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                                                                   Exhibit 10.21

                      SUBORDINATION AND PLEDGE AGREEMENT

                                                                 October 5, 2000

WHEREAS, VERMONT PURE HOLDINGS, LTD., (f/k/a VP Merger Parent, Inc.), a Delaware
corporation  formerly  named "VP  Merger  Parent,  Inc.",  and  whose  principal
executive  office is located at Catamount  Industrial  Park, Route 66, Randolph,
Vermont 05060  ("HOLDINGS"),  CRYSTAL ROCK SPRING WATER  COMPANY,  a Connecticut
corporation  with an office AT 1050 Buckingham  Street,  Watertown,  Connecticut
06795  ("CRYSTAL  ROCK"),   PLATINUM  ACQUISITION  CORP.,  (f/k/a  Vermont  Pure
Holdings,  Ltd.), a Delaware  corporation with an office at Catamount Industrial
Park, Route 66, Randolph,  Vermont 05060  ("PLATINUM") and VERMONT PURE SPRINGS,
INC., a Delaware  corporation with an office at CATAMOUNT INDUSTRIAL PARK, Route
66, Randolph, Vermont 05060 ("VPS", and collectively with Holdings, Crystal Rock
and  PLATINUM,  the  "OBLIGORS  ") are now  indebted  to  HENRY  E.  BAKER  (the
"Subordinate Lender") and may from time to time hereafter become indebted to the
Subordinate Lender in further amounts; and

WHEREAS, Ross S. Rapaport, not individually but as Trustee of the Peter K. Baker
Life Insurance Trust, The John B. Baker Insurance Trust and u/t/a dated December
16,  1991  f/b/o  Joan  Baker  et.  al. is acting  as agent  (the  "Agent")  for
Subordinate Lender pursuant to certain of the Subordinated Loan Documents; and

WHEREAS,  the  Obligors  have  requested,  and may from  time to time  hereafter
request, WEBSTER BANK (the "BANK") to make or agree to make loans, extensions of
credit or other financial accommodations to the Obligors (the "Loans"); and

WHEREAS,  the Bank, as a condition to the making or  continuation  of the Loans,
has required the  Subordinate  Lender to execute and deliver this  Subordination
and Pledge  Agreement  (together  with all schedules  and any exhibits  attached
hereto and amendments or  modifications  hereto in effect from time to time, the
"AGREEMENT").

NOW,  THEREFORE,  in order to induce the Bank to make,  or  continue to make the
Loans and in consideration thereof, the Subordinate Lender agrees as follows:

A.  DEFINITIONS.    As used herein, the following terms shall have the following
    meanings:

1.      AFFILIATE. THE TERM "AFFILIATE" means Webster Financial  Corporation and
        any of its direct and indirect affiliates and subsidiaries.

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2.      BANK COLLATERAL.  The term "BANK COLLATERAL" means the personal property
        of the  Obligors  described in Schedule A and any other real or personal
        property of any of the  Obligors in which the Bank or an  Affiliate  may
        hereafter  be granted a security  interest,  mortgage  interest or other
        similar interest.

3.

        COLLECTION ACTION.   The term "COLLECTION  ACTION" means to (i) exercise
        or enforce  any  rights or  remedies  or assert  any claims  against the
        Bank  Collateral or  Subordinated  Lenders'  Collateral;   (ii) make any
        claim  or commence or initiate  any action,  lawsuit, case or proceeding
        against  any of the  Obligors or  join  together   or with any  creditor
        other than, with its consent, the  Bank in any action,  lawsuit, case or
        proceeding against the Obligors  (including,  but not being limited to,
        proceedings under the Bankruptcy    Code);  (iii) contact any account of
        any  of the  Obligors  or  attach  or  take  possession  of    any  Bank
        Collateral or  Subordinated  Lenders'   Collateral or exercise any right
        of  foreclosure  or  any right or  remedy  with  respect  to  any of the
        Obligors or  the Bank  Collateral or Subordinated  Lenders'  Collateral;
        or (iv) take  any other action  prejudicial  to or inconsistent with the
        Bank's rights and first priority  secured position   with respect to the
        Obligors or the Bank Collateral,  including,  without   limitation, that
        any action that will impede, interfere with, restrict,   or restrain the
        exercise  by the  Bank of its  rights  and  remedies    under  the  Loan
        Documents  or  contest  in any  manner  the    perfection,  priority  or
        validity of any lien held by the Bank in any of the Bank Collateral.

4.      EVENT OF  DEFAULT.  THE TERM "EVENT OF DEFAULT"   shall mean an Event of
        Default  under the Loan  Agreement  beyond any applicable grace and cure
        period.

5.      FINANCIAL COVENANT DEFAULT.  THE TERM "FINANCIAL COVENANT DEFAULT" shall
        mean an Event of Default which results  solely from the violation of any
        now existing or hereafter  arising financial  covenant  contained in the
        Loan  Agreement,  including,  by way  of  illustration,  those  specific
        financial  covenants set forth in Sections 6.16,  6.17,  6.18, 6.19, and
        6.20 of the Loan Agreement and any supplement, addition, modification or
        amendment to those specific financial covenants.

6.      LIABILITIES.  THE TERM  "LIABILITIES"  means any and all obligations and
        indebtedness of every kind and description,  now or hereafter  existing,
        whether such debts or  obligations  are primary or secondary,  direct or
        indirect,  absolute or contingent,  sole,  joint or several,  secured or
        unsecured,  due or to become due,  contractual  or tortious,  arising by
        operation  of  law,  by  overdraft,  or  otherwise,  including,  without
        limitation,  principal,  interest, fees, late fees, expenses, attorneys'
        fees and costs,  and/or  allocated fees and costs of the Bank's in-house
        legal  counsel,  that  have  been  or may  hereafter  be  contracted  or
        incurred.

7.      LOAN  AGREEMENT. THE TERM "LOAN  AGREEMENT"  means that certain Loan and
        Security  Agreement  among the Obligors  and Bank dated the date hereof,
        and any subsequent supplement,  modification,  renewal,  extension    or
        amendment thereto.

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8.       LOAN DOCUMENTS.  The term "LOAN DOCUMENTS" means the Loan Agreement and
         all other credit accommodations, notes,  loan agreements, and any other
         agreements  and  documents,   now  or  hereafter   existing,  creating,
         evidencing,  guarantying,  securing  or relating  to  any or all of the
         Senior  Liabilities,   together  with  all amendments,   modifications,
         renewals, or extensions thereof.

