has not incurred any Liabilities other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) Liabilities not required to be reflected in Beeline’s financial statements pursuant to GAAP (iii) Beeline has not altered its method of accounting, (iv) Beeline has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) Beeline has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Beeline stock option plans

 

3.9. Taxes. Except as set forth on Schedule 3.9:

 

(a) Beeline has filed all Tax Returns (as hereinafter defined) that it was required to file. All such Tax Returns were correct and complete in all material respects. All Taxes (as hereinafter defined) owed by Beeline (whether or not shown on any Tax Return and whether or not any Tax Return was required) have been paid except for Taxes not yet due and payable. Beeline has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party. There are no Liens on any of the assets of Beeline that arose in connection with any failure (or alleged failure) to pay any Tax, except for Liens for Taxes not yet due.

 

(b) Beeline is not a party to any Tax allocation or sharing agreement. Beeline (i) has not been a member of an Affiliated Group (as hereinafter defined) filing a consolidated Federal income Tax Return and (ii) has no liability for the Taxes of any Person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, by contract or otherwise.

 

(c) Beeline shall not be required to include in a taxable period ending after the Closing Date taxable income attributable to income that accrued in a prior taxable period but was not recognized in any prior taxable period as a result of the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, the cash method of accounting or Section 481 of the Code or any comparable provision of state, local or foreign Tax Law. No issue relating to Taxes has been raised in writing by a taxing authority during any pending audit or examination, and no issue relating to Taxes was raised in writing by a taxing authority in any completed audit or examination, that reasonably can be expected to recur in a later taxable period.

 

(d) Intentionally omitted.

 

(e) Beeline has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

 

 

(f) As used in this Agreement, “Affiliated Group” means any affiliated group within the meaning of Section 1504(a) of the Code or any similar group defined under a similar provision of state, local or foreign Law; “Tax” means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including Taxes under Section 59A of the Code), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated or other Tax of any kind whatsoever, including any interest, penalty or addition thereto, whether disputed or not, and “Taxes” means any or all of the foregoing collectively; and “Tax Return” means any return, declaration, report, claim for refund or information return or statement relating to Taxes, including any schedule or attachment thereto and including any amendment thereof.

 

3.10. Contracts; Insurance. Except as set forth on Schedule 3.10, Beeline has no currently existing contract, obligation, agreement, plan, arrangement, commitment or the like of any material nature regarding the following:

 

(a) Written employment agreements, bonus agreements, pension, profit sharing, deferred compensation, stock bonus, retirement, stock option, stock purchase, phantom stock or similar plans, including agreements evidencing rights to purchase securities of Beeline, and agreements among stockholders and Beeline;

 

(b) Loan or other agreements, notes, indenture, or instruments relating to or evidencing indebtedness for borrowed money, or mortgaging, pledging or granting or creating a Lien or security interest or other encumbrance on any of Beeline’s property or any agreement or instrument evidencing any guaranty by Beeline of payment or performance by any other person;

 

(c) Agreements with consultants, dealers, sales representatives, brokers or other distributors, jobbers, advertisers or sales agencies, under which Beeline anticipates incurring $100,000 or more of expenses in 2024;

 

(d) Agreements with any labor union or collective bargaining organization or other labor agreements;

 

(e) Contracts or series of contracts with the same Person for the furnishing or purchase of machinery, equipment, goods or services, including without limitation agreements with processors and subcontractors under which Beeline may incur expenses of $100,000 or more in 2024;

 

(f) Joint venture contracts or arrangements or other agreements involving a sharing of profits or expenses to which Beeline is a party;

 

(g) Agreements limiting the freedom of Beeline to compete in any line of business or in any geographic area or with any Person;

 

 

(h) Agreements providing for disposition of the business, assets or shares of Beeline, agreements of merger or consolidation to which Beeline is a party or letters of intent with respect to the foregoing;

 

(i) Letters of intent or agreements with respect to the purchase or sale of the business, assets or shares of any third party (other than the Merger) except for matters which have by their terms expired;

 

(j) Insurance policies presently in effect; and

 

(k) Existing leases for real or personal property.

 

3.11. Litigation. Except as set forth on Schedule 3.11, to Beeline’s Knowledge there is no pending nor threatened legal or governmental action, suit, investigation, proceeding or claim, to which Beeline is or may be named as a party by or before any Governmental Authority or by any third party that is reasonably likely to have a Material Adverse Effect on Beeline. Beeline is not a party or subject to the provisions of any material injunction, judgment, decree, or order of any Governmental Authority.

 

3.12. Title to Properties; Liens and Encumbrances. Beeline has good and valid title in all property and assets recorded on Beeline Financial Statements, free from all mortgages, pledges, Liens, security interests, conditional sale agreements, encumbrances or charges, except as disclosed on Schedule 3.12. Beeline owns or has adequate rights to use all such properties or assets as are necessary to its operations as now conducted.

 

3.13. Compliance. Beeline is not in violation of any term of its Certificate of Incorporation or By-Laws, as amended. Except as set forth on Schedule 3.13, to Beeline’s Knowledge, Beeline is not in violation of or default under any provision of: (a) any mortgage, indenture, contract, agreement, license, deed of trust, lease, franchise, Permit or other instrument to which it is a party or by which it or any of its properties are bound and there does not exist any state of facts which constitutes an event of default or which, with notice or lapse of time or both, would constitute an event of default; or (b) any judgment, decree, order, statute, rule or regulation to which Beeline is subject to. Except as would not reasonably be expected to be, individually or in the aggregate, have a Material Adverse Effect on Beeline, and except with respect to compliance with Environmental Laws (as to which certain representations and warranties are made pursuant to Section 3.14), Beeline is in compliance with all applicable Laws and orders of Governmental Authorities, including without limitation all Laws relating to Taxes, insurance, environmental protection, occupational health and safety, consumer lending, and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect on Beeline.

 

 

(a) Beeline and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign Laws relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. To Beeline’s Knowledge:

 

(i) no allegations of sexual harassment, sexual misconduct or discrimination, whether such discrimination arises from race, ethnic background, sex, gender status, age or otherwise (“Misconduct”) have been made involving any current or former director, officer, employee or independent contractor of Beeline or any of its Subsidiaries; and

 

(ii) neither Beeline nor any of its Subsidiaries have entered into any settlement agreements related to allegations of Misconduct by any current or former director, officer, employee, or independent contractor of Beeline or any of its Subsidiaries.

 

3.14 Compliance with Environmental Laws. To Beeline’s Knowledge, Beeline is in material compliance with all applicable Laws relating to the protection of the environment or occupational health and safety except for non-compliance which would not, individually or in the aggregate, have a Material Adverse Effect on Beeline. Beeline has not received any written notice of, or to the Knowledge of Beeline, is the subject of, any actions, claims, investigations, demands or notices alleging liability under or non-compliance with any Laws relating to the protection of the environment or occupational health and safety which would, individually or in the aggregate, have a Material Adverse Effect on Beeline.

 

3.15 Brokers or Finders. Except as reflected on Schedule 3.15, no agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to any brokers’ or finder’s fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement.

 

3.16. Permits and Licenses. Schedule 3.16 sets forth all material permits, licenses, orders, franchises and approvals (collectively, “Permits”) from all Governmental Authorities held by Beeline. Except for Permits the absence of which would not have a Material Adverse Effect on Beeline, Beeline has all Permits necessary to conduct its business of all Governmental Authorities. Such Permits are in full force and effect, and no suspension or cancellation of any of such Permits is pending or to the Knowledge of Beeline threatened. Beeline is in compliance in all material respects with all requirements, standards and procedures of the Governmental Authorities which have issued Permits, except for such non-compliance as would not have a Material Adverse Effect on Beeline.

 

3.17. Intentionally omitted.

 

3.18. Interest in Assets. Except as disclosed on Schedule 3.18, neither the stockholders of Beeline nor any Affiliate(s) of the stockholders nor anyone else other than Beeline owns any property or rights, tangible or intangible, used in or related, directly or indirectly, to the business of Beeline.

 

 

3.19. Employee Benefit Plans. Other than as set forth on Schedule 3.19: (a) there are no “employee pension benefit plans” (within the meaning of Section 3(2)(A) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) (collectively, the “Pension Plans”) maintained by Beeline; and (b) Beeline does not have any policies or plans, whether written or not, that provide for vacation benefits, severance benefits, leave rights or other benefits to its employees. There are no outstanding Liabilities of Beeline to the Pension Plans, and Beeline knows of no potential Liabilities in connection therewith. To the Knowledge of Beeline, there are no actions, suits or claims, other than for benefits in the normal course, pending or threatened, and Beeline has no Knowledge of any facts which could give rise to any actions, suits or claims, against any of the Pension Plans, or against Beeline which might subject Beeline to any liability which would have a Material Adverse Effect on Beeline.

 

3.20. Labor Discussions. Beeline is not, and nor has it ever been, a party to any agreement, collective bargaining or otherwise, with any third party regarding the rates of pay or working conditions of any of Beeline’s employees, nor obligated under any agreement to recognize or bargain with any labor organization or union, nor involved in any labor discussions with any unit or group seeking to become the bargaining unit for any of its employees.

 

3.21 Intentionally omitted.

 

3.22 Untrue or Omitted Facts. No representation, warranty or statement by Beeline in this Agreement contains any untrue statement of a material fact or omits to state a fact necessary in order to make such representations, warranties or statements not materially misleading.

 

3.23 Related Party Disclosure. Except as set forth on Schedule 3.23, no officer or member of the Board of Directors of Beeline, any member of his or her immediate family or any of their respective Affiliates (i) is involved in any business arrangement or other relationship with Eastside (whether written or oral), (ii) owns any property or right, tangible or intangible, that is used by Eastside, (iii) to the Knowledge of Beeline, has any claim or cause of action against Eastside or (iv) to the Knowledge of Beeline, owns any direct or indirect interest of any kind in, or controls or is a director, officer, employee or partner of, or consultant to, or lender to or borrower from, or has the right to participate in the profits of, any person which is a competitor, supplier, customer, landlord, tenant, creditor or debtor of Eastside.

 

3.24 Beeline Stockholders. To the Knowledge of Beeline, all Beeline stockholders are “accredited investors” within the meaning Rule 501 of Regulation D promulgated under the Securities Act.

 

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF EASTSIDE AND MERGER SUB

 

Eastside and Merger Sub, make the following representations and warranties to Beeline which shall be true and correct on the date hereof and at the Effective Time (and Beeline, in executing, delivering and consummating this Agreement, has relied and will rely upon the correctness and completeness of each of such representations and warranties):

 

4.1. Organization, Good Standing and Qualification. Eastside and each of the Subsidiaries is an entity incorporated, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither Eastside nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of Eastside and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a Material Adverse Effect on Eastside taken as a whole, and no action has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

4.2. Certificate of Incorporation and By-Laws. Eastside’s SEC Reports contain accurate and complete copies of its Articles of Incorporation including all amendments thereto. There has not been any violation of any provisions of Eastside’s Articles of Incorporation, and no action has been taken that is inconsistent in any material respect with any resolution adopted by the stockholders, the Board of Directors or any committee of the Board of Directors of Eastside. Merger Sub has delivered to Beeline accurate and complete copies of its Certificate of Incorporation and applicable consents, including all amendments thereto. There has not been any violation of any of the provisions of Merger Sub’s Certificate of Incorporation, and no action has been taken that is inconsistent with any resolution adopted by the stockholders or the Board of Directors of Merger Sub.

 

4.3. Subsidiaries. All of the direct and indirect Subsidiaries of Eastside are set forth on Schedule 4.3. Eastside owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary, free and clear of any Liens, except for Liens created under this Agreement or imposed by Law, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

 

 

 

4.4. Capitalization. The authorized capital stock of Eastside consists of 6,000,000 shares of Common Stock having a par value of $0.0001 and 100,000,000 shares of preferred stock having a par value of $0.0001. Currently there are 1,763,489 shares of Common Stock issued outstanding. Currently there are 2,500,000 shares of Series B Preferred Stock issued and outstanding and 200,000 shares of Series C Preferred Stock issued and outstanding. All the issued and outstanding capital stock of Eastside has been duly authorized and validly issued, are fully paid and nonassessable. Schedule 4.4 reflects the number of shares of Eastside capital stock owned by each Affiliate of Eastside. Eastside has not issued any capital stock since its most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by this Agreement. Except as reflected on Schedule 4.4, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of the capital stock of Eastside or any Subsidiary, or contracts, commitments, understandings or arrangements by which Eastside or any Subsidiary is or may become bound to issue additional shares of capital stock or Common Stock Equivalents or capital stock of any Subsidiary. The issuance of the Merger Shares will not obligate Eastside or any Subsidiary to issue shares of Common Stock or other securities to any Person other than the Beeline stockholders. There are no outstanding securities or instruments of Eastside or any Subsidiary with any provision that adjusts the exercise, conversion, exchange or reset price of such security or instrument upon an issuance of securities by Eastside or any Subsidiary. There are no outstanding securities or instruments of Eastside or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which Eastside or any Subsidiary is or may become bound to redeem a security of Eastside or such Subsidiary. Beeline does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. There are no stockholders agreements, voting agreements or other similar agreements with respect to Eastside’s capital stock to which Eastside is a party or, to the Knowledge of Eastside, between or among any of Eastside’s stockholders other than as disclosed in Schedule 4.4.

 

4.5 Issuance of the Securities. The Merger Shares when issued in accordance with this Agreement, will be duly and validly issued, fully paid and non-assessable, free and clear of all Liens imposed by Eastside other than restrictions on transfer provided by Law and the Series F shall not be convertible until Eastside obtains Stockholder Approval. The Common Stock underlying the Series F, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, free and clear of all Liens imposed by Eastside other than restrictions on transfer imposed by Laws. Eastside has reserved from its duly authorized capital stock a number of shares of Common Stock equal to the number of shares issuable upon conversion of the Series F.

 

4.6. Corporate Authority; Binding Nature of Agreement. Eastside and Merger Sub each has all requisite corporate power and authority to execute and deliver this Agreement, to carry out and perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by Eastside and Merger Sub of this Agreement and the consummation of the transactions contemplated herein have been duly and validly authorized by their respective Boards of Directors. No further corporate authorization is necessary on the part of Eastside or Merger Sub to consummate the transactions contemplated hereby. Assuming this Agreement constitutes the valid and binding obligation of the other Party hereto, this Agreement, when executed and delivered by Eastside and Merger Sub, constitutes or will constitute the legal, valid and binding obligation of Eastside and Merger Sub, enforceable against Eastside and Merger Sub in accordance with its terms, (i) subject to: applicable bankruptcy, insolvency, reorganization and moratorium Laws and other Laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by Laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable Law.

 

 

4.7. No Conflicts. Except for the Required Approvals, nether the execution, delivery and performance by Eastside of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of Eastside’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) require Eastside to issue any authorization, license, consent or approval of or require notice to or filing with, any Governmental Authority; (iii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of Eastside or any Subsidiary, or give to others any rights of termination, amendment, anti-dilution or similar adjustments, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which Eastside or any Subsidiary is a party or by which any property or asset of Eastside or any Subsidiary is bound or affected, or (iv) subject to the Required Approvals, conflict with or result in a violation of any Law to which Eastside or a Subsidiary is subject (including federal and state securities Laws), or by which any property or asset of Eastside or a Subsidiary is bound or affected; except in the case of each of clauses (iii) and (iv), such as could not have or reasonably be expected to result in a Material Adverse Effect on Eastside.

 

4.8. Eastside SEC Reports; Sarbanes-Oxley Act.

 

(a) Since December 31, 2022, Eastside has filed or furnished in a timely manner all reports and other documents (the “SEC Reports”) required to be filed with the SEC under Section 15(d), 12(b) or 12(g) of the Exchange Act. None of the Eastside SEC Reports, as of their respective dates (or if amended or superseded by a filing prior to the date of this Agreement or the Closing Date, then on the date of the last such amendment or filing), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

 

(b) Eastside has established and maintains disclosure controls and procedures (as defined in Rule 13a-15 under the Exchange Act). Such disclosure controls and procedures are reasonably designed to ensure that material information relating to Eastside is made known to Eastside’s principal executive officer and its principal financial officer, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared, and (ii) to Eastside’s Knowledge, such disclosure controls and procedures are effective in timely alerting Eastside’s principal executive officer and principal financial officer to material information required to be included in Eastside’s periodic reports required under the Exchange Act.

 

(c) Eastside has established and maintains a system of internal controls. Except as disclosed in the Eastside SEC Reports, such internal controls are sufficient to provide reasonable assurance regarding the reliability of Eastside’s financial reporting and the preparation of Eastside’s financial statements for external purposes in accordance with GAAP.

 

(d) Except as reflected on Schedule 4.8(d), since December 31, 2022 to the Knowledge of Eastside, each director and executive officer of Eastside has filed with the SEC on a timely basis all statements required by Section 16(a) of the Exchange Act and the rules and regulations promulgated thereunder. Eastside has not taken any action prohibited by Section 402 of the Sarbanes-Oxley Act.

 

 

(e) Except as set forth on Schedule 4.8(e), neither Eastside nor Eastside’s independent auditors has identified or been made aware of (i) any significant deficiency or material weakness in the system of internal accounting controls utilized by Eastside, (ii) any fraud, whether or not material, that involves Eastside’s management or other employees who have a role in the preparation of financial statements or the internal accounting controls utilized by Eastside or (iii) any claim or allegation regarding any of the foregoing.

 

(f) There are no outstanding SEC comments in comment letters received from the SEC with respect to the Eastside SEC Reports. To the Knowledge of Eastside, none of the Eastside SEC Reports filed on or prior to the date hereof is subject to ongoing SEC review or investigation as of the date hereof.

 

4.9. Financial Information. (a) The financial statements of Eastside (including the related notes and schedules) for the year ended December 31, 2023 and any interim period(s) which have been filed with the SEC (the “Eastside Financial Statements”) (including, in each case, the notes and schedules thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, and fairly present the financial condition of Eastside as of the indicated dates and the results of operations of Eastside for the indicated periods except as may be otherwise specified in such financial statements or the footnotes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of Eastside and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustment, complied as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto as of their respective dates and are consistent with the books and records of Eastside. Except as set forth in the latest interim Eastside Financial Statements delivered to Beeline, Eastside has no Liabilities (i) of a nature required to be disclosed on a balance sheet or in the related notes to the Eastside Financial Statements prepared in accordance with GAAP or (ii) which, individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect on Eastside. Eastside does not have any material off-balance sheet arrangements except as disclosed in the Eastside SEC Reports. The Eastside Financial Statements do not contain any untrue statements of material facts or omit to state any material facts required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.

 

(b) The Indebtedness of Eastside is listed on Schedule 4.9(b).

 

4.10. Issuance of Merger Shares. The issuance and delivery by Eastside of the Merger Shares in connection with the Merger and this Agreement have been duly and validly authorized by all necessary action on the part of Eastside. The Merger Shares to be issued in connection with the Merger and this Agreement, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable.

 

4.11. Brokers or Finders. Except as reflected on Schedule 4.11, Eastside represents, as to itself, its subsidiaries and its Affiliates, that no agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to any brokers’ or finder’s fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement.

 

 

4.12. Consents. Eastside’s and Merger Sub’s execution and delivery of this Agreement does not, and Eastside’s and Merger Sub’s performance of this Agreement and the consummation of the transactions contemplated hereby will not require any filing to or receipt of any material consent from any Person including the holders of its capital stock or Indebtedness, except for the Required Approvals.

 

4.13 Litigation. Except as described on Schedule 4.13, there is neither pending nor, to Eastside’s Knowledge, threatened any legal or governmental action, suit, investigation, proceeding or claim, to which Eastside or any Subsidiary is or may be named as a party by or before any Governmental Authority or by any third party that is reasonably likely to have a Material Adverse Effect on Eastside. Eastside is not a party or subject to the provisions of any material injunction, judgment, decree, or order of any Governmental Authority including any preliminary inquiry or investigation by the SEC. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by Eastside or any Subsidiary under the Exchange Act or the Securities Act.

 

4.14. Absence of Undisclosed Liabilities. All Eastside Liabilities are disclosed in its SEC Reports, except: (i) those not required under GAAP to be disclosed in the SEC Reports, (ii) those which would not have or reasonably be expected to have a Material Adverse Effect on Eastside, and (iii) those which arose in the ordinary course of business subsequent to the latest Eastside Financial Statements filed with the SEC.

