EXECUTION
DRAFT

    SECURITY
AGREEMENT

     

               
THIS SECURITY AGREEMENT (“Security Agreement”) is made and entered into this
____ day of October, 2009, by and among Sapphire Advisors, LLC, a Delaware
limited liability company (“Secured Party”), Sapphire Wines, LLC, a Delaware
limited liability company (“Sapphire Wines”), Emerald Wines, LLC, a Delaware
limited liability company (“Emerald Wines”), and The Saint James Eos Wine
Company, a California corporation (“Purchaser,” and together with Sapphire Wines
and Emerald Wines collectively and individually “Pledgor”).

     

    WITNESSETH:

     

               
WHEREAS, in connection with that certain Membership Interest Purchase Agreement,
dated October ___, 2009 (the “Purchase Agreement”), by and among Purchaser, The
Saint James Company, a North Carolina corporation, and Secured Party, Purchaser
is executing and delivering to Secured Party that certain Secured Promissory
Note of Pledgor, dated of even date herewith, in favor of Secured Party in the
initial principal amount of $6,128,559.91 (the “Note”);

     

    WHEREAS,
in accordance with the Purchase Agreement, Purchaser is purchasing all of the
membership interests of Sapphire Wines and Emerald Wines;

     

               
WHEREAS, Secured Party has required, as a condition to entering into the
Purchase Agreement, that Pledgor execute and deliver this Security Agreement.
(Capitalized terms not defined herein shall have the meaning given in the
Purchase Agreement.); and

     

               
WHEREAS, Sapphire Wines and Emerald Wines will be benefited by the transactions
contemplated in the Purchase Agreement.

     

               
NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt, adequacy, and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

     

    1.            Pledge.  As
security for the prompt and complete payment and performance of Purchaser’s
obligations under the Note (the “Obligations”), Pledgor hereby pledges and
grants a security interest to Secured Party in all of its right, title and
interest, whether now existing or hereafter arising or acquired, in and to any
and all items of its personal property which are or have been used or are
useable in, or reasonably necessary to, the historical or current operations of
the Business, wherever located, including, without limitation, the property set
forth below (collectively, the “Collateral”):

     

    a.             As
such term is defined in the Uniform Commercial Code as the same may from time to
time be in effect in the State of California (the “Code”), all “Equipment”, in
all of its forms, wherever located and all fixtures and all parts thereof and
all accessions, parts, appurtenances, additions, attachments, improvements,
substitutions and replacements thereto and therefor (any and all of the
foregoing being the “Equipment”);

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    b.            As
such terms are defined in the Code, all “Accounts,” “Chattel Paper,” “Commercial
Tort Claims,” “Deposit Accounts,” “Documents,” “Goods,” “General Intangibles,”
“Instruments,” “Inventory,” “Investment Property,” and “Supporting
Obligations”;

     

    c.            All
books, records, writings, correspondence, files, data bases, computer programs,
tapes, disks, information and other property relating to, used or useful in
connection with, evidencing, embodying, incorporating or referring to, any of
the foregoing in this Section 1;
and

     

    d.            All
“Proceeds” thereof, as such term is defined in the Code.

     

    2.            Pledgor Remains
Liable.  Anything herein to the contrary
notwithstanding:

     

    a.            Pledgor
shall remain liable under the contracts and agreements included in the
Collateral to the extent set forth therein, and shall perform all of its duties
and obligations thereunder to the same extent as if this Security Agreement had
not been executed;

     

    b.            the
exercise by Secured Party of any of its rights hereunder shall not release
Pledgor from any of its duties or obligations under the contracts or agreements
included in the Collateral; and

     

    c.            Secured
Party shall not have any obligation or liability under such contracts or
agreements included in the Collateral solely by reason of this Security
Agreement, and, accordingly, Secured Party shall not be obligated to perform any
of the obligations or duties of Pledgor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.

     

    3.            Covenants. 
Pledgor covenants and agrees that, during the term of this Security Agreement,
Pledgor will perform the obligations set forth in this Section
3.

