<PAGE>

[EXHIBIT 10.26]

                              SUBORDINATION AGREEMENT

          THIS SUBORDINATION AGREEMENT (the "AGREEMENT") is made as of 
October __, 1998 by and among Color Spot Nurseries, Inc., a Delaware 
corporation (the "ISSUER"), Heller Equity Capital Corporation, a Delaware 
corporation, (the "INITIAL NOTEHOLDER" and, together with its successors and 
assigns, the "NOTEHOLDERS") and Fleet Capital Corporation, as Agent under the 
Senior Credit Agreement described below (the "AGENT").

                                      RECITALS

          WHEREAS, on or about December 31, 1996, Color Spot Nurseries, Inc., 
a Delaware corporation (later known as CSN, Inc.) ("Color Spot") and its 
wholly owned subsidiary, the Issuer (previously known as Color Spot 
Watsonville, Inc.), issued to the Initial Noteholder their 8% Convertible 
Subordinated Pay-in-Kind Note due 2004 (the "SUBORDINATED NOTE" and, together 
with any like notes issued upon the transfer or partial conversion of the 
Subordinated Note, the "SUBORDINATED NOTES") in the form of Exhibit A hereto; 
and

          WHEREAS, Color Spot subsequently merged with and into the Issuer, 
with the Issuer being the surviving entity; and

          WHEREAS, the Issuer has entered into a Loan and Security Agreement 
dated as of October __, 1998, among the Issuer, the Agent, and the other 
lending institutions from time to time parties thereto (collectively, the 
"BANKS"), pursuant to which the Banks have agreed to extend loans to the 
Issuer, in order, among other things, to provide working capital for the 
Issuer and its subsidiaries; and

          WHEREAS, as a condition to the willingness of the Agent and the 
Banks to enter into the Senior Credit Agreement (as hereinafter defined), and 
of the Banks to make the extensions of credit to the Issuer referred to 
above, they have required that the parties enter into this Agreement, 
providing for the subordination of the Issuer's indebtedness under the 
Subordinated Notes to its obligations under the Senior Credit Agreement and 
related documents, all on the terms and conditions set forth herein.

          NOW, THEREFORE, in consideration of the above recitals and the 
provisions set forth herein, and other good and valuable consideration, the 
receipt and sufficiency of which is hereby acknowledged, the parties hereto 
agree as follows:

                                     AGREEMENT

ARTICLE 1.  DEFINITIONS.

          Section 1.1.   CERTAIN DEFINED TERMS.  The following terms used in 
this Agreement shall have the following meanings:


                                     
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          "ACCELERATION EVENT" is defined in Section 2.4(a)(i).

          "AGENT" is defined in the preamble to this Agreement, and shall 
mean and include any successor Agent under the Senior Credit Agreement; 
PROVIDED that, in the event that there is Senior Indebtedness for which there 
is not an Agent, the "Agent" shall mean the holders of over 50% in principal 
amount of such Senior Indebtedness, including any undrawn commitments to lend 
under the Senior Credit Agreement.

          "BANKRUPTCY CODE" means Title 11 of the United States Code, as now 
and hereafter in effect, or any successor statute.

          "BUSINESS DAY" means any day excluding Saturday, Sunday and any day 
which shall be in the State of Illinois or the State of California a legal 
holiday or a day on which banking institutions are authorized by law or other 
governmental actions to close.

          "CASH" means U.S. dollars in money, currency or a credit balance in 
a Deposit Account.

          "CASH" means (a) cash, (b) securities issued or directly and fully 
guaranteed or insured by the United States of America or any agency or 
instrumentality thereof (PROVIDED that the full faith and credit of the 
United States of America is pledged in support thereof) having maturities of 
not more than one year from the date of acquisition; (c) marketable direct 
obligations issued by any State of the United States of America or any local 
government or other political subdivision thereof rated (at the time of 
acquisition of such security) at least AA by S&P or the equivalent thereof by 
Moody's having maturities of not more than one year from the date of 
acquisition; (d) U.S. dollar denominated time deposits, certificates of 
deposit and bankers' acceptances of (i) any Bank, (ii) any domestic 
commercial bank of recognized standing having capital and surplus in excess 
of $10,000,000,000 or (iii) any bank whose short-term commercial paper rating 
(at the time of acquisition of such security) by S&P is at least A-1 or the 
equivalent thereof or by Moody's is at least P-1 or the equivalent thereof 
(any such bank, an "APPROVED BANK"), in each case with maturities of not more 
than six months from the date of acquisition; (e) commercial paper and 
variable or fixed rate notes issued by any Bank or Approved Bank or by the 
parent company of any Bank or Approved Bank and commercial paper and variable 
rate notes issued by, or guaranteed by, any industrial or financial company 
with a short-term commercial paper rating (at the time of acquisition of such 
security) of at least A-1 or the equivalent thereof by S&P or at least P-1 or 
the equivalent thereof by Moody's, or guaranteed by any industrial company 
with a long-term unsecured debt rating (at the time of acquisition of such 
security) of at least AA or the equivalent thereof by S&P or the equivalent 
thereof by Moody's and in each case maturing within one year after the date 
of acquisition; (f) repurchase agreements with any Bank or any primary dealer 
maturing within one year from the date of acquisition that are fully 
collateralized by investment instruments that would otherwise be "Cash"; 
PROVIDED that the terms of such repurchase agreements comply with the 
guidelines set forth in the Federal Financial Institutions Examination 
Council Supervisory Policy - Repurchase Agreements of Depository Institutions 