 

4.15. Absence of Certain Changes. Except as disclosed in a Current Report on Form 8-K filed with the SEC, since the last Eastside Financial Statements filed with the SEC, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) Eastside has not incurred any Liabilities other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) Liabilities not required to be reflected in Eastside’s financial statements pursuant to GAAP or disclosed in filings made with the SEC, (iii) Eastside has not altered its method of accounting, (iv) Eastside has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) Eastside has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Eastside stock option plans. Eastside does not have pending before the SEC any request for confidential treatment of information. Except for the issuance of the Securities contemplated by this Agreement or as set forth on Schedule 4.15, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to Eastside or its Subsidiaries or their respective businesses, prospects, properties, operations, assets or financial condition, that would be required to be disclosed by Eastside under applicable securities Laws at the time this representation is made or deemed made that has not been publicly disclosed at least one Business Day prior to the date that this representation is made.

 

 

4.16. Taxes. Except as set forth on Schedule 4.16:

 

(a) Eastside has filed all Tax Returns that it was required to file. All such Tax Returns were correct and complete in all material respects. All Taxes (as hereinafter defined) owed by Eastside (whether or not shown on any Tax Return and whether or not any Tax Return was required) have been paid except for taxes not yet due and payable. Eastside has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party. There are no Liens on any of the assets of Eastside that arose in connection with any failure (or alleged failure) to pay any Tax, except for Liens for Taxes not yet due.

 

(b) Eastside is not a party to any Tax allocation or sharing agreement. Eastside (i) has not been a member of an Affiliated Group (as hereinafter defined) filing a consolidated Federal income Tax Return and (ii) has no liability for the Taxes of any Person under Treasury regulation section 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, by contract or otherwise.

 

(c) Eastside shall not be required to include in a taxable period ending after the Closing Date taxable income attributable to income that accrued in a prior taxable period but was not recognized in any prior taxable period as a result of the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, the cash method of accounting or Section 481 of the Code or any comparable provision of state, local or foreign Tax Law. No issue relating to Taxes has been raised in writing by a taxing authority during any pending audit or examination, and no issue relating to Taxes was raised in writing by a taxing authority in any completed audit or examination, that reasonably can be expected to recur in a later taxable period.

 

(d) Except for limitations imposed by Sections 382 through 384 of the Code and analogous provisions of state Tax Law, the Merger will not result in any Tax liability to Eastside or result in a reduction of the amount of any net operating loss, net operating loss carryover, net capital loss, net capital loss carryover, Tax credit, Tax credit carryover, excess charitable contribution or basis of property that otherwise would be available to Eastside by reason or as a result of deferred intercompany transactions, excess loss accounts, or otherwise.

 

(e) Eastside has not filed a consent under Section 341(f) of the Code concerning collapsible corporations. Eastside has not made any payments, is not obligated to make any payments and is not a Party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Section 280G of the Code. Eastside has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

 

(f) Eastside is not an S corporation (within the meaning of Section 1361(a)(1) of the Code). All material elections with respect to Taxes affecting Eastside are disclosed or attached to a Tax Return of Eastside.

 

 

4.17. Contracts; Insurance. Except as set forth in Schedule 4.17 or filed as an exhibit to an SEC Report, since January 1, 2022, Eastside has no currently existing contract, obligation, agreement, plan, arrangement, commitment or the like of any material nature regarding the following:

 

(a) Written employment, bonus agreements, pension, profit sharing, deferred compensation, stock bonus, retirement, stock option, stock purchase, phantom stock or similar plans, including agreements evidencing rights to purchase securities of Eastside, and agreements among stockholders and Eastside;

 

(b) Loan or other agreements, notes, indenture, or instruments relating to or evidencing indebtedness for borrowed money, or mortgaging, pledging or granting or creating a Lien or security interest or other encumbrance on any of Eastside’s property or any agreement or instrument evidencing any guaranty by Eastside of payment or performance by any other person;

 

(c) Agreements with consultants, dealers, sales representatives, brokers or other distributors, jobbers, advertisers or sales agencies, under which Beeline anticipates incurring $100,000 or more of expenses in 2024;

 

(d) Agreements with any labor union or collective bargaining organization or other labor agreements;

 

(e) Contracts or series of contracts with the same Person for the furnishing or purchase of machinery, equipment, goods or services, including without limitation agreements with processors and subcontractors under which Eastside may incur expenses of $100,000 or more in 2024;

 

(f) Joint venture contracts or arrangements or other agreements involving a sharing of profits or expenses to which Eastside is a party;

 

(g) Agreements limiting the freedom of Eastside to compete in any line of business or in any geographic area or with any Person;

 

(h) Agreements providing for disposition of the business, assets or shares of Eastside, agreements of merger or consolidation to which Eastside is a party or letters of intent with respect to the foregoing;

 

(i) Letters of intent or agreements with respect to the purchase of sale of the business, assets or shares of any third party (other than the Merger) except for matters which have by their terms expired;

 

(j) Insurance policies presently in effect; and

 

(k) Existing leases for real or personal property.

 

 

Each of the material contracts, agreements and understandings is in full force and effect, except where the failure to be in full force and effect would not have a Material Adverse Effect on Eastside. To the Knowledge of Eastside, there are no existing defaults by Eastside thereunder, which default would result in a Material Adverse Effect on Eastside and the other parties are not in default of any of the material contracts, agreements and understandings. Eastside and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which Eastside and the Subsidiaries are engaged.. Neither Eastside nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

 

4.18. Title to Properties; Liens and Encumbrances. Eastside has good and valid title in all property and assets recorded on the Eastside Financial Statements and property and assets acquired in the ordinary course of business since the balance sheet date in the Eastside Financial Statements, free from all mortgages, pledges, Liens, security interests, conditional sale agreements, encumbrances or charges, except: (a) as would not have a Material Adverse Effect on Eastside; (b) as shown on the Eastside Financial Statements or footnotes thereto; or (c) Tax, materialmen’s or like Liens for obligations not yet due or payable or being contested in good faith by appropriate proceedings. Eastside owns or has adequate rights to use all such properties or assets as are necessary to its operations as now conducted.

 

4.19. Intellectual Property. Except for such claims, which individually or in the aggregate, would not have a Material Adverse Effect on Eastside, there are no pending or threatened claims of which Eastside has been given written notice by any Person against their use of any material trademarks, trade names, service marks, service names, mark registrations, logos, assumed names and copyright registrations, patents and all applications therefor which are owned by Eastside and used in its operations as currently conducted (the “Eastside Intellectual Property”). To Eastside’s Knowledge, Eastside has such ownership of or such rights by license, lease or other agreement to the Eastside Intellectual Property as are necessary to permit it to conduct its operations as currently conducted, except where the failure to have such rights would not have an Eastside Material Adverse Effect.

 

4.20. Compliance. Eastside is not in violation of any term of its articles of incorporation, as amended. Except as set forth on Schedule 4.20, to Eastside’s Knowledge, Eastside is not in violation of or default under any provision of: (a) any mortgage, indenture, contract, agreement, license, deed of trust, lease, franchise, Permit or other instrument to which it is a party or by which it or any of its properties are bound and there does not exist any state of facts which constitutes an event of default or which, with notice or lapse of time or both, would constitute an event of default; or (b) any judgment, decree, order, Law to which Eastside is subject to, but excluding from the foregoing clauses (a) and (b), defaults or violations which would not have a Material Adverse Effect on Eastside. Except as would not reasonably be expected to be, individually or in the aggregate, have a Material Adverse Effect on Eastside, and except with respect to compliance with Environmental Laws (as to which certain representations and warranties are made pursuant to Section 5.21 ), Eastside is in compliance with all applicable Laws and orders of Governmental Authorities including without limitation all Laws relating to taxes, insurance, environmental protection, occupational health and safety, product quality and safety, alcoholic beverages, and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect on Eastside.

 

 

(a) Eastside and its Subsidiaries are in compliance with all Laws relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. To Eastside’s Knowledge:

 

(i) no allegations of Misconduct have been made involving any current or former director, officer, employee or independent contractor of Eastside or any of its Subsidiaries; and

 

(ii) neither Eastside nor any of its Subsidiaries have entered into any settlement agreements related to allegations of Misconduct by any current or former director, officer, employee, or independent contractor of Eastside or any of its Subsidiaries.

 

4.21. Compliance with Environmental Laws. To Eastside’s Knowledge, Eastside is in material compliance with all applicable Laws relating to the protection of the environment or occupational health and safety except for non-compliance which would not, individually or in the aggregate, have a Material Adverse Effect on Eastside. Eastside has not received any written notice of, or to the Knowledge of Eastside, is the subject of, any actions, claims, investigations, demands or notices alleging liability under or non-compliance with any Laws relating to the protection of the environment or occupational health and safety which would, individually or in the aggregate, have a Material Adverse Effect on Eastside.

 

4.22. Intentionally omitted.

 

4.23. Permits and Licenses. Eastside holds all material Permits from any Governmental Authority necessary to conduct its business. Except for Permits which would not have a Material Adverse Effect on Eastside, Eastside has all Permits necessary to conduct its business of all Governmental Authorities. Such Permits are in full force and effect, and no suspension or cancellation of any such Permits, etc. is pending or to the Knowledge of Eastside threatened; and Eastside is in compliance in all material respects with all requirements, standards and procedures of the Governmental Authorities which have issued such Permits, except for such non-compliance as would not have a Material Adverse Effect on Eastside.

 

4.24. Interest in Assets. Except as described on Schedule 4.24, neither the stockholders of Eastside nor any Affiliate(s) of the stockholders nor anyone else other than Eastside owns any property or rights, tangible or intangible, used in or related, directly or indirectly, to the business of Eastside.

 

4.25. Employee Benefit Plans. (a) There are no “employee pension benefit plans” (within the meaning of Section 3(2)(A) of ERISA (collectively, the “Eastside Pension Plans”) maintained by Eastside; and (b) Eastside does not have any policies or plans, whether written or not, that provide for vacation benefits, severance benefits, leave rights or other benefits to its employees. There are no outstanding Liabilities of Eastside to the Eastside Pension Plans, and Eastside knows of no potential Liabilities in connection therewith. To the Knowledge of Eastside, there are no actions, suits or claims, other than for benefits in the normal course, pending or threatened, and Eastside has no Knowledge of any facts which could give rise to any actions, suits or claims, against any of the Eastside Pension Plans, or against Eastside which might subject Eastside to any liability which would have a Material Adverse Effect on Eastside.

 

 

4.26. Labor Discussions. Eastside is not, and nor has it ever been, a party to any agreement, collective bargaining or otherwise, with any Party regarding the rates of pay or working conditions of any of Eastside’s employees, nor obligated under any agreement to recognize or bargain with any labor organization or union, nor involved in any labor discussions with any unit or group seeking to become the bargaining unit for any of its employees.

 

4.27 Eastside’s Existing Businesses. Eastside has no plans to sell or otherwise divest its existing pre-closing businesses, except as reflected on Schedule 4.27. After the contemplated divestiture Eastside without giving effect to the Beeline acquisition shall not be a shell company within the meaning of the Rules of the SEC and interpretations of its Staff.

 

4.28 IT Systems.

 

(a) To Eastside’s Knowledge, Eastside Systems are reasonably sufficient for the needs of Eastside’s business as currently conducted, including as to capacity, scalability, and ability to process current and anticipated peak volumes in a timely manner. Eastside Systems are in sufficiently good working condition to perform all information technology operations and include sufficient licensed capacity (whether in terms of authorized sites, units, users, seats or otherwise) for all Software, in each case as necessary for the conduct of Eastside’s business as currently conducted.

 

(b) Since its inception, there has been no unauthorized access, use, intrusion or breach of security, or material failure, breakdown, performance reduction or other adverse event affecting any Eastside Systems, that has resulted in or could reasonably be expected to result in any: (A) substantial disruption of or interruption in or to the use of such Eastside Systems or the conduct of Eastside’s business; (B) material loss, destruction, damage or harm of or to Eastside or its operations, personnel, property or other assets; or (C) material liability of any kind to Eastside. Eastside has taken reasonable actions, consistent with applicable industry best practices in Eastside’s industry, to protect the integrity and security of Eastside Systems and the data and other information stored thereon.

 

(c) Eastside maintains commercially reasonable back-up and data recovery, disaster recovery and business continuity plans, procedures and facilities, has acted in material compliance therewith, and has tested such plans and procedures on a regular basis, and such plans and procedures have been proven effective in all material respects upon such testing.

 

 

4.29 Data Privacy and Protection; Cybersecurity.

 

(a) Eastside has complied with all Eastside Privacy Policies and with all applicable Laws and contracts to which it is a party relating to: (A) the privacy of customers or users of Eastside Products, any website, product or service operated by or on behalf of Eastside; and (B) the collection, storage, hosting, disclosure, transmission, transfer, disposal, other processing or security of any Customer Data or Personal Information by Eastside or by third parties having authorized access to the records of Eastside, with respect to each of (A) and (B) in all material respects. No claims have been asserted or, are threatened against Eastside alleging a violation of any Person’s privacy, confidentiality or other rights under any Eastside Privacy Policy, under any contract, or under any Law relating to any Customer Data or Personal Information. With respect to any Customer Data and Personal Information, Eastside has taken commercially reasonable measures (including implementing and monitoring compliance with respect to technical and physical security) designed to safeguard such data against loss and against unauthorized access, use, modification, disclosure or other misuse. There has been no unauthorized access to or other misuse of any Customer Data and Personal Information. Eastside has not received any complaint from any Person (including any action letter or other inquiry from any Governmental Authority) regarding Eastside’s collection, storage, hosting, disclosure, transmission, transfer, disposal, other processing or security of Customer Data or Personal Information. There have been no facts or circumstances that would require Eastside to give notice to any customers, suppliers, consumers or other similarly situated Persons of any actual or perceived data security breaches pursuant to an applicable Laws requiring notice of such a breach.

 

(b) Without limiting the generality of the foregoing, Eastside is compliant with all Laws relating to data privacy and data protection, and the collection, storage, maintenance and transmission of personal data and health information, including, without limitation, all applicable Laws relating to cybersecurity, data privacy and protection and/or Customer Data or Personal Information. Eastside is compliant with the agreements, terms and policies of, and has not reason to believe that it will not continue to have access to, the third party data hosting and transmission services and infrastructure it utilizes or anticipates utilizing in its operations as presently conducted or planned, including without limitation, Amazon Web Services, Google Cloud and Microsoft Azure Cloud. Eastside has complied with the SEC’s rules related to cybersecurity risks and related disclosures.

 

4.30 Investment Company. Eastside is not, and is not an Affiliate of, and immediately after receipt of payment for the Merger Shares, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. Eastside shall conduct its business in a manner so that it will not become an investment company subject to registration under the Investment Company Act of 1940, as amended.

 

4.31 Foreign Corrupt Practices. Neither Eastside nor any Subsidiary, nor to the Knowledge of Eastside or any Subsidiary, any agent or other Person acting on behalf of Eastside or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by Eastside or any Subsidiary (or made by any Person acting on its behalf of which Eastside is aware) which is in violation of Law or (iv) violated in any material respect any provision of FCPA.

 

 

4.32 Accountants. Eastside’s accounting firm is set forth on Schedule 4.32. Such accounting firm (i) is a public accounting firm registered with the PCAOB as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in Eastside’s annual report on Form 10-K for the fiscal year ended December 31, 2024. To Eastside’s Knowledge, such accounting firm has not been subject to any disciplinary actions or other adverse actions from the PCAOB or any Governmental Authority adversely impacting the ability of such accounting firm to conduct its audit and review and related accounting services for which it was engaged by Eastside, nor does Eastside have any Knowledge that the PCAOB or any Governmental Authority is conducting any investigation or inquiry, however termed, which may lead to disciplinary action against such accounting firm.

 

4.33 Stock Plans. Each stock option granted by Eastside under Eastside’s stock option plan or equity incentive plan was granted (i) in accordance with the terms of Eastside’s stock option plan and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under GAAP and applicable Law. No stock option granted under Eastside’s stock option plan or equity incentive plan has been backdated. Eastside has not knowingly granted, and there is no and has been no Eastside policy or practice to knowingly grant, stock options or other equity securities or rights to equity securities including restricted stock units prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding Eastside or its Subsidiaries or their financial results or prospects.

 

4.34 Money Laundering. The operations of Eastside and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, and all other applicable money laundering Laws including in the United States and other countries (collectively, the “Money Laundering Laws”), and no Action by or before any Governmental Authority and involving Eastside or any Subsidiary with respect to the Money Laundering Laws is pending or, to the Knowledge of Eastside or any Subsidiary, threatened.

 

4.35 Application of Takeover Protections. Eastside and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under Eastside’s certificate of incorporation (or similar charter documents) or the Laws of its state of incorporation that is or could become applicable to the Investor as a result of the Investor and Eastside fulfilling their obligations or exercising their rights under the Agreement and the Merger, including without limitation as a result of Eastside’s issuance of the Merger Shares.

 

4.36 Registration Rights. Except as reflected on Schedule 4.36, no Person has any right to cause Eastside or any Subsidiary to effect the registration under the Securities Act of any securities of Eastside or any Subsidiaries.

 

 

4.37 Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and Eastside has taken no action designed to, or which to Eastside’s Knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has Eastside received any notification that the SEC is contemplating terminating such registration. Except as set forth on Schedule 4.37, Eastside has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Eastside Common Stock is or has been listed or quoted to the effect that Eastside is not in compliance with the listing or maintenance requirements of such Trading Market. Eastside is and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The Common Stock is currently eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and Eastside is current in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer.

 

4.38 Private Placement. Assuming the accuracy of Beeline’s representations and warranties in Section 3.25, no registration under the Securities Act is required for the offer and sale of the Securities by Eastside to the Beeline stockholders as contemplated hereby. The issuance and sale of the Merger Shares pursuant to the Merger does not contravene the rules and regulations of the Trading Market.

 

4.39 No Disqualification Events. With respect to the Merger Shares to be offered and sold hereunder in reliance on Rule 506 under the Securities Act, none of Eastside, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of Eastside participating in the offering hereunder, any beneficial owner of 20% or more of Eastside’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with Eastside in any capacity at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). Eastside has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. Eastside has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Investor a copy of any disclosures provided thereunder.

 

4.40 Other Covered Persons. Other than the broker-dealer identified on Schedule 4.40, Eastside is not aware of any Person (other than any Issuer Covered Person) that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Merger Shares

 

4.41 Notice of Disqualification Events. Eastside will notify Beeline in writing, prior to each Closing Date of (i) any Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person.

 

4.42 Related Party Disclosure. Except as set forth on Schedule 4.42, no officer, director or Affiliate of Eastside, or any member of his or her immediate family or any of their respective Affiliates (i) is involved in any business arrangement or other relationship with Eastside(whether written or oral), (ii) owns any property or right, tangible or intangible, that is used by Eastside, (iii) to the Knowledge of Eastside, has any claim or cause of action against Eastside or (iv) to the Knowledge of Eastside, owns any direct or indirect interest of any kind in, or controls or is a director, officer, employee or partner of, or consultant to, or lender to or borrower from, or has the right to participate in the profits of, any Person which is a competitor, supplier, customer, landlord, tenant, creditor or debtor of Eastside.

 

 

4.43. Untrue or Omitted Facts. No representation, warranty or statement by Eastside in this Agreement contains any untrue statement of a material fact, or omits to state a fact necessary in order to make such representations, warranties or statements not materially misleading.

 

ARTICLE V

 

ADDITIONAL AGREEMENTS OF THE PARTIES

 

The Parties hereby further agree that, from and after the Closing:

 

5.1 Conduct of Business. From the date hereof until the Effective Time, except (a) as required or contemplated by this Agreement, (b) as required or contemplated by any of the agreements annexed as exhibits to this Agreement, or (c) as consented to in writing by the other Parties, each of Eastside and Beeline will, and will cause each of its Subsidiaries to, (i) conduct its business in the ordinary course consistent with past practice, (ii) use its commercially reasonable efforts to preserve intact its business organization and goodwill and relationships with customers, suppliers, licensors, licensees, distributors and other third parties and to keep available the services of its current officers and employees and (iii) use its commercially reasonable efforts to protect its intellectual property to the end that its goodwill and ongoing business shall not be impaired in any material respect as of the Closing Date.

