Document:

Exhibit 10.2

 

Execution Copy

 

EXHIBIT A

 

COMMON STOCK PURCHASE WARRANT

 

spherix
incorporated

 

	Warrant Shares: [_______]	 	Initial Exercise Date: January _, 2016
	 	 	Issue Date: July 21, 2015

 

THIS COMMON STOCK PURCHASE
WARRANT (the “Warrant”) certifies that, for value received, _____________ or its assigns (the “Holder”)
is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on
or after the six month anniversary of the Issue Date (the “Initial Exercise Date”) and on or prior to the close
of business on the five year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter,
to subscribe for and purchase from Spherix Incorporated, a Delaware corporation (the “Company”), up to __________
shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one
share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1.          Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement
(the “Purchase Agreement”), dated July 15, 2015, among the Company and the purchasers signatory thereto.

 

Section 2.          Exercise.

 

a)         Exercise
of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial
Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as
it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company)
of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise in the form annexed hereto. Within three (3)
Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares
specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank (unless
the cashless exercise procedure specified in Section 2(c) below is specified and permitted under the applicable Notice of Exercise).
No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization)
of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and
the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation
within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The
Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder
at any given time may be less than the amount stated on the face hereof.

 

    	 

    	 

    

 

b)       Exercise
Price. The exercise price per share of the Common Stock under this Warrant shall be $0.43, subject to adjustment hereunder
(the “Exercise Price”).

 

c)       Cashless
Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained
therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may only be exercised, in whole
or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number
of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = the
VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless
exercise,” as set forth in the applicable Notice of Exercise;

 

(B) =  the
Exercise Price of this Warrant, as adjusted hereunder; and

 

(X) =
the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant
if such exercise were by means of a cash exercise rather than a cashless exercise.

 

If
Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9)
of the Securities Act (as applicable as of the date hereof), the Warrant Shares shall take on the registered characteristics of
the Warrants being exercised.  The Company agrees not to take any position contrary to this Section 2(c).

 

“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed
or quoted on a Trading Market, 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)), (b)  if OTCQB or OTCQX is not a Trading Market,
the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable,
(c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then
reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases,
the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers
of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.

 

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		d)	Mechanics of Exercise.

 

i.            Delivery
of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer
Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository
Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant
in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or
resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical
delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the
number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the
Notice of Exercise by the date that is not more than three (3) Trading Days after the delivery to the Company of the Notice of
Exercise (such date, the “Warrant Share Delivery Date”). The Warrant Shares shall be deemed to have been issued,
and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares
for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless
exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance
of such shares, having been paid. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a
Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and
not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date
of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such
liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered
or Holder rescinds such exercise.

 

ii.         Delivery
of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder
and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.

 

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iii.         Rescission
Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i)
by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

iv.         Compensation
for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder,
if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions
of Section 2(d)(i) above pursuant to an exercise on or before the Warrant 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 Warrant Shares which the Holder anticipated
receiving upon such exercise (a “Buy-In”), then the Company 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 Warrant Shares that the Company was required
to deliver to the Holder in connection with the exercise 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 portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver
to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise
and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000
to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the
Buy-In and, upon request of the Company, evidence of the amount of such loss. 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 the Company’s failure to timely deliver shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

 

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v.           No
Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise
of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the
Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price or round up to the next whole share.

 

vi.         Charges,
Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder;
provided, however, that in the event Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder
and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees
to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day
electronic delivery of the Warrant Shares.

 

vii.         Closing
of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.

 

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e)       Holder’s
Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise
any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after
exercise as set forth on the applicable Notice of Exercise, 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), would beneficially own in excess of
the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder
or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth
in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company
is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder
is solely responsible for any schedules required to be filed in accordance therewith. 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. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder
may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual
report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent
written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon
the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder
the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder
or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company,
may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership
Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to
the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e)
shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day
after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which
may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.

 

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Section 3.        Certain
Adjustments.

 

a)       Stock
Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise
makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable
in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon
exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including
by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately
after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the
aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b)       RESERVED.

 

c)       Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues
or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired
if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to
any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder
exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such
extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase
Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in
the Holder exceeding the Beneficial Ownership Limitation).

 

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d)       Pro
Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of
a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a "Distribution"),
at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution
to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock
acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation,
the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in
such Distribution (provided, however, to the extent that the Holder's right to participate in any such Distribution
would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate
in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution
to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if
ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation). To the extent that this
Warrant has not been partially or completed exercised at the time of such Distribution, such portion of the Distribution shall
be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant.

 

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e)       Fundamental
Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, including through
subsidiaries, in one or more related transactions effects any merger or consolidation of the Company with or into another Person,
(ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition
of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer,
tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock
are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders
of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects
any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which
the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly
or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or Persons
whereby such other Person acquires or Persons acquire more than 50% of the outstanding shares of Common Stock (not including any
shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction,
at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares
of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional
consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination
of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate
Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion
the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components
of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon
any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of
a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable
at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction, purchase this Warrant
from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value of the remaining unexercised portion
of this Warrant on the date of the consummation of such Fundamental Transaction. “Black Scholes Value” means
the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg,
L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing
purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between
the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility
equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately
following the public announcement of the applicable Fundamental Transaction, (C) the higher of (i) $0.43 (as adjusted for any stock
dividend, stock split, stock combination, reclassification or similar transaction after July 15, 2015) and (ii) the underlying
price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value
of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the
time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. The Company
shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor
Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents
in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory
to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option
of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital
stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise
of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and
with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the
relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock,
such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant
immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance
to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted
for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction
Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and
power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents
with the same effect as if such Successor Entity had been named as the Company herein.

 

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f)         Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

g)       Notice
to Holder.

 

i.            Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly
mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

ii.         Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the
Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the
Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last
address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares
of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale,
transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall
not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided
in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the
Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain
entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering
such notice except as may otherwise be expressly set forth herein.

 

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Section 4.        Transfer
of Warrant.

 

a)       Transferability.
This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in
part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment
of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient
to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company
shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination
or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary,
the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant
in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date the Holder
delivers an assignment form to the Company assigning this Warrant full. The Warrant, if properly assigned in accordance herewith,
may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

b)       New
Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by
the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants
to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial
issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant
thereto.

 

c)       Warrant
Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and
for all other purposes, absent actual notice to the contrary.

 

    	11

    	 

    

 

Section 5.         Miscellaneous.

 

a)       No
Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights
as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in
Section 3.

 

b)       Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant
Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of
the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate,
if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation,
in lieu of such Warrant or stock certificate.

 

c)       Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding
Business Day.

 

d)       Authorized
Shares.

 

The Company covenants
that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.
The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged
with the duty of executing stock certificates to execute and issue the necessary Warrant Shares upon the exercise of the purchase
rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market
upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise
of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment
for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).

 

    	12

    	 

    

 

Except and
to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending
its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions
as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting
the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable
therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant
and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory
body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking
any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction thereof.

 

e)       Jurisdiction.
All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.

 

f)         Restrictions.
The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does
not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.

 

g)       Nonwaiver
and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate
as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision
of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant,
which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to
cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings,
incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.

 

h)       Notices.
Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered
in accordance with the notice provisions of the Purchase Agreement.

 

    	13

    	 

    

 

i)         Limitation
of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase
Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder
for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.

 

j)         Remedies.
The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled
to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert
the defense in any action for specific performance that a remedy at law would be adequate.

 

k)       Successors
and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and
shall be enforceable by the Holder or holder of Warrant Shares.

 

l)         Amendment.
This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

m)       Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions
of this Warrant.

 

n)       Headings.
The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of
this Warrant.

 

********************

 

(Signature Page Follows)

 

    	14

    	 

    

 

IN WITNESS WHEREOF, the
Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

	 	spherix incorporated
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:
	 	 	 

 

    	15

    	 

    

 

NOTICE OF EXERCISE

 

		To:	spherix incorporated

 

(1) The
undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only
if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes,
if any.

 

(2) Payment
shall take the form of (check applicable box):

 

	o		in lawful money of the United States; or

 

	o		if permitted the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant
Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3) Please
issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

	 	 	 

 

The Warrant Shares shall be delivered to
the following DWAC Account Number:

 

	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

 

[SIGNATURE
OF HOLDER]

 

	Name of Investing Entity: 	 

	Signature of Authorized Signatory of Investing Entity: 	 

	Name of Authorized Signatory: 	 

	Title of Authorized Signatory: 	 

	Date: 	 

 

    	 

    	 

    

 

EXHIBIT B

 

ASSIGNMENT
FORM

(To assign the
foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED,
the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

	Name:	 
		(Please Print)
	 	
	Address:	 
	 	(Please Print)

 

	Dated:                                ,                                                	 
	 	 
	Holder’s Signature:                                                                     	 
	 	 
	Holder’s Address:Exhibit
10.1

 

LOAN AND
SECURITY AGREEMENT

 

This LOAN AND SECURITY AGREEMENT (this “Agreement”)
is entered into as of July 6, 2015, between H.D.D. LLC, a California limited liability company, with its chief executive office
located at 125 Foss Creek Circle, Healdsburg, California 95448 (the “Borrower”) and Bank of the West, a California
banking corporation, with an address of 6873 N. West Ave., Suite 102, Fresno, California 93711 (the “Lender”).

 

This Agreement amends and restates that
certain Loan Agreement dated April 30, 2014, between Borrower and Lender.

 

FOR VALUE RECEIVED, and in consideration
of the granting by the Lender of financial accommodations to or for the benefit of Borrower, including without limitation respecting
the Obligations (as hereinafter defined), Borrower represents to and agrees with the Lender, as of the date hereof and as of the
date of each loan, credit and/or other financial accommodation, as follows:

 

1.           THE
LOAN

 

1.1           Loan(s).
Lender agrees, from time to time, in its sole discretion, to make one or more revolving loans, non-revolving loans or term loans
(collectively, the “Loans”) to or for the account of Borrower, upon Borrower’s request therefor, in such amounts
as shall be mutually agreed upon, subject to the terms and conditions set forth herein; provided there is no continuing uncured
Event of Default (as hereinafter defined). Loans shall be evidenced by one or more notes issued by Borrower in favor of the Lender
(collectively, and each a “Note”). This Agreement, each Note and any and all other documents, substitutions, modifications,
extensions, amendments or renewals executed and delivered in connection with any of the foregoing are collectively hereinafter
referred to as the “Loan Documents”.

 

1.2           Existing
Loan. Borrower is presently indebted to the Lender under a certain Term Note dated July 16, 2012 in the original principal
sum of $3,381,000.00 (the “Existing Note”). Notwithstanding anything to the contrary contained in the Existing Note,
it is hereby understood and agreed that the Existing Note shall be and is now subject to the terms and conditions of this Agreement.

 

1.3           Loan
Account(s). One or more accounts shall be opened on the books of Lender in which a record will be kept of all Loans, and all
payments thereon and other appropriate debits and credits as provided by the Loan Documents.

 

1.4           Interest.
Interest respecting the Loan(s) will be charged to Borrower on the principal amount from time to time outstanding at the interest
rate specified in the Note(s) in accordance with the terms of the Note(s).

 

1.5           Repayment.
All loans and advances made respecting any Loan shall be payable to Lender on or before the Expiration Date of the respective Note.

