8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
September 12, 2017 (September 8, 2017)

TRUETT-HURST, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation) 001-35973 (Commission File Number) 46-1561499 (I.R.S. Employer Identification No.)

5610 Dry Creek Road, Healdsburg, CA 95448

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (707) 431-4423

(Former name or former address, if changed since last report): Not applicable

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

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Emerging growth company         ¨

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

¨

Item 1.01. Entry into a Material Definitive Agreement

On September 8, 2017, H.D.D. LLC (the “LLC”), a subsidiary of Truett-Hurst, Inc. (together with the LLC, the “Company”) entered into the Modification Agreement, dated as of August 17, 2017 (the “Modification Agreement”), to the Loan and Security Agreement, dated as of July 6, 2015 (the “Credit Agreement”), with Bank of the West (the “Lender”). In connection with, and pursuant to the terms and conditions of the Modification Agreement, the LLC received an Accounts Receivable Line of Credit Note, dated as of August 17, 2017 (the “Note”), with an aggregate principal balance of $10 million from the Lender (the Credit Agreement as modified, the Note, and any and all other agreements, instruments and documents executed by the Company and/or the Lender related to the Credit Agreement or the Note, collectively, the “Loan Documents”). The Company intends to use the proceeds from the Note for general working capital purposes. All outstanding principal and interest under the Note is due on or before July 31, 2018. Amounts repaid by the Company to the Lender under the Note prior to July 31, 2018 may be reborrowed. The aggregate principal balance outstanding under the Note bears interest at 2.25% above the one-month LIBOR. The LLC has the option to fix portions of the aggregate principal balance outstanding, in minimum increments of $100,000, at 2.25% above the corresponding month’s LIBOR for periods of one to six months.

The Loan Documents contain usual and customary covenants, including, without limitation:

· A limitation on incurring senior indebtedness;

· A limitation on making loans and advances;

· A limitation on investments, acquisitions, and capital expenditures; and

· A limitation on liens, mergers and sales of assets.

In addition, the Loan Documents maintain a minimum current assets to current liabilities ratio covenant (measured quarterly) and a maximum debt to effective tangible net worth ratio (measured quarterly).

The LLC must achieve EBITDA of at least $357,000 for the fiscal quarter ending September 30, 2017, of at least $434,000 for the fiscal quarter ending December 31, 2017, of at least $289,000 for the fiscal quarter ending March 31, 2018, and at least $242,000 for the fiscal quarter ending June 30, 2018.

The foregoing description does not purport to be a complete description and is qualified in its entirety by reference to the Modification Agreement and the Note, which are filed herewith as Exhibits 10.1 and 10.2 and incorporated by reference into this Item 1.01.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits

Exhibit No.	Description
10.1	Modification Agreement by and between H.D.D. LLC and Bank of the West, dated as of August 17, 2017.
10.2	Accounts Receivable Line of Credit Note, in the principal amount of $10,000,000, dated as of August 17, 2017.

SIGNATURE

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

Truett-Hurst, Inc.
By:	/s/ Phillip L. Hurst
Phillip L. Hurst
President and Chief Executive Officer

Date: September 12, 2017

EXHIBIT INDEX

Exhibit No.	Description
10.1	Modification Agreement by and between H.D.D. LLC and Bank of the West, dated as of August 17, 2017.
10.2	Accounts Receivable Line of Credit Note, in the principal amount of $10,000,000, dated as of August 17, 2017.

EX-10.1

Exhibit 10.1

MODIFICATION AGREEMENT

This MODIFICATION AGREEMENT (this “Agreement”) is entered into as of August 17, 2017, between H.D.D. LLC, a California limited liability company, with an address of 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”).