 

5.2 No Solicitation.

 

(a) Alternative Transaction. Beeline shall not and shall not authorize or permit the directors, officers, employees and representatives of Beeline to, directly or indirectly, (i) solicit, initiate or knowingly facilitate, induce or encourage any inquiries or the making of any proposal or offer that constitutes or would reasonably be expected to lead to any merger, consolidation, share exchange, business combination, reorganization, recapitalization or other similar transaction (an “Alternative Transaction”), or (ii) enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any Person any information with respect to, or cooperate in any way that would otherwise reasonably be expected to lead to a proposal to effect any Alternative Transaction (an “Alternative Transaction Proposal”). Beeline agrees that it will take the necessary steps to promptly inform its directors, officers, employees and representatives of the obligations undertaken in this Section 5.2.

 

 

(b) Superior Proposal. Notwithstanding anything to the contrary contained in Section 5.2(a) or elsewhere in this Agreement, in the event that Beeline receives after the date of this Agreement and prior to obtaining Beeline Stockholder Approval, a bona fide written Alternative Transaction Proposal which the Board of Directors of Beeline determines (after consultation with its outside legal counsel) to be on terms that the Board of Directors of Beeline has determined superior to the transaction contemplated by this Agreement (a “Superior Proposal”) or to be reasonably likely to lead to a Superior Proposal, Beeline may then take the following actions:

 

(i) Furnish any information with respect to Beeline to the Person or group (and their respective representatives) making such Alternative Transaction Proposal; and

 

(ii) Engage in discussions or negotiations with such Person or group (and their representatives) with respect to such Alternative Transaction Proposal.

 

(c) Notification. Within one (1) Business Day after receipt of any Alternative Transaction Proposal or any request for nonpublic information or any inquiry relating in any way to, or that would reasonably be expected to lead to, any Alternative Transaction Proposal, Beeline shall provide Eastside with written notice of the material terms and conditions of such Alternative Transaction Proposal, request or inquiry, and the identity of the Person or group making any such Alternative Transaction Proposal, request or inquiry and a copy of all written materials provided to it in connection with such Alternative Transaction Proposal, request or inquiry. In addition, Beeline shall provide Eastside as promptly as practicable (and in any event within one (1) Business Day) with all information as is reasonably necessary to keep Eastside fully informed of all material oral or written communications regarding, and the status and changes to the economic or other material terms of, any such Alternative Transaction Proposal, request or inquiry, and shall provide, as promptly as reasonably practicable, to Eastside a copy of all material written materials (including material written materials provided by email or otherwise in electronic format) provided by or to Beeline or any of its representatives in connection with such Alternative Transaction Proposal, request or inquiry. Beeline shall provide Eastside with seventy-two (72) hours prior notice (or such lesser prior notice as is provided to the members of its Board of Directors) of any meeting of its Board of Directors at which its Board of Directors is reasonably expected to consider any Alternative Transaction Proposal; provided, that nothing contained in this Section 5.2(c) or elsewhere in this Agreement shall give or be deemed to give Eastside the right to participate or otherwise be a party to any meeting of Beeline’s Board of Directors or any committee thereof.

 

(d) Termination. Notwithstanding anything to the contrary set forth in any other provision of this Agreement, the Board of Directors of Beeline may, solely in response to a Superior Proposal, terminate this Agreement pursuant to Section 7.1 and concurrently enter into a definitive agreement with respect to such Superior Proposal, if all of the following conditions in clauses (i) through (vi) are met, as applicable:

 

(i) such Superior Proposal has been made and has not been withdrawn and continues to be a Superior Proposal;

 

(ii) Beeline Stockholder Approval has not been obtained;

 

(iii) Beeline has (A) provided to Eastside five (5) Business Days’ prior written notice which shall state expressly (1) that it has received a Superior Proposal, (2) the material terms and conditions of the Superior Proposal (including the per share value of the consideration offered therein and the identity of the Person or group of Persons making the Superior Proposal), and shall have contemporaneously provided to Eastside a copy of the relevant proposed transaction agreements with the Person or group of Persons making such Superior Proposal and other material documents, including the definitive agreement with respect to such Superior Proposal (the “Alternative Acquisition Agreement”) (it being understood and agreed that any amendment to the financial terms or any other material term of such Superior Proposal shall require a new notice and a new five (5) Business Day period) and (3) that it intends to terminate this Agreement, and the manner in which it intends to do so, and (B) prior to terminating this Agreement, to the extent requested by Eastside, engaged in good faith negotiations with Eastside to amend this Agreement in such a manner that the Alternative Acquisition Agreement ceases to constitute a Superior Proposal;

 

 

(iv) the Board of Directors of Beeline has determined in good faith, after consultation with its outside legal counsel, that, in light of such Superior Proposal and taking into account any revised terms offered by Eastside, the failure to terminate this Agreement and enter into the Alternative Acquisition Agreement would reasonably be expected to constitute a breach of its fiduciary duties under applicable Law;

 

(v) Beeline shall have complied with Section 5.2(a) and shall not have breached any of the other provisions set forth in this Section 5.2 in any material respect; and

 

(vi) Beeline pays all fees and expenses as required pursuant to Section 8.2 hereof.

 

(e) Beeline Adverse Recommendation Change. Notwithstanding anything to the contrary set forth in Section 5.2(d) or in any other provision of this Agreement, the Board of Directors of Beeline may recommend to the Beeline stockholders a Superior Proposal (a “Beeline Adverse Recommendation Change”) if it determines in good faith after consultation with its legal advisors that the failure to make such Beeline Adverse Recommendation Change would reasonably be expected to constitute a breach of its fiduciary duties under applicable Law; provided, that (i) Beeline has provided to Eastside five (5) Business Days’ prior written notice advising Eastside that it intends to effect a Beeline Adverse Recommendation Change and specifying, in reasonable detail, the reasons for Beeline Adverse Recommendation Change and (ii) during such five (5) Business Day period, if requested by Eastside, Beeline engages in good faith negotiations with Eastside to amend this Agreement in a manner that obviates the need for Beeline Adverse Recommendation Change.

 

5.3 Beeline Stockholders’ Approval.

 

Except to the extent expressly permitted by Section 5.2(d), (i) the Board of Directors of Beeline shall recommend that its stockholders vote in favor of the adoption of this Agreement by written consent or at the Beeline stockholders’ meeting, (ii) any solicitation material provided to Beeline stockholders shall include a statement to the effect that the Board of Directors of Beeline has recommended that Beeline stockholders vote in favor of adoption of this Agreement by written consent at a Beeline stockholders’ meeting and (iii) neither the Board of Directors of Beeline nor any committee thereof shall withdraw, amend or modify, or propose or resolve to withdraw, amend or modify in a manner adverse to Eastside, the recommendation of its Board of Directors that Beeline stockholders consent to or vote in favor of the adoption of this Agreement.

 

 

5.4 Access to Information. (a) Upon reasonable prior notice and subject to applicable Law, from the date hereof until the Effective Time, Beeline shall, and shall cause its officers, directors, employees and representatives of Beeline to, afford Eastside and its officers, directors, employees and representatives, following notice from Eastside to Beeline in accordance with this Section 5.4, reasonable access during normal business hours to the officers, employees, agents, properties, offices and other facilities, books and records of Beeline and its subsidiaries, and all other financial, operating and other data and information as Eastside may reasonably request. Notwithstanding the foregoing, Beeline shall not be obligated to disclose any information that, in the reasonable judgment of Beeline, (i) it is not legally permitted to disclose or the disclosure of which would contravene any applicable Law or court order or (ii) the disclosure of which would be reasonably likely to cause the loss of any attorney-client or other legal privilege or trade secret protection held by Beeline. Beeline shall be entitled to have representatives present at all times during any such inspection. No investigation pursuant to this Section 5.4 or information provided, made available or delivered to Eastside pursuant to this Section 5.4 or otherwise shall affect any representations or warranties of Beeline or conditions or rights of Eastside contained in this Agreement.

 

(b) Upon reasonable prior notice and subject to applicable Law, from the date hereof until the Effective Time, Eastside shall, and shall cause its officers, directors, employees and representatives of Eastside to, afford Beeline and its officers, directors, employees and representatives, following notice from Beeline to Eastside in accordance with this Section 5.4, reasonable access during normal business hours to the officers, employees, agents, properties, offices and other facilities, books and records of Eastside and its subsidiaries, and all other financial, operating and other data and information as Beeline may reasonably request. Notwithstanding the foregoing, Eastside shall not be obligated to disclose any information that, in the reasonable judgment of Eastside, (i) it is not legally permitted to disclose or the disclosure of which would contravene any applicable Law or court order or (ii) the disclosure of which would be reasonably likely to cause the loss of any attorney-client or other legal privilege or trade secret protection held by Eastside. Eastside shall be entitled to have representatives present at all times during any such inspection. No investigation pursuant to this Section 5.4 or information provided, made available or delivered to Beeline pursuant to this Section 5.4 or otherwise shall affect any representations or warranties of Eastside or conditions or rights of Beeline contained in this Agreement.

 

5.5 Listing. Eastside shall use commercially reasonable efforts to cause the Merger Shares to be authorized for listing on the Trading Market, subject to official notice of issuance, prior to the Closing Date, except for the non-voting preferred stock that is subject to Stockholder Approval.

 

 

5.6. Confidentiality. Notwithstanding anything to the contrary contained in this Agreement, and subject only to any disclosure requirements which may be imposed upon Eastside under applicable state or federal securities Laws, it is expressly understood and agreed by Eastside and Beeline that: (a) the conversations, negotiations and transactions relating to this Agreement and/or contemplated hereby; and (b) all financial information, business records and other non-public information concerning Eastside or Beeline which any of the Parties or their respective representatives has received or may hereafter receive, shall be maintained in the strictest confidence by the Parties and their respective representatives, and shall not be disclosed to any Person that is not associated or affiliated with any of the Parties and involved in the transactions contemplated hereby, without the prior written approval of Eastside or Beeline, as applicable. The Parties hereto shall use their best efforts to avoid disclosure of any of the foregoing or undue disruption of any of the business operations or personnel of Eastside or Beeline. Except for information generally available to the public, in the event that the transactions contemplated hereby shall not be consummated for any reason, each of the Parties covenants and agrees that neither it nor its representatives shall retain any documents, lists or other writings which they may have received or obtained in connection herewith or any documents incorporating any of the information contained in any of the same (all of which, and all copies thereof in the possession or control of themselves or their representatives, shall be returned to the original source of the material at issue or destroyed, if certified as to such destruction by an officer of such party). The Parties hereto shall be responsible for any damages sustained by reason of their respective breaches of this Section 5.6, and this Section 5.6 may be enforced by injunctive relief. Any duty of confidentiality is subject applicable Laws.

 

5.7. Publicity. The initial press releases with respect to the execution of this Agreement shall be acceptable to Eastside and Beeline. Thereafter, so long as this Agreement is in effect, neither Eastside nor Beeline nor any of their Affiliates shall issue or cause the publication of any press release with respect to the Merger, this Agreement or the other transactions contemplated hereby or otherwise without the prior agreement of Eastside and Beeline; provided, however, that Beeline shall not unreasonably withhold its agreement to any press release proposed by Eastside based upon advice of Eastside’s counsel that the proposed disclosure is reasonably necessary in light of Eastside’s responsibilities as a public company.

 

5.8. Accounting Cooperation. Beeline and Eastside shall cause any accountants retained by Beeline or Eastside to cooperate in connection with ongoing audit or other work relating to periods prior to the Closing Date, as required by applicable federal and state securities Laws, and other reasonable requirements. Such cooperation shall include, without limitation, providing such assurances, comfort letters and access to work papers as may reasonably be requested by Eastside or Beeline and its accountants.

 

5.9. Further Assurances. From time to time from and after the Closing, the Parties shall execute and deliver, or cause to be executed and delivered, any and all such further agreements, certificates and other instruments, and shall take or cause to be taken any and all such further action, as any of the Parties may reasonably deem necessary or desirable in order to carry out the intent and purposes of this Agreement.

 

5.10. Tax Matters. Eastside and Beeline shall use commercially reasonable efforts prior to the Effective Time to cause the Merger to qualify as a tax-free reorganization under Section 368(a)(1) of the Code. The Parties hereto shall report the Merger as a reorganization within the meaning of Section 368(a) of the Code, and neither Eastside, Merger Sub nor Beeline shall take any action or fail to take any action prior to or following the Closing that would reasonably be expected to cause the Merger to fail to qualify as a reorganization.

 

 

5.11 Voting Agreements. Prior to the Closing, all of the officers, directors and stockholders of Eastside listed on Schedule 5.11 shall enter into agreements to vote all capital stock of Eastside over which such Persons have voting control as of the record date for the meeting of stockholders of Eastside in accordance with a Voting Agreement reasonable acceptable to Eastside and Beeline (the “Voting Agreement”), and Eastside shall enter into a Voting Agreement with each such Person in the furtherance thereof. Eastside shall not amend, modify, waive or terminate any provision of any of the Voting Agreements and shall enforce the provisions of each Voting Agreement in accordance with its terms. If any party to a Voting Agreement breaches any provision of a Voting Agreement, Eastside shall promptly use its best efforts to seek specific performance of the terms of such Voting Agreement. Notwithstanding the foregoing, the current Beeline stockholders shall each be a third party beneficiary of any Voting Agreement.

 

5.12 Eastside Stockholder Approval. Following the Closing, Eastside shall promptly file proxy material with the SEC and use its best efforts to seek Stockholder Approval at a stockholders’ meeting of the issuance of Eastside Common Stock issuable upon conversion of the Series F.

 

ARTICLE VI

 

CONDITIONS

 

6.1. Conditions to the Obligations of Eastside, Merger Sub and Beeline. The respective obligations of Eastside, Merger Sub and Beeline to consummate the transactions contemplated by this Agreement are subject to the satisfaction, at or before the Closing Date, of all the following conditions, any one or more of which may be waived in writing by any Party solely on its own behalf:

 

(a) Beeline Stockholder Approval. The stockholders of Beeline shall have approved the Merger contemplated by this Agreement.

 

(b) Listing. The Eastside Common Stock which is part of the Merger Shares issuable to Beeline stockholders pursuant to the Merger shall have been authorized for listing on the Trading Market, subject to official notice of issuance.

 

(c) Debt Exchange Agreement. The Debt Exchange Agreement between Eastside and all of its secured lenders, in the form annexed hereto as Exhibit A, shall have been fully executed, and the Closing defined in the Debt Satisfaction Agreement shall have occurred prior to or simultaneous with the Closing of the Merger.

 

(d) Lock-Up Agreements. Each holder of Eastside preferred stock outstanding as of July 31, 2024 shall execute a lock-up agreement in a form agreeable to Eastside and Beeline agreeing to a 90-day lock-up following the Closing.

 

(e) the outstanding Beeline Debentures have been converted into Beeline Common Stock.

 

 

(f) Eastside shall have raised $3,000,000 in gross proceeds from the sale of preferred stock and warrants on terms economically similar to the Term Sheet attached as Exhibit B.

 

(g) The Employment Agreement with Geoffrey Gwin has been amended in a manner satisfactory to Eastside, Beeline and Gwin.

 

6.2 Conditions Specific to Obligations of Eastside and Merger Sub. The obligations of Eastside to consummate the transactions contemplated by this Agreement are further subject to the satisfaction, at or before the Closing Date, of all the following conditions, any one or more of which may be waived in writing by Beeline:

 

(a) Accuracy of Representations and Warranties. All representations and warranties made by Beeline shall be true and correct on and as of the Closing Date as though such representations and warranties were made on and as of that date (other than those representations and warranties that address matters only as of a particular date or only with respect to a specific period of time which need only be true and accurate as of such date or with respect to such period), except where the failure of such representations and warranties to be so true and accurate (without giving effect to any limitation as to “materiality” set forth therein), would not have a Material Adverse Effect on Beeline.

 

(b) Performance. Beeline shall have performed, satisfied and complied with in all material aspects all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Beeline on or before the Closing Date.

 

(c) Certification. Eastside shall have received a certificate, dated the Closing Date, signed by an officer of Beeline certifying:

 

(i)

that the conditions specified in Sections 6.2(a) and (b) above have been fulfilled;

 

(ii)

that, as of the Closing Date, there are no equity securities issued by Beeline and outstanding other than Common Stock and the stock options, other equity grants, if any, and warrants to be assumed by Eastside pursuant to Section 2.1(e);

 

(iii)

that, as of the Closing Date, there are no other rights to acquire equity securities issued by Beeline that will not be assumed by Eastside;

 

(iv)

the Debenture holders of Beeline have converted the Debentures into Beeline Common Stock;

 

(v)

The Parties shall have received evidence that immediately prior to the Closing the Preferred Stock of Beeline not issued as of July 31, 2024 shall have been converted into Beeline Common Stock; and

 

(vi)

After July 31, 2024, Eastside shall have received at least Three Million Dollars ($3 million) in gross proceeds from the sale of preferred stock, of which Two Million ($2 million) has been advanced to Beeline on terms reasonably satisfactory to Beeline and Eastside.

 

 

(d) Resolutions and Written Consents. Eastside shall have received certified resolutions of the Boards of Directors of Beeline authorizing Beeline’s execution, delivery and performance of this Agreement and all actions to be taken by Beeline hereunder. Eastside shall have also received resolutions duly adopted by the stockholders of Beeline authorizing Beeline’s execution, delivery and performance of this Agreement, and all actions to be taken by Beeline hereunder.

 

(e) Good Standing Certificate. Beeline shall have delivered to Eastside a certificate issued by the Secretary of State of Delaware, evidencing the good standing of Beeline in Delaware as of a date not more than five (5) calendar days prior to the Closing Date.

 

(f) Due Diligence. Eastside shall have received from Beeline all information reasonably requested by Eastside from Beeline, and none of such information shall have revealed a material inaccuracy of any warranty by Beeline made in this Agreement.

 

(g) Beeline Finances. Beeline shall have delivered to Eastside a certification by Beeline’s Chief Financial Officer that, as of June 30, 2024, Beeline’s stockholders’ equity, measured in accordance with GAAP, was approximately One Million Dollars ($1,000,000).

 

(h) Consents. All authorizations, consents, orders, declarations or approvals of, or filings with, or terminations or expirations of waiting periods imposed by, any Governmental Authority or third party which the failure to obtain, make or occur would have or could reasonably be expected to have a Material Adverse Effect on Beeline shall have been obtained, made or occurred.

 

(i) No Material Adverse Effect. There shall not have occurred any Material Adverse Effect as to Beeline.

 

(j) Eastside shall have arranged for the transfer of its existing operating businesses to wholly-owned Subsidiaries and further arranged for the future sales of the “craft” subsidiary and the transfer of the net proceeds to its stockholders as of the date prior to the Effective Time.

 

 

6.3. Conditions Specific to the Obligations of Beeline. The obligations of Beeline to consummate the Merger and the transactions contemplated by this Agreement are further subject to the satisfaction, at or before the Closing Date, of all of the following conditions, any one or more of which may be waived in writing by Beeline:

 

(a) Accuracy of Representations and Warranties. All representations and warranties made by Eastside and Merger Sub shall be true and correct on and as of the Closing Date as though such representations and warranties were made on and as of that date (other than those representations and warranties that address matters only as of a particular date or only with respect to a specific period of time which need only be true and accurate as of such date or with respect to such period), except where the failure of such representations and warranties to be so true and accurate (without giving effect to any limitation as to “materiality” or “material adverse effect” set forth therein), would not have a Material Adverse Effect on Eastside.

 

(b) Performance. Eastside and Merger Sub shall have performed, satisfied and complied in all material aspects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Eastside or Merger Sub on or before the Closing Date.

 

(c) Certification. Beeline shall have received a certificate, dated the Closing Date, signed by an officer of Eastside, certifying that:

 

(i)

that the conditions specified in Sections 6.3(a) and (b) above have been fulfilled;

 

(ii)

that, as of the Closing Date, Eastside will have no outstanding Indebtedness;

 

(iii)

Beeline has received the Eastside Voting Agreements reflected in Section 5.11;

 

(iv)

Eastside has appointed two Persons to its Board of Directors who have been designated by Beeline;

 

(v)

Eastside has amended its By-laws to reduce its quorum for stockholders’ meetings to one-third of the voting power.

 

(d) Resolutions. Beeline shall have received certified resolutions of the Boards of Directors of Eastside and Merger Sub and certified resolutions of Eastside as stockholder of Merger Sub authorizing the Merger and Eastside’s execution, delivery and performance of this Agreement, and all actions to be taken by Eastside and Merger Sub hereunder. Beeline shall have also received resolutions duly adopted by the stockholders of Eastside authorizing Eastside’s issuance of the Merger Shares as well as the amendments to Eastside’s Articles of Incorporation required hereunder.