     

    a.            Place of Perfection;
Records. Pledgor hereby agrees that it shall:

     

    
      i.             keep
its chief place of business and chief executive office and the office where it
keeps its records concerning the Accounts, and all originals of all Chattel
Paper that evidence Accounts, at Pledgor’s existing location as of the date
hereof; provided, that such places or offices may be moved to other locations
within the United States so long as Pledgor provides Secured Party with at least
thirty (30) calendar days prior notice;

       

      ii.            not
change its name or state of domicile except upon thirty (30) calendar days prior
written notice to Secured Party; and

       

      iii.           hold
and preserve its books and records and Chattel Paper and permit Secured Party
and its representatives the right of periodic access to inspect and make
abstracts from such books and records and Chattel Paper upon reasonable notice,
subject to the execution by Secured Party and its representatives and affiliates
of a standard confidentiality agreement.

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    b.            Books, Records and
Inspections.  Pledgor shall:  (i) maintain complete and
accurate books and records; (ii) permit reasonable access by Secured Party and
its representatives to its books and records; and (iii) permit Secured Party,
upon reasonable notice, to inspect its operations and properties, whether real
or personal.

     

    c.            Taxes and
Liabilities.  Pledgor shall pay when due all taxes, assessments and
other liabilities except as contested in good faith and by appropriate
proceedings and for which adequate reserves have been established.

     

    d.            Indebtedness. 
Pledgor will not incur or permit to exist any indebtedness or liability for
borrowed money or for the deferred purchase price of any property or any
services, except:  (i) in the ordinary course of its business or (ii) with
respect to the Farm Credit Obligations or a Qualified Refinancing (as defined in
Section
5).

     

    e.            Mergers, Consolidations and
Sales.  Pledgor will not:  (i) be a party to any merger or
consolidation with, or purchase or otherwise acquire all or substantially all of
the assets or stock of any class of, or any partnership or joint venture
interest in, any other person; (ii) sell, transfer, convey or lease all or any
substantial part of its assets; (iii) sell or assign, with or without recourse,
any Accounts; or (iv) enter into any other transaction outside the ordinary
course of business, except, in each case, with the prior written consent of the
Secured Party, except, in each case, with the prior written consent of the
Secured Party, which may not be unreasonably withheld, delayed, or
denied.

     

    f.             Equity
Interests.  Pledgor shall neither purchase, retire, redeem, nor
otherwise acquire any of its equity interests, except, in each case, with the
prior written consent of the Secured Party, which may not be unreasonably
withheld, delayed, or denied.

     

    g.            Organizational
Documents.  Pledgor shall not make any changes in its capital
structure or amend any of its organizational documents, except, in each case,
with the prior written consent of the Secured Party, which may not be
unreasonably withheld, delayed, or denied.

     

    h.            Litigation and Other
Material Events.  Pledgor shall immediately in writing notify
Secured Party of the institution of or threat of any litigation or
administrative proceeding against Pledgor seeking damages in excess of $200,000
and any other event or occurrence that might have a material adverse affect on
the properties, assets, liabilities, or finances of Pledgor.

     

    i.             Collection of
Accounts. Except as otherwise provided in this Section 3(i), Pledgor
shall collect, at its own expense, all amounts due or to become due to Pledgor
under the Accounts.  In connection with such collections, Pledgor may take
such action as Pledgor may deem necessary or advisable to enforce collection of
the Accounts; provided,
however, that Secured
Party shall have the right upon and during the continuance of an Event of
Default (but only subsequent to the expiration of any relevant cure period) to
notify the account debtors or obligors under any Accounts of the assignment of
such Accounts to such Secured Party and to direct such account debtors or
obligors to make payment of all amounts due or to become due to Pledgor
thereunder directly to such Secured Party and, at the expense of Pledgor, to
enforce collection of any such Accounts, and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as Pledgor
might have done.  Upon and during the continuance of any Event of Default
(but only subsequent to the expiration of any relevant cure period), all amounts
and proceeds (including instruments) received by Pledgor in respect of the
Accounts shall be received in trust for the benefit of Secured Party hereunder
shall be segregated from other funds of Pledgor, and shall be forthwith paid
over to Secured Party in the same form as so received (with any necessary
endorsement) to be held as cash collateral and applied as provided in this
Security Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    j.            Transfers and Other
Liens.  Pledgor shall not:

     

    
      i.            
sell, lease, assign, transfer or otherwise dispose of any now owned or hereafter
acquired Collateral except:  (i) Inventory disposed of in the ordinary
course of business; and (ii) the sale or other disposition of assets no longer
used or useful in the conduct of Pledgor’s business; or

       

      ii.      
     create or permit to exist any liens, claims, security
interest, charge or encumbrance upon or with respect to any of the Collateral to
secure indebtedness of any person or entity except:  (i) in the ordinary
course of its business, (ii) with respect to the Farm Credit Obligations or a
Qualified Refinancing, or (iii) with respect to any such encumbrance that is
lesser in priority to the rights granted hereunder.

    

     

    k.           Control. 
Pledgor will cooperate with Secured Party in obtaining control with respect to
Collateral consisting of:  (i) Deposit Accounts; (ii) Investment Property;
and (iii) Supporting Obligations.  With respect to the foregoing and the
grant of the security interest hereunder, Pledgor hereby authorizes Secured
Party to file one or more financing or continuation statements, and amendments
thereto, and any instruments giving notice of the security interest hereunder
relative to all or any part of the Collateral without the signature of Pledgor
where permitted by law; provided, however, that, concurrently
with any such filing, Secured Party shall deliver a true and correct copy
thereof to Pledgor. A carbon, photographic or other reproduction of this
Security Agreement or any financing statement covering the Collateral or any
part thereof shall be sufficient as a financing statement where permitted by
law.

     

    4.            Representations. 
Pledgor hereby makes the following representations and warranties to Secured
Party, which representations and warranties shall survive the execution and
delivery of this Security Agreement:

     

    a.            Pledgor
owns all of the Collateral free and clear of any liens, encumbrances, charges or
security interests of any nature whatsoever, except as set forth on Schedule 1
hereto;

     

    b.            Pledgor
has full power and authority to enter into this Pledge Agreement and to pledge
and grant a security interest in or otherwise transfer the Collateral free of
any restrictions, liens, claims and encumbrances, except as set forth on Schedule 1;
and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    c.            None
of the Collateral is subject to any option to purchase or similar rights of any
person, entity or trust, except as set forth on Schedule 1. 
Pledgor is not and will not become party to or otherwise bound by any agreement
which restricts in any manner the rights of any present or future holder of any
of the Collateral with respect thereto, except with the prior written consent of
the Secured Party, which may not be unreasonably withheld, delayed, or
denied.

     

    5.           
Limitation on
Liens and Dispositions.  Pledgor agrees that it will not create,
permit or suffer to exist, and will defend the Collateral against and take such
other action as is necessary to remove any mortgage, pledge, title retention
lien, or other lien, encumbrance or security interest lien on the Collateral
(except for liens with respect to the Farm Credit Obligations or any Qualified
Refinancing or with respect to any lien that is lesser in priority to the rights
granted hereunder) and will defend the right, title and interest of Secured
Party in and to any of Pledgor’s right, title and interest in and to the
Collateral against the claims and demands of all other Persons.  Pledgor
will not sell, assign, exchange, grant a security interest in (except for liens
with respect to any Farm Credit Obligations or any Qualified Refinancing),
transfer, encumber, or otherwise dispose of, any of the Collateral, or attempt
or contract to do so without Secured Party’s prior written consent, which may
not be unreasonably withheld, delayed, or denied.  The term Qualified
Refinancing shall mean any refinancing of the Farm Credit Obligations in a
principal amount of up to Ten Million Dollars ($10,000,000).

     

    6.            Subsequent Changes Affecting
Collateral.  Secured Party may, upon and during the continuance of
an Event of Default (but only subsequent to the expiration of any relevant cure
period), at its option upon written notice to Pledgor, transfer or register the
Collateral or any part thereof into its name or that of a Direct Successor (as
defined in Section
19) with or without any prominent indication that such Collateral is
subject to the security interest hereunder.