 

    	1

    	 

    

 

1.6         Authorized
Persons; Advances. Any person duly authorized in writing by Borrower, or in the absence of such a writing, the manager or managing
member of Borrower, or any person otherwise authorized in this paragraph, may request discretionary Loans hereunder, either orally
or otherwise, but the Lender at its option may require that all requests for Loans hereunder shall be in writing. The Lender shall
incur no liability to Borrower in acting upon any request referred to herein which the Lender believes in good faith to have been
made by an authorized person or persons. Each Loan hereunder may be credited by Lender to any deposit account of Borrower with
Lender or with any other bank with which Borrower maintains a deposit account, or may be paid to Borrower (or as Borrower instructs)
or may be applied to any Obligations, as Lender may in each instance elect.

 

1.7         Periodic
Statement. At the option of the Lender, Lender will render to Borrower a statement of the Loan accounts, showing all applicable
credits and debits. Each statement shall be considered correct and to have been accepted by Borrower and shall be conclusively
binding upon Borrower in respect of all charges, debits and credits of whatsoever nature contained therein respecting the Loans,
and the closing balance shown therein, unless Borrower notifies Lender in writing of any discrepancy within 30 days from the mailing
by Lender to Borrower of any such statement.

 

2.           GRANT
OF SECURITY INTEREST

 

2.1         Grant
of Security Interest. In consideration of the Lender’s extending credit and other financial accommodations to or for
the benefit of Borrower, Borrower hereby grants to the Lender a security interest in, a lien on and pledge and assignment of the
Collateral (as hereinafter defined). The security interest granted by this Agreement is given to and shall be held by the Lender
as security for the payment and performance of all Obligations, including, without limitation, all amounts outstanding pursuant
to the Loan Documents.

 

2.2         Definitions.
The following definitions shall apply to this Agreement:

 

(a)          “Acceptable
Inventory” shall mean inventory as defined in the Uniform Commercial Code but excluding:

 

(i)          inventory
which is not owned by Borrower free and clear of all security interests, liens, encumbrances or claims of any third party;

 

(ii)         inventory
which is not permanently located in the State(s) of California;

 

(iii)        inventory
which consists of display items, work-in-process, parts, samples, and/or packing and shipping materials;

 

(iv)         inventory
which the Bank, in its sole discretion, deems to be obsolete, unsalable, damaged, defective or unfit for further processing;

 

(v)          inventory
which consists of white wine in the Borrower’s possession for more than 36 months from vintage date;

 

    	2

    	 

    

 

(vi)         inventory
which consists of red wine in the Borrower’s possession for more than 48 months from vintage date;

 

(vii)        inventory
which has been returned by the buyer; and

 

(viii)      inventory
that is located on any real property that is not owned by Borrower, unless the Borrower has provided to the Lender a landlord or
warehouse waiver/estoppel letter in form and substance acceptable to the Lender in its sole and absolute discretion.

 

(b)          “Account”
shall mean, individually and collectively as the context so requires, any and all accounts, chattel paper and general intangibles
owed or owing to Borrower by Debtors, whether now owned or hereafter acquired by Borrower, or in which Borrower may now have or
hereafter acquire any interest.

 

(c)          “Borrowing
Base” shall mean, as determined by the Lender from time to time, an amount equal to the lesser of: (i) (1) 80% of the aggregate
amount of Eligible Accounts of Borrower plus 50% of the Value of Acceptable Inventory of Borrower, minus (2) such reserves as the
Lender may establish from time to time in its reasonable credit judgment with respect to (A) annual debt service of the Borrower
(including, without limitation, capitalized lease obligations and the amount of estimated maximum exposure, as determined by the
Lender from time to time, under any interest rate contracts which the Borrower enters into with the Lender (including interest
rate swaps, caps, floors, options thereon, combinations thereof, or similar contracts), and (B) liabilities to growers of agricultural
products which are entitled to lien rights under the federal Perishable Agricultural Commodities Act or any applicable state law;
or (ii) $10,000,000.00.

 

(d)          “Code”
shall mean the Uniform Commercial Code of California as amended from time to time.

 

(e)          “Collateral”
shall mean all of Borrower’s present and future right, title and interest in and to any and all of the personal property
of Borrower whether such property is now existing or hereafter created, acquired or arising and wherever located from time to time,
including without limitation:

 

(i)          accounts;

 

(ii)         chattel
paper;

 

(iii)        goods;

 

(iv)         inventory;

 

(v)          equipment;

 

(vi)         instruments;

 

(vii)        investment
property;

 

    	3

    	 

    

 

(viii)      documents;

 

(ix)         commercial
tort claims;

 

(x)          deposit
accounts;

 

(xi)         letter-of-credit
rights;

 

(xii)        general
intangibles;

 

(xiii)      supporting
obligations; and

 

(xiv)        records
of, accession to and proceeds and products of the foregoing.

 

(f)          “Debtors”
shall mean Borrower’s customers who are indebted to Borrower.

 

(g)          “Eligible
Account” shall mean, at any time, the gross amount, less returns, discounts, credits or offsets of any nature, of the Accounts
owing to Borrower by Debtors containing selling terms not exceeding 60 days, but excluding the following:

 

(i)          Accounts
with respect to which the Debtor is an officer, employee or agent of Borrower.

 

(ii)         Accounts
arising from consignments, guarantied sales, bill and hold sales, or other terms by reason of which the payment by the Debtor may
be conditional.

 

(iii)        Accounts
with respect to which the Debtor is not a resident of the United States except to the extent such accounts are supported by adequate
Eximbank insurance or other insurance acceptable to the Lender or by irrevocable letters of credit issued by banks satisfactory
to the Lender.

 

(iv)         Accounts
with respect to which the Debtor is the United States or any federal department or agency not supported by assignment of claims
under government contract.

 

(v)          Accounts
with respect to which the Debtor is a subsidiary of, or affiliated with, Borrower or its shareholders, officers or directors.

 

(vi)         Accounts
with respect to which Borrower is or may become liable to the Debtor for goods sold or services rendered by the Debtor to Borrower.

 

(vii)        That
portion of the Accounts of any single Debtor that exceeds 25% of all of Borrower’s Accounts, other than the following Debtor:
Southern Wine and Spirits which may be 40%.

 

(viii)      Accounts
which have not been paid in full within 60 days from the date payment was due or 90 days from the original date of invoice, whichever
is less.

 

    	4

    	 

    

 

(ix)         All
Accounts of any single Debtor if 25% or more of the dollar amount of all such Accounts are represented by Accounts which have not
been paid in full within 60 days from the date payment was due or 90 days from the original date of invoice, whichever is less.

 

(x)          Accounts
which are subject to dispute or counterclaim.

 

(xi)         Accounts
with respect to which the goods have not been shipped or delivered, or the services have not been rendered, to the Debtor.

 

(xii)        Accounts
with respect to which the Lender, in its sole discretion, deems the creditworthiness or financial condition of the Debtor to be
unsatisfactory.

 

(xiii)      Accounts
of any Debtor who has filed or had filed against it a petition in bankruptcy, or an application for relief under any provision
of any state or federal bankruptcy, insolvency or debtor-in-relief acts; or who has had appointed a trustee, custodian or receiver
for the assets of such Debtor; or who has made an assignment for the benefit of creditors or has become insolvent or fails generally
to pay its debts (including its payrolls) as such debts become due.

 

(xiv)        Accounts
arising from cash sales or from collect on delivery sales of inventory.

 

(xv)         Accrued
finance charges on Accounts.

 

(h)          “Obligation(s)”
shall mean, without limitation, all loans, advances, indebtedness, notes, liabilities, rate swap transactions, basis swaps, forward
rate transactions, commodity swaps, commodity options, equity or equity index swaps, equity or equity index options, bond options,
interest rate options, foreign exchange transactions, cap transactions, floor transactions, collar transactions, forward transactions,
currency swap transactions, cross-currency rate swap transactions, currency options (provided, however, that if and only if Borrower
is not an “eligible contract participant” (as defined in the Commodity Exchange Act (7 U.S.C. § 1 et seq.) and
any applicable rules, as amended), then to the extent applicable law prohibits such Borrower from entering into an agreement to
secure any obligations in respect of a “swap” (as defined in the Commodity Exchange Act and any applicable rules, as
amended, and referred to herein as a “Swap”), Obligations shall not include obligations of Borrower to Lender under
any Swap) and amounts, liquidated or unliquidated, owing by Borrower to the Lender at any time, of each and every kind, nature
and description, whether arising under this Agreement or otherwise, and whether secured or unsecured, direct or indirect (that
is, whether the same are due directly by Borrower to the Lender; or are due indirectly by Borrower to the Lender as endorser, guarantor
or other surety, or as borrower of obligations due third Persons which have been endorsed or assigned to the Lender, or otherwise),
absolute or contingent, due or to become due, now existing or hereafter arising or contracted, including, without limitation, payment
when due of all amounts outstanding respecting any of the Loan Documents. Said term shall also include all interest and other charges
chargeable to Borrower or due from Borrower to the Lender from time to time and all costs and expenses referred to in this Agreement.

 

    	5

    	 

    

 

(i)          “Person”
or “party” shall mean individuals, partnerships, corporations, limited liability companies and all other entities.

 

(j)          “Value”
shall mean (i) with respect to bulk wine, the lesser of the Borrowers cost or the estimated market value which shall be based on
the most recent Turrentine Collateral Value Report as determined by the Lender in its sole discretion, and (ii) with respect to
cased and bottled wine the average FOB value thereof as the Bank in its sole discretion may determine.

 

All words and terms used in this Agreement
other than those specifically defined herein shall have the meanings accorded to them in the Code.

 

2.3         Ordinary
Course of Business. The Lender hereby authorizes and permits Borrower to hold, process, sell, use or consume in the manufacture
or processing of finished goods, or otherwise dispose of inventory for fair consideration, all in the ordinary course of Borrower’s
business, excluding, without limitation, sales to creditors or in bulk or sales or other dispositions occurring under circumstances
which would or could create any lien or interest adverse to the Lender’s security interest or other right hereunder in the
proceeds resulting therefrom. The Lender also hereby authorizes and permits Borrower to receive from the Debtors all amounts due
as proceeds of the Collateral at Borrower’s own cost and expense, and also liability, if any, subject to the direction and
control of the Lender at all times; and the Lender may at any time, without cause or notice, and whether or not an Event of Default
has occurred or demand has been made, terminate all or any part of the authority and permission herein or elsewhere in this Agreement
granted to Borrower with reference to the Collateral, and notify Debtors to make all payments due as proceeds of the Collateral
to the Lender. Until Lender shall otherwise notify Borrower, all proceeds of and collections of Collateral shall be retained by
Borrower and used solely for the ordinary and usual operation of Borrower’s business. Prior to the occurrence of an Event
of Default or an event which, with notice or the passage of time, could become an Event of Default, Borrower shall have the right
to adjust, settle or compromise the amount of any payment of any Account or release wholly or partly and Debtor or obligor thereof
or allow any credit or discount thereof, all in accordance with its customary practices in the ordinary course of business. From
and after notice by Lender to Borrower, all proceeds of and collections of the Collateral shall be held in trust by Borrower for
Lender and shall not be commingled with Borrower’s other funds or deposited in any Lender account of Borrower; and Borrower
agrees to deliver to Lender on the dates of receipt thereof by Borrower, duly endorsed to Lender or to bearer, or assigned to Lender,
as may be appropriate, all proceeds of the Collateral in the identical form received by Borrower.