 

(e) Good Standing Certificates. Eastside shall have delivered to Beeline (x) a certificate issued by the Secretary of State of Nevada evidencing the good standing of Eastside in Nevada and (y) a certificate issued by the Secretary of State of Delaware evidencing the good standing of Merger Sub, each as of a date not more than five (5) calendar days prior to the Closing Date.

 

(f) Dispute Settlements. The lawsuit now pending between Eastside and Sandstrom Partners Inc. shall have been dismissed or withdrawn. The claim by Perkins Coie LLP shall have been released.

 

 

(g) Due Diligence. Beeline shall have received from Eastside all information reasonably requested by Beeline from Eastside, and none of such information shall have revealed a material inaccuracy of any warranty by Eastside made in this Agreement.

 

(h) Grant of Warrants. Eastside shall have agreed to assume all Beeline warrants and arranged for the issuance at Closing of new Eastside stock options, equity grants, if any, and warrants in a manner acceptable to Beeline.

 

(i) Consents. All authorizations, consents, orders, declarations or approvals of, or filings with, or terminations or expirations of waiting periods imposed by, any Governmental Authority or third party which the failure to obtain, make or occur would have or could reasonably be expected to have a Material Adverse Effect on Eastside shall have been obtained, made or occurred.

 

(j) No Material Adverse Effect. There shall not have occurred any Material Adverse Effect as to Eastside.

 

(k) Beeline shall in its sole discretion be satisfied with the outstanding liabilities of Beeline and the amount of cash or other property payable to satisfy liabilities.

 

ARTICLE VII

 

CLOSING

 

7.1. Place and Date of Closing. The consummation of the transactions contemplated by this Agreement (the “Closing”) shall take place at such location as is agreed to between the Parties, on the tenth Business Day after satisfaction of all conditions set forth in Article VI or such time as is mutually agreeable to the Parties (the date of the Closing being referred to in this Agreement as (the “Closing Date”), but in no event later than September 30, 2024, without consent of the Parties.

 

7.2. Items to be Delivered by Beeline. At the Closing, Beeline will deliver or cause to be delivered to Eastside:

 

(a) The items required by Section 6.2;

 

(b) Evidence of any Persons who have elected their dissenters’ rights under the DGCL;

 

(c) The Good Standing Certificates required by Section 6.2(e).

 

7.3. Items to be Delivered by Eastside. At the Closing, Eastside will deliver or cause to be delivered to Beeline.

 

(a) The certificate items by Section 6.3;

 

(b) Evidence that the Certificate of Designations of Rights, Privileges and Limitations of Series F Convertible Preferred Stock has been filed with the Secretary of State of Nevada and accepted for filing;

 

 

(c) Evidence that the Merger Shares have been issued in book entry form;

 

(d) Evidence that the new Eastside stock options and warrants have been issued in exchange for the outstanding Beeline stock options and warrants pursuant to Sections 2.1(e) and (f);

 

(e) The Good Standing Certificates required by Section 6.3(e).

 

(f) Resignations, effective on the Closing Date, of two members of the Eastside Board of Directors as are requested in writing by Beeline.

 

(g) Resolutions, effective on the Closing Date, appointing to the Eastside Board of Directors two individuals as are designated in writing by Beeline.

 

(h) Resolutions appointing a Chief Financial Officer as designated in writing by Beeline.

 

(i) Evidence of third party consents and waivers requested by Beeline.

 

(j) Evidence that the stock options to replace terminated Beeline stock options have been granted.

 

ARTICLE VIII

 

TERMINATION OF AGREEMENT

 

8.1 Termination. This Agreement may be terminated and the Merger contemplated hereby may be abandoned at any time prior to the Effective Time, whether before or after receipt of Beeline Stockholder Approval:

 

(a) by mutual written consent of Eastside and Beeline;

 

(b) by either Eastside or Beeline, if the Merger shall not have been consummated by September 30, 2024; provided that the right to terminate this Agreement pursuant to this clause (b)(i) shall not be available to the Party seeking to terminate this Agreement if such Party’s breach of this Agreement has been the cause of the failure of the Effective Time to occur;

 

(c) by Eastside or Beeline, if the approval of the Merger by the stockholders of Beeline shall not have been obtained by written consent or at the Beeline stockholders’ meeting, or at any adjournment or postponement thereof, at which the final vote thereon was taken;

 

(d) by Beeline, at any time prior to the receipt of Beeline Stockholder Approval, in accordance with Section 5.2(d); provided, that, as a condition to the effectiveness of such termination, Eastside shall have received all fees and expenses as required pursuant to Section 8.2;

 

 

(e) by Beeline (provided it is not then in material breach of any of its obligations under this Agreement), if (i) there is any continuing inaccuracy in the representations and warranties of Eastside or Merger Sub set forth in this Agreement, or (ii) Eastside or Merger Sub are then failing to perform any of their covenants or other agreements set forth in this Agreement, in either cases (i) and (ii), (1) such that the conditions set forth in Section 6.3(a) or Section 6.3(b), as applicable, would not be satisfied as of the time of such termination, and (2) such breach shall be incapable of being cured or shall not have been cured within ten (10) days after written notice thereof shall have been received by Eastside; or

 

(f) by Eastside (provided it is not then in material breach of any of its obligations under this Agreement), if (i) there is any continuing inaccuracy in the representations and warranties of Beeline set forth in this Agreement, or (ii) Beeline is then failing to perform any of its covenants or other agreements set forth in this Agreement, in either cases (i) and (ii), (1) such that the conditions set forth in Section 6.2(a) or Section 6.2(b), as applicable, would not be satisfied as of the time of such termination and (2) such breach shall be incapable of being cured or shall not have been cured within ten (10) days after written notice thereof shall have been received by Beeline.

 

(g) by Beeline, if the Common Stock of Eastside is delisted from the Trading Market or if the Trading Market has instituted proceedings to delist Eastside.

 

(h) by Beeline, if the SEC’s Division of Enforcement commenced an informal inquiry or an investigation relating to Eastside or any of its Affiliates.

 

8.2 Payments.

 

(a) Beeline Termination Fee. In the event that Beeline terminates this Agreement pursuant to Section 7.1(d); then Beeline shall pay Eastside a one-time fee equal to One Hundred Thousand Dollars ($100,000).

 

(b) Expenses. Except as otherwise specifically provided herein, each Party shall bear its own expenses in connection with this Agreement and the transactions contemplated hereby.

 

 

ARTICLE IX

 

DEFINITIONS

 

9.1 Definitions. In addition to the terms defined elsewhere in this Agreement: (a) capitalized words and terms that are not descriptive or otherwise defined herein have the following terms have the meanings set forth in this Section 9.1:

 

“Agreement” shall have the meaning ascribed to such term in the preamble.

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Affiliated Group” shall have the meaning ascribed to such term in Section 3.9(f).

 

“Alternative Acquisition Agreement” shall have the meaning ascribed to such term in Section 5.2(d)(iii).

 

“Alternative Transaction” shall have the meaning ascribed to such term in Section 5.2(a).

 

“Alternative Transaction Proposal” shall have the meaning ascribed to such term in Section 5.2(a).

 

“Beeline” shall have the meaning ascribed to such term in the preamble.

 

“Beeline Adverse Recommendation Change” shall have the meaning ascribed to such term in Section 5.2(e).

 

“Beeline Board Recommendation” shall have the meaning ascribed to such term in the recitals.

 

“Beeline Capital Stock” shall have the meaning ascribed to such term in Section 2.1.

 

“Beeline Financial Statements” shall have the meaning ascribed to such term in Section 3.6.

 

“Beeline Stockholder Approval” shall have the meaning ascribed to such term in Section 3.2.

 

“Board of Directors” means the board of directors of any Party.

 

“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in New York, N.Y. are authorized or required by Law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by Law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any Governmental Authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in the New York, N.Y. are generally are open for use by customers on such day.

 

“By-Laws” shall have the meaning ascribed to such term in Section 1.4.

 

“Certificate” shall have the meaning ascribed to such term in Section 1.4.

 

“Certificate of Merger” shall have the meaning ascribed to such term in Section 1.2.

 

“Closing” shall have the meaning ascribed to such term in Section 7.1.

 

 

“Closing Date” shall have the meaning ascribed to such term in Section 7.1.

 

“Code” shall have the meaning ascribed to such term in the recitals.

 

“Common Stock Equivalents” means any securities of any Party or its Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

“Constituent Corporations” shall have the meaning ascribed to such term in Section 1.1.

 

“Customer Data” means all data, text, content, information or other material uploaded or otherwise transmitted by Eastside’s customers to, or stored by Eastside’s customers on or in Eastside Products or any service of Eastside.

 

“DGCL” shall have the meaning ascribed to such term in the recitals.

 

“Disqualification Event” shall have the meaning ascribed to such term in Section 4.39.

 

“Dissenting Shares” shall have the meaning ascribed to such term in Section 2.2.

 

“Eastside” shall have the meaning ascribed to such term in the preamble.

 

“Eastside Financial Statements” has the meaning ascribed to such term in Section 4.9.

 

“Eastside Pension Plans” shall have the meaning ascribed to such term in Section 4.25.

 

“Eastside Intellectual Property” shall have the meaning ascribed to such term in Section 4.19.

 

“Effective Time” shall have the meaning ascribed to such term in Section 1.2.

 

“Environmental Laws” means all federal, state, local and foreign Laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including Laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder.

 

“ERISA” shall have the meaning ascribed to such term in Section 3.19.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

 

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

 

“GAAP” shall have the meaning ascribed to such term in Section 3.6.

 

“Governmental Authority” means any federal, state, county, local, municipal or other government or political subdivision thereof, whether domestic or foreign, and any agency, authority, commission, ministry, instrumentality, regulatory body, court, tribunal, arbitrator, central bank or other Person exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to any such government.

 

“Indebtedness” means (a) any liabilities of a Party for borrowed money or amounts owed in excess of $10,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations of a Party all in respect of indebtedness of others, whether or not the same are or should be reflected in the Party’s consolidated balance sheet (or the footnotes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (c) the present value of any lease payments of the Party including all Subsidiaries in excess of $10,000 due under leases required to be capitalized in accordance with GAAP; and (d) transactions relating to the sale of any existing or future sales of accounts receivables including merchant cash advances or sales of future accounts receivable of the Party.

 

“Issuer Covered Person” shall have the meaning ascribed to such term in Section 4.39.

 

“Knowledge” means the actual knowledge after a reasonable investigation of the officers of Eastside or Beeline, as the case may be, who are listed on Schedule 9, except for purposes of Section 3.25 Beeline may rely upon questionnaires provided by its stockholders.

 

“Laws” with respect to a Person means any federal, state, local, municipal, or other laws, common law, statutes, constitutions, ordinances, rules, regulations, codes, orders, or legally enforceable requirements enacted, issued, adopted, promulgated, enforced, ordered, or applied by any Governmental Authority applicable to such Person or any of its Subsidiaries, including its respective business and operations.

 

“Liabilities” shall have the meaning ascribed to it in Section 3.7.

 

“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1.

 

“Merger” shall have the meaning ascribed to such term in the recitals.

 

“Merger Shares” shall have the meaning ascribed to such term in Section 2.1(a).

 

 

“Merger Sub” shall have the meaning ascribed to such term in the preamble.

 

“Misconduct” shall have the meaning ascribed to such term in Section 3.13(a)(i).

 

“Money Laundering Laws” shall have the meaning ascribed to such term in Section 4.34.

 

“Party” or “Parties” shall have the meaning ascribed to such term in the preamble.

 

“PCAOB” shall have the meaning ascribed to such term in Section 3.6.

 

“Pension Plans” shall have the meaning ascribed to such term in Section 3.19.

 

“Permits” shall have the meaning ascribed to such term in Section 3.16.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Personal Information” means: (i) a natural person’s name, street address, telephone number, email address, photograph, social security number or tax identification number, driver’s license number, passport number, credit card number, bank information, or customer or account number, biometric identifiers or any other piece of information that allows the identification of or contact with a natural person and for greater certainty includes all such information with respect to employees, (ii) data collected from an IP address, unique device identifier or MAC address, web beacon, pixel tag, ad tag, cookie, local storage object, software, or by any other means, or from a particular computer, web browser, mobile device, or other device or application, where such data (a) is collected from a particular computer or device regarding online activities; or (b) is or may be used to identify or contact an individual or device or application, to predict or infer the preferences, interests, or other characteristics of the device or application or of a user of such device or application, or to target advertisements or other content to a device or application, or to a user of such device or application, and (iii) any information that is associated, directly or indirectly (by, for example, records linked via unique keys), to any of the foregoing. Personal Information also includes any information not listed in (i), (ii) or (iii) above if such information is defined as “personal data”, “personally identifiable information”, “individually identifiable health information,” “protected health information,” or “personal information” under any Law.

 

“Privacy Policy” means each external or internal, past or present privacy policy or privacy or data security-related policy of Eastside, as well as any representation, obligation or promise of Eastside under any contract, relating to: (i) the privacy of customers or users of any Eastside Products, website, products or services operated by or on behalf of Eastside; and (ii) the collection, storage, hosting, disclosure, transmission, transfer, disposal, other processing or security of any Customer Data or Personal Information.

 

“Products” means all proprietary products and services of a Party that are currently being, or at any time since a Party’s inception have been, offered, licensed, sold, distributed, hosted, maintained, supported or otherwise provided or made available by or on behalf of such Party.

 

 

“Required Approvals” has the meaning contained in Section 3.5.

 

“SEC” means the United States Securities and Exchange Commission.

 

“SEC Reports” shall have the meaning ascribed to such term in Section 4.8(a).

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Series F” shall have the meaning ascribed to such term in Section 2.1(a).

 

“Software” means any and all computer software and code, including all new versions, updates, revisions, improvements and modifications thereof, whether in source code, object code, or executable code format, including systems software, application software (including mobile apps), firmware, middleware, programming tools, scripts, routines, interfaces, architecture, schematics, records, libraries, and data, databases and data collections, and all related specifications and documentation, including developer notes, comments and annotations, user manuals and training materials relating to any of the foregoing.

 

“Stockholder Approval” means such approval as may be required by the Trading Market Rules and/or applicable Law from the stockholders of Eastside with respect to the transactions contemplated by this Agreement, including the issuance of all of the Eastside Common Stock in excess of 19.99% of the issued and outstanding Common Stock on the Closing Date.

 

“Subsidiary” means any subsidiary of a Party as set forth on a Schedule to this Agreement and shall, where applicable, also include any direct or indirect subsidiary formed or acquired after the date hereof.

 

“Superior Proposal” shall have the meaning ascribed to such term in Section 5.2(b).

 

“Surviving Corporation” shall have the meaning ascribed to such term in Section 1.1.

 

“Systems” means all Software, and computer hardware, servers, networks, platforms, peripherals, data communication lines and other information technology equipment and related systems, including any outsourced systems and processes, that are owned or used by Eastside in the conduct of its business as currently conducted.

 

“Tax” or “Taxes” shall have the meaning ascribed to such term in Section 3.9(f).

 

“Tax Return” shall have the meaning ascribed to such term in Section 3.9(f).

 

“Trading Market” means The Nasdaq Capital Market.

 

“Trading Market Rules” means the rules and regulations of the Trading Market.

 

 

“Transaction Documents” means this Agreement and the Certificates and/or Articles of Merger.

 

“Voting Agreement” shall have the meaning ascribed to such term in Section 5.11.

 

ARTICLE X

 

MISCELLANEOUS

 

10.1. Non-Assignability; Binding Effect. Neither this Agreement, nor any of the rights or obligations of the Parties hereunder, shall be assignable by any Party hereto without the prior written consent of all other Parties hereto. Otherwise, this Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective heirs, executors, administrators, personal representatives, successors and permitted assigns.

 

10.2. Non-survival of Representations and Warranties. The Parties hereto agree that their respective representations, warranties, covenants and agreements contained in this Agreement shall not survive the Closing. This Section 11.2 shall not limit any covenant or agreement contained in this Agreement which by its terms contemplates performance after the Effective Time.

 

10.3. Waiver. No waiver by either Party of any default or nonperformance hereunder shall be deemed a waiver of any subsequent default or nonperformance. No waiver shall be effective unless in writing and signed by the Party or Parties to which the performance of duty is owed. No delay in the serving of any right or remedy shall constitute a waiver of any right or remedy.

 

10.4. Entire Agreement. This Agreement contains and represents the entire and complete understanding and agreement concerning and in reference to the arrangement between the Parties hereto. The Parties hereto agree that no prior statements, representations, promises, agreements, instructions, or understandings, written or oral, pertaining to this Agreement, other than those specifically set forth and stated herein, shall be of any force or effect.

 

10.5. Modifications and Amendments. This Agreement may not be, and shall not be construed to have been modified, amended, rescinded, canceled, or waived, in whole or in part, except if done so in writing and executed by the Parties hereto.

 

10.6. Governing Law. The validity, interpretation and enforcement of this Agreement shall be governed by and construed and enforced in accordance with the local Laws of the State of Delaware without giving effect to its conflicts of laws provisions, and to the exclusion of the Law of any other forum, without regard to the jurisdiction in which any action or special proceeding may be instituted.

 

 

10.7 Disclosure Schedules.

 

(a) Except as otherwise provided in the Schedules attached hereto (the “Schedules”), which are incorporated herein and made a part of this Agreement, all capitalized terms used therein shall have the meanings assigned to them in this Agreement. The inclusion of any information in the Schedules will not be deemed an admission or acknowledgment that such information is required to be listed in the Schedules or that such items are material. The Schedules are arranged in sections corresponding to the sections contained in this Agreement merely for convenience, and the disclosure of an item in one section of the Schedules as an exception to a particular covenant, agreement, representation or warranty shall be deemed adequately disclosed as an exception with respect to all other covenants, agreements, representations and warranties to the extent that the relevance of such item to such other covenants, agreements, representations or warranties is reasonably apparent on its face without independent knowledge of the reader, notwithstanding the presence or absence of an appropriate cross-reference thereto.

 

(b) Notwithstanding anything to the contrary herein, from time-to-time prior to the Closing, each Party may at its option supplement or amend and deliver updates to any Schedule that has been rendered inaccurate or incomplete since the date of this Agreement solely as a result of matters or events first occurring after such date as necessary to complete or correct any information in such Schedules. The updating Party shall provide the other Party(ies) with any such supplement or amendment by written notice (each, a “Schedule Update”). If the matters identified in a Schedule Update, individually or collectively with matters identified in any other Schedule Update, constitute a Material Adverse Effect on such Party(ies), then the Party(ies) in receipt of such Schedule Update may, at any time within three Business Days following their receipt of any such Schedule Update, elect to terminate this Agreement pursuant to Article VIII. If the receiving Party does (Parties do) not so timely elect (subject to the preceding sentence with respect to the cumulative effect of matters identified in all Schedule Updates, whether prior to or after the Schedule Update in question), the Schedule Update shall be deemed to have amended the appropriate Schedule or Schedules as of the date of this Agreement, and shall be deemed to have qualified the applicable representations and warranties contained in this Agreement as of such date, and to have cured any misrepresentation or breach of warranty that otherwise might have existed hereunder by reason of the existence of such matter, subject to the succeeding sentence.

 

10.8 Interpretation; Construction.

 

(a) The Recitals, each Exhibit and the Schedules are hereby incorporated into and made a part of this Agreement by reference. The headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. Unless the context otherwise requires, references herein: (i) to “Article(s),” “Section(s),” “Exhibit(s)” and “Schedules” refer to the corresponding article(s), section(s), exhibit(s) and schedule(s) of or to this Agreement; (ii) to “Schedule(s)” refer to the corresponding Schedule(s) of the Disclosure Schedules; (iii) to an agreement, instrument, or other document means such agreement, instrument, or other document as amended, supplemented, and modified from time to time to the extent permitted by the provisions thereof; and (iv) to a Law means such Law as amended from time-to-time. Whenever the words “include,” “includes,” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” and the word “or” is not exclusive. The word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and does not simply mean “if.” A reference in this Agreement to $ or dollars is to U.S. dollars. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. The words “hereof,” “herein,” “hereby,” “hereto,” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to “this Agreement” shall include the Schedules.

 

 

(b) The Parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.