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<PAGE>

With Securities Dealers and Others, as adopted by the Comptroller of the 
Currency on October 31, 1985; and (g) investments in money market mutual 
funds, all of the assets of which are invested in securities and instruments 
of the types set forth in clauses (a) through (e) above.

          "CREDIT PARTY" means each of the Issuer and each Subsidiary of the 
Issuer.

          "DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like 
account with a bank, savings and loan association, credit union or like 
organization, other than an account evidenced by a negotiable certificate of 
deposit.

          "ENFORCEMENT ACTION" is defined in Section 2.4(a)(ii).

          "INITIAL NOTEHOLDER" has the meaning set forth in the recitals 
hereto.

          "ISSUER" has the meaning set forth in the preamble hereto.

          "MATURITY DATE" means December 31, 2004.

          "NOTEHOLDERS" has the meaning set forth in the recitals hereto, and 
shall mean and include (i) the Initial Noteholder and (ii) any assignees of 
the Subordinated Notes, in whole or in part.

          "OBLIGATIONS" means all amounts, direct or indirect, contingent or 
absolute, of every type or description, and at any time existing, owing to 
the Agent or any Bank pursuant to the terms of the Senior Credit Agreement or 
any other Senior Credit Document or secured by any of the "Security 
Documents" (as defined in the Senior Credit Agreement).

          "PERSON" means and includes natural persons, corporations, limited 
partnerships, general partnerships, joint stock companies, joint ventures, 
associations, companies, trusts, banks, trust companies, land trusts, 
business trusts or other organizations, whether or not legal entities, and 
governments and agencies and political subdivisions thereof.

          "POST-PETITION INTEREST" shall mean interest at the contract rate 
accruing subsequent to the filing of a petition initiating any proceeding in 
bankruptcy, insolvency or like proceeding whether or not such interest is an 
allowed claim enforceable against the debtor in a bankruptcy case under the 
Bankruptcy Code.

          "SENIOR CREDIT AGREEMENT" means the Loan and Security Agreement 
dated as of October __, 1998, among the Issuer, the Agent, and the Banks 
signatory thereto, as such agreement may be amended, restated, supplemented 
or otherwise modified from time to time, including, without limitation, to 
increase the principal amount and/or available commitments thereunder, and 
any agreement changing the maturity of, refinancing, replacing, or otherwise 
restructuring all or any portion of the "Obligations" under such agreements 
or any successor thereto, whether with the same or different lenders.


                                     -3-
<PAGE>

          "SENIOR CREDIT DOCUMENTS" means, collectively, the Senior Credit 
Agreement, and the other "Loan Documents" (as defined in the Senior Credit 
Agreement), and each other document or instrument executed by the Issuer or 
any other Credit Party in connection therewith, as such agreements may be 
amended, restated, supplemented or otherwise modified from time to time, and 
any agreement changing the maturity of, refinancing, replacing, or otherwise 
restructuring all or any portion of the Obligations under any such agreements 
or any successors thereto, whether with the same or different lenders.

          "SENIOR INDEBTEDNESS" shall mean, collectively, all Obligations now 
or hereafter incurred pursuant to or in connection with the Senior Credit 
Documents, in each case, including, without limitation, principal, premium 
(if any), interest (including Post-Petition Interest), expenses, fees and 
indemnifications thereunder.

          "SUBORDINATED NOTE" and "SUBORDINATED NOTES" have the respective 
meanings set forth in the recitals hereto.

          "SUBORDINATED OBLIGATIONS" shall mean all Obligations to the 
Noteholders now or hereafter incurred pursuant to or in connection with the 
Subordinated Notes, including, without limitation, any principal or interest 
on the Subordinated Notes and any expenses payable thereunder.