WHEREAS, the Lender has made various loans to the Borrower (the “Loan”);

WHEREAS, in connection with the Loan, Borrower entered into that certain Loan and Security Agreement, dated July 6, 2015 (as previously amended, modified or supplemented, the “Loan Agreement”);

WHEREAS, as further security for the Loan, the Lender has been granted a Deed of Trust, Security Agreement, Assignment of Leases, Rents, and Profits, and Fixture Filing, dated July 16, 2012, recorded on August 30, 2012 as Instrument No. 2012-84224 and subsequently modified by that certain Amendment to Deed of Trust dated October 10, 2012, recorded on October 31, 2012 as Instrument No. 2012108185, that certain Amendment to Deed of Trust dated July 6, 2015, recorded on July 16, 2015 as Instrument No. 2015063573 and that certain Amendment to Deed of Trust dated July 29, 2016, recorded August 3, 2016 as Instrument No. 2016066217 at the Official records of Sonoma County, State of California (as previously amended, modified or supplemented, the “Deed of Trust”), given by H.D.D. LLC and encumbering certain real property located at 5610 Dry Creek Road, Healdsburg, California 95448 (the “Real Property”);

WHEREAS, the Loan Agreement, the Deed of Trust and all other documents and instruments executed in connection with or relating to the Loan are referred to herein, collectively, as the “Loan Documents”; and the Real Property and all other collateral granted to the Lender to secure the Loan is referred to herein, collectively, as the “Collateral”;

WHEREAS, the Borrower has requested and the Lender has agreed to amend certain of the covenants applicable to the Loan;

WHEREAS, the Borrower and the Lender have agreed to modify the Loan and the Loan Documents in accordance with the terms of this Agreement.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Lender and the Borrower mutually agree as follows:

1.    MODIFICATION AGREEMENT

1.1         Recitals and Representations Accurate. The above recitals are hereby made a part of this Agreement and the Borrower acknowledges and agrees that each of the recitals is true and correct.

1.2         Ratification. All of the terms, covenants, provisions, representations, warranties, and conditions of the Loan Documents, as amended or modified hereby, are ratified, acknowledged, confirmed, and continued in full force and effect as if fully restated herein.

1.3         Collateral. The Borrower confirms and ratifies its continuing mortgage, pledge, assignment, and/or grant of security interest in and lien on the Collateral to and in favor of the Lender as set forth in the Loan Documents.

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1.4         Amendment to Definitions/“EBITDA”. Section 4.21 (a)(v) of the Loan Agreement is hereby deleted in its entirety and replaced with the followings:

(v)          “EBITDA” shall mean, for any period, earnings from continuing operations, exclusive of extraordinary gains or losses, before payment of federal, state and local income taxes, plus Interest Expense, depreciation expense and amortization expense, in each case for such period, computed and calculated in accordance with GAAP.

1.5         Amendment to Financial Covenants/ EBITDA to Current Portion of Long-Term Debt plus Interest Expense. Section 4.21 (d) of the Loan Agreement is hereby deleted in its entirety and replaced with the followings:

(d)          Minimum Quarterly EBITDA. Borrower shall achieve EBITDA of at least $357,000.00 for the fiscal quarter ending September 30, 2017, of at least $434,000.00 for the fiscal quarter ending December 31, 2017, of at least $289,000.00 for the fiscal quarter ending March 31, 2018, and at least $242,000.00 for the fiscal quarter ending June 30, 2018.

1.6           Representations and Warranties. The Borrower hereby represents and warrants to the Lender that:

(a) The person executing this Agreement is duly authorized to do so and to bind the Borrower to the terms hereof;

(b) Each of the Loan Documents is a valid and legal binding obligation of the Borrower, enforceable in accordance with its terms, and is not subject to any defenses, counterclaims, or offsets of any kind;

(c) All financial statements delivered to the Lender were true, accurate and complete, in all material respects, as of the date of delivery to the Lender;

(d) Since the date of the Loan Documents there has been no material adverse change in the condition, financial or otherwise, of the Borrower, except as disclosed to the Lender in writing;

(e) There exists no action, suit, proceeding or investigation, at law or in equity, before any court, board, administrative body or other entity, pending or threatened, affecting the Borrower or its property, wherein an unfavorable decision, ruling or finding would materially adversely affect the business operations, property or financial condition of the Borrower; and

(f) There exists no event of default, or other circumstance that with the passage of time or giving of notice or both will become an event of default, under any of the Loan Documents.

1.7         Interest, Fees, Costs and Expenses. The Borrower shall, simultaneously with the execution of this Agreement, pay to the Lender all accrued interest owing on the Loan as of the date of this Agreement together with all fees, costs and expenses due and owing to the Lender by the Borrower under the Loan Documents.