 

10.9. Parties in Interest. Except for the rights of Beeline stockholders to be third party beneficiaries, as provided in this Agreement nothing in this Agreement, whether expressed or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any Persons other than the Parties to it and their respective heirs, executors, administrators, personal representatives, successors and permitted assigns, nor is anything in this Agreement intended to relieve or discharge the obligations or liability of any third party to any Party to this Agreement, nor shall any provision give any third party any right of subrogation or action over or against any Party to this Agreement.

 

10.10. Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be sufficiently given if delivered to the addressees in person, by recognized overnight courier service next business day delivery or by email delivery followed by overnight next business day delivery as follows:

 

	(a)	If to Eastside and Merger Sub:
		Eastside Distilling, Inc.
		2321 NE Argyle Street, Unit D
		Portland, OR 97211
		email: ggwin@eastsidedistilling.com

 

	with a copy to:
	Robert Brantl, Esq.
	181 Dante Ave.
	Tuckahoe, NY 10707-3042
	email: rbrantl21@gmail.com

 

	(b)	If to Beeline:
		Beeline Financial Holdings, Inc.
		188 Valley Street
		Providence, RI 02909
		Email: nick@makeabeeline.com

 

	with a copy to:
	Nason Yeager Gerson Harris & Fumero, P.A.
	3001 PBG Boulevard, Suite 305
	Palm Beach Gardens, FL 33410
	Attention: Michael D. Harris, Esq.
	Email: mharris@nasonyeager.com

 

or to such other address as either Party shall have specified by notice in writing given to the other Party.

 

[SIGNATURE PAGE FOLLOWS]

 

 

IN WITNESS WHEREOF, the Parties have executed this Agreement and Plan of Merger and Reorganization as of the date first set forth above.

 

Eastside:
EASTSIDE DISTILLING, INC.
a Nevada corporation
By:	/s/ Geoffrey Gwin
Name:	Geoffrey Gwin
Title:	Chief Executive Officer
Merger Sub:
EAST ACQUISITION CORP.
a Delaware corporation
By:	/s/ Geoffrey Gwin
Name:	Geoffrey Gwin
Title:	Chief Executive Officer
Beeline:
BEELINE FINANCIAL HOLDINGS, INC.
a Delaware corporation
By:	Nick Liuzza
Name:	Nick Liuzza
Title:	Chief Executive Officer

 

Signature to Agreement and Plan of Merger and Reorganization

 

 

List of Exhibits and Schedules

 

	Exhibit		Description
	Exhibit A		Debt Exchange Agreement
	Exhibit B		Term Sheet
	Schedule		Description
	Schedule 2.1		Share Conversion
	Schedule 2.1(e)		Assumption of Outstanding Beeline Stock Options
	Schedule 3.3		Subsidiaries
	Schedule 3.4		Capitalization
	Schedule 3.7		Absence of Undisclosed Liabilities
	Schedule 3.8		Absence of Certain Changes
	Schedule 3.9		Taxes
	Schedule 3.10		Contracts, Insurance
	Schedule 3.11		Litigation
	Schedule 3.12		Title to Properties; Liens and Encumbrances
	Schedule 3.13		Compliance
	Schedule 3.15		Brokers or Finders
	Schedule 3.16		Permits and Licenses
	Schedule 3.18		Interest in Assets
	Schedule 3.19		Employee Benefit Plans
	Schedule 3.23		Related Party Disclosure
	Schedule 4.3		Subsidiaries
	Schedule 4.4		Capitalization
	Schedule 4.8		Eastside SEC Reports; Sarbanes-Oxley Act
	Schedule 4.9(b)		Indebtedness of Eastside
	Schedule 4.11		Brokers or Finders
	Schedule 4.13		Litigation
	Schedule 4.15		Absence of Certain Changes
	Schedule 4.16		Taxes
	Schedule 4.17		Contracts; Insurance
	Schedule 4.20		Compliance
	Schedule 4.24		Interest in Assets
	Schedule 4.27		Existing Businesses
	Schedule 4.32		Accountants
	Schedule 4.36		Registration Rights
	Schedule 4.37		Listing and Maintenance Requirements
	Schedule 4.40		Other Covered Persons
	Schedule 4.42		Related Party Disclosure
	Schedule 5.11		Voting Agreements
	Schedule 9		Officers

 

 

Exhibit A

Form of Debt Exchange Agreement

 

 

Exhibit B

Term Sheet

 

 

 

Exhibit 10.b

 

DEBT EXCHANGE AGREEMENT

 

Contract Date: September 4, 2024

 

“Parties” (each a “Party”):

 

“Eastside”	Eastside Distilling, Inc. 2321 NE Argyle Street, Unit D Portland, OR 97211 Email: ggwin@eastsidedistilling.com
“Craft”	Craft Canning & Bottling, LLC 2321 NE Argyle Street, Unit D Portland, OR 97211 Email: ggwin@eastsidedistilling.com
“SPV”	The B.A.D. Company, LLC c/o District 2 Capital Fund LP 14 Wall Street, 2d Floor Huntington, NY 11743 Email: michael@district2capital.com
“Aegis”	Aegis Security Insurance Company 4431 N. Front Street, Suite 200 Harrisburg, PA 17110 Email: wwollyung@aegisinsco.com
“Bigger”	Bigger Capital Fund, LP 11700 W Charleston Blvd 170-659 Las Vegas, NV 89135 Email: biggercapital@gmail.com
“District 2”	District 2 Capital Fund LP 14 Wall Street, 2nd Floor Huntington, NY 11743 Email: michael@district2capital.com As used herein, “Bigger/D2” will refer to Bigger and District 2, collectively.
“LDI”	LDI Investments, LLC P.O. Box 1641 Rancho Santa Fe, CA 92067 Email: kilkenny_patrick@yahoo.com
“Esping”	William Esping Address Address Email
“WPE”	WPE Kids Partners Address Address Email
“Grammen”	Robert Grammen Address Address Email:

 

 

Premises:

 

A.

Aegis, LDI, Bigger and District 2 are secured creditors of Eastside, although Bigger and District 2 also hold unsecured debt issued by Eastside. Esping, WPE and Grammen are unsecured creditors of Eastside. SPV is the record owner of all of the Series C Preferred Stock issued by Eastside. Aegis, LDI, Bigger, District 2, Esping, WPE, Grammen and SPV are referred to herein as the “Investors”.

 

B.

Simultaneous with the execution of this agreement, Eastside is entering into a Plan and Agreement of Merger and Reorganization (the Merger Agreement”) with Beeline Financial Holdings, Inc. (“Beeline”), pursuant to which, upon satisfaction of certain conditions precedent, Eastside will acquire ownership of Beeline (the “Merger”).

 

C.	Among the conditions precedent to the Merger is the reorganization of Eastside’s debt and certain changes to its capital structure, as set forth in this Debt Satisfaction Agreement.

 

D.

The Investors believe that the Merger will serve their individual interests as well as those of Eastside and, accordingly, are willing to participate in the reorganization of Eastside’s debt and the changes to its capital structure, subject to completion of the Merger and on the terms and subject to the conditions set forth in this Agreement.

Agreement:

 

1.	Closing. The “Closing” of the transactions undertaken herein will take place on the Closing Date determined pursuant to the terms of the Merger Agreement (the “Merger Closing Date”) and simultaneous with the Closing of the Merger.

 

2.	Definitions.

 

Securities and Instruments Issued or to be Issued by Eastside

 

“Bigger/D2 TQLA Notes” identifies four (4) unsecured instruments, each titled “Promissory Note” and dated September 29, 2023, in the aggregate principal amount of $7,517,467, consisting of (1) an Amended and Restated Promissory Note in the principal amount of $2,844,675 issued by Eastside to Bigger (the “First Bigger TQLA Note”), (2) an Amended and Restated Promissory Note in the principal amount of $162,312 issued by Eastside to Bigger (the “Second Bigger TQLA Note”), (3) a Promissory Note in the principal amount of $4,267,013 issued by Eastside to District 2 (the “First District 2 TQLA Note”) and (4) a Promissory Note in the principal amount of $243,467 issued by Eastside to District 2 (the “Second District 2 TQLA Note”), each as amended, amended and restated, supplemented or otherwise modified from time to time.

 

“Convertible Notes” identifies two (2) instruments, each titled “Amended and Restated Secured Convertible Promissory Note” and dated September 29, 2023, in the aggregate principal amount of $399,290, consisting of: (1) an Amended and Restated Secured Convertible Promissory Note in the principal amount of $199,645 issued by Eastside to Bigger (the “Bigger Secured Convertible Note”) and (2) aa Amended and Restated Secured Convertible Promissory Note in the principal amount of $199,645 issued by Eastside to District 2 (the “District 2 Secured Convertible Note”), each as amended, amended and restated, supplemented or otherwise modified from time to time.

 

“Craft Exchange Assets” means the Craft Exchange Debt plus 44,280 shares of SC Preferred owned by SPV.

 

 

“Craft Exchange Debt” means the aggregate of the following:

 

●

the Senior Debt;

 

●

$59,710 of principal owed by Eastside to Bigger pursuant to the First Bigger TQLA Note;

 

●

The Second Bigger TQLA Note;

 

●

$89,566 owed by Eastside to District 2 pursuant to the First District 2 TQLA Note;

 

●

The Second District 2 TQLA Note;

 

●

$69,660 owed by Eastside to Esping pursuant to the Esping TQLA Note;

 

●

$78,764 owed by Eastside to WPE pursuant to the WPE TQLA Note; and

 

●

$28,019 owed by Eastside to Grammen pursuant to the Grammen TQLA Note.

 

 

“First Senior Note” identifies an instrument titled “Amended and Restated Secured Promissory Note” dated September 29, 2023 in the principal amount of $2,638,291 issued by Eastside to Aegis, as amended, amended and restated, supplemented or otherwise modified from time to time.

 

“Notes” means the Convertible Notes, the First Senior Note, the Whiskey Notes and the Bigger/D2 Unsecured Notes, collectively.

 

“Other Investor TQLA Notes” identifies three (3) unsecured instruments, each titled “Promissory Note”, in the aggregate principal amount of $577,884, consisting of (1) a Promissory Note in the principal amount of $228,174 issued by Eastside to Esping (the “Esping TQLA Note”), (2) a Promissory Note in the principal amount of $257,970 issued by Eastside to WPE (the “WPE TQLA Note”), and (3) a Promissory Note in the principal amount of $91,740 issued by Eastside to Grammen (the “Grammen TQLA Note”)

 

“SC Preferred” means the Series C Preferred Stock of Eastside, par value $0.0001 per share.

 

“SD Preferred” means the Series D Preferred Stock of Eastside, par value $0.0001 per share.

 

“SE Preferred” means the Series E Preferred Stock of Eastside, par value $0.0001 per share.

 

“Senior Debt” means the Convertible Notes, the First Senior Note and the Whiskey Notes, collectively.

 

“Spirits Common” means the Common Stock of Spirits, Inc., $0.0001 par value.

 

“Whiskey Notes” means the three (3) secured instruments, each titled “2024 Secured Note”, issued by Eastside on May 15, 2024 in the aggregate principal amount of $1,100,000, consisting of (1) a 2024 Secured Note in the principal amount of $275,000 issued by Eastside to Bigger (the “Bigger Whiskey Note”), (2) a 2024 Secured Note in the principal amount of $275,000 issued by Eastside to District 2 (the “District 2 Whiskey Note”), and (3) a 2024 Secured Note in the principal amount of $550,000 issued by Eastside to LDI (the “LDI Whiskey Note”).

 

Other Defined Terms

 

“Agreement” means this Debt Satisfaction Agreement

 

“Beeline” means Beeline Financial Holdings, Inc., a Delaware corporation

 

“Craft” means Craft Canning + Bottling LLC, an Oregon limited liability company and wholly-owned subsidiary of Eastside.

 

“Creditors” means the holders of the Senior Debt and the Other Investors, collectively.

 

 

“Merger Agreement” means the Plan and Agreement of Merger and Reorganization dated September 3, 2024 among Eastside, East Acquisition Inc. and Beeline.

 

“Other Investors” means Esping, WPE and Grammen, collectively.

 

“Trading Day” means (i) a day on which the Common Stock is listed or quoted and traded on a Trading Market (as defined below) or (ii) if the Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by OTC Markets Group Inc. (formerly OTC Markets Inc.) (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i) and (ii) hereof, then Trading Day shall mean a business day.

 

“Trading Market” means as of any date, any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, or the OTC Markets QB Tier (or any successors to any of the foregoing).

 

I. PREPARATION

 

3.

Amendment of Designation of Series C Preferred Stock. Simultaneous with the execution of this Agreement, the SPV and Eastside shall execute the “Filing Consent” in the form annexed hereto as Appendix A authorizing the filing of the SC Amendment. Immediately before the Closing, Eastside shall file with the Secretary of State of Nevada the “Amendment of Designation of Series C Preferred Stock of Eastside Distilling, Inc.” (the “SC Amendment”) in the form annexed hereto as Appendix A.

 

4.

Designation of Series D Preferred Stock. Promptly after the execution of this Agreement, Eastside shall file with the Secretary of State of Nevada the “Certificate of Designation Establishing Series D Preferred Stock of Eastside Distilling, Inc.” (the “SD Certificate of Designation”). The SD Certificate of Designation shall consist of a cover page in the form mandated by the Secretary of State of Nevada and Exhibit A thereto in the form annexed hereto as Appendix B setting forth the relative rights, preferences, privileges and limitations of 255,474 shares of the SD Preferred.

 

5.

Designation of Series E Preferred Stock. Promptly after the execution of this Agreement, Eastside shall file with the Secretary of State of Nevada the “Certificate of Designation Establishing Series E Preferred Stock of Eastside Distilling, Inc.” (the “SE Certificate of Designation”). The SE Certificate of Designation shall consist of a cover page in the form mandated by the Secretary of State of Nevada and Exhibit A thereto in the form annexed hereto as Appendix C setting forth the relative rights, preferences, privileges and limitations of 200,000 shares of the SD Preferred.

 

6.

Transfer to Craft. Immediately prior to the Closing, Eastside will assign to Craft, from Eastside’s inventory, the sum of seven hundred fifty (750) barrels of spirits less barrels sold by Eastside in the third quarter of 2024 (the “Craft Barrels”). The identity of the specific barrels to be transferred shall be determined by the management of Eastside. Without the written consent of the holders of a majority by principal amount of the Senior Debt, Craft will not sell, transfer or assign any of the Craft Barrels, other than pursuant to the exercise of a right of foreclosure held on this date by a holder of Senior Debt. By execution hereof, the holders of Whiskey Notes consent to the transfer of the Craft Barrels pursuant to this Section 5.

 

 

7.

Craft Lenders Acquisition Co. Promptly after the execution of this Agreement, the Creditors will file with the Oregon Secretary of State Articles of Organization of Craft Lenders Acquisition Co., LLC, an Oregon limited liability company (“Craft Lenders”). The Creditors and SPV will also adopt an Operating Agreement for Craft Lenders designating Patrick Kilkenny as Manager and with such other terms as to which they may agree. The Operating Agreement will reflect ownership of Craft Lenders by the Creditors and SPV in the following proportions:

 

Aegis			28.86	%		SPV			20.90	%
LDI			6.82	%		Esping			0.76	%
Bigger			17.98	%		WPE			0.86	%
District 2			23.51	%		Grammen			0.31	%

 

8.

Organization of Spirits Inc. Promptly after the execution of this Agreement, Eastside will cause a corporation to be organized in Nevada with the name “Spirits Inc.” The articles of incorporation of Spirits Inc. will contain standard provisions for a Nevada corporation. Immediate upon the organization of Spirits Inc., Eastside shall contribute to Spirits Inc. all of its inventory of spirits and all of its spirits brands and related intellectual property, and Spirits Inc. shall issue to Eastside one million (1,000,000) shares of Spirits Common. By execution hereof, the holders of Whiskey Notes consent to the transfer of spirits inventory pursuant to this Section 8.

 

9.

Employment Agreement. Immediate upon the organization of Spirits Inc., Spirits Inc. will enter into an employment agreement with Geoffrey Gwin (the “Employment Agreement”), pursuant to which Geoffrey Gwin will serve as Chief Executive Officer of Spirits Inc. until the earlier of (a) the date on which Spirits Inc. is liquidated, (b) the date on which Eastside ceases to own a majority of the voting power in Spirits Inc., or (c) the date on which Geoffrey Gwin resigns from his position as CEO of Spirits Inc. The Employment Agreement shall provide for a salary of Three Hundred Fifty Thousand Dollars ($350,000) to be paid by Spirits Inc. to Mr. Gwin, except that the salary will be reduced by any amount paid by Eastside to Mr. Gwin in cash or equity securities as compensation for services as an officer of Eastside. The Employment Agreement shall have such other terms as are appropriate for the employment of an officer of a subsidiary of a public company.

 

II. THE CLOSING

 

10.

Exchange of Notes and Securities. If the Merger Agreement has been executed and remains in full force and effect, and there has been no breach of any covenant in the Merger Agreement that has not been fully remedied, and the parties to the Merger Agreement have expressed their intent to close the Merger, then on the Closing Date, the following transactions will take place online.

 

a.

At the Closing, Eastside will issue 255,474 shares of SD Preferred (the “SD Exchange Shares”) as follows: 99,055 SD Exchange Shares to Bigger and 156,419 SD Exchange Shares to District 2, and will deliver to Bigger and District 2 notices issued by Eastside’s transfer agent reciting the book entry to the accounts of Bigger and District 2 of the SD Exchange Shares. The SD Exchange Shares will be issued by Eastside to Bigger in satisfaction of $990,552 of principal owed by Eastside to Bigger pursuant to the First Bigger TQLA Note. The SD Exchange Shares will be issued to District 2 in satisfaction of $1,564,194 of principal owed by Eastside to District 2 pursuant to the First District 2 TQLA Note.

 

b.

At the Closing, Eastside will issue 200,000 shares of SE Preferred (the “SE Exchange Shares”) as follows: 80,000 SE Exchange Shares to Bigger and 120,000 SE Exchange Shares to District 2, and will deliver to Bigger and District 2 notices issued by Eastside’s transfer agent reciting the book entry to the accounts of Bigger and District 2 of the SE Exchange Shares. The SE Exchange Shares will be issued by Eastside to Bigger in satisfaction of $800,000 of principal owed by Eastside to Bigger pursuant to the First Bigger TQLA Note. The SE Exchange Shares will be issued to District 2 in satisfaction of $1,200,000 of principal owed by Eastside to District 2 pursuant to the First District 2 TQLA Note.

 

 

c.

At the Closing, Eastside will transfer 82,626 shares of Spirits Common as follows: 33,050 shares of Spirits Common to Bigger and 49,576 shares of Spirits Common to District 2, and will deliver to Bigger and District 2 notices issued by Spirits’ transfer agent reciting the book entry to the accounts of Bigger and District 2 of the Spirits Common shares. The Spirits Common shares will be transferred by Eastside to Bigger in satisfaction of $269,598 of principal owed by Eastside to Bigger pursuant to the First Bigger TQLA Note. The Spirits Common shares will be transferred by Eastside to District 2 in satisfaction of $404,397 of principal owed by Eastside to District 2 pursuant to the First District 2 TQLA Note.

 

d.

At the Closing, Eastside will transfer 26,273 shares of Spirits Common as follows: 10,373 shares of Spirits Common to Esping, 11,728 shares of Spirits Common to WPE, and 4,172 shares of Spirits Common to Grammen, and will deliver to Esping, WPE and Grammen notices issued by Spirits’ transfer agent reciting the book entry to the accounts of Esping, WPE and Grammen of the Spirits Common shares. The Spirits Common shares will be transferred by Eastside to Esping in satisfaction of $84,587 of principal owed by Eastside to Esping pursuant to the Esping TQLA Note. The Spirits Common shares will be transferred by Eastside to WPE in satisfaction of $95,642 of principal owed by Eastside to WPE pursuant to the WPE TQLA Note. The Spirits Common shares will be transferred by Eastside to Grammen in satisfaction of $34,023 of principal owed by Eastside to Grammen pursuant to the Grammen TQLA Note.

 

e.

At the Closing, Eastside will transfer 361,101 shares of Spirits Common to SPV, and will deliver to SPV a notice issued by Spirits’ transfer agent reciting the book entry to the account of SPV of the Spirits Common shares. The Spirits Common shares will be transferred by Eastside to SPV in consideration of SPV’s surrender to Eastside of 63,220 shares of SC Preferred and SPV’s execution of the Filing Consent.

 

f.

