THIS NOTE AND THE SHARES OF COMMON STOCK  ISSUABLE UPON  CONVERSION  HEREOF HAVE
NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED  ("SECURITIES
ACT"), OR THE SECURITIES  LAWS OF ANY STATE, IN RELIANCE UPON CERTAIN  EXEMPTIVE
PROVISIONS OF SUCH LAWS.  SUCH SECURITIES  CANNOT BE SOLD OR TRANSFERRED  EXCEPT
IF, IN THE OPINION OF COUNSEL TO THE ISSUER, SUCH SALE OR TRANSFER WOULD BE: (1)
PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR
PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION;  AND (2) IN A TRANSACTION WHICH
IS EXEMPT  UNDER  APPLICABLE  STATE  SECURITIES  LAWS,  OR PURSUANT TO EFFECTIVE
REGISTRATION  STATEMENTS UNDER SUCH LAWS, OR IN A TRANSACTION WHICH IS OTHERWISE
IN COMPLIANCE WITH SUCH LAWS.


                    CONVERTIBLE SUBORDINATED PROMISSORY NOTE


$2,750,000                                                       August 21, 2002


         FOR  VALUE  RECEIVED,  The  Chalone  Wine  Group,  Ltd.,  a  California
corporation  ("Maker")  promises  to  pay  to SFI  Intermediate  Limited  or its
affiliates  ("Holder"),  in lawful money of the United States, the principal sum
of Two Million Seven Hundred Fifty Thousand Dollars  ($2,750,000)  together with
interest thereon and other amounts  specified  herein,  as specified below. This
Note is issued  pursuant to a Convertible  Note Purchase  Agreement dated August
21, 2002 among  Maker,  Holder and Les  Domaines  Baron de  Rothschild  (Lafite)
("Note Purchase Agreement").

         1.       INTEREST.  Simple  interest on the  principal sum shall accrue
at a rate of nine  percent  (9%) per  annum  and  shall be  payable  at the time
specified in Paragraph 2 of this Note. Interest shall be calculated on the basis
of a 365 day year and the actual number of days elapsed.

         2. MATURITY. The entire principal sum and all accrued interest shall be
due and  payable  in full two years  from the date of this  Note (the  "Maturity
Date"), except to the extent that such indebtedness is, pursuant to Paragraph 4,
5 or 8 hereof, converted into shares of Common Stock of Maker.

         3.  PREPAYMENT.  This Note may be prepaid  in whole or in part,  at any
time, without penalty or premium, upon 20 days prior written notice to Holder of
Maker's intention to prepay this Note (a "PREPAYMENT NOTICE"), provided that (i)
if Maker gives a Prepayment  Notice  within 180 days after the date of this Note
or (ii) if the  Board of  Directors  or any  officer  or agent of Maker has held
substantive  discussions  or  negotiations  with any  third  party  regarding  a
transaction or has authorized or entered into any agreement or formal indication
of  interest  with  respect  to a  transaction,  in  any  such  case,  which  if
consummated  would  constitute a Change of Control  Transaction (as such term is
defined in Section 5 below),  then such prepayment  shall be subject to Holder's
consent (which  consent may, at the option of the Holder,  be subject to Maker's
agreement  to convert  the  indebtedness  under this Note into  shares of Common
Stock as provided  below).  Any  partial  prepayment  shall be applied  first to
accrued and unpaid interest on this Note and then to the  outstanding  principal
amount of this Note.

<PAGE>

         4.  CONVERSION  BY MAKER.  At the  Maturity  Date  (or,  with the prior
written  consent of Holder,  at such date prior to the Maturity Date selected by
Maker),  Maker may elect to pay the  entire  outstanding  principal  sum and all
accrued  and  unpaid  interest  or may elect to  convert  all or any part of the
outstanding  principal  balance of this Note and all or any part of the  accrued
and unpaid  interest into shares of Common Stock of Maker at a conversion  price
of $9.4207 per share (the "Conversion Price");  provided,  however,  that: Maker
shall not be  entitled  to  exercise  this  conversion  right if, at the time of
conversion, Maker is insolvent or is in bankruptcy proceedingsprovided, further,
however,  that,  notwithstanding  the foregoing proviso,  if, as a result of the
provisions  of the  Subordination  Agreement,  dated even date  herewith,  among
Holder and certain senior lenders of Maker,  or otherwise,  on the Maturity Date
Maker  is  unable  or  otherwise  fails to  either  pay the  entire  outstanding
principal  sum and all accrued  and unpaid  interest on this Note or convert all
such amounts into shares of Common Stock of Maker as provided above, at the sole
election of Holder  pursuant to written notice to Maker,  all or any part of the
outstanding  principal  balance of this Note and all or any part of the interest
accrued and unpaid  thereon  shall be  converted  into shares of Common Stock of
Maker as provided above within the two business days following  receipt by Maker
of such notice. For purposes of this Paragraph 4, Maker will be insolvent if the
fair value of Maker's assets does not exceed the reasonably  estimated amount of
Maker's  liabilities  or if Maker is unable to pay its debts as they become due.
Maker  acknowledges  that its right to convert  this Note into  shares of Common
Stock is a contract for financial accommodation and to issue a security of Maker
within the meaning of 11 U.S.C. ss. 365(c)(2).

         5.  CONVERSION BY HOLDER.  At the sole  election of Holder  pursuant to
written notice to Maker, all or any part of the outstanding principal balance of
this Note and all or any part of the interest  accrued and unpaid thereon may be
converted  within the two business  days  immediately  prior to the  Anticipated
Closing Date of a Change of Control  Transaction  (as defined below) into shares
of  Common  Stock  of  Maker  at  the  Conversion  Price.   "Change  of  Control
Transaction"  means the  consummation  of any  transaction  or series of related
transactions  approved by Maker's Board of Directors that results in the holders
of record of Maker's  capital  stock  immediately  prior to the  transaction  or
transactions  holding less than fifty percent (50%) of the voting power of Maker
immediately after the transaction or transactions,  including the acquisition of
Maker by another entity and any reorganization,  merger,  consolidation or share
exchange, or which results in the sale of all or substantially all of the assets
of Maker.  "Anticipated  Closing  Date"  means the date  that  Maker's  Board of
Directors  determines  to be the expected  closing date of the Change of Control
Transaction.  Notwithstanding  the foregoing,  any  conversion  pursuant to this
Section  shall be  conditioned  upon the  actual  closing of a Change of Control
Transaction  and shall not be deemed to have  occurred if such Change of Control
Transaction is not consummated.

         6. MECHANICS OF CONVERSION. Upon either Holder's or Maker's election to
convert this Note, the specified part of the  outstanding  principal and accrued
interest of the Note shall be converted without any further action by Holder and
whether or not the Note is  surrendered  to Maker or its transfer  agent.  Maker
shall not be obligated  to issue  certificates  evidencing  the shares of Common
Stock issuable upon conversion  unless the Note is either  delivered to Maker

                                       2

<PAGE>

or its transfer agent.  Maker shall, as soon as practicable after such delivery,
issue and deliver to Holder,  a certificate  or  certificates  with  appropriate
restrictive  legends  for the number of shares of Common  Stock to which  Holder
shall be  entitled.  If a  fractional  share would  otherwise  be issuable  upon
conversion of this Note,  Maker will in lieu of such issuance pay the cash value
of that fractional share.

         7. ADJUSTMENTS FOR STOCK SPLITS;  REVERSE STOCK SPLITS. In case Maker's
Common Stock shall be subdivided into a greater number of shares, the Conversion
Price shall be proportionately  reduced, and conversely,  in case Maker's Common
Stock shall be combined into a smaller number of shares,  the  Conversion  Price
shall be proportionately increased.