 

2.4         Allowances.
Absent an Event of Default Borrower may grant such allowances or other adjustments to Debtors (exclusive of extending the time
for payment of any item which shall not be done without first obtaining the Lender’s written consent in each instance) as
Borrower may reasonably deem to accord with sound business practice, including, without limiting the generality of the foregoing,
accepting the return of all or any part of the inventory.

 

    	6

    	 

    

 

2.5           Records.
Borrower shall hold its books and records relating to the Collateral segregated from all Borrower’s other books and records
in a manner satisfactory to the Lender; and shall deliver to the Lender from time to time promptly at its request all invoices,
original documents of title, contracts, chattel paper, instruments and any other writings relating thereto, and other evidence
of performance of contracts, or evidence of shipment or delivery of the merchandise or of the rendering of services; and Borrower
will deliver to the Lender promptly at the Lender’s request from time to time additional copies of any or all of such papers
or writings, and such other information with respect to any of the Collateral and such schedules of inventory, schedules of accounts
and such other writings as the Lender may in its sole discretion deem to be necessary or effectual to evidence any loan hereunder
or the Lender’s security interest in the Collateral.

 

2.6           Legends.
Borrower shall promptly make, stamp or record such entries or legends on Borrower’s books and records or on any of the Collateral
(including, without limitation, chattel paper) as Lender shall request from time to time, to indicate and disclose that Lender
has a security interest in such Collateral.

 

2.7           Inspection.
The Lender, or its representatives, at any time and from time to time, shall have the right at the sole cost and expense of Borrower,
and Borrower will permit the Lender and/or its representatives: (a) to examine, check, make copies of or extracts from any of Borrower’s
books, records and files (including, without limitation, orders and original correspondence); (b) to perform field exams or otherwise
inspect and examine the Collateral and to check, test or appraise the same as to quality, quantity, value and condition; and (c)
to verify the Collateral or any portion or portions thereof or Borrower’s compliance with the provisions of this Agreement.

 

3.           REPRESENTATIONS
AND WARRANTIES

 

3.1           Organization
and Qualification. Borrower is a duly organized and validly existing limited liability company under the laws of the State
of its formation, with the exact legal name set forth in the first paragraph of this Agreement. Borrower is in good standing under
the laws of said State, has the power to own its property and conduct its business as now conducted and as currently proposed to
be conducted, is duly qualified to do business under the laws of each state where the nature of the business done or property owned
requires such qualification, and, where necessary to maintain Borrower’s rights and privileges, has complied with the fictitious
name statute of every jurisdiction in which Borrower is doing business.

 

3.2           Reliance.
Each warranty, representation, covenant, obligation and agreement contained in this Agreement shall be conclusively presumed to
have been relied upon by the Lender regardless of any investigation made or information possessed by the Lender and shall be cumulative
and in addition to any other warranties, representations, covenants and agreements which Borrower now or hereafter shall give,
or cause to be given, to the Lender.

 

3.3           Related
Parties. Borrower has no interest in any entities other than as previously specifically consented to in writing by the Lender,
if any, and Borrower has never consolidated, merged or acquired substantially all of the assets of any other Person other than
as previously specifically consented to in writing by the Lender, if any.

 

    	7

    	 

    

 

3.4           Limited
Liability Company Records. Borrower’s certificate of organization, articles of organization or other charter document
and all amendments thereto have been duly filed and are in proper order. All members of Borrower are properly reflected on all
books and records of Borrower, including but not limited to its operating agreement, minute books, bylaws and books of account,
all of which are accurate and up to date and will be so maintained.

 

3.5           Title
to Properties; Absence of Liens. Borrower has good and clear record and marketable title to all of its properties and assets,
and all of its properties and assets including the Collateral are free and clear of all mortgages, liens, pledges, charges, encumbrances
and setoffs, other than the security interest therein granted to the Lender and those mortgages, deeds of trust, leases of personal
property and security interests previously specifically consented to in writing by the Lender.

 

3.6           Places
of Business. Borrower’s chief executive office is correctly stated in the preamble to this Agreement, and Borrower shall,
during the term of this Agreement, keep the Lender currently and accurately informed in writing of each of its other places of
business, and shall not change the location of such chief executive office or open or close, move or change any existing or new
place of business without giving the Lender at least 30 days prior written notice thereof.

 

3.7           Valid
Obligations. The execution, delivery and performance of the Loan Documents have been duly authorized by all necessary action
and each represents a legal, valid and binding obligation of Borrower and is fully enforceable according to its terms, except as
limited by equity or laws relating to the enforcement of creditors’ rights.

 

3.8           Fictitious
Trade Styles. All fictitious trade styles, fictitious trade names, assumed business names or trade names (defined herein as
“Trade Name”) used by Borrower in connection with its business operations and each State in which each such Trade Name
is used are listed below. Borrower shall notify the Lender not less than 30 days prior to effecting any change in the matters described
below or prior to using any other Trade Name at any future date, indicating the Trade Name and State(s) of its use.

 

	Trade Name	 	State of Use
	 	 	 
	Truett Hurst Winery	 	California
	 	 	 
	VML Russian River Winery	 	California

 

3.9           Conflicts.
There is no provision in Borrower’s organizational or charter documents, if any, or in any indenture, contract or agreement
to which Borrower is a party which prohibits, limits or restricts the execution, delivery or performance of the Loan Documents.

 

3.10         Governmental
Approvals. The execution, delivery and performance of the Loan Documents does not require any approval of or filing with any
governmental agency or authority.

 

3.11         Litigation,
etc. Except as otherwise disclosed to Lender in writing, there are no actions, claims or proceedings pending or to the knowledge
of Borrower threatened against Borrower which might materially adversely affect the ability of Borrower to conduct its business
or to pay or perform the Obligations.

 

    	8

    	 

    

 

3.12         Accounts
and Contract Rights. All accounts arise out of legally enforceable and existing contracts, and represent unconditional and
undisputed bona fide indebtedness by a Debtor, and are not and will not be subject to any discount (except such cash or trade discount
as may be shown on any invoice, contract or other writing delivered to the Lender). No contract right, account, general intangible
or chattel paper is or will be represented by any note or other instrument, and, unless the Lender agrees otherwise, no contract
right, account or general intangible is, or will be represented by any conditional or installment sales obligation or other chattel
paper, except such instruments or chattel paper as have been or immediately upon receipt by Borrower will be delivered to the Lender
(duly endorsed or assigned), such delivery, in the case of chattel paper, to include all executed copies except those in the possession
of the installment buyer and any security for or guaranty of any of the Collateral shall be delivered to the Lender immediately
upon receipt thereof by Borrower, with such assignments and endorsements thereof as the Lender may request.

 

3.13         Title
to Collateral. At the date hereof Borrower is (and as to Collateral that Borrower may acquire after the date hereof, will be)
the lawful owner of the Collateral, and the Collateral and each item thereof is, will be and shall continue to be free of all restrictions,
liens, encumbrances or other rights, title or interests (other than the security interest therein granted to the Lender), credits,
defenses, recoupments, set-offs or counterclaims whatsoever. Borrower has and will have full power and authority to grant to the
Lender a security interest in the Collateral and Borrower has not transferred, assigned, sold, pledged, encumbered, subjected to
lien or granted any security interest in, and will not transfer, assign, sell (except sales or other dispositions in the ordinary
course of business in respect to inventory as expressly permitted in this Agreement), pledge, encumber, subject to lien or grant
any security interest in any of the Collateral (or any of Borrower’s right, title or interest therein), to any Person other
than the Lender. The Collateral is and will be valid and genuine in all respects. Borrower will warrant and defend the Lender’s
right to and interest in the Collateral against all claims and demands of all Persons whatsoever.

 

3.14         Location
of Collateral. Except for sale, processing, use, consumption or other disposition in the ordinary course of business, Borrower
will keep all farm products consisting of crops, livestock or feed, inventory and equipment only at locations specified in this
Agreement or specified to the Lender in writing. Borrower shall, during the term of this Agreement, keep its records concerning
the Collateral, including originals of all chattel paper (unless Lender requires Borrower to deliver originals of chattel paper
to Lender), at the address set forth in this Agreement, and shall keep the Lender currently and accurately informed in writing
of each location where Borrower’s records relating to its accounts and contract rights, respectively, are kept, and shall
not remove such records or any of them to another location without giving the Lender at least 30 days prior written notice thereof.

 

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3.15         Third
Parties. The Lender shall not be deemed to have assumed any liability or responsibility to Borrower or any third Person for
the correctness, validity or genuineness of any instruments or documents that may be released or endorsed to Borrower by the Lender
(which shall automatically be deemed to be without recourse to the Lender in any event) or for the existence, character, quantity,
quality, condition, value or delivery of any goods purporting to be represented by any such documents; and the Lender, by accepting
such security interest in the Collateral, or by releasing any Collateral to Borrower, shall not be deemed to have assumed any obligation
or liability to any supplier or Debtor or to any other third party, and Borrower agrees to indemnify and defend the Lender and
hold it harmless in respect to any claim or proceeding arising out of any matter referred to in this paragraph.

 

3.16         Payment
of Accounts. Each account or other item of Collateral, other than inventory and equipment, will be paid in full on or before
the date shown as its due date in the schedule of Collateral, in the copy of the invoice(s) relating to the account or other Collateral
or in contracts relating thereto. Upon any suspension of business, assignment or trust mortgage for the benefit of creditors, dissolution,
petition in receivership or under any chapter of the Bankruptcy Code as amended from time to time by or against any Debtor, any
Debtor becoming insolvent or unable to pay its debts as they mature or any other act of the same or different nature amounting
to a business failure, Borrower will immediately notify the Lender thereof.

 

3.17         Water.
As of the date of this Agreement, sufficient water is available and is projected to be available, from verifiable surface and ground
water sources as described in the most recent budget submitted by Borrower to Lender, if Borrower is required to submit a budget,
or to conduct operations materially similar to prior years’ operations as evidenced by information provided by any Borrower
to the Lender. Borrower has filed with all governmental agencies, all notices and other documents required under Federal, state
and local laws and regulations in connection with the supply of water for and use of water in Borrower’s operations.

 

3.18         Taxes.
Borrower has filed all Federal, state and other tax returns required to be filed (except for such returns for which current and
valid extensions have been filed), and all taxes, assessments and other governmental charges due from Borrower have been fully
paid. Borrower has established on its books reserves adequate for the payment of all Federal, state and other tax liabilities (if
any).

 

3.19         Use
of Proceeds. No portion of any loan is to be used for (i) the purpose of purchasing or carrying any “margin security”
or “margin stock” as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System,
12 C.F.R. 221 and 224 or (ii) primarily personal, family or household purposes. The Collateral is not used or acquired primarily
for personal, family or household purposes.

 

3.20         Environmental.
As of the date hereof neither Borrower nor any of Borrower’s agents, employees or independent contractors (1) have caused
or are aware of a release or threat of release of Hazardous Materials (as defined herein) on any of the premises or personal property
owned or controlled by Borrower (“Controlled Property”) or any property abutting Controlled Property (“Abutting
Property”), which could give rise to liability under any Environmental Law (as defined herein) or any other Federal, state
or local law, rule or regulation; (2) have arranged for the transport of or transported any Hazardous Materials in a manner as
to violate, or result in potential liabilities under, any Environmental Law; (3) have received any notice, order or demand from
the Environmental Protection Agency or any other Federal, state or local agency under any Environmental Law; (4) have incurred
any liability under any Environmental Law in connection with the mismanagement, improper disposal or release of Hazardous Materials;
or (5) are aware of any inspection or investigation of any Controlled Property or Abutting Property by any Federal, state or local
agency for possible violations of any Environmental Law.