At the Closing, Eastside will issue 190,000 shares of its common stock as follows: 75,037 shares to Esping, 84,819 shares to WPE and 30,144 shares to Grammen, and will deliver to Esping, WPE and Grammen notices issued by Eastside’s transfer agent reciting the book entry to the accounts of Esping, WPE and Grammen of the Eastside common stock. The Eastside common stock will be issued to Esping in satisfaction of $73,927 of principal owed by Eastside to Esping pursuant to the Esping TQLA Note. The Eastside common stock will be issued by Eastside to WPE in satisfaction of $83,564 of principal owed by Eastside to WPE pursuant to the WPE TQLA Note. The Eastside common stock will be issued by Eastside to Grammen in satisfaction of $29,698 of principal owed by Eastside to Grammen pursuant to the Grammen TQLA Note.

 

III. CRAFT-FOR-DEBT EXCHANGE

 

11.

Exchange of Debt. At the Closing, the holders of the Craft Exchange Debt will surrender to Eastside for cancellation the instruments representing the Craft Exchange Debt, and Craft Lenders will issue to those holders unsecured promissory notes maturing on the first anniversary of the Merger Closing (the “Craft Replacement Notes”). Each holder of Craft Exchange Debt will receive from Craft Lenders a Craft Replacement Note with the following terms identical to the terms of the Craft Exchange Debt surrendered by that holder: principal amount and interest rate. The Craft Exchange Debt will provide for quarterly payments of interest and payment of principal on the maturity date of the Craft Replacement Notes.

 

12.

Surrender of Shares. At the Closing, SPV will deliver to Eastside a notice of transfer of 44,280 shares of SC Preferred in form satisfactory to Eastside’s transfer agent. The signature of SPV’s Manager on the notice of transfer shall be medallion-guaranteed. Promptly after the Closing, Eastside will cause its transfer agent to issue to SPV a notice of book entry reciting SPV’s ownership of the 95,200 shares of Series C Preferred that will remain owned by SPV after the Closing.

 

 

13.

Craft Merger. At the Merger Closing, in consideration of the surrender of the Craft Exchange Assets by the members of Craft Lenders and SPV’s execution of the Filing Consent, the Manager of Craft and the Manager of Craft Lenders will execute Articles of Merger of Craft with and into Craft Lenders (the “Craft Merger Articles”), and the parties shall cause the Craft Merger Articles to be filed with the Secretary of State of the State of Oregon. Upon such filing, Eastside shall cease to have any legal or equitable interest in Craft. Eastside will cause the books and records of Craft to be delivered to the Manager of Craft Lenders, accompanied by such instruments and information as Craft Lenders requires to assume operational control over the business and financial operations previously carried on by Craft.

 

IV. EFFECT OF EXCHANGES

 

14.

Release of Accrued Liability. Effective on the completion of the Closing, in consideration of the undertakings herein, each of the Creditors hereby releases and discharges Eastside from all liability, including liability for accrued and unpaid interest, arising under the Notes or under the Other Investor TQLA Notes, as applicable.

 

15.

Full Satisfaction; Release of Liens. The Parties hereby acknowledge that the several exchanges carried out pursuant to this Debt Exchange Agreement have fully satisfied the obligations of Eastside arising from any of the following instruments: the Bigger/D2 TQLA Notes, the Convertible Notes, the First Senior Note, the Other Investor TQLA Notes and the Whiskey Notes. Promptly after the Closing, the Creditors will each file in all applicable jurisdictions UCC-3 forms terminating their liens on the assets of Eastside.

 

V. OTHER COVENANTS

 

16.	Available Shares.

 

a.

Reservation and Authorization of Shares. Eastside covenants that, as soon as practicable and during the period when any of the Derivatives are outstanding, it will reserve for issuance to SPV, Bigger and District 2 pursuant to conversions and/or exercises of Derivatives (as defined below), from its authorized and unissued Common Stock a number of shares equal to two hundred percent (200%) of the Potential Shares (the “Requisite Reserve”). As used herein, the term “Derivatives” means the outstanding SC Preferred, SD Preferred, SE Preferred, and such warrants as are owned by Bigger or District 2, all to the extent they are outstanding, and the term “Potential Shares” means the number of shares of Common Stock into which the Derivatives could be converted or for which the Derivatives could be exercised as of completion of the Merger Closing. Eastside further covenants that its execution of this Agreement shall constitute full authority to its officers who are charged with the duty of issuing the necessary shares upon the conversion or exercise of Derivatives. Eastside will take all such reasonable action as may be necessary to assure that such Potential Shares may be issued without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. Eastside covenants that all Potential Shares that may be issued upon the exercise or conversion of a Derivative will, upon such conversion or exercise and payment of the purchase price, if any, be duly authorized, validly issued, fully paid, and nonassessable and free from all taxes, liens, and charges created by Eastside in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

b.

Stockholder Approval. Eastside will use commercially reasonable efforts to obtain from its stockholders as soon as possible following the date hereof such approval as is required by applicable law and/or rules of the Trading Market to effect all material terms of this Agreement (the “Stockholder Approval”), including without limitation approval to amend its articles of incorporation to increase its authorized Common Stock to a number of shares that equals or exceeds ten million (10,000,000) shares.

 

 

17.	Conversion Shares; Transfer Agent.

 

a. If at any time the Common Shares issuable upon conversion of a Derivative (the “Conversion Shares”) are eligible for resale under Rule 144 promulgated by the Securities and Exchange Commission (the “Commission”) under the 1933 Act, Eastside covenants to, upon the written request of a holder of a Derivative, use best efforts to cause the removal of any legend from the Conversion Shares (including by delivering an opinion of Eastside’s counsel to Eastside’s transfer agent at its own expense to ensure the foregoing). Eastside expressly acknowledges that Rule 144(d)(3)(ii) promulgated under the 1933 Act, as currently in effect, provides that the Conversion Shares issued upon any conversion of the Derivative shall be deemed to have been acquired at the same time as the Derivative, and agrees not to take any position to the contrary.

 

b. Following the date on which Rule 144 becoming available for the resale of securities without the requirement for Eastside to be in compliance with the current public information required under Rule 144 as to such securities and without volume or manner-of-sale restrictions, upon request of a holder of a Derivative, Eastside shall cause its counsel to issue to its transfer agent a legal opinion directing the transfer agent to take action in accordance with this Section 17(b). Any fees (with respect to the transfer agent, Eastside’s counsel or otherwise) associated with the issuance of such opinion or the removal of such legend shall be borne by Eastside. Following such time as a legend is no longer required for the Conversion Shares, Eastside will no later than two (2) Trading Days following the delivery by a holder of a Derivative to Eastside of a legended book entry statement representing Conversion Shares (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer) (such second (2nd) Trading Day, the “Legend Removal Date”), deliver or cause to be delivered via the Depository Trust Company to the holder such securities that are free from all restrictive and other legends. Eastside may not make any notation on its records or give instructions to the transfer agent that enlarge the restrictions on transfer set forth in this Section 17(b).

 

c. Eastside acknowledges that a breach by it of its obligations under this Section 17 will cause irreparable harm. Accordingly, Eastside acknowledges that the remedy at law for a breach of its obligations under this Section 17 will be inadequate and agrees, in the event of a breach or threatened breach by Eastside of the provisions of this Section 17, that the affected holder shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required.

 

d. If Eastside shall fail for any reason or for no reason to issue via the Depository Trust Company to a holder of a Derivative (the “Holder”) Common Stock that is free from all restrictive and other legends within two (2) Trading Days of receipt of all documents necessary for the removal of the legend on the Common Stock, then, in addition to all other remedies available to the Holder, if on or after the Trading Day immediately following such two (2) Trading Day period, the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock that the Holder anticipated receiving from Eastside without any restrictive legend (a “Buy-In”), then Eastside shall, within two (2) Trading Days after the Holder’s request and in the Holder’s sole discretion, (A) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including any brokerage commissions) for the shares of Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions). The Holder shall provide Eastside written notice, within three (3) Trading Days after the occurrence of a Buy-In, indicating the amounts payable to the Holder in respect of such Buy-In together with applicable confirmations and other evidence reasonably requested by Eastside. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Eastside’s failure to timely deliver shares of Common Stock upon conversion of a Derivative as required pursuant to the terms hereof.

 

e. Eastside agrees to maintain a transfer agent that is a participant in the Fast Automated Securities Transfer Program (FAST) so long as any shares of SC, SD or SE Preferred are outstanding.

 

 

VI. REPRESENTATIONS AND WARRANTIES

 

18.	Representations by Holders. Each of Bigger, District 2, Esping, WPE and Grammen (a “Holder”) represents and warrants to Eastside as follows:

 

a.

Holder’s Qualification. The Holder is an “accredited investor”, as such term is defined in Regulation D promulgated under the 1933 Act. Its principals are experienced in investments and business matters, have made investments of a speculative nature, and have such knowledge and experience in financial, tax, and other business matters as to enable the Holder to utilize the information made available by Eastside to evaluate the merits and risks of and to make an informed investment decision with respect to the proposed purchase, which represents a speculative investment.

 

b.

Nature of Investment. The Holder is able to bear the risk of this investment for an indefinite period and to afford a complete loss thereof. The Holder is acquiring the SD Preferred, SE Preferred or Eastside common stock for the Holder’s own account for investment and not with a view toward any public offering, resale or distribution of the securities or their derivatives.

 

c.

Information on Eastside. The Holder has been furnished with or has had access at the EDGAR Website to Eastside’s Form 10-K for the year ended December 31, 2023 and all reports, schedules, forms, statements and other documents required to be filed by it with the Commission (collectively, the “Reports”). In addition, the Holder has received in writing from Eastside such other information concerning its operations, financial condition, and other matters as the Holder has requested in writing, and considered all factors the Holder deems material in deciding on the advisability of investing in the Eastside’s equity securities.

 

d.

Restricted Security. The Holder is aware that the sale of the SD Preferred, SE Preferred and Eastside common stock has not been registered under the Securities Act of 1933, as amended (the “1933 Act”) or under the securities laws of any country, state or province. Therefore, those securities cannot be resold without registration under the 1933 Act or unless an exemption from registration is available.

 

19.

Representations by Eastside. As of the date hereof, Eastside represents and warrants the following, except as set forth in the Reports (but (i) without giving effect to any amendment thereof filed with, or furnished to the Commission on or after the date hereof and (ii) excluding any disclosures contained under the heading “Risk Factors” and any disclosure of risks included in any “forward-looking statements” disclaimer or in any other section to the extent they are forward-looking statements or cautionary, predictive or forward-looking in nature):

 

f.

Due Incorporation. Eastside is a corporation duly incorporated, validly existing, and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power to own its properties and to carry on its business as disclosed in the Reports. Eastside is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect. For purpose of this Agreement, a “Material Adverse Effect” shall mean a material adverse effect on the financial condition, results of operations, properties or business of Eastside taken as a whole.

 

 

g.

Authority; Enforceability. This Agreement and any other agreements delivered together with this Agreement or in connection therewith (collectively “Transaction Documents”) have been duly authorized, executed, and delivered by Eastside and are valid and binding agreements enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights generally and to general principles of equity. Eastside has full corporate power and authority necessary to enter into and deliver the Transaction Documents and to perform its obligations thereunder, including, without limitation, (i) the issuance of the SD Preferred SE Preferred and common stock and (ii) the reservation and issuance of the SD Conversion Shares and SE Conversion Shares in accordance with their Certificates of Designation and the terms of this Agreement (subject to any Stockholder Approval that may be required).

 

h.

Consents. No consent, approval, authorization, or order of any court, governmental agency or body or arbitrator having jurisdiction over Eastside, or any of its Affiliates, any Trading Market, or Eastside’s stockholders is required for the execution by Eastside of the Transaction Documents or, except for any Stockholder Approval that may be required under the terms of this Agreement, the compliance and performance by Eastside of its obligations under the Transaction Documents, including, without limitation, (i) the issuance and sale of the SD Preferred and SE Preferred and common stock and (ii) the reservation and issuance of the SD Conversion Shares and SEC Conversion Shares in accordance with their Certificates of Designation and the terms of this Agreement. Except as disclosed in Current Reports on Form 8-K, Eastside is not in violation of the requirements of the Trading Market and has no knowledge of any facts or circumstances which could reasonably lead to delisting or suspension of the Common Stock in the foreseeable future.

 

i.

Litigation. Except as set forth in the Reports, there is no pending or, to the best knowledge of Eastside, threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over Eastside, or any of its Affiliates that would affect the execution by Eastside of, or the performance by Eastside of its obligations under, the Transaction Documents. Except as disclosed in the Reports, there is no pending or, to the best knowledge of Eastside, basis for or threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over Eastside, or any of its Affiliates which litigation, if adversely determined, would have a Material Adverse Effect.

 

j.

Information Concerning Eastside. During the two (2) years prior to the date hereof, Eastside has timely filed all Reports required to be filed by it with the Commission pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended. The Reports contain all the information required to be disclosed therein under applicable law, rules and regulations of the Commission and applicable accounting requirements as of their respective dates. As of their respective dates, the financial statements of Eastside included in the Reports complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission with respect thereto as in effect as of the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of Eastside as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which will not be material, either individually or in the aggregate). Since the last day of the fiscal year of the most recent audited financial statements included in the Reports (“Latest Financial Date”), and except as modified in the Reports, there has been no Material Adverse Event relating to Eastside’s business, financial condition, or affairs not disclosed in the Reports. The Reports do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances when made.

 

 

k.

Intellectual Property. Eastside has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or required for use in connection with its businesses as described in the Reports and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). None of, and Eastside has not received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated, or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement. Except as disclosed in the Reports, Eastside has not received, since the Latest Financial Date, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of Eastside, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights.

 

l.

No Undisclosed Events, Liabilities, Developments, or Circumstances. Except as disclosed in the Reports, no event, liability, development or circumstance has occurred or exists, or is reasonably expected to exist or occur with respect to Eastside or any of its businesses, properties, liabilities, prospects, operations (including results thereof) or condition (financial or otherwise), that (i) would be required to be disclosed by Eastside under applicable securities laws on a registration statement on Form S-1 filed with the Commission relating to an issuance and sale by Eastside of its Common Stock and which has not been publicly announced, (ii) could have a material adverse effect on the Parties’ investments hereunder, or (iii) could have a Material Adverse Effect.

 

m.

Rule 144(i). Eastside is not an issuer under Rule 144(i) of the 1933 Act.

 

VII. MISCELLANEOUS

 

20.

General

 

a.

Governing Law; Jurisdiction. All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Nevada, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Nevada or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Nevada. Each Party irrevocably consents to the exclusive jurisdiction of any court within the State of Nevada (except for purposes of enforcing a judgment), including, federal courts with concurrent jurisdiction, for the purpose of resolving any dispute arising under this Agreement. Each Party waives any objection to venue or inconvenience of the forum in any such court.

 

b.

Specific Enforcement. The Parties acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to seek one or more preliminary and final injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.

 

c.

Amendments. This Agreement may not be modified or amended except pursuant to a written instrument executed by all of the Parties.

 

d.

Notices. Any notice with respect to this Agreement must be in writing and must be either personally delivered or sent by reputable overnight courier service (charges prepaid) or sent via electronic mail to the recipient at the address indicated on the first page hereof or such other address or to the attention of such other Person as the recipient Party shall have specified by prior written notice to the sending Party. Any notice under this Agreement shall be deemed to have been given (i) at the time and on the date personally delivered if delivered by hand, (ii) on that date that is one (1) business day following the mailing of such notice by reputable overnight courier service, or (iii) at the time and on the date shown in a delivery confirmation report generated by the sender’s email system which indicates that delivery of the email to the recipient’s email address has been completed, if sent by electronic mail.

 

e.

Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimile, .pdf, or other electronic signatures shall be deemed acceptable and binding.

 

(The remainder of this page is intentionally blank.)

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement.

 

EASTSIDE DISTILLING, INC.			CRAFT CANNING + BOTTLING, LLC
By:	/s/ Geoffrey Gwin		By:	/s/ Geoffrey Gwin
	Geoffrey Gwin, CEO			Geoffrey Gwin, Manager
BIGGER CAPITAL FUND, LP			DISTRICT 2 CAPITAL FUND LP
By:	Bigger Capital Fund GP, LLC		By:	District 2 GP, LLC
By:	/s/ Michael Bigger		By:	/s/ Michael Bigger
	Michael Bigger, Managing Member			Michael Bigger, Managing Member
LD INVESTMENTS, LLC			AEGIS SECURITY INSURANCE COMPANY
By:	/s/ Patrick Kilkenny		By:	/s/ Patrick Kilkenny
	Patrick Kilkenny, Managing Member			Patrick Kilkenny, Managing Member
THE B.A.D. COMPANY, LLC			WPE KIDS PARTNERS
By:	Bigger Capital, LLC
By:	/s/ Michael Bigger		By:	/s/ William Esping
	Michael Bigger, Manager			William Esping
	/s/ Robert Grammen			/s/ William Esping
	Robert Grammen			William Esping

 

[Signature Page to Debt Exchange Agreement]

 

 

APPENDICES

 

A.	Filing Consent

 

B.	Exhibit A to Certificate of Designation of Series D Preferred Stock

 

C.	Exhibit A to Certificate of Designation of Series E Preferred Stock

 

 

FILING CONSENT

 

The undersigned, being the sole holder of shares of Series C Preferred Stock issued by Eastside Distilling Inc. (the “Issuer”), hereby consents to filing by the Issuer with the Nevada Secretary of State of a Certificate of Amendment of Designation with respect to the Series C Preferred Stock in the form annexed hereto as Exhibit A (the “SC Amendment”).

 

The Consent of the undersigned is given pursuant to Section 4 of the Debt Exchange Agreement dated September 4, 2024, and is conditioned on confirmation by the Issuer that the SC Amendment shall be filed only for the purpose and under the circumstances described in said Section 4.

 

	The B.A.D. Company, LLC
	By:	Bigger Capital, LLC, Manager
	By:
		Michael Bigger, Manager

 

Confirmation

 

Eastside Distilling, Inc hereby confirms that it will file the SC Amendment annexed hereto only for the purpose and under the circumstances described in Section 4 of the Debt Exchange Agreement dated September __, 2024.

 

	Eastside Distilling, Inc.
	By:
		Geoffrey Gwin, CEO

 

 

 

 

EXHIBIT A

TO

CERTIFICATE OF DESIGNATION

ESTABLISHING SERIES D PREFERRED STOCK OF

EASTSIDE DISTILLING, INC.

 

A Nevada Corporation

 

Eastside Distilling, Inc., a Nevada corporation (the “Corporation”), hereby establishes and designates Two Hundred Fifty-Five Thousand Four Hundred Seventy Four (255,474) shares of its preferred stock, $0.0001 par value per share, as Series D Preferred Stock (the “Series D Preferred Stock”). The voting powers, designations, preferences, privileges, limitations, restrictions, and relative rights of the Series D Preferred Stock relative to those of the common stock, par value $0.0001 per share, of the Corporation (the “Common Stock”) and any other class or series of stock of the Corporation are set forth in this Certificate of Designation Establishing Series D Preferred Stock of the Corporation (the “Certificate”).

 

1. Stated Value. Each share of Series D Preferred Stock shall have a stated value equal to $10.00 (the “Stated Value”).

 

2. Liquidation. Upon the liquidation, dissolution and winding up of the Corporation, or upon the effective date of a consolidation, merger or statutory share exchange in which the Corporation is not the surviving entity (generically, a “Liquidation Event”), the holder of each share of the Series D Preferred Stock (a “Holder”) shall be entitled to a distribution prior to and in preference of the holders of the Common Stock and in pari passu with the holders of the Series C Preferred Stock and the holders of the Series E Preferred Stock. Notwithstanding the forgoing, upon a Liquidation Event, the holders of each share of the Corporation’s Series B Preferred Stock will be entitled to a distribution prior to and in preference of the Holders of Series D Preferred Stock in accordance with the terms of the Certificate of Designation Establishing Series B Preferred Stock of Eastside Distilling, Inc. In determining the appropriate distribution of available cash among the Holders of Series D Preferred Stock, each share of Series D Preferred Stock shall be deemed to have been converted into the number of shares of the Corporation’s Common Stock into which that Holder’s Series D Preferred Stock could be converted on the record date for the distribution without taking into account the restriction on conversion set forth in Section 5.3.7 hereof.