     

    7.            Attorney-in-Fact. 
Pledgor hereby irrevocably appoints Secured Party, acting individually, as
Pledgor’s attorney-in-fact, with full authority in the place and stead of
Pledgor and in the name of Pledgor or otherwise, from time to time in such
Secured Party’s discretion, upon and during the continuance of an Event of
Default (but only subsequent to the expiration of any relevant cure period), to
take any action and to execute any instrument which such Secured Party may deem
reasonably necessary or advisable to accomplish the purposes of this Security
Agreement, including, without limitation:

     

    a.            To
ask, demand, collect, sue for, recover, compromise, receive and give acquittance
and receipts for moneys due and to become due under or in connection with the
Collateral;

     

    b.            To
receive, endorse, and collect any drafts or other instruments, documents, and
chattel paper; and

     

    c.            To
file any claims or take any action or institute any proceedings which such
Secured Party may deem reasonably necessary or desirable for the collection of
any of the Collateral or the rights of such Secured Party with respect to any of
the Collateral; provided, however, that, if such
Secured Party takes any of the foregoing actions during a period that such
appointment is effective, any such specific actions shall remain effective
notwithstanding the waiver or cure of the triggering Event of Default. 
Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section 7 is
irrevocable and coupled with an interest.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    8.            Secured Party’s
Duties.  The powers conferred on Secured Party hereunder are solely
to protect its interest in the Collateral and shall not impose any duty upon it
to exercise any such powers.  Except for the safe custody of any Collateral
in its possession and the accounting for moneys actually received by it
hereunder, Secured Party shall not be responsible for:  (a) the safekeeping
of Collateral; (b) any loss or damage to Collateral; (c) any diminution in the
value of Collateral; or (d) any act or default of any other Person with respect
to Collateral.  Secured Party shall have no other duties as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.  Secured
Party shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which it accords its own property in the
ordinary course of business.

     

    9.            Consent. 
Pledgor hereby consents that, from time to time, before or after the occurrence
or existence of an Event of Default, with or without notice to or assent from
Pledgor, any other security at any time held by or available to Secured Party
for any of the Obligations or any security at any time held by or available to
Secured Party for any obligation of any other Person secondarily or otherwise
liable for any of the Obligations may be changed, altered, renewed, extended,
continued, surrendered, compromised, waived or released, in whole or in part, as
Secured Party may reasonably see fit, and Pledgor shall remain bound under this
Security Agreement notwithstanding any such exchange, surrender, release,
alteration, renewal, extension, continuance, compromise, waiver or inaction,
extension of further credit or other dealing.

     

    10.          Remedies.

     

    a.            Upon
and during the continuance of an Event of Default (but only subsequent to the
expiration of any relevant cure period), Secured Party shall have, in addition
to any other rights given by law or equity, all of the rights and remedies with
respect to the Collateral of a secured party under the Code.  In addition,
with respect to the Collateral, or any part thereof, which shall then be or
shall thereafter come into the possession or custody of Secured Party, Secured
Party may in its sole discretion, upon notice as provided in Section 10(b) below,
sell or cause the same to be sold at any public or private sale, in one or more
sales or lots, at such price as Secured Party may reasonably deem best, and for
cash or on credit or for future delivery, without assumption of any credit risk,
and the Pledgor of any or all of the Collateral so sold shall thereafter hold
the same, absolutely free from any claim, encumbrance or right of any kind
whatsoever.  Secured Party may, in its own name, or in the name of a
designee or nominee (so long as Secured Party discloses such relationship to
Pledgor not less than 10 calendar days prior to any such public or private
sale), buy the Collateral at any public sale and, if permitted by applicable
law, buy the Collateral at any private sale.  Pledgor hereby waives all of
its rights of redemption from any sale or other disposition of the Collateral,
to the extent permitted by law.  Pledgor will pay to Secured Party all
expenses (including, without limitation, court costs and reasonable attorneys’
fees and expenses) of, or incident to, the enforcement of any of the provisions
hereof.  Neither Secured Party, nor a party acting as its attorney, shall
be liable for any acts or omissions or for any error of judgment or mistake of
fact or law other than their gross negligence or willful misconduct. 
Secured Party agrees to return to Pledgor any proceeds of the sale of the
Collateral that exceed the then outstanding balance of the Obligations and the
expenses described above. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    b.            Secured
Party will give Pledgor reasonable notice of the time and place of any public
sale thereof, or of the time after which any private sale or other intended
disposition is to be made.  Pledgor acknowledges and agrees that the
requirement of reasonable notice shall be met if such notice is received by
Pledgor at least 10 business days before the time of the sale or
disposition.  Any other requirement of notice, demand or advertisement for
sale is, to the extent permitted by law, waived.