9.       NON-COVENANT  DEFAULT.  The term "NON-COVENANT  DEFAULT" means an Event
         of Default other than a Financial Covenant Default.

10.      OBLIGOR. the term "OBLIGOR" means the Holdings, Crystal Rock, Platinum,
         VPS and each and every other maker,  endorser, guarantor,  or surety of
         or for the Senior Liabilities.

11.      SENIOR LIABILITIES. The term "SENIOR LIABILITIES" means all Liabilities
         of the Obligors to the Bank and/or to any of the Affiliates  including,
         without limitation, any and all interest accruing on Senior Liabilities
         after the commencement of any proceedings referred to in paragraph B.5.
         hereof,  notwithstanding  any  provision  or  rule  of  law which might
         restrict the rights of the Bank, as against the Obligors and/or  anyone
         else,  to  collect such  interest.  For  purposes  of  this  Agreement,
         Senior Liabilities shall include all Liabilities of the Obligors to the
         Bank,  notwithstanding any right or power of any of the Obligors and/or
         anyone else to assert any  claim or  defense  as to the  invalidity  or
         unenforceability of any such Senior Liabilities.

12.      SUBORDINATED  LENDERS'  COLLATERAL.  The  term  "SUBORDINATED  LENDERS'
         COLLATERAL"  means  the  personal   property of the Obligors more fully
         described in Schedule B attached hereto.


13.     SUBORDINATED LIABILITIES. The term "SUBORDINATED  LIABILITIES" means all
        Liabilities of  the  Obligors  to  the  Subordinate  Lender,  including,
        without limitation,   all payments of principal and interest pursuant to
        that  Subordinated Promissory Note dated the date of this Agreement from
        Holdings payable to the order of the Subordinated Lender in the original
        principal amount of $3,488,888.89  (the  "SUBORDINATED  NOTE") and  that
        Guaranty  dated the date of this  Agreement  from  Platinum  and  VPS to
        Subordinate  Lender  guarantying payments  due  under  the  Subordinated
        Note (the  "SUBORDINATE  GUARANTY") but specifically excluding therefrom
        compensation  from  the  Obligors  to  the  Subordinate Lender presently
        contemplated pursuant to the existing  employment  agreement between any
        of the Obligors and the Subordinate Lender, as the compensation  clauses
        thereof may  be amended  from time to time with the consent of the Bank,
        the normal reimbursement of expenses in the ordinary  course of business
        and  indemnification  of  claims  arising  solely  from  the Subordinate
        Lender's actions as an officer or director of any of the Obligors.

14.     SUBORDINATED  LOAN  DOCUMENTS.  The term  "SUBORDINATED  LOAN DOCUMENTS"
        means all credit  accommodations,  notes,  loan agreements and any other
        agreements  and  documents,   now  or  hereafter   existing,   creating,
        evidencing,  guarantying,  securing  or  relating  to  any or all of the
        Subordinated Liabilities,  together with all amendments,  modifications,
        renewals or extensions thereof.

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B.  SUBORDINATION AND PLEDGE.

1.       SUBORDINATION TO SENIOR LIABILITIES.

               (a)  Except as hereinafter  expressly set forth in this Agreement
                    or as the Bank may hereafter  otherwise expressly consent in
                    writing,  the payment of all Subordinated  Liabilities shall
                    be postponed and subordinated to the indefeasible payment in
                    full of all Senior  Liabilities,  and no  payments  or other
                    distributions  whatsoever,  including,  without  limitation,
                    payments  of   interest  in  respect  of  any   Subordinated
                    Liabilities  shall be made, nor shall any property or assets
                    of the Borrower or other  Obligor be applied to the purchase
                    or  other  acquisition  or  retirement  of any  Subordinated
                    Liabilities,  nor  given as  collateral  security  to secure
                    repayment of same.

               (b)  NOTWITHSTANDING  THE  PROVISIONS IN PARAGRAPH  B.1(A) above,
                    and  subject  to the  other  terms  of this  Agreement,  the
                    Subordinate Lender may be granted a security interest in the
                    Subordinated  Lenders'  Collateral to secure the payments of
                    principal and interest and other amounts due pursuant to the
                    Subordinated Note.

               (c)  NOTWITHSTANDING THE PROVISIONS OF PARAGRAPH B.1(A) above, so
                    long as no Event of Default exists and is continuing, and so
                    long as no event exists and is  continuing  which,  with the
                    giving  of  notice  or the  passage  of time or both,  would
                    constitute  a Event of Default,  the  Obligors  may make the
                    following payments (including partial payments thereof), but
                    only to the extent  that the making of such  payments  would
                    not result in a Financial  Covenant  Default:  (i) regularly
                    scheduled   quarterly   payments  of   interest   under  the
                    Subordinated  Note,  at a rate not in excess  of twelve  per
                    cent  (12%)  per  annum,  and past due  regularly  scheduled
                    quarterly  payments of interest under the Subordinated  Note
                    which were not paid when scheduled to be paid because of the
                    terms of this Agreement, including interest at a rate not in
                    excess of twelve  per cent  (12%) per annum on such past due
                    amounts;  and (ii) regularly  scheduled  principal payments,
                    together  with accrued but unpaid  interest at a rate not in
                    excess of twelve  per cent (12%) per  annum,  in  accordance
                    with the terms of the Subordinated Note, commencing with the
                    first regularly  scheduled principal payment more than three
                    years  after  the  date  of  this  Agreement  and  past  due
                    regularly    scheduled    principal   payments   under   the
                    Subordinated  Note which were not paid when  scheduled to be
                    paid  because  of the  terms  of this  Agreement,  including
                    interest  at a rate not in excess of twelve  per cent  (12%)
                    per annum on such past due amounts.