         8. DEFAULT AND  REMEDIES.  Maker will be in default  under this Note if
Maker fails to make the payment of principal and interest hereunder when due and
such failure has not been  corrected  within five days after  written  notice by
Holder to Maker at the  address  set forth  below.  Additionally,  Maker will be
deemed in default  under this Note if Maker has breached a provision of the Note
Purchase Agreement and such breach has not been cured within the applicable cure
period specified in the Note Purchase  Agreement.  Upon Maker's default,  Holder
may exercise any and all of the remedies provided at law or, upon written notice
to Maker, may require the immediate conversion of this Note into Common Stock of
Maker at the Conversion Price.

         9. WAIVERS.  Maker, and any endorsers or guarantors  hereof,  severally
waive  diligence,  presentment,  protest  and demand and also notice of protest,
demand,  dishonor,  acceleration,  intent to accelerate,  and nonpayment of this
Note,  and  expressly  agree that this Note,  or any payment  hereunder,  may be
extended  by mutual  agreement  of Maker and  Holder  from time to time  without
notice  without in any way  affecting the liability of Maker or any endorsers or
guarantors  hereof.  No extension  of time for the payment of this Note,  or any
installment hereof,  agreed to by Holder with any person now or hereafter liable
for the payment of this Note, shall affect the original liability of Maker under
this Note, even if Maker is not a party to such agreement.

         10. MAXIMUM LEGAL RATE OF INTEREST. If Holder ever receives interest or
anything  deemed  interest in connection with this Note in excess of the maximum
lawful amount, an amount equal to the excessive interest shall be applied to the
reduction of the  principal,  and if it exceeds the unpaid  balance of principal
hereof, such excess shall be refunded to Maker. If interest otherwise payable to
Holder would exceed the maximum  lawful  amount,  the interest  payable shall be
reduced to the maximum amount permitted under applicable law.

         11.      SUBORDINATION.  This Note is  subordinate  to all other debt
for borrowed  money of Maker.  Upon the request of Maker,  Holder shall promptly
execute  such  reasonable  and  customary  documents  that  either  Maker or its
creditors deem necessary or desirable to effectuate the foregoing subordination.

         12.      NO TRANSFER.  Holder shall not sell, assign, transfer, pledge,
give or  otherwise  dispose  of all or any  part  of its  respective  rights  or
obligations under this Note.

                                       3

<PAGE>

         13.      MISCELLANEOUS.

                  a.       Maker shall pay all costs,  including,  without
limitation, reasonable attorneys' fees incurred by Holder in collecting the sums
due hereunder.

                  b.       This Note may be modified only by a written agreement
executed by Maker and Holder.

                  c.       This Note shall be governed by California law.

                  d. The terms of this Note  shall  inure to the  benefit of and
bind Maker and Holder and their  respective  heirs,  legal  representatives  and
successors and assigns.

                  e. If this  Note is  destroyed,  lost or  stolen,  Maker  will
deliver a new note to Holder on the same terms and  conditions as this Note with
a  notation  of  the  unpaid  principal  and  accrued  and  unpaid  interest  in
substitution  of the  prior  Note.  Holder  shall  furnish  to Maker  reasonable
evidence  that  the Note was  destroyed,  lost or  stolen  and any  security  or
indemnity  that may be  reasonably  required  by Maker  in  connection  with the
replacement of this Note.

         IN WITNESS  WHEREOF,  Maker has  executed  this Note as of the date and
year first above written.

                           MAKER
                                          The Chalone Wine Group, Ltd.


                                          By:  _________________________________
                                          Name:  _______________________________
                                          Title:  ______________________________

Notice Addresses:

Maker:  621 AIRPARK ROAD, NAPA, CALIFORNIA  94558 Attn: THOMAS SELFRIDGE
         Facsimile:  707-254-4204

Holder:  ________________________, Attn:  _________________
         Facsimile:  ___________      E-mail:  __________________



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