PROMISSORY NOTE

 Borrower: VERMONT PURE HOLDINGS, LTD. (TIN: 13-3576606),
 VERMONT PURE SPRINGS, INC. (TIN: 03-0330521)(TIN:P.O. BOX c RANDOLPH, VT 05060


Principal Amount: $1,814,461.73

Lender: CHITTENDEN TRUST COMPANY d/b/a CHITTENDEN BANK Burlington
           Two Burlington Square Burlington, VT 05401



                                                    Date of Note: July 17, 1997

PROMISE TO PAY.  VERMONT PURE HOLDINGS, LTD. (TIN: 13-3576606), VERMONT PURE
SPRINGS, INC. (TIN: 03-033OS21) ("Borrower") promises to pay to CHITTENDEN TRUST
COMPANY d/b/a CHITTENDEN BANK ("Lender"), or order, in lawful money of the
United States of America, the principal amount of One Million Eight Hundred
Fourteen Thousand Four Hundred Sixty One & 73/100 Dollars ($1,814,461.73),
together with interest on the unpaid principal balance from July 17,1997, until
paid in full.

PAYMENT.  Subject to any payment  changes  resulting  from changes in the Index,
Borrower will pay this loan In accordance with the following payment schedule:

         47 consecutive monthly interest payments,  beginning September 1, 1997,
         with  Interest  calculated  on  the  unpaid  principal  balances  at an
         interest  rate of 0.500  percentage  points  over the  Index  described
         below; 47 consecutive  monthly  principal  payments of $15,375.00 each,
         beginning  September 1, 1997,  with  Interest  calculated on the unpaid
         principal  balances at an interest rate of 0.500 percentage points over
         the Index described  below; and 1 principal and interest payment in the
         Initial  amount  of  $1,100,298.46  on August 1,  2001,  with  interest
         calculated  on the unpaid  principal  balances at an  interest  rate of
         0.500 percentage  points over the Index described below. This estimated
         final payment is based on the assumption that all payments will be made
         exactly as  scheduled  and that the Index does not  change;  the actual
         final payment will be for all  principal  and accrued  interest not yet
         paid, together with any other unpaid amounts under this Note.

Interest on this Note is computed on a 365/360 simple interest  basis;  that is,
by  applying  the  ratio of the  annual  interest  rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the  principal  balance  is  outstanding.  Borrower  will pay  Lender at
Lender's  address  shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest,  then to principal,  and any remaining
amount to any unpaid collection costs and late charges.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the 'The Wall Street  Journal
Prime Rate" (the "Index"). Lender will tell Borrower the current Index rate upon
Borrower's  request.  Borrower  understands  that Lender may make loans based on
other  rates as well.  The  interest  rate change will not occur more often than
each Day. The Index currently Is 8.600% per annum. The Interest rate or rates to
be  applied  to the  unpaid  principal  balance of this Note will be the rate or
rates set forth above In the "Payment" section.  NOTICE:  Under no circumstances
will the  interest  rate on this Note be more than the maximum  rate  allowed by
applicable law.  Whenever  increases occur in the interest rate,  Lender, at its
option, may do one or more of the following: (a) increase Borrower's payments to
ensure  Borrower's  loan will pay off by its original  final  maturity date, (b)
increase Borrower's payments to cover accruing interest, (c) increase the number
of Borrower's payments,  and (d) continue Borrower's payments at the same amount
and increase Borrower's final payment.
<PAGE>

PREPAYMENT. Borrower may pay all or a portion of the amount owed earlier than it
is due. Early payments will not, unless agreed to by Lender in writing,  relieve
Borrower of Borrower's obligation to continue to make payments under the payment
schedule.  Rather,  they will reduce the principal balance due and may result in
Borrower making fewer payments.

LATE CHARGE.  If a payment is 15 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment.

DEFAULT.  Borrower  will be in  default  if any of the  following  happens:  (a)
Borrower  fails to make any payment when due.  lb)  Borrower  breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement  related to this Note, or in any other  agreement or loan Borrower
has with Lender.  (c)  Borrower  defaults  under any loan,  extension of credit,
security  agreement,  purchase or sales agreement,  or any other  agreement,  in
favor of any  other  creditor  or  person  that  may  materially  affect  any of
Borrower's  property  or  Borrower's  ability  to  repay  this  Note or  perform
Borrower's  obligations under this Note or any ofthe Related Documents.  (d) Any
representation  or  statement  made or  furnished  to Lender by  Borrower  or on
Borrower's  behalf is false or misleading in any material  respect either now or
at the time made or furnished.  (e) Borrower  becomes  insolvent,  a receiver is
appointed for any part of Borrower's property,  Borrower makes an assignment for
the benefit of creditors,  or any proceeding is commenced  either by Borrower or
against Borrower under any  bankruptcy  or  insolvency  laws.  (f) Any  creditor
tries  to take any of Borrower's property on or in which Lender has a lien or 
security interest.  This includes a  garnishment  of any of  Borrower's accounts
with  Lender.  (g) Any guarantor  dies or any of the other events  described  in
this  default  section occurs with respect to any guarantor of this Note. 
(h) A material adverse change occurs in Borrower's  financial  condition,  or 
Lender  believes the prospect of payment or performance of the Indebtedness is 
impaired. (i) Lender in good faith deems itself insecure.