2.   PLEDGE OF  SUBORDINATED  LOAN  DOCUMENTS.  In order to  secure  the due and
     punctual payment and performance of the Senior Liabilities, the Subordinate
     Lender  hereby  pledges,  transfers,  assigns,  and  grants  to the  Bank a
     continuing  security  interest  in and  lien  upon  the  Subordinated  Loan
     Documents.  The  Subordinate  Lender has endorsed and delivered to the Bank
     physical  possession of any of the  Subordinated  Loan Documents  which are
     instruments,  including  the  Subordinated  Note and has  executed  Uniform
     Commercial  Code  financing  statements  and such  other  documents  and/or

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     instruments  as may be  necessary  or  convenient  to perfect the  security
     interests  granted herein.  Bank shall hold the  Subordinated  Note and any
     other  Subordinated  Loan Documents which are instruments  delivered to the
     Bank as security for the due and punctual  payment and  performance  of the
     Senior Liabilities and  notwithstanding  the possession of the Subordinated
     Note or such other Subordinated Loan Documents by the Bank, the Subordinate
     Lender  shall be  entitled  to receive  payments  thereunder  to the extent
     expressly permitted by the terms of this Agreement. Upon payment in full of
     the Senior Liabilities,  the Bank will deliver to the Subordinate Lender in
     care of Peter K.  Baker the  Subordinated  Note and any other  Subordinated
     Loan Documents in its possession.

3.   SUBORDINATION  OF  SECURITY  INTEREST  OF  SUBORDINATED  LIABILITIES.   Any
     security  interest  now or  hereafter  held by the  Subordinate  Lender and
     granted  by  any  of  the  Obligors  to  secure  any  of  the  Subordinated
     Liabilities, including the security interest described in paragraph B.1(B),
     is hereby  immediately made  subordinate,  junior and postponed in priority
     and effect to the priority and effect of the security interest purported to
     be created  by any of the Loan  Documents,  as if (and  whether or not) the
     Bank's security interest had been perfected by possession, by timely filing
     of  financing  statements,  or by any  other  means  prior  to the time the
     security   interest  with  respect  to  the  Subordinated   Liabilities  is
     perfected,  and  prior  to  the  filing  of  any  financing  statements  in
     connection with the Subordinated Liabilities. The Subordinate Lender agrees
     to execute  and  deliver to the Bank all  instruments,  including,  without
     limitation,  Forms UCC-3,  subordinations  of lien, and  subordinations  of
     mortgage  which,  in the  reasonable  opinion of the Bank, are necessary or
     convenient to effectuate the purposes of this paragraph and this Agreement.

4.   FURTHER ASSURANCES OF PLEDGE OF SUBORDINATED  LIABILITIES.  The Subordinate
     Lender  will  (i)  promptly   notify  the  Bank  of  the  creation  of  any
     Subordinated  Liabilities  and of the  issuance of any  promissory  note or
     other instrument to evidence any Subordinated  Liabilities;  (ii) cause any
     Subordinated  Liabilities  which are not already  evidenced by a promissory
     note or other  instrument  of the  Obligors  to be so  evidenced;  (iii) as
     collateral security for the Senior Liabilities, endorse, deliver and pledge
     to  the  Bank  any  and  all  promissory  notes  and/or  other  instruments
     evidencing Subordinated Liabilities,  and otherwise assign and/or pledge to
     the Bank any or all  Subordinated  Liabilities  and the  Subordinated  Loan
     Documents, all in a manner satisfactory to the Bank in its sole discretion,
     and (iv)  promptly  give the Bank  written  notice  of any  default  by any
     Obligor under the  Subordinated  Note or any agreement  securing  Obligors'
     obligations under any of the other Subordinated Loan Documents.

     FURTHER   ASSURANCES  OF  BANK.  Bank  will  endeavor  to  deliver  to  the
     Subordinate  Lender in care of Peter K. Baker prompt notice of any Event of
     Default or Financial  Covenant  Default under the Loan  Agreement or any of
     the other Loan Documents of which the Bank becomes aware but the failure of
     the Bank to  promptly  deliver  any such  notice will not affect any of the
     rights or obligations of the parties under this Agreement.

5.   RIGHTS OF BANK TO COLLECT  SUBORDINATED  LIABILITIES.  In the event of, and
     commencing with the date thereof, any dissolution, winding up, liquidation,

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     reorganization or other similar  proceedings  relating to any Obligor or to
     any of their creditors,  or to any of their property (whether  voluntary or
     involuntary, partial or complete, and whether in bankruptcy,  insolvency or
     receivership,  or upon an assignment  for the benefit of creditors,  or any
     other marshalling of the assets and liabilities of any Obligor, or any sale
     of all or  substantially  all of the assets of any Obligor,  or otherwise),
     the Senior  Liabilities  shall first be paid in full before the Subordinate
     Lender  shall be  entitled  to  receive  and/or to retain  any  payment  or
     distribution in respect of the Subordinated Liabilities;  provided that the
     Subordinate  Lender shall be entitled to receive and retain any  securities
     issued in connection with  reorganization  proceedings  which are junior in
     right of  repayment  to the  Senior  Liabilities  to the  extent  set forth
     herein, are treated as Subordinated  Liabilities  hereunder and are subject
     to all the  provisions  of this  Agreement,  and, in order to implement the
     foregoing  (i) all payments and  distributions  of any kind or character in
     respect of the  Subordinated  Liabilities  to which any of the  Subordinate
     Lender would be entitled but for the  provisions of this  Agreement  (other
     than such junior  securities)  will be made directly to the Bank;  (ii) the
     Subordinate  Lender  shall  promptly  file a claim or  claims,  in the form
     required  in such  proceedings,  for the  full  outstanding  amount  of the
     Subordinated  Liabilities,  and  shall  cause  said  claim or  claims to be
     approved and all payments and other distributions in respect thereof (other
     than such junior  securities)  to be made  directly to the Bank;  (iii) the
     Subordinate Lender hereby irrevocably agrees that the Bank may, in its sole
     discretion, in the name of the Subordinate Lender or otherwise, demand, sue
     for,  collect,  receive,  and  receipt  for any and all  such  payments  or
     distributions, and file, prove, and vote or consent in any such proceedings
     with respect to, any and all claims of the  Subordinate  Lender relating to
     the  Subordinated  Liabilities;  and (iv)  the  Subordinate  Lender  hereby
     ratifies  all of the  foregoing  acts or  omissions  on the Bank's  part or
     behalf and waives any  claim,  counterclaim  or defense of the  Subordinate
     Lender which may be alleged to arise from such acts or omissions.