 

    	10

    	 

    

 

To the best of Borrower’s knowledge,
neither Borrower, nor any prior owner or tenant of any Controlled Property, committed or omitted any act which caused the release
of Hazardous Materials on such Controlled Property which could give rise to a lien thereon by any Federal, state or local government.
No notice or statement of claim or lien affecting any Controlled Property has been recorded or filed in any public records by any
Federal, state or local government for costs, penalties, fines or other charges as to such property. All notices, permits, licenses
or similar authorizations, if any, required to be obtained or filed in connection with the ownership, operation, or use of the
Controlled Property, including without limitation, the past or present generation, treatment, storage, disposal or release of any
Hazardous Materials into the environment, have been duly obtained or filed.

 

Borrower agrees to indemnify and hold the
Lender harmless from all liability, loss, cost, damage and expense, including attorney fees and costs of litigation, arising from
any and all of its violations of any Environmental Law (including those arising from any lien by any Federal, state or local government
arising from the presence of Hazardous Materials) or from the presence of Hazardous Materials located on or emanating from any
Controlled Property or Abutting Property whether existing or not existing and whether known or unknown at the time of the execution
hereof and regardless of whether or not caused by, or within the control of Borrower. Borrower further agrees to reimburse Lender
upon demand for any costs incurred by Lender in connection with the foregoing. Borrower agrees that its obligations hereunder shall
be continuous and shall survive the repayment of all debts to Lender and shall continue so long as a valid claim may be lawfully
asserted against the Lender. Borrower agrees to conduct its operations and keep and maintain all of its property in compliance
with all applicable Environmental Laws and, upon the written request of the Lender, Borrower shall submit to the Lender, at Borrower’s
sole cost and expense, at reasonable intervals, a report providing the status of any environmental, health or safety compliance,
hazard or liability.

 

The term “Hazardous Materials”
includes but is not limited to any and all substances (whether solid, liquid or gas) defined, listed, or otherwise classified as
pollutants, hazardous wastes, hazardous substances, hazardous materials, extremely hazardous wastes, or words of similar meaning
or regulatory effect under any present or future Environmental Law or that may have a negative impact on human health or the environment,
including but not limited to petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls,
lead, radon, radioactive materials, flammables and explosives.

 

The term “Environmental Law”
means any present and future Federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common
law, relating to protection of human health or the environment, relating to Hazardous Materials, relating to liability for or costs
of remediation or prevention of releases of Hazardous Materials or relating to liability for or costs of other actual or threatened
danger to human health or the environment. The term “Environmental Law” includes, but is not limited to, the following
statutes, as amended, any successor thereto, and any regulations promulgated pursuant thereto, and any state or local statutes,
ordinances, rules, regulations and the like addressing similar issues: the Comprehensive Environmental Response, Compensation and
Liability Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous Materials Transportation Act; the Resource
Conservation and Recovery Act (including but not limited to Subtitle I relating to underground storage tanks); the Solid Waste
Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational
Safety and Health Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered
Species Act; the National Environmental Policy Act; and the River and Harbors Appropriation Act.

 

    	11

    	 

    

 

4.           COVENANTS

 

4.1         Payments
and Performance. Borrower will duly and punctually pay all Obligations becoming due to the Lender and will duly and punctually
perform all Obligations on its part to be done or performed under this Agreement.

 

4.2         Books
and Records; Inspection. Borrower will at all times keep proper books of account in which full, true and correct entries will
be made of its transactions in accordance with generally accepted accounting principles, consistently applied and which are, in
the opinion of a Certified Public Accountant acceptable to Lender, adequate to determine fairly the financial condition and the
results of operations of Borrower. Borrower will at all reasonable times make its books and records available in its offices for
inspection, examination and duplication by the Lender and the Lender’s representatives and will permit inspection of the
Collateral and all of its properties by the Lender and the Lender’s representatives. Borrower will from time to time furnish
the Lender with such information and statements as the Lender may request in its sole discretion with respect to the Obligations
or the Lender’s security interest in the Collateral. Borrower shall, during the term of this Agreement, keep the Lender currently
and accurately informed in writing of each location where Borrower’s records relating to its accounts and contract rights
are kept, and shall not remove such records to another location without giving the Lender at least 30 days prior written notice
thereof.

 

4.3         Financial
Statements of H.D.D. LLC. H.D.D. LLC will deliver or cause to be delivered to Lender in form and detail satisfactory to Lender:

 

(a)          Not
later than 45 days after the end of each quarter, a copy of H.D.D. LLC’s financial statement as of the end of such period.

 

(b)          Not
later than 25 days after the end of each month, (i) a borrowing base certificate in the form attached hereto as Exhibit “A”
(“Borrowing Base Certificate”), executed by Borrower and certifying the Amount of the Eligible Accounts as of the last
day of the preceding month; (ii) an aging of accounts receivable indicating separately the amount of accounts due from each Debtor
and the amount of total accounts receivable which are current, 31 to 60 days past the date of invoice, 61 to 90 days past the date
of invoice, and the amount over 90 days past the date of invoice and an aging of accounts payable indicating the amount of such
payables which are current, 31 to 60 days past the date of invoice, 61 to 90 days past the date of invoice, and the amount over
90 days past the date of invoice; and, (iii) a schedule of inventory specifying the Value in form attached hereto as Exhibit “B”,
and such other information relating to the Borrower’s inventory as the Lender may reasonably request.

 

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Notwithstanding the foregoing, Lender, at
its sole discretion, may require Borrower to submit daily or at such other time as required by the Lender: (i) a transaction report
and schedule of accounts receivable which indicates all sales made and all collections received for each such day; (ii) all remittances
and collections of accounts in kind and without commingling to be applied to the payment of Borrower’s Obligations on the
next Business Day following receipt thereof; provided, however, that if such amounts are received in a form other than cash or
bank wire, the Lender may withhold application of such amounts for such time to the extent permitted by law as the Lender, in its
sole discretion, deems reasonable to allow for collection and provided further that any remittances and collections received by
the Lender later than 11:00 a.m. Pacific time on any day shall be deemed received on the next succeeding Business Day; and (iii)
clear and legible copies of all invoices or sales receipts evidencing the sale of goods or services by Borrower.

 

4.4         Financial
Statements of Truett-Hurst, Inc. H.D.D. LLC will cause Truett-Hurst, Inc. to deliver to Lender in form and detail satisfactory
to Lender:

 

(a)          Not
later than 120 days after the end of Truett-Hurst, Inc.’s fiscal year, a copy of the annual audited financial report of Truett-Hurst
for such year, prepared by a firm of certified public accountants acceptable to Lender and accompanied by an unqualified opinion
of such firm.

 

4.5         Financial
Statements of Heath E. Dolan. Borrower will cause Heath E. Dolan to deliver to Lender in form and detail satisfactory to Lender:

 

(a)          Not
later than 90 days after the end of Heath E. Dolan’s calendar year, a copy of the annual financial report of Heath E. Dolan
for such year, or if an individual, Heath E. Dolan’s personal financial statement.

 

(b)          Not
later than 30 days after filing with the appropriate federal agency, but in any event no later than October 31st of each year,
a copy of Heath E. Dolan’s federal tax returns filed for such year.

 

4.6         Financial
Statements of Paul E. Dolan, III. Borrower will cause Paul E. Dolan, III to deliver to Lender in form and detail satisfactory
to Lender:

 

(a)          Not
later than 90 days after the end of Paul E. Dolan, III’s calendar year, a copy of the annual financial report of Paul E.
Dolan, III for such year, or if an individual, Paul E. Dolan, III’s personal financial statement.

 

(b)          Not
later than 30 days after filing with the appropriate federal agency, but in any event no later than October 31st of each year,
a copy of Paul E. Dolan, III’s federal income tax returns filed for such year.

 

4.7         Financial
Statements of Phillip L. Hurst. Borrower will cause Phillip L. Hurst to deliver to Lender in form and detail satisfactory to
Lender:

 

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(a)          Not
later than 90 days after the end of Phillip L. Hurst’s calendar year, a copy of the annual financial report of Phillip L.
Hurst for such year, or if an individual, Phillip L. Hurst’s personal financial statement.

 

(b)          Not
later than 30 days after filing with the appropriate federal agency, but in any event no later than October 31st of each year,
a copy of Phillip L. Hurst’s federal income tax returns filed for such year.

 

4.8         Financial
Statements of Daniel A. Carroll. Borrower will cause Daniel A. Carroll to deliver to Lender in form and detail satisfactory
to Lender:

 

(a)          Not
later than 90 days after the end of Daniel A. Carroll’s calendar year, a copy of the annual financial report of Daniel A.
Carroll for such year, or if an individual, Daniel A. Carroll’s personal financial statement.

 

(b)          Not
later than 30 days after filing with the appropriate federal agency, but in any event no later than October 31st of each year,
a copy of Daniel A. Carroll’s federal income tax returns filed for such year.

 

4.9         Additional
Financial Information. Borrower will furnish to Lender:

 

(a)          from
time to time, such financial data and information about Borrower as Lender may reasonably request; and

 

(b)          any
financial data and information about any guarantors of the Obligations as Lender may reasonably request.

 

4.10       Conduct
of Business. Borrower will maintain its existence in good standing and comply with all laws and regulations of the United States
and of any state or states thereof and of any political subdivision thereof, and of any governmental authority which may be applicable
to it or to its business; provided that this covenant shall not apply to any tax, assessment or charge which is being contested
in good faith and with respect to which reserves have been established and are being maintained.

 

4.11       Notice
to Debtors. Borrower agrees, at the request of the Lender, to notify all or any of the Debtors in writing of the Lender’s
security interest in the Collateral in whatever manner the Lender requests and, hereby authorizes the Lender to notify all or any
of the Debtors of the Lender’s security interest in Borrower’s accounts at Borrower’s expense.

 

4.12       Contact
with Accountant. Borrower hereby authorizes the Lender to directly contact and communicate with any accountant employed by
Borrower in connection with the review and/or maintenance of Borrower’s books and records or preparation of any financial
reports delivered by or at the request of Borrower to Lender.

 

4.13       Operating
and Deposit Accounts. Borrower shall maintain its primary business depository relationship with the Lender, including general,
operating and administrative deposit accounts and cash management services.

 

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4.14         Evidence
of Water Availability. At such times as the Lender may request, Borrower to deliver to the Lender a certificate stating that
the amount of water available and projected to be available is sufficient to conduct operations as described in the most recent
budget submitted by Borrower to Lender, if Borrower is required to submit a budget materially similar to prior years’ operations,
as evidenced by information provided by Borrower to the Lender. Such certificate shall be signed, at the Lender’s option,
either (i) by Borrower or by an independent third party, such as an officer of Borrower’s water district or other supplier
of water, or (ii) by a water resources engineer’s determination of a dependable yield of water rights compared to crop water
demand.