LENDER'S  RIGHTS.  Upon default,  Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest  immediately  due,  without
notice, and then Borrower will pay that amount. Upon default,  including failure
to pay upon final maturity,  Lender, at its option, may also, if permitted under
applicable  law,  increase  the  variable  interest  rate on this  Note by 2.000
percentage  points. The interest rate will not exceed the maximum rate permitted
by applicable law. Lender may hire or pay someone else to help collect this Note
if  Borrower  does not pay.  Borrower  also will pay Lender  that  amount.  This
includes,  subject to any limits under applicable law, Lender's  attorneys' fees
and  Lender's  legal  expenses  whether  or not  there is a  lawsuit,  including
attorneys' fees and legal expenses for bankruptcy proceedings (including efforts
to  modify  or  vacate  any  automatic  stay or  injunction),  appeals,  and any
anticipated  post-judgment  collection services. If not prohibited by applicable
law,  Borrower  also will pay any court  costs,  in  addition  to all other sums
provided by law.  This Note has been  delivered to Lender and accepted by Lender
in the State of Vermont.  If there Is a lawsuit,  Borrower  agrees upon Lender's
request to submit to the  jurisdiction of the courts of Chittenden  County,  the
State of Vermont.  Lender and Borrower  hereby waive the right to any jury trial
in any action,  proceeding, or counterclaim brought by either Lender or Borrower
against the other.  This Note shall be governed by and  construed In  accordance
with the laws of the State of Vermont.

DISHONORED  ITEM FEE.  Borrower  will pay a fee to Lender of $25.00 if  Borrower
makes a payment on Borrower's  loan and the check or  preauthorized  charge with
which Borrower pays is later dishonored.
<PAGE>

RIGHT OF SETOFF.  Borrower  grants to Lender a contractual  possessory  security
interest in, and hereby assigns,  conveys,  delivers,  pledges, and transfers to
Lender all Borrower's right,  title and interest in and to, Borrower's  accounts
with  Lender  (whether  checking,  savings,  or some other  account),  including
without  limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future,  excluding  however all IRA and Keogh accounts,
and all trust  accounts  for which the  grant of a  security  interest  would be
prohibited  by law.  Borrower  authorizes  Lender,  to the extent  permitted  by
applicable  law, to charge or setoff all sums owing on this Note against any and
all such accounts.

COLLATERAL.  This Note is secured by A SECURITY AGREEMENT DATED 04-29-96,
A SECURITY AGREEMENT DATED 03-07-97 AND A SECURITY AGREEMENT OF EVEN DATE.

DOCUMENTATION FEE.  Borrower agrees to pay a documentation fee of $1750.00.

PURPOSE.  The purpose of this loan is BUSINESS: FINANCE PURCHASE OF EXISTING

BUSINESS. ADDITIONAL TERMS.  Refer to Commitment Letter dated 07-11-97.

FINANCIAL  STATEMENT  SUBMISSION.  Borrower  agrees to provide  to Lender,  upon
request,  any financial  statements or information  that Lender deems necessary.
The failure of Borrower to provide financial statements as required hereunder or
under the Loan Agreement,  the Commitment  Letter, or any other document related
to the Note is an event of  default  under the terms of this Note and is subject
to the remedies  outlined in "Lender's  Rights",  above,  including the right of
Lender to increase the interest rate on the Note.

WAIVERS AND CONSENTS. Lender shall not be deemed to have waived any rights under
this Note (or under the Related  Documents) unless such waiver is in writing and
signed by Lender.  No delay or omission on the part of the Lender in  exercising
any right shall  operate as a waiver of such right or any other right.  A waiver
by any party of a  provision  of this Note shall not  constitute  a waiver of or
prejudice the party's  right  otherwise to demand  strict  compliance  with that
provision in the future or any other provision.  No prior waiver by Lender,  nor
any course of dealing between Lender and Borrower,  shall constitute a waiver of
any of  Lender's  rights  or  any of  Borrower's  obligations  as to any  future
transactions.  Whenever consent by Lender is required in this Note, the granting
of such  consent  by Lender in any  instance  shall  not  constitute  continuing
consent to subsequent instances where such consent is required.