6.   PROTECTION OF BANK'S RIGHTS IN SUBORDINATED LIABILITIES.  In the event that
     the Subordinate  Lender  receives any payment or other  distribution of any
     kind or  character  from any  Obligor  or any other  source  whatsoever  in
     respect of any of the  Subordinated  Liabilities,  other than as  expressly
     permitted  by  the  terms  of  this   Agreement,   such  payment  or  other
     distribution  shall be received in trust for the Bank and  promptly  turned
     over by the  Subordinate  Lender to the Bank. The  Subordinate  Lender will
     mark its books and records,  and cause the Obligors to mark their books and
     records,  so as to clearly indicate that the  Subordinated  Liabilities are
     subordinated in accordance with the terms of this Agreement, and will cause
     to be clearly  inserted in any promissory note or other instrument which at
     any time evidences any of the  Subordinated  Liabilities a statement to the
     effect that the payment  thereof is  subordinated  in  accordance  with the
     terms of this Agreement.  The Subordinate  Lender will execute such further
     documents and instruments and take such further action as the Bank may from
     time to time reasonably  request to carry out the intent of this Agreement.
     The Subordinate Lender hereby irrevocably appoints the Bank its attorney in
     fact,  said  appointment  being  coupled with an interest,  to execute such
     further documents and instruments and take such further action on behalf of
     the Subordinate Lender as the Bank may from time to time deem reasonable to
     carry out the intent of this Agreement,  including, without limitation, the
     actions set forth in paragraph B.4. hereof.


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7.   TREATMENT  OF  PAYMENT  OF  SUBORDINATED  LIABILITIES.   All  payments  and
     distributions   received  by  the  Bank  in  respect  of  the  Subordinated
     Liabilities,  to the extent  received  in or  converted  into cash,  may be
     applied by the Bank first to the payment of any and all expenses (including
     attorneys' fees and disbursements and the allocated fees, expenses and cost
     of  in-house  counsel)  paid or  incurred  by the  Bank in  enforcing  this
     Agreement  or in  endeavoring  to  collect  or  realize  upon  any  of  the
     Subordinated Liabilities,  and any balance thereof shall, solely as between
     the Subordinate  Lender and the Bank, be applied by the Bank, in such order
     of application as the Bank may from time to time select, toward the payment
     of any of the Senior Liabilities  remaining unpaid. As between the Obligors
     and any of their  creditors,  no such payments or distributions of any kind
     or character shall be deemed to be payments or  distributions in respect of
     the  Senior  Liabilities;   and,   notwithstanding  any  such  payments  or
     distributions   received  by  the  Bank  in  respect  of  the  Subordinated
     Liabilities  and so  applied by the Bank  toward the  payment of the Senior
     Liabilities,  the  Subordinate  Lender  shall  be  subrogated  to the  then
     existing rights of the Bank, if any, in respect of the Senior  Liabilities,
     only at such time as the Bank shall have received  indefeasible  payment of
     the full amount of the Senior Liabilities.

8.   WAIVERS. The Subordinate Lender hereby waives (i) any and all notice of the
     receipt and  acceptance by the Bank of this  Agreement;  (ii) except as set
     forth in paragraph B.4, notice of the existence, incurrence, or non-payment
     of all or any of the Senior Liabilities;  (iii) all diligence in collection
     or protection of or realization  upon any of the Senior  Liabilities or any
     security therefor;  and (iv) any obligation with respect to the marshalling
     of assets by the Bank.

9.   PROHIBITION ON CHANGES IN SUBORDINATED LIABILITIES.

    (a)   Except as herein set forth in paragraph B.9(B), the Subordinate Lender
          will not  without  the prior  written  consent of the Bank (i) cancel,
          waive,  forgive,  amend,  modify,  transfer  or assign,  or attempt to
          enforce or collect,  or subordinate to any Liabilities  other than the
          Senior  Liabilities,  any  Subordinated  Liabilities  or any rights in
          respect thereof; (ii) convert any Subordinated  Liabilities into stock
          or other securities in any of the Obligors;  (iii) take any Collection
          Action; (iv) commence,  or join with any other creditor in commencing,
          any bankruptcy,  reorganization or insolvency proceedings with respect
          to any of the Obligors, or (v) take any other action prejudicial to or
          inconsistent  with  the  Bank's  rights  and  first  priority  secured
          position  with  respect  to the  Obligors,  the  Bank  Collateral  and
          collateral for the Senior Liabilities.

(b)       Notwithstanding the provisions of paragraph B.9(A), if any default has
          occurred under any of the Subordinated Loan Documents and such default
          has  continued in existence  for a period of one hundred  eighty (180)
          consecutive days after the Subordinated  Lenders have provided written
          notice of the  existence of such default to the Bank (the  "STANDSTILL
          PERIOD"),  the  Subordinated  Lender may proceed to take legal  action
          against  the  Obligors  for the sole  purpose of  obtaining a judgment

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          against the Obligors;  provided,  however, at no time either before or
          after the expiration of the Standstill  Period,  may any  Subordinated
          Lender  take any  action or  Collection  Action to  enforce a security
          interest  in,   liquidate  or  otherwise   receive  payment  from  any
          collateral for the Senior  Liabilities,  including the Bank Collateral
          or  Subordinated  Lenders'  Collateral,  unless and until the Bank has
          been indefeasibly paid in full for all Senior Liabilities.

10.       CONTINUING  AGREEMENT.  This  Agreement  shall  in all  respects  be a
          continuing  agreement  and  shall  remain  in full  force  and  effect
          notwithstanding,   without  limitation,  the  death,  incompetency  or
          dissolution of the Subordinate Lender or that at any time or from time
          to time all  Senior  Liabilities  may have been paid in full if any of
          the Loan Documents have not been terminated.

11.       PERMITTED  CHANGES IN SENIOR  LIABILITIES.  The Bank may, from time to
          time, whether before or after any discontinuance of this Agreement, at
          its sole discretion and without notice to the Subordinate Lender, take
          any or all of the following  actions:  (i) retain or obtain a security
          interest in any property to secure any of the Senior Liabilities; (ii)
          retain or obtain the  primary  or  secondary  obligation  of any other
          Obligor or  Obligors  with  respect to any of the Senior  Liabilities;
          (iii) extend,  renew (whether or not longer than the original period),
          alter or  exchange  any of the  Senior  Liabilities;  (iv)  release or
          compromise any obligation of any nature of any Obligor with respect to
          any of the Senior Liabilities;  and, (v) release its security interest
          or lien in,  allows its security  interest or lien to be  unperfected,
          surrender,  release or permit any substitution or exchange for, all or
          any part of any property  securing any of the Senior  Liabilities,  or
          extend or renew for one or more  periods  (whether  or not longer than
          the  original  period) or release,  compromise,  alter or exchange any
          obligations  of any  nature of any  Obligor  with  respect to any such
          property.