     

    11.          Security
Interest.  The pledge and security interests herein created and
provided for stand as direct and primary security for all of the
Obligations.  No application of any sums received by any Secured Party in
respect of the Collateral or any disposition thereof to the reduction of the
Obligations or any part thereof shall in any manner entitle Pledgor to any
right, title or interest in or to the Obligations or any collateral security
therefor unless and until all Obligations have been fully paid and
satisfied.  Pledgor acknowledges and agrees that the pledge and security
interests hereby created are absolute and unconditional and shall not in any
manner be affected or impaired by any acts or omissions whatsoever of any
Secured Party or its affiliates or any other holder of any of the Obligations,
and, without limiting the generality of the foregoing, the pledge and security
interests hereby created shall not be impaired by any acceptance by any Secured
Party or any Direct Successor of any of the Obligations or any other security
for or guarantor upon any of or by any failure, neglect, or omission on the part
of any Secured Party of any of the Obligations to realize upon or protect any of
the Obligations or any collateral security therefor.  The pledge and
security interests hereby created shall not in any manner be impaired or
affected by any sale, pledge, surrender, compromise, settlement, release,
renewal, extension, indulgence, alteration, substitution, exchange, change in,
modification or disposition of any of the Obligations, or of any collateral
security therefor, or of any guaranty thereof, or of the Note.

     

    12.          Waivers and
Consents.  Upon and during the continuance of any Event of Default
(but only subsequent to the expiration of any relevant cure period), Secured
Party may enforce this Security Agreement independently, and it shall not be
necessary for Secured Party to marshal assets in favor of Pledgor or any other
Person or to proceed upon or against and/or exhaust any other security or remedy
before proceeding to enforce this Security Agreement.  Secured Party’s
rights hereunder shall be reinstated and revived, and the enforceability of this
Security Agreement shall continue, with respect to any amount at any time paid
on account of the Obligations which thereafter shall be required to be restored
or returned by such Secured Party (whether as a “voidable preference”,
“fraudulent conveyance” or otherwise) upon the Bankruptcy, insolvency or
reorganization of Pledgor, or otherwise, all as though such amount had not been
paid.  The liens created or granted herein and the enforceability of this
Security Agreement at all times shall remain effective to secure the full amount
of all the Obligations even though the Obligations, including any part thereof
or any other security or guaranty therefor, may be or hereafter may become
invalid or otherwise unenforceable and whether or not Pledgor shall have any
personal liability with respect thereto.  Pledgor expressly waives any and
all defenses now or hereafter arising or asserted by reason of:  (a) the
unenforceability or invalidity of any security or guaranty for the Obligations
or the lack of perfection or continuing perfection or failure of priority of any
security for the Obligations; (b) any failure of Secured Party to marshal assets
in favor of Pledgor or any other Person, (c) any act or omission of any Secured
Party or others that directly or indirectly results in or aids the discharge or
release of any portion of the Obligations or any other security or guaranty
therefor by operation of law or otherwise, except any act of gross negligence or
willful misconduct which such Secured Party is determined by the judgment of a
court of competent jurisdiction (sustained on appeal, if any) to have committed,
or (d) any action taken by any Secured Party that is authorized by this Section 12 or any
other provision of this Security Agreement. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    13.          Understandings With Respect
To Waivers And Consents.  Pledgor warrants and agrees that each of
the waivers and consents set forth herein are made after consultation with legal
counsel and with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Pledgor otherwise
may have against Secured Party or others or against the Collateral, and that,
under the circumstances, the waivers and consents herein given are
reasonable.  Such waivers and consents shall be effective to the maximum
extent permitted by law.