HAZARDOUS  SUBSTANCES.  Except as disclosed to Lender in writing, no property of
Borrower  ever has been, or ever will be so long as this Note remains in effect,
used for the generation,  manufacture,  storage, treatment, disposal, release or
threatened  release of any  hazardous  waste or  substance,  as those  terms are
defined in the Comprehensive Environmental Response,  Compensation and Liability
Act of 1980,  as  amended,  42 U.S.C.  Section  9601,  et seq.  ("CERCLA"),  the
Superfund  Amendments  and  Reauthorization  Act ("SARA'),  applicable  state or
Federal laws,  or  regulations  adopted  pursuant to any of the  foregoing.  The
representations  and  warranties  contained  herein are based on Borrower's  due
diligence in investigating

07-17-1997
                                 PROMISSORY NOTE
                                     Page 2

                                   (Continued)

  the properties for hazardous  waste.  Borrower  hereby (a) releases and waives
  any future claims  against Lender for indemnity or  contribution  in the event
  Borrower  becomes  liable for cleanup or other costs under any such laws,  and
  (b) agrees to indemnify  and hold harmless  Lender  against any and all claims
  and  losses  resulting  from a breach of this  provision  of this  Note.  This
  obligation  to indemnify  shall survive the payment and  satisfaction  of this
  Note.

  CREDIT REPORTS.  Any credit investigation  information  furnished to Lender by
  any person,  organization or credit reporting agency is authorized by Borrower
  for the purpose of  originating,  reviewing the  performance of, or collecting
  this Note.

  SALE OF ASSETS OR CHANGE IN OWNERSHIP.  Borrower  agrees and covenants that it
  will not sell, lease, assign,  transfer or otherwise dispose of any of its now
  owned  or  hereafter  acquired  assets  other  than in the  normal  course  of
  business,  and that the  ownership  of the  borrowing  entity  will not change
  during the period of this loan,  including any  extensions,  modifications  or
  renewals thereof, without the prior written consent of Lender.

  LIMITATION  ON RIGHT OF SETOFF.  Lender agrees that it will exercise its right
  of setoff, as described above, only in the event of default under the terms of
  the Note or any related document,  including (without limitation) the Business
  Loan Agreement, any Guaranty, any Mortgage, any Security Agreement, any Pledge
  Agreement, or any Letter of Credit Reimbursement or similar agreement.

  ADDITIONAL EVENT OF DEFAULT.  Borrower will be in default if Borrower (or any
  Grantor) fails to keep the Collateral insured.

  ADDITIONAL LENDER'S RIGHTS.  In the event of default, Lender may demand more
  security or new parties obligated to pay the Note in return for not using any
  other remedy.
<PAGE>

  BANKRUPTCY ARREARAGES.  If Borrower files a petition under the Bankruptcy Code
  and seeks to pay any amount  which is past due under this Note,  Mortgage  and
  Security  Agreement as of the date of filing of the petition through a Chapter
  1 1 or 13 plan, Borrower agrees to pay Lender Interest on the amounts past due
  (arrearages)  at the Interest  Rate.  Interest will be calculated on the total
  amount  past due as of the date of filing of the  petition  (this may  include
  Interest on past due Interest and late  charges) for the time  required to pay
  the past due amounts through the bankruptcy case.

  AUTO-PAY  FEATURE.  If this loan contains an automatic  payment option and the
  automatic  payment  option is stopped for any reason,  the discount will cease
  and the rate will be increased to reflect termination of the discount.

  PRIOR NOTE.  NOTE #34.

  GENERAL  PROVISIONS.  Lender may delay or forgo enforcing any of its rights or
  remedies  under this Note without  losing them.  Borrower and any other person
  who signs,  guarantees or endorses  this Note,  to the extent  allowed by law,
  waive presentment,  demand for payment,  protest and notice of dishonor.  Upon
  any change in the terms of this Note, and unless otherwise expressly stated in
  writing,  no  party  who  signs  this  Note,  whether  as  maker,   guarantor,
  accommodation  maker or endorser,  shall be released from liability.  All such
  parties agree that Lender may renew or extend  (repeatedly  and for any length
  of time) this loan,  or  release  any party or  guarantor  or  collateral;  or
  impair,  fail to realize  upon or perfect  Lender's  security  interest in the
  collateral;  and take any other action deemed  necessary by Lender without the
  consent of or notice to anyone.  All such  parties  also agree that Lender may
  modify this loan  without  the  consent of or notice to anyone  other than the
  party with whom the modification is made.

  PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
  THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
  THE TERMS OF THE NOTE AND  ACKNOWLEDGES  RECEIPT  OF A  COMPLETED  COPY OF THE
  NOTE.

  BORROWER:
  VERMONT PURE HOLDINGS, LTD. (TIN: 13-3576606), VERMONT PURE SPRINGS, INC.
  (TIN: 03-0330521)

  VERMONT PURE HOLDINGS, LTD., BY: BRUCE MACDONALD, CHIEF FINANCIAL OFFICER.

  VERMONT PURE SPRINGS, INC., BY: BRUCE MACDONALD, CHIEF FINANCIAL OFFICER