12.       DISPOSITION  OF  ASSETS.   The  Subordinate   Lender  agree  that  any
          disposition by the Bank of any collateral for the Senior  Liabilities,
          whether by collection, sale, or other manner of liquidation,  after an
          Event  of  Default  under  the  Loan  Documents,  if  conducted  in  a
          commercially  reasonable manner, may not be challenged or contested by
          the Subordinate Lender on the grounds of commercial  unreasonableness.
          The  Subordinate  Lender  agrees  that the Bank may use such  means of
          collection  and exercise such  diligence  with respect  thereto as the
          Bank,   in  its  sole   discretion,   deems   appropriate   under  the
          circumstances  and may enter into such  compromise  with and give such
          releases and  acquittances to account debtors or other obligors of the
          Obligors' receivables as it determines in its sole discretion, without
          obtaining  the  agreement or  concurrence  of or giving  notice to the
          Subordinate  Lender and the Subordinate  Lender hereby waive all right
          to require  that its  agreement  or consent be  obtained or that it be
          given  notice.  The  Subordinate  Lender  further  agrees that it will
          release  its  security  interest  on  any  collateral  (including  the
          Subordinated  Lenders' Collateral) for the Senior Liabilities upon the
          sale or other disposition  thereof at the request of the Bank, whether
          or not  any  proceeds  therefrom  will  pay  any  of the  Subordinated
          Liabilities.

C.        REPRESENTATIONS   AND  WARRANTIES.   The  Subordinate   Lender  hereby
          represents  and  warrants  that  (i) the  Subordinate  Lender  has the
          necessary  power and capacity to make and perform this  Agreement  and

                                       8
<PAGE>

          such making and performance have been duly authorized by all necessary
          actions  on the part of the  Subordinate  Lender;  (ii) the making and
          performance by the  Subordinate  Lender of this Agreement does not and
          will not violate any  provision of law or  regulation or result in the
          breach of, or constitute a default or require any consent  under,  any
          indenture or other  agreement or  instrument to which it is a party or
          by which any of its properties may be bound;  and (iii) this Agreement
          is the legal, valid and binding obligation of the Subordinate  Lender,
          enforceable  against the  Subordinate  Lender in  accordance  with its
          terms.

D.        REMEDIES.  Upon the  occurrence  of any Event of Default,  or upon the
          breach of any representation,  covenant or agreement in this Agreement
          by any  Obligor  or the  Subordinate  Lender,  or in the  event of the
          termination of this Agreement,  all of the Senior  Liabilities  shall,
          without notice or demand,  become  immediately  due and payable at the
          option  of the  Bank and the Bank  may  immediately,  without  further
          notice,  resort  to all of its  rights  and  remedies  herein,  in any
          document  (including the Loan Agreement and any of the Loan Documents)
          by and between the Bank and any Obligor,  or in any in any  instrument
          evidencing  any  obligation  under  any  such  document,  at law or in
          equity.  The  Bank  agrees  that  it  shall  proceed,  to  the  extent
          commercially reasonable, against all the assets of the Obligors before
          liquidating the Subordinated Note.

E.        MISCELLANEOUS.

       1. REMEDIES CUMULATIVE; NO WAIVER. The rights, powers and remedies of the
          Bank  provided in this  Agreement  and any of the Loan  Documents  are
          cumulative and not exclusive of any right, power or remedy provided by
          law or  equity.  No  failure  or  delay on the part of the Bank in the
          exercise  of any  right,  power or remedy  shall  operate  as a waiver
          thereof,  nor shall any single or partial exercise  preclude any other
          or further exercise thereof, or the exercise of any other right, power
          or remedy.

       2. NOTICES.  Notices and communications  under this Agreement shall be in
          writing and shall be given by (i) hand-delivery, (ii) first class mail
          (postage  prepaid),  or (iii) reliable  overnight  commercial  courier
          (charges prepaid) to the addresses listed in this Agreement. Notice by
          overnight  courier  shall be deemed to have been given and received on
          the date  scheduled  for  delivery.  Notice by mail shall be deemed to
          have been given and received  three (3)  calendar  days after the date
          first  deposited in the United  States Mail.  Notice by  hand-delivery
          shall be deemed to have been given and received upon delivery. A party
          may change its address by giving  written notice to the other party as
          specified herein.

    3.    COSTS AND EXPENSES.  Whether or not the  transactions  contemplated by
          this  Agreement  or the Loan  Documents  are  fully  consummated,  the
          Obligors shall promptly pay (or reimburse,  as the Bank may elect) all
          costs and expenses which the Bank has incurred or may hereafter  incur
          in  connection  with  the  negotiation,   preparation,   reproduction,
          interpretation,  perfection, protection of collateral,  administration
          and  enforcement of this Agreement and the other Loan  Documents,  the
          collection of all amounts due under this  Agreement and the other Loan
          Documents, and all amendments,  modifications, consents or waivers, if

                                       9
<PAGE>

          any, to the Loan Documents.  The Obligors'  reimbursement  obligations
          under this Paragraph  shall survive any  termination of this Agreement
          or any  other  Loan  Document  and  are  deemed  part  of  the  Senior
          Liabilities.

    4.    GOVERNING LAW.  This Agreement shall be construed in  accordance  with
          and  governed  by  the  substantive  laws  of the State of Connecticut
          without reference to conflict of laws principles.

    5.    INTEGRATION;  AMENDMENT.  This  Agreement and the other Loan Documents
          constitute  the sole  agreement  of the  parties  with  respect to the
          subject matter hereof and thereof and supersede all oral  negotiations
          and prior  writings  with  respect to the  subject  matter  hereof and
          thereof.  No amendment of this Agreement,  and no waiver of any one or
          more of the provisions  hereof shall be effective  unless set forth in
          writing and signed by the parties hereto.