          "SUBSIDIARY" of any Person shall mean and include (i) any 
corporation more than 50% of whose stock of any class or classes having by 
the terms thereof ordinary voting power to elect a majority of the directors 
of such corporation (irrespective of whether or not at the time stock of any 
class or classes of such corporation shall have or might have voting power by 
reason of the happening of any contingency) is at the time owned by such 
Person directly or indirectly through Subsidiaries and (ii) any partnership, 
association, joint venture or other entity in which such Person directly or 
indirectly through Subsidiaries has more than a 50% equity interest at the 
time.

ARTICLE 2.  SUBORDINATION

          Section 2.1.   OBLIGATIONS SUBORDINATE TO SENIOR INDEBTEDNESS.  
Each of the Issuer and the Initial Noteholder covenant and agree, for the 
benefit of the Banks, and any subsequent Noteholders by their acceptance of 
Subordinated Notes likewise covenant and agree, that all Subordinated Notes 
shall be issued and all Subordinated Obligations shall be incurred hereunder 
subject to the provisions of this Agreement; and each Noteholder, whether 
upon original issue of the Subordinated Note or upon transfer, assignment or 
exchange thereof, accepts and agrees that the payment of all Subordinated 
Obligations, to the extent and in the manner hereinafter set forth, be 
subordinated and junior in right of payment to the prior payment in Cash in 
full of all Senior Indebtedness from time to time outstanding; that the 
subordination provided herein is for the benefit of, and shall be enforceable 
directly by (subject to the powers and duties of the Agent provided herein), 
each holder of Senior Indebtedness, and that each holder of Senior 
Indebtedness shall be deemed to have acquired 


                                     -4-
<PAGE>

its Senior Indebtedness in reliance upon the covenants and provisions 
contained in this Agreement.  The Senior Indebtedness shall not be deemed to 
have been paid in full for all purposes of the Senior Credit Documents and 
the Subordinated Obligations until all Senior Indebtedness has been paid in 
full in Cash (including, without limitation, Post-Petition Interest) and all 
commitments to lend under the Senior Credit Documents have been terminated.

          Section 2.2.   PAYMENT OVER TO HOLDERS OF SENIOR INDEBTEDNESS.

          (a)  In the event of any payment by or distribution of assets of 
the Issuer or any other Credit Party of any kind or character, in part or in 
whole, whether in cash, property or securities, to creditors of the Issuer, 
including in connection with (i) any insolvency or bankruptcy case or 
proceeding, or any receivership, liquidation, reorganization, adjustment, 
composition or other similar case or proceeding in connection therewith, 
relative to the Issuer or any other Credit Party or to any of its creditors 
or to their assets, or (ii) any liquidation, dissolution or other winding up 
of the Issuer or any other Credit Party, whether voluntary or involuntary and 
whether or not involving insolvency or bankruptcy, or (iii) any assignment 
for the benefit of creditors or any other marshaling of assets and 
liabilities of the Issuer or any other Credit Party, then and in any and all 
such events:

               (i)   all Obligations due or to become due under or with
     respect to all Senior Indebtedness in such proceeding shall be paid in
     full in Cash before the Noteholders are entitled to receive any
     payment or distribution of the assets of the Issuer or such Credit
     Party, whether in cash, securities or other property, on account of
     the Subordinated Obligations;

               (ii)  any payment or distribution of assets of the Issuer
     or any other Credit Party of any kind or character, whether in Cash,
     property or securities, by set-off or otherwise, to which the
     Noteholders would be entitled but for the provisions of this
     Agreement, including any such payment or distribution which may be
     payable or deliverable by reason of the payment of any other
     obligation of the Issuer being subordinated to the payment of the
     Subordinated Obligations, shall be paid by the liquidating trustee or
     agent or other Person making such payment or distribution, whether a
     trustee in bankruptcy, a receiver or liquidating trustee or otherwise,
     directly to the Agent, until all Obligations shall have been paid in
     Cash, ratably according to the aggregate amounts remaining unpaid on
     account of the principal of, and interest on, such Senior Indebtedness
     to the extent necessary to make payment in Cash in full of all such
     Senior Indebtedness remaining unpaid after giving effect to any
     concurrent payment or distribution to the holders of such Senior
     Indebtedness, and

               (iii) in the event that, notwithstanding the foregoing
     provisions, the holders of the Subordinated Notes shall have received
     any such 


                                     -5-
<PAGE>

     payment or distribution of assets of the Issuer of any kind or 
     character, whether in cash, property or securities, before all such 
     Senior Indebtedness is paid in full in Cash, then and in such event such 
     payment or distribution shall be received by such holders in trust and 
     paid over or delivered promptly, in the form received, to the Agent, 
     until all Obligations shall have been paid in full, in Cash, to the 
     extent necessary to pay all such other Senior Indebtedness in full in 
     Cash, after giving effect to any concurrent payment or distribution to 
     or for the holders of such other Senior Indebtedness.
     
