Item 1.01. Entry into a Material Definitive Agreement.
On January 15, 2020, Eastside Distilling, Inc. (the "Eastside") entered into a
loan agreement (the "Loan Agreement") between Eastside and its wholly-owned
subsidiaries MotherLode LLC, an Oregon limited liability company, Big Bottom
Distilling, LLC, an Oregon limited liability company, Craft Canning + Bottling,
LLC, an Oregon limited liability company, Redneck Riviera Whiskey Co., LLC, a
Tennessee limited liability company, and Outlandish Beverages LLC, an Oregon
limited liability company (collectively, the "Borrowers" and each a "Borrower")
and Live Oak Banking Company, a North Carolina banking corporation ("Lender") to
refinance existing debt of the Borrowers and to provide funding for general
working capital purposes. Under the Loan Agreement, Lender has committed to make
up to two loan advances to the Borrowers in an aggregate principal amount not to
exceed the lesser of (i) $8,000,000 and (ii) a borrowing base equal to 85% of
the appraised value of the Borrowers' eligible inventory of whisky in barrels or
totes less an amount equal to all service fees or rental payments owed by
Borrowers during the 90 day period immediately succeeding the date of
determination to any warehouses or bailees holding eligible inventory (the
"Loan").
The Loan matures on January 14, 2021 (the "Maturity Date"). On the Maturity
Date, all amounts outstanding under the Loan will become due and payable. The
Lender may at any time demand repayment of the Loan in whole or in part, in
which case the Borrowers will be obligated to repay the Loan (or portion thereof
for which repayment is demanded) within 30 days following the date of demand.
The Borrowers may prepay the Loan, in whole or in part, at any time without
penalty or premium.
The Loan bears interest at a rate equal to the prime rate plus a spread of
2.49%, adjusted quarterly. Accrued interest is payable monthly, with the final
installment of interest being due and payable on the Maturity Date. The
Borrowers are also obligated to pay a servicing fee, unused commitment fee and
origination fee in connection with the Loan.
The Loan Agreement contains affirmative and negative covenants that include
covenants restricting each Borrower's ability to, among other things, incur
indebtedness, grant liens, dispose of assets, merge or consolidate, make
investments, or enter into restrictive agreements, subject to certain
exceptions.
The obligations of the Borrowers under the Loan Agreement are secured by
substantially all of their respective assets, except for accounts receivable and
certain other specified excluded property.
The Loan Agreement includes customary events of default that include among other
things, non-payment defaults, covenant defaults, inaccuracy of representations
and warranties, cross default to material indebtedness, bankruptcy and
insolvency defaults and change in control defaults. Under certain circumstances,
a default interest rate will apply on all obligations during the existence of an
event of default under the Loan Agreement at a per annum rate equal to 2.00%
above the applicable interest rate.
In connection with the Loan Agreement, Eastside issued to Lender a warrant to
purchase up to 100,000 shares of Eastside's common stock at an initial exercise
price of $3.9425 per share (the "Warrant"). The Warrant expires on January 15,
2025. In connection with the issuance of the Warrant, Eastside granted the
Lender piggy-back registration rights with respect to the shares of common stock
issuable upon exercise of the Warrant, subject to certain exceptions.
The foregoing summary of the Loan Agreement and Warrant is qualified in its
entirety by reference to the Loan Agreement and Warrant, copies of which will be
filed as exhibits to Eastside's Annual Report on Form 10-K for the year ended
December 31, 2019.
Item 1.02. Termination of a Material Definitive Agreement.
On January 16, 2020, in connection with Eastside's consummation of the Loan
Agreement described in Item 1.01 above, Eastside repaid in full and terminated
the Secured Line of Credit Promissory Note that Eastside had issued to TQLA, LLC
("Holder") on November 29, 2019 (the "TQLA Note"). Since Eastside repaid the
TQLA Note in full prior to its maturity date, the Common Stock Purchase Warrant
that Eastside had issued to Holder on November 29, 2019 will not be exercisable
and is cancelled. No prepayment or early termination penalties were incurred by
Eastside as a result of repaying the TQLA Note.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information regarding the Loan Agreement set forth in Item 1.01 of this
Current Report on Form 8-K is hereby incorporated by reference into this Item
2.03 in its entirety.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
The following exhibits are furnished with this Current Report on Form 8-K:
Exhibit No. Description
99.1 Press Release of Eastside dated January 16, 2020
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EASTSIDE DISTILLING, INC. 
