Document:

EXHIBIT 10.60

                          THE CHALONE WINE GROUP, LTD.

                                CONVERTIBLE NOTE
                               PURCHASE AGREEMENT

         THIS CONVERTIBLE NOTE PURCHASE  AGREEMENT (this "AGREEMENT") is entered
into as of August 21,  2002 by and  between The  Chalone  Wine  Group,  Ltd.,  a
California  corporation (the "COMPANY") whose principal office is located at 621
Airpark Road,  Napa,  California  94558,  and,  severally  and not jointly,  SFI
Intermediate Limited, a Texas Limited Partnership ("SFI") whose principal office
is located at 5810 Skelly  Drive,  Suite  1650,  Tulsa,  Oklahoma  74135 and Les
Domaines Baron de Rothschild  (Lafite), a French company ("DBR") whose principal
office  is  located  at 33 rue de la  Baume,  Paris,  France.  DBR  and  SFI are
individually  referred  to  herein  as a  "PURCHASER"  and  collectively  as the
"PURCHASERS."

                                    RECITALS

         The  Company  desires  to  issue  and sell to the  Purchasers,  and the
Purchasers desire to purchase,  subordinated convertible promissory notes in the
aggregate principal amount of US$11,000,000 in consideration for DBR's and SFI's
respective investments of US$8,250,000 and US$2,750,000. The parties have agreed
that the foregoing  notes will be convertible,  under  specified  circumstances,
into shares of the Company's Common Stock.  Simultaneously with the issuance and
delivery  of the notes,  the  Purchasers  and the Company  are  entering  into a
registration  rights  agreement,  pursuant  to which the Company  agrees,  under
specified  circumstances,  to register the Company's  Common Stock issuable upon
conversion of the notes.

         NOW, THEREFORE, the parties agree as follows:

Section  1:       SALE.  Upon the terms and  subject to the  conditions  hereof,
the Company shall issue to DBR, and DBR shall purchase from the Company,  at the
Closing (as defined below),  a subordinated  convertible  promissory note in the
form of EXHIBIT A ("CONVERTIBLE  NOTE") for the principal  amount of $8,250,000.
Upon the terms and subject to the conditions  hereof, the Company shall issue to
SFI, and SFI shall purchase from the Company, at the Closing (as defined below),
a Convertible Note for the principal amount of $2,750,000.  The Convertible Note
issued to DBR is  referred to below as the "DBR NOTE" and the  Convertible  Note
issued to SFI is referred to below as the "SFI NOTE."

Section 2:        CLOSING.

        2.1 CLOSING  DATE AND  LOCATION.  The