 

4.15         Taxes.
Borrower will promptly pay all real and personal property taxes, assessments and charges and all franchise, income, unemployment,
retirement benefits, withholding, sales and other taxes assessed against it or payable by it before delinquent; provided that this
covenant shall not apply to any tax assessment or charge which is being contested in good faith and with respect to which reserves
have been established and are being maintained. The Lender may, at its option, from time to time, discharge any taxes, liens or
encumbrances of any of the Collateral, and Borrower will pay to the Lender on demand or the Lender in its sole discretion may charge
to Borrower all amounts so paid or incurred by it.

 

4.16         Maintenance.
Borrower will keep and maintain the Collateral and its other properties, if any, in good repair, working order and condition. Borrower
will immediately notify the Lender of any loss or damage to or any occurrence which would adversely affect the value of any Collateral.
The Lender may, at its option, from time to time, take any other action that the Lender may deem proper to repair, maintain or
preserve any of the Collateral, and Borrower will pay to the Lender on demand or the Lender in its sole discretion may charge to
Borrower all amounts so paid or incurred by it.

 

4.17         Insurance.
Borrower will maintain in force property and casualty insurance on all Collateral and any other property of Borrower, if any, against
risks customarily insured against by companies engaged in businesses similar to that of Borrower containing such terms and written
by such companies as may be satisfactory to the Lender, such insurance to be payable to the Lender as its interest may appear in
the event of loss and to name the Lender as insured pursuant to a standard loss payee clause; no loss shall be adjusted thereunder
without the Lender’s approval; and all such policies shall provide that they may not be canceled without first giving at
least 30 days written notice of cancellation to the Lender. In the event that Borrower fails to provide evidence of such insurance,
the Lender may, at its option, secure such insurance and charge the cost thereof to Borrower. At the option of the Lender, all
insurance proceeds received from any loss or damage to any of the Collateral shall be applied either to the replacement or repair
thereof or as a payment on account of the Obligations. From and after the occurrence of an Event of Default, the Lender is authorized
to cancel any insurance maintained hereunder and apply any returned or unearned premiums, all of which are hereby assigned to the
Lender, as a payment on account of the Obligations.

 

4.18         Notification
of Default. Immediately upon becoming aware of the existence of any condition or event which constitutes an Event of Default,
or any condition or event which would upon notice or lapse of time, or both, constitute an Event of Default, Borrower shall give
Lender written notice thereof specifying the nature and duration thereof and the action being or proposed to be taken with respect
thereto.

 

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4.19       Material
Notices. Borrower shall give the Lender prompt written notice of any and all (i) litigation, arbitration or administrative
proceedings to which Borrower is a party or which affects the Collateral; (ii) other matters which have resulted in, or might result
in a material adverse change in the Collateral or the financial condition or business operations of Borrower, and (iii) any enforcement,
cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against Borrower or any of its
properties.

 

4.20       Pension
Plans. With respect to any pension or benefit plan maintained by Borrower, or to which Borrower contributes (“Plan”),
the benefits under which are guarantied, in whole or in part, by the Pension Benefit Guaranty Corporation created by the Employee
Retirement Income Security Act of 1974, P.L. 93-406, as amended (“ERISA”) or any governmental authority succeeding
to any or all of the functions of the Pension Benefit Guaranty Corporation (“Pension Benefit Guaranty Corporation”),
Borrower will (a) fund each Plan as required by the provisions of Section 412 of the Internal Revenue Code of 1986, as amended;
(b) cause each Plan to pay all benefits when due; (c) furnish Lender (i) promptly with a copy of any notice of each Plan’s
termination sent to the Pension Benefit Guaranty Corporation (ii) no later than the date of submission to the Department of Labor
or to the Internal Revenue Service, as the case may be, a copy of any request for waiver from the funding standards or extension
of the amortization periods required by Section 412 of the Internal Revenue Code of 1986, as amended and (iii) notice of any Reportable
Event as such term is defined in ERISA; and (d) subscribe to any contingent liability insurance provided by the Pension Benefit
Guaranty Corporation to protect against employer liability upon termination of a guarantied pension plan, if available to Borrower.

 

4.21       Definitions
and/or Financial Covenants. The following Definitions will apply to this Agreement and Borrower will at all times or during
or at the end of any fiscal period (as applicable) comply with all of the financial covenants in this section, if any.

 

(a)          Definitions.

 

(i)          “Current
Portion of Long-Term Debt” shall mean, for any period, the current scheduled principal or capital lease payments required
to be paid during the applicable period.

 

(ii)         “Cash
Flow” shall mean EBITDA, minus dividends, withdrawals and distributions, minus unfinanced capital expenditures, plus contributions,.

 

(iii)        “Current
Assets” shall mean current assets as determined in accordance with GAAP, less all amounts due from affiliates, officers or
employees.

 

(iv)         “Current
Liabilities” shall mean current liabilities as in accordance with GAAP, including any negative cash balance on Borrower’s
financial statements.

 

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(v)          “EBITDA”
shall mean, for any period, Net Income, less income or plus loss from discontinued operations and extraordinary items, plus federal,
state and local income taxes, plus Interest Expense, plus depreciation, depletion and amortization, plus stock compensation expenses
and all other non-cash expenses, in each case for such period, computed and calculated in accordance to GAAP.

 

(vi)         “Debt”
shall mean all liabilities of Borrower, or any Borrower, as applicable, less Subordinated Liabilities, if any.

 

(vii)        “Effective
Tangible Net Worth” shall mean Borrower’s stated net worth plus Subordinated Liabilities but less all intangible assets
of Borrower (i.e. goodwill, trademarks, patents, copyrights, organization expense, covenants not to compete and other similar intangibles
items including, but not limited to, investments and/or advances in all amounts due from affiliates, officers or employees).

 

(viii)      “GAAP”
shall mean generally accepted accounting principles in effect from time to time in the United States.

 

(ix)         “Interest
Expense” shall mean, for any period, ordinary, regular, recurring and continuing expenses for interest on all borrowed money.

 

(x)          “Liabilities”
shall mean (a) contingent liabilities including letters of credit and derivatives, (b) all indebtedness for borrowed money or for
the deferred purchase price of property or services, and all obligations under leases which are or should be, under GAAP, recorded
as capital leases, in respect of which a Person is directly or contingently liable as borrower, guarantor, endorser or otherwise,
or in respect of which a Person otherwise assures a creditor against loss, (c) all obligations for borrowed money or for the deferred
purchase price of property or services secured by (or for which the holder has an existing right, contingent or otherwise, to be
secured by) any lien upon property (including without limitation accounts receivable and contract rights) owned by a Person, whether
or not such Person has assumed or become liable for the payment thereof, and (d) all other liabilities and obligations which would
be classified in accordance with GAAP as liabilities on a balance sheet or to which reference should be made in footnotes thereto.

 

(xi)         “Net
Income” shall mean, for any period, all income actually paid in cash or accrued less all expenses and other charges for such
period, determined in accordance with GAAP.

 

(xii)        “Permitted
Liens” shall mean: (i) liens and security interests securing Total Funded Indebtedness owed by Borrower to the Lender; (ii)
liens for taxes, assessments or similar charges not yet due; (iii) liens of materialmen, mechanics, warehousemen, or carriers or
other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (iv) purchase
money liens or purchase money security interests upon or in any property acquired or held by any Borrower in the ordinary course
of business to secure Senior Funded Indebtedness outstanding on the date hereof or permitted to be incurred herein; (v) liens and
security interests which, as of the date hereof, have been disclosed to and approved by the Lender in writing; and (vi) those liens
and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net
value of Borrower’s assets.

 

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(xiii)      “Subordinated
Liabilities” shall mean as of the date of determination thereof, all Liabilities which have been subordinated in writing
to the obligations owing to the Lender on terms and conditions acceptable to the Lender.

 

(xiv)        “Senior
Funded Indebtedness” shall mean, as of the date of determination thereof, all borrowed money, including, but not limited
to, all letters of credit and derivatives as reflected in the most recent financial statements in the form required by this Agreement,
if any, excluding all such borrowed money that has been subordinated to the satisfaction of Lender.

 

(xv)         “Total
Funded Indebtedness” shall mean, as of the date of determination thereof, all borrowed money, including, but not limited
to, all letters of credit and derivatives as reflected in the most recent financial statements in the form required by this Agreement,
if any.

 

(b)          Current
Ratio. Borrower shall maintain a ratio of Current Assets to Current Liabilities of not less than 1.50 to 1.0.

 

(c)          Debt
to Effective Tangible Net Worth. Borrower shall maintain a ratio of Debt to Effective Tangible Net Worth of not more than 2.00
to 1.0.

 

(d)          Cash
Flow to Current Portion of Long-Term Debt plus Interest Expense. Borrower shall maintain a ratio of (1) Cash Flow to (2) Current
Portion of Long-Term Debt plus Interest Expense, of not less than 1.25 to 1.0, measured at the end of and with respect to each
fiscal year commencing with the fiscal year ending on June 30, 2016.

 

(e)          EBITDA.
Borrower shall maintain an EBITDA of at least (1) **** with respect to the six (6)-month period ending on December 31, 2015, and
(2) **** with respect to the nine (9)-month period ending on March 31, 2016.

 

4.22       Limitations
on Senior Funded Indebtedness. Borrower shall not, after the date hereof, create, incur or assume, directly or indirectly,
any additional Senior Funded Indebtedness other than Senior Funded Indebtedness owed or to be owed to Lender.

 

4.23       Loans
or Advances. Borrower shall not make any loans or advances to any individual, partnership, corporation, limited liability company,
trust, or other organization or Person, including without limitation its officers and employees; provided, however, that Borrower
may make advances to its employees, including its members, officers, with respect to expenses incurred or to be incurred by such
employees in the ordinary course of business which expenses are reimbursable by Borrower; and provided further, however, that Borrower
may extend credit in the ordinary course of business in accordance with customary trade practices.

 

4.24       Investments.
Borrower shall not make investments in, or advances to, any individual, partnership, corporation, limited liability company, trust
or other organization or Person other than as previously specifically consented to in writing by the Lender. Borrower will not
purchase or otherwise invest in or hold securities, nonoperating real estate or other nonoperating assets or purchase all or substantially
all the assets of any entity other than as previously specifically consented to in writing by the Lender.

 

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4.25         Mergers
and Consolidation. Borrower shall not liquidate or dissolve, merge or consolidate with or into, or acquire any other business
organization.

 

4.26         Repurchase
Member Interest. Borrower shall not purchase or repurchase, in whole or in part, any member’s interest.

 

4.27         Capital
Expenditures. Borrower shall not, directly or indirectly, make or commit to make capital expenditures by lease, purchase, or
otherwise, except in the ordinary and usual course of business for the purpose of replacing machinery, equipment or other personal
property which, as a consequence of wear, duplication or obsolescence, is no longer used or necessary in Borrower’s business.

 

4.28         Sale
of Assets. Borrower shall not sell, lease or otherwise dispose of any of its assets, except in the ordinary course of business
and except for the purpose of replacing machinery, equipment or other personal property which, as a consequence of wear, duplication
or obsolescence, is no longer used or necessary in Borrower’s business, provided that full, fair and reasonable consideration
is received therefor; provided, however, in no event shall Borrower sell, lease or otherwise dispose of any equipment purchased
with the proceeds of any loans made by the Lender.

 

4.29         Liens
and Encumbrances. Borrower shall not create, assume or permit to exist any security interest, encumbrance, mortgage, deed of
trust, or other lien (including, but not limited to, a lien of attachment, judgment or execution) affecting any of Borrower’s
properties, or execute or allow to be filed any financing statement or continuation thereof affecting any of such properties, except
for Permitted Liens or as otherwise provided in this Agreement.