    6.    SUCCESSORS  AND ASSIGNS.  This Agreement (i) shall be binding upon the
          Subordinate Lender, the Obligors executing this Agreement and the Bank
          and,   where   applicable,    their   respective   heirs,   executors,
          administrators,  successors  and assigns,  and (ii) shall inure to the
          benefit of the  Subordinate  Lender,  the  Obligors  and the Bank and,
          where applicable,  their respective heirs, executors,  administrators,
          successors  and  permitted  assigns;   provided,   however,  that  the
          Subordinate  Lender and the  Obligors  may not assign  their rights or
          obligations hereunder or any interest herein without the prior written
          consent of the Bank, and any such  assignment or attempted  assignment
          by the Subordinate Lender and/or any of the Obligors shall be void and
          of no effect with respect to the Bank.  The Bank may from time to time
          sell or assign,  in whole or in part, or grant  participations  in the
          Loans and/or the Agreement and/or the obligations  evidenced  thereby.
          The  Subordinate  Lender  authorizes  the Bank to provide  information
          concerning the Subordinate  Lender and the Obligors to any prospective
          purchaser, assignee or participant.

    7.    SEVERABILITY  AND  CONSISTENCY.  The illegality,  unenforceability  or
          inconsistency  of any provision of this Agreement or any instrument or
          agreement required hereunder shall not in any way affect or impair the
          legality, enforceability or consistency of the remaining provisions of
          this Agreement or any instrument or agreement required hereunder.  The
          Loan  Documents  and this  Agreement  are  intended to be  consistent.
          However, in the event of any inconsistencies between and/or among this
          Agreement and any of the Loan Documents,  such inconsistency shall not
          affect the validity or  enforceability of this Agreement or any of the
          Loan Documents. In the event of any inconsistency or ambiguity in this
          Agreement or any of the Loan  Documents,  this  Agreement and the Loan
          Documents  shall not be  construed  against any one party but shall be
          interpreted consistent with the Bank's policies and procedures.

    8.    CONSENT TO JURISDICTION AND SERVICE OF PROCESS. The Subordinate Lender
          irrevocably  appoints  Rapaport & Ellenthal,  P.C., 750 Summer Street,
          Stamford,  CT 06901 as its  attorneys  upon  whom  may be  served  any
          notice,  process or  pleading in any action or  proceeding  against it

                                       10
<PAGE>

          arising out of or in  connection  with this  Agreement.  If service of
          process cannot be delivered to the Subordinate  Lender as specified by
          statute,  the Subordinate Lender agrees that, with court approval,  it
          may be served by regular or  certified  mail at the  address set forth
          herein. The Subordinate Lender hereby consents and agrees that (i) any
          action or proceeding against it may be commenced and maintained in any
          court within the State of Connecticut or in the United States District
          Court for the  District  of  Connecticut  by  service  of  process  on
          Rapaport & Ellenthal  and (ii) the courts of the State of  Connecticut
          and the United States  District  Court for the District of Connecticut
          shall have  jurisdiction with respect to the subject matter hereof and
          the person of the Subordinate Lender and the Subordinated Liabilities.
          The  Subordinate   Lender  agrees  that  any  action  brought  by  the
          Subordinate Lender on account of this Agreement shall be commenced and
          maintained only in a court in the federal judicial  district or county
          in which the Bank has its principal place of business in Connecticut.

9.        PREJUDGMENT REMEDIES.

          The  Subordinate  Lender  hereby  acknowledges  that the  transactions
          contemplated herein constitute  commercial  transactions.  Pursuant to
          Section 52-278f of the Connecticut  General Statutes,  the Subordinate
          Lender hereby waives and relinquishes all rights to notice and hearing
          as provided in Sections  52-278a through  52-278g of said  Connecticut
          General  Statutes  prior to the  securing  of any  prejudgment  remedy
          against the  Subordinate  Lender in connection with the Liabilities or
          any of the instruments or documents executed in connection herewith.

10.       PROVISIONS SOLELY FOR THE BENEFIT OF THE BANK.

          The  provisions  of this  Agreement  are solely to define the relative
          rights and obligations of the Bank and the Subordinate  Lender, and no
          other  person or entity,  including,  without  limitation,  any of the
          Obligors,  shall  have any  rights  hereunder  or as a  result  of the
          provisions hereof.

11.       AGENT FOR SUBORDINATE LENDER.

          The Agent  hereby  agrees to be bound by the terms and  provisions  of
          this Agreement and agrees not to make any payment or  distribution  or
          to otherwise  take any action which is contrary to the  provisions  of
          this Agreement.

12.      JUDICIAL PROCEEDINGS; WAIVERS.

        THE SUBORDINATE  LENDER AND THE BANK  ACKNOWLEDGE AND AGREE THAT (i) ANY
        SUIT,  ACTION OR PROCEEDING,  WHETHER CLAIM OR COUNTERCLAIM,  BROUGHT OR
        INSTITUTED  BY THE BANK,  THE  SUBORDINATE  LENDER OR ANY  SUCCESSOR  OR
        ASSIGN OF THE BANK OR THE SUBORDINATE LENDER, ON OR WITH RESPECT TO THIS
        AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE DEALINGS OF THE PARTIES WITH
        RESPECT HERETO, OR THERETO,  SHALL BE TRIED ONLY BY A COURT AND NOT BY A

                                       11
<PAGE>

        JURY AND EACH PARTY WAIVES THE RIGHT TO TRIAL BY JURY;  (ii) EACH WAIVES
        ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER,  IN ANY SUCH SUIT,  ACTION OR
        PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR
        ANY DAMAGES  OTHER THAN, OR IN ADDITION TO,  ACTUAL  DAMAGES;  AND (iii)
        THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND THE
        BANK WOULD NOT EXTEND  CREDIT IF THE WAIVERS  SET FORTH IN THIS  SECTION
        WERE NOT A PART OF THIS AGREEMENT.

    IN WITNESS WHEREOF, the Subordinate Lender has executed and delivered to the
Bank this Agreement, as of the day and year first above written.