 

3. Dividends. In the event the Corporation declares a dividend payable in cash or stock to holders of any class of stock, the Holder of each share of Series D Preferred Stock shall be entitled to receive a dividend equal in amount and kind to that payable to the holder of the number of shares of the Corporation’s Common Stock into which that Holder’s Series D Preferred Stock could be converted on the record date for the distribution without taking into account the restriction on conversion set forth in Section 5.3.7 hereof.

 

4. Voting.

 

4.1 General. Except as required by applicable law and as set forth in Section 4.2 below, the Holders of Series D Preferred Stock shall have no voting rights by reason thereof; provided for the avoidance of doubt, that nothing in this Section 4.1 shall be deemed to limit a Holder’s voting rights with respect to shares of any other class of the Corporation’s capital stock held by such Holder from time to time.

 

 

4.2 Series D Preferred Stock Protective Provisions. The affirmative vote at a meeting duly called for such purpose, or the written consent without a meeting, of the Holders of more than fifty percent (50%) of the then outstanding shares of Series D Preferred Stock, voting or consenting (as the case may be) separately as a class, shall be required in order to effect any amendment, restatement, amendment and restatement, supplement or other change or modification to the Corporation’s Articles of Incorporation (the “Articles”), Bylaws or this Certificate, to the extent that such amendment, restatement, amendment and restatement, supplement or other modification or change, as applicable, would adversely affect any of the preferences, privileges, relative rights or other rights of the Series D Preferred Stock, and any such amendment, restatement, amendment and restatement, supplement or other change or modification purported to be effected without such vote or consent shall be null and void ab initio, and of no force or effect.

 

5. Conversion. The Holders of the Series D Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

5.1 Right to Convert.

 

5.1.1 Conversion Ratio. Each share of Series D Preferred Stock shall be convertible, at the option of the Holder thereof, at any time and from time to time, and without the payment of additional consideration by the Holder thereof, into such number of fully paid and non-assessable shares of Common Stock equal to the ratio determined by dividing (A) the Stated Value of such share of Series D Preferred Stock by (B) the Series D Conversion Price (as defined below) in effect at the time of conversion (the “Conversion Ratio”). The “Series D Conversion Price” shall initially be One Dollar and Eighty Cents ($1.80). The Series D Conversion Price shall be subject to adjustment as provided in Sections 5.4 through 5.7 below, and for the avoidance of doubt, any adjustment to the Series D Conversion Price as provided in Section 5.4 through 5.7 below shall result in a concordant adjustment to the number of shares of Common Stock into which each share of Series D Preferred Stock may be converted pursuant to the formula set forth in the first sentence of this Section 5.1.1 for determining the Conversion Ratio.

 

5.1.2 Termination of Conversion Rights. In the event of a liquidation, dissolution, or winding up of the Corporation or a Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for payment of any amounts distributable to the Holders of Series D Preferred Stock by reason of such event.

 

5.2 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series D Preferred Stock. In lieu of any fractional shares to which the Holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series D Preferred Stock the Holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

 

 

5.3 Mechanics of Conversion.

 

5.3.1 Notice of Conversion. In order for a Holder of Series D Preferred Stock to convert shares of Series D Preferred Stock into shares of Common Stock, such Holder shall (a) provide written notice to the Corporation that such Holder elects to convert all or any number of such Holder’s shares of Series D Preferred Stock on the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”), duly completed and executed. The Notice of Conversion shall state the Holder’s name or the names of the nominees in which the Holder wishes the shares of Common Stock to be issued. The calculations set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. The “Conversion Date” with respect to any conversion of Series D Preferred Stock hereunder (or the date on which any such conversion shall be deemed effective), shall be the date on which the Notice of Conversion with respect to such conversion is delivered to the Corporation. The shares of Common Stock issuable upon conversion of the specified shares of Series D Preferred Stock in a Notice of Conversion shall be deemed to be outstanding of record as of the Conversion Date with respect to such Notice of Conversion. Not later than two (2) Trading Days following the Conversion Date with respect to any conversion of Series D Preferred Stock hereunder (the “Share Delivery Date”), the Corporation shall cause the shares of Common Stock issuable upon conversion of the shares of Series D Preferred Stock specified in the applicable Notice of Conversion to be transmitted by the Corporation’s transfer agent to the Holder or its nominee’s balance account with The Depository Trust Company through its Deposit Withdrawal Agent Commission System, provided that at least one of the following two conditions is met as of the Conversion Date: (1) there is an effective registration statement permitting the issuance of the shares of Common Stock issuable upon conversion of the shares of Series D Preferred Stock specified in the Notice of Conversion or the resale of such shares of Common Stock by the Holder and (2) the shares of Common Stock issuable upon conversion of the shares of Series D Preferred Stock specified in the Notice of Conversion are eligible for resale by the Holder pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended (the “DWAC Delivery Conditions”); provided, that solely in the case that neither of the DWAC Delivery Conditions is met as of the Conversion Date, the Corporation shall cause the shares of Common Stock issuable upon conversion of the shares of Series D Preferred Stock specified in the Notice of Conversion to be transmitted by no later than the Share Delivery Date by the Corporation’s transfer agent to the account of the Holder or its nominee by book entry transfer, and shall cause the Transfer Agent to deliver to the Holder evidence of such book entry transfer by no later than the Share Delivery Date. In addition, upon delivery of any Notice of Conversion to the Corporation by a Holder, by no later than the Share Delivery Date, the Corporation shall (i) pay in cash to the Holder such amount as provided in Subsection 5.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (ii) pay all declared but unpaid dividends on the shares of Series D Preferred Stock so converted. If the Corporation fails for any reason to cause delivery to the Holder or its nominee of the shares of Common Stock issuable upon a conversion of Series D Preferred Stock in accordance with this Section 5.3.1 on or prior to the applicable Share Delivery Date, the Corporation shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of shares of Common Stock issuable pursuant to such conversion (based on the number of shares of Common Stock issuable pursuant to such conversion and the VWAP of the Common Stock on the applicable Conversion Date), $5 per Trading Day (increasing to $10 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Share Delivery Date until such shares of Common Stock are delivered or the Holder rescinds such conversion.

 

 

5.3.2 Rescission Rights. If the Corporation fails to cause its transfer agent to transmit to the Holder or its nominee the shares of Common Stock issuable upon a conversion of Series D Preferred Stock in accordance with the provisions of Section 5.3.1 on or prior to the applicable Share Delivery Date, the Holder will have the right to rescind such conversion by written notice to the Corporation.

 

5.3.3 Compensation for Buy-In on Failure to Timely Deliver Shares Upon Conversion. In addition to any other rights available to a Holder, if the Corporation fails to cause its transfer agent to transmit to the Holder or its nominee the shares of Common Stock issuable upon a conversion of Series D Preferred Stock in accordance with the provisions of Section 5.3.1 on or prior to the applicable Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the shares of Common Stock which the Holder anticipated receiving upon such conversion (a “Buy-In”), then the Corporation shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of shares of Common Stock that the Corporation was required to deliver to the Holder in connection with the conversion at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the number of shares of Series D Preferred Stock for which such conversion was not honored (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Corporation timely complied with its conversion and delivery obligations hereunder. The Holder shall provide the Corporation written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder under any other Section hereof or under applicable law with respect to the Corporation’s failure to timely deliver shares of Common Stock upon conversion of the Series D Preferred Stock as required pursuant to the terms hereof; provided, however, that any amount payable by the Corporation to a Holder pursuant to this Section 5.3.3 shall be reduced by any amount paid by the Corporation to that Holder as liquidated damages pursuant to Section 5.3.1 hereof.

 

5.3.4 Reservation of Shares. The Corporation shall at all times when the Series D Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series D Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series D Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series D Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Articles.

 

 

5.3.5 Effect of Conversion. All shares of Series D Preferred Stock which shall have been converted as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate on the Conversion Date, except only the right of the Holders thereof (i) to receive shares of Common Stock in exchange therefor on or prior to the applicable Share Delivery Date in accordance with Section 5.3.1, (ii) to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 5.2, (iii) to receive payment of any dividends declared but unpaid thereon, and (iv) if the Corporation fails to transmit to the Holder or its nominee the shares of Common Stock issuable upon a conversion of Series D Preferred Stock in accordance with the provisions of Section 5.3.1 on or prior to the applicable Share Delivery Date, to payment of liquidated damages in accordance with Section 5.3.1 and to any payment due in respect of a Buy-In in accordance with Section 5.3.2, as applicable. Any shares of Series D Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series D Preferred Stock accordingly. Notwithstanding anything to the contrary set forth herein and for the avoidance of doubt, any shares of Series D Preferred Stock subject to a conversion that is rescinded by a Holder in accordance with this Section 5 shall not be deemed converted and all rights of such Holder with respect to such shares of Series D Preferred Stock shall remain intact as if such conversion had never occurred.

 

5.3.6 Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Series D Preferred Stock pursuant to this Section 5. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Series D Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the Person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

 

 

5.3.7 Conversion Limitations. The Corporation shall not effect any conversion of any shares of Series D Preferred Stock, and a Holder shall not have the right to effect any such conversion of any of his, her or its shares of Series D Preferred Stock, pursuant to Section 5 or otherwise, to the extent that after giving effect to such conversion, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons “Attribution Parties”)), would beneficially own voting stock in excess of the Beneficial Ownership Limitation (as defined below). For purposes of this Section 5.3.7, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon any conversion with respect to which a Notice of Conversion has been given, but shall exclude the number of shares of Common Stock which would be issuable upon (i) conversion of the remaining, unconverted shares of Series D Preferred Stock beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other derivative securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 5.3.7 applies, the determination of the number of shares of Series D Preferred Stock that are convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination as to the number of shares of Series D Preferred Stock that are convertible, in each case subject to the Beneficial Ownership Limitation, and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. The “Beneficial Ownership Limitation” shall be 9.99% of the Cumulative Voting Power outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon the conversion specified in the Notice of Conversion. For purposes of this Section 5.3.7, the “Cumulative Voting Power” shall be the sum of the votes that may be cast at a meeting of the Corporation’s shareholders by the record holders of securities issued by the Corporation which by their terms provide the holder of such securities the right to cast votes on any proposal presented for vote of the shareholders. For purposes of this Section 5.3.7, in determining the Cumulative Voting Power, a Holder may rely on the information pertaining to the Cumulative Voting Power reflected in (A) the Corporation’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (B) a more recent public announcement by the Corporation or (C) a more recent written notice by the Corporation or its transfer agent setting forth the number of shares of Common Stock and/or the number of shares of other classes of stock with voting rights outstanding. Upon the written request of a Holder (which, for clarity, includes electronic mail), the Corporation shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock and number of shares of other classes of voting stock then outstanding. In any case, the Cumulative Voting Power shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including the Series D Preferred Stock, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock or such number of outstanding shares of other classes of voting stock, as applicable, was reported. The Holder, upon not less than 61 days’ prior notice to the Corporation, may increase the percentage of Cumulative Voting Power that defines the Beneficial Ownership Limitation to 19.99%.

 

5.4 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the filing date of this Certificate (the “Effective Date”) effect a subdivision of the outstanding Common Stock, the Series D Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Effective Date combine the outstanding shares of Common Stock, the Series D Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

 

5.5 Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Effective Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on Common Stock in additional shares of Common Stock, then and in each such event the Series D Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Series D Conversion Price then in effect by a fraction:

 

(1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

 

(2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

 

Notwithstanding the foregoing, (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series D Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series D Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (b) no such adjustment shall be made if the Holders of Series D Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Series D Preferred Stock had been converted into Common Stock on the date of such event.

 

5.6 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Effective Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 5.5 do not apply to such dividend or distribution, then and in each such event provision shall be made so that the Holders of the Series D Preferred Stock shall receive upon conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the kind and amount of securities of the Corporation, cash or other property which they would have been entitled to receive had the Series D Preferred Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this paragraph with respect to the rights of the Holders of the Series D Preferred Stock; provided, however, that no such provision shall be made if the holders of Series D Preferred Stock receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as they would have received if all outstanding shares of Series D Preferred Stock had been converted into Common Stock on the date of such event.

 

 

5.7 Adjustment for Merger or Reorganization, etc. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which Common Stock (but not the Series D Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 5.5 or 5.6), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series D Preferred Stock shall thereafter be convertible, in lieu of Common Stock into which it was convertible prior to such event, into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Series D Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Section 5.7 with respect to the rights and interests thereafter of the Holders of the Series D Preferred Stock, to the end that the provisions set forth in this Section 5.7 (including provisions with respect to changes in and other adjustments of the Series D Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Series D Preferred Stock.

 

5.8 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Series D Conversion Price pursuant to this Section 5, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than fifteen (15) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series D Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series D Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any Holder of Series D Preferred Stock (but in any event not later than five (5) days thereafter), furnish or cause to be furnished to such Holder a certificate setting forth (i) the Series D Conversion Price then in effect (reflecting all adjustments and readjustments pursuant to this Section 5), and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series D Preferred Stock.

 

5.9 Notice of Record Date. In the event:

 

(a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Series D Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

 

(b) of any capital reorganization of the Corporation, any reclassification of Common Stock of the Corporation, or any Liquidation Event,

 

then, and in each such case, the Corporation will send or cause to be sent to the Holders of the Series D Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Series D Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Series D Preferred Stock and Common Stock. Such notice shall be sent at least twenty (20) days prior to the record date or effective date for the event specified in such notice.

 

6. No Preemptive Rights. Holders of Series D Preferred Stock shall have no preemptive rights except pursuant to a written agreement by and between such Holder of Series D Preferred Stock and the Corporation.

 

7. Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by email, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at 188 Valley Road, Providence, RI 02909, email: cmoe@makeabeeline.com,or such other address or email address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, or sent by a nationally recognized overnight courier service or email addressed to each Holder at the address or email address of such Holder appearing on the books of the Corporation, or such other address or email address as such Holder may specify for such purposes by notice to the Corporation delivered in accordance with this Section. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via email at the email address specified in or pursuant to this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the date immediately following the date of transmission, if such notice or communication is delivered via email at the email address specified in or pursuant to this Section between 5:30 p.m. and 11:59 p.m. (New York City time) on any date, (iii) the second Trading Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

8. Definitions. For the purposes hereof, the following terms shall have the following meanings:

 

“Affiliate” means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.

 

“Person” means any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, any other person or entity, and any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

 

“Trading Day” means a day on which the shares of the Corporation’s Common Stock are traded on the Nasdaq Capital Market; provided, however, that in the event that the shares of Common Stock are not listed or quoted on the Nasdaq Capital Market, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York or State of Nevada are authorized or required by law or other government action to close.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, or the OTC Markets QB Tier (or any successors to any of the foregoing).

 

“VWAP” means, for any date, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)).

 

*        *        *        *        *

 

 

ANNEX A

 

NOTICE OF CONVERSION

 

(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO

CONVERT SHARES OF SERIES D PREFERRED STOCK)

 

Dated: ____________________________________________

 

The undersigned Holder hereby irrevocably elects to convert the number of shares of Series D Preferred Stock indicated below, into shares of common stock, par value $0.0001 per share (the “Common Stock”), of Eastside Distilling, Inc., a Nevada corporation (the “Corporation”), as of the date written above. No fee will be charged to the Holder for any conversion.

 

Conversion Calculations:

 

Number of shares of Series D Preferred Stock owned prior to Conversion: _______________________________________

 

Number of shares of Series D Preferred Stock to be Converted: ____________________________________________

 

Stated Value of Series D Preferred Stock to be Converted ($10 per share): ________________________________________

 

Applicable Series D Conversion Price: __________________________________________________________________

 

Applicable Conversion Ratio: _____________________________________________________

 

Number of shares of Common Stock to be Issued: ____________________________________________

 

The shares of Common Stock shall be issued in the name of undersigned Holder or to its nominee as specified below:

 

__________________________________________________________________________

 

The shares of Common Stock shall be issued to the following DWAC Account Number:

 

DTC Participant:		DTC Number:
Account Number:

 

Name of Holder: __________________________________________________________________________________

 

Signature of Authorized Signatory of Holder: __________________________________________________________

 

Name of Authorized Signatory: _______________________________________________________________________

 

Title of Authorized Signatory: ____________________________________________

 

 

EXHIBIT A

TO

CERTIFICATE OF DESIGNATION

ESTABLISHING SERIES E PREFERRED STOCK OF

EASTSIDE DISTILLING, INC.

 

A Nevada Corporation

 

Eastside Distilling, Inc., a Nevada corporation (the “Corporation”), hereby establishes and designates Two Hundred Thousand (200,000) shares of its preferred stock, $0.0001 par value per share, as Series E Preferred Stock (the “Series E Preferred Stock”). The voting powers, designations, preferences, privileges, limitations, restrictions, and relative rights of the Series E Preferred Stock relative to those of the common stock, par value $0.0001 per share, of the Corporation (the “Common Stock”) and any other class or series of stock of the Corporation are set forth in this Certificate of Designation Establishing Series E Preferred Stock of the Corporation (the “Certificate”).

 

Capitalized terms in this Certificate have the meaning given in Section 9 of this Certificate or defined within the text of this Certificate.

 

1. Stated Value. Each share of Series E Preferred Stock shall have a stated value equal to Ten Dollars ($10.00) (the “Stated Value”).

 

2. Liquidation. Upon the liquidation, dissolution and winding up of the Corporation, or upon the effective date of a consolidation, merger or statutory share exchange in which the Corporation is not the surviving entity (generically, a “Liquidation Event”), the holder of each share of the Series E Preferred Stock (a “Holder”) shall be entitled to a distribution prior to and in preference of the holders of the Common Stock and in pari passu with the holders of the Series C Preferred Stock and the holders of the Series D Preferred Stock. Notwithstanding the forgoing, upon a Liquidation Event, the holders of each share of the Corporation’s Series B Preferred Stock will be entitled to a distribution prior to and in preference of the Holders of Series E Preferred Stock in accordance with the terms of the Certificate of Designation Establishing Series B Preferred Stock of Eastside Distilling, Inc. In determining the appropriate distribution of available cash among the Holders of Series E Preferred Stock, each share of Series E Preferred Stock shall be deemed to have been converted into the number of shares of the Corporation’s Common Stock into which that Holder’s Series E Preferred Stock could be converted on the record date for the distribution (the “Record Date”) without taking into account either (a) the restriction on conversion set forth in Section 5.3.7 hereof or (b) the restriction on conversion prior to the Measurement Date set forth in Section 5.1.1. In the event that the Liquidation Event occurs prior to the Measurement Date, the Series E Conversion Price for purposes of the Liquidation Event alone shall be determined by reference to the five day average VWAP preceding the Record Date as if the Measurement Date was the Record Date.

 

3. Dividends. In the event the Corporation declares a dividend payable in cash or stock to holders of any class of stock, the Holder of each share of Series E Preferred Stock shall be entitled to receive a dividend equal in amount and kind to that payable to the holder of the number of shares of the Corporation’s Common Stock into which that Holder’s Series E Preferred Stock could be converted on the record date for the distribution without taking into account the restriction on conversion set forth in Section 5.3.7 hereof.

 

 

4. Voting.

 

4.1 General. Except as required by applicable law and as set forth in Section 4.2 below, the Holders of Series E Preferred Stock shall have no voting rights by reason thereof; provided for the avoidance of doubt, that nothing in this Section 4.1 shall be deemed to limit a Holder’s voting rights with respect to shares of any other class of the Corporation’s capital stock held by such Holder from time to time.

 

4.2 Series E Preferred Stock Protective Provisions. The affirmative vote at a meeting duly called for such purpose, or the written consent without a meeting, of the Holders of more than fifty percent (50%) of the then outstanding shares of Series E Preferred Stock, voting or consenting (as the case may be) separately as a class, shall be required in order to effect any amendment, restatement, amendment and restatement, supplement or other change or modification to the Corporation’s Articles of Incorporation (the “Articles”), Bylaws or this Certificate, to the extent that such amendment, restatement, amendment and restatement, supplement or other modification or change, as applicable, would adversely affect any of the preferences, privileges, relative rights or other rights of the Series E Preferred Stock, and any such amendment, restatement, amendment and restatement, supplement or other change or modification purported to be effected without such vote or consent shall be null and void ab initio, and of no force or effect.

 

5. Conversion. The Holders of the Series E Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

5.1 Right to Convert.

 

5.1.1 Conversion Ratio. On and after the Measurement Date, each share of Series E Preferred Stock shall be convertible, at the option of the Holder thereof, at any time and from time to time, and without the payment of additional consideration by the Holder thereof, into such number of fully paid and non-assessable shares of Common Stock equal to the ratio determined by dividing (A) the Stated Value of such share of Series E Preferred Stock by (B) the Series E Conversion Price (as defined below) in effect at the time of conversion (the “Conversion Ratio”).