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2.    MISCELLANEOUS

2.1         Release of the Lender.

(a) The Borrower hereby confirms that as of the date hereof it has no claim, set-off, counterclaim, defense, or other cause of action against the Lender including, but not limited to, a defense of usury, any claim or cause of action at common law, in equity, statutory or otherwise, in contract or in tort, for fraud, malfeasance, misrepresentation, financial loss, usury, deceptive trade practice, or any other loss, damage or liability of any kind, including, without limitation, any claim to exemplary or punitive damages arising out of any transaction between the Borrower and the Lender. To the extent that any such set-off, counterclaim, defense, or other cause of action may exist or might hereafter arise based on facts known or unknown that exist as of this date (collectively, the “Released Claims”), such set-off, counterclaim, defense and other cause of action is hereby expressly and knowingly waived and released by the Borrower. The Borrower acknowledges that this release is part of the consideration to the Lender for the financial and other accommodations granted by the Lender in this Agreement.

(b) The Borrower hereby agrees, represents and warrants that it realizes and acknowledges that factual matters now unknown to it may have given or may hereafter give rise to causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses, which are presently unknown, unanticipated and unsuspected, and the Borrower further agrees, represents and warrants that this Agreement has been negotiated and agreed upon in light of that realization and that it nevertheless hereby intends to release, discharge and acquit the Lender from all Released Claims. In furtherance of this intention, the Borrower expressly waives any and all rights conferred upon it by the provisions of California Civil Code Section 1542, and expressly agrees that this Agreement shall be given full force and effect according to each of its express provisions. California Civil Code Section 1542 provides:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR”.

2.2         Costs and Expenses. The 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 any of the obligations owing by the Borrower to the Lender, 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 Loan.

2.3         Indemnification. The Borrower shall indemnify, defend and hold the Lender and its directors, officers, employees, agents and attorneys (each an “indemnitee”) harmless against any claim brought or threatened against any Indemnitee by the Borrower or any guarantor or endorser of the obligations of the Borrower to the Lender, or any other person (as well as from attorneys’ fees and expenses in connection therewith) on account of the Lender’s relationship with the Borrower, or any guarantor or endorser of the obligations of the Borrower to the Lender (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 the 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 of the Borrower to the Lender, and/or any termination, release or discharge executed by the Lender in favor of the Borrower.

2.4         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.

2.5         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.

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2.6         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.

2.7         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. 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.

2.8         Further Assurances. The Borrower will from time to time execute and deliver to the Lender such documents, and take or cause to be taken, all such other further action, as the Lender may request in order to effect and confirm or vest more securely in the Lender all rights contemplated by this Agreement (including, without limitation, to correct clerical errors) or to vest more fully in or assure to the Lender the security interest in the Collateral 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, the Borrower authorizes the Lender to file financing statements, continuation statements or amendments without the Borrower’s signature appearing thereon, and any such financing statements, continuation statements or amendments may be signed by the Lender on behalf of the Borrower, if necessary, and may be filed at any time in any jurisdiction. The 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 Uniform Commercial Code of California as amended from time to time (the “Code”) for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including whether the Borrower is an organization, the type of organization and any organization identification number issued to the Borrower. The Borrower agrees to furnish any such information to the Lender promptly upon request. In addition, the Borrower shall at any time and from time to time take such steps as the Lender may reasonably request for the Lender (i) to obtain an acknowledgment, in form and substance satisfactory to the Lender, of any bailee having possession of any of the Collateral that the bailee holds such Collateral for the 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 the Lender’s security interest in any of the Collateral and the preservation of its rights therein. The Borrower hereby constitutes the 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 of the Borrower to the Lender are irrevocably paid in full and the Collateral is released.

2.9         Amendments and Waivers. This Agreement may be amended and the Borrower may take any action herein prohibited, or omit to perform any act herein required to be performed by it, if the Borrower shall obtain the Lender’s prior written consent to each such amendment, action or omission to act. No delay or omission on the part of the 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 the Lender on any future occasion.