WITNESSED BY:


----------------------------                ------------------------------------
                                            Name:      Henry E. Baker
                                            Address: 1050 Buckingham Street
----------------------------                Watertown, CT 06795

----------------------------



----------------------------                ------------------------------------
                                            Ross S. Rapaport,   not individually
                                            but as Trustee of the Peter K. Baker
----------------------------                Life Insurance Trust,   The  John B.
                                            Baker  Insurance  Trust  and   u/t/a
                                            dated December 16,   1991 f/b/o Joan
----------------------------                Baker et. al., as Agent
                                            Address: 1050 Buckingham Street
                                                     Watertown, CT 06795


                                            WEBSTER BANK

----------------------------                By:---------------------------------
                                               Robert E. Teittinen
                                               Its Vice President
----------------------------                   Address: 174 Bank Street
                                               Waterbury, CT 06702

----------------------------

<PAGE>



STATE OF CONNECTICUT                                  )
                          ) ss: Hartford                         October _, 2000
COUNTY OF HARTFORD        )

Personally  appeared  Henry  E.  Baker,  signer  and  sealer  of  the  foregoing
instrument and acknowledged the same to be his free act and deed, before me.

                                              Commissioner of the Superior Court

                                              Notary Public
                                              My Commission expires:




STATE OF CONNECTICUT       )
                                    ) ss: Hartford               October _, 2000
COUNTY OF HARTFORD         )

Personally  appeared Ross S. Rapaport,  not  individually  but as Trustee of the
Peter K. Baker Life Insurance Trust, the John B. Baker Insurance Trust and U/T/A
dated December 16, 1991 F/B/O Joan Baker et. al, as Agent,  signer and sealer of
the foregoing  instrument and  acknowledged the same to be his free act and deed
as Trustee and Agent, before me.

                                              Commissioner of the Superior Court

                                              Notary Public
                                              My Commission expires:


                                       13
<PAGE>


STATE OF CONNECTICUT       )
                                    ) ss: Hartford               October _, 2000
COUNTY OF HARTFORD         )

Personally appeared Robert E. Teittinen,  Vice President of Webster Bank, signer
and sealer of the foregoing  instrument and acknowledged the same to be his free
act and deed as such officer and the free act and deed of Webster  Bank,  before
me.

                                              Commissioner of the Superior Court

                                              Notary Public
                                              My Commission expires:

                                       14
<PAGE>




The Obligors signing below hereby acknowledge receipt of a copy of the foregoing
Agreement, waive notice of acceptance thereof by the Bank, and agree to be bound
by the terms and provisions thereof. The Obligors signing below further agree to
make no payments or distributions,  or grant any security interest,  contrary to
the terms and  provisions of this  Agreement and to do every other act and thing
necessary  or  appropriate  to carry  out such  terms and  provisions.  Upon the
occurrence  of any Event of Default,  or upon the breach of any  representation,
covenant  or  agreement  in  this  Agreement  by  any  of  the  Obligors  or the
Subordinated  Lender, or in the event of the termination of this Agreement,  all
of the Senior  Liabilities shall,  without notice or demand,  become immediately
due and payable at the option of the Bank and the Bank may immediately,  without
further notice, resort to all of its rights and remedies herein, in any document
(including the Loan Agreement and any of the Loan  Documents) by and between the
Bank and any Obligor,  or in any in any  instrument  evidencing  any  obligation
under any such document, at law or in equity.

DATED: As of the 5th day of October, 2000

                                              VERMONT PURE HOLDINGS, LTD.
                                              (f/k/a VP Merger Parent, Inc.)


                                              By:-------------------------------
                                              Name:    Timothy G. Fallon
                                              Title:   President
                                              Address: Catamount Industrial Park
                                                       Route 66
                                                       Randolph, VT 05060


                                              CRYSTAL ROCK SPRING WATER COMPANY


                                              By:-------------------------------
                                              Name:     John B. Baker
                                              Title:    President
                                              Address:  1050 Buckingham Street
                                                        Watertown, CT 06795


                                      15
<PAGE>


                                              PLATINUM ACQUISITION CORP.
                                             (f/k/a Vermont Pure Holdings, Ltd.)


                                              By:-------------------------------
                                              Name:    Timothy G. Fallon
                                              Title:   President
                                              Address: Catamount Industrial Park
                                                       Route 66
                                                       Randolph, VT 05060


                                              VERMONT PURE SPRINGS, INC.


                                              By:-------------------------------
                                              Name:    Timothy G. Fallon
                                              Title:   President
                                              Address: Catamount Industrial Park
                                                       Route 66
                                                       Randolph, VT 05060

                                       16
<PAGE>







                                   SCHEDULE A

                                 Bank Collateral

"Collateral"  means  Receivables,  Inventory,  Equipment,  Patents,  Trademarks,
Investment Property, Additional Collateral, and the Premises.

"Additional  Collateral"  means  (i) all  General  Intangibles  (as such term is
defined in the Uniform  Commercial  Code as in effect in Connecticut on the date
of this  Agreement) of every kind and  description  of the  Obligors,  including
without  limitation  federal,  state and local tax  refund  claims of all kinds,
whether  now  existing  or  hereafter  arising;  (ii) all of  Obligors'  deposit
accounts,  whether now owned or hereafter created,  wherever located;  (iii) all
monies,  securities,  instruments,  cash and other  property of Obligors and the
proceeds thereof, now or hereafter held or received by, or in transit to, Lender
from or for Obligors,  whether for safekeeping,  pledge, custody,  transmission,
collection  or  otherwise,  and all of Obligors'  deposits  (general or special,
balances,  sums,  proceeds  and  credits  of  Obligors  with  Lender at any time
existing);  (iv) all  interests  in real  property  held or  owned by  Obligors,
including all leasehold  interests;  (v) all rights under  contracts and license
agreements for water;  (vi) all books,  records,  customer lists,  ledger cards,
computer  programs,  computer  tapes,  disks,  printouts and records,  and other
property and general  intangibles  at any time  evidencing or relating to any of
the foregoing,  whether now in existence or hereafter  created;  (vii) all other
personal  property  and  fixtures  of the  Obligors,  whether  now  existing  or
hereafter arising or created; and all proceeds of the foregoing and all proceeds
of any insurance on the foregoing.

"Equipment"  means all Equipment,  Farm Products and Fixtures (as such terms are
defined in the Uniform  Commercial  Code as in effect in Connecticut on the date
of this Agreement),  including all machinery,  equipment,  furniture,  fixtures,
tools, parts, supplies and motor vehicles,  now owned and hereafter acquired, by
Debtor of whatsoever name, nature,  kind or description,  wherever located,  and
all additions and accessions thereto and replacements or substitutions therefor,
and all proceeds thereof and all proceeds of any insurance thereon.