 

5.1.2 Conversion Price. The “Series E Conversion Price” shall initially be Two Dollars ($2.00). On the Measurement Date, the Series E Conversion Price shall be automatically adjusted to equal the average of the VWAPs for the five Trading Days immediately preceding the Measurement Date. The Series E Conversion Price shall be also subject to adjustment as provided in Sections 5.4 through 5.7 below, and for the avoidance of doubt, any adjustment to the Series E Conversion Price as provided in this Section 5.1.2 or in Section 5.4 through 5.7 below shall result in a concordant adjustment to the number of shares of Common Stock into which each share of Series E Preferred Stock may be converted pursuant to the formula set forth in Section 5.1.1 for determining the Conversion Ratio.

 

 

5.1.3 Termination of Conversion Rights. In the event of a liquidation, dissolution, or winding up of the Corporation or a Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for payment of any amounts distributable to the Holders of Series E Preferred Stock by reason of such event.

 

5.2 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series E Preferred Stock. In lieu of any fractional shares to which the Holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series E Preferred Stock the Holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

 

5.3 Mechanics of Conversion.

 

5.3.1 Notice of Conversion. In order for a Holder of Series E Preferred Stock to convert shares of Series E Preferred Stock into shares of Common Stock, such Holder shall (a) provide written notice to the Corporation that such Holder elects to convert all or any number of such Holder’s shares of Series E Preferred Stock on the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”), duly completed and executed. The Notice of Conversion shall state the Holder’s name or the names of the nominees in which the Holder wishes the shares of Common Stock to be issued. The calculations set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. The “Conversion Date” with respect to any conversion of Series E Preferred Stock hereunder (or the date on which any such conversion shall be deemed effective), shall be the date on which the Notice of Conversion with respect to such conversion is delivered to the Corporation. The shares of Common Stock issuable upon conversion of the specified shares of Series E Preferred Stock in a Notice of Conversion shall be deemed to be outstanding of record as of the Conversion Date with respect to such Notice of Conversion. Not later than two (2) Trading Days following the Conversion Date with respect to any conversion of Series E Preferred Stock hereunder (the “Share Delivery Date”), the Corporation shall cause the shares of Common Stock issuable upon conversion of the shares of Series E Preferred Stock specified in the applicable Notice of Conversion to be transmitted by the Corporation’s transfer agent to the Holder or its nominee’s balance account with The Depository Trust Company through its Deposit Withdrawal Agent Commission System, provided that at least one of the following two conditions is met as of the Conversion Date: (1) there is an effective registration statement permitting the issuance of the shares of Common Stock issuable upon conversion of the shares of Series E Preferred Stock specified in the Notice of Conversion or the resale of such shares of Common Stock by the Holder and (2) the shares of Common Stock issuable upon conversion of the shares of Series E Preferred Stock specified in the Notice of Conversion are eligible for resale by the Holder pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended (the “DWAC Delivery Conditions”); provided, that solely in the case that neither of the DWAC Delivery Conditions is met as of the Conversion Date, the Corporation shall cause the shares of Common Stock issuable upon conversion of the shares of Series E Preferred Stock specified in the Notice of Conversion to be transmitted by no later than the Share Delivery Date by the Corporation’s transfer agent to the account of the Holder or its nominee by book entry transfer, and shall cause the Transfer Agent to deliver to the Holder evidence of such book entry transfer by no later than the Share Delivery Date. In addition, upon delivery of any Notice of Conversion to the Corporation by a Holder, by no later than the Share Delivery Date, the Corporation shall (i) pay in cash to the Holder such amount as provided in Subsection 5.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (ii) pay all declared but unpaid dividends on the shares of Series E Preferred Stock so converted. If the Corporation fails for any reason to cause delivery to the Holder or its nominee of the shares of Common Stock issuable upon a conversion of Series E Preferred Stock in accordance with this Section 5.3.1 on or prior to the applicable Share Delivery Date, the Corporation shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of shares of Common Stock issuable pursuant to such conversion (based on the number of shares of Common Stock issuable pursuant to such conversion and the VWAP of the Common Stock on the applicable Conversion Date), $5 per Trading Day (increasing to $10 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Share Delivery Date until such shares of Common Stock are delivered or the Holder rescinds such conversion.

 

 

5.3.2 Rescission Rights. If the Corporation fails to cause its transfer agent to transmit to the Holder or its nominee the shares of Common Stock issuable upon a conversion of Series E Preferred Stock in accordance with the provisions of Section 5.3.1 on or prior to the applicable Share Delivery Date, the Holder will have the right to rescind such conversion by written notice to the Corporation.

 

5.3.3 Compensation for Buy-In on Failure to Timely Deliver Shares Upon Conversion. In addition to any other rights available to a Holder, if the Corporation fails to cause its transfer agent to transmit to the Holder or its nominee the shares of Common Stock issuable upon a conversion of Series E Preferred Stock in accordance with the provisions of Section 5.3.1 on or prior to the applicable Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the shares of Common Stock which the Holder anticipated receiving upon such conversion (a “Buy-In”), then the Corporation shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of shares of Common Stock that the Corporation was required to deliver to the Holder in connection with the conversion at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the number of shares of Series E Preferred Stock for which such conversion was not honored (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Corporation timely complied with its conversion and delivery obligations hereunder. The Holder shall provide the Corporation written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder under any other Section hereof or under applicable law with respect to the Corporation’s failure to timely deliver shares of Common Stock upon conversion of the Series E Preferred Stock as required pursuant to the terms hereof; provided, however, that any amount payable by the Corporation to a Holder pursuant to this Section 5.3.3 shall be reduced by any amount paid by the Corporation to that Holder as liquidated damages pursuant to Section 5.3.1 hereof.

 

 

5.3.4 Reservation of Shares. The Corporation shall at all times when the Series E Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series E Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series E Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series E Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Articles.

 

5.3.5 Effect of Conversion. All shares of Series E Preferred Stock which shall have been converted as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate on the Conversion Date, except only the right of the Holders thereof (i) to receive shares of Common Stock in exchange therefor on or prior to the applicable Share Delivery Date in accordance with Section 5.3.1, (ii) to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 5.2, (iii) to receive payment of any dividends declared but unpaid thereon, and (iv) if the Corporation fails to transmit to the Holder or its nominee the shares of Common Stock issuable upon a conversion of Series E Preferred Stock in accordance with the provisions of Section 5.3.1 on or prior to the applicable Share Delivery Date, to payment of liquidated damages in accordance with Section 5.3.1 and to any payment due in respect of a Buy-In in accordance with Section 5.3.2, as applicable. Any shares of Series E Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series E Preferred Stock accordingly. Notwithstanding anything to the contrary set forth herein and for the avoidance of doubt, any shares of Series E Preferred Stock subject to a conversion that is rescinded by a Holder in accordance with this Section 5 shall not be deemed converted and all rights of such Holder with respect to such shares of Series E Preferred Stock shall remain intact as if such conversion had never occurred.

 

5.3.6 Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Series E Preferred Stock pursuant to this Section 5. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Series E Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the Person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

 

 

5.3.7 Conversion Limitations. The Corporation shall not effect any conversion of any shares of Series E Preferred Stock, and a Holder shall not have the right to effect any such conversion of any of his, her or its shares of Series E Preferred Stock, pursuant to Section 5 or otherwise, to the extent that after giving effect to such conversion, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons “Attribution Parties”)), would beneficially own voting stock in excess of the Beneficial Ownership Limitation (as defined below). For purposes of this Section 5.3.7, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon any conversion with respect to which a Notice of Conversion has been given, but shall exclude the number of shares of Common Stock which would be issuable upon (i) conversion of the remaining, unconverted shares of Series E Preferred Stock beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other derivative securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 5.3.7 applies, the determination of the number of shares of Series E Preferred Stock that are convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination as to the number of shares of Series E Preferred Stock that are convertible, in each case subject to the Beneficial Ownership Limitation, and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. The “Beneficial Ownership Limitation” shall be 9.99% of the Cumulative Voting Power outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon the conversion specified in the Notice of Conversion. For purposes of this Section 5.3.7, the “Cumulative Voting Power” shall be the sum of the votes that may be cast at a meeting of the Corporation’s shareholders by the record holders of securities issued by the Corporation which by their terms provide the holder of such securities the right to cast votes on any proposal presented for vote of the shareholders. For purposes of this Section 5.3.7, in determining the Cumulative Voting Power, a Holder may rely on the information pertaining to the Cumulative Voting Power reflected in (A) the Corporation’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (B) a more recent public announcement by the Corporation or (C) a more recent written notice by the Corporation or its transfer agent setting forth the number of shares of Common Stock and/or the number of shares of other classes of stock with voting rights outstanding. Upon the written request of a Holder (which, for clarity, includes electronic mail), the Corporation shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock and number of shares of other classes of voting stock then outstanding. In any case, the Cumulative Voting Power shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including the Series E Preferred Stock, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock or such number of outstanding shares of other classes of voting stock, as applicable, was reported. The Holder, upon not less than 61 days’ prior notice to the Corporation, may increase the percentage of Cumulative Voting Power that defines the Beneficial Ownership Limitation to 19.99%.

 

 

5.4 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the filing date of this Certificate (the “Effective Date”) effect a subdivision of the outstanding Common Stock, the Series E Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Effective Date combine the outstanding shares of Common Stock, the Series E Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

5.5 Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Effective Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on Common Stock in additional shares of Common Stock, then and in each such event the Series E Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Series E Conversion Price then in effect by a fraction:

 

(1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

 

(2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

 

Notwithstanding the foregoing, (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series E Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series E Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (b) no such adjustment shall be made if the Holders of Series E Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Series E Preferred Stock had been converted into Common Stock on the date of such event.

 

 

5.6 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Effective Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 5.5 do not apply to such dividend or distribution, then and in each such event provision shall be made so that the Holders of the Series E Preferred Stock shall receive upon conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the kind and amount of securities of the Corporation, cash or other property which they would have been entitled to receive had the Series E Preferred Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this paragraph with respect to the rights of the Holders of the Series E Preferred Stock; provided, however, that no such provision shall be made if the holders of Series E Preferred Stock receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as they would have received if all outstanding shares of Series E Preferred Stock had been converted into Common Stock on the date of such event.

 

5.7 Adjustment for Merger or Reorganization, etc. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which Common Stock (but not the Series E Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 5.5 or 5.6), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series E Preferred Stock shall thereafter be convertible, in lieu of Common Stock into which it was convertible prior to such event, into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Series E Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Section 5.7 with respect to the rights and interests thereafter of the Holders of the Series E Preferred Stock, to the end that the provisions set forth in this Section 5.7 (including provisions with respect to changes in and other adjustments of the Series E Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Series E Preferred Stock.

 

5.8 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Series E Conversion Price pursuant to this Section 5, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than fifteen (15) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series E Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series E Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any Holder of Series E Preferred Stock (but in any event not later than five (5) days thereafter), furnish or cause to be furnished to such Holder a certificate setting forth (i) the Series E Conversion Price then in effect (reflecting all adjustments and readjustments pursuant to this Section 5), and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series E Preferred Stock.

 

 

5.9 Notice of Record Date. In the event:

 

(a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Series E Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

(b) of any capital reorganization of the Corporation, any reclassification of Common Stock of the Corporation, or any Liquidation Event,

 

then, and in each such case, the Corporation will send or cause to be sent to the Holders of the Series E Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Series E Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Series E Preferred Stock and Common Stock. Such notice shall be sent at least twenty (20) days prior to the record date or effective date for the event specified in such notice.

 

6. No Preemptive Rights. Holders of Series E Preferred Stock shall have no preemptive rights except pursuant to a written agreement by and between such Holder of Series E Preferred Stock and the Corporation.

 

7. Redemption.

 

7.1 Redemption Notice. The Corporation shall have the right to redeem all (but not less than all) of the Series E Preferred Stock (the “Redemption”) by delivering to the Holders written notice of its exercise of the redemption right granted hereunder (the “Redemption Notice”) not less than fifteen (15) Business Days prior to the Measurement Date. The Redemption Notice shall state:

 

(a) that the Corporation has elected to exercise its right to redeem all of the Series E Preferred Stock;

 

(b) that the Redemption Price shall be Ten Dollars ($10.00) per Share; and

 

(c) the date on which the Corporation shall pay the Redemption Price (the “Redemption Date”), which shall be a Business Day selected by the Corporation not less than five (5) nor greater than ten (10) Business Days subsequent to the date of receipt by the Holders of the Redemption Notice.

 

 

7.2 Closing of Redemption. Subject to the terms and conditions of this Certificate, including, without limitation, the Corporation’s timely delivery of a proper Redemption Notice in accordance with this Certificate, the closing of the Redemption (the “Closing”) shall take place, remotely, on the Redemption Date. At the Closing, the Corporation shall deliver the Purchase Price payable to each Holder by wire transfer per instructions provided by the Holder, and the Holders shall sell to the Corporation, all of the Series E Preferred Stock at the Redemption Price. Upon indefeasible receipt of the full Redemption Price in cash by each Holder, all Series E Preferred Stock held by such Holder shall cease to be outstanding.

 

8. Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by email, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at 188 Valley Road, Providence, RI 02909, email: cmoe@makeabeeline.com, or such other address or email address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, or sent by a nationally recognized overnight courier service or email addressed to each Holder at the address or email address of such Holder appearing on the books of the Corporation, or such other address or email address as such Holder may specify for such purposes by notice to the Corporation delivered in accordance with this Section. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via email at the email address specified in or pursuant to this Section prior to 5:30 p.m. (Providence time) on any date, (ii) the date immediately following the date of transmission, if such notice or communication is delivered via email at the email address specified in or pursuant to this Section between 5:30 p.m. and 11:59 p.m. (Providence time) on any date, (iii) the second Trading Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

9. Definitions. For the purposes hereof, the following terms shall have the following meanings:

 

“Affiliate” means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.

 

“Measurement Date” means the 390th calendar day after the Closing Date of the Debt Exchange Agreement pursuant to which the Series E Preferred Stock was issued.

 

“Person” means any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, any other person or entity, and any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

 

“Trading Day” means a day on which the shares of the Corporation’s Common Stock are traded on the Nasdaq Capital Market; provided, however, that in the event that the shares of Common Stock are not listed or quoted on the Nasdaq Capital Market, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York or State of Nevada are authorized or required by law or other government action to close.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, or the OTC Markets QB Tier (or any successors to any of the foregoing).

 

“VWAP” means, for any date, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)).

 

*        *        *        *        *

 

 

ANNEX A

 

NOTICE OF CONVERSION

 

(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO

CONVERT SHARES OF SERIES E PREFERRED STOCK)

 

Dated: ____________________________________________

 

The undersigned Holder hereby irrevocably elects to convert the number of shares of Series E Preferred Stock indicated below, into shares of common stock, par value $0.0001 per share (the “Common Stock”), of Eastside Distilling, Inc., a Nevada corporation (the “Corporation”), as of the date written above. No fee will be charged to the Holder for any conversion.

 

Conversion Calculations:

 

Number of shares of Series E Preferred Stock owned prior to Conversion: _______________________________________

 

Number of shares of Series E Preferred Stock to be Converted: _______________________________________

 

Stated Value of Series E Preferred Stock to be Converted ($10 per share): _______________________________________

 

Applicable Series E Conversion Price: _______________________________________

 

Applicable Conversion Ratio: _______________________________________

 

Number of shares of Common Stock to be Issued: _______________________________________

 

The shares of Common Stock shall be issued in the name of undersigned Holder or to its nominee as specified below:

 

__________________________________________________________________________

 

The shares of Common Stock shall be issued to the following DWAC Account Number:

 

DTC Participant:		DTC Number:
Account Number:

 

Name of Holder: __________________________________________________________________________________

 

Signature of Authorized Signatory of Holder: __________________________________________________________

 

Name of Authorized Signatory: _______________________________________________________________________

 

Title of Authorized Signatory: ________________________________________________________________________

 

 

 

Exhibit 99

 

Eastside Distilling, Inc. to Merge with Beeline Financial Holdings Inc., Marking Strategic Expansion into FinTech Mortgage Services

 

The transaction underscores Eastside’s commitment to deliver value to its shareholders by entering the rapidly changing Mortgage Origination & Technology sector and to also enhance the Spirits’ portfolio through increased scale & collaboration leveraging Beeline’s consumer intelligence tools.

 

Portland, OR and Providence, RI – September 5, 2024 – Eastside Distilling, Inc. (Nasdaq: EAST) today announced it had signed a Merger Agreement with Beeline Financial Holdings, Inc., a privately-held pioneering mortgage technology company that operates an end-to-end, all-digital, AI-enhanced platform for homeowners and property investors. This strategic move follows a comprehensive two-year review of Eastside’s business portfolio and aligns with the company’s mission to maximize value for all stakeholders while achieving significant growth across multiple sectors.

 

In conjunction with this transaction, Eastside has executed a debt-for-equity exchange with, and asset sale of Craft Canning + Digital Printing to, a group of private investors. This transaction effectively will eliminate all debt from Eastside’s balance sheet and provides Craft with access to additional growth capital to accelerate the expansion of its digital printing business in the Pacific Northwest. The Debt Exchange Agreement and related instruments are expected to close immediately prior to the merger closing.

 

As merger consideration, Eastside will issue Beeline shareholders a combination of common and preferred stock. This strategic partnership positions Eastside as a leader in the digital mortgage services space while continuing to grow its legacy craft spirits business.

 

The transaction will benefit both parties. For Eastside it includes access to proprietary technology in human-level B2C sales AI tools. Beeline is among the first in mortgage origination to deliver AI-driven customer service tools and is now launching sales support AI leading to lower cost conversions for Direct-to-Consumer platforms. For Beeline, it is an opportunity to create liquidity for its shareholders while growing in the public markets and in a more favorable real estate financing environment with forecasted lower mortgage rates.

 

“Mortgage origination has yet to fully experience the dynamic and exciting transformation seen in other financial services sectors,” said Nick Liuzza, co-founder and CEO of Beeline. “Our disruptive, cloud-based, go-to-market strategy targets Millennials and Gen Z borrowers. The benefits of operating in the public markets to help Beeline achieve its goals are significant.”

 

Geoffrey Gwin, CEO of Eastside, commented, “I couldn’t be more thrilled about this new growth platform, the opportunities it presents for our shareholders and the talented team and innovative technology joining the Eastside family. This development offers tremendous potential for our stakeholders. Nick and his team have demonstrated remarkable innovation and share a vision that aligns perfectly with our strategic objectives.”

 

 

The transactions are subject to customary closing conditions, including required Beeline shareholder approvals and closing of the transactions contemplated by the Debt Exchange Agreement. Both Eastside’s Board and Beeline’s Board of Directors have approved the deal, which is expected to close later this year. For further details on the expected closing see the Form 8-K filed by Eastside with the Securities and Exchange Commission.

 

About Eastside Distilling, Inc.

 

Eastside Distilling, Inc. (Nasdaq: EAST) is a producer of award-winning craft spirits, including whiskey, vodka, and rum. Founded in Portland, Oregon, Eastside is committed to quality, innovation, and sustainability, delivering exceptional products that reflect the spirit of the Pacific Northwest.

 

About Beeline Financial Holdings, Inc.

 

Beeline Financial Holdings, Inc. is a technology-driven mortgage lender offering a fully digital, AI-enhanced, platform that simplifies and accelerates the home financing process for homeowners and property investors. Based in Providence, RI, Beeline is dedicated to transforming the mortgage industry through innovative technology and customer-centric solutions.

 

For more information, please contact:

 

Eastside Distilling, Inc.

 

Investor Relations

 

Email: ggwin@eastsidedistilling.com

 

 

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Cover	Sep. 04, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Sep. 04, 2024
Entity File Number	001-38182
Entity Registrant Name	EASTSIDE DISTILLING, INC.
Entity Central Index Key	0001534708
Entity Tax Identification Number	20-3937596
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	2321 NE Argyle Street
Entity Address, Address Line Two	Unit D
Entity Address, City or Town	Portland
Entity Address, State or Province	OR
Entity Address, Postal Zip Code	97211
City Area Code	(971)
Local Phone Number	888-4264
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Trading Symbol	EAST
Security Exchange Name	NASDAQ
Title of 12(g) Security	Common Stock, $0.0001 par value
Entity Emerging Growth Company	false

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