     

    14.          Term.  This
Security Agreement shall remain in full force and effect until all Obligations
have been performed in full, including payment of all principal and other fees
and expenses due thereon.  Promptly following the termination of this
Security Agreement as provided above (other than as a result of the sale of the
Collateral), Secured Party will release the security interest and lien created
hereunder and will deliver the Collateral to Pledgor.

     

    15.          Amendments.  No
amendment, modification, termination or waiver of any provision of this Security
Agreement shall in any event be effective unless the same shall be in writing
and signed by Secured Party and Pledgor.  No notice to or demand on Pledgor
in any case shall entitle Pledgor to any other or further notice or demand in
similar or other circumstances.

     

    16.          Costs and
Expenses.  Pledgor agrees to pay all costs and expenses (including
reasonable attorneys’ fees), if any, incurred by any Secured Party in connection
with the enforcement of this Security Agreement.

     

    17.          Further
Assurances.  Pledgor agrees that it will cooperate with Secured
Party and will execute and deliver, or cause to be executed and delivered, all
such other proxies, instruments and documents, and will take all such other
action, including, without limitation, the filing of financing statements, as
any Secured Party may reasonably request from time to time in order to carry out
the provisions and purposes hereof.  Without limiting the generality of the
foregoing, Pledgor will:

     

    a.            permit
Secured Party and its designees, from time to time during normal business hours
and upon at least 48 hours written notice, to inspect the Collateral, and to
inspect, audit and make copies of and extracts from all records and all other
papers in the possession of Pledgor, and will, upon and during the continuance
of an Event of Default (but only subsequent to the expiration of any relevant
cure period), at the request of any Secured Party, deliver to any Secured Party
true and correct copies all of such records and papers which pertain to the
Collateral; and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    b.            furnish
to any Secured Party, from time to time at any Secured Party’s request,
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as any Secured Party may
reasonably request, all in reasonable detail.

     

    18.          Reserved.

     

    19.          Priority of Liens;
Subordination.  Secured Party hereby further acknowledges the
security interests granted hereby shall be a second priority lien subordinate
only to the security interests securing the Farm Credit Obligations (and those
in place thereof, e.g., a Qualified
Refinancing).  Secured Party agrees to execute a subordination agreement
with Farm Credit or the holder(s) of the security interest securing the
Qualified Refinancing, as applicable, in a form reasonably acceptable to Secured
Party’s counsel which provides that, except during the pendency of any event of
default set forth in the documents underlying the Farm Credit Obligations or
Qualified Refinancing, as applicable, payments shall be made when due under the
Note (and, if such event of default is cured, any payments suspended during the
pendency of such event of default, are promptly paid to Secured Party); provided, however, that, if either Farm
Credit or the entity that provides the Qualifying Refinancing shall impose more
“restrictive subordination provisions” as a condition to providing Pledgor with
access to its reasonably required financing, Secured Party shall execute such
further-restricted subordination agreement.  For purposes of this
Agreement, the phrase “restrictive subordination provisions” means (i) reserve
requirements imposed upon either or both of Pledgor and Saint James, (ii) cash,
free cash, or excess cash requirements imposed upon either or both of Pledgor
and Saint James, (iii) financial ratios or financial statement ratios imposed
upon either or both of Pledgor and Saint James, (iv) requirements that all
payments to grape growers or suppliers for the current or upcoming season, as
imposed upon either or both of Pledgor and Saint James, shall have been made in
full, or (v) equivalent restrictions, such that Farm Credit or the Qualifying
Financing entity has the contractual right and power to limit or preclude the
performance by the Pledgor of its obligations to the Secured Party under the
Note or the obligations of Saint James, as guarantor under that certain Guaranty
in favor of the Secured Party, of even date herewith; subject to the Pledgor not
being in breach of any of its covenants in any such financing agreement, as of
the effective date of each financing agreement between the Pledgor and Farm
Credit or between the Pledgor and the Qualifying Financing entity, as
appropriate. 

     

    20.          Successors. 
This Security Agreement shall be binding upon and inure to the benefit of
Pledgor, Secured Party and their respective heirs, legal representatives,
successors. 