2.10       Terms of Agreement. This Agreement shall continue in force and effect so long as any obligation of the Borrower to Lender shall be outstanding and is supplementary to each and every other agreement between the 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 the Borrower under any such agreement, nor shall any contemporaneous or subsequent agreement between the 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 the Borrower hereunder, unless such other agreement specifically refers to this Agreement and expressly so provides.

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2.11       Notices. Any notices under or pursuant to this Agreement shall be deemed duly received and effective if delivered in hand to any officer or agent of the Borrower or Lender, or if mailed by registered or certified mail, return receipt requested, addressed to the Borrower or Lender at the address set forth in the Loan Agreement or as any party may from time to time designate by written notice to the other party.

2.12       California 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.

2.13       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).

2.14       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 irrevocably appoints the Secretary of State of the State of California as its authorized agent to accept and acknowledge on its behalf any and all process which may be served in any such suit, action or proceeding, consents to such process being served (i) by mailing a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to Borrower’s address shown above or as notified to the Lender and (ii) by serving the same upon such agent, and agrees that such service shall in every respect be deemed effective service upon Borrower.

2.15       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.

2.16       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.

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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.

Executed as of the date written above.

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

Accepted: Bank of the West
By:	/s/ Parker Callister
Name: Parker Callister
Title: Director

BOTW Modification-Extension Agreement

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EX-10.2

Exhibit 10.2

ACCOUNTS RECEIVABLE LINE OF CREDIT NOTE

August 17, 2017

$10,000,000.00

For value received, the undersigned H.D.D, LLC, a California limited liability company (the “Borrower”), promises to pay to the order of Bank of the West (together with its successors and assigns, the “Lender”), the principal amount of up to Ten Million Dollars and Zero Cents ($10,000,000,00) on or before July 31, 2018 (the “Expiration Date”), as set forth below. The aggregate principal balance outstanding shall bear interest, and interest shall be payable, in accordance with that certain Interest Rate Election Rider, attached hereto and made a part hereof (the “Interest Rate Election Rider”).

On terms and conditions as set forth herein, the Borrower may request advances (each an “Advance”) from time to time from the date hereof to the Expiration Date of this Note (the “Accounts Receivable Line of Credit”), provided that no Advance shall be made if at the time of or following such Advance, the aggregate amount of all Advances outstanding hereunder exceeds the Borrowing Base (as defined in the Loan Agreement). Within the foregoing limits, the Borrower may borrow, partially or wholly prepay, and reborrow as described herein, Each Advance shall be conclusively deemed to have been made at the request of and for the benefit of the Borrower (i) when credited to any deposit account of the Borrower maintained with the Lender or (ii) when paid in accordance with the Borrower’s written instructions. Subject to the requirements herein, and provided such request is made in a timely manner as provided below, Advances shall be made by the Lender under the Accounts Receivable Line of Credit.

This Note is entered into in connection with one or more certain Loan and Security Agreements or Loan Agreements, dated July 6, 2015 (each a “Loan Agreement” and collectively, the “Loan Agreements”) between the Borrower and the Lender, and any capitalized terms not defined herein shall have the meanings given to them in the Loan Agreements.

If at any time the aggregate principal amount of the outstanding Advances shall exceed the applicable Borrowing Base (as defined in the Loan Agreement), the Borrower hereby promises and agrees, immediately upon written or telephonic notice from the Lender, to pay to the Lender an amount equal to the difference between the outstanding principal balance of the Advances and the Borrowing Base. On the Expiration Date, the Borrower hereby promises and agrees to pay to the Lender in full the aggregate unpaid principal amount outstanding, together with all accrued and unpaid interest and all other fees and charges owing to the Lender under this Note.

Principal and interest shall be payable at the Lender’s main office or at such other place as the Lender may designate in writing in immediately available funds in lawful money of the United States of America without set-off, deduction or counterclaim. Interest shall be calculated on the basis of actual number of days elapsed and a 360-day year. If interest is not paid as and when it is due, it shall be added to the principal, become and be treated as a part thereof, and shall thereafter bear like interest.

“Business Day” shall mean a day, other than a Saturday or Sunday, on which the Lender is open for business for the funding of corporate loans, and, with respect to a LIBOR Rate or One Month Libor Rate, a day on which dealings are carried on in the London interbank market and banks are open for business in London.