               (iv)  The Agent shall have the right to request any
     Noteholder to file and, in the event that the Noteholder fails to do
     so within 30 days prior to the date such claims or proofs of claim
     would be barred for failure to make a timely filing, is hereby
     authorized to file a proof of claim for and on behalf of that
     Noteholder or any other holder of the Subordinated Notes in such form
     as the Agent may determine to be necessary or appropriate for the
     enforcement of the provisions of this Section 2.2, to accept and
     receive any payment or distribution which may be payable or
     deliverable at any time upon or in respect of the Subordinated
     Obligations in an amount not in excess of the Senior Indebtedness then
     outstanding and to take such other action as may be reasonably
     necessary to effectuate the foregoing.  Each holder of a Subordinated
     Note shall provide to the Agent all such powers of attorney, proofs of
     claim, assignments of claim and other instruments, documents and
     information, reasonably necessary to present any such claims or seek
     enforcement as aforesaid.

               (v)   If there shall occur any consolidation of the Issuer
     with, or any merger of the Issuer into, another corporation or the
     liquidation or dissolution of the Issuer following any conveyance,
     transfer or lease of its properties and assets substantially as an
     entirety to another corporation, such consolidation, merger or
     liquidation shall not be deemed a dissolution, winding up,
     liquidation, reorganization, assignment for the benefit of creditors
     or marshaling of assets and liabilities of the Issuer for the purposes
     of this Section 2.2.

          Section 2.3.   NO PAYMENT IN CERTAIN CIRCUMSTANCES.

          (a)  In the event that the Issuer or any other Credit Party shall 
fail to pay when due, upon acceleration or otherwise, any principal, interest 
or fees with respect to Senior Indebtedness, which payment default shall not 
have been cured or waived, or any other "Event of Default" (as defined in the 
Senior Credit Agreement) shall not have been cured or waived, then no payment 
shall be made by the Issuer, or accepted by any Noteholder, on account of the 
Subordinated Obligations unless and until all Senior Indebtedness shall have 
been paid in Cash, in full, or provision shall have been made for such 
payment or until such "Event of Default" shall have been cured or waived; 
PROVIDED that the 


                                     -6-
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foregoing shall not prevent the capitalization of accrued interest payable on 
the Subordinated Notes, pursuant to section 1 thereof, or the conversion of 
said Subordinated Notes in accordance with section 3 thereof.

          (b)  Without limiting the foregoing clause (a), prior to the 
payment in full of all Senior Indebtedness and the termination of all 
commitments to lend under the Senior Credit Agreement, absent the prior 
written consent of the Agent, Issuer shall not make, and no Noteholder shall 
accept, any payment on or with respect to any Subordinated Note, including, 
without limitation, any payment with respect to interest on the Subordinated 
Notes or any optional or mandatory prepayment or redemption payment, except 
that the Issuer may make, and the Noteholders may accept, (i) payments 
pursuant to section 3.1(f) of the Subordinated Notes which (x) do not exceed 
$1,000 in the aggregate for all such payments, and (y) are not made during 
the pendency of any "Event of Default" under the Senior Credit Agreement and 
(ii) payments of cash interest in respect of the Subordinated Notes on each 
June 30 and December 31, pursuant to the terms of the Subordinated Notes as 
they exist on the date hereof, so long as (A) no "Event of Default" under the 
Senior Credit Agreement is in existence at the time of each payment or would 
be caused by the making of such payment and (B) after making such payment, 
"Availability" under the Senior Credit Agreement is equal to or greater than 
$3,000,000; PROVIDED that the foregoing shall not prevent the capitalization 
of accrued interest payable on the Subordinated Notes pursuant to section 1 
thereof, or the conversion of said Subordinated Notes in accordance with 
section 3 thereof.

          (c)  In the event that any payment shall be received by any 
Noteholder which is prohibited by the foregoing provisions of this Section 
2.3, then and in such event such payment shall be held in trust by such 
Noteholder for the benefit of the holders of Senior Indebtedness, and shall 
be paid over and delivered to the Agent, promptly, in the form received, for 
application to the Senior Indebtedness.