"Inventory"  means all  Inventory  and Goods (as such  terms are  defined in the
Uniform  Commercial  Code  as in  effect  in  Connecticut  on the  date  of this
Agreement)  of  whatsoever  name,  nature,  kind or  description  now  owned and
hereafter acquired by Debtor, wherever located, including without limitation all
contract  rights with respect thereto and documents  representing  the same, all
goods held for sale or lease or to be  furnished  under  contracts  of  service,
finished  goods,  raw materials,  materials  used or consumed by Debtor,  parts,
supplies,  and all wrapping,  packaging,  advertising and shipping materials and
any documents  relating  thereto,  and all labels and other  devices,  names and
marks affixed or to be affixed thereto for purposes of selling or of identifying
the same or the  seller  or  manufacturer  thereof,  and all  right,  title  and
interest of Debtor  therein and thereto,  and all proceeds of the  foregoing and
all proceeds of any insurance on the foregoing.


<PAGE>

"Investment  Property" means all investment property (as such term is defined in
the  Uniform  Commercial  Code as  adopted  in  Connecticut  on the date of this
Agreement)  of whatever  type or nature now owned or  hereafter  acquired by the
Debtor,  including  without  limitation,   all  certificated   securities,   all
uncertificated securities, all security entitlements, all security accounts, all
commodity  contracts,  all commodity  accounts and all financial assets of every
type and nature and all rights thereto or therein, and all financial accounts of
every type and nature and all rights  thereto or therein,  and all  proceeds and
products  thereof,  including  without  limitation,  all insurance  proceeds and
fidelity bond proceeds related thereto.

"Patents" means all of Debtor's right,  title and interest,  present and future,
in and to (a) all letters patent of the United States or any other country,  all
right,  title and  interest  therein  and  thereto,  and all  registrations  and
recordings thereof, including without limitation applications, registrations and
recordings in the United  States  Patent and Trademark  Office or in any similar
office or agency of the United  States or any state thereof or any other country
or any  political  subdivision  thereof,  all  whether  now  owned or  hereafter
acquired by Debtor; and (b) all reissues,  continuations,  continuations-in-part
or  extensions  thereof  and  all  licenses  thereof;  and all  proceeds  of the
foregoing and all proceeds of any insurance on the foregoing.

"Premises" means the following  real property  owned by Debtor:
       Hedding  Drive, Randolph,  Vermont
       Chase  Road,  Randolph,  Vermont
       Route 66 Factory, Randolph,  Vermont
       North Randolph Road,  Randolph,  Vermont
       20.0 acres, Route 66, Randolph, Vermont
       5.0 acres, Route 66, Randolph, Vermont

"Receivables"  means  (i) all of  Debtor's  now owned  and  hereafter  acquired,
present and future, Accounts,  Chattel Paper, Documents,  Instruments,  (as such
terms are defined in the Uniform  Commercial Code as in effect in Connecticut on
the date of this Agreement) and contract rights,  including  without  limitation
all  obligations  to Debtor for the  payment of money,  whether  arising  out of
Debtor's  sale of goods or rendition of services or otherwise  (all  hereinafter
called  "Accounts")  and all proceeds of the  foregoing  and all proceeds of any
insurance on the foregoing; (ii) all of Debtor's rights, remedies,  security and
liens,  in, to and in respect of the  Accounts,  present and  future,  including
without limitation,  rights of stoppage in transit,  replevin,  repossession and
reclamation  and other rights and remedies of an unpaid vendor,  lien or secured
party, guaranties or other contracts of suretyship with respect to the Accounts,
deposits or other security for the obligation of any debtor or Debtor in any way
obligated on or in connection with any Accounts, and credit and other insurance,
and all  proceeds of the  foregoing  and all  proceeds of any  insurance  on the
foregoing;  and (iii) all of Debtor's  right,  title and  interest,  present and
future,  in, to and in respect of all goods  relating  to, or which by sale have
resulted in,  Accounts,  including  without  limitation  all goods  described in
invoices  or other  documents  or  instruments  with  respect  to, or  otherwise
representing  or  evidencing  any  Accounts,  and  all  returned,  reclaimed  or
repossessed  goods,  and all proceeds of the  foregoing  and all proceeds of any
insurance on the foregoing.


<PAGE>




                                   SCHEDULE B

                         Subordinated Lender Collateral

         The following property,  whether now existing or subsequently acquired,
and  all  additions,  substitutions,  accessions,  replacements,  proceeds,  and
products thereof or thereto:  all tangible and intangible  assets and properties
of each of Vermont Pure Holdings,  Ltd., a Delaware  corporation  formerly named
"VP Merger Parent,  Inc.", Vermont Pure Springs,  Inc., a Delaware  corporation,
Platinum  Acquisition  Corp.,  f/k/a Vermont Pure  Holdings  (each a "Company"),
including without limitation all furniture,  fixtures, equipment, raw materials,
inventory,  other goods,  accounts,  contract  rights,  rights to the payment of
money, insurance refund claims and all other insurance claims and proceeds, tort
claims, chattel paper, documents,  instruments,  securities and other investment
property,  deposit  accounts,  rights to  proceeds  of letters of credit and all
general  intangibles  including,  without  limitation,  all tax  refund  claims,
license fees, patents, patent applications,  trademarks, trademark applications,
trade names, copyrights,  copyright applications,  rights to sue and recover for
past  infringement  of patents,  trademarks and copyrights,  computer  programs,
computer  software,   engineering  drawings,   service  marks,  customer  lists,
goodwill, and all licenses,  permits,  agreements of any kind or nature pursuant
to which any Company possesses, uses or has authority to possess or use property
(whether  tangible  or  intangible)  of others or  others  possess,  use or have
authority to possess or use property  (whether  tangible or  intangible) of such
Company,  and all recorded data of any kind or nature,  regardless of the medium
of recording  including,  without  limitation,  all software,  writings,  plans,
specifications  and schematics  (each of which terms has the meaning ascribed to
in the  Uniform  Commercial  Code,  as in effect  in the  State of  Connecticut)
(collectively,  the "COLLATERAL");  PROVIDED THAT notwithstanding the foregoing,
such grant of security  interest shall not extend to, and the term  "Collateral"
shall  not  include  any  cash  and cash  equivalents  at any time  owned by any
Company.