     

    21.          Notices. 
Whenever any party hereto desires or is required to give any notice, demand or
request with respect to this Note, each such communication shall be in writing
and shall be effective only if it is delivered as provided in Section 12.9 of
the Purchase Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    22.          Binding Nature, Governing
Law.  This Security Agreement shall be binding upon Pledgor and its
successors and assigns and shall inure to the benefit of Secured Party and its
direct successors, the equity and debt structure of which shall be substantially
identical to Secured Party’s as of the date hereof (a “Direct Successor”),
including any subsequent permitted holder of all or a portion of the Note. 
This Security Agreement and the rights and duties of the parties hereto shall be
governed by and construed in accordance with the laws of the State of
California, without regards to its conflict of laws provisions.  This
Security Agreement, the Note, and the Purchase Agreement constitute the entire
understanding of the parties with respect to the subject matter hereof and any
prior agreements, whether written or oral, with respect thereto are superseded
hereby.  Pledgor may not assign its rights hereunder without the prior
written consent of the Secured Party, which may not be unreasonably withheld,
delayed, or denied.

     

    23.          General. 
Article and paragraph headings used in this Security Agreement are for
convenience of reference only and are not to be part of this Security Agreement
for any other purpose.  Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.  The language
used in this Security Agreement will be deemed to be the language chosen by the
parties hereto to express their mutual intent, and no rule of strict
construction will be applied against any party.  This Security Agreement
may be executed in any number of counterparts and by different parties hereto on
separate counterparts, and all such counterparts taken together shall be deemed
to constitute one instrument.

     

    24.          Waiver of Jury Trial; Venue;
Jurisdiction.  PLEDGOR AND SECURED PARTY WAIVE ANY
RIGHT TO TRIAL BY JURY ON ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS (A) UNDER THIS SECURITY AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT
OR SECURITY AGREEMENT WHICH MAY BE DELIVERED IN THE FUTURE IN CONNECTION WITH
THE OBLIGATIONS, OR (B) ARISING FROM THE TRANSACTIONS CONTEMPLATED BY THIS
SECURITY AGREEMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.  PLEDGOR AND SECURED PARTY
IRREVOCABLY AGREE THAT ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT
ARISING OUT OF OR FROM OR RELATED TO THIS SECURITY AGREEMENT OR THE OBLIGATIONS
SHALL BE LITIGATED ONLY IN COURTS HAVING SITUS WITHIN THE CITY OF SAN FRANCISCO,
STATE OF CALIFORNIA.  PLEDGOR AND SECURED PARTY HEREBY CONSENT AND SUBMIT
TO THE EXCLUSIVE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED
WITHIN SAID CITY AND STATE.  PLEDGOR AND SECURED PARTY HEREBY WAIVES ANY
RIGHT HE OR IT MAY HAVE TO TRANSFER OR CHANGE VENUE OF ANY SUCH ACTION OR
PROCEEDING.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Security
Agreement as of the date first set forth above.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                	
                                        PLEDGOR:

                                      	 
      	
                                        SECURED
      PARTY:

                                      
	 
      	 
      	 
      
	
                                        THE
      SAINT JAMES EOS WINE COMPANY

                                      	 
      	
                                        SAPHIRE
      ADVISORS, LLC

                                      
	 
      	 
      	 
      
	
                                        By:

                                      	 
      	 
      	
                                        By:

                                      	 
      
	
                                        Its: 

                                      	 
      	 
      	
                                        Its:

                                      	 
      
	 
      	 
      	 
      
	
                                        SAPPHIRE
      WINES, LLC

                                      	 
      	 
      
	
                                        By:
      THE SAINT JAMES EOS WINE COMPANY

                                      	 
      	 
      
	 
      	 
      	 
      
	
                                        By:

                                      	 
      	 
      	 
      
	
                                        Its:

                                      	 
      	 
      	 
      
	 
      	 
      	 
      
	
                                        EMERALD
      WINES, LLC

                                      	 
      	 
      
	
                                        By:
      THE SAINT JAMES EOS WINE COMPANY

                                      	 
      	 
      
	 
      	 
      	 
      
	
                                        By:

                                      	 
      	 
      	 
      
	
                                        Its: