FINAL









________________________________________________________________________________

                          THE CHALONE WINE GROUP, LTD.


$ 5,000,000  8.75% Senior Guaranteed Notes, Series A, Due September 15, 2010
$ 10,000,000 8.78% Senior Guaranteed Notes, Series B, Due September 15, 2010
$ 15,000,000 8.90% Senior Guaranteed Notes, Series C, Due September 15, 2010

                             _______________________

                             NOTE PURCHASE AGREEMENT
                             _______________________

                         Dated as of September 15, 2000




________________________________________________________________________________


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                               TABLE OF CONTENTS


                                                                            Page


1.      Authorization Of Notes..............................................  1
2.      Sale And Purchase Of Notes..........................................  2
3.      Closing ............................................................  2
4.      Conditions To Closing...............................................  2
        4.1   Representations and Warranties................................  2
        4.2   Performance; No Default.......................................  3
        4.3   Compliance Certificates.......................................  3
        4.4   Opinions of Counsel...........................................  3
        4.5   Original Subsidiary Guarantee Agreement.......................  4
        4.6   Purchase Permitted By Applicable Law, etc.....................  4
        4.7   Sale of Other Notes...........................................  4
        4.8   Payment of Special Counsel Fees...............................  4
        4.9   Private Placement Number......................................  4
        4.10  Changes in Corporate Structure................................  4
        4.11  Consent of Other Lenders......................................  5
        4.12  Proceedings and Documents.....................................  5
        4.13  Farm Credit Act Matters.......................................  5
5.      Representations And Warranties Of The Company.......................  5
        5.1   Organization; Power and Authority.............................  5
        5.2   Authorization, etc............................................  5
        5.3   Disclosure....................................................  6
        5.4   Organization and Ownership of Shares of Subsidiaries;
                 Affiliates.................................................  6
        5.5   Financial Statements..........................................  7
        5.6   Compliance with Laws and Instruments..........................  7
        5.7   Governmental Authorizations, etc..............................  8
        5.8   Litigation; Observance of Agreements, Statutes and Orders.....  8
        5.9   Taxes.........................................................  8
        5.10  Title to Property; Leases.....................................  8
        5.11  Licenses, Permits, etc........................................  9

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                                TABLE OF CONTENTS
                                   (continued)


                                                                            Page


        5.12  Compliance with ERISA.........................................  9
        5.13  Private Offering by the Company............................... 10
        5.14  Use of Proceeds; Margin Regulations........................... 10
        5.15  Existing Debt; Future Liens................................... 10
        5.16  Foreign Assets Control Regulations, etc....................... 11
        5.17  Status under Certain Statutes................................. 11
        5.18  Environmental Matters......................................... 11
        5.19  Parity of Obligations......................................... 12
        5.20  Solvency...................................................... 12
        5.21  Consolidated and Integrated Business of the Company and its
                 Restricted Subsidiaries.................................... 13
        5.22  No Burdensome Restrictions.................................... 13
6.      Representations Of The Purchasers................................... 13
        6.1   Purchase for Investment....................................... 13
        6.2   Source of Funds............................................... 13
7.      Information As To Company........................................... 15
        7.1   Financial and Business Information............................ 15
        7.2   Officer's Certificate......................................... 18
        7.3   Inspection.................................................... 18
8.      Prepayment Of The Notes............................................. 18
        8.1   Required Prepayments.......................................... 19
        8.2   Optional Prepayments with Make-Whole Amount................... 20
        8.3   Allocation of Partial Prepayments............................. 20
        8.4   Maturity; Surrender, etc...................................... 20
        8.5   Purchase of Notes............................................. 21
        8.6   Make-Whole Amount............................................. 21
9.      Affirmative Covenants............................................... 22
        9.1   Compliance with Law........................................... 22
        9.2   Insurance..................................................... 23
        9.3   Maintenance of Properties..................................... 23


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                                TABLE OF CONTENTS
                                   (continued)


                                                                            Page


        9.4   Payment of Taxes and Claims................................... 23
        9.5   Corporate Existence, etc...................................... 23
        9.6   Notes and Guarantee to Rank Pari Passu........................ 24
10.     Negative Covenants.................................................. 24
        10.1  Transactions with Affiliates.................................. 24
        10.2  Merger, Consolidation, etc.................................... 24
        10.3  Liens......................................................... 25
        10.4  Consolidated Net Worth........................................ 27
        10.6  Limitation on Funded Debt..................................... 27
        10.7  Limitation on Restricted Payments............................. 28
        10.8  Limitation on Investment...................................... 29
        10.9  Sale of Assets................................................ 30
        10.10 Limitations on Sale-and-Leaseback Transactions................ 31
        10.11 Subsidiary Guarantors......................................... 32
        10.12 Line of Business.............................................. 33
11.     Events Of Default................................................... 33
12.     Remedies On Default, Etc............................................ 35
        12.1  Acceleration.................................................. 36
        12.2  Other Remedies................................................ 36
        12.3  Rescission.................................................... 36
        12.4  No Waivers or Election of Remedies, Expenses, etc............. 37
13.     Registration; Exchange; Substitution Of Notes....................... 37
        13.1  Registration of Notes......................................... 37
        13.2  Transfer and Exchange of Notes................................ 37
        13.3  Replacement of Notes.......................................... 38
14.     Payment Of Notes.................................................... 38
        14.1  Place of Payment.............................................. 38
        14.2  Home Office Payment........................................... 38
15.     Expenses, Etc....................................................... 39


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                                TABLE OF CONTENTS
                                   (continued)


                                                                            Page


        15.1  Transaction Expenses.......................................... 39
        15.2  Survival...................................................... 39
16.     Survival Of Representations And Warranties; Entire Agreement........ 39
17.     Amendment And Waiver................................................ 40
        17.1  Requirements.................................................. 40
        17.2  Solicitation of Holders of Notes.............................. 40
        17.3  Binding Effect, etc........................................... 40
        17.4  Notes Held by Company, etc.................................... 41
18.     Notices............................................................. 41
19.     Reproduction Of Documents........................................... 41
20.     Confidential Information............................................ 42
21.     Substitution Of Purchaser; Participation............................ 43
22.     Miscellaneous....................................................... 43
        22.1  Successors and Assigns........................................ 43
        22.2  Payments Due on Non-Business Days............................. 43
        22.3  Severability.................................................. 44
        22.4  Construction.................................................. 44
        22.5  Counterparts.................................................. 44
        22.6  Governing Law; Jurisdiction and Service of Process............ 45
        22.7  Agent for Service of Process.................................. 45


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                                TABLE OF CONTENTS
                                   (continued)


SCHEDULES

Schedule A      Information Relating to Purchasers
Schedule B      Defined Terms
Schedule 4.10   Corporate Changes
Schedule 5.4    Subsidiaries
Schedule 5.5    Financial Statements
Schedule 5.8    Litigation
Schedule 5.11   Licenses
Schedule 5.14   Use of  Proceeds
Schedule 5.15   Existing  Debt
Schedule 5.19   Senior Debt


EXHIBITS

Exhibit 1-A     Form of Series A Note
Exhibit 1-B     Form of Series B Note
Exhibit 1-C     Form of Series C Note
Exhibit 4.4(a)  Form of Opinion of Counsel  for the Company
Exhibit 4.4(b)  Form of Opinion of Special  Counsel for the Purchasers
Exhibit 4.5     Form  of  Subsidiary   Guarantee   Agreement
Exhibit 10.11(a)Representations  and  Warranties  of  Original  Subsidiary
                Guarantors


                                      -v-


<PAGE>


                          THE CHALONE WINE GROUP, LTD.
                                621 Airpark Road
                             Napa, California 94558


$  5,000,000 8.75% Senior Guaranteed Notes, Series A, Due September 15, 2010
$ 10,000,000 8.78% Senior Guaranteed Notes, Series B, Due September 15, 2010
$ 15,000,000 8.90% Senior Guaranteed Notes, Series C, Due September 15, 2010


                                                              September 15, 2000


TO EACH OF THE PURCHASERS LISTED IN
          THE ATTACHED SCHEDULE A:


Ladies and Gentlemen;

                  THE CHALONE WINE GROUP, LTD., a California corporation (the
"Company"),  agrees with each of the purchasers named in Schedule A to this
Agreement (the "PURCHASERS") as follows:

1.   AUTHORIZATION OF NOTES

     1.1 AUTHORIZATION OF NOTES.

     The Company will authorize the issue and sale of (i)  $5,000,000  8.75%
Senior  Guaranteed  Notes,  Series A, Due  September  15,  2010  (the  "Series A
Notes"); (ii) $10,000,000 8.78% Senior Guaranteed Notes, Series B, Due September
15, 2010 (the "Series B Notes");  and (iii)  $15,000,000 8.90% Senior Guaranteed
Notes,  Series C, Due  September  15, 2010 (the "Series C Notes"),  and together
with the  Series A Notes  and the  Series B Notes,  the  "Notes",  such  term to
include any such notes issued in substitution therefor pursuant to Section 13 of
this  Agreement).  The Series A Notes shall be substantially in the form set out
in Exhibit 1-A, the Series B Notes shall be substantially in the form set out in
Exhibit 1-B, and the Series C Notes shall be  substantially  in the form set out
in Exhibit 1-C, with such changes  therefrom,  if any, as may be approved by you
and the Company. Certain capitalized terms used in this Agreement are defined in
Schedule B;  references to a "Schedule" or an "Exhibit"  are,  unless  otherwise
specified, to a Schedule or an Exhibit attached to this Agreement.

     1.2 SALE OF NOTES.

     The  payment  and  performance  obligations  of the  Company  under and
pursuant  to this  Agreement  and the Notes are to be fully and  unconditionally
guaranteed  by  each  of the  Subsidiary  Guarantors  pursuant  to a  Subsidiary
Guarantee Agreement (the "Guarantee").


<PAGE>


2.   SALE AND PURCHASE OF NOTES.

     Subject to the terms and conditions of this Agreement, the Company will
issue and sell to each  Purchaser  and each  Purchaser  will  purchase  from the
Company,  at the Closing  provided  for in Section 3, Notes of the Series and in
the principal amount  specified  opposite each Purchaser's name in Schedule A at
the purchase price of 100% of the principal  amount  thereof.  The obligation of
each  Purchaser  shall be several and not joint and no Purchaser  shall have any
obligation or any liability to any Person for the performance or non-performance
by any other Purchaser hereunder.

3.   CLOSING.

         The sale and  purchase  of the  Notes  shall  occur at the  offices  of
McDermott,  Will & Emery, 227 West Monroe Street,  Chicago,  Illinois,  at 10:00
a.m.,  Central  time,  at a closing (the  "CLOSING") on September 15, 2000 or on
such other  Business Day  thereafter on or prior to September 21, 2000 as may be
agreed upon by the Company  and the  Purchasers  (the  "Closing  Date").  At the
Closing the Company will deliver the Notes to be purchased by each  Purchaser in
the form of a single Note (or such greater number of Notes in  denominations  of
at least  $100,000 as each  Purchaser  may  request)  dated the Closing Date and
registered in such  Purchaser's  name (or in the name of its  nominee),  against
delivery by such Purchaser to the Company or its order of immediately  available
funds  in the  amount  of the  purchase  price  therefor  by  wire  transfer  of
immediately  available  funds for the account of the  Company to account  number
8026002533  at Bank of New York,  New York,  New York,  ABA  number  021-000018,
Reference: Chalone Wine Group, Attention: Christine Dell'Aira. If at the Closing
the Company  shall fail to tender such Notes to be purchased by any Purchaser as
provided above in this Section 3, or any of the conditions  specified in Section
4 shall not have been fulfilled to such Purchaser's satisfaction, such Purchaser
shall,  at its  election,  be  relieved of all  further  obligations  under this
Agreement,  without thereby waiving any rights such Purchaser may have by reason
of such failure or such non-fulfillment.

4.   CONDITIONS TO CLOSING.

     Each  Purchaser's  obligation  to purchase  and pay for the Notes to be
sold to such  Purchaser  at the  Closing is subject to the  fulfillment  to such
Purchaser's  satisfaction,  prior  to  or  at  the  Closing,  of  the  following
conditions:

     4.1 REPRESENTATIONS AND WARRANTIES.

     The  representations  and warranties of the Company in this  Agreement,
and the  representations  and warranties of the Original  Subsidiary  Guarantors
contained in Exhibit 10.11 (a) to this Agreement, shall be correct when made and
at the time of the Closing.


                                      -2-


<PAGE>


     4.2 PERFORMANCE; NO DEFAULT.

     The Company and each of the Original  Subsidiary  Guarantors shall have
performed  and complied with all  agreements  and  conditions  contained in this
Agreement  and the  Original  Subsidiary  Guarantee  Agreements  required  to be
performed  or complied  with by it prior to or at the  Closing and after  giving
effect to the issue and sale of the Notes (and the  application  of the proceeds
thereof as  contemplated  by Schedule 5.14) no Default or Event of Default shall
have  occurred  and be  continuing.  Neither  the  Company  nor  any  Restricted
Subsidiary  shall  have  entered  into  any  transaction  since  the date of the
Memorandum that would have been prohibited by Section 10 hereof had such Section
applied since such date.

     4.3 COMPLIANCE CERTIFICATES.

                  (a) Officer's  Certificate  of the Company.  The Company shall
have delivered to you an Officer's  Certificate,  dated the date of the Closing,
certifying that the conditions specified in Sections 4.1, 4.2 and 4.10 have been
fulfilled.
                  (b) Secretary's  Certificate of the Company. The Company shall
have delivered to you a certificate  certifying as to the  resolutions  attached
thereto and other corporate proceedings relating to the authorization, execution
and delivery of the Notes and this Agreement.

                  (c) Officer's  Certificate of the  Guarantors.  Each Original
Subsidiary  Guarantor  shall have  delivered to you an  Officer's  Certificate,
dated the date of the  Closing,  certifying  that the  conditions  specified in
Sections  4.1,  4.2 and 4.10 have been  fulfilled  in respect of such  Original
Subsidiary Guarantor.

                  (d) Secretary's Certificate of the Guarantors.  Each Original
Subsidiary Guarantor shall have delivered to you a certificate certifying as to
the resolutions  attached thereto and other corporate  proceedings  relating to
the  authorization,  execution and delivery of the subject Original  Subsidiary
Guarantee Agreement.

     4.4 OPINIONS OF COUNSEL.

     You shall have received opinions in form and substance  satisfactory to
you, dated the date of the Closing (a) from Farella Braun & Martel LLP,  counsel
for the Company and the Original Subsidiary Guarantors, covering the matters set
forth in  Exhibit  4.4(a)  and  covering  such  other  matters  incident  to the
transactions  contemplated  hereby as you or your counsel may reasonably request
(and the Company  hereby  instructs  its counsel to deliver such opinion to you)
and (b) from  McDermott,  Will & Emery,  your special counsel in connection with
such  transactions,  substantially  in the form set forth in Exhibit  4.4(b) and
covering such other matters incident to such  transactions as each Purchaser may
reasonably request.


                                      -3-


<PAGE>


     4.5 ORIGINAL SUBSIDIARY GUARANTEE AGREEMENT.

     You  shall  have  received  a  counterpart  original  of  a  Subsidiary
Guarantee  Agreement,  duly  executed  and  delivered  by each  of the  Original
Subsidiary  Guarantors,  in substantially the form set forth in Exhibit 4.5 (the
"Original Subsidiary Guarantee  Agreement"),  together with such other documents
as to each  Original  Subsidiary  Guarantor  as are  sufficient  to comply  with
Section 10.11, and each Original Subsidiary Guarantee Agreement shall be in full
force and effect.

     4.6 PURCHASE PERMITTED BY APPLICABLE LAW, etc.

     On the  Closing  Date each  Purchaser's  purchase of Notes shall (i) be
permitted  by the  laws  and  regulations  of each  jurisdiction  to which it is
subject,  without recourse to provisions (such as Section  1405(a)(8) of the New
York  Insurance  Law)  permitting  limited  investments  by insurance  companies
without restriction as to the character of the particular  investment,  (ii) not
violate  any  applicable  law  or  regulation  (including,  without  limitation,
Regulation  U, T or X of the Board of Governors of the Federal  Reserve  System)
and (iii) not subject any  Purchaser to any tax,  penalty or liability  under or
pursuant to any applicable law or regulation, which law or regulation was not in
effect on the date hereof.  If requested by any Purchaser,  such Purchaser shall
have received an Officer's Certificate  certifying as to such matters of fact as
such  Purchaser  may  reasonably  specify to enable such  Purchaser to determine
whether such purchase is so permitted.

     4.7 SALE OF OTHER NOTES.

         Contemporaneously  with  the  Closing  the  Company  shall  sell to the
Purchasers and the  Purchasers  shall purchase the Notes to be purchased by them
at the Closing as specified in Schedule A.

     4.8 PAYMENT OF SPECIAL COUNSEL FEES.

     Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing the reasonable fees,  charges and disbursements of
the  Purchasers'  special  counsel  referred  to in  Section  4.4 to the  extent
reflected in a statement  of such  counsel  rendered to the Company at least one
Business Day prior to the Closing.

     4.9 PRIVATE PLACEMENT NUMBER.

     A Private  Placement  number  issued by Standard & Poor's CUSIP Service
Bureau (in  cooperation  with the  Securities  Valuation  Office of the National
Association of Insurance Commissioners) shall have been obtained for each series
of the Notes.

     4.10 CHANGES IN CORPORATE STRUCTURE.

         Except as  specified  in  Schedule  4.10,  neither  the Company nor any
Original   Subsidiary   Guarantor   shall  have  changed  its   jurisdiction  of
incorporation or been a party to any merger or  consolidation  nor shall it have
succeeded to all or any substantial part of the liabilities of any other entity,
at any time following the date of the most recent financial  statements referred
to in Schedule 5.5.


                                      -4-


<PAGE>


     4.11 CONSENT of OTHER LENDERS.

     Any consents or approvals  required to be obtained  from any lender or
holder  of any  outstanding  debt of the  Company  or any  Original  Subsidiary
Guarantor and any amendments of agreements  pursuant to which any debt may have
been incurred by the Company or any Original Subsidiary  Guarantor,  including,
but not limited to, the Credit  Agreement,  which shall be  necessary to permit
the  consummation  of the  transactions  contemplated  hereby  shall  have been
obtained and all such consents,  approvals or amendments  shall be satisfactory
in form and substance to each Purchaser and special  counsel to the Purchasers.

     4.12 PROCEEDINGS AND DOCUMENTS.

     All  corporate   and  other   proceedings   in  connection   with  the
transactions  contemplated  by this Agreement and all documents and instruments
incident to such  transactions  shall be satisfactory to each Purchaser and the
Purchasers'  special  counsel,  and each Purchaser and the Purchasers'  special
counsel  shall have  received  all such  counterpart  originals or certified or
other  copies of such  documents as each  Purchaser  or special  counsel to the
Purchasers' may reasonably request.

     4.13 FARM CREDIT ACT MATTERS.

     The  Company  shall  have  acquired  stock  in each  Purchaser  for an
aggregate  purchase  price of  $2,000.  The  Company  shall have  executed  and
delivered the Farm Credit Act Documents.

5.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company  represents and warrants to the Purchasers that:

     5.1  ORGANIZATION; POWER AND AUTHORITY.

     The Company is a corporation  duly organized,  validly existing and in
good standing under the laws of its jurisdiction of  organization,  and is duly
qualified  as a  foreign  corporation  or  other  legal  entity  and is in good
standing in each  jurisdiction in which such  qualification is required by law,
other than those jurisdictions as to which the failure to be so qualified or in
good  standing  would not,  individually  or in the  aggregate,  reasonably  be
expected to have a Material  Adverse  Effect.  The Company has the corporate or
other  legal  entity  power  and  authority  to own or  hold  under  lease  the
properties it purports to own or hold under lease,  to transact the business it
transacts and proposes to transact,  to execute and deliver this  Agreement and
the Notes and to perform the provisions hereof and thereof.

     5.2 AUTHORIZATION, ETC.

     This Agreement has been duly authorized by all necessary  corporate or
other  legal  entity  action  on the part of the  Company,  and this  Agreement
constitutes,  a legal, valid and binding obligation of the Company  enforceable
against the Company in accordance with its terms, except as such enforceability
may  be  limited  by (a)  applicable  bankruptcy,  insolvency,  reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally  and (b) general  principles  of equity  (regardless  of whether such
enforceability is considered in a


                                      -5-


<PAGE>


proceeding in equity or at law). Upon execution and delivery thereof,  each Note
will constitute a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms,  except as such enforceability
may  be  limited  by  (a)  applicable  bankruptcy,  insolvency,  reorganization,
moratorium or other similar laws affecting the enforcement of creditors'  rights
generally  and (b) general  principles  of equity  (regardless  of whether  such
enforceability is considered in a proceeding in equity or in law).

     5.3 DISCLOSURE.

     The    Company,    through    its    agent,    Cooperatieve    Centrale
Raiffeisen-Boerenleenbank,  B.A.,  "Rabobank  Nederland,"  New York  Branch (the
"AGENT"),  has  delivered  to each  Purchaser a copy of a  Confidential  Private
Placement  Memorandum  dated  June  2000  (the  "MEMORANDUM"),  relating  to the
transactions  contemplated  hereby.  The  Memorandum  fairly  describes,  in all
material respects,  the general nature of the business and principal  properties
of the  Company  and its  Subsidiaries.  This  Agreement,  the  Memorandum,  the
documents,  certificates  or  other  communications  made or  delivered  to each
Purchaser by or on behalf of the Company and the Original Subsidiary  Guarantors
in  connection  with the  transactions  contemplated  hereby  and the  financial
statements  listed in Schedule 5.5, taken as a whole,  do not contain any untrue
statement  of a material  fact or omit to state any material  fact  necessary to
make the statements  therein not misleading in light of the circumstances  under
which  they were  made.  Since  June 30,  2000,  there has been no change in the
financial  condition,  operations,  business or properties of the Company or any
Subsidiary  except  changes  that  individually  or in the  aggregate  could not
reasonably be expected to have a Material Adverse Effect. There is no fact known
to the Company  that could  reasonably  be  expected to have a Material  Adverse
Effect that has not been set forth herein or in the  Memorandum  or in the other
documents,  certificates and other communications made or delivered to you by or
on behalf of the Company or any Original Subsidiary  Guarantor  specifically for
use in connection with the transactions contemplated hereby.

     5.4 ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.

                  (a)  Schedule 5.4 contains (except as noted therein)  complete
 and  correct  lists  (i) of the  Company's  Subsidiaries,  showing,  as to each
 Subsidiary, the correct name thereof, the jurisdiction of its organization, and
 the  percentage of shares of each class of its Capital Stock or similar  equity
 interests  outstanding owned by the Company and each other Subsidiary,  (ii) of
 the Company's Restricted Subsidiaries, (iii) of the Company's Affiliates, other
 than Subsidiaries, and (iv) of the Company's directors and senior officers.

                  (b) All of the outstanding  shares of Capital Stock or similar
 equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the
 Company  and its  Subsidiaries  have been  validly  issued,  are fully paid and
 nonassessable and are owned by the Company or another Subsidiary free and clear
 of any Lien (except as otherwise disclosed in Schedule 5.4).

                  (c)  Each   Subsidiary   identified   in  Schedule  5.4  is  a
corporation or other legal entity duly organized,  validly  existing and in good
standing  under  the  laws  of its  jurisdiction  of  organization,  and is duly
qualified as a foreign corporation or other legal entity and is in good standing
in each jurisdiction in which such  qualification is required by law, other than
those  jurisdictions  as to which  the  failure  to be so  qualified  or in good
standing could not, individually


                                      -6-


<PAGE>


or in the aggregate,  reasonably be expected to have a Material  Adverse Effect.
Each such  Subsidiary  has the  corporate or other power and authority to own or
hold under  lease the  properties  it purports to own or hold under lease and to
transact the business it transacts and proposes to transact.

                  (d) No Subsidiary  is a party to, or otherwise  subject to any
legal  restriction or any agreement  (other than this Agreement,  the agreements
listed on  Schedule  5.4 and  customary  limitations  imposed by  corporate  law
statutes)  restricting  the ability of such  Subsidiary  to pay dividends out of
profits or make any other similar distributions of profits to the Company or any
of its  Subsidiaries  that owns  outstanding  shares of Capital Stock or similar
equity interests of such Subsidiary.

     5.5 FINANCIAL STATEMENTS.

     The Company has  delivered to each  Purchaser  copies of the  financial
statements  of the Company and its  Subsidiaries  listed on Schedule 5.5. All of
said  financial  statements  (including  in each case the related  schedules and
notes)  fairly  present in all  Material  respects  the  consolidated  financial
position  of  the  Company  and  its  Subsidiaries  as of the  respective  dates
specified in such  financial  statements and the  consolidated  results of their
operations and cash flows for the respective  periods so specified and have been
prepared in accordance  with GAAP  consistently  applied  throughout the periods
involved except as set forth in the notes thereto  (subject,  in the case of any
interim financial statements, to normal year-end adjustments).

     5.6 COMPLIANCE WITH LAWS AND INSTRUMENTS.

     The execution, delivery and  performance by the  Company of this  Agreement
and the Notes will not (i) contravene,  result in any breach of, or constitute a
default under,  or, unless  permitted  hereunder,  result in the creation of any
Lien in respect of any  property of the  Company or any  Subsidiary  under,  any
indenture,  mortgage, deed of trust, loan, purchase or credit agreement,  lease,
corporate charter or by-laws,  or any other agreement or instrument to which the
Company or any  Subsidiary is bound or by which the Company or any Subsidiary or
any of their respective properties may be bound or affected,  (ii) conflict with
or result in a breach  of any of the  terms,  conditions  or  provisions  of any
order,  judgment,  decree,  or ruling of any court,  arbitrator or  Governmental
Authority  applicable  to the Company or any  Subsidiary,  or (iii)  violate any
provision  of any  statute  or  other  rule or  regulation  of any  Governmental
Authority applicable to the Company or any Subsidiary.

     5.7 GOVERNMENTAL AUTHORIZATIONS, ETC.

     No consent,  approval or authorization  of, or registration,  filing or
declaration with, any Governmental  Authority is required in connection with the
execution,  delivery  or  performance  by the Company of this  Agreement  or the
Notes.

     5.8 LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.

                   (a)  Except  as  disclosed  in  Schedule  5.8,  there  are no
 actions,  suits or  proceedings  pending or, to the  knowledge  of the Company,
 threatened against or affecting the Company or


                                      -7-


<PAGE>


any  Subsidiary or any property of the Company or any Subsidiary in any court or
before any  arbitrator  of any kind or before or by any  Governmental  Authority
that,  individually or in the aggregate,  could reasonably be expected to have a
Material Adverse Effect.

                   (b)  Neither the  Company  nor any  Subsidiary  is in default
 under  any term of any  agreement  or  instrument  to which it is a party or by
 which it is bound,  or any  order,  judgment,  decree  or ruling of any  court,
 arbitrator or Governmental  Authority or is in violation of any applicable law,
 ordinance, rule or regulation (including without limitation Environmental Laws)
 of any Governmental Authority,  which default or violation,  individually or in
 the aggregate, could reasonably be expected to have a Material Adverse Effect.

     5.9 TAXES.

     The Company and its  Subsidiaries  have filed all tax returns  that are
required to have been filed in any  jurisdiction,  and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their properties,  assets, income or franchises, to the extent such
taxes and  assessments  have  become due and payable and before they have become
delinquent,  except for any taxes and assessments (i) the amount of which is not
individually or in the aggregate Material, or (ii) the amount,  applicability or
validity of which is  currently  being  contested  in good faith by  appropriate
proceedings  and  with  respect  to  which  the  Company  or  a  Subsidiary  has
established  adequate  reserves in accordance with GAAP. The Company knows of no
basis for any other tax or assessment that could  reasonably be expected to have
a Material  Adverse Effect.  The charges,  accruals and reserves on the books of
the Company and its Subsidiaries in respect of Federal, state or other taxes for
all fiscal  periods are  adequate.  The Federal  income tax  liabilities  of the
Company  and its  Subsidiaries  have  been paid for all  fiscal  years up to and
including the fiscal year ended March 31, 2000.

     5.10 TITLE TO PROPERTY; LEASES.

     The  Company and its  Subsidiaries  have good and  sufficient  title to
their respective  properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been  acquired by the Company or
any Subsidiary  after said date (except as sold or otherwise  disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this  Agreement.  All leases that  individually or in the aggregate are Material
are valid  and  subsisting  and are in full  force  and  effect in all  Material
respects.

     5.11 LICENSES, PERMITS, ETC.

     Except as disclosed in Schedule 5.11

                  (a) the Company and its Subsidiaries  own, possess or have the
right  to  use  all  licenses,  permits,  franchises,  authorizations,  patents,
copyrights, service marks, trademarks, technology, know-how, processes and trade
names,  or  rights  thereto   (collectively   "Intellectual   Property"),   that
individually  or in the aggregate are Material,  without known conflict with the
rights of others;


                                      -8-


<PAGE>


                  (b) to the best  knowledge of the  Company,  no product of the
Company or any Subsidiary infringes in any Material respect any license, permit,
franchise, authorization, patent, copyright, service mark, trademark, trade name
or other right owned by any other Person;

                  (c) to the best knowledge of the Company, there is no Material
violation  by any Person of any right of the Company or any of its  Subsidiaries
with  respect to any  Intellectual  Property or other right owned or used by the
Company or any of its Subsidiaries; and

                   (d) the Company and each  Subsidiary  owns,  or has the legal
 right  to  use,  (subject  to the  common  law  rights  of  another  user)  all
 Intellectual  Property  necessary  for each of them to conduct its  business as
 currently  conducted  except  for those  which the  failure to own or have such
 legal right to use could not have a Material Adverse Effect.

     5.12 COMPLIANCE WITH ERISA.

                  (a) The Company and each ERISA  Affiliate  have  operated  and
administered  each Plan in compliance  with all applicable  laws except for such
instances of  noncompliance  as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability  pursuant
to Title I or IV of ERISA or the  penalty or excise tax  provisions  of the Code
relating to employee  benefit  plans (as defined in Section 3 of ERISA),  and no
event,  transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or any
ERISA  Affiliate,  or in the  imposition  of  any  Lien  on  any of the  rights,
properties  or assets of the  Company  or any ERISA  Affiliate,  in either  case
pursuant to Title I or IV of ERISA or to such  penalty or excise tax  provisions
or to Section  401(a)(29)  or 412 of the Code,  other than such  liabilities  or
Liens as would not be individually or in the aggregate Material.

                   (b) The Company  does not maintain any Plan that is a defined
benefit  pension  plan  subject to Title IV of ERISA.

                  (c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities(and are not subject to contingent withdrawal liabilities)
under  section  4201 or 4204 of  ERISA  in respect  of  Multiemployer  Plans
that  individually  or in the  aggregate  are Material.

                  (d) The expected postretirement benefit obligation (determined
as of the  last  day  of the  Company's  most  recently  ended  fiscal  year  in
accordance with Financial  Accounting Standards Board Statement No. 106, without
regard to liabilities  attributable to continuation coverage mandated by section
4980B of the Code) of the Company and its Subsidiaries is not Material.

                  (e)  The  execution  and  delivery of this  Agreement  and the
issuance and sale of the Notes hereunder will not involve any  transaction  that
is subject to the  prohibitions  of section 406 of ERISA or in  connection  with
which a tax could be imposed pursuant to section  4975(c)(1)(A)(D)  of the Code.
The  representation by the Company in the first sentence of this Section 5.12(e)
is made in  reliance  upon and subject to (i) the  accuracy of each  Purchaser's
representation  in  Section  6.2 as to the  sources of the funds used to pay the
purchase  price of the  Notes to be  purchased  by such  Purchaser  and (ii) the
assumption, made solely for the purpose of making such


                                      -9-


<PAGE>


representation, that Department of Labor Interpretive Bulletin 75-2 with respect
to  prohibited   transactions   remains  valid  in  the   circumstances  of  the
transactions contemplated herein.

     5.13 PRIVATE OFFERING BY THE COMPANY.

     Neither  the  Company  nor anyone  acting on its behalf has offered the
Notes or any similar  securities  for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof with,
any Person other than the  Purchasers  and not more than 40 other  Institutional
Investors,  each of which  has been  offered  the  Notes at a  private  sale for
investment.  Neither the Company nor anyone  acting on its behalf has taken,  or
will take,  any action that would  subject the  issuance or sale of the Notes to
the  registration  requirements  of  Section  5 of the  Securities  Act.


     5.14 USE OF PROCEEDS; MARGIN REGULATIONS.

     The  Company  will apply the  proceeds  of the sale of the Notes as set
forth in  Schedule  5.14.  No part of the  proceeds  from the sale of the  Notes
hereunder  will be used,  directly or  indirectly,  for the purpose of buying or
carrying  any margin  stock  within the meaning of  Regulation U of the Board of
Governors  of the  Federal  Reserve  System (12 CFR 221),  or for the purpose of
buying or carrying or trading in any securities  under such  circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220).  Margin  stock  does not  constitute  more than 5% of the value of the
consolidated assets of the Company and its Subsidiaries and the Company does not
have any present intention that margin stock will constitute more than 5% of the
value of such assets.  As used in this  Section,  the terms  "margin  stock" and
"purpose of buying or carrying" shall have the meanings assigned to them in said
Regulation U.

     5.15 EXISTING DEBT; FUTURE LIENS.

                  (a) Except as described  therein,  Schedule 5.15  sets forth a
 complete  and  correct  list of all  outstanding  Debt of the  Company  and its
 Subsidiaries as of the Closing Date since which date there has been no Material
 change in the amounts,  interest rates, sinking funds,  installment payments or
 maturities of the Debt of the Company or its Subsidiaries.  Neither the Company
 nor any  Subsidiary  is in default  and no waiver of default  is  currently  in
 effect,  in the payment of any principal or interest on any Debt of the Company
 or any such  Subsidiary  and no event or  condition  exists with respect to any
 Debt of the Company or any Subsidiary that would permit (or that with notice or
 the lapse of time,  or both,  would  permit) one or more  Persons to cause such
 Debt to become  due and  payable  before  its  stated  maturity  or before  its
 regularly scheduled dates of payment.

                  (b) Except as described in Schedule 5.15,  neither the Company
nor any  Subsidiary  has  agreed or  consented  to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property,  whether
now owned or  hereafter  acquired,  to be  subject  to a Lien not  permitted  by
Section 10.3.


                                      -10-


<PAGE>


                  (c)  The  Original   Subsidiary   Guarantors   will  derive  a
 commercial  benefit by their execution and delivery of the Original  Subsidiary
 Guarantee  Agreements  generally  and,  in  certain  other  respects,  as  more
 specifically described in Section 5.21 hereto.

     5.16 FOREIGN ASSETS CONTROL REGULATIONS, ETC.

     Neither the sale of the Notes by the Company  hereunder nor its use of
 the  proceeds  thereof will violate the Trading with the Enemy Act, as amended,
 or any of the foreign assets control  regulations of the United States Treasury
 Department  (31  CFR,  Subtitle  B,  Chapter  V, as  amended)  or any  enabling
 legislation or executive order relating thereto.

     5.17 STATUS UNDER CERTAIN STATUTES.

     Neither the Company nor any Subsidiary is subject to regulation  under
 the  Investment  Company Act of 1940, as amended,  the Public  Utility  Holding
 Company Act of 1935, as amended,  the Interstate  Commerce Act, as amended,  or
 the Federal Power Act, as amended.

     5.18 ENVIRONMENTAL MATTERS.

     As of the date of the Closing,  neither the Company nor any Subsidiary
 has  knowledge  of any claim or has  received  any notice of any claim,  and no
 proceeding has been instituted  raising any claim against the Company or any of
 its  Subsidiaries  or any of their  respective  real properties now or formerly
 owned,  leased or operated by any of them or other assets,  alleging any damage
 to the  environment or violation of any  Environmental  Laws,  except,  in each
 case, such as could not reasonably be expected to result in a Material  Adverse
 Effect. As of the Closing Date, except as otherwise disclosed to the Purchasers
 in writing,

                   (a) neither the Company nor any  Subsidiary  has knowledge of
 any facts which would give rise to any claim,  public or private,  of violation
 of Environmental Laws or damage to the environment emanating from, occurring on
 or in any way  related to real  properties  now or  formerly  owned,  leased or
 operated by any of them or to other assets or their use, except,  in each case,
 such as could not  reasonably  be  expected  to result  in a  Material  Adverse
 Effect;

                   (b) neither the  Company nor any  Subsidiaries  has stored or
 has knowledge of any storage of any Hazardous  Materials on real properties now
 or formerly owned, leased or operated by any of them and has not disposed,  nor
 has any  knowledge  of any  disposal,  of any  Hazardous  Materials in a manner
 contrary  to any  Environmental  Laws in each  case in any  manner  that  could
 reasonably be expected to result in a Material Adverse Effect; and

                   (c)  neither  the  Company  nor any of its  Subsidiaries  has
  knowledge  that any  buildings  on any real  properties  now owned,  leased or
  operated by the Company or any of its  Subsidiaries are not in compliance with
  applicable  Environmental  Laws,  except  where  failure  to comply  could not
  reasonably be expected to result in a Material Adverse Effect.


                                      -11-


<PAGE>


     5.19 PARITY OF OBLIGATIONS.

     All obligations  hereunder and under the Notes are direct  obligations
of the Company ranking pari passu as against the assets of the Company with the
obligations of the Company under the Credit Agreement and any other Debt of the
Company, except the Debt of the Company disclosed in Schedule 5.19.

     5.20 SOLVENCY.

     Each of the Company and the  Original  Subsidiary  Guarantors  is, and
upon  giving  effect to the  issuance  of the Notes and the  execution  of this
Agreement and the Original Subsidiary  Guarantee Agreements will be, a "solvent
institution",  as said term is used in  section  1405(c)  of the New York State
Insurance  Law,  whose  "obligations  are not in  default  as to  principal  or
interest",  as said terms are used in said section 1405(c). Each of the Company
and the Original  Subsidiary  Guarantors has capital not unreasonably  small in
relation  to  its  respective   business  or  any  contemplated  or  undertaken
transaction and has assets having a value both at fair valuation and at present
fair salable  value  greater than the amount  required to pay its debts as they
become  due and  greater  than the  amount  that  will be  required  to pay its
respective probable liability on its existing debts as they become absolute and
matured.  Neither the Company nor any Original Subsidiary  Guarantor intends to
incur, or believes or should have believed that it will incur, debts beyond its
ability to pay such debts as they  become  due.  Neither  the  Company  nor any
Original  Subsidiary  Guarantor will be rendered insolvent by the execution and
delivery  of,  and  performance  of  its  respective  obligations  under,  this
Agreement, the Notes and the Original Subsidiary Guarantee Agreements.

     5.21 CONSOLIDATED AND INTEGRATED BUSINESS of THE COMPANY AND ITS RESTRICTED
SUBSIDIARIES

         The  Company  and  its  Restricted   Subsidiaries   share  centralized
administration of the winery functions of each entity including finance,  sales
and marketing.  Such centralized  administration  is performed at the Company's
Napa office. This facility also includes a central distribution center in which
substantially all of the Company's and its Restricted  Subsidiaries'  wines are
stored prior to shipping.

         Sales  and  marketing  of  all  of  the   Company's   and   Restricted
Subsidiaries'  wines  within  the  State of  California  are made  through  the
Company's  own sales  forces and one or more  wholesalers.  The Company  uses a
single  broker  for all  wholesale  California  sales  of the  Company  and its
Restricted  Subsidiaries.  Furthermore,  all of the  Company's  and  Restricted
Subsidiaries'  wineries  are  operated  under the  overall  supervision  of the
Company's Chief Executive Officer.

         The Company  and its  Restricted  Subsidiaries  prepare  consolidated
financial  statements  and  present  their financial reporting on a consolidated
basis.

     5.22 NO BURDENSOME RESTRICTIONS.

     Neither the Company nor any Original  Subsidiary  Guarantor is a party
to any  agreement  or  instrument  or  subject to any other  obligation  or any
charter or corporate restriction or any


                                      -12-


<PAGE>


provision of any applicable law, rule or regulation which, individually or in
the aggregate, could have a Material Adverse Effect.

6.   REPRESENTATIONS OF THE PURCHASERS.

     6.1 PURCHASE FOR INVESTMENT.

     Each Purchaser  represents  that it is purchasing the Notes for its own
account or for one or more separate accounts maintained by it for the account of
one or more  pension  or trust  funds  and not  with a view to the  distribution
thereof, PROVIDED THAT the disposition of such Purchaser's property shall at all
times be within its control.  Each Purchaser understands that the Notes have not
been  registered  under the  Securities Act and may be resold only if registered
pursuant  to the  provisions  of the  Securities  Act  or if an  exemption  from
registration  is  available,  except  under  circumstances  where  neither  such
registration  nor such an  exemption is required by law, and that the Company is
not required to register the Notes.

     6.2 SOURCE OF FUNDS.

     Each  Purchaser   represents  that  at  least  one  of  the  following
statements  is an  accurate  representation  as to  each  source  of  funds  (a
"SOURCE") to be used by such  Purchaser to pay the purchase  price of the Notes
to be purchased by such Purchaser hereunder:

                   (a) the  Source is an  "insurance  company  general  account"
 within the meaning of  Department  of Labor  Prohibited  Transaction  Exemption
 ("PTE")  95-60  (issued July 12, 1995) and there is no employee  benefit  plan,
 treating  as a single  plan,  all  plans  maintained  by the same  employer  or
 employee organization,  with respect to which the amount of the general account
 reserves and  liabilities  for all contracts held by or on behalf of such plan,
 exceed ten percent (10%) of the total reserves and  liabilities of such general
 account (exclusive of separate account  liabilities) plus surplus, as set forth
 in the NAIC Annual  Statement  filed by such  Purchaser  with such  Purchaser's
 state of domicile; or

                  (b) the  Source  is either  (i) an  insurance  company  pooled
separate  account,  within the meaning of PTE 90-1 (issued January 29, 1990), or
(ii) a bank  collective  investment  find,  within the  meaning of the PTE 91-38
(issued  July 12,  1991) and,  except as such  Purchaser  has  disclosed  to the
Company in writing  pursuant to this paragraph (b), no employee  benefit plan or
group  of  plans  maintained  by the  same  employer  or  employee  organization
beneficially  owns more than 10% of all assets allocated to such pooled separate
account or collective investment fund; or

                   (c) the Source  constitutes  assets of an  "investment  fund"
 (within the meaning of Part V of the "QPAM Exemption")  managed by a "qualified
 professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM
 Exemption),  no  employee  benefit  plan's  assets  that are  included  in such
 investment  fund,  when combined with the assets of all other employee  benefit
 plans established or maintained by the same employer or by an affiliate (within
 the meaning of Section  V(c)(1) of the QPAM  Exemption)  of such employer or by
 the same  employee  organization  and  managed by such QPAM,  exceed 20% of the
 total client assets  managed by such QPAM,  the conditions of Part I(c) and (g)
 of the QPAM Exemption are satisfied,  neither the QPAM nor a person controlling
 or controlled by the QPAM (applying the


                                      -13-


<PAGE>


definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more
interest in the Company and (i) the  identity of such QPAM and (ii) the names of
all employee  benefit  plans whose assets are included in such  investment  fund
have been disclosed to the Company in writing pursuant to this paragraph (c); or

                  (d) the Source is a governmental plan; or

                  (e) the Source is one or more  employee  benefit  plans,  or a
separate  account or trust fund comprised of one or more employee benefit plans,
each of which has been  identified  to the  Company in writing  pursuant to this
paragraph (e); or

                  (f) the Source does not include assets of any employee benefit
plan,  other than a plan exempt from the coverage of ERISA.

          If any Purchaser or any subsequent  transferee of the Notes  indicates
that  such  Purchaser  or  such  transferee  is  relying  on any  representation
contained in paragraph  (b), (c) or (e) above,  the Company shall deliver on the
Closing Date and on the date of any  applicable  transfer a  certificate,  which
shall  either  state  that  (i)  it  is  neither  a  party  in  interest  nor  a
"disqualified  person" (as defined in Section 4975(e)(2) of the Internal Revenue
Code of 1986,  as  amended),  with  respect to any plan  identified  pursuant to
paragraphs  (b) or (e)  above,  or (ii) with  respect  to any  plan,  identified
pursuant to paragraph (c) above,  neither it nor any  "affiliate" (as defined in
Section V(c) of the QPAM Exemption) has at such time, and during the immediately
preceding one year, exercised the authority to appoint or terminate said QPAM as
manager of any plan identified in writing  pursuant to paragraph (c) above or to
negotiate  the terms of said QPAM's  management  agreement on behalf of any such
identified plan. As used in this Section 6.2, the terms "employee benefit plan",
"governmental  plan",  "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.

7.   INFORMATION AS TO COMPANY.

     7.1 FINANCIAL AND BUSINESS INFORMATION.

     The Company shall deliver to each Holder:

                  (a)  Quarterly  Statements  -- within 60 days after the end of
each quarterly  fiscal period in each fiscal year of the Company (other than the
last quarterly fiscal period of each such fiscal year), duplicate copies of,

                       (i) a  consolidated  balance  sheet of the Company  and
                  its  Restricted Subsidiaries  as at the end of such  quarter,
                  and

                      (ii)  consolidated statements  of income and changes in
                  cash flows of the Company and its Restricted Subsidiaries, for
                  such quarter and (in the case of the second and third
                  quarters) for the portion of the fiscal year ending with such
                  quarter,

setting forth in each case in comparative form the figures for the corresponding
periods in the  previous  fiscal year,  all in  reasonable  detail,  prepared in
accordance with GAAP applicable to


                                      -14-


<PAGE>


quarterly financial  statements  generally,  and certified by a Senior Financial
Officer as fairly presenting,  in all material respects,  the financial position
of the companies  being  reported on and their  results of  operations  and cash
flows,  subject to changes  resulting from year-end  adjustments,  PROVIDED THAT
delivery  within  the time  period  specified  above of copies of the  Company's
Quarterly  Report on Form 10-Q  prepared  in  compliance  with the  requirements
therefor and filed with the Securities and Exchange  Commission  shall be deemed
to satisfy the  requirements  of this  Section 7.1 (a) so long as such Form 10-Q
reports  on  the  Company  and  its  Restricted   Subsidiaries,   and  no  other
Subsidiaries;

                   (b)  Annual  Statements  -- within  150 days after the end of
each fiscal year of the Company, duplicate copies of,

                        (i) a consolidated balance sheet of the Company  and its
Restricted  Subsidiaries,  as at the end of such year, and

                       (ii)  consolidated  statements  of income,  changes  in
shareholders'   equity  and  cash  flows  of  the  Company  and  its  Restricted
Subsidiaries,  for such year, setting forth in each case in comparative form the
figures for the previous  fiscal year,  all in  reasonable  detail,  prepared in
accordance with GAAP, and accompanied by

          (A) an opinion thereon of independent  certified public accountants of
recognized  national  standing,  which opinion  shall state that such  financial
statements present fairly, in all material  respects,  the financial position of
the Company and its Restricted  Subsidiaries and their results of operations and
cash  flows  and have  been  prepared  in  conformity  with  GAAP,  and that the
examination of such accountants in connection with such financial statements has
been made in accordance with generally  accepted  auditing  standards,  and that
such audit  provides a reasonable  basis for such opinion in the  circumstances;
and

          (B) a certificate of such accountants  stating that they have reviewed
this Agreement and stating  further  whether,  in making their audit,  they have
become  aware of any  condition or event that then  constitutes  a Default or an
Event of Default,  and, if they are aware that any such  condition or event then
exists,  specifying  the nature and period of the  existence  thereof  (it being
understood that such  accountants  shall not be liable,  directly or indirectly,
for any failure to obtain  knowledge  of any Default or Event of Default  unless
such accountants  should have obtained  knowledge  thereof in making an audit in
accordance with generally  accepted  auditing  standards or did not make such an
audit);

PROVIDED THAT the delivery within the time period specified above of the
Company's  Annual  Report on Form 10-K for such fiscal year  (together  with the
Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3
under the Exchange Act) prepared in accordance  with the  requirements  therefor
and filed with the Securities and Exchange


                                      -15-


<PAGE>


          Commission,  together with the accountant's  certificate  described in
          clause (B) above,  shall be deemed to satisfy the requirements of this
          Section  (b) so long as such Form 10-K  reports on the Company and its
          Restricted Subsidiaries, and no other Subsidiaries;

                  (c) Audit Reports -- promptly upon receipt  thereof,  one copy
of each  interim or special  audit made by the  independent  accountants  of the
books of the Company and its  Subsidiaries  and any management  letter  received
from such accountants;

                  (d) SEC and Other  Reports --  promptly  upon  their  becoming
available,  one copy of (i) each financial  statement,  report,  notice or proxy
statement  sent by the Company or any  Subsidiary to public  securities  holders
generally, and (ii) each regular or periodic report, each registration statement
(without  exhibits  except as  expressly  requested  by such  holder),  and each
prospectus  and all  amendments  thereto filed by the Company or any  Subsidiary
with the Securities and Exchange  Commission and of all press releases and other
statements  made  available  generally by the Company or any  Subsidiary  to the
public concerning developments that are Material;

                  (e) Notice of Default or Event of Default -- promptly,  and in
any event within five days after a  Responsible  Officer  becoming  aware of the
existence  of any  Default  or Event of Default or that any Person has given any
notice or taken any action with respect to a claimed  default  hereunder or that
any Person has given any  notice or taken any action  with  respect to a claimed
default of the type referred to in Section 11(f),  a written  notice  specifying
the nature and period of existence thereof and what action the Company is taking
or proposes to take with respect thereto;

                  (f)  Notice of ERISA  Matters  --  promptly,  and in any event
within  five  days  after a  Responsible  Officer  becoming  aware of any of the
following,  a written notice setting forth the nature thereof and the action, if
any,  that the  Company  or an ERISA  Affiliate  Proposes  to take with  respect
thereto:
                           (i) with  respect  to any Plan, any reportable event,
                  as defined in section  4043(b)  of ERISA and the  regulations
                  thereunder,  for  which  notice thereof has not been waived
                  pursuant  to such regulations as in effect on the date hereof;
                  or

                           (ii) the taking by the PBGC of steps to institute, or
                  the threatening by the PBGC of the institution of, proceedings
                  under section 4042 of ERISA for the termination of, or the
                  appointment of a trustee to administer,  any Plan, or the
                  receipt  by  the  Company  or  any  ERISA  Affiliate  of a
                  notice  from  a Multiemployer  Plan that such action has been
                  taken by the PBGC with  respect to such Multiemployer Plan; or

                           (iii) any event,  transaction  or  condition  that
                  could result in the incurrence of any liability by the Company
                  or any ERISA  Affiliate  pursuant to Title I or IV of ERISA or
                  the  penalty  or  excise  tax provisions  of the Code relating
                  to employee  benefit plans,  or in the imposition of any Lien
                  on any of the rights,  properties or assets of the Company or
                  any ERISA Affliate  pursuant to  Title  I  or  IV  of  ERISA
                  or  such   penalty   or   excise   tax


                                      -16-


<PAGE>


                  provisions,  if such  liability  or Lien, taken together  with
                  any other such liabilities  or Liens then  existing,  could
                  reasonably  be expected to have a Material Adverse Effect;

                  (g) Notices from Governmental  Authority -- promptly,  and in
any event within 30 days of receipt thereof, copies of any notice to the Company
or any Subsidiary from any Federal or state  Governmental  Authority relating to
any order,  ruling,  statute or other law or regulation that could reasonably be
expected to have a Material Adverse Effect; and

                  (h) Requested Information -- with reasonable promptness, such
other  data and  information  relating  to the  business,  operations,  affairs,
financial  condition,  assets  or  properties  of  the  Company  or  any  of its
Subsidiaries  or  relating  to  the  ability  of  the  Company  to  perform  its
obligations hereunder and under the Notes as from time to time may be reasonably
requested by any such Holder.

 7.2 OFFICER'S CERTIFICATE.

          Each set of financial  statements  delivered  to a Holder  pursuant to
 Section  7.1 (a) and (b)  shall be  accompanied  by a  certificate  of a Senior
 Financial Offcer setting forth:

                  (a) Covenant  Compliance the information  (including detailed
calculations)  required  in  order  to  establish  whether  the  Company  was in
compliance  with the  requirements of Section 10.3 through Section 10.10 hereof,
inclusive,  during the quarterly or annual period covered by the statements then
being furnished (including with respect to each such Section,  where applicable,
the calculations of the maximum or minimum amount,  ratio or percentage,  as the
case may be,  permissible under the terms of such Sections,  and the calculation
of the amount, ratio or percentage then in existence); and

                  (b) Event of Default -- a  statement  that such  officer  has
reviewed the relevant terms hereof and has made, or caused to be made, under his
or her  supervision,  a review of the transactions and conditions of the Company
and its  Subsidiaries  from the  beginning  of the  quarterly  or annual  period
covered by the statements  then being  furnished to the date of the  certificate
and that such review shall not have  disclosed the existence  during such period
of any condition or event that  constitutes a Default or an Event of Default or,
if any such condition or event existed or exists (including, without limitation,
any such event or  condition  resulting  from the  failure of the Company or any
Subsidiary  to comply with any  Environmental  Law),  specifying  the nature and
period of  existence  thereof and what  action the  Company  shall have taken or
proposes to take with respect thereto.

7.3  INSPECTION.

     The Company shall permit the representatives of each Holder:

                  (a) No Default  -- if no  Default  or Event of  Default  then
exists,  at the expense of such Holder and upon  reasonable  prior notice to the
Company during normal business hours, to visit the principal executive office of
the Company to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the


                                      -17-


<PAGE>


Company, which consent will not be unreasonably withheld) its independent public
accountants,  and (with the consent of the  Company,  which  consent will not be
unreasonably  withheld) to visit the other offices and properties of the Company
and  each  Subsidiary,  all at such  reasonable  times  and as  often  as may be
reasonably requested in writing; and

                  (b) Default -- if a Default or Event of Default  then  exists,
at the  expense  of the  Company,  to visit and  inspect  any of the  offices or
properties  of the Company or any  Subsidiary,  to examine all their  respective
books of account, records, reports and other papers, to make copies and extracts
therefrom,  and to discuss their respective affairs,  finances and accounts with
their  respective  officers  and  independent  public  accountants  (and by this
provision  the Company  authorizes  said  accountants  to discuss  the  affairs,
finances  and accounts of the Company and its  Subsidiaries),  all at such times
and as often as may be requested.

8.   PREPAYMENT OF THE NOTES

     8.1  REQUIRED PREPAYMENTS.

                  (a) The  Company  agrees  that on  September  15 in each  year
commencing  September 15, 2004 and ending on September 15, 2009, both inclusive,
it will prepay and apply and there shall become due and payable on the principal
debt  evidenced  by the  Series A Notes an  amount  equal to the  lesser  of (x)
$714,285.71 or (y) the principal amount of the Series A Notes then  outstanding.
The entire remaining principal amount of the Series A Notes shall become due and
payable on September 15, 2010.  No premium  shall be payable in connection  with
any required  prepayment made pursuant to this Section 8.1(a).  Upon any partial
prepayment of the Series A Notes  pursuant to Section 8.2, the principal  amount
of each  required  prepayment  of the  Series A Notes  becoming  due under  this
Section 8.1 (a) on and after the date of such prepayment shall be reduced in the
same proportion as the aggregate  unpaid  principal amount of the Series A Notes
is reduced as a result of such prepayment;

                  (b) The  Company  agrees  that on  September  15 in each year
commencing  September 15, 2004 and ending on September 15, 2009, both inclusive,
it will prepay and apply and there shall become due and payable on the principal
debt  evidenced  by the  Series B Notes an  amount  equal to the  lesser  of (x)
$1,428,571.43   or  (y)  the  principal  amount  of  the  Series  B  Notes  then
outstanding.  The entire remaining  principal amount of the Series B Notes shall
become due and payable on  September  15, 2010.  No premium  shall be payable in
connection  with any required  prepayment  made pursuant to this Section 8.1(b).
Upon any partial  prepayment of the Series B Notes  pursuant to Section 8.2, the
principal amount of each required  prepayment of the Series B Notes becoming due
under this  Section  8.1 (b) on and after the date of such  prepayment  shall be
reduced in the same proportion as the aggregate  unpaid  principal amount of the
Series B Notes is reduced as a result of such prepayment;

                  (c) The  Company  agrees  that on  September  15 in each year
commencing  September 15, 2004 and ending on September 15, 2009, both inclusive,
it will prepay and apply and there shall become due and payable on the principal
debt  evidenced  by the  Series C Notes an  amount  equal to the  lesser  of (x)
$2,142,857.14   or  (y)  the  principal  amount  of  the  Series  C  Notes  then
outstanding.  The entire remaining  principal amount of the Series C Notes shall
become due and payable on  September  15, 2010.  No premium  shall be payable in
connection with any


                                      -18-


<PAGE>


required  prepayment  made  pursuant to this  Section  8.1(c).  Upon any partial
prepayment of the Series C Notes  pursuant to Section 8.2, the principal  amount
of each  required  prepayment  of the  Series C Notes  becoming  due under  this
Section 8.1 (c) on and after the date of such prepayment shall be reduced in the
same proportion as the aggregate  unpaid  principal amount of the Series C Notes
is  reduced  as a result  of such  prepayment.

     8.2  OPTIONAL  PREPAYMENTS  WITH MAKE-WHOLE AMOUNT.

          The Company may, at its option,  upon notice as provided below, prepay
at any time  all,  or from  time to time any part of (but if in part,  then such
prepayment shall be applied against the Series A Note, the Series B Note and the
Series C Note, respectively, in proportion to the aggegate amount outstanding of
each  Series),  the  Notes,  in an  amount  not  less  than 5% of the  aggregate
principal  amount of all series of the Notes then  outstanding  in the case of a
partial  prepayment,  at 100% of the principal amount so prepaid,  together with
interest accrued thereon to the date of such prepayment, plus the greater of (i)
zero and (ii) the Make-Whole  Amount  determined  for the  prepayment  date with
respect to such  principal  amount.  The Company  will give each Holder of Notes
written notice of each optional  prepayment under this Section 8.2 not less than
30 days and not more than 60 days prior to the date  fixed for such  prepayment.
Each such notice shall specify such date, the aggregate  principal amount of the
Notes to be prepaid on such date, the principal amount of each Note held by such
Holder to be prepaid  (determined  in  accordance  with  Section  8.3),  and the
interest to be paid on the prepayment date with respect to such principal amount
being prepaid,  and shall be accompanied by a certificate of a Senior  Financial
Officer  as to the  estimated  Make-Whole  Amount  due in  connection  with such
prepayment  (calculated  as if the  date of such  notice  were  the  date of the
prepayment),  setting forth the details of such  computation.  Two Business Days
prior to such  prepayment,  the Company  shall deliver to each Holder of Notes a
certificate of a Senior  Financial  Offcer  specifying  the  calculation of such
Make-Whole Amount as of the specified prepayment date.

     8.3 ALLOCATION OF PARTIAL PREPAYMENTS

     In the case of each partial prepayment of the Notes pursuant to Section
8.2, the principal  amount of the Notes to be prepaid  shall be allocated  among
all  of  the  Notes  at  the  time  outstanding  in  proportion,  as  nearly  as
practicable,  to the respective unpaid principal amounts thereof not theretofore
prepaid.

     8.4 MATURITY; SURRENDER, ETC.

     In the case of each  prepayment  or purchase of Notes  pursuant to this
Section 8, the  principal  amount of each Note to be prepaid or purchased  shall
mature  and become due and  payable  on the date  fixed for such  prepayment  or
purchase,  together with interest on such principal  amount accrued to such date
and the applicable  Make-Whole  Amount, if any. From and after such date, unless
the Company  shall fail to pay such  principal  amount when so due and  payable,
together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such  principal  amount  shall cease to accrue.  Any Note paid,  purchased or
prepaid in full shall be  surrendered to the Company and cancelled and shall not
be  reissued,  and no Note shall be issued in lieu of any  prepaid or  purchased
principal amount of any Note.


                                      -19-


<PAGE>


     8.5 PURCHASE OF NOTES.

     The Company  will not and will not permit any  Affiliate  to  purchase,
redeem,  prepay  or  otherwise  acquire,  directly  or  indirectly,  any  of the
outstanding  Notes except upon the purchase,  payment or prepayment of the Notes
in accordance  with the terms of this Agreement and the Notes.  The Company will
promptly  cancel  all Notes  acquired  by it or any  Affiliate  pursuant  to any
payment,  prepayment  or purchase of Notes  pursuant  to any  provision  of this
Agreement  and no Notes may be issued in  substitution  or exchange for any such
Notes.

     8.6 MAKE-WHOLE AMOUNT.

     "MAKE-WHOLE  AMOUNT" means,  with respect to any Note of any series, an
amount equal to the excess,  if any, of the  Discounted  Value of the  Remaining
Scheduled  Payments  with  respect to the Called  Principal of such Note of such
series over the amount of such Called  Principal,  PROVIDED THAT the  Make-Whole
Amount may in no event be less than zero.  For the purposes of  determining  the
Make-Whole Amount, the following terms have the following meanings:

          "CALLED  PRINCIPAL" means, with respect to any Note of any series, the
principal of the Note of such series that is to be prepaid or purchased pursuant
to Section 8.2 or has become or is declared  to be  immediately  due and payable
pursuant to Section 12.1, as the context requires.

          "DISCOUNTED  VALUE" means, with respect to the Called Principal of any
Note of any series,  the amount obtained by discounting all Remaining  Scheduled
Payments with respect to such Called Principal from their  respective  scheduled
due dates to the  Settlement  Date with  respect to such  Called  Principal,  in
accordance with accepted financial practice and at a discount factor (applied on
the same  periodic  basis as that on which  interest  on such Notes is  payable)
equal to the Reinvestment Yield with respect to such Called Principal.

          "REINVESTMENT  YIELD" means, with respect to the Called Principal of a
Note of any series,  0.50% over the yield to maturity  implied by (i) the yields
reported,  as of 10:00  A.M.  (New York City time) on the  second  Business  Day
preceding  the  Settlement  Date with respect to such Called  Principal,  on the
display  designated as Screen PX1 on the Bloomberg  Financial  Markets  Services
System (or such other display as may replace  Screen PX1 on Bloomberg  Financial
Markets Services System) for actively traded U. S. Treasury  securities having a
maturity equal to the remaining average live of such Called Principal as of such
Settlement Date, [or (ii) if such yields are not reported as of such time or the
yields  reported as of such time are not  ascertainable,  the Treasury  Constant
Maturity Series Yields  reported,  for the latest day for which such yields have
been so reported as of the second  Business Day  preceding the  Settlement  Date
with respect to such Called Principal,  in Federal Reserve  Statistical  Release
H.15 (519) (or any comparable  successor  publication) for actively traded U. S.
Treasury  securities  having a constant  maturity equal to the remaining average
life of such Called  Principal as of such  Settlement  Date.] Such implied yield
will  be  determined,  if  necessary,  by  (a)  converting  U.S.  Treasury  bill
quotations  to  bond-equivalent  yields in accordance  with  accepted  financial
practice and (b)  interpolating  linearly  between (1) the actively traded U. S.
Treasury  security  with the maturity  closest to and greater than the remaining
average life of such Called Principal and (2) the actively traded U. S. Treasury
security with the maturity  closest to and less than the remaining  average life
of such Called Principal.


                                      -20-


<PAGE>


          "REMAINING  SCHEDULED  PAYMENTS"  means,  with  respect  to the Called
Principal of any Note of any series,  all payments of such Called  Principal and
interest  thereon  that would be due after the  Settlement  Date with respect to
such Called  Principal if no payment or purchase of such Called  Principal  were
made prior to its scheduled due date,  PROVIDED that if such  Settlement Date is
not a date on which interest  payments are due to be made under the terms of the
Notes of such series, then the amount of the next succeeding  scheduled interest
payment  will be reduced by the amount of  interest  accrued to such  Settlement
Date and required to be paid on such  Settlement Date pursuant to Section 8.2 or
12.1.

          "SETTLEMENT  DATE" means,  with respect to the Called Principal of any
Note of any series,  the date on which such Called Principal is to be prepaid or
purchased pursuant to Section 8.2 or has become or is declared to be immediately
due and payable pursuant to Section 12.1, as the context requires.

 9.  AFFIRMATIVE COVENANTS.

     The Company covenants that so long as any of the Notes are outstanding:

     9.1 COMPLIANCE WITH LAW.

     The Company will, and will cause each of its  Subsidiaries  to, comply
with all laws,  ordinances or governmental rules or regulations to which each of
them is subject,  including,  without  limitation,  Environmental Laws, and will
obtain and maintain in effect all licenses,  certificates,  permits,  franchises
and  other  governmental  authorizations  necessary  to the  ownership  of their
respective properties or to the conduct of their respective businesses,  in each
case to the  extent  necessary  to ensure  that  non-compliance  with such laws,
ordinances  or  governmental  rules or  regulations  or  failures  to  obtain or
maintain in effect such licenses,  certificates,  permits,  franchises and other
governmental  authorizations  could  not,  individually  or  in  the  aggregate,
reasonably be expected to have a Material Adverse Effect.


                                      -21-


<PAGE>


     9.2 INSURANCE.

     The Company will, and will cause each of its Subsidiaries to, maintain,
with financially sound and reputable  insurers,  insurance with respect to their
respective  properties and businesses against such casualties and contingencies,
of  such  types,  on such  terms  and in such  amounts  (including  deductibles,
co-insurance  and  self-insurance,  if adequate  reserves  are  maintained  with
respect  thereto)  as is  customary  in the  case  of  entities  of  established
reputations engaged in the same or a similar business and similarly situated.

     9.3 MAINTENANCE OF PROPERTIES.

         The Company will, and will cause each of its  Subsidiaries to, maintain
and keep, or cause to be maintained  and kept,  their  respective  properties in
good repair, working order and condition (other than ordinary wear and tear), so
that the business carried on in connection  therewith may be properly  conducted
at all times,  PROVIDED  that this Section  shall not prevent the Company or any
Subsidiary  from  discontinuing  the operation and the maintenance of any of its
properties  if such  discontinuance  is desirable in the conduct of its business
and the Company has concluded that such discontinuance  could not,  individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

     9.4 PAYMENT OF TAXES AND CLAIMS.

         The Company will, and will cause each of its  Subsidiaries to, file all
tax returns  required to be filed in any  jurisdiction  and to pay and discharge
all taxes  shown to be due and  payable  on such  returns  and all other  taxes,
assessments,  governmental  charges,  or levies  imposed on them or any of their
properties,  assets,  income  or  franchises,  to  the  extent  such  taxes  and
assessments  have become due and payable and before they have become  delinquent
and all  claims for which sums have  become due and  payable  that have or might
become a Lien on properties or assets of the Company or any Subsidiary, PROVIDED
that neither the Company nor any Subsidiary  need pay any such tax or assessment
or claims if (a) the amount,  applicability  or validity thereof is contested by
the  Company  or  such  Subsidiary  on a  timely  basis  in  good  faith  and in
appropriate  proceedings,  and the Company  has  established  adequate  reserves
therefor  in  accordance  with  GAAP  on the  books  of the  Company  or (b) the
nonpayment  of all  such  taxes  and  assessments  in the  aggregate  could  not
reasonably be expected to have a Material Adverse Effect.

     9.5 CORPORATE EXISTENCE, ETC.

         The Company and each  Subsidiary will at all times preserve and keep in
fill force and effect its  corporate  existence.  Subject to  Sections  10.2 and
10.9,  the Company will at all times  preserve and keep in full force and effect
the  corporate  existence  of  each  of its  Subsidiaries  and  all  rights  and
franchises  of the  Company  and its  Subsidiaries  unless,  in the  good  faith
judgment of the Company,  the  termination of or failure to preserve and keep in
full force and effect such corporate  existence,  right or franchise  could not,
individually or in the aggregate, have a Material Adverse Effect.


                                      -22-


<PAGE>


     9.6 NOTES AND GUARANTEE TO RANK PARI PASSU.

     The Notes, the Subsidiary  Guarantee Agreements and all obligations of
the Company and the  Subsidiary  Guarantors  thereunder and hereunder are and at
all times shall  remain  direct  obligations  of the Company and the  Subsidiary
Guarantors,  as the case may be, ranking pari passu as against the assets of the
Company or the Subsidiary  Guarantors,  as the case may be, with the obligations
of the Company and the  Subsidiary  Guarantors  under the Credit  Agreement  and
other Debt of the Company and of the Subsidiary  Guarantors,  except the Debt of
the Company disclosed on Schedule 5.19.

10.  NEGATIVE COVENANTS.

     The Company covenants that so long as any of the Notes are outstanding:

     10.1 TRANSACTIONS WITH AFFILIATES.

     The  Company  and  each  Restricted  Subsidiary  will not  enter  into
directly or indirectly any transaction or Material group of related transactions
(including  without  limitation  the  purchase,   lease,  sale  or  exchange  of
properties  of any kind or the  rendering  of any  service)  with any  Affiliate
(other  than the  Company  or  another  Restricted  Subsidiary),  except  in the
ordinary course and pursuant to the reasonable  requirements of the Company's or
such Restricted Subsidiary's business and upon fair and reasonable terms no less
favorable to the Company or such Restricted  Subsidiary than would be obtainable
in a comparable arm's-length transaction with a Person not an Affiliate.

     10.2 MERGER, CONSOLIDATION, ETC.

     The Company and each Restricted  Subsidiary shall not consolidate with
or merge with any other corporation or convey,  transfer or lease  substantially
all of its  assets in a single  transaction  or series  of  transactions  to any
Person unless:

                  (a) in the case of the Company,  the successor formed by such
consolidation  or the  survivor of such  merger or the Person  that  acquires by
conveyance,  transfer or lease substantially all of the assets of the Company as
an entirety,  as the case may be, shall be a solvent  corporation  organized and
existing under the laws of the United States or any State thereof (including the
District of Columbia),  and, if such  corporation  is not the Company,  (x) such
corporation  shall have executed and delivered to each Holder its  assumption of
the due and punctual  performance  and observance of each covenant and condition
of this  Agreement  and the Notes and (y) shall have caused to be  delivered  to
each Holder an opinion of nationally  recognized  independent  counsel, or other
independent  counsel  reasonably  satisfactory to the Required  Holders,  to the
effect  that  all  agreements  or  instruments  effecting  such  assumption  are
enforceable in accordance  with their terms and comply with the terms hereof and
(ii) in the case of any Restricted  Subsidiary,  any  Restricted  Subsidiary may
merge or consolidate with the Company or any Wholly-Owned Subsidiary;

                  (b) after  giving  effect to such  transaction, no  Default or
Event of Default shall have occurred and be continuing; and


                                      -23-


<PAGE>


                  (c) after giving effect to such transaction, the Company would
be  permitted  to incur at least $1.00 of  additional  Funded  Debt  pursuant to
Section 10.6(a)(iii).

 No such conveyance, transfer or lease of substantially all of the assets of the
 Company or any  Restricted  Subsidiary  shall have the effect of releasing  the
 Company,  such Restricted  Subsidiary or any successor  corporation  that shall
 theretofore have become such in the manner prescribed in this Section 10.2 from
 its liability under this Agreement or the Notes.

     10.3 LIENS.

     The  Company  and its  Restricted  Subsidiaries  will not,  directly or
indirectly,  create or incur,  or suffer to be  incurred  or to exist  (upon the
happening of a contingency or otherwise),  any Lien on or with respect to any of
its or their property or assets (including,  without limitation, any document or
instrument  in respect of goods or  accounts  receivable),  whether now owned or
hereafter  acquired or upon any income or profits  therefrom,  or  transfer  any
property for the purpose of subjecting the same to the payment of obligations in
priority to the payment of its or their general  creditors,  or acquire or agree
to acquire,  any property or assets upon  conditional  sales agreements or other
title retention devices, except:

                  (a) Liens for property  taxes,  assessments  or  governmental
charges or levies  which are not yet due and payable or the payment of which is
not at the time required by Section 9.4;

                  (b) statutory Liens of landlords,  Growers' Liens and Liens of
carriers, warehousemen,  mechanics, materialmen and other similar Liens, in each
case,  incurred  in the  ordinary  course of  business  for sums not yet due and
payable or the payment of which is not at the time required by Section 9.4;

                  (c) Liens (other than any Lien imposed by ERISA) incurred,  or
Liens  consisting of deposits  made,  in the ordinary  course of business (i) in
connection with workers' compensation, unemployment insurance and other types of
social security or retirement benefits,  or (ii) to secure (or to obtain letters
of credit that secure) the performance of tenders, statutory obligations, surety
bonds,  appeal  bonds,  bids,  leases (other than Capital  Leases),  performance
bonds, purchase,  construction or sales contracts and other similar obligations,
in each case not incurred or made in connection with the borrowing of money, the
obtaining of advances or credit or the payment of the deferred purchase price of
property;

                   (d) any attachment or judgment  Lien,  unless the judgment it
 secures shall not, within 60 days after the entry thereof, have been discharged
 or execution  thereof stayed pending appeal,  or shall not have been discharged
 within 60 days after the expiration of any such stay;

                  (e)  leases,   licenses  or   subleases   granted  to  others,
easements,   rights-of-way,   restrictions   and  other   similar   charges   or
encumbrances, in each case incidental to, and not interfering with, the ordinary
conduct of the business of the Company or any of its Subsidiaries, PROVIDED that
such Liens do not, in the aggregate,  result in a Material Adverse Effect on the
occupation, use and enjoyment of the property encumbered thereby;


                                      -24-


<PAGE>


                  (f) Liens on property or assets of any Wholly-Owned Subsidiary
securing  Debt of such  Wholly-Owned  Subsidiary  owing to another  Wholly-Owned
Subsidiary or to the Company;

                  (g) Liens existing as of the date hereof and reflected on
Schedule 5.15 hereto;

                  (h) Liens existing on property of a Person  immediately  prior
to its  being  consolidated  with or merged  into the  Company  or a  Restricted
Subsidiary or its becoming a Restricted Subsidiary,  or any Lien existing on any
property  acquired by the Company or any Restricted  Subsidiary at the time such
property is so acquired (whether or not the Debt secured thereby shall have been
assumed),  PROVIDED  THAT (i) no such Lien shall have been created or assumed in
contemplation  of such  consolidation  or merger  or such  Person's  becoming  a
Restricted Subsidiary or such acquisition of property, (ii) each such Lien shall
extend  solely to the item or items of property so acquired  and, if required by
the terms of the instrument  originally creating such Lien, other property which
is an improvement  to or is acquired for specific use in  connections  with such
acquired property and (iii) the Debt assumed,  created,  acquired or incurred in
connection therewith shall have been incurred within the limitations provided in
Section 10.6(a)(iii);

                  (i) any Lien  created  after the date hereof to secure all or
any part of the purchase  price, or to secure Funded Debt incurred or assumed to
pay all or any part of the purchase price or cost of  construction,  of tangible
property (or any improvement  thereon) acquired or constructed by the Company or
any Restricted Subsidiary after the Closing Date, PROVIDED that

                           (i) any such Lien  shall  extend  solely  to the item
                  or items of such property (or improvement thereon) so acquired
                  or constructed and, if required by the terms of the instrument
                  originally  creating such Lien, other property (or improvement
                  thereon)  which  is  an  improvement  to or  is  acquired  for
                  specific use in connection  with such acquired or  constructed
                  property (or  improvement  thereon) or which is real  property
                  being  improved by such acquired or  constructed  property (or
                  improvement thereon),

                           (ii) the  principal amount of the Funded Debt secured
                  by any such Lien  shall at no time  exceed an amount  equal to
                  the lesser of (A) the cost to the  Company or such  Restricted
                  Subsidiary  of  the  property  (or  improvement   thereon)  so
                  acquired  or  constructed  and (B) the fair  market  value (as
                  determined  in good  faith by the  board of  directors  of the
                  Company) of such property (or improvement thereon) at the time
                  of such acquisition or construction,

                          (iii) any such Lien shall be created contemporaneously
                  with,   or  within  180  days  after,   the   acquisition   or
                  construction of such property, and

                          (iv) incurrence of any Funded Debt in connection there
                  with shall have been incurred within the limitations  provided
                  in Section 10.6;


                                      -25-


<PAGE>





                  (j) Liens  created  or  incurred  after the  Closing  given to
secure  Funded Debt of the Company or any  Restricted  Subsidiary in addition to
the Liens permitted by clauses (a) through (i) hereof, PROVIDED THAT (i) the sum
of (x)  Funded  Debt  secured  by such  Liens  and (y) the  aggregate  amount of
outstanding Priority Debt does not exceed 10% of Consolidated Net Worth and (ii)
that all Funded Debt secured by Liens incurred pursuant to this Section 10.3 (j)
shall have been incurred within the limitation provided in Section 10.6; and

                  (k) any extension,  renewal or refunding of any Lien permitted
by the preceding  clauses (g), (h) or (i) of this Section 10.3 in respect of the
same property theretofore subject to such Lien in connection with the extension,
renewal or refunding of the Funded Debt secured thereby;  PROVIDED THAT (1) such
extension,  renewal or refunding of Funded Debt shall be without increase in the
principal amount  remaining unpaid as of the date of such extension,  renewal or
refunding,  (2) the time remaining  until the maturity of such Funded Debt shall
not be reduced, (3) such Lien shall attach solely to the same such property, (4)
immediately  after the  consummation of the extension,  renewal or refunding and
after giving effect thereto, no Default or Event of Default would exist, and (5)
after giving effect to such extension,  renewal or refunding,  the Company would
be  permitted  to incur at least $1.00 of  additional  Funded  Debt  pursuant to
Section 10.6(a)(iii).

         If,  notwithstanding  the  prohibition  contained  herein,  the Company
shall,  or shall  permit any of its  Restricted  Subsidiaries  to,  directly  or
indirectly,  create, incur, assume or permit to exist any Lien, other than those
Liens  permitted by the provisions of paragraphs (a) through (k) of this Section
10.3,  it will make or cause to be made  effective  provision  whereby the Notes
will be secured equally and ratably with any and all other  obligations  thereby
secured, such security to be pursuant to agreements  reasonably  satisfactory to
the Required Holders and, in any such case, the Notes shall have the benefit, to
the fullest extent that, and with such priority as, the Holders of the Notes may
be entitled under  applicable  law, of an equitable Lien on such property.  Such
violation of this Section 10.3 will  constitute an Event of Default,  whether or
not  provision  is made for an equal and ratable  Lien  pursuant to this Section
10.3.

     10.4 CONSOLIDATED NET WORTH.

     The Company shall not, at any time, permit Consolidated Net Worth to be
less  than  75% of  Consolidated  Net  Worth  calculated  as of  the  end of the
Company's most recently completed fiscal year.

     10.5 INTEREST COVERAGE.

     The  Company  shall  at all  times  keep  and  maintain  the  ratio  of
Consolidated  Net  Income   Available  for  Consolidated   Interest  Expense  to
Consolidated Interest Expense, calculated on a Rolling Four Quarter basis at the
end of each fiscal quarter, of at least 2.0 to 1.0.

     10.6 LIMITATION ON FUNDED DEBT.

                  (a) The Company will not,  and will not permit any  Restricted
Subsidiary to, create,  issue,  assume,  guarantee or otherwise  incur or in any
manner be or become liable in respect of any Funded Debt except:


                                      -26-


<PAGE>


                          (i) Funded Debt evidenced by the Notes and Funded Debt
                  of the  Subsidiary  Guarantors  evidenced  by  the  Subsidiary
                  Guarantee Agreements;

                          (ii)  Funded Debt of the Company and  its   Restricted
                  Subsidiaries  outstanding as of the Closing Date and described
                  as such on Schedule 5.15;

                          (iii)  additional  Funded Debt of the Company incurred
                  after the Closing Date,  PROVIDED, HOWEVER,  that Consolidated
                  Funded  Debt  shall  not  exceed  50%  of  Consolidated  Total
                  Capitalization; and

                          (iv)  unsecured   Current  Debt  of  the  Company  and
                  its Restricted Subsidiaries, PROVIDED THAT the Company and its
                  Restricted   Subsidiaries  will  not  at  any  time  have  any
                  Consolidated  Current Debt outstanding unless there shall have
                  been during the twelve-month period immediately  preceding the
                  date of determination  hereunder,  a period of at least thirty
                  consecutive  days during which the unpaid  principal amount of
                  all  Consolidated  Current  Debt  outstanding  at the close of
                  business on each such date would have been permitted  pursuant
                  to clause  (b)(iii) of this Section 10.6 if such  Consolidated
                  Current Debt had been deemed to be Funded Debt.

                  (b) The  Company  will not at any time  permit the  aggregate
 amount of outstanding  Funded Debt of Restricted  Subsidiaries  (other than (i)
 Funded  Debt of such  Restricted  Subsidiaries  owed to the  Company or another
 Restricted  Subsidiary,  and  (ii)  Funded  Debt  evidenced  by  the  Permitted
 Subsidiary  Guarantor   Guarantees)  to  exceed  an  amount  equal  to  15%  of
 Consolidated Net Worth.

                  (c) Any Person which becomes a Restricted Subsidiary after the
date  hereof  shall  for all  purposes  of this  Section  10.6 be deemed to have
created,  assumed or incurred at the time it becomes a Restricted Subsidiary all
Funded Debt of such Person  existing  immediately  after it becomes a Restricted
Subsidiary.

     10.7 LIMITATION ON RESTRICTED PAYMENTS.

         The Company will not, and will not permit any Restricted Subsidiary to,
except as hereinafter provided:

                  (a) Declare or pay any dividends,  either in cash or property,
on any share of its Capital Stock or other equity interests (except dividends or
other  distributions  (i)  payable  solely in shares of  Capital  Stock or other
equity interests of the Company and (ii) payable by a Wholly-owned Subsidiary to
the Company or to another Wholly-owned Subsidiary);

                  (b)  Directly  or  indirectly,   or  through  any  Restricted
 Subsidiary or through any Affiliate of the Company,  purchase, redeem or retire
 any shares of its Capital  Stock of any class or other equity  interests or any
 warrants,  rights or options to  purchase  or acquire any shares of its Capital
 Stock or other equity interests; or


                                      -27-


<PAGE>


                  (c) make any other payment or distribution, either directly or
indirectly or through any Restricted Subsidiary, in respect of its Capital Stock
or other equity interest;

(such  declarations  or  payments  of  dividends,   purchases,   redemptions  or
retirements of Capital Stock or other equity  interests and warrants,  rights or
options and all such other payments or distributions  being herein  collectively
called "RESTRICTED PAYMENTS"),  unless (i) the sum of (x) the aggregate value of
all  Investments  of  the  Company  and  its  Restricted   Subsidiaries  (valued
immediately  after such action) incurred  pursuant to Section 10.8(h),  plus (y)
the aggregate  amount of Restricted  Payments of the Company and its  Restricted
Subsidiaries  declared or made during the period  commencing on the Closing Date
and ending on the date such Restricted  Payment is declared or made,  inclusive,
would not exceed an amount equal to (A) 50% of Consolidated  Net Income for such
period (or minus 100% of Consolidated Net Income for such period if Consolidated
Net  Income  for such  period is a loss)  plus (B) the  aggregate  amount of Net
Proceeds of Capital  Stock for such period;  (ii) no Default or Event of Default
would exist hereunder, and (iii) after giving effect to such Restricted Payment,
the Company would be permitted to incur at least $1.00 of additional Funded Debt
pursuant to Section 10.6(a)(iii).

         Notwithstanding  the other provisions of this Section 10.7, the Company
shall be entitled to issue Wine Dividend Credits to its  shareholders,  and such
issuance  shall not be subject to the  calculation  set forth above and shall be
permitted  hereunder,  PROVIDED  no  Default  or Event of  Default  shall  exist
immediately after the declaration or payment of any such Wine Dividend Credits.

     10.8 LIMITATION ON INVESTMENT.

     The Company will not, and will not permit any Restricted Subsidiary to,
make any Investments, other than:

                  (a)  Investments  in and advances to Restricted  Subsidiaries,
including any  Investment  in a  corporation  that operates in lines of business
similar to the Company's  existing lines of business which,  after giving effect
to such Investment, will become a Restricted Subsidiary;

                  (b)  Investments  representing  loans or advances to officers,
directors and employees for expenses  (including  moving  expenses  related to a
transfer)  incidental  to  carrying  on  the  business  of  the  Company  or any
Restricted Subsidiary in an aggregate outstanding amount not to exceed $500,000;

                  (c) notes receivable  arising from transactions with customers
and  suppliers  in the  ordinary  course  of  business  of the  Company  and its
Restricted  Subsidiaries  in an  aggregate  outstanding  amount  not  to  exceed
$1,500,000;

                  (d) Investments in direct  obligations of the United States of
America or any agency or  instrumentality  of the United States of America,  the
payment or guarantee of which  constitutes a full faith and credit obligation of
the United States of America, in either case, maturing within twelve months from
the date of acquisition thereof;


                                      -28-


<PAGE>


                  (e)  Investments in  certificates of deposit and time deposits
maturing  within  one  year  from  the  date  of  issuance   thereof,   bankers'
acceptances,  Eurodollar deposits,  short-term investment funds and money market
certificates  issued by a bank or trust  company  having  capital,  surplus  and
undivided profits aggregating at least  $100,000,000,  PROVIDED that at the time
of  acquisition  thereof by the Company or a Restricted  Subsidiary , the senior
unsecured long-term debt of such bank or trust company or of the holding company
of such bank or trust company is rated,  or has an equivalent  rating of, "A" or
better by Standard & Poor's Ratings Group or "A2" or better by Moody's Investors
Service, Inc.;

                  (f) Investments in commercial paper of corporations organized
under the laws of the United States or any State  thereof,  maturing  within 270
days or less from the date of issuance  which, at the time of acquisition by the
Company  or  any   Subsidiary,   are   accorded   one  of  the  top  two  rating
classifications  by  Standard & Poor's  Ratings  Group or by  Moody's  Investors
Service, Inc.;

                  (g) Guaranties of Funded Debt of  Unrestricted  Subsidiaries,
PROVIDED THAT the  incurrence of such  Guaranties  would be permitted  under the
limitations of Section 10.6(a)(iii) hereof; and

                  (h) other  Investments (in addition to those permitted by the
foregoing  provisions of this Section 10.8),  PROVIDED,  THAT (i) the sum of (x)
the  aggregate  value  of all  Investments  of the  Company  and its  Restricted
Subsidiaries  (valued  immediately  after such action) incurred pursuant to this
clause (h), plus (y) the aggregate amount of Restricted  Payments of the Company
and its Restricted Subsidiaries declared or made during the period commencing on
the  Closing  Date and ending on the date such  Investment  is declared or made,
inclusive,  would  not  exceed an amount  equal to (A) 50% of  Consolidated  Net
Income for such period (or minus 100% of Consolidated Net Income for such period
if  Consolidated  Net Income for such period is a loss),  plus (B) the aggregate
amount of Net  Proceeds  of Capital  Stock for such  period;  (ii) no Default or
Event of Default  would exist  hereunder,  and (iii) after giving effect to such
Investment, the Company would be permitted to incur at least $1.00 of additional
Funded Debt pursuant to Section 10.6(a)(iii).

         In valuing any  Investments for the purpose of applying the limitations
set forth in this Section 10.8, such Investments  shall be taken at the original
cost thereof, without allowance for any subsequent write-offs or appreciation or
depreciation  therein,  but less any amount  repaid or  recovered  on account of
capital or principal.

         For  purposes  of this  Section  10.8,  at any time when a  corporation
becomes a Restricted  Subsidiary,  all  Investments of such  corporation at such
time  shall be deemed to have been  made by such  corporation,  as a  Restricted
Subsidiary , at such time.

     10.9 SALE OF ASSETS.

     The Company shall not, and shall not permit any  Restricted  Subsidiary to,
sell, lease,  transfer or otherwise dispose of assets (except assets sold in the
ordinary  course of  business  for fair  market  value and except as provided in
Section 10.2); PROVIDED, THAT the foregoing restrictions do not apply to:


                                      -29-


<PAGE>





                  (a) the sale,  lease,  transfer or other disposition of assets
of a  Restricted  Subsidiary  to the  Company or a Wholly-Owned Subsidiary; or

                  (b) the sale of assets for cash or other property to a person
or persons if all the following conditions are met:

                           (i) such  assets (valued  at net book  value) do not,
                  together  with  all  other  assets  of  the  Company  and  its
                  Restricted  Subsidiaries  previously  disposed  of during  the
                  immediately  preceding  twelve-month period (other than in the
                  ordinary course of business), exceed 15% of Consolidated Total
                  Assets,  determined  at the end of the  immediately  preceding
                  fiscal quarter;

                           (ii) in the opinion of the Company's  board of direc-
                  tors,  the sale is for fair value and is in the best interests
                  of the Company and its Subsidiaries, taken as a whole; and

                           (iii) immediately  prior  to  and  after  the  consu-
                  mmation  of the  transaction  and  prior to and  after  giving
                  effect  thereto (A) no Default or Event of Default would exist
                  and (B) the Company would be permitted to incur at least $1.00
                  of  additional  Funded  Debt under the  provisions  of Section
                  10.6(a)(iii) hereof;

PROVIDED, HOWEVER,  that for the purposes of the  foregoing  calculation,  there
shall not be included any assets to the extent that the net proceeds of the sale
of such assets were or are applied  within  twelve months of the date of sale of
such assets to either (A) the acquisition of fixed assets useful and intended to
be used in the  operation  of the  business of the  Company  and its  Restricted
Subsidiaries  as described in the  Memorandum and having a fair market value (as
determined  in good faith by the board of  directors  of the  Company)  at least
equal  to that of the net  proceeds  applied  from  the  sale of the  assets  so
disposed of or (B) the prepayment at par of the Notes on a pro rata basis.

     10.10 LIMITATIONS ON SALE-AND-LEASEBACK TRANSACTIONS.

     The Company will not, and will not permit any Restricted Subsidiary to,
enter into any Sale-and-Leaseback  Transaction more than 180 days after the date
of acquisition or occupancy of the subject asset  (whichever  shall be the later
to occur), with the intention of leasing back such asset, except:

                  (a) a  Sale-and-Leaseback  Transaction  where the term of the
lease, including renewal, does not exceed three years;

                  (b) a Sale-and-Leaseback Transaction  where the sale is either
(i)  by a  Restricted  Subsidiary  to  the  Company  or  to  another  Restricted
Subsidiary or (ii) by the Company to a Restricted Subsidiary;

                  (c) a  Sale-and-Leaseback  Transaction  where (i) in the good
 faith  opinion  of the  Company,  the sale is for fair  value  and (ii) the net
 proceeds are applied (1) to purchase, acquire


                                      -30-


<PAGE>


or, in the case of real  property,  construct  assets to be used in the ordinary
course of  business  of the  Company or its  Restricted  Subsidiaries  or (2) to
reduce senior Funded Debt of the Company; or

                  (d)   Sale-and-Leaseback   Transactions  in  addition  to  the
Sale-and-Leaseback  Transactions permitted by the preceding clauses (a), (b) and
(c)  hereof;   PROVIDED  that   immediately   after  the   consummation  of  the
Sale-and-Leaseback  Transaction  and after giving effect thereto an amount equal
to the fair market  value of the subject  property  could have been  incurred as
Priority Debt within the limitation of Section 10.30).

     10.11 SUBSIDIARY GUARANTORS.

                  (a) The Company  shall cause each of the  Original  Subsidiary
Guarantors  to execute and  deliver,  on or before the Closing,  and  thereafter
shall cause each  Additional  Subsidiary  Guarantor to execute and deliver,  the
Subsidiary  Guarantee  Agreement  pursuant to which each such  Subsidiary  shall
guarantee the payment of all amounts payable by the Company  hereunder and under
the Notes and the  performance of all  obligations of the Company  hereunder and
under the Notes.

                  (b)  In  connection   with  the  delivery  of  the  Subsidiary
Guarantee  Agreement,  the Company  shall  cause each  Subsidiary  Guarantor  to
deliver to each Holder of the Notes (i) such documents and evidence with respect
to such  Subsidiary  Guarantor as any Holder may reasonably  request in order to
establish  the  existence  and good  standing of such  Subsidiary  Guarantor and
evidence  that the Board of Directors of such  Subsidiary  Guarantor has adopted
resolutions  authorizing the execution and delivery of the Subsidiary  Guarantee
Agreement to which such Subsidiary  Guarantor is a party, (ii) evidence that the
Subsidiary   Guarantee  Agreement  does  not  violate  any  of  such  Subsidiary
Guarantor's  outstanding  debt instruments in the form of (A) a certificate from
such  Subsidiary  Guarantor  to such  effect,  (B)  consents or approvals of the
holder or holders of any Security,  and/or (C) amendments of agreements pursuant
to which any  Security  may have been issued,  all as may be  reasonably  deemed
necessary by the Holders to permit the execution and delivery of the  Subsidiary
Guarantee  Agreement  to which such  Subsidiary  Guarantor  is a party,  (iii) a
certificate of such Subsidiary as to the matters  described in Exhibit 10.11 (a)
hereto and such  certificates  or other  evidence  as any Holder may  reasonably
request  to  establish  that the  transactions  contemplated  by the  Subsidiary
Guarantee  Agreement  to which such  Subsidiary  Guarantor  is a party shall not
subject any such Subsidiary  Guarantor to any tax,  penalty,  liability or other
onerous  condition  under or  pursuant  to any  applicable  law or  governmental
regulation,  (iv) an opinion of independent  counsel (which  opinion,  in scope,
form and  substance,  and  counsel,  shall  be  reasonably  satisfactory  to the
Holders) and (v) all other  documents and showings  reasonably  requested by the
Holders  in  connection  with  the  execution  and  delivery  of the  Subsidiary
Guarantee  Agreement  to which  such  Subsidiary  Guarantor  is a  party,  which
documents  shall be  satisfactory in form and substance to the Holders and their
special  counsel,  and each  Holder  shall  have  received a copy  (executed  or
certified as may be appropriate) of all of the foregoing legal documents.

                  (c) Subject to compliance with Section 10.11(d) hereof, in the
event  that a  Subsidiary  Guarantor  at any  time is not,  or  ceases  to be, a
guarantor  of any Funded  Debt  (other than the Notes) of the Company or another
Subsidiary, the Company may request that the


                                      -31-


<PAGE>


Holders of the Notes  terminate  the  Subsidiary  Guarantee  Ageement as to such
Subsidiary  Guarantor and upon evidence  reasonably  satisfactory to the Holders
(and their  special  counsel if required by the  Holders)  that such  Subsidiary
Guarantor is not, or has indeed  ceased to be, a guarantor of any Funded Debt of
the Company or another  Subsidiary,  the Holders will  terminate the  Subsidiary
Guarantee Agreement with respect to such Subsidiary Guarantor.

                   (d) In addition to the other  limitations  contained  in this
Agreement,  the Company will not permit any Subsidiary which is not a Subsidiary
Guarantor at that time to be or become  liable in respect of any other  Guaranty
after the date hereof;  PROVIDED,  however, that such Subsidiary may execute and
deliver such subsequent Guaranty so long as the Company shall  contemporaneously
therewith  cause such  Subsidiary  to execute and deliver,  and such  Subsidiary
shall execute and deliver, to the Holders of the Notes, the Subsidiary Guarantee
Agreement together with all other documents, ageement, certificates and opinions
in compliance  with the terms and provisions of this Section 10.11. It being the
intent of this Section  10.11 (d) that at all times the Company  shall cause all
Subsidiaries  which have executed and delivered  Guaranties to Holders of Funded
Debt of the Company and/or any other  Subsidiary to be Subsidiary  Guarantors in
accordance with and pursuant to the provisions of this Section 10.11.

                   (e) All  reasonable  out-of-pocket  fees and  expenses of the
Holders of the Notes,  including,  without  limitation,  the reasonable fees and
expenses of special counsel to the Holders of the Notes,  incurred in connection
with the execution  and delivery of the  Subsidiary  Guarantee  Ageement and the
related ageements and opinions described above shall be borne by the Company.

     10.12 LINE OF BUSINESS.

     The  Company  will  not,  and will  not  permit  any of the  Restricted
Subsidiaries  to, engage in any business if, as a result,  the general nature of
the business in which the Company and the  Restricted  Subsidiaries,  taken as a
whole,  would then be engaged  would be  substantially  changed from the general
nature of the  business in which the Company  and the  Restricted  Subsidiaries,
taken as a whole,  are  engaged on the date of the Closing as  described  in the
Memorandum.

     10.13 CHANGE OF CONTROL.

The Company will not allow a Change of Control.

11.  EVENTS OF DEFAULT.

          An "EVENT OF DEFAULT"  shall exist if any of the following  conditions
or events shall occur:

                  (a) the Company  defaults in the payment of any  principal  or
Make-Whole  Amount,  if any, on any Note when the same  becomes due and payable,
whether at  maturity  or at a date fixed for  prepayment  or by  declaration  or
otherwise; or

                  (b) the Company defaults in the payment of any interest on any
Note for more than five days after the same becomes due and payable; or


                                      -32-


<PAGE>


                  (c) the Company  defaults in the performance of or compliance
with any term contained in Sections 10.2 through 10.8 inclusive; or

                   (d) the Company  defaults in the performance of or compliance
with any term contained herein (other than those referred to in paragraphs (a),
(b) and (c) of this Section 11) and such default is not remedied within 30 days
after the occurrence thereof; or

                  (e) any  representation  or warranty  made in writing by or on
behalf of the Company or any Original Subsidiary  Guarantor or by any officer of
the Company or any Original  Subsidiary  Guarantor  in this  Agreement or in any
writing furnished in connection with the transactions contemplated hereby proves
to have been false or incorrect in any Material  respect on the date as of which
made; or

                  (f) (i) the Company or any Subsidiary  Guarantor is in default
(as  principal or as guarantor or other  surety) in the payment of any principal
of or premium or make-whole  amount or interest on any Debt that is  outstanding
in an aggregate principal amount exceeding $5,000,000 beyond any period of grace
provided with respect thereto,  or (ii) the Company or any Subsidiary  Guarantor
is in default in the  performance of or compliance with any term of any evidence
of any Debt in an aggregate outstanding principal amount exceeding $5,000,000 or
of any  mortgage,  indenture or other  agreement  relating  thereto or any other
condition  exists,  and as a consequence  of such default or condition such Debt
has become, or has been declared (or one or more Persons are entitled to declare
such Debt to be),  due and  payable  before  its stated  maturity  or before its
regularly  scheduled  dates  of  payment,  or  (iii)  as a  consequence  of  the
occurrence or continuation of any event or condition  (other than the passage of
time or the  right of the  holder  of Debt to  convert  such  Debt  into  equity
interests),  (x) the Company or any Subsidiary Guarantor has become obligated to
purchase  or repay Debt  before its  regular  maturity  or before its  regularly
scheduled  dates  of  payment  in  an  aggregate  outstanding  principal  amount
exceeding  $5,000,000,  or (y) one or more Persons have the right to require the
Company or any Subsidiary Guarantor so to purchase or repay such Debt; or

                  (g) the Company or any Restricted Subsidiary (i) is generally
not paying,  or admits in writing its inability to pay, its debts as they become
due, (ii) files, or consents by answer or otherwise to the filing against it of,
a petition for relief or  reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy,  insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (iii) makes
an assignment for the benefit of its creditors, (iv) consents to the appointment
of a custodian,  receiver,  trustee or other  officer  with similar  powers with
respect to it or with respect to any  substantial  part of its property,  (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or

                  (h)  a  court  or   governmental   authority   of   competent
jurisdiction  enters an order appointing,  without consent by the Company or any
of its Restricted Subsidiaries, a custodian,  receiver, trustee or other officer
with similar powers with respect to it or with respect to any  substantial  part
of its property, or constituting an order for relief or approving a petition for
relief or  reorganization or any other petition in bankruptcy or for liquidation
or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of the Company or any of its
Restricted Subsidiaries, or any such petition shall be filed


                                      -33-


<PAGE>


against  the Company or any of its  Restricted  Subsidiaries  and such  petition
shall not be dismissed within 60 days; or

                  (i) a final judgment or judgments for  the  payment  of  money
aggregating  in excess of  $1,500,000  are  rendered  against one or more of the
Company and its Restricted  Subsidiaries  and which judgments are not, within 30
days after entry thereof,  bonded,  discharged or stayed pending appeal,  or are
not discharged within 30 days after the expiration of such stay; or

                  (j) (i) Default shall occur in the  observance or  performance
of any covenant or  agreement  contained in any  Subsidiary  Guaranty  Agreement
which is not  remedied  within 30 days  after the  occurrence  thereof,  (2) any
Subsidiary Guaranty Agreement shall cease to be in full force and effect for any
reason  whatsoever,  including,  without  limitation,  a  determination  by  any
governmental body or court that such agreement is invalid, void or unenforceable
or (3) the  Company  or any  Subsidiary  Guarantor,  as the case  may be,  shall
contest  or  deny  in  writing  the  validity  or  enforceability  of any of its
obligations under any Subsidiary Guarantee Agreement; or

                   (k) any  Plan  shall  fail to  satisfy  the  minimum  funding
standards  of ERISA or the Code for any plan year or part thereof or a waiver of
such  standards  or extension  of any  amortization  period is sought or granted
under  section 412 of the Code,  (ii) a notice of intent to  terminate  any Plan
shall have been or is reasonably  expected to be filed with the PBGC or the PBGC
shall have  instituted  proceedings  under ERISA  section  4042 to  terminate or
appoint a trustee to  administer  any Plan or the PBGC shall have  notified  the
Company  or any ERISA  Affiliate  that a Plan may  become a subject  of any such
proceedings,  (iii) the  aggregate  "amount  of  unfunded  benefit  liabilities"
(within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined
in  accordance  with Title IV of ERISA,  shall  exceed an amount  equal to 5% of
Consolidated  Net  Worth,  (iv) the  Company or any ERISA  Affiliate  shall have
incurred or is reasonably expected to incur any liability pursuant to Title I or
IV of ERISA or the  penalty or excise tax  provisions  of the Code  relating  to
employee  benefit plans,  (v) the Company or any ERISA Affiliate  withdraws from
any  Multiemployer  Plan, or (vi) the Company or any  Subsidiary  establishes or
amends any employee welfare benefit plan that provides  post-employment  welfare
benefits in a manner that would  increase  the  liability  of the Company or any
Subsidiary  thereunder;  and any such event or events  described  in clauses (i)
through (vi) above, either individually or together with any other such event or
events, could reasonably be expected to have a Material Adverse Effect.

As used in  Section  11(k),  the terms  "EMPLOYEE  BENEFIT  PLAN" and  "EMPLOYEE
WELFARE BENEFIT plan" shall have the respective  meanings assigned to such terms
in Section 3 of ERISA.

12.  REMEDIES ON DEFAULT, ETC.

     12.1 ACCELERATION.

                  (a) If an  Event  of  Default  with  respect  to  the  Company
described in paragraph  (g) or (h) of Section 11 (other than an Event of Default
described  in  clause  (i) of  paragraph  (g) or  described  in  clause  (vi) of
paragraph (g) by virtue of the fact that such clause  encompasses  clause (i) of
paragraph (g)) has occurred,  all the Notes then outstanding shall automatically
become immediately due and payable.


                                      -34-


<PAGE>


                  (b)  If  any  other  Event  of  Default  has  occurred  and is
continuing,  any Holder or Holders of more than 25% in  principal  amount of the
Notes at the time outstanding may at any time at its or their option,  by notice
or  notices  to the  Company,  declare  all the  Notes  then  outstanding  to be
immediately due and payable.

                  (c) If any Event of Default described in paragraph (a) or (b)
of Section 11 has occurred and is continuing,  any Holder or Holders of Notes at
the time  outstanding  affected by such Event of Default may at any time, at its
or their option, by notice or notices to the Company, declare all the Notes held
by it or them to be immediately due and payable.

          Upon any Notes  becoming  due and  payable  under this  Section  12.1,
whether  automatically  or by declaration,  such Notes will forthwith mature and
the entire  unpaid  principal  amount of such  Notes,  plus (x) all  accrued and
unpaid interest thereon and (y) the Make-Whole  Amount  determined in respect of
such principal  amount (to the full extent  permitted by applicable  law), shall
all be immediately due and payable, in each and every case without  presentment,
demand,  protest or further notice,  all of which are hereby waived. The Company
acknowledges,  and the parties hereto agree,  that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically  provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are  accelerated  as a result of an Event of  Default,  is  intended  to provide
compensation for the deprivation of such right under such circumstances.

     12.2 OTHER REMEDIES.

          If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared  immediately
due and  payable  under  Section  12.1,  the  Holder  of any  Note  at the  time
outstanding  may  proceed to protect and enforce the rights of such Holder by an
action at law, suit in equity or other appropriate  proceeding,  whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof,  or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.

     12.3 RESCISSION.

          At any time  after  any  Notes  have  been  declared  due and  payable
pursuant  to clause (b) or (c) of  Section  12.1,  the  Holders of not less than
66-2/3% in principal amount of the Notes then outstanding,  by written notice to
the Company,  may rescind and annul any such declaration and its consequences if
(a) the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole  Amount, if any, on any Notes that are due and payable and are unpaid
other  than by reason of such  declaration,  and all  interest  on such  overdue
principal  and  Make-Whole  Amount,  if any,  and (to the  extent  permitted  by
applicable  law) any overdue  interest  in respect of the Notes,  at the Default
Rate, (b) all Events of Default and Defaults,  other than non-payment of amounts
that have  become due solely by reason of such  declaration,  have been cured or
have been waived  pursuant to Section 17, and (c) no judgment or decree has been
entered for the payment of any monies due  pursuant  hereto or to the Notes.  No
rescission  and  annulment  under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.


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<PAGE>


     12.4 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.

         No course of dealing and no delay on the part of any Holder of any Note
in exercising  any right,  power or remedy shall operate as a waiver  thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy  conferred by this Agreement or by any Note upon any Holder thereof shall
be exclusive of any other right,  power or remedy  referred to herein or therein
or now or  hereafter  available  at law,  in equity,  by  statute or  otherwise.
Without  limiting the  obligations  of the Company under Section 15, the Company
will pay to the holder of each Note on demand  such  further  amount as shall be
sufficient  to cover all costs  and  expenses  of such  holder  incurred  in any
enforcement or collection under this Section 12, including,  without limitation,
reasonable attorneys' fees, expenses and disbursements.

13.  REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

     13.1 REGISTRATION OF NOTES.

     The Company shall keep at its principal  executive offce a register for
the registration and registration of transfers of Notes. The name and address of
each  Holder and the name and  address of each  transferee  of one or more Notes
shall be registered in such register.  Prior to due presentment for registration
of  transfer,  the Person in whose name any Note  shall be  registered  shall be
deemed and treated as the owner and Holder thereof for all purposes hereof,  and
the Company  shall not be affected by any notice or knowledge  to the  contrary.
The Company shall give to any Holder promptly upon request therefor,  a complete
and correct copy of the names and addresses of all registered Holders.

     13.2 TRANSFER AND EXCHANGE OF NOTES.

         Upon  surrender of any Note at the  principal  executive  office of the
Company for registration of transfer or exchange (and in the case of a surrender
for  registration  of  transfer,  duly  endorsed  or  accompanied  by a  written
instrument of transfer duly  executed by the  registered  Holder or his attorney
duly  authorized in writing and  accompanied  by the address for notices of each
transferee of such Note or part thereof), the Company shall execute and deliver,
at the Company's  expense (except as provided below),  one or more new Notes (as
requested  by the Holder  thereof) in such Series in  exchange  therefor,  in an
aggregate  principal  amount  equal  to  the  unpaid  principal  amount  of  the
surrendered  Note.  Each such new Note shall be  payable to such  Person as such
Holder may request and shall be substantially in the form of Exhibit 1-A, 1-B or
1-C,  as the case may be.  Each such new Note  shall be dated and bear  interest
from the date to which interest shall have been paid on the surrendered  Note or
dated  the date of the  surrendered  Note if no  interest  shall  have been paid
thereon.  The Company may require payment of a sum sufficient to cover any stamp
tax or  governmental  charge  imposed in respect of any such  transfer of Notes.
Notes shall not be transferred in denominations of less than $100,000,  PROVIDED
THAT if  necessary  to enable the  registration  of  transfer by a Holder of its
entire  holding  of  Notes,  one  Note  may be in a  denomination  of less  than
$100,000. Any transferee, by its acceptance of a Note registered in its name (or
the name of its nominee),  shall be deemed to have made the  representation  set
forth in Section 6.2.


                                      -36-


<PAGE>


     13.3 REPLACEMENT OF NOTES.

         Upon receipt by the Company of evidence  reasonably  satisfactory to it
of the ownership of and the loss,  theft,  destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor,  notice from
such Institutional Investor of such ownership and such loss, theft,  destruction
or mutilation), and

                  (a) in the case of loss,  theft or  destruction,  of indemnity
reasonably  satisfactory  to it (PROVIDED THAT if the Holder is, or is a nominee
for,  an  original  Purchaser  or another  Holder with a minimum net worth of at
least $25,000,000,  such Person's own unsecured  agreement of indemnity shall be
deemed to be satisfactory), or

                  (b) in the case of mutilation, upon surrender and cancellation
thereof,

     the Company at the Holder's sole expense shall execute and deliver,  in
lieu  thereof,  a new Note of such Series,  dated and bearing  interest from the
date to which interest shall have been paid on such lost,  stolen,  destroyed or
mutilated  Note or dated the date of such lost,  stolen,  destroyed or mutilated
Note if no interest shall have been paid thereon.

14.  PAYMENT OF NOTES.

     14.1 PLACE OF PAYMENT.

     Subject to Section 14.2,  payments of principal,  Make-Whole Amount, if
any,  and  interest  becoming  due and payable on the Notes shall be made in New
York, New York, at the principal office of Chase Manhattan Bank. The Company may
at any time, by notice to each Holder,  change the place of payment of the Notes
so long as such place of payment  shall be either  the  principal  office of the
Company in such  jurisdiction or the principal office of a bank or trust company
in such jurisdiction.

     14.2 HOME OFFICE PAYMENT.

     So  long  as any  Purchaser  or its  nominee  shall  be a  Holder,  and
notwithstanding  anything  contained  in  Section  14.1 or in  such  Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole  Amount,  if any,  and  interest  by the  method  and at the  address
specified for such purpose below such Purchaser's name in Schedule A, or by such
other method or at such other  address as such  Purchaser or nominee  shall have
from time to time specified to the Company in writing for such purpose,  without
the  presentation  or  surrender  of such  Note or the  making  of any  notation
thereon,  except that upon written request of the Company made concurrently with
or reasonably  promptly  after  payment or prepayment in full of any Note,  such
Purchaser or nominee  shall  surrender  such Note for  cancellation,  reasonably
promptly  after any such  request,  to the  Company at its  principal  executive
office  or at the place of  payment  most  recently  designated  by the  Company
pursuant to Section 14.1.  Prior to any sale or other  disposition  of any Note,
any Purchaser or its nominee will, at its election,  either endorse  thereon the
amount of principal  paid  thereon and the last date to which  interest has been
paid thereon or surrender such Note to the Company in exchange for a new Note or
Notes  pursuant to Section  13.2.  The Company  will afford the benefits of this
Section 14.2 to any Institutional


                                      -37-


<PAGE>


Investor that is the direct or indirect transferee of any Note purchased by each
Purchaser under this Agreement and that has made the same agreement  relating to
such Note as each Purchaser has made in this Section 14.2.

15.  EXPENSES, ETC.

     15.1  TRANSACTION EXPENSES.

         Whether or not the  transactions  contemplated  hereby are consummated,
the Company will pay all costs and  expenses  (including  reasonable  attorneys'
fees of a special counsel and, if reasonably  required,  local or other counsel)
incurred by each Purchaser or Holder in connection with such transactions and in
connection with any amendments,  waivers or consents under or in respect of this
Agreement or the Notes (whether or not such amendment, waiver or consent becomes
effective),  including,  without limitation: (a) the costs and expenses incurred
in enforcing or defending (or  determining  whether or how to enforce or defend)
any rights under this Agreement or the Notes or in responding to any subpoena or
other legal process or informal  investigative  demand issued in connection with
this Agreement or the Notes,  or by reason of being a Holder,  and (b) the costs
and expenses,  including  financial  advisors' fees, incurred in connection with
the insolvency or bankruptcy of the Company,  any  Restricted  Subsidiary or any
Subsidiary  Guarantor in connection  with any work-out or  restructuring  of the
transactions  contemplated  hereby and by the Notes.  The Company  will pay, and
will save each Purchaser or other Holder harmless from, all claims in respect of
any fees,  costs or expenses  if any,  of brokers and finders  (other than those
retained by such Purchaser or other Holder).

     15.2  SURVIVAL.

         The  obligations  of the Company under this Section 15 will survive the
payment or transfer of any Note,  the  enforcement,  amendment  or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.

16.  SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

     All representations and warranties  contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by any  Purchaser  of any Note or portion  thereof or  interest  therein and the
payment of any Note, and may be relied upon by any subsequent Holder, regardless
of any  investigation  made at any time by or on behalf of any  Purchaser or any
other Holder.  All statements  contained in any certificate or other  instrument
delivered  by or on behalf of the Company  pursuant to this  Agreement  shall be
deemed  representations  and  warranties  of the Company  under this  Agreement.
Subject to the  preceding  sentence,  this  Agreement  and the Notes  embody the
entire  agreement and  understanding  between the Purchasers and the Company and
supersede all prior agreements and understandings relating to the subject matter
hereof.

17.  AMENDMENT AND WAIVER.

     17.1  REQUIREMENTS


                                      -38-


<PAGE>


     This Agreement and the Notes may be amended,  and the observance of any
term  hereof  or  of  the  Notes  may  be  waived   (either   retroactively   or
prospectively),  with (and only with) the written consent of the Company and the
Required Holders, and the Notes may be amended and the observance of any term of
the Notes may be waived (either  retroactively or prospectively),  with and only
with the written  consent of the Company and the Required  Holders,  except that
(a) no amendment or waiver of any of the  provisions of Section 1, 2, 3, 4, 5, 6
or 21 hereof, or any defined term (as it is used therein),  will be effective as
to each Purchaser unless  consented to by each Purchaser in writing,  and (b) no
such amendment or waiver may,  without the written consent of the Holder of each
Note at the time outstanding  affected thereby, (i) subject to the provisions of
Section 12 relating to acceleration or rescission,  change the amount or time of
any prepayment or payment of principal of, or reduce the rate or change the time
of payment or method of computation of interest or of the Make-Whole  Amount on,
the Notes,  (ii) change the percentage of the principal amount of the Notes, the
Holders of which are  required  to consent  to any such  amendment  or waiver or
(iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.

     17.2 SOLICITATION OF HOLDERS OF NOTES

                  (a)  Solicitation  -- the Company  will provide each Holder of
the Notes (irrespective of the amount of Notes then owned by it) with sufficient
information,  sufficiently far in advance of the date a decision is required, to
enable such Holder to make an informed and  considered  decision with respect to
any proposed  amendment,  waiver or consent in respect of any of the  provisions
hereof or of the Notes.  The Company will  deliver  executed or true and correct
copies of each amendment,  waiver or consent effected pursuant to the provisions
of this Section 17 to each Holder of outstanding  Notes  promptly  following the
date on which it is  executed  and  delivered  by, or  receives  the  consent or
approval of, the requisite Holders of Notes.

                  (b) Payment -- the Company will not directly or indirectly pay
or  cause  to be  paid  any  remuneration,  whether  by way of  supplemental  or
additional interest,  fee or otherwise,  or grant any security, to any Holder of
Notes as  consideration  for or as an  inducement  to the  entering  into by any
Holder of Notes of any waiver or  amendment  of any of the terms and  provisions
hereof or of the  Notes  unless  such  remuneration  is  concurrently  paid,  or
security is concurrently  granted, on the same terms,  ratably to each Holder of
Notes then  outstanding  whether or not such Holder  consented to such waiver or
amendment.
     17.3 BINDING EFFECT, ETC.

     Any  amendment  or waiver  consented  to as provided in this Section 17
applies  equally to all Holders of Notes and is binding  upon them and upon each
future Holder of Notes and upon the Company  without regard to whether such Note
has been marked to indicate  such  amendment  or waiver.  No such  amendment  or
waiver will extend to or affect any obligation,  covenant, agreement, Default or
Event of Default not expressly  amended or waived or impair any right consequent
thereon.  No course of dealing  between the Company and any Holder nor any delay
in exercising  any rights  hereunder or under any Note shall operate as a waiver
of any rights of any  Holder.  As used  herein,  the term "this  Agreement"  and
references  thereto  shall  mean this  Agreement  as it may from time to time be
amended or supplemented.


                                      -39-


<PAGE>


     17.4 NOTES HELD BY COMPANY, ETC.

     Solely  for the  purpose  of  determining  whether  the  Holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement  or the Notes,  or have  directed  the  taking of any action  provided
herein  or in the  Notes to be taken  upon the  direction  of the  Holders  of a
specified   percentage  of  the  aggregate   principal   amount  of  Notes  then
outstanding,  Notes  directly or  indirectly  owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.

18.  NOTICES.

     All notices  and  communications  provided  for  hereunder  shall be in
writing  and  sent  (a) by  telecopy  if the  sender  on the  same  day  sends a
confirming  copy of such  notice  by a  recognized  overnight  delivery  service
(charges  prepaid),  or (b) by registered or certified  mail with return receipt
requested (postage prepaid),  or (c) by a recognized  overnight delivery service
(with charges prepaid). Any such notice must be sent:

                           (i) if to a Purchaser or its nominee, to such
                  Purchaser  or its  nominee at the address  specified  for such
                  communications in Schedule A, or at such other address as such
                  Purchaser or its nominee  shall have  specified to the Company
                  in writing,

                           (ii) if to any other Holder,  to such Holder at such
                  address  as such other  Holder  shall  have  specified  to the
                  Company in writing, or

                          (iii) if to the Company, to the Company at its address
                  set  forth at the  beginning  hereof to the  attention  of the
                  Chief  Financial  Officer,  or at such  other  address  as the
                  Company  shall  have  specified  to the Holder of each Note in
                  writing.

Notices  under this Section 18 will be deemed given only when actually received.

19.  REPRODUCT1ON OF DOCUMENTS.

     This Agreement and all documents relating thereto,  including,  without
limitation,  (a)  consents,  waivers and  modifications  that may  hereafter  be
executed, (b) documents received by each Holder at the Closing (except the Notes
themselves),  and (c) financial  statements,  certificates and other information
previously  or hereafter  furnished  to any Holder,  may be  reproduced  by such
Holder  by  any  photographic,   photostatic,  microfilm,  microcard,  miniature
photographic  or other similar  process and such Holder may destroy any original
document so reproduced.  The Company  agrees and stipulates  that, to the extent
permitted  by  applicable  law, 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 by such Holder in the regular course of business) and any
enlargement,  facsimile  or  further  reproduction  of such  reproduction  shall
likewise be  admissible  in  evidence.  This  Section 19 shall not  prohibit the
Company or any Holder from contesting any such


                                      -40-


<PAGE>


reproduction  to the same extent that it could  contest  the  original,  or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.

20.  CONFIDENTIAL INFORMATION.

     For the purposes of this Section 20, "CONFIDENTIAL  INFORMATION" means
information  delivered  to each  Holder by or on behalf  of the  Company  or any
Subsidiary  in connection  with the  transactions  contemplated  by or otherwise
pursuant to this  Agreement  that is  proprietary in nature and that was clearly
marked or labeled or  otherwise  adequately  identified  when  received  by such
Holder as being  confidential  information  of the  Company or such  Subsidiary,
PROVIDED THAT such term does not include information that (a) was publicly known
or  otherwise  known to such Holder  prior to the time of such  disclosure,  (b)
subsequently becomes publicly known through no act or omission by such Holder or
any Person acting on such Holder's behalf,  (c) otherwise  becomes known to such
Holder  other than through  disclosure  by the Company,  any  Subsidiary  or any
Guarantor  through  disclosure by a Person who was  otherwise  permitted to make
such  disclosure,  or (d)  constitutes  financial  statements  delivered to such
Holder under Section 7.1 that are otherwise publicly available.

     Each Holder will use its best efforts to maintain  the  confidentiality
of such Confidential  Information in accordance with procedures  adopted by such
Holder  in good  faith to  protect  confidential  information  of third  parties
delivered  to such  Holder,  PROVIDED  THAT such  Holder may deliver or disclose
Confidential  Information to (i) each Holder's  directors,  trustees,  officers,
employees,  agents,  attorneys  and  affiliates  (to the extent such  disclosure
reasonably relates to the  administration of the investment  represented by each
Holder's Notes),  (ii) each Holder's  financial  advisors and other professional
advisors  who  agree  to  hold   confidential   the   Confidential   Information
substantially  in accordance  with the terms of this Section 20, (iii) any other
Holder,  (iv) any Institutional  Investor to which any Holder sells or offers to
sell such Note or any part thereof or any participation  therein (if such Person
has agreed in writing prior to its receipt of such  Confidential  Information to
be bound by the  provisions  of this  Section  20), (v) any Person from whom any
Holder offers to purchase any security of the Company (if such Person has agreed
in writing prior to its receipt of such Confidential  Information to be bound by
the  provisions  of this  Section  20),  (vi) any  federal  or state  regulatory
authority having jurisdiction over any Holder, (vii) the National Association of
Insurance   Commissioners  or  any  similar  organization,   or  any  nationally
recognized rating agency that requires access to information about such Holder's
investment  portfolio  or (viii)  any other  Person to which  such  delivery  or
disclosure may be necessary or  appropriate  (w) to effect  compliance  with any
law, rule,  regulation or order applicable to any Holder, (x) in response to any
subpoena or other legal process,  (y) in connection with any litigation to which
any  Holder  is a party  or (z) if an  Event  of  Default  has  occurred  and is
continuing,  to the extent any Holder may reasonably determine such delivery and
disclosure  to be  necessary  or  appropriate  in the  enforcement  or  for  the
protection of the rights and remedies under your Notes and this Agreement.  Each
Holder,  by its acceptance of a Note,  will be deemed to have agreed to be bound
by and to be  entitled to the  benefits  of this  Section 20 as though it were a
party to this Agreement.

21.  SUBSTITUTION OF PURCHASER; PARTICIPATION.


                                      -41-


<PAGE>


                  (a) Each Purchaser  shall have the right to substitute any one
of its Affliates as the purchaser of the Notes that such Purchaser has agreed to
purchase  hereunder,  by written  notice to the  Company,  which notice shall be
signed by both such Purchaser and such Affiliate, shall contain such Affiliate's
agreement to be bound by this Agreement and shall contain a confirmation by such
Affiliate of the accuracy with respect to it of the representations set forth in
Section 6. Upon receipt of such notice, wherever the word "Purchaser" is used in
this  Agreement  (other than in this Section  21),  such word shall be deemed to
refer to such  Affiliate  in lieu of the previous  Purchaser.  In the event that
such  Affiliate is so  substituted  as a purchaser  hereunder and such Affiliate
thereafter  transfers  to any  Purchaser  all of the  Notes  then  held  by such
Affiliate, upon receipt by the Company of notice of such transfer,  wherever the
word "Purchaser" is used in this Agreement (other than in this Section 21), such
word shall no longer be deemed to refer to such  Affiliate,  but shall  refer to
the Purchaser, and the Purchaser shall have all the rights of an original Holder
under this Agreement.

                  (b) Any Holder may at any time sell to one or more Persons not
Affiliates of the Company (a "Participant")  participating interests in any loan
evidenced  by a Note issued  hereunder  held by such  Holder  (the  "Originating
Holder"); provided, however, that (i) the Originating Holder's obligations under
this Agreement shall remain unchanged,  (ii) the Originating Holder shall remain
solely  responsible for the performance of such  obligations,  (iii) the Company
and  the  Subsidiary   Guarantors  shall  deal  solely  and  directly  with  the
Originating  Holder in  connection  with the  Originating  Holder's  rights  and
obligations  under this  Agreement  and the Notes held by it, and (iv) no Holder
shall transfer or grant any  participating  interest under which the Participant
has rights to approve any  amendment  to, or any consent or waiver with  respect
to, this Agreement or any of the Notes.  In the case of any such  participation,
the Participant  shall be entitled to the benefit of  Section 14.2, as though it
were also a Holder hereunder.

22.  MISCELLANEOUS.

     22.1 SUCCESSORS AND ASSIGNS.

     All covenants and other agreements contained in this Agreement by or on
behalf  of any of the  parties  hereto  bind and inure to the  benefit  of their
respective successors and assigns (including, without limitation, any subsequent
Holder) whether so expressed or not.

     22.2 PAYMENTS DUE ON NON BUSINESS DAYS.

     Anything   in   this   Agreement   or  the   Notes   to  the   contrary
notwithstanding, any payment of principal of or Make-Whole Amount or interest on
any Note that is due on a date other  than a  Business  Day shall be made on the
next  succeeding  Business Day without  including the additional days elapsed in
the computation of the interest  payable on such next  succeeding  Business Day.

     22.3 SEVERABILITY.

     Any provision of this Agreement that is prohibited or  unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such  prohibition  or  unenforceability   without   invalidating  the  remaining
provisions  hereof,  and  any  such  prohibition  or   unenforceability  in  any
jurisdiction  shall (to the full  extent  permitted  by law) not  invalidate  or
render unenforceable


                                      -42-


<PAGE>


such provision in any other jurisdiction.

     22.4 CONSTRUCTION.

     Each  covenant  contained  herein  shall be construed  (absent  express
provision to the contrary) as being independent of each other covenant contained
herein,  so that  compliance  with any one  covenant  shall not (absent  such an
express  contrary  provision)  be  deemed to  excuse  compliance  with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which  such  Person  is  prohibited  from  taking,  such  provision  shall be
applicable whether such action is taken directly or indirectly by such Person.

     22.5 COUNTERPARTS.

     This Agreement may be executed in any number of  counterparts,  each of
which  shall be an  original  but all of which  together  shall  constitute  one
instrument.  Each  counterpart  may consist of a number of copies  hereof,  each
signed by less than all, but together signed by all, of the parties hereto.

     22.6 GOVERNING LAW; JURISDICTION AND SERVICE OF PROCESS.

     This Agreement shall be construed and enforced in accordance  with, and
the  rights of the  parties  shall be  governed  by, the law of the State of New
York,  excluding  choice-of-law  principles  of the law of such State that would
require the application of the laws of a jurisdiction other than such State. The
Company hereby  irrevocably and  unconditionally  agree that any suit, action or
proceeding  with  respect to this  Agreement,  or any  proceeding  to execute or
otherwise enforce any judgment in respect of any breach thereof,  brought by any
registered  Holder of a Note against the Company or any of its property,  may be
brought by such  Holder of a Note in the United  States  District  Court for the
Southern District of New York or any New York State Court sitting in the Borough
of Manhattan as such Holder of a Note may in its sole discretion  elect,  and by
the execution and delivery of this Agreement, the Company irrevocably submits to
the  jurisdiction  of each such court;  and agrees that  process  served  either
personally or by registered mail shall  constitute,  to the extent  permitted by
law,  adequate  service of process in any such suit.  In  addition,  the Company
hereby irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of venue in any suit, action or
proceeding  arising out of or relating to this Agreement or any Note, brought in
the said  courts,  and hereby  irrevocably  waives any claim that any such suit,
action  or  proceeding  brought  in  any  such  court  has  been  brought  in an
inconvenient  forum.  Nothing  herein  shall in any way be  deemed  to limit the
ability of any registered  Holder of a Note to serve any such writs,  process or
summonses,  in any manner permitted by applicable law or to obtain  jurisdiction
over the  Company  in such other  jurisdiction,  and in such  manner,  as may be
permitted by applicable law.

     22.7 AGENT FOR SERVICE OF PROCESS.

     WITHOUT LIMITING THE FOREGOING,  THE COMPANY HEREBY  APPOINTS,  IN THE
CASE OF ANY SUCH ACTION OR  PROCEEDING  BROUGHT IN THE COURTS OF OR IN THE STATE
OF NEW YORK, CT  CORPORATION  TO RECEIVE,  FOR IT AND ON ITS BEHALF,  SERVICE Of
PROCESS IN THE STATE OF NEW YORK WITH


                                      -43-


<PAGE>


RESPECT THERETO,  PROVIDED THE COMPANY MAY, AND IN THE EVENT THAT CT CORPORATION
IS AT ANY TIME NO LONGER  DOMICILED IN THE STATE OF NEW YORK, THE COMPANY SHALL,
APPOINT  CT  CORPORATION  OR ANY  OTHER  PERSON,  REASONABLY  ACCEPTABLE  TO THE
REQUIRED  HOLDERS,  WITH  OFFICES IN THE STATE OF NEW YORK TO REPLACE SUCH AGENT
FOR SERVICE OF PROCESS UPON  DELIVERY TO THE HOLDERS OF A REASONABLY  ACCEPTABLE
AGREEMENT OF SUCH NEW AGENT AGREEING SO TO ACT. IF SERVICE OF PROCESS IS MADE BY
ANY HOLDER OF A NOTE UPON SUCH APPOINTEE,  A COPY THEREOF SHALL ALSO BE PROVIDED
TO    THE    COMPANY,    BY    REGISTERED    OR    CERTIFIED    MAIL,    OR   BY
INTERNATIONALLY-RECOGNIZED EXPEDITED DELIVERY SERVICE; PROVIDED THAT THE FAILURE
OF SUCH HOLDER TO PROVIDE SUCH COPY TO THE COMPANY SHALL NOT IMPAIR OR AFFECT IN
ANY WAY THE VALIDITY OF SUCH SERVICE OF PROCESS OR ANY JUDGMENT  RENDERED IN ANY
SUCH SUIT,  ACTION, OR PROCEEDING.  NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO
LIMIT THE  ABILITY OF ANY HOLDER OF A NOTE TO SERVE ANY SUCH  WRITS,  PROCESS OR
SUMMONSES IN ANY MANNER  PERMITTED BY APPLICABLE LAW, OR TO OBTAIN  JURISDICTION
OVER THE COMPANY,  IN SUCH OTHER  JURISDICTION,  AND IN SUCH  MANNER,  AS MAY BE
PERMITTED BY APPLICABLE LAW.


                                   * * * * *


                                      -44-


<PAGE>


     If you are in  agreement  with the  foregoing,  please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company,  whereupon the foregoing shall become a binding  agreement  between you
and the Company.

                                        Very truly yours,

                                        THE CHALONE WINE GROUP, LTD.



                                        By:  /s/ PAUL R. OGORZELEC
                                             -----------------------
                                             Paul R. Ogorzelec
                                        Its: Chief Financial Officer


<PAGE>


The foregoing is hereby agreed to as of the date thereof.


                                        FARM CREDIT SERVICES OF AMERICA, PCA



                                        By:   /s/: BRUCE P. ROUSE
                                             -----------------------------------
                                        Name: Bruce P. Rouse
                                             -----------------------------------
                                        Its:  Vice President
                                             -----------------------------------


<PAGE>


The foregoing is hereby agreed to as of the date thereof.




                                        AGSTAR FINANCIAL SERVICES, PCA,
                                        D/B/A FARM CREDIT SERVICES COMMERCIAL
                                              FINANCE GROUP




                                        By:   /s/: JAMES B. JONES
                                             -----------------------------------
                                        Name: James B. Jones
                                             -----------------------------------
                                        Its:  Vice President
                                             -----------------------------------


<PAGE>


                       INFORMATION RELATING TO PURCHASERS
                       ----------------------------------


                                        Principal Amount and Series
Name and Address of Purchaser           of Notes to be Purchased
-----------------------------           ---------------------------

FARM CREDIT SERVICES OF AMERICA, PCA    $ 5,000,000 Series A Notes
206 South 19th Street                    15,000,000 Series C Notes
Omaha, Nebraska 68102
Attention: Bruce P. Rouse
Facsimile Number: (402) 348-3324
Confirmation Number: (402) 348-3284

Payments

All  payments  on or in  respect  of the Notes to be by bank wire  transfer  of
Federal or other immediately available funds at the opening of business on the
due date thereof  (identifying  each  payment as "The Chalone Wine Group,  Ltd
8.75% Senior Guaranteed Notes, Series A, Due September 15, 2010, PPN 157639 A*
6,  principal,  premium or interest" or "The  Chalone Wine Group,  Ltd.  8.90%
Senior  Guaranteed  Notes,  Series C, Due September 15, 2010, PPN 157639 A# 2,
principal, premium or interest") to:

Bank Name: AgAmerica FCB
Short Name: AGAMER FCB
Routing # (ABA): 125108298
Beneficiary Account Name: Farm Credit Services of America
Beneficiary Account Number: 81100-000 (Commercial Loan)
Further Credit Account Name: The Chalone Wine Group, Ltd.
Further Credit Account #: 89407-151 & 152
Contact: Judy Bachand (800) 348-0023 or Sue Bement (800) 348-0283 x3284

Contemporaneous  with the  above  electronic  funds  transfer,  mail or fax the
following information:  (1) the full name, private placement number,  interest
rate and maturity date of the Notes;  (2) the  allocation  of payment  between
principal,  interest,  premium and any special  payment;  and (3) the name and
address of the Bank from which such transfer was sent, to:

Farm Credit Services of America, PCA
206 South 19th Street
Omaha, Nebraska 68102
Attention: Sue Bement
Facsimile Number: (402) 348-3324
Confirmation Number: (402) 348-3284

All other notices and communications to be addressed as first provided above.

Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 47-0373522


                                   SCHEDULE A
                          (to Note Purchase Agreement)


<PAGE>


                                        Principal Amount and Series
Name and Address of Purchaser           of Notes to be Purchased
-----------------------------           ----------------------------

AGSTAR FINANCIAL SERVICES, PCA          $10,000,000 Series B Notes
DBA FARM CREDIT SERVICES COMMERCIAL
        FINANCE GROUP
1921 Premiere Drive
PO Box 4249
Mankato, MN 56002-4249
Attention: James Jones
Facsimile Number: (507) 344-5081
Confirmation Number: (507) 345- 5626



Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal or other  immediately  available funds at the opening of business on the
due date thereof (identifying each payment as "The Chalone Wine Group, Ltd 8.78%
Senior  Guaranteed  Notes,  Series B, Due September  15, 2010,  PPN 157639 A@ 4,
principal, premium or interest") to:

Bank Name: AgriBank St Paul
Routing Number: 0960 1697 2
Remitter: Agent Bank for Chalone Wine Group
Deadline: Wire must be sent to AgriBank by 2 p.m.




Notices


Contemporaneous  with  the  above  electronic  funds  transfer,  mail or fax the
following  information  setting  forth:  (1) the full  name,  private  placement
number,  interest  rate and maturity  date of the Notes and  including  also the
identifying information:  Chalone Loan # 1068700900,  Chalone CIF # 1682954; (2)
the allocation of payment between principal,  interest,  premium and any special
payment;  and (3) the name and address of the Bank from which such  transfer was
sent,  to the above  address,  Attention:  Karen  Doyen.

All other  notices and communications to be addressed as first provided above.

Name of Nominee in which Notes  are  to  be  issued:   None

Taxpayer  I.D.   Number:   41-1956284


                                      A-2


<PAGE>


                                  DEFINED TERMS


          As used herein,  the following terms have the respective  meanings set
forth below or set forth in the Section hereof following such term:

          "ADDITIONAL SUBSIDIARY GUARANTOR" means each Subsidiary of the Company
that, subsequent to the Closing, from time to time guarantees any Funded Debt of
the Company or of another Subsidiary.

           "AFFILIATE"  means, at any time, and with respect to any Person,  (a)
any other Person that at such time  directly or  indirectly  through one or more
intermediaries  Controls,  or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially  owning or holding,  directly
or  indirectly,  10% or more of any class of voting or equity  interests  of the
Company  or any  Subsidiary  or any  corporation  of which the  Company  and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or  more  of any  class  of  voting  or  equity  interests.  As used in this
definition, "Control" means the possession, directly or indirectly, of the power
to direct or cause the  direction  of the  management  and policies of a Person,
whether  through the ownership of voting  securities,  by contract or otherwise.
Unless the context otherwise  clearly requires,  any reference to an "Affiliate"
is a reference to an Affiliate of the Company.

           "BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which commercial banks in New York, New York are required or authorized to be
closed.

           "CAPITAL LEASE" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.

           "CAPITAL LEASE  OBLIGATIONS" means the amount of the obligations of a
Person  as  lessee  under all  Capital  Leases  which  would be  required  to be
reflected as a liability on a balance sheet in accordance with GAAP.

           "CAPITAL  STOCK"  means  (a) in the  case of a  corporation,  capital
stock, (b) in the case of an association or business entity, any and all shares,
interests,  participation,  rights or other equivalents  (however designated) of
capital stock, (c) in the case of a partnership,  partnership interests (whether
general or limited), (d) in the case of a limited liability company,  membership
interests and (e) any other interest or  participation  that confers on a Person
the right to receive a share of the profits and losses of, or  distributions  of
assets of, the issuing Person.

           "CHANGE OF CONTROL"  means (a) any  "person" (as such term is used in
subsections 13(d) and 14(d) of the Exchange Act) or group of persons on or after
the Closing  Date other than members of the Board of Directors of the Company as
of the date hereof and their  "Affiliates"  (as such term is used in Rule 405 of
the Securities  Act), is or becomes the  "beneficial  owner" (as defined in Rule
13d-3 under said Act),  directly or  indirectly,  of  securities  of the Company
representing  51% or  more  of  the  combined  voting  power  of  the  Company's
then-outstanding voting securities, or (b) the Existing Directors for any reason
cease to constitute a majority of the


                                   SCHEDULE B
                          (to Note Purchase Agreement)


<PAGE>


Company's  board  of  directors.  "EXISTING  DIRECTORS"  means  (x)  individuals
constituting  the Company's  board of directors on the Closing Date, and (y) any
subsequent  director  whose election by the board of directors or nomination for
election  by the  Company's  shareholders  was  approved by a vote of at least a
majority of the directors then in office,  which directors either were directors
on the Closing Date or whose  election or nomination for election was previously
so approved.

           "CLOSING" is defined in Section 3.

           "CLOSING DATE" is defined in Section 3.

           "CODE " means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.

           "COMPANY" means The Chalone Wine Group, Ltd., a California corpora-
tion.

           "CONFIDENTIAL INFORMATION" is defined in Section 20.

           "CONSOLIDATED CURRENT DEBT" means,  as of any date of  determination,
the total of all Current  Debt of the Company  and its  Restricted  Subsidiaries
outstanding  on  such  date  determined  on  a  consolidated  basis  eliminating
inter-company items in accordance with GAAP.

           "CONSOLIDATED  FUNDED DEBT" means  (without  duplication)  all Funded
Debt  of  the  Company  and  its  Restricted   Subsidiaries,   determined  on  a
consolidated basis eliminating inter-company items in accordance with GAAP.

           "CONSOLIDATED INTEREST EXPENSE"  for  any  period  shall  mean on  a
consolidated  basis all interest expense (including that attributable to Capital
Leases)  of  the  Company  and  its  Restricted   Subsidiaries,   including  all
commissions,  discounts  and other fees and charges owed with respect to standby
letters of credit, determined in accordance with GAAP.

           "CONSOLIDATED NET INCOME " means,  for any period,  consolidated  net
income (or loss) of the Company and its Restricted  Subsidiaries,  as determined
in accordance with GAAP.

           "CONSOLIDATED NET INCOME AVAILABLE FOR CONSOLIDATED INTEREST EXPENSE"
means,  for any  period,  the sum of (a)  Consolidated  Net Income  during  such
period, plus (b) (to the extent deducted in determining Consolidated Net Income)
all provisions for any Federal,  state or other income taxes made by the Company
and its  Restricted  Subsidiaries  during such period,  plus, (c) (to the extent
deducted in determining  Consolidated Net Income) Consolidated Interest Expense,
plus/minus (d) (to the extent deducted in determining  Consolidated  Net Income)
extraordinary   non-cash   gains/losses   of  the  Company  and  its  Restricted
Subsidiaries not incurred in the ordinary course of business.

           "CONSOLIDATED NET WORTH"means, without duplication, as of the date of
any determination  thereof, the amounts which would be included as stockholders'
equity of the Company and its Restricted  Subsidiaries  on a consolidated  basis
determined in accordance with GAAP.


                                      B-2


<PAGE>


           "CONSOLIDATED TOTAL ASSETS"  means,  at any time, the total assets of
the Company and its Restricted  Subsidiaries  determined on a consolidated basis
in accordance with GAAP.

           "CONSOLIDATED TOTAL  CAPITALIZATION"  means,  at any time, the sum of
Consolidated Funded Debt and Consolidated Net Worth.

           "CREDIT AGREEMENT"  means the Credit  Agreement dated as of March 31,
1999, between the Company and Cooperatieve  Centrale  Raiffeisen-Boerenleenbank,
B.A.,  "Rabobank  Nederland," New York Branch,  as such Credit  Agreement may be
amended, renewed or extended.

           "CURRENT  DEBT" means,  with respect to any Person,  all Debt of such
Person  which  by its  terms  or by the  terms of any  instrument  or  agreement
relating  thereto  matures  on demand  or  within  one year from the date of the
creation  thereof and is not directly or  indirectly  renewable or extendible at
the option of the  obligor  in  respect  thereof to a date one year or more from
such date, and which shall include Current Maturities of Funded Debt.

           "CURRENT  MATURITIES  OF  FUNDED  DEBT"  means,  at any time and with
respect to any item of Funded Debt, the portion of such Funded Debt  outstanding
at such time which by the terms of such  Funded  Debt is due on demand or within
one year from such time (whether by sinking fund,  other required  prepayment or
final  payment  at  maturity)  and  is not  directly  or  indirectly  renewable,
extendible or refundable at the option of the obligor under an agreement or firm
commitment in effect at such time to a date one year or more from such date.

           "DEBT" with respect to any Person means, at any time, without dupli-
cation,

                  (a)  its  liabilities  for  borrowed  money and its redemption
obligations  in  respect of mandatorily redeemable Preferred Stock;

                  (b)  its  liabilities  for  the  deferred  purchase  price  of
property  acquired by such Person  (excluding  accounts  payable  arising in the
ordinary  course of business but  including all  liabilities  created or arising
under any conditional  sale or other title  retention  agreement with respect to
any such property);

                  (c) all Capital Lease Obligations;

                  (d) all  liabilities  for borrowed  money  secured by any Lien
with respect to any property owned by such Person (whether or not it has assumed
or otherwise become liable for such liabilities);

                  (e) all its  liabilities in respect of drawn letters of credit
or instruments  serving a similar function issued or accepted for its account by
banks and other financial institutions (whether or not representing  obligations
for borrowed money); and

                  (f) any Guaranty of such Person with  respect to  liabilities
of a type  described in any of clauses (a) through (e) hereof.

Debt of any Person shall include all obligations of such Person of the character
described in


                                      B-3


<PAGE>


clauses (a) through (f) to the extent  such  Person  remains  legally  liable in
respect  thereof  notwithstanding  that  any such  obligation  is  deemed  to be
extinguished under GAAP.

           "DEFAULT" means an event or condition the  occurrence or existence of
which would,  with the lapse of time or the giving of notice or both,  become an
Event of Default.

           "DEFAULT RATE" means that rate of interest that is the greater of (a)
2% per annum  above  the rate of  interest  stated  in  clause  (a) of the first
paragraph of the Notes or (b) 2% over the rate of interest publicly announced by
Chase Manhattan Bank in New York, New York as its "base" or "prime" rate.

           "DOLLARS"  means  lawful  currency  of the United  States of America.

           "DOMESTIC SUBSIDIARY" means a Subsidiary which is organized under the
laws of a State of the United States, Canada or Puerto Rico.

           "EDNA VALLEY" means Edna Valley Vineyards, a California general part-
nership.

           "ENVIRONMENTAL LAWS" means  any  and  all  Federal,  state,  local,
and foreign statutes, laws, regulations,  ordinances,  rules, judgments, orders,
decrees,  permits,  concessions,  grants,  franchises,  licenses,  agreements or
governmental  restrictions  relating  to  pollution  and the  protection  of the
environment or the release of any materials into the environment,  including but
not limited to those related to hazardous  substances  or wastes,  air emissions
and discharges to waste or public systems.

           "ERISA" means the  Employee  Retirement  Income Security Act of 1974,
as  amended  from  time to  time,  and the  rules  and  regulations  promulgated
thereunder from time to time in effect.

           "ERISA  AFFILIATE"  means  any  trade  or  business  (whether  or not
incorporated)  that is treated as a single  employer  together  with the Company
under section 414 of the Code.

           "EVENT OF DEFAULT" is defined in Section 11.

           "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

           "FARM CREDIT ACT  DOCUMENTS" shall mean the  Effective  Interest Rate
Disclosure  Statement  executed by the  Company and the Farm Credit  Stock/Voter
Designation Form executed by the Company.

           "FOREIGN  SUBSIDIARY"  means  any  Subsidiary  other  than a Domestic
Subsidiary.

           "FUNDED DEBT" of any Person shall mean (a) all Debt of such Person,
or all Debt of such  Person  which  has been  incurred  in  connection  with the
acquisition of assets,  in each case having a final maturity of one or more than
one year from the date of origin thereof (or which is renewable or extendible at
the option of the  obligor  for a period or periods  more than one year from the
date of origin),  including all payments in respect thereof that are required to
be made  within  one year from the date of any  determination  of  Funded  Debt,
whether or not the obligation to make such


                                      B-4


<PAGE>


payments shall constitute a current liability of the obligor under GAAP, (b) all
Capitalized  Lease  Obligations  of such Person,  and (c) all Guaranties by such
Person of Funded Debt of others.

           "GAAP" means generally  accepted  accounting  principles as in effect
from time to time in the United States of America.

           "GOVERNMENTAL AUTHORITY" means

                  (a) the government of

                     (i)  the United States of America or any State or other
                  political subdivision thereof, or

                    (ii) any jurisdiction in which the Company or any Subsidiary
                  conducts all or any part of its business, or which asserts
                  jurisdiction over any properties of the Company or any Subsi-
                  diary, or

                  (b) any entity exercising executive,  legislative,  judicial,
regulatory or administrative functions of,or pertaining to, any such government.

          "GROWERS' LIENS" means statutory Liens securing the payment of amounts
due from the Company to any other Person on account of any crops, produce or raw
materials supplied by such Person to the Company, including  but not limited to,
Liens in favor of growers arising pursuant to Article 9 (commencing with Section
55631),  Chapter 6, Division 20 of the California Food and Agricultural Code, as
now in effect or hereafter amended."

          "GUARANTEE" is defined in Section 1.1(b).

          "GUARANTY" means, with respect to any Person,  any obligation  (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Debt,  dividend or other  obligation of any other Person in any manner,  whether
directly or indirectly,  including  (without  limitation)  obligations  incurred
through an agreement, contingent or otherwise, by such Person:

                  (a) to purchase such Debt or obligation or any property con-
stituting security therefore;

                  (b) to advance or supply funds (i) for the purchase or payment
of such Debt or  obligation,  or (ii) to maintain  any working  capital or other
balance sheet condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment of such
Debt or obligation;

                  (c) to lease properties or to purchase  properties or services
primarily  for the purpose of assuring the owner of such Debt or  obligation  of
the ability of any other Person to make payment of the Debt or obligation; or

                  (d) otherwise to assure the owner of such Debt or obligation
against loss in respect thereof.


                                       B-5


<PAGE>


In any  computation  of the Debt or other  liabilities  of the obligor under any
Guaranty,  the Debt or other  obligations  that are the subject of such Guaranty
shall be assumed to be direct obligations of such obligor.

          "HAZARDOUS MATERIAL" means any and all pollutants,  toxic or hazardous
wastes or any other  substances  that  pose a hazard  to health or  safety,  the
removal  of which may be  required  or the  generation,  manufacture,  refining,
production, processing, treatment, storage, handling, transportation,  transfer,
use, disposal, release, discharge,  spillage, seepage, or filtration of which is
restricted,  prohibited or penalized by any applicable law  (including,  without
limitation,  asbestos,  urea formaldehyde  foam insulation and  polycholorinated
biphenyls).

          "HOLDER"  means,  with  respect to any Note,  the Person in whose name
such Note is  registered in the register  maintained by the Company  pursuant to
Section 13.1.

          "INSTITUTIONAL  INVESTOR" means (a) any original  purchaser of a Note,
(b) any holder of a Note holding more than 5% of the aggregate  principal amount
of the Notes then outstanding, and (c) any bank, trust company, savings and loan
association,  national  banking  association or Farm Credit System  institution,
acting  for its own  account  or in a  fiduciary  capacity,  or other  financial
institution,  any pension plan, any investment  company,  any insurance company,
any broker or dealer,  or any other  similar  financial  institution  or entity,
regardless of legal form.

          "INVESTMENT" means any  investment,  made  in  cash or by  delivery of
property,  by the  Company  or any of its  Restricted  Subsidiaries  in (a)  any
Person,  whether by acquisition of Capital Stock,  Debt or other  obligations or
security, or by loan, guaranty,  advance,  capital contribution or otherwise, or
(b) any property.

           "LIEN" means, with respect to any Person, any mortgage, lien, pledge,
 charge, security interest or other encumbrance, or any interest or title of any
 vendor,  lessor,  lender or other  secured party to or of such Person under any
 conditional sale or other title retention  agreement or Capital Lease,  upon or
 with respect to any property or asset of such Person  (including in the case of
 Capital Stock, stockholder agreements,  voting trust agreements and all similar
 arrangements).

          "MAKE-WHOLE AMOUNT" is defined in Section 8.6.

          "MATERIAL"  means  material in relation to the  business,  operations,
affairs,  financial condition,  assets,  properties, or prospects of the Company
and its Restricted Subsidiaries taken as a whole.

          "MATERIAL  ADVERSE EFFECT" means a material  adverse effect on (a) the
business, operations,  affairs, financial condition, assets or properties of the
Company and its Restricted  Subsidiaries taken as a whole, or (b) the ability of
the Company to perform its  obligations  under this Agreement and the Notes,  or
(c) the validity or enforceability of this Agreement or the Notes.

          "MEMORANDUM" is defined in Section 5.3.

          "MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).


                                      B-6


<PAGE>


          "NOTES" is defined in Section 1.

          "OFFICER'S  CERTIFICATE"  means a  certificate  of a Senior  Financial
Officer or of any other  officer of the Company or a  Subsidiary  as the context
shall  require,  whose  responsibilities  extend to the  subject  matter of such
certificate.

          "ORIGINAL  SUBSIDIARY  GUARANTOR"  means a  corporation  which  is a
Restricted  Subsidiary  listed  on Schedule 5.4.

          "ORIGINAL SUBSIDIARY GUARANTEE AGREEMENT" is defined in Section 4.5.

           "PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.

           "PERSON"  means  an  individual,  partnership,  corporation,  limited
liability  company,  association,  trust,  unincorporated  organization,  or  a
government or agency or political subdivision thereof.

          "PLAN" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or,  within the preceding  five years,  has been  established  or
maintained,  or to which  contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA  Affiliate or
with respect to which the Company or any ERISA affiliate may have any liability.

          "PERMITTED  SUBSIDIARY  GUARANTOR  GUARANTEES"  means  the  Subsidiary
Guarantee  Agreements  and the  Guaranties  of the Debt  evidenced by the Credit
Agreement entered into by Edna Valley and SHW.

           "PREFERRED  STOCK" means any class of Capital  Stock of a corporation
that is preferred  over any other class of Capital Stock of such  corporation as
to the payment of  dividends  or the payment of any amount upon  liquidation  or
dissolution of such corporation.

           "PRIORITY  DEBT" means (a) Funded Debt of any  Restricted  Subsidiary
(other than (i) Funded Debt of such Restricted Subsidiary owed to the Company or
another  Restricted  Subsidiary,  and (ii) the  Permitted  Subsidiary  Guarantor
Guarantees)  plus  (without  duplication)  (b) Funded Debt of the Company or any
Restricted  Subsidiary  secured by a Lien which is  incurred  after the  Closing
under and pursuant to Section 10.3(j).

           "PROPERTY"  or  "PROPERTIES"  means,  unless  otherwise  specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.

           "QPAM EXEMPTION" means Prohibited  Transaction  Class Exemption 84-14
issued by the United States Department of Labor.

           "REQUIRED  HOLDERS"  means,  at any time,  the  holders of at least a
majority in principal amount of the Notes at the time outstanding (exclusive of
Notes then owned by the Company or any of its Affiliates).


                                       B-7


<PAGE>


          "RESPONSIBLE OFFICER" means any senior Financial Officer and any other
officer  of the  Company  with  responsibility  for  the  administration  of the
relevant portion of this Agreement.

          "RESTRICTED  PAYMENTS"  has the meaning set forth in Section
10.7 hereof.

          "RESTRICTED  SUBSIDIARY"  means any Domestic  Subsidiary which has not
been designated as an Unrestricted Subsidiary.

          "SALE AND  LEASEBACK  TRANSACTION"  means a  transaction  or series of
transactions  pursuant to which the Company or any Restricted  Subsidiary  shall
sell or  transfer  to any  Person  (other  than the  Company  or a  Wholly-Owned
Subsidiary) any property,  whether now owned or hereafter acquired, and, as part
of the same transaction or series of transactions, the Company or any Restricted
Subsidiary  shall  rent or lease as lessee  (other  than  pursuant  to a Capital
Lease), or similarly acquire the right to possession or use of, such property or
one or more properties  which it intends to use for the same purpose or purposes
as such property.

          "SECURITIES  ACT"  means  the  Securities  Act of  1933,  as amended
from time to time.

          "SECURITY"  has the meaning  set forth in section  2(a)(1) of the
Securities Act.

           "SENIOR  FINANCIAL   OFFICER"  means  the  chief  financial  officer,
 principal accounting officer, treasurer or comptroller of the Company.

           "SHW" means SHW Equity Co., a Washington corporation.

           "SUBSIDIARY" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests  to  enable  it or them (as a group)  ordinarily,  in the  absence  of
contingencies,  to elect a majority  of the  directors  (or  Persons  performing
similar  functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or  more  of its  Subsidiaries  or  such  Person  and  one  or  more  of its
Subsidiaries  (unless  such  partnership  can and  does  ordinarily  take  major
business actions without the prior approval of such Person or one or more of its
Subsidiaries).  The term  "Subsidiary" also shall include Edna Valley so long as
(i) the  financial  results of Edna  Valley are  consolidated  with those of the
Company in accordance  with GAAP,  and (ii) the Company  continues to act as the
managing partner of Edna Valley.  Unless the context otherwise clearly requires,
any reference to a "Subsidiary" is a reference to a Subsidiary of the Company.

           "SUBSIDIARY  GUARANTOR"  means any Original  Subsidiary  Guarantor or
Additional  Subsidiary  Guarantor  which  executes  and  delivers  a  Subsidiary
Guarantee  Agreement  and  so  long  as  such  Person's  obligations  under  the
Subsidiary Guarantee Agreement remain in full force and effect and to the extent
that the  obligations  of such Person  under the  provisions  of the  Subsidiary
Guarantee Agreement have not, at the time, been terminated pursuant to the terms
hereof.

           "SUBSIDIARY GUARANTEE AGREEMENT" means an agreement  substantially in
the form of the Subsidiary Guarantee Agreement attached hereto as Exhibit 4.5.


                                      B-8


<PAGE>


          "UNRESTRICTED SUBSIDIARY" means each Subsidiary which is designated as
an  Unrestricted  Subsidiary on Schedule 5.4 and any other  Subsidiary  which is
hereafter designated as an Unrestricted  Subsidiary by the Board of Directors of
the Company.  The Board of  Directors  of the Company  may,  after 30 days prior
written notice is provided to the Holders designated any Unrestricted Subsidiary
to be a Restricted  Subsidiary or designate any  Restricted  Subsidiary to be an
Unrestricted  Subsidiary if, in each case, at the date of such  designation  and
after giving effect thereto,  no Default or Event of Default shall have occurred
and be continuing.

          "WHOLLY-OWNED  SUBSIDIARY"  means,  at any time,  any  Subsidiary  one
hundred  percent  (100%)  of all  of the  equity  interests  (except  directors'
qualifying shares) and voting interests of which are owned by any one or more of
the Company and the Company's other Wholly-Owned Subsidiaries at such time.

          "WINE DIVIDEND  CREDITS" means annual credits  provided by the Company
to shareholders  owning 100 or more shares of the Company's common stock,  which
credits may be applied by each such shareholder,  for a period not to exceed one
year following such shareholder's receipt of such credits,  towards up to 50% of
the purchase  price of  mail-order  or other  direct  purchases of wine from the
Company.


                                       B-9


<PAGE>


                                CORPORATE CHANGES


None.











                                  SCHEDULE 4.10
                          (to Note Purchase Agreement)


<PAGE>


                                  SUBSIDIARIES
                                  Schedule 5.4


Subsidiaries (each such Subsidiary being also a Restricted Subsidiary):


Name                                         Ownership Interest
----                                         ------------------
SHW Equity Co., a Washington
corporation                                  100%

Staton Hills Winery Company Limited          100% owned by SHW Equity Co.

Edna Valley Vineyard, a California general    50%
partnership

Canoe Ridge Vineyard, LLC. a Washington       50.5%
limited liability company



Affiliates:        Les Domaines Barons de Rothschild (Lafite)
                   Phyllis S. Hojel

Senior Officers:                                             Directors:

W. Philip Woodward, Chairman                                 W. Philip Woodward
Thomas B. Selfridge, President and                           Thomas B. Selfridge
   Chief Executive Officer                                   Christina G. Banks
Daniel E. Cohn, Secretary                                    Mark A. Hojel
Robert B. Farver, Vice President,                            Yves-Andre Istel
   Sales and Distribution                                    C. Richard Kramlich
Paul R. Ogorzelec, Chief Financial                           William G. Myers
   Officer and Assistant Secretary                           James H. Niven
Paul Novak, Vice President, Marketing                        Phillip M. Plant
                                                             Christophe Salin
                                                             Eric de Rothschild


                                  SCHEDULE 5.4
                          (to Note Purchase Agreement)



<PAGE>


                              FINANCIAL STATEMENTS


Consolidated  Statement of Income,  Statement of Cash Flow, Statement of Changes
in  Shareholder  Equity and Balance  Sheet for the years  ending March 31, 2000,
March 31, 1999, March 31, 1998 and March 31, 1997.

Consolidated  Statement of Income,  Statement of Cash Flow and Balance Sheet for
the quarter ending June 30, 2000.




























                                  SCHEDULE 5.5
                          (to Note Purchase Agreement)



<PAGE>


                                  LITITGATION


The Company's  Carmenet Winery operates the Vintage Lane production  facility in
Glen Ellen,  California.  The Glen Ellen  Community  Group has filed a challenge
with the County of Sonoma  which if  successful  would  restrict  the  Company's
ability to use this facility. Production at this facility is insignificant given
the  context of the  Company's  total  production.  In the event this  matter is
resolved  adversely  to the  Company,  the Company  believes  that it could move
production to alternate facilities without incurring a Material Adverse Effect.

As disclosed in the Form 10-K filed for the fiscal year ended March 31, 2000, an
alleged  violation  of  Section  25502(a)(2)  of  the  California  Business  and
Professions  Code.  The Company  received  notice dated August 28, 1998 from the
California Department of Alcoholic Beverage Control ("ABC") that it was accused,
along with 36 other  companies  (most of them wineries) of violations of Section
25502(a)(2) of the California Business and Professions Code which prohibits wine
growers and others from giving "something of value" to retailers. The accusation
arises  from the  appearance  of paid  advertisements  of the  Company and other
wineries  in  catalogues  distributed  by  a  certain  retailer.  The  notice of
violation  requested each of the noticed  companies who agreed to the accusation
to  stipulate  to a ten (10) day  suspension  of its license or,  consent to the
payment  of a fine  in  lieu of the  suspension.  The  matter  was  tried  to an
administrative  law judge appointed by the ABC on July 14, 1999. The judge found
for the ABC and the ABC adopted the judge's decision. The Company, together with
16 other wine companies, has filed an appeal with the Alcoholic Beverage Control
Appeals Board,  an independent  body that hears appeals from ABC decisions.  The
hearing date for the appeal has been set for November 16, 2000.




                                  SCHEDULE 5.8
                            (to Note Purchase Agreement)


<PAGE>


                                    LICENSES


The  Company's  application  for transfer of the Staton Hills  Washington  state
permit remains  pending.  The Company's local counsel  anticipates that approval
for the transfer will be obtained in the near future.



























                                  SCHEDULE 5.11
                          (to Note Purchase Agreement)



<PAGE>


                                 USE OF PROCEEDS


The  proceeds  of the sale of the Notes will be used to prepay  the  outstanding
principal balance of the Term Loan in an amount equal to $10,000,000 pursuant to
that Credit Agreement between Chalone Wine Group, Ltd. and Cooperatieve Centrale
Raiffeisen - Boerenleenbank B.A.,  "Rabobank  Nederland," New York Branch, dated
March 31, 1999 ("Rabobank Credit Agreement"). The remainder of the proceeds will
be used to pay down the Revolving Loan Facility  pursuant to the Rabobank Credit
Agreement,  which line of credit will remain  available  for  additional  credit
after the payment subject to a $15,000,000 reduction in credit availability.

















                                  SCHEDULE 5.14
                          (to Note Purchase Agreement)


<PAGE>


                                  EXISTING DEBT


Amounts owed pursuant to that Credit Agreement  between Chalone Wine Group, Ltd.
and  Cooperatieve   Centrale   Raiffeisen  -  Boerenleenbank   B.A.,   "Rabobank
Nederland," New York Branch, dated March 31, 1999, as amended.

Amounts owed pursuant to that Secured Purchase Money Promissory Note (Secured by
Deed of Trust)  dated July 1, 1996 in favor of Richard H. Graff  Trustee,  Graff
1993 Trust Dated June 10, 1993 by The Chalone Wine Group,  Ltd.,  in an original
principal amount of $942,503.  As of September 1, 2000, the remaining  principal
balance due is $907,653.

Amounts owed pursuant to that Promissory  Note and Loan Agreement  Variable Rate
dated July 17, 1996 in favor of Central  Coast  Federal  Land Bank  Association,
FLCA by Edna Valley Vineyard, in an original principal amount of $1,839,275.

Other  accounts  payable  and  accrued  liabilities  in the  ordinary  course of
business.











                                  SCHEDULE 5.15
                          (to Note Purchase Agreement)


<PAGE>


                                   SENIOR DEBT


Amounts owed pursuant to that Secured Purchase Money Promissory Note (Secured by
Deed of Trust) dated July 1, 1996 in favor of Richard H. Graff,  Trustee,  Graff
1993 Trust Dated June 10, 1993 by The Chalone Wine Group,  Ltd.,  in an original
principal amount of $942,503.  As of September 1, 2000, the remaining  principal
balance due is $907,653.












                                  SCHEDULE 5.19
                          (to Note Purchase Agreement)


<PAGE>


                              FORM of SERIES A NOTE

                          THE CHALONE WINE GROUP, LTD.

        8.75 % SENIOR GUARANTEED NOTE, SERIES A, DUE SEPTEMBER 15, 2010


No. [_______]                                                             [Date]

$ [_________]                                                    PPN 157639 A* 6


          FOR VALUE  RECEIVED,  the  undersigned,  The Chalone  Wine Group,  Ltd
(herein called the  "Company"),  a corporation  organized and existing under the
laws of the State of  California,  hereby  promises to pay to  [__________],  or
registered assigns,  the principal sum of [__________]  DOLLARS on September 15,
2010,  with  interest  (computed on the basis of a 360-day year of twelve 30-day
months)  (a) on the unpaid  balance  thereof at the rate of 8.75% per annum from
the date  hereof,  payable  monthly in  arrears,  on the 15th day of each month,
commencing  with October 15, until the principal  hereof shall have been paid in
full, and (b) to the extent  permitted by law on any overdue payment  (including
any overdue  prepayment) of principal,  any overdue  payment of interest and any
overdue  payment  of any  Make-Whole  Amount (as  defined  in the Note  Purchase
Agreement referred to below), payable monthly as aforesaid (or, at the option of
the registered holder hereof, on demand),  at a rate per annum from time to time
equal to the  greater  of (i)  10.75%  and  (ii) 2% over  the  rate of  interest
publicly  announced by Chase  Manhattan  Bank from time to time in New York, New
York as its "base" or "prime" rate.

         Payments of principal of,  interest on and any  Make-Whole  Amount with
respect  to this Note are to be made in  lawful  money of the  United  States of
America in New York, New York at the principal  office of Chase  Manhattan Bank,
or at such other place as the Company shall have designated by written notice to
the holder of this Note as provided in the Note Purchase  Agreement  referred to
below.
          This Note is one of a series of Senior Guaranteed Notes (herein called
the  "Notes")  issued  pursuant  to the  Note  Purchase  Agreement,  dated as of
September  15,  2000  (as  from  time  to  time  amended,   the  "Note  Purchase
Agreement"),  between  the  Company  and the  Purchasers  named  therein  and is
entitled to the benefits  thereof.  Each holder of this Note will be deemed,  by
its acceptance hereof, (i) to have agreed to the confidentiality  provisions set
forth in Section  20 of the Note  Purchase  Agreement  and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreement.

          This Note is a registered  Note and, as provided in the Note  Purchase
Agreement,  upon  surrender  of this Note for  registration  of  transfer,  duly
endorsed,  or accompanied by a written instrument of transfer duly executed,  by
the  registered  holder  hereof or such  holder's  attorney  duly  authorized in
writing,  a new  Note  for a like  principal  amount  will  be  issued  to,  and
registered  in the  name  of,  the  transferee.  Prior  to due  presentment  for
registration  of  transfer,  the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of


                                   EXHIBIT 1-A
                          (to Note Purchase Agreement)


<PAGE>


receiving  payment  and for all  other  purposes,  and the  Company  will not be
affected by any notice to the contrary.

          This Note is subject to  optional  prepayment,  in whole or from time
to time in part,  at the times and on the terms  specified in the Note  Purchase
Agreement,  but not otherwise.  This Note is subject to mandatory  prepayment at
the times and on the terms specified in the Note Purchase Agreement.

          If an Event of  Default,  as defined in the Note  Purchase  Agreement,
occurs  and is  continuing,  the  principal  of this  Note  may be  declared  or
otherwise  become due and payable in the  manner,  at the price  (including  any
applicable  Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.

          The payment of all principal of, premium, if any, and interest on this
Note and the other Notes outstanding under the Note Purchase  Agreement has been
unconditionally  guaranteed by certain  Subsidiaries of the Company  pursuant to
separate and several  Subsidiary  Guarantee  Agreements  (as defined in the Note
Purchase  Agreement).  Reference  is hereby made  thereto for a statement of the
rights and benefits accorded thereby.

          This Note shall be construed and enforced in accordance  with, and the
rights of the parties  shall be  governed  by, the law of the State of New York,
excluding  choice-of-law  principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.



                                           THE CHALONE WINE GROUP, LTD.



                                           By:__________________________________

                                           Its:_________________________________


                                     1-A-2


<PAGE>


                               FORM OF SERIES B NOTE


                          THE CHALONE WINE GROUP, LTD.

        8.78 % SENIOR GUARANTEED NOTE, SERIES B, DUE SEPTEMBER 15, 2010


No. [__________]                                                          [Date]
$ [__________]                                                   PPN 157639 A@ 4


          FOR VALUE  RECEIVED,  the  undersigned,  The Chalone  Wine Group,  Ltd
(herein called the  "Company"),  a corporation  organized and existing under the
laws of the State of  California,  hereby  promises to pay to [ ], or registered
assigns,  the principal sum of [ ] DOLLARS on September 15, 2010,  with interest
(computed  on the basis of a 360-day  year of twelve  30-day  months) (a) on the
unpaid  balance  thereof  at the rate of 8.78% per annum  from the date  hereof,
payable  monthly in  arrears,  on the 15th day of each  month,  commencing  with
October 15, 2000,  until the principal  hereof shall have been paid in full, and
(b) to the extent permitted by law on any overdue payment (including any overdue
prepayment)  of  principal,  any  overdue  payment of  interest  and any overdue
payment of any Make  Whole  Amount (as  defined in the Note  Purchase  Agreement
referred  to below),  payable  monthly as  aforesaid  (or,  at the option of the
registered  holder  hereof,  on  demand),  at a rate per annum from time to time
equal to the  greater  of (i)  10.78%  and  (ii) 2% over  the  rate of  interest
publicly  announced by Chase  Manhattan  Bank from time to time in New York, New
York as its "base" or "prime" rate.

         Payments of principal of,  interest on and any  Make-Whole  Amount with
respect  to this Note are to be made in  lawful  money of the  United  States of
America in New York, New York at the principal  office of Chase  Manhattan Bank,
or at such other place as the Company shall have designated by written notice to
the holder of this Note as provided in the Note Purchase  Agreement  referred to
below.

          This Note is one of a series of Senior Guaranteed Notes (herein called
the  "Notes")  issued  pursuant  to the  Note  Purchase  Agreement,  dated as of
September  15,  2000  (as  from  time  to  time  amended,   the  "Note  Purchase
Agreement"),  between  the  Company  and the  Purchasers  named  therein  and is
entitled to the benefits  thereof.  Each holder of this Note will be deemed,  by
its acceptance hereof, (i) to have agreed to the confidentiality  provisions set
forth in Section  20 of the Note  Purchase  Agreement  and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreement.

          This Note is a registered  Note and, as provided in the Note  Purchase
Agreement,  upon  surrender  of this Note for  registration  of  transfer,  duly
endorsed,  or accompanied by a written instrument of transfer duly executed,  by
the  registered  holder  hereof or such  holder's  attorney  duly  authorized in
writing,  a new  Note  for a like  principal  amount  will  be  issued  to,  and
registered  in the  name  of,  the  transferee.  Prior  to due  presentment  for
registration  of  transfer,  the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of


                                   EXHIBIT 1-B
                          (to Note Purchase Agreement)


<PAGE>


receiving  payment  and for all  other  purposes,  and the  Company  will not be
affected by any notice to the contrary.

         This Note is subject to optional  prepayment,  in whole or from time to
time in part,  at the  times  and on the terms  specified  in the Note  Purchase
Agreement,  but not otherwise.  This Note is subject to mandatory  prepayment at
the times and on the terms specified in the Note Purchase Agreement.

         If an Event of  Default,  as  defined in the Note  Purchase  Agreement,
occurs  and is  continuing,  the  principal  of this  Note  may be  declared  or
otherwise  become due and payable in the  manner,  at the price  (including  any
applicable  Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.

         The payment of all principal of, premium,  if any, and interest on this
Note and the other Notes outstanding under the Note Purchase  Agreement has been
unconditionally  guaranteed by certain  Subsidiaries of the Company  pursuant to
separate and several  Subsidiary  Guarantee  Agreements  (as defined in the Note
Purchase  Agreement).  Reference  is hereby made  thereto for a statement of the
rights and benefits accorded thereby

         This Note shall be construed and enforced in accordance  with,  and the
rights of the parties  shall be  governed  by, the law of the State of New York,
excluding  choice-of-law  principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.



                                                THE CHALONE WINE GROUP, LTD.



                                                By:_____________________________

                                                Its:____________________________



                                     1-B-2


<PAGE>


                              FORM OF SERIES C NOTE

                          THE CHALONE WINE GROUP, LTD.

         8.90% SENIOR GUARANTEED NOTE, SERIES C, DUE SEPTEMBER 15, 2010


No. [__________]                                                          [Date]

$ [__________]                                                   PPN 157639 A# 2


          FOR VALUE  RECEIVED,  the  undersigned,  The Chalone  Wine Group,  Ltd
(herein called the  "Company"),  a corporation  organized and existing under the
laws of the State of  California,  hereby  promises to pay to [ ], or registered
assigns,  the  principal sum of I[ ] DOLLARS  September 15, 2010,  with interest
(computed  on the basis of a 360-day  year of twelve  30-day  months) (a) on the
unpaid  balance  thereof  at the rate of 8.90% per annum  from the date  hereof,
payable  monthly in  arrears,  on the 15th day of each  month,  commencing  with
October 15, 2001,  until the principal  hereof shall have been paid in full, and
(b) to the extent permitted by law on any overdue payment (including any overdue
prepayment)  of  principal,  any  overdue  payment of  interest  and any overdue
payment of any Make  Whole  Amount (as  defined in the Note  Purchase  Agreement
referred  to below),  payable  monthly as  aforesaid  (or,  at the option of the
registered  holder  hereof,  on  demand),  at a rate per annum from time to time
equal to the  greater  of (i)  10.90%  and  (ii) 2% over  the  rate of  interest
publicly  announced by Chase  Manhattan  Bank from time to time in New York, New
York as its "base" or "prime" rate.

         Payments of principal of,  interest on and any  Make-Whole  Amount with
respect  to this Note are to be made in  lawful  money of the  United  States of
America in New York, New York at the principal  office of Chase  Manhattan Bank,
or at such other place as the Company shall have designated by written notice to
the holder of this Note as provided in the Note Purchase  Agreement  referred to
below.

          This Note is one of a series of Senior Guaranteed Notes (herein called
 the  "Notes")  issued  pursuant  to the Note  Purchase  Agreement,  dated as of
 September  15,  2000  (as  from  time  to  time  amended,  the  "Note  Purchase
 Agreement"),  between  the  Company  and the  Purchasers  named  therein and is
 entitled to the benefits  thereof.  Each holder of this Note will be deemed, by
 its acceptance hereof, (i) to have agreed to the confidentiality provisions set
 forth in Section 20 of the Note  Purchase  Agreement  and (ii) to have made the
 representation set forth in Section 6.2 of the Note Purchase Agreement.

          This Note is a registered  Note and, as provided in the Note  Purchase
 Agreement,  upon  surrender of this Note for  registration  of  transfer,  duly
 endorsed,  or accompanied by a written instrument of transfer duly executed, by
 the  registered  holder  hereof or such holder's  attorney  duly  authorized in
 writing,  a new  Note  for a like  principal  amount  will be  issued  to,  and
 registered  in the name  of,  the  transferee.  Prior  to due  presentment  for
 registration of transfer, the Company


                                  EXHIBIT 1-C-1
                          (to Note Purchase Agreement)


<PAGE>


may treat the person in whose name this Note is  registered  as the owner hereof
for the purpose of receiving payment and for all other purposes, and the Company
will not be affected by any notice to the contrary.

         This Note is subject to optional  prepayment,  in whole or from time to
time in part,  at the  times  and on the terms  specified  in the Note  Purchase
Agreement,  but not otherwise.  This Note is subject to mandatory  prepayment at
the times and on the terms specified in the Note Purchase Agreement.

         If an Event of  Default,  as  defined in the Note  Purchase  Agreement,
occurs  and is  continuing,  the  principal  of this  Note  may be  declared  or
otherwise  become due and payable in the  manner,  at the price  (including  any
applicable  Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.

         The payment of all principal of, premium,  if any, and interest on this
Note and the other Notes outstanding under the Note Purchase  Agreement has been
unconditionally  guaranteed by certain  Subsidiaries of the Company  pursuant to
separate and several  Subsidiary  Guarantee  Agreements  (as defined in the Note
Purchase  Agreement).  Reference  is hereby made  thereto for a statement of the
rights and benefits accorded thereby.

         This Note shall be construed and enforced in accordance  with,  and the
rights of the parties  shall be  governed  by, the law of the State of New York,
excluding  choice-of-law  principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.



                                                THE CHALONE WINE GROUP, LTD.



                                                By:_____________________________

                                                Its:____________________________



                                     1-C-2






<PAGE>


            DESCRIPTION OF CLOSING OPINION OF COUNSEL TO THE COMPANY


         The  closing  opinion of  Farella  Braun & Martel  LLP,  counsel to the
Company,  called for by Section 4.4(a) of the Note Purchase Agreement,  shall be
dated the date of Closing and addressed to the Purchasers, shall be satisfactory
in form and substance to the Purchasers and shall be to the effect that:

         1. The Company is a corporation,  duly organized,  validly existing and
in good standing  under the laws of the State of  California,  has the corporate
power and the  corporate  authority  to execute and  perform  the Note  Purchase
Agreement  and to issue  the  Notes  and has the full  corporate  power  and the
corporate  authority to conduct the activities in which it is now engaged and is
duly licensed or qualified and is in good standing as a foreign  corporation  in
each jurisdiction in which the character of the properties owned or leased by it
or the  nature  of  the  business  transacted  by it  makes  such  licensing  or
qualification necessary.

          2. Each Restricted  Subsidiary is a corporation or other legal entity,
duly  organized,  validly  existing and in good  standing  under the laws of its
jurisdiction  of  formation  and is duly  licensed or  qualified  and is in good
standing in each  jurisdiction in which the character of the properties owned or
leased by it or the nature of the business transacted by it makes such licensing
or  qualification  necessary  and all of the  issued and  outstanding  shares of
Capital Stock or equivalent  equity interest of each such Restricted  Subsidiary
have been duly issued,  are fully paid and  non-assessable  and are owned by the
Company,  by one or more Restricted  Subsidiaries,  or by the Company and one or
more Subsidiaries.

          3.  The  Note  Purchase  Agreement  has been  duly  authorized  by all
necessary corporate or other legal entity action on the part of the Company, has
been duly executed and delivered by the Company and constitute the legal,  valid
and binding  contract of the Company  enforceable in accordance  with its terms,
subject  to  bankruptcy,  insolvency,  fraudulent  conveyance  or  similar  laws
affecting  creditors'  rights  generally,   and  general  principles  of  equity
(regardless  of whether the  application  of such  principles is considered in a
proceeding in equity or at law).

          4. The Notes  have been duly  authorized  by all  necessary  corporate
action on the part of the Company,  have been duly executed and delivered by the
Company and constitute the legal,  valid and binding  obligations of the Company
enforceable in accordance with their terms,  subject to bankruptcy,  insolvency,
fraudulent conveyance or similar laws affecting creditors' rights generally, and
general  principles of equity  (regardless  of whether the  application  of such
principles is considered in a proceeding in equity or at law).

           5. No approval,  consent or  withholding of objection on the part of,
or filing,  registration or qualification  with, any governmental body, Federal,
state or local,  is necessary in  connection  with the  execution,  delivery and
performance of the Note Purchase Agreement or the Notes.

          6. The issuance and sale of the Notes and the execution,  delivery and
performance  by the Company of the Note Purchase  Agreement do not conflict with
or result in any  breach of any of the  provisions  of or  constitute  a default
under or result in the creation or imposition of any Lien

                                 EXHIBIT 4.4(a)
                          (to Note Purchase Agreement)


<PAGE>


upon any of the  property  of the  Company  pursuant  to the  provisions  of the
Articles of Incorporation or By-laws, or equivalent formation documents,  of the
Company or any agreement or other  instrument to which the Company is a party or
by which the Company may be bound.

          7.  The   issuance,   sale  and   delivery  of  the  Notes  under  the
circumstances  contemplated  by the Note  Purchase  Agreement  does  not,  under
existing law,  require the registration of the Notes under the Securities Act of
1933, as amended, or the qualification of an indenture under the Trust Indenture
Act of 1939, as amended.

          8. The  issuance of the Notes and the use of the  proceeds of the sale
of the Notes in accordance  with the provisions of and  contemplated by the Note
Purchase  Agreement do not violate or conflict with  Regulation T, U or X of the
Board of Governors of the Federal Reserve System.

          9. There is no  litigation  pending or, to the best  knowledge of such
counsel, threatened which in such counsel's opinion could reasonably be expected
to have Material  Adverse  Effect on the  Company's  business or assets or which
would  impair the  ability of the  Company to issue and  deliver the Notes or to
comply with the provisions of the Note Purchase Agreement.

          10.  The  Company  is  not  an  "investment   company"  or  a  company
"controlled"  by an  "investment  company",  as such  terms are  defined  in the
Investment Company Act of 1940, as amended.

          11.  The  Company  has  the  power  to  submit,  and  pursuant  to the
Agreement, has legally,  validly,  effectively and irrevocably submitted, to the
non-exclusive  jurisdiction  of the  courts  of the State of New York and of the
courts of the United States of America having  jurisdiction  in the State of New
York in respect of any legal action or  proceeding  arising out of the Agreement
or the Notes.

           12. The choice of New York as the  governing law of the Agreement and
the Notes is valid and will be recognized  and applied by the courts of New York
and of the United States.

          13.  The  Company  is not,  nor will it  become,  solely  by reason of
entering into or performing  its respective  obligations  under the Agreement or
the  carrying out of any of the  transactions  contemplated  thereby,  a "public
utility company" or a "holding company" under the Public Utility Holding Company
Act of 1935, as amended.

          14. Each Subsidiary  Guarantor is a corporation or other legal entity,
duly formed,  validly existing and in good standing under the laws of the United
States,  has the  corporate or other legal entity power and authority to execute
and perform the  Subsidiary  Guarantee  Agreement to which it is a party and has
the full  corporate  or other legal  entity  power and  authority to conduct the
activities  in which it is now engaged and is duly  licensed or qualified and is
in good  standing  as a  foreign  corporation  or  other  legal  entity  in each
jurisdiction  in which the character of the properties  owned or leased by it or
the  nature  of  the  business   transacted  by  it  makes  such   licensing  or
qualification necessary.


                                    4.4(a)-2


<PAGE>


         15. To ensure the legality,  validity,  enforceability or admissibility
into  evidence of the Agreement  and the Notes,  it is not  necessary  that said
documents or any other  documents be  registered,  notarized,  filed or recorded
with any court or other  authority or that any stamp or similar tax be paid with
respect thereto.

         16. The  obligations  of the Company under the Agreement and the Notes,
and the  obligations of the Original  Subsidiary  Guarantors  under the Original
Subsidiary  Guarantee  Agreements,  RANK PARI PASSU in right of payment with all
other Debt  (actual or  contingent)  of the Company  which is not secured or the
subject  of any  statutory  trust  or  preference  or  which  is  not  expressly
subordinated in right of payment to any other Debt thereof.
         The opinion of such counsel shall cover such other matters  relating to
the sale of the Notes as the Purchasers may reasonably request.  With respect to
matters of fact on which such opinion is based,  such counsel  shall be entitled
to rely on  appropriate  certificates  of public  officials  and officers of the
Company.


                                    4.4(a)-3


<PAGE>


                DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION


         The closing opinion of McDermott,  Will & Emery, special counsel to the
Purchasers,  called for by Section 4.4(b) of the  Agreement,  shall be dated the
Closing Date and addressed to the Purchasers,  shall be satisfactory in form and
substance to the Purchasers and shall be to the effect that:

         1.  Assuming  that (a) the  Company  has the  power  and  authority  to
execute,  deliver and perform its  obligations  under the Agreement and that the
Company has taken all necessary action to authorize the execution,  delivery and
performance  of the  Agreement,  (b) the  Agreement  has been duly  executed and
delivered by the Company and constitute the legal, valid and binding contract of
the Company and (c) the  execution,  delivery and  performance by the Company of
the  Agreement  does not violate or conflict  with any  provision of the charter
documents  of the  Company or any other  agreement  or  instrument  by which the
Company is bound, the Agreement is enforceable against the Company in accordance
with its terms,  subject to  bankruptcy,  insolvency,  fraudulent  conveyance or
similar laws affecting  creditors' rights generally,  and general  principles of
equity  (regardless of whether the  application of such principles is considered
in a proceeding in equity or at law).

         2. Assuming that (a) the Original Subsidiary  Guarantors have the power
and  authority  to  execute,  deliver and perform  their  obligations  under the
Original  Subsidiary  Guarantee  Agreements  and  that the  Original  Subsidiary
Guarantors have taken all necessary action to authorize the execution,  delivery
and  performance  of the  Original  Subsidiary  Guarantee  Agreements,  (b)  the
Original Subsidiary  Guarantee  Agreements have been duly executed and delivered
by the  Original  Subsidiary  Guarantors  and  constitute  the legal,  valid and
binding  contract of the Original  Subsidiary  Guarantors and (c) the execution,
delivery and performance by the Original  Subsidiary  Guarantors of the Original
Subsidiary  Guarantee Agreements does not violate or conflict with any provision
of the charter  documents of the  Original  Subsidiary  Guarantors  or any other
agreement or instrument by which the Original  Subsidiary  Guarantors are bound,
the  Original  Subsidiary  Guarantee  Agreements  are  enforceable  against  the
Original  Subsidiary  Guarantors  in  accordance  with their  terms,  subject to
bankruptcy,   insolvency,   fraudulent  conveyance  or  similar  laws  affecting
creditors' rights  generally,  and general  principles of equity  (regardless of
whether the  application  of such  principles  is  considered in a proceeding in
equity or at law).

          3.  Assuming  that (a) the  Company  has the  power and  authority  to
execute,  deliver  and  perform  its  obligations  under  the Notes and that the
Company has taken all necessary action to authorize the execution,  delivery and
performance of the Notes, (b) the Notes have been duly executed and delivered by
the Company and  constitute  the legal,  valid and  binding  obligations  of the
Company and (c) the  execution,  delivery and  performance by the Company of the
Notes does not violate or conflict with any  provision of the charter  documents
of the  Company or any other  agreement  or  instrument  by which the Company is
bound,  the Notes are  enforceable  against the Company in accordance with their
terms, subject to bankruptcy,  insolvency, fraudulent conveyance or similar laws
affecting  creditors'  rights  generally,   and  general  principles  of  equity
(regardless  of whether the  application  of such  principles is considered in a
proceeding in equity or at law).


                                 EXHIBIT 4.4(b)
                          (to Note Purchase Agreement)


<PAGE>


         4. The issuance, sale and delivery of the Notes under the circumstances
contemplated  by the  Agreement  does  not,  under  existing  law,  require  the
registration  of the Notes under the Securities Act of 1933, as amended,  or the
qualification of an indenture under the Trust Indenture Act of 1939, as amended.

         The  opinion  of  McDermott,  Will & Emery  shall  also  state that the
opinion  of  Farella  Braun & Martel LLP is  satisfactory  in scope  and form to
McDermott, Will & Emery and that, in their opinion, the Purchasers are justified
in relying thereon.

         With  respect to  matters  of fact upon  which  such  opinion is based,
McDermott, Will & Emery may rely on appropriate certificates of public officials
and officers of the Company and the Original Subsidiary Guarantors.


                                    4.4(b)-2


<PAGE>


                     FORM OF SUBSIDIARY GUARANTEE AGREEMENT







































                                  EXHIBIT 4. 5
                          (to Note Purchase Agreement)


<PAGE>


        REPRESENTATION AND WARRANTIES of ORIGINAL SUBSIDIARY GUARANTORS


          Such Subsidiary Guarantor represents and warrants to each Purchaser as
follows:
           1.  SUBSIDIARIES.  Such Subsidiary Guarantor has, directly and
indirectly, good and marketable title to all of the shares it purports to own of
the stock of each of its subsidiaries,  free and clear in each case of any Lien.
All such shares have been duly issued and are fully paid and non-assessable.

           2.  ORGANIZATION AND AUTHORITY. Such Subsidiary Guarantor, and each
of its subsidiaries,

                   (a)  is  a   corporation   or   general   partnership,   duly
incorporated,  or duly organized,  as the case may be, amalgamated or continued,
validly  existing and in good standing and has duly made all  registrations  and
filings  required  given  the  nature  of its  business  under  the  laws of its
jurisdiction  of  incorporation  or  organization  and has paid all taxes as are
necessary to maintain its corporate or  partnership  existence,  as the case may
be;

                   (b) has all  requisite  power and authority and all necessary
licenses  and  permits to own and  operate  its  properties  and to carry on its
business  as now  conducted,  where  failure  to do so would  materially  affect
adversely  the  business,  properties,  profits or  financial  condition of such
Subsidiary Guarantor or any of its subsidiaries; and

                   (c) is duly  licensed or qualified and is in good standing as
a foreign  corporation in each  jurisdiction  wherein the nature of the business
transacted by it or the nature of the property  owned or leased by it makes such
licensing or  qualification  necessary,  where failure to do so would materially
affect  adversely the business,  properties,  profits or financial  condition of
such Subsidiary Guarantor or any of its subsidiaries.

           3.  FULL DISCLOSURE.  Neither the Subsidiary  Guarantee  Agreement to
which such  Subsidiary  Guarantor is a signatory,  the  Memorandum nor any other
written  statement  furnished by such Subsidiary  Guarantor to such Purchaser in
connection with the negotiation of the Subsidiary  Guarantee  Agreement to which
such  Subsidiary  Guarantor is a signatory,  contains any untrue  statement of a
material  fact or  omits a  material  fact  necessary  to  make  the  statements
contained  therein or herein not  misleading.  There is no fact peculiar to such
Subsidiary Guarantor or its subsidiaries which such Subsidiary Guarantor has not
disclosed to such Purchaser in writing which materially  affects  adversely nor,
so far as such  Subsidiary  Guarantor can now foresee,  will  materially  affect
adversely  the  properties,  business,  profits or  financial  condition of such
Subsidiary Guarantor and its subsidiaries, taken as a whole.

           4. PENDING LITIGATION.  There are no proceedings pending or, to the
knowledge of such  Subsidiary  Guarantor,  threatened  against or affecting such
Subsidiary  Guarantor  or any of its  subsidiaries  in any court or  before  any
governmental authority or arbitration board or tribunal are reasonably likely to
materially  affect  adversely  the  properties,  business,  profits or financial
condition of such Subsidiary Guarantor and its subsidiaries.

           5. TITLE TO PROPERTIES.  Such  Subsidiary  Guarantor and each of its
subsidiaries  has good and  marketable  title in fee simple  (or its  equivalent
under  applicable  law) to all  material  parcels of real  property and has good
title to all the other material items of property it purports to


                               EXHIBIT 10.11 (a)
                          (to Note Purchase Agreement)


<PAGE>


own, except as sold or otherwise  disposed of in the ordinary course of business
and except for Liens permitted by this Agreement.

           6. PATENTS AND TRADEMARKS. Such Subsidiary Guarantor and each of its
subsidiaries  owns,  possesses  or  has  the  right  to  use  all  the  patents,
trademarks,  trade names,  service  marks,  copyright,  licenses and rights with
respect to the foregoing necessary for the present and planned future conduct of
its business, without any known conflict with the rights of others.

           7. COMPLIANCE IS LEGAL AND AUTHORIZED  Compliance by such Subsidiary
Guarantor with all of the provisions of the  Subsidiary  Guarantee  Agreement to
which such Subsidiary Guarantor is a signatory-

                 (a) is within the corporate or partnership  powers, as the
case may  be, of such SUBSIDIARY GUARANTOR;

                 (b)  will not  violate  any  provisions  of any law or any
order of any court or  governmental  authority  or agency and will not  conflict
with or result in any breach of any of the terms,  conditions or provisions  of,
or constitute a default under the charter or other  organizational  documents of
such  Subsidiary  Guarantor or any indenture or other agreement or instrument to
which such Subsidiary Guarantor is a party or by which it may be bound or result
in  the  imposition  of any  Liens  or  encumbrances  on any  property  of  such
Subsidiary Guarantor; and

                 (c) has been duly authorized by proper corporate or partnership
action, as the case may be, on the part of such Subsidiary  Guarantor (no action
by the  stockholders or partners of such Subsidiary  Guarantor being required by
law,  by the  charter  or  other  organizational  documents  of such  Subsidiary
Guarantor or otherwise),  and such Subsidiary  Guarantee Agreement has been duly
executed and delivered by such  Subsidiary  Guarantor and constitutes the legal,
valid  and  binding  obligation,  contract  and  agreement  of such  Subsidiary
Guarantor enforceable in accordance with its terms.

           8.    NO DEFAULTS. Neither such Subsidiary Guarantor nor any of its
subsidiaries  is in default in the payment of  principal or interest on any Debt
or is in default under any  instrument or  instruments  or agreements  under and
subject  to which any Debt has been  issued,  and no event has  occurred  and is
continuing  under the provisions of any such  instrument or agreement which with
the lapse of time or the giving of notice, or both, would constitute an event of
default thereunder.

           9.  GOVERNMENTAL  CONSENT.  No approval,  consent or  withholding of
objection on the part of, or filing,  registration  or  qualification  with, any
governmental  department,  regulatory  authority  or court under the laws of the
United States or any agency or authority  thereof,  state,  Federal or local, is
necessary  in  connection  with  the  lawful  execution  and  delivery  by  such
Subsidiary  Guarantor of its Guaranty or compliance by such Subsidiary Guarantor
with any of the provisions of such  Subsidiary  Guarantee  Agreement  including,
without  limitation,  payments  to  be  made  under  such  Subsidiary  Guarantee
Agreement.

           10. TAXES Such Subsidiary Guarantor and its subsidiaries have filed
all tax returns  that are required to have been filed in any  jurisdiction,  and
have paid all taxes  shown to be due and  payable on such  returns and all other
taxes and assessments  levied upon them or their properties,  assets,  income or
franchises, to the extent such taxes and assessments have become due and payable
and before they have become delinquent, except for any taxes and assessments


                                   10.11 (a)-2



<PAGE>


(i) the amount of which is not  individually  or in the aggregate  material,  or
(ii) the amount, applicability or validity of which is currently being contested
in good  faith by  appropriate  proceedings  and  with  respect  to  which  such
Subsidiary  Guarantor  or a  subsidiary  has  established  adequate  reserves in
accordance with GAAP. Such Subsidiary  Guarantor knows of no basis for any other
tax or assessment that could  reasonably be expected to have a material  adverse
effect.  The  charges,  accruals  and  reserves on the books of such  Subsidiary
Guarantor and its  subsidiaries in respect of Federal,  state or other taxes for
all fiscal  periods are adequate.  The Federal  income tax  liabilities  of such
Subsidiary Guarantor and its subsidiaries have been paid for all fiscal years up
to and including the fiscal year ended March 31, 2000.

           11.  EMPLOYEE-RELATED  MATTERS.  (a) Each pension plan  maintained by
such Subsidiary  Guarantor or any of its  subsidiaries  complies in all material
respects with all applicable  statutes and  governmental  rules and regulations.
Such  Subsidiary  Guarantor and each of its  subsidiaries  has  satisfied  their
respective  funding  obligations  as required by applicable  law for all pension
plans maintained by them. All tax returns and reports required to be filed by or
with  respect  to such  Subsidiary  Guarantor's  and  each of its  subsidiaries'
pension plans in all applicable  jurisdictions  have been filed.  Such plans are
(to the extent  required under  applicable  law, rule or regulation)  registered
under,  and are in  compliance  with,  applicable  federal  legislation  and all
reports, returns and filings required to be made thereunder have been made. Such
plans have been at all times administered in accordance with their terms and the
provisions of applicable law.  Neither such Subsidiary  Guarantor nor any of its
subsidiaries  has incurred a liability in  connection  with the  winding-up of a
pension  plan or the  withdrawal  from a  multiemployer  plan which would have a
Material  adverse  effect on the  properties,  business,  profits  or  condition
(financial  or  otherwise)  of  such  Subsidiary   Guarantor  and  each  of  its
subsidiaries taken as a whole or impair the ability of such Subsidiary Guarantor
or any of its  subsidiaries to perform its respective  obligations  contained in
the  Subsidiary  Guarantee  Agreement  to which such  Subsidiary  Guarantor is a
signatory.  There are no  controversies  pending  or, to the  knowledge  of such
Subsidiary   Guarantor,   threatened  or  anticipated  between  such  Subsidiary
Guarantor and any of its employees which would have a material adverse effect on
the properties,  business, profits or condition (financial or otherwise) of such
Subsidiary  Guarantor or any of its subsidiaries or would materially  impair the
ability of such Subsidiary  Guarantor or any of its  subsidiaries to perform its
obligations  contained  in the  Subsidiary  Guarantee  Agreement  to which  such
Subsidiary  Guarantor is a signatory and there are no material  labor  disputes,
grievances, arbitration proceedings or any strikes, work stoppages or slow downs
pending  or,  to  such  Subsidiary  Guarantor's  knowledge,  threatened  by such
Subsidiary Guarantor's employees and representatives.

           (b)  The  consummation  of  the  transactions  provided  for  in  the
Subsidiary Guarantee Agreement to which such Subsidiary Guarantor is a signatory
and compliance by such Subsidiary Guarantor with the provisions thereof will not
involve any prohibited  transaction  within the meaning of ERISA or Section 4975
of the  Internal  Revenue  Code of 1986,  as amended.  No  Reportable  Event has
occurred and is  continuing  with respect to any Plan.  Neither such  Subsidiary
Guarantor nor any ERISA  Affiliate has withdrawn from any Plan or  Multiemployer
Plan or instituted steps to do so and no steps have been instituted to terminate
any Plan. No condition exists or event or transaction has occurred in connection
with any Plan which could result in the incurrence by such Subsidiary  Guarantor
or any ERISA  Affiliate  of any  material  liability,  fine or penalty.  No Plan
maintained by such Subsidiary Guarantor or any ERISA


                                  10.11 (a)-3


<PAGE>


Affiliate,  nor any trust  created  thereunder,  has incurred  any  "accumulated
funding  deficiency"  as defined in  Section  302 of ERISA nor does the  present
value of all  benefits  vested  under all Plans  exceed,  as of the last  annual
valuation  date,  the value of the assets of the Plans  allocable to such vested
benefits.  Neither such  Subsidiary  Guarantor  nor any ERISA  Affiliate has any
contingent liability with respect to any post-retirement  "welfare benefit plan"
(as  such  term is  defined  in  ERISA)  except  as has  been  disclosed  to the
Purchasers.

          12. COMPLIANCE WITH LAW. Neither such Subsidiary  Guarantor nor any of
its  subsidiaries  (a)  is  in  violation  of  any  law,  ordinance,  franchise,
governmental  rule or  regulation  to which it is subject;  or (b) has failed to
obtain  any  license,  permit,  franchise  or other  governmental  authorization
necessary to the  ownership  of its property or to the conduct of its  business,
which  violation  or failure to obtain  would  materially  adversely  affect the
business,  prospects,  profits, properties or condition (financial or otherwise)
of such Subsidiary  Guarantor and its subsidiaries,  taken as a whole, or impair
the ability of such Subsidiary Guarantor to perform its obligations contained in
the  Subsidiary  Guarantee  Agreement  to which such  Subsidiary  Guarantor is a
signatory.  Neither such Subsidiary  Guarantor nor any of its subsidiaries is in
default  with  respect to any order of any court or  governmental  authority  or
arbitration board or tribunal.

           13.  COMPLIANCE  WITH  ENVIRONMENTAL  LAWS.  Neither such  Subsidiary
Guarantor nor any of its  subsidiaries is in violation of any applicable  United
States Federal, state, or local laws, statutes, rules, regulations or ordinances
relating  to  public  health,  safety  or the  environment,  including,  without
limitation,  relating to  releases,  discharges,  emissions or disposals to air,
water,  land or ground water,  to the withdrawal or use of ground water,  to the
use, handling or disposal of polychlorinated  biphenyls (PCBs), asbestos or urea
formaldehyde,  to the  treatment,  storage,  disposal or management of hazardous
substances (including, without limitation,  petroleum, crude oil or any fraction
thereof,  or other  hydrocarbons),  pollutants or  contaminants,  to exposure to
toxic,  hazardous or other controlled,  prohibited or regulated substances which
violation could materially affect adversely the business, profits, properties or
financial condition of such Subsidiary Guarantor and its subsidiaries,  taken as
a whole.  Such  Subsidiary  Guarantor does not know of any liability or class of
liability  of such  Subsidiary  Guarantor or any of its  subsidiaries  under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (42 U.S.C.  Section  9601 ET SEQ.),  or the  Resource  Conservation  and
Recovery Act of 1976, as amended (42 U.S.C. Section 6901 ET SEQ.).

           14. ABSENCE OF FOREIGN OR ENEMY STATUS.  (a) No Subsidiary  Guarantor
nor any of their  subsidiaries on the date hereof, is (i) an "ENEMY" or an "ALLY
OF ENEMY"  within the  meaning of Section 2 of the  Trading  with the Enemy Act,
(ii) a "national" of a foreign  country  designated in Executive  Order 8389, as
amended or of any  "designated  enemy country" as defined in Executive Order No.
9095, as amended, of the President of the United States of America, in each case
within the meaning of said Executive  Orders,  as amended,  or of any regulation
issued  thereunder,  or (iii) a "national  of any  designated  foreign  country"
within the meaning of the Foreign  Assets  Control  Regulations  or of the Cuban
Assets Control Regulations of the United States of America.

           (b) The execution and delivery of the Subsidiary  Guarantee Agreement
by any Subsidiary  Guarantor as contemplated hereby will not violate the Foreign
Assets  Control  Regulations,   the  Foreign  Funds  Control  Regulations,   the
Transaction Control Regulations, the

                                   10.11(a)-4


<PAGE>


Cuban Assets Control Regulations,  the Iranian Assets Control  Regulations,  the
Libyan Sanctions Regulations, the South African Transactions Regulations, or the
Iraqi Sanctions  Regulations of the United States Treasury  Department  (each as
set forth in 31 C.F.R., Subtitle B, Chapter V, as amended).

                  15. CONSOLIDATED AND INTEGRATED BUSINESS.  The Company and its
Restricted Subsidiaries share centralized administration of the winery functions
of  each  entity  including  finance,  sales  and  marketing.  Such  centralized
administration  is performed at the  Company's  Napa office.  This facility also
includes  a  central  distribution  center  in  which  substantially  all of the
Company's and its Restricted Subsidiaries' wines are stored prior to shipping.

                  Sales and  marketing of all of the  Company's  and  Restricted
Subsidiaries'  wines  within  the  State  of  California  are made  through  the
Company's  own sales  forces and one or more  wholesalers.  The  Company  uses a
single  broker  for  all  wholesale  California  sales  of the  Company  and its
Restricted  Subsidiaries.  Furthermore,  all of  the  Company's  and  Restricted
Subsidiaries'  wineries  are  operated  under  the  overall  supervision  of the
Company's Chief Executive Officer.

                  The Company and each Subsidiary Guarantor prepare consolidated
financial statements and do their financial reporting on a consolidated basis.

          16.  SOLVENCY  AND  CONSIDERATION.  (a) Such  Subsidiary  Guarantor is
solvent,  has capital not unreasonably  small in relation to its business or any
contemplated  or  undertaken  transaction  and has assets having a value both at
fair  valuation  and at  present  fair  salable  value  greater  than the amount
required to pay its debts as they  become due and  greater  than the amount that
will be required to pay its probable  liability  on its  existing  debts as they
become absolute and matured. Such Subsidiary Guarantor does not intend to incur,
or believes or should have believed that it will incur, debts beyond its ability
to pay such debts as they  become due.  Such  Subsidiary  Guarantor  will not be
rendered  insolvent by the  execution  and delivery of, and  performance  of its
obligations under, the Subsidiary  Guarantee  Agreement to which such Subsidiary
Guarantor is a signatory.  such Subsidiary  Guarantor does not intend to hinder,
delay or defraud its  creditors by or through the  execution and delivery of, or
performance of its  obligations  under,  the Subsidiary  Guarantee  Agreement to
which such Subsidiary Guarantor is a signatory.

          (b) Each  Subsidiary  Guarantor  for  itself has  determined  that the
execution  and  delivery of the  Subsidiary  Guarantee  Agreement  to which such
Subsidiary  Guarantor is a signatory is in furtherance of its corporate purposes
and is in its best interest and that it will derive substantial benefit, whether
directly or indirectly,  from the making of Such Subsidiary  Guarantee Agreement
(i) by, among other things,  (1) enabling its direct or indirect  parent company
to obtain  financing  deemed necessary and beneficial by such parent company for
general,  consolidated  corporate  purposes  and (2) enabling it to increase its
capitalization  on  a  consolidated  basis  and  (ii)  in  accordance  with  its
participation in the consolidated and integrated business described in paragraph
15 hereof.
           17. SUBSIDIARY GUARANTEE AGREEMENT TO RANK PARI PASSU. The Subsidiary
Guarantee Agreement to which such Subsidiary  Guarantor is a party and all other
obligations  thereunder are direct and unsecured  obligations of such Subsidiary
Guarantor  ranking  pari  passu as against  all other  present  and future  Debt
(actual or contingent) of such Subsidiary Guarantor which is not


                                  10.11 (a)-5


<PAGE>


secured or the  subject of any  statutory  trust or  preference  or which is not
expressed  to be  subordinate  or  junior  in  rank  to any  other  Debt of such
Subsidiary Guarantor.

           18. INVESTMENT COMPANY ACT. Such Subsidiary Guarantor is not, and is
not directly or indirectly controlled by or acting on behalf of any Person which
is, required to register as an "INVESTMENT COMPANY" under the Investment Company
Act of 1940, as amended.

           19. PUBLIC UTILITY HOLDING COMPANY ACT. Such Subsidiary  Guarantor is
not, nor will it become,  solely by reason of entering  into or  performing  its
obligations under the Subsidiary  Guarantee  Agreement to which it is a party or
the  carrying out of any of the  transactions  contemplated  thereby,  a "public
utility company" or a "holding company" under the Public Utility Holding Company
Act of 1935, as amended.


                                   10.11 (a)-6