 

4.30         Other
Business. Borrower shall not engage in any business other than the business in which it is currently engaged or a business
reasonably allied thereto.

 

4.31         Change
of Name, etc. Borrower shall not change its legal name or the State or the type of its formation, without giving the Lender
at least 30 days prior written notice thereof.

 

4.32         Compensation
of Employees. Borrower shall compensate its employees for services rendered at an hourly rate at least equal to the minimum
hourly rate prescribed by any applicable federal or state law or regulation.

 

4.33         Payment
of Obligations and Taxes. Borrower shall make timely payment of all assessments and taxes and all of its liabilities and obligations
including, but not limited to, trade payables, unless the same are being contested in good faith by appropriate proceedings with
the appropriate court or regulatory agency. For purposes hereof, Borrower’s issuance of a check, draft or similar instrument
without delivery to the intended payee shall not constitute payment.

 

4.34         Inventory.

 

(i)          Except
as provided herein below, Borrower’s inventory shall, at all times, be in Borrower’s physical possession, or other
location(s) acceptable to Lender, and shall not be held by others on consignment, sale on approval, or sale or return, and shall
only be located only at the following locations: 5610 Dry Creek Road, Healdsburg, CA; 4035 Westside Road, Healdsburg, CA; 305 Technology
Way, Napa, CA; 499 Moore Lane, Healdsburg, CA; 1010 Shiloh Road, Windsor, CA; 9786 Ross Station Road, Sebastopol, CA; 2030 Barlow
Lane, Sebastopol, CA; and 9119 Graton Road, Graton, CA.

 

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(ii)         The
value of the inventory is, as of the date of any such schedule of inventory, as reflected in such schedule.

 

(iii)        The
value of the inventory is determined on the basis of its average cost.

 

(iv)         Borrower
shall keep correct and accurate records (itemizing and describing the kind, type, quality and quantity of inventory, Borrower’s
cost therefore and selling price thereof, and the daily withdrawals therefrom and additions thereto).

 

(v)          All
inventory shall be of good and merchantable quality, free from defects.

 

(vi)         The
inventory shall not at any time or times hereafter be stored with a bailee, warehouseman or similar party without the Lender’s
prior written consent and, in such event, Borrower will concurrently therewith cause any such bailee, warehouseman or similar party
to issue and deliver to the Lender, in form acceptable to the Lender, warehouse receipts in the Lender’s name evidencing
the storage of inventory.

 

(vii)        Borrower
is not a “retail merchant” as defined in the Uniform Commercial Code.

 

(viii)      Borrower
shall, at any reasonable time and from time to time, allow Lender to have the right, upon demand, to inspect and examine inventory
and to check and test the same as to quality, quantity, value and condition and Borrower agrees to reimburse the Lender for the
Lender’s reasonable costs and expenses in so doing.

 

4.35         Location
and Maintenance of Equipment.

 

(i)          Borrower’s
equipment (the “Equipment”) shall at all times be in Borrower’s physical possession or other location(s) acceptable
to Lender and shall not be held for sale or lease.

 

(ii)         Borrower
shall not secrete, abandon or remove, or permit the removal of, the Equipment, or any part thereof, from Borrower’s physical
possession or other location(s) acceptable to Lender or remove or permit to be removed any accessories now or hereafter placed
upon the Equipment.

 

(iii)        Upon
the Lender’s demand, Borrower shall immediately provide the Lender with a complete and accurate description of the Equipment
including, as applicable, the make, model, identification number and serial number of each item of Equipment. In addition, Borrower
shall immediately notify the Lender of the acquisition of any new or additional Equipment or the replacement of any existing Equipment
and shall supply the Lender with a complete description of any such additional or replacement Equipment.

 

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(iv)         Borrower
shall, at Borrower’s sole cost and expense, keep and maintain the Equipment in a good state of repair and shall not destroy,
misuse, abuse, illegally use or be negligent in the care of the Equipment or any part thereof. Borrower shall not remove, destroy,
obliterate, change, cover, paint, deface or alter the name plates, serial numbers, labels or other distinguishing numbers or identification
marks placed upon the Equipment or any part thereof by or on behalf of the manufacturer, any dealer or rebuilder thereof, or the
Lender. Borrower shall not be released from any liability to the Lender hereunder because of any injury to or loss or destruction
of the Equipment. Borrower shall allow the Lender and its representatives free access to and the right to inspect the Equipment
at all times and shall comply with the terms and conditions of any leases covering the real property on which the Equipment is
located and any orders, ordinances, laws, regulations or rules of any federal, state or municipal agency or authority having jurisdiction
of such real property or the conduct of the business of the Persons having control or possession of the Equipment.

 

(v)          The
Equipment is not now and shall not at any time hereafter be so affixed to the real property on which it is located as to become
a fixture or a part thereof. The Equipment is now and shall at all times hereafter be and remain personal property of Borrower.

 

5.           DEFAULT

 

5.1           Default.
“Event of Default” shall mean the occurrence of one or more of any of the following events:

 

(a)          default
of any liability, obligation, covenant or undertaking of Borrower or any guarantor of the Obligations to the Lender, hereunder
or otherwise, including, without limitation, failure to pay in full and when due any installment of principal or default of Borrower
or any guarantor of the Obligations under any other Loan Document or any other agreement with the Lender continuing for 5 days
with respect to the payment of interest, or continuing for 30 days with respect to any other default, or under an Accounts Receivable
Line of Credit, default of any liability, obligation, covenant or undertaking of Borrower or any guarantor of the Obligations to
the Lender, hereunder or otherwise, including, without limitation, failure to pay in full and when due any installment of principal
or interest or default of Borrower or any guarantor of the Obligations under any other Loan Document or any other agreement with
the Lender, or continuing for 30 days with respect to any other default;

 

(b)          failure
of Borrower or any guarantor of the Obligations to maintain or cause to maintain aggregate collateral security value satisfactory
to the Lender;

 

(c)          default
of any material liability, obligation or undertaking of Borrower or any guarantor of the Obligations to any other party;

 

(d)          if
any statement, representation or warranty heretofore, now or hereafter made by Borrower or any guarantor of the Obligations in
connection with this Agreement or in any supporting financial statement of Borrower or any guarantor of the Obligations shall be
determined by the Lender to have been false or misleading in any material respect when made;

 

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(e)          if
Borrower or any guarantor of the Obligations is a corporation, trust, partnership or limited liability company, the liquidation,
termination or dissolution of any such organization, or the merger or consolidation of such organization into another entity, or
Borrower ceasing to carry on actively its present business or the appointment of a receiver for its property;

 

(f)          the
death of Borrower or any guarantor of the Obligations and, if Borrower or any guarantor of the Obligations is a partnership or
limited liability company, the death of any partner or member;

 

(g)          for
a corporation, there shall occur a sale, transfer, disposition or encumbrance (whether voluntary or involuntary), or an agreement
shall be entered into to do so, with respect to more than 10% of the issued and outstanding capital stock of Borrower;

 

(h)          for
a general partnership, limited partnership, or limited liability partnership, there shall occur a change in any general partner
or a change affecting the control of Borrower; or for a limited liability company, there shall occur a change in any manager or
member or a change affecting the control of Borrower;

 

(i)          Borrower
or any guarantor shall: (i) become insolvent or be unable to pay its debts as they mature; (ii) make an assignment for the benefit
of creditors or to an agent authorized to liquidate any substantial amount of its properties and assets; (iii) file a voluntary
petition in bankruptcy or seeking reorganization or to effect a plan or other arrangement with creditors; (iv) file an answer admitting
the material allegations of an involuntary petition relating to bankruptcy or reorganization or join in any such petition; (v)
become or be adjudicated a bankrupt; (vi) apply for or consent to the appointment of, or consent that an order be made, appointing
any receiver, custodian or trustee, for itself or any of its properties, assets or businesses; or (vii) in an involuntary proceeding,
any receiver, custodian or trustee shall have been appointed for all or substantial part of Borrower’s or guarantor’s
properties, assets or businesses and shall not be discharged within 30 days after the date of such appointment;

 

(j)          the
service upon the Lender of a writ in which the Lender is named as trustee of Borrower or any guarantor of the Obligations;

 

(k)          a
judgment or judgments for the payment of money shall be rendered against Borrower or any guarantor of the Obligations, and any
such judgment shall remain unsatisfied and in effect for any period of 30 consecutive days without a stay of execution;

 

(l)          any
levy, lien (including mechanics lien), seizure, attachment, execution or similar process shall be issued or levied on any of the
property of Borrower or any guarantor of the Obligations;

 

(m)          any
subordination agreement or any other Loan Document shall be revoked or limited or its enforceability or validity shall be contested
by any signatory thereto, by operation of law, legal proceeding or otherwise;

 

(n)          the
termination or revocation of any guaranty of the Obligations;

 

(o)          water
is or is projected to be insufficient in amount or unsuitable in quality, as determined by the Lender in either case, to conduct
operations as described in the most recent budget provided by Borrower to Lender if required or in projections or by information
provided by Borrower to the Lender; or

 

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(p)          the
occurrence of such a change in the condition or affairs (financial or otherwise) of Borrower or any guarantor of the Obligations,
or the occurrence of any other event or circumstance, such that the Lender, in its sole discretion, deems that it is insecure or
that the prospects for timely or full payment or performance of any obligation of Borrower or any guarantor of the Obligations
to the Lender has been or may be impaired.

 

5.2         Acceleration.
If an Event of Default shall occur, at the election of the Lender, all Obligations shall become immediately due and payable without
notice or demand, except with respect to Obligations payable on DEMAND, which shall be due and payable on DEMAND, whether or not
an Event of Default has occurred. In addition, regardless of whether the Lender has declared all Obligations to be immediately
due and payable, Lender may exercise any action set forth below.

 

The Lender is hereby authorized, at its
election, after an Event of Default or after Demand, without any further demand or notice except to such extent as notice may be
required by applicable law, to take possession and/or sell or otherwise dispose of all or any of the Collateral at public or private
sale; and the Lender may also exercise any and all other rights and remedies of a secured party under the Code or which are otherwise
accorded to it in equity or at law, all as Lender may determine, and such exercise of rights in compliance with the requirements
of law will not be considered adversely to affect the commercial reasonableness of any sale or other disposition of the Collateral.
If notice of a sale or other action by the Lender is required by applicable law, unless the Collateral is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized market, Borrower agrees that 10 days written notice
to Borrower, or the shortest period of written notice permitted by such law, whichever is smaller, shall be sufficient notice;
and that to the extent permitted by law, the Lender, its officers, attorneys and agents may bid and become purchasers at any such
sale, if public, and may purchase at any private sale any of the Collateral that is of a type customarily sold on a recognized
market or which is the subject of widely distributed standard price quotations. Any sale (public or private) shall be without warranty
and free from any right of redemption, which Borrower shall waive and release after default upon the Lender’s request therefor,
and may be free of any warranties as to the Collateral if Lender shall so decide. No purchaser at any sale (public or private)
shall be responsible for the application of the purchase money. Any balance of the net proceeds of sale remaining after paying
all Obligations of Borrower to the Lender shall be returned to such other party as may be legally entitled thereto; and if there
is a deficiency, Borrower shall be responsible for repayment of the same, with interest. Upon demand by the Lender, Borrower shall
assemble the Collateral and make it available to the Lender at a place designated by the Lender which is reasonably convenient
to the Lender and Borrower. Borrower hereby acknowledges that the Lender has extended credit and other financial accommodations
to Borrower upon reliance of Borrower’s granting the Lender the rights and remedies contained in this Agreement including
without limitation the right to take immediate possession of the Collateral upon the occurrence of an Event of Default or after
DEMAND with respect to Obligations payable on DEMAND and Borrower hereby acknowledges that the Lender is entitled to equitable
and injunctive relief to enforce any of its rights and remedies hereunder or under the Code and Borrower hereby waives any defense
to such equitable or injunctive relief based upon any allegation of the absence of irreparable harm to the Lender.

