SETTLEMENT AGREEMENT



1.   The parties to this  Settlement  Agreement are Vermont Pure Holdings,  Ltd.
     ("Vermont Pure"), and Pristine Mountain Springs, Inc., Amsource LLC, Barton
     Lord and Ronald Colton (collectively, the "Debtors").

2.   The  Debtors  shall pay to Vermont  Pure the sum of One Million Two Hundred
     Seventy Thousand Dollars  ($1,270,000.00)  no later than December 15, 1999.
     One hundred fifty thousand  dollars  ($150,000.00)  of this amount shall be
     delivered to Charles  Dougherty as escrow agent ("Escrow  Agent"),  pending
     the resolution of issues  described in paragraph  three of this  Settlement
     Agreement.  The balance of One Million One Hundred Twenty Thousand  Dollars
     ($1,120,000.00)  shall be  delivered  to  Vermont  Pure at its  offices  in
     Randolph, Vermont.

3.   Vermont  Pure  shall   provide  the  Debtors   with  proof  that   Wesfield
     Construction  Company  has  been  paid in cash or  equivalent  accepted  by
     Wesfield the sum of One Hundred Thirty Thousand  Dollars  ($130,000.00)  in
     connection   with  the  June  18,  1999   disbursement  by  Marcon  Capital
     Corporation.  If Vermont  Pure cannot  provide  this proof by December  31,
     1999,  the Escrow  Agent shall  refund the  Debtors  the One Hundred  Fifty
     Thousand Dollars  ($150,000.00)  held in escrow.  If Vermont Pure takes the
     position  that it has  offered  such  evidence,  the  Debtors  may elect by
     written  notice  delivered  to Vermont  Pure by  January 4, 2000,  to offer
     evidence to the  contrary,  so long as such offer of evidence is made on or
     before January 15, 2000.  The parties  hereby appoint the mediator  Charles
     Dougherty to serve as arbitrator of any dispute  between the parties on the
     adequacy  of such  proof  of  payment  to  Wesfield.  The  decision  of the
     arbitrator  (which  shall be  rendered  by  January  30,  2000  unless  the
     arbitrator  determines that additional evidence is required) on the process
     and  substance  for  resolving  such  dispute  shall be final,  binding and
     non-appealable.   The  parties   shall  split   equally  the  cost  of  any
     arbitration.

4.   The  Debtors  hereby  acknowledge  that the  assignment  of all  rights  of
     Amsource LLC under the Amended and Restated  Spring Water License and Water
     Supply  Agreement,  dated April 13, 1999  ("Water  Supply  Agreement"),  to
     Vermont Pure is final, absolute and irrevocable, and hereby irrevocably and
     finally  waive any  objection  to or argument  against the  enforcement  by
     Vermont Pure of that  agreement  according to its terms.  The Debtors shall
     execute  a  binding  acknowledgement  (the  "Acknowledgement"),  in a  form
     suitable  for  recording  in Vermont land  records,  confirming  all of the
     rights  provided to Vermont Pure under the Water Supply  Agreement and this
     Settlement  Agreement,  including  (without  limitation) rights to purchase
     water on a priority  basis and the rights of first refusal  provided for in

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     the Water Supply  Agreement.  None of the Debtors  shall take any action to
     interfere with Vermont Pure's rights under the Water Supply Agreement.

5.   Vermont Pure and the Debtors  shall execute an Addendum to the Water Supply
     Agreement providing that Amsource, LLC, shall have the right to purchase on
     a priority equal to Vermont Pure's up to five million  (5,000,000)  gallons
     per month from the Pristine  Mountain Spring in Stockbridge (the "Spring").
     By equal  priority,  this  paragraph  means that the parties  shall have an
     equal right,  superior to any other party, to purchase in the aggregate the
     first ten  million  (10,000,000)  gallons  per month from the  Spring;  any
     shortfall  in supply shall be borne  equally by the  parties.  Vermont Pure
     shall  retain  all other  priority  rights  provided  by the  Water  Supply
     Agreement,  and Pristine shall not convey  priority rights in the Spring to
     any other  party.  The rights  provided to Amsource  under the Addendum may
     only be exercised by Amsource.  Amsource's  rights under the Addendum shall
     be  non-assignable,  except that in the event that a majority of Amsource's
     membership  interests are transferred or conveyed by the Debtors,  Amsource
     may continue to exercise the rights provided by the Addendum.

6.   This  Settlement  Agreement does not effect any novation of any of the Loan
     Documents  (i.e.,  as  that  term  is  defined  in the  Debenture  Purchase
     Agreement  and related  documents,  dated  December 29,  1998)  assigned by
     Marcon  Capital  Corporation  to Vermont Pure. In the event of a failure to
     make the  payments  required or execute the  Addendum  and  Acknowledgement
     provided by this Settlement  Agreement,  Vermont Pure may enforce the terms
     of this Settlement Agreement,  or, at its sole election,  any or all of the
     Loan  Documents.  By making  this  Settlement  Agreement,  Vermont  Pure is
     postponing  its  enforcement of the Loan Documents in return for the actual
     performance  of  the  above-referenced  obligations  under  the  Settlement
     Agreement.  Provided,  however,  that if Vermont Pure elects to enforce the
     Loan Documents instead of this Settlement Agreement,  then, notwithstanding
     Paragraph four above, the  Acknowledgement  shall be no longer enforceable,
     and the parties shall be free to argue claims and  positions  regarding the
     Water Supply Agreement.  Further  provided,  that in the event Vermont Pure
     elects to  enforce  this  Settlement  Agreement,  it shall be  entitled  to
     recover interest on all past due sums at the rate of 14 percent per year.

7.   Vermont Pure and the Debtor  shall stay all pending  court  actions  unless
     there is a failure to make the payment,  or execute the  Acknowledgement or
     Addendum of this Settlement  Agreement,  at which point any party may, with
     written  notice to all other parties,  pursue  pending court  actions,  and
     institute other proceedings.  Simultaneously  upon the payment of all money
     required under this Settlement  Agreement,  and the execution and tendering
     of the  Acknowledgement and Addendum related to the Water Supply Agreement,
     the  parties  shall  jointly  stipulate  to the  dismissal  of all  pending
     litigation  against  each  other with  prejudice,  and  Vermont  Pure shall
     provide the Debtors  with all  original  Loan  Documents  marked  "paid and
     satisfied",  and shall execute all other documents  provided by the Debtors
     which are reasonably  necessary to terminate any security interest provided

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     by the Loan Documents. Without limitation, the Loan Documents terminated by
     Vermont Pure in such  circumstance  shall  include all rights of conversion
     into ownership interest in Amsource, LLC.

8.   Upon the payment of all money required under this Settlement Agreement, and
     the execution and tendering of the  Acknowledgement and Addendum related to
     the Water  Supply  Agreement,  Vermont  Pure shall  indemnify  the  Debtors
     against all claims made by Marcon  arising out of or  connected to the Loan
     Documents or the  operating  agreement  of  Amsource,  LLC, and the parties
     shall  exchange  mutual   releases,   excepting  only  performance  of  the
     obligations  arising  under  this  Settlement  Agreement  and Water  Supply
     Agreement.  In the event any party  prevails  in an action to  enforce  the
     terms of this Settlement  Agreement,  that party may recover its reasonable
     costs of litigation, including attorneys' fees.

9.   Vermont Pure hereby  represents  that it is fully  authorized  to make this
     Settlement  Agreement,  and that it makes this Settlement  Agreement freely
     and  voluntarily  following  the advice of counsel of its choice,  and that
     Vermont Pure's agreement is not based on any  representation or warranty by
     the Debtors,  except  those  contained in this  Settlement  Agreement.  The
     Debtors hereby  represent that Lincoln  Craighead is no longer  involved in
     the  management of Amsource.  The Debtors  further  represent that they are
     fully authorized to execute this Settlement Agreement on behalf of Amsource
     and  Pristine  Mountain  Springs,  Inc.,  and that all  Debtors  make  this
     Settlement  Agreement  freely and  voluntarily,  following  full  advice of
     counsel  of  their  choosing,  and  not  based  on any  representations  or
     warranties of Vermont Pure.

Dated at Boston Massachusetts, this first day of December, 1999.


/s/: Timothy Fallon
--------------------------------
Vermont Pure Holdings, Ltd.
By Timothy Fallon, its President

/s/: Ronald Colton
--------------------------------
Amsource, LLC
By Ronald Colton, President

/s/: Ronald Colton
--------------------------------
Pristine Mountain Springs, Inc.
By Ronald Colton, President

/s/: Ronald Colton
--------------------------------
Ronald Colton


/s/: Barton Lord
--------------------------------
Barton Lord

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Approved as to form:



/s/: Kevin Berry
---------------------------------
Vermont Pure Counsel, Kevin Berry



/s/: Michael Marks
--------------------------------
Vermont Pure Counsel, Michael Marks



/s/: Biron Bedard
--------------------------------
Amsource LLC Counsel, Biron Bedard



/s/: Frank Kenison
--------------------------------
Amsource LLC Counsel, Frank Kenison


/s/: M.B. Neisner, Jr.
--------------------------------
Pristine Mountain Springs of Vermont, Inc. Counsel, M.B. Neisner, Jr.


/s/: M.B. Neisner
--------------------------------
Ronald Colton Counsel, M.B. Neisner



/s/: Biron Bedard
--------------------------------
Barton Lord Counsel, Biron Bedard



Witnessed by Mediator:



/s/: Charles Dougherty
--------------------------------
Charles Dougherty