The Borrower agrees to pay to the Lender a commitment fee on the unused portion of the Accounts Receivable Line of Credit Note of 0.25% per annum, payable monthly in arrears, commencing September 29, 2017 and computed on a year of 360 days for actual days elapsed

At the option of the Lender, this Note shall become immediately due and payable upon default of any liability, obligation, covenant or undertaking of the Borrower hereunder or the occurrence at any time of an Event of Default under the Loan Agreement.

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Any payments received by the Lender on account of this Note shall, at the Lender’s option, be applied first, to accrued and unpaid interest; second, to the unpaid principal balance, then any fees, or charges then owed to the Lender by the Borrower; with payments being applied to installments remaining due in such order and amounts as the Lender may determine in its discretion. Notwithstanding the foregoing, any payments received after the occurrence and during the continuance of an Event of Default shall be applied in such manner as the Lender may determine. The Borrower hereby authorizes the Lender to charge any deposit account which the Borrower may maintain with the Lender for any payment required hereunder without prior notice to the Borrower.

If pursuant to the terms of this Note, the Borrower is at any time obligated to pay interest on the principal balance at a rate in excess of the maximum interest rate permitted by applicable law for the loan evidenced by this Note, the applicable interest rate shall be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. More specifically, if from any circumstances whatsoever, fulfillment of any provision of this Note or any other loan document excuted and delivered in connection with this Note, at the time performance of such provision becomes due, would exceed the limit on interest then permitted by any applicable usury statute or any other applicable law, the Lender may, at its option (a) reduce the obligations to be fulfilled to such limit on interest, or (b) apply the amount in excess of such limit on interest to the reduction of the outstanding principal balance of the obligations, and not to the payment of interest, with the same force and effect as though Borrower had specifically designated such sums to be so applied to principal and Lender had agreed to accept such extra payments(s) as a premium-free prepayment, so that in no event shall any exaction be possible under this Note or any other loan document that is in excess of the applicable limit on interest. It is the intention of Borrower and Lender that the total liability for payments in the nature of interest shall not exceed the limits imposed by any applicable state or federal interest rate laws. The provisions of this paragraph shall control every other provision of this Note, and any provision of any other loan document in conflict with this paragraph.

The Borrower represents to the Lender that the proceeds of this Note will not be used for personal, family or household purposes or for the purpose of purchasing or carrying margin stock or margin securities within the meaning of Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224,

The Borrower grants to the Lender a continuing lien on and security interest in any and all deposits or other sums at any time credited by or due from the Lender to the Borrower and any cash, securities, instruments or other property of the Borrower in the possession of the Lender, 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 the Borrower to the Lender and such deposits and other sums may be applied or set off against such liabilities and obligations of the 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.

No delay or omission on the part of the Lender in exercising any right hereunder shall operate as a waiver of such right or of any other right of the Lender, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. The Borrower and any other party obligated on account of this Note by contract, by operation of law or otherwise (the Borrower and each Borrower, if more than one, and each such other party, an “Obligor”), regardless of the time, order or place of signing, waive presentment, demand, protest, notice of intent to accelerate, notice of acceleration, notice of dishonor, notice of protest and all other notices and demands of every kind in connection with the delivery, acceptance, performance or enforcement of this Note, all suretyship defenses of any kind, in each case that would otherwise be available in connection with this Note including, without limitation, any right (whether now or hereafter existing) to require the holder hereof to first proceed against the Borrower, or any other party obligated on account of this Note, for any security, and assent to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral, and to the addition or release of any other party or person primarily or secondarily liable and waives all recourse to suretyship and guarantor defenses generally, including any defense based on impairment of collateral. To the maximum extent permitted by law, the Borrower waives and terminates any homestead rights and/or exemptions respecting any premises under the provisions of any applicable homestead laws, including without limitation, California Code of Civil Procedure Sections 704-710 et seq.