          (d)  The provisions of this Section 2.3 shall not apply to any 
payment with respect to which Section 2.2 would be applicable.

          Section 2.4.   FORBEARANCE SO LONG AS SENIOR INDEBTEDNESS 
OUTSTANDING.

          (a)  Until all Senior Indebtedness has been paid in full in Cash 
and all commitments to lend under the Senior Credit Agreement shall have been 
terminated, no Noteholder may, without the prior written consent of the Agent,

               (i)   accelerate the maturity of the Subordinated Notes
     other than by reason of the occurrence and continuation of an event
     described in section 8.1(d) or (g) of the Subordinated Notes or of an
     event described in section 8.1(f) of the Subordinated Notes with
     respect to acceleration of the Senior Indebtedness (any such event, an
     "ACCELERATION EVENT"), or


                                     -7-
<PAGE>

               (ii)  commence any action, suit or proceeding to accelerate
     or to enforce any claims, rights, demands, causes of action,
     liabilities, or suits, of any kind whatsoever, whether known or
     unknown, that have been, could have been, or in the future might be
     asserted by the holders of the Subordinated Notes based upon, arising
     out of, or in any way relating to, the Subordinated Notes (each, an
     "ENFORCEMENT ACTION") other than upon the occurrence and continuation
     of an Acceleration Event; PROVIDED that the foregoing shall not
     preclude the Noteholders from seeking specific performance of the
     covenants set forth in sections 5.1 through 5.6 of the Subordinated
     Notes; and PROVIDED further that the foregoing shall not preclude the
     Noteholders from asserting any defense in an affirmative suit or claim
     against them, or from raising their entitlement to payment on the
     Subordinated Notes in offset or as a defense in any such affirmative
     action.

          (b)  So long as any Senior Indebtedness remains outstanding, and 
there remain any outstanding commitments to make advances or issue letters of 
credit under the Senior Credit Agreement, each Noteholder agrees that it 
shall not commence an Enforcement Action (which it may, in any event, only 
commence upon the occurrence of an Acceleration Event), until the first to 
occur of the following: (i) the expiration of 60 days following the delivery 
by such Noteholder of a written notice to the Agent informing it of the 
existence of the Acceleration Event and of its intention to commence an 
Enforcement Action and (ii) the occurrence of any event described in section 
8.1(d) of the Subordinated Notes; PROVIDED that the Noteholders may 
accelerate the Subordinated Notes upon the occurrence of an Acceleration 
Event, but may not take any other Enforcement Action until the expiry of the 
above-described period.

          Section 2.5.   SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR 
INDEBTEDNESS.  Upon the payment in full in Cash of all Senior Indebtedness, 
the Noteholders shall become subrogated to the rights of the holders of such 
Senior Indebtedness to receive payments and distributions of cash, property 
and securities applicable to such Senior Indebtedness until the principal of 
and interest on the Subordinated Notes shall be paid in full in cash. For 
purposes of such subrogation, no payments or distributions to the holders of 
such Senior Indebtedness of any cash, property or securities to which the 
Noteholders would be entitled except for the provisions of this Agreement, 
and no payments over pursuant to the provisions of this Agreement to the 
holders of such Senior Indebtedness by the Noteholders shall, as among the 
Issuer, its creditors (other than holders of such Senior Indebtedness) and 
the Noteholders be deemed to be a payment or distribution by the Issuer to or 
on account of such Senior Indebtedness.

          Section 2.6.   PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.  The 
provisions of this Agreement are and are intended solely for the purpose of 
defining the relative rights of the holders of the Subordinated Notes on the 
one hand and the holders of Senior Indebtedness on the other hand. Nothing 
contained in this Agreement or in the Subordinated 


                                     -8-
<PAGE>

Notes (including, without limitation, the failure of any Noteholder to bring 
an Enforcement Action which is barred under the provisions of this Agreement) 
is intended to or shall (i) impair, as among the Issuer, its creditors (other 
than holders of Senior Indebtedness) and the Noteholders, the obligation of 
the Issuer, which is absolute and unconditional, to pay to the Noteholders 
the principal of, and premium and interest on, and any other amount payable 
by the Issuer under, the Subordinated Notes as and when the same shall become 
due and payable in accordance with its terms; or (ii) affect the relative 
rights against the Issuer of the Noteholders and its creditors (other than 
the holders of Senior Indebtedness); or (iii) prevent the Noteholders from 
accelerating the Subordinated Obligations and exercising all other remedies 
otherwise permitted by applicable law upon a default under the Subordinated 
Notes after the payment in full in Cash of the Senior Indebtedness and 
termination of commitments to make advances or issue letters of credit under 
the Senior Credit Agreement or otherwise in accordance with the provisions of 
this Agreement; or (iv) constitute or effect a waiver of any claims, defenses 
or rights of such Noteholders which may be available to them in an action by 
or against the Issuer or any other creditor (other than the holders of Senior 
Indebtedness).