 

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The Lender shall not be required to marshal
any present or future security for (including but not limited to this Agreement and the Collateral subject to the security interest
created hereby), or guarantees of, the Obligations or any of them, or to resort to such security or guarantees in any particular
order; and all of its rights hereunder and in respect of such securities and guaranties shall be cumulative and in addition to
all other rights, however existing or arising. To the extent that it lawfully may do so, Borrower hereby agrees that it will not
invoke and irrevocably waives the benefits of any law relating to the marshaling of collateral which might cause delay in or impede
the enforcement of the Lender’s rights under this Agreement or under any other instrument evidencing any of the Obligations
or under which any of the Obligations is outstanding or by which any of the Obligations is secured or guaranteed. Except as required
by applicable law, the Lender shall have no duty as to the collection or protection of the Collateral or any income thereon, nor
as to the preservation of rights against prior parties, nor as to the preservation of any rights pertaining thereto beyond the
safe custody thereof.

 

5.3           Cease
Extending Credit. The Lender may cease making advances or otherwise extending credit to or for the account of Borrower under
this Agreement or under any other agreement now existing or hereafter entered into between Borrower and the Lender.

 

5.4           Termination.
The Lender may terminate this Agreement as to any future obligation of the Lender without affecting Borrower’s obligations
to the Lender or the Lender’s rights and remedies under this Agreement or under any other document, instrument or agreement.

 

5.5           Close-Out
and Liquidation. Close-out and liquidate each outstanding FX Transaction so that each FX Transaction is canceled in accordance
with the following:

 

(i)          Close-Out
Date shall mean the Business Day on which the Lender closes out and liquidates an FX Transaction.

 

(ii)         Closing
Value. The Lender shall calculate value of such canceled FX Transaction by converting (1) in the case of a FX Transaction whose
Settlement Date is the same as or later than the Close-Out Date, the amount of Foreign Currency into US dollars at a rate of exchange
at which the Lender can buy or sell US dollars with or against the Foreign Currency for delivery on the Settlement Date of the
relevant FX Transaction; or (2) in the case of a FX Transaction whose Settlement Date precedes the Close-Out Date, the amount of
the Foreign Currency adjusted by adding interest with respect thereto at the rate then in effect from the Settlement Date to the
Close-Out Date, into US Dollars at a rate of exchange at which the Lender can buy or sell US dollars with or against the Foreign
Currency for delivery on the Close-Out Date.

 

(iii)        Closing
Gain or Loss. (1) For a FX Transaction for which the Lender agreed to purchase a Foreign Currency, the amount by which the Closing
Value exceeds the Notional Value shall be a Closing Loss and the amount by which the Closing Value is less than the Notional Value
shall be a Closing Gain; and (2) For a FX Transaction for which the Lender agreed to sell a Foreign Currency, the amount by which
the Closing Value exceeds the Notional Value shall be a Closing Gain and the amount by which the Closing Value is less than the
Notional Value shall be a Closing Loss.

 

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(iv)         Net
Present Value. The Closing Gain or Closing Loss for each Settlement Date falling after the Close-out Date will be discounted by
the Lender to it net present value.

 

(v)          Payment.
To the extent that the net amount of the aggregate Closing Gains exceeds the Closing Losses, such amount shall be payable by the
Lender to Borrower. To the extent that the aggregate net amount of the Closing Losses exceeds the Closing Gains, such amount shall
be payable by Borrower to the Lender.

 

5.6           Application
of Proceeds. All amounts received by the Lender as proceeds from the disposition or liquidation of the Collateral shall be
applied to Borrower’s indebtedness to the Lender as follows: first, to the costs and expenses of collection, enforcement,
protection and preservation of the Lender’s lien in the Collateral, including court costs and reasonable attorneys’
fees, whether or not suit is commenced by the Lender; next, to those costs and expenses incurred by the Lender in protecting, preserving,
enforcing, collecting, liquidating, selling or disposing of the Collateral; next, to the payment of accrued and unpaid interest
on all of the Obligations; next, to the payment of the outstanding principal balance of the Obligations; and last, to the payment
of any other indebtedness owed by Borrower to the Lender. Any excess Collateral or excess proceeds existing after the disposition
or liquidation of the Collateral will be returned or paid by the Lender to Borrower.

 

If any non-cash proceeds are received in
connection with any sale of Collateral, the Lender shall not apply such non-cash proceeds to the Obligations unless and until such
proceeds are converted to cash.

 

5.7           Power
of Attorney. Borrower hereby irrevocably constitutes and appoints the Lender as Borrower’s true and lawful attorney,
with full power of substitution, at the sole cost and expense of Borrower but for the sole benefit of the Lender, upon the occurrence
of an Event of Default or after DEMAND with respect to Obligations payable on DEMAND, to convert the Collateral into cash, including,
without limitation, completing the manufacture or processing of work in process, and the sale (either public or private) of all
or any portion or portions of the inventory and other Collateral; to enforce collection of the Collateral, either in its own name
or in the name of Borrower, including, without limitation, executing releases or waivers, compromising or settling with any Debtors
and prosecuting, defending, compromising or releasing any action relating to the Collateral; to receive, open and dispose of all
mail addressed to Borrower and to take therefrom any remittances or proceeds of Collateral in which the Lender has a security interest;
to notify Post Office authorities to change the address for delivery of mail addressed to Borrower to such address as the Lender
shall designate; to endorse the name of Borrower in favor of the Lender upon any and all checks, drafts, money orders, notes, acceptances
or other instruments of the same or different nature; to sign and endorse the name of Borrower on and to receive as secured party
any of the Collateral, any invoices, freight or express receipts, or bills of lading, storage receipts, warehouse receipts, or
other documents of title of the same or different nature relating to the Collateral; to sign the name of Borrower on any notice
of the Debtors or on verification of the Collateral; and to sign, if necessary, and file or record on behalf of Borrower any financing
or other statement in order to perfect or protect the Lender’s security interest. The Lender shall not be obliged to do any
of the acts or exercise any of the powers hereinabove authorized, but if the Lender elects to do any such act or exercise any such
power, it shall not be accountable for more than it actually receives as a result of such exercise of power, and it shall not be
responsible to Borrower except for its own gross negligence or willful misconduct. All powers conferred upon the Lender by this
Agreement, being coupled with an interest, shall be irrevocable so long as any Obligation of Borrower or any guarantor or surety
to the Lender shall remain unpaid or the Lender is obligated under this Agreement to extend any credit to Borrower.

 

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5.8           Nonexclusive
Remedies. All of the Lender’s rights and remedies not only under the provisions of this Agreement but also under any
other agreement or transaction shall be cumulative and not alternative or exclusive, and may be exercised by the Lender at such
time or times and in such order of preference as the Lender in its sole discretion may determine. No course of dealing and no delay
or omission on the part of Lender in exercising any right hereunder shall operate as a waiver of such right or any other right
and waiver on any one or more occasions shall not be construed as a bar to or waiver of any right or remedy of Lender on any future
occasion.

 

6.           MISCELLANEOUS

 

6.1           Waivers.
Borrower waives notice of intent to accelerate, notice of acceleration, notice of nonpayment, demand, presentment, protest or notice
of protest of the Obligations, and all other notices, consents to any renewals or extensions of time of payment thereof, and generally
waives any and all suretyship defenses and defenses in the nature thereof.

 

6.2           Waiver
of Homestead. To the maximum extent permitted under applicable law, Borrower hereby waives and terminates any homestead rights
and/or exemptions respecting any of its property under the provisions of any applicable homestead laws, including without limitation,
California Code of Civil Procedure Sections 704-710 et seq..

 

6.3           Deposit
Collateral. Borrower hereby grants to the Lender a continuing lien and security interest in any and all deposits or other sums
at any time credited by or due from the Lender to Borrower and any cash, securities, instruments or other property of Borrower
in the possession of the Lender, including all accounts Borrower holds jointly with others, whether for safekeeping or otherwise,
or in transit to or from the Lender (regardless of the reason the Lender had received the same or whether the Lender has conditionally
released the same) as security for the full and punctual payment and performance of all of the liabilities and obligations of Borrower
to the Lender and such deposits and other sums may be applied or set off against such liabilities and obligations of Borrower to
the Lender at any time, whether or not such are then due, whether or not demand has been made and whether or not other collateral
is then available to the Lender.

 

6.4           Disposal
of Documents. All documents, schedules, invoices or other papers received by the Lender from Borrower may be destroyed or disposed
of 6 months after receipt by the Lender.

 

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6.5           Telephone
Recording. Borrower agrees that the Lender may electronically record all telephone conversations between Borrower and the Lender
with respect to any transaction and that any such recording may be submitted in evidence in any arbitration or other legal proceeding.
Such recording shall be deemed to be conclusive evidence as to the terms of any transaction in the event of a dispute.

 

6.6           Rights
of the Lender With or Without Default. Borrower agrees that the Lender may at any time and at its option, whether or not Borrower
is in default:

 

(i)          Require
Borrower to direct all Debtors to forward all remittances, payments and proceeds of the Collateral directly to the Lender at such
address as the Lender may designate. In connection therewith, Borrower hereby irrevocably constitutes and appoints the Lender as
its attorney-in-fact to endorse Borrower’s name on any notes, acceptances, checks, drafts, money orders or other evidence
of payment that may come into the Lender’s possession.

 

(ii)         Require
Borrower to deliver to the Lender, at such times designated by the Lender, records and schedules which show the status and condition
of the Collateral, where it is located and such contracts or other matters which affect the Collateral.

 

(iii)        Send
verification requests to any Debtor.

 

(iv)         Make
inquiries of Borrower’s trade vendors.

 

6.7           Debtor
Indemnification. Borrower agrees to hold the Lender harmless from and indemnify and defend the Lender from any liability, claim,
loss or expense (including, but not limited to, attorneys’ fees) arising from any transaction between Borrower and any Debtor
including, but not limited to, any loss, claim or liability arising from:

 

(i)          Any
violation of any federal or state consumer protection law (including, but not limited to, the federal Truth-In-Lending Act) and
regulations promulgated thereunder.

 

(ii)         Improper
collection practices or procedures of Borrower.

 

(iii)        Any
unlawful acts taken by Borrower in connection with the collection of any Account(s).

 

(iv)         Any
suit by any Person against the Lender resulting or arising from such Person’s dealings with Borrower.

 

6.8           Indemnification.
Borrower shall indemnify, defend and hold the Lender and its directors, officers, employees, agents and attorneys (each an “Indemnitee”)
harmless of and from any claim brought or threatened against any Indemnitee by Borrower, any guarantor or endorser of the Obligations,
or any other Person (as well as from reasonable attorneys’ fees and expenses in connection therewith) on account of the Lender’s
relationship with Borrower, or any guarantor or endorser of the Obligations (each of which may be defended, compromised, settled
or pursued by the Lender with counsel of the Lender’s election, but at the expense of Borrower), except for any claim arising
out of the gross negligence or willful misconduct of the Lender. The within indemnification shall survive payment of the Obligations,
and/or any termination, release or discharge executed by the Lender in favor of Borrower.