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To the fullest extent permitted by law, each Obligor waives:

(A) any rights and defenses that are or may become available to such Obligor by reason of Sections 2787 to 2855, inclusive, of the California Civil Code;

(B) all rights and defenses that such Obligor may have because any of the indebtedness hereunder is secured by real property; this means, among other things: (i) the Lender may collect from an Obligor without first foreclosing on any real or personal property collateral pledged by the Borrower or another Obligor; and (ii) if the Lender forecloses on any real property collateral pledged by the Borrower or another Obligor: (1) the amount of such indebtedness may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (2) the Lender may collect from an Obligor even if the Lender, by foreclosing on the real property collateral, has destroyed any right such Obligor may have to collect from the Borrower or another Obligor. This is an unconditional and irrevocable waiver of any rights and defenses each Obligor may have because any of the indebtedness under this Note is secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure;

(C) any right or defense it may have at law or equity, including California Code of Civil Procedure Section 580a, to a fair market value hearing or action to determine a deficiency judgment after a foreclosure.

The Borrower shall indemnify, defend and hold the Lender and its directors, officers, employees, agents and attorneys (each an “Indemnitee”) harmless against any claim brought or threatened against any Indemnitee by the Borrower or by any other person (as well as from attorneys’ reasonable fees and expenses in connection therewith) on account of the Lender’s relationship with the Borrower (each of which may be defended, compromised, settled or pursued by the Lender with counsel of the Lender’s selection, but at the expense of the Borrower), except for any claim arising out of the gross negligence or willful misconduct of the Lender.

The Borrower agrees to pay, upon demand, costs of collection of ail amounts under this Note including, without limitation, principal and interest, or in connection with the enforcement of, or realization on, any security for this Note, including, without limitation, to the extent permitted by applicable law, reasonable attorneys’ fees and expenses, if any payment due under this Note is unpaid for 15 days or more, the Borrower shall pay, in addition to any other sums due under this Note (and without limiting the Lender’s other remedies on account thereof), a late charge equal to 5.0% of such unpaid amount.

This Note shall be binding upon the Borrower and upon its heirs, successors, assigns and legal representatives, and shall inure to the benefit of the Lender and its successors, endorsees and assigns.

In the event that at any time, a surety is liable upon only a portion of the Borrower’s or any Obligor’s obligations under this Note and the Borrower provides partial satisfaction of any such obligation(s), each of the Borrower and each Obligor hereof, if any, 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 this Note, be made by the Lender rather than Borrower.

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The liabilities of the Borrower and each Borrower, if more than one, and any Obligor are joint and several; provided, however, the release by the Lender of the Borrower or any one or more Obligors shall not release any other person obligated on account of this Note. Any and all present and future debts of the Borrower to any Obligor are subordinated to the full payment and performance of all present and future debts and obligations of the Borrower to the Lender. Each reference in this Note to the Borrower and each Borrower, if more than one, and Obligor, is to such person individually and also to all such persons jointly, No person obligated on account of this Note may seek contribution from any other person also obligated, unless and until all liabilities, obligations and indebtedness to the Lender of the person from whom contribution is sought have been irrevocably satisfied in full. The release or compromise by the Lender of any collateral shall not release any person obligated on account of this Note.

The Borrower authorizes the Lender to complete this Note if delivered incomplete in any respect. A photographic or other reproduction of this Note may be made by the Lender, and any such reproduction shall be admissible in evidence with the same effect as the original itself in any judicial or administrative proceeding, whether or not the original is in existence.

This Note 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.

Any notices under or pursuant to this Note shall be deemed duly received and effective if delivered in hand to any officer of agent of the Borrower or Lender, or if mailed by registered or certified mail, return receipt requested, addressed to the Borrower 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.

The 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 Note. The 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. The 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 the Borrower’s, address shown below or as notified to the Lender and (ii) by serving the same upon the Borrower(s) in any other manner otherwise permitted by law, and agrees that such service shall in every respect be deemed effective service upon the Borrower,

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 NOTE OR ANY OTHER DOCUMENT, INSTRUMENT OR TRANSACTION BETWEEN THE PARTIES.

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 Note 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.

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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.

Executed as of August 17, 2017.

Borrower:

H.D.D. LLC

By: Truett-Hurst, Inc., Manager

By:	/s/ Phillip L. Hurst
	Phillip L. Hurst, Chief Executive Officer/Chairman

125 Foss Creek Circle
Healdsburg, California
95448

AR Line of Credit Note

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