          Section 2.7.   NO WAIVER OF SUBORDINATION PROVISIONS.  No right of 
any present or future holder of any Senior Indebtedness to enforce 
subordination as herein provided shall at any time in any way be prejudiced 
or impaired by any act or failure to act on the part of the Issuer, any other 
Credit Party, the Agent or any holder of Senior Indebtedness or by any act or 
failure to act by the Agent or any such holder, or by any noncompliance by 
the Issuer, the Agent or any holder of Senior Indebtedness with the terms, 
provisions and covenants of this Agreement, regardless of any knowledge of 
such act or failure to act any holder thereof may have or be otherwise 
charged with. Without in any way limiting the generality of the foregoing, 
the holders of Senior Indebtedness may at any time and from time to time, 
without the consent of or notice to the Noteholders, without incurring 
responsibility to the Noteholders and without impairing or releasing the 
subordination provided in this Agreement or the obligations hereunder of the 
Noteholders to the holders of Senior Indebtedness, do any one or more of the 
following: (i) change the manner, place or terms of payment or extend the 
time of payment of, or renew or alter, or increase or reduce the available 
commitments under or principal amount of, or otherwise amend, supplement, 
modify, refinance or restructure in any manner any Senior Indebtedness or any 
instrument evidencing the same or any agreement under which the Senior 
Indebtedness is outstanding or is related thereto; (ii) sell, exchange, 
release or otherwise deal with any property pledged, mortgaged or otherwise 
securing Senior Indebtedness; (iii) release any Person liable in any manner 
for the collection of Senior Indebtedness; and (iv) exercise or refrain from 
exercising or waiving any rights, powers or remedies against the Issuer or 
any other Person.

          Section 2.8.   RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF 
LIQUIDATING AGENT. Upon any payment or distribution of assets of the Issuer 
referred to in this Agreement, the Noteholders shall be entitled to rely upon 
any order or decree entered by any court of competent jurisdiction in which 
such insolvency, bankruptcy, receivership, liquidation, reorganization, 
dissolution, winding up or similar case or proceeding is pending, or a 


                                     -9-
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certificate of the trustee in bankruptcy, receiver, liquidating trustee, 
custodian, assignee for the benefit of creditors, agent or other Person 
making such payment or distribution, delivered to the Noteholders for the 
purpose of ascertaining the Persons entitled to participate in such payment 
or distribution, the holders of Senior Indebtedness and other debt of any 
Credit Party, the amount thereof or payable thereon, the amount or amounts 
paid or distributed thereon and all other facts pertinent thereto.

ARTICLE 3.  MISCELLANEOUS

          Section 3.1.   REINSTATEMENT.  The holders of Senior Indebtedness 
shall continue to benefit from the subordination created hereunder and the 
provisions of this Agreement shall continue to govern the relative rights and 
priorities of such holders, on the one hand, and the Noteholders, on the 
other, notwithstanding the fact that part or all of the Senior Indebtedness 
or the liens securing payment thereof are subordinated, set aside, avoided or 
disallowed under Section 548 of the Bankruptcy Code or any successor statute 
or other applicable insolvency law or equitable principles.

          Section 3.2.   REPRESENTATIONS AND WARRANTIES.  Each of the parties 
hereto hereby represents and warrants that (a) it has full power, authority 
and legal right to make and perform this Agreement, and (b) this Agreement is 
its legal, valid and binding obligation, enforceable against it in accordance 
with its terms, except as enforceability may be limited by bankruptcy, 
insolvency, moratorium or other laws affecting creditors' rights generally 
and by general principles of equity (whether enforcement is sought in a 
proceeding in equity or at law).

          Section 3.3.   AMENDMENT.  This Agreement may only be amended by a 
writing executed by the "Required Holders" (as defined in the Subordinated 
Notes), the Issuer and the Agent. No modification, amendment or waiver to the 
Subordinated Notes (other than to the conversion mechanisms in section 3 
thereof) prior to the payment in full, in Cash, of all Senior Indebtedness 
and the termination of all commitments under the Senior Credit Agreement, 
shall be effected without the prior written consent of the Agent, other than 
a waiver granted by the Noteholders of a default by the Issuer.