 

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6.9           Fees.
Borrower will pay all of the Lender’s out-of-pocket expenses in connection with the preparation and negotiation of this Agreement.
Any such out-of-pocket expenses not paid prior to or at closing shall be paid within 30 of days of receipt of invoice from Lender.

 

6.10         Costs
and Expenses. Borrower shall pay to the Lender on demand any and all costs and expenses (including, without limitation, reasonable
attorneys’ fees and disbursements, court costs, litigation and other expenses) incurred or paid by the Lender in establishing,
maintaining, protecting or enforcing any of the Lender’s rights or the Obligations, including, without limitation, any and
all such costs and expenses incurred or paid by the Lender in defending the Lender’s security interest in, title or right
to the Collateral or in collecting or attempting to collect or enforcing or attempting to enforce payment of the Obligations.

 

6.11         Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which shall constitute
but one agreement.

 

6.12         Severability.
If any provision of this Agreement or portion of such provision or the application thereof to any Person or circumstance shall
to any extent be held invalid or unenforceable, the remainder of this Agreement (or the remainder of such provision) and the application
thereof to other Persons or circumstances shall not be affected thereby.

 

6.13         Headings.
The headings herein set forth are solely for the purpose of identification and have no legal significance.

 

6.14         Conflicting
Provisions. To the extent the provisions contained in this Agreement are inconsistent with those contained in any other document,
instrument or agreement executed pursuant hereto, the terms and provisions contained herein shall control. Otherwise, such provisions
shall be considered cumulative.

 

6.15         Complete
Agreement. This Agreement and the other Loan Documents constitute the entire agreement and understanding between and among
the parties hereto relating to the subject matter hereof, and supersedes all prior proposals, negotiations, agreements and understandings
among the parties hereto with respect to such subject matter. This Agreement may be amended only by an instrument in writing signed
by Borrower and Lender.

 

6.16         Accuracy
of Financial Statements. All financial statements, information and other data which may have been or which may hereafter be
submitted by Borrower to the Lender are true, accurate and correct and have been or will be prepared in accordance with generally
accepted accounting principles consistently applied and accurately represent the financial condition or, as applicable, the other
information disclosed therein. Since the most recent submission of such financial information or data to the Lender, Borrower represents
and warrants that no material adverse change in Borrower’s financial condition or operations has occurred which has not been
fully disclosed to the Lender in writing.

 

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6.17         Binding
Effect of Agreement. This Agreement shall be binding upon and inure to the benefit of the respective heirs, executors, administrators,
legal representatives, successors and assigns of the parties hereto, and shall remain in full force and effect (and the Lender
shall be entitled to rely thereon) until released in writing by the Lender. The Lender may transfer and assign this Agreement and
deliver the Collateral to the assignee, who shall thereupon have all of the rights of the Lender; and the Lender shall then be
relieved and discharged of any responsibility or liability with respect to this Agreement and the Collateral. Borrower may not
assign or transfer any of its rights or obligations under this Agreement. Except as expressly provided herein or in the other Loan
Documents, nothing, expressed or implied, is intended to confer upon any party, other than the parties hereto, any rights, remedies,
obligations or liabilities under or by reason of this Agreement or the other Loan Documents.

 

6.18         Further
Assurances. Borrower will from time to time execute and deliver to Lender such documents, and take or cause to be taken, all
such other or further action, as Lender may request in order to effect and confirm or vest more securely in Lender all rights contemplated
by this Agreement and the other Loan Documents (including, without limitation, to correct clerical errors) or to vest more fully
in or assure to the Lender the security interest in the Collateral granted to the Lender by this Agreement or to comply with applicable
statute or law and to facilitate the collection of the Collateral (including, without limitation, the execution of stock transfer
orders and stock powers, endorsement of promissory notes and instruments and notifications to obligors on the Collateral). To the
extent permitted by applicable law, Borrower authorizes the Lender to file financing statements, continuation statements or amendments,
and any such financing statements, continuation statements or amendments may be filed at any time in any jurisdiction. Lender may
at any time and from time to time file financing statements, continuation statements and amendments thereto which contain any information
required by the Code for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment,
including whether Borrower is an organization, the type of organization and any organization identification number issued to Borrower.
Borrower agrees to furnish any such information to Lender promptly upon request. In addition, Borrower shall at any time and from
time to time take such steps as Lender may reasonably request for Lender (i) to obtain an acknowledgment, in form and substance
satisfactory to Lender, of any bailee having possession of any of the Collateral that the bailee holds such Collateral for Lender,
(ii) to obtain “control” (as defined in the Code) of any Collateral comprised of deposit accounts, electronic chattel
paper, letter of credit rights or investment property, with any agreements establishing control to be in form and substance satisfactory
to Lender, and (iii) otherwise to insure the continued perfection and priority of Lender’s security interest in any of the
Collateral and the preservation of its rights therein. Borrower hereby constitutes Lender its attorney-in-fact to execute, if necessary,
and file all filings required or so requested for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed;
and such power, being coupled with an interest, shall be irrevocable until this Agreement terminates in accordance with its terms,
all Obligations are irrevocably paid in full and the Collateral is released.

 

6.19         Terms
of Agreement. This Agreement shall continue in full force and effect so long as any Obligations or obligation of Borrower to
Lender shall be outstanding, or the Lender shall have any obligation to extend any financial accommodation hereunder, and is supplementary
to each and every other agreement between Borrower and Lender and shall not be so construed as to limit or otherwise derogate from
any of the rights or remedies of Lender or any of the liabilities, obligations or undertakings of Borrower under any such agreement,
nor shall any contemporaneous or subsequent agreement between Borrower and the Lender be construed to limit or otherwise derogate
from any of the rights or remedies of Lender or any of the liabilities, obligations or undertakings of Borrower hereunder, unless
such other agreement specifically refers to this Agreement and expressly so provides.

 

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6.20         Notices.
Any notice under or pursuant to this Agreement shall be a signed writing or other authenticated record (within the meaning of Article
9 of the Code). Any notices or other documents sent under or pursuant to this Agreement shall be deemed duly received and effective
if delivered in hand to any officer or agent of Borrower or Lender, or if mailed by registered or certified mail, return receipt
requested, addressed to Borrower at 125 Foss Creek Circle, Healdsburg, CA 95448 or Lender at the address set forth in the Loan
Agreement together with a copy to Bank of the West, Asset Based Lending at 1977 Saturn Street, Monterey Park, CA 91755 or as any
party may from time to time designate by written notice to the other party.

 

6.21         Governing
Law. This Agreement shall be governed by federal law applicable to the Lender and, to the extent not preempted by federal law,
the laws of the State of California without giving effect to the conflicts of laws principles thereof.

 

6.22         Reproductions.
This Agreement and all documents which have been or may be hereinafter furnished by Borrower to the Lender may be reproduced by
the Lender by any photographic, photostatic, microfilm, xerographic or similar process, and any such reproduction shall be admissible
in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made in the regular course of business).

 

6.23         Jurisdiction
and Venue. Borrower irrevocably submits to the nonexclusive jurisdiction of any Federal or state court sitting in California,
over any suit, action or proceeding arising out of or relating to this Agreement. Borrower irrevocably waives, to the fullest extent
it may effectively do so under applicable law, any objection it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding brought in any such court and any claim that the same has been brought in an inconvenient forum. Borrower
hereby consents to any and all process which may be served in any such suit, action or proceeding, (i) by mailing a copy thereof
by registered and certified mail, postage prepaid, return receipt requested, to Borrower’s address shown in this Agreement
or as notified to the Lender and (ii) by serving the same upon Borrower in any other manner otherwise permitted by law, and agrees
that such service shall in every respect be deemed effective service upon Borrower.

 

6.24         Civil
Code Section 2822. In the event that at any time, a surety is liable upon only a portion of Borrower’s obligations under
the Loan Documents and Borrower provides partial satisfaction of any such obligation(s), Borrower hereby waives any right it would
otherwise have, under Section 2822 of the California Civil Code, to designate the portion of the obligations to be satisfied. The
designation of the portion of the obligation to be satisfied shall, to the extent not expressly made by the terms of the Loan Documents,
be made by the Lender rather than Borrower.

 

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6.25         Waiver
Of Jury Trial. THE BORROWER AND LENDER ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, AND THAT IT MAY
BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW EACH PARTY, AFTER CONSULTING (OR HAVING THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF ITS CHOICE, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION RELATED TO THIS AGREEMENT OR
ANY OTHER DOCUMENT, INSTRUMENT OR TRANSACTION BETWEEN THE PARTIES.

 

6.26         Judicial
Reference Provision. In the event the above Jury Trial Waiver is unenforceable, the parties elect to proceed under this Judicial
Reference Provision. With the exception of the items specified below, any controversy, dispute or claim between the parties relating
to this Agreement or any other document, instrument or transaction between the parties (each, a Claim), will be resolved by a reference
proceeding in California pursuant to Sections 638 et seq. of the California Code of Civil Procedure, or their successor sections,
which shall constitute the exclusive remedy for the resolution of any Claim, including whether the Claim is subject to reference.
Venue for the reference will be the Superior Court in the County where real property involved in the action, if any, is located,
or in a County where venue is otherwise appropriate under law (the Court). The following matters shall not be subject to reference:
(i) nonjudicial foreclosure of any security interests in real or personal property, (ii) exercise of self-help remedies (including
without limitation set-off), (iii) appointment of a receiver, and (iv) temporary, provisional or ancillary remedies (including
without limitation writs of attachment, writs of possession, temporary restraining orders or preliminary injunctions). The exercise
of, or opposition to, any of the above does not waive the right to a reference hereunder.

 

The referee shall be selected by agreement
of the parties. If the parties do not agree, upon request of any party a referee shall be selected by the Presiding Judge of the
Court. The referee shall determine all issues in accordance with existing case law and statutory law of the State of California,
including without limitation the rules of evidence applicable to proceedings at law. The referee is empowered to enter equitable
and legal relief, and rule on any motion which would be authorized in a court proceeding, including without limitation motions
for summary judgment or summary adjudication. The referee shall issue a decision, and pursuant to CCP §644 the referee’s
decision shall be entered by the Court as a judgment or order in the same manner as if tried by the Court. The final judgment or
order from any decision or order entered by the referee shall be fully appealable as provided by law. The parties reserve the right
to findings of fact, conclusions of law, a written statement of decision, and the right to move for a new trial or a different
judgment, which new trial if granted, will be a reference hereunder. AFTER CONSULTING (OR HAVING THE OPPORTUNITY TO CONSULT) WITH
COUNSEL OF ITS CHOICE, EACH PARTY AGREES THAT ALL CLAIMS RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND
NOT A JURY.

 

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Executed as of July 15, 2015.

 

	 	Borrower:
	 	 
	 	H.D.D. LLC
	 	 
	 	By:	Truett-Hurst, Inc., Managing Member
	 	 	 
	 	 	By:	 
	 	 	 	Phillip L. Hurst
	 	 	 	Chief Executive Officer/Chairman

 

	Accepted: Bank of the West	 
	 	 
	By:	 	 
	Name: Adam Beak	 
	Title: Managing Director	 

 

    	32

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