          Section 3.4.   LEGEND.  The Subordinated Notes shall bear a legend 
substantially in the form of the following:

          THIS 8.0% SUBORDINATED CONVERTIBLE NOTE (THIS "NOTE") IS
          SUBORDINATED TO THE PRIOR PAYMENT AND SATISFACTION OF ALL
          SENIOR INDEBTEDNESS, PURSUANT TO, AND AS DEFINED IN, THE
          SUBORDINATION AGREEMENT DATED AS OF OCTOBER ___, 1998, AS
          AMENDED FROM TIME TO TIME (THE "SUBORDINATION AGREEMENT")
          AMONG THE ISSUER, HELLER EQUITY CAPITAL CORPORATION 


                                     -10-
<PAGE>


          AND THE AGENT (AS DEFINED IN THE SUBORDINATION AGREEMENT) 
          TO THE EXTENT, AND IN THE MANNER PROVIDED IN, THE 
          SUBORDINATION AGREEMENT. A COPY OF THE SUBORDINATION 
          AGREEMENT WILL BE PROVIDED TO ANY HOLDER OF THIS NOTE 
          UPON WRITTEN REQUEST TO THE ISSUER.

          Section 3.5.   REMEDIES. The holders of Senior Indebtedness shall 
be entitled to enforce their rights under this Agreement specifically, to 
recover damages by reason of any breach of any provision of this Agreement 
and to exercise all other rights existing in their favor. The Noteholders and 
the Issuer acknowledge and agree that money damages may not be an adequate 
remedy for any breach of the provisions of this Agreement and that the Agent 
on behalf of the holders of Senior Indebtedness may apply to any court of law 
or equity of competent jurisdiction for specific performance and/or 
injunctive relief (without posting bond or other security) in order to 
enforce or prevent any violation of the provisions of this Agreement.

          Section 3.6.   NOTICES. So long as any Senior Indebtedness or any 
commitments to make loans or issue letters of credit under the Senior Credit 
Agreement remain outstanding, all notices, demands or other communications to 
be given or delivered under or by reason of the provisions of the 
Subordinated Notes shall be simultaneously transmitted to the Agent by the 
Issuer or Noteholder delivering such communication, and any notice of 
acceleration of Senior Indebtedness provided to the Issuer by the Agent shall 
also be provided to the Noteholders; PROVIDED that the failure of a 
Noteholder or the Agent to so provide a copy of any such notice to the Agent 
or the Noteholders, respectively, shall not prevent such notice from being 
effective as to the Issuer. Notwithstanding the foregoing, so long as any 
Senior Indebtedness or any commitments to lend under the Senior Credit 
Agreement remain outstanding, no acceleration of, redemption of, or action 
for specific performance of any covenant under, any Subordinated Note or any 
Enforcement Action shall be effective without notice of the same being 
provided to the Agent. All notices, demand or other communications to be 
given or delivered under or by reason of the provisions of the Subordinated 
Notes or this Agreement shall be in writing and delivered personally, mailed 
by certified or registered mail, return receipt requested and postage 
prepaid, sent via a nationally recognized overnight courier or sent via 
facsimile. Such notices, demands and other communications will be sent to the 
address indicated below:

      If to the Issuer, to it at:
                                  3478 Burkirk Avenue, Suite 260
                                  Pleasant Hill, CA 94523
                                  Attention:  President



                                     -11-
<PAGE>

                                  with a copy to each of the following:

                                  Brownstein Hyatt Farber & Strickland, PC
                                  410 Seventeenth Street
                                  22nd Floor
                                  Denver, CO  80202-4437
                                  Attention:  Steven Siegel, Esq.
                                  Telecopy: (303) 623-1956

                                  and

                                  Kohlberg & Company
                                  111 Radio Circle
                                  Mt. Kisco, NY  10549
                                  Attention:  Samuel Frieder
                                  Telecopy: (914) 241-7476


      If to the Initial Noteholder:

                                  Heller Equity Capital Corporation
                                  500 West Monroe Street
                                  Chicago, IL  60661
                                  Attention:  Charles P. Brisman, Esq.
                                  Telecopy: (312) 441-7208

                                  with a copy to:

                                  Katten Muchin & Zavis
                                  1999 Avenue of the Stars
                                  Suite 1400
                                  Los Angeles, CA  90067
                                  Attention:  James K. Baer, Esq.
                                  Telecopy: (310) 788-4471


      If to the Agent, to it at:

                                  Fleet Capital Corporation
                                  20800 Swenson Drive
                                  Suite 350
                                  Waukesha, Wisconsin  53186
                                  Attention:  Loan Administration Manager
                                  Telecopy: (414) 798-4882

                                  with a copy to:

                                  Goldberg, Kohn, Bell, Black,
                                    Rosenbloom & Moritz


                                     -12-
<PAGE>

                                  55 East Monroe Street
                                  Suite 3700
                                  Chicago, IL 60603
                                  Attention:  Karen R. Bieber, Esq.
                                  Telecopy: (312) 332-2196

or such other address or to the attention of such other Person as the 
recipient party shall have specified by prior written notice to the sending 
party; PROVIDED that the failure to deliver copies of notices as indicated 
above shall not affect the validity of any notice. Any such communication 
shall be deemed to have been received (i) when delivered, if personally 
delivered, or sent by nationally recognized overnight courier or via 
facsimile or (ii) on the third Business Day following the date on which the 
piece of mail containing such communication is posted if sent by certified or 
registered mail.

          Section 3.7.   SEVERABILITY.  In case any provision in this 
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the 
validity, legality and enforceability of the remaining provisions or 
obligations, or of such provision or obligation in any other jurisdiction, 
shall not in any way be affected or impaired thereby.

          Section 3.8.   HEADING. Section and subsection headings in this 
Agreement are included herein for convenience of reference only and shall not 
constitute a part of this Agreement for any other purpose or be given any 
substantive effect.

          Section 3.9.   APPLICABLE LAW.  THIS AGREEMENT SHALL BE GOVERNED 
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE 
STATE OF ILLINOIS WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.

          Section 3.10.  SUCCESSORS AND ASSIGNS.  This Agreement shall be 
binding upon the parties hereto and their respective successors and assigns 
and shall inure to the benefit of the parties hereto and their successors and 
assigns, and each holder of Senior Indebtedness shall be deemed to have 
acquired its Senior Indebtedness in reliance on the terms hereof. Without 
limitation, any and all holders of Subordinated Indebtedness shall be bound 
by the provisions hereof.

          Section 3.11.  CONSENT TO JURISDICTION AND SERVICE OF PROCESS.  All 
judicial proceedings brought against the Issuer or any Noteholder with 
respect to this Agreement or any Subordinated Note may be brought in any 
State or Federal court of competent jurisdiction in the State of Illinois 
located in Cook County and by execution and delivery of this Agreement (or 
the acceptance of any Subordinated Note) each such Person accepts for itself 
and in connection with its properties, generally and unconditionally, the 
jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by 
any judgment rendered thereby in connection with this Agreement subject, 
however, to rights of appeal. The Issuer and each 


                                     -13-
<PAGE>

such Noteholder hereby designates and appoints CT Corporation System, with an 
address at 1633 Broadway, New York, New York 10019 and such other Persons as 
may hereafter be selected by such Person irrevocably agreeing in writing to 
serve as its agent to receive on its behalf, service of all process in any 
such proceedings in any such court, such service being hereby acknowledged by 
each such person to be effective and binding service in every respect. A copy 
of such process so served shall be sent by air courier to the applicable 
party at its address provided in section 3.6, except that unless otherwise 
provided by applicable law, any failure to mail such copy shall not affect 
the validity of service of process. If any agent appointed by the Issuer or 
any Noteholder refuses to accept service, such Person hereby agrees that 
service upon it by mail shall constitute sufficient notice. Nothing herein 
shall affect the right to serve process in any other manner permitted by law.

          Section 3.12.  WAIVER OF JURY TRIAL. Each of the parties to this 
Agreement and each holder of any Subordinated Note hereby irrevocably waives 
all rights to a trial by jury in any action, proceeding or counterclaim 
arising out of or relating to this Agreement or the Subordinated Notes or the 
transactions contemplated hereby or thereby.

          Section 3.13.  COUNTERPARTS: EFFECTIVENESS. This Agreement may be 
executed in any number of counterparts and by different parties hereto in 
separate counterparts, each of which when so executed and delivered shall be 
deemed an original, but all such counterparts together shall constitute but 
one and the same instrument.


                                     -14-
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement 
to be executed by the respective duly authorized officers of the undersigned 
as of the date first written above.



                                        THE ISSUER:

                                        COLOR SPOT NURSERIES, INC.



                                        By:  
                                           ----------------------------------
                                        Name:
                                        Title:

                                        THE INITIAL NOTEHOLDER:

                                        HELLER EQUITY CAPITAL CORPORATION


                                        By:  
                                           ----------------------------------
                                        Name:
                                        Title:

                                        THE AGENT:


                                        FLEET CAPITAL CORPORATION


                                        By:  
                                           ----------------------------------
                                        Name:
                                        Title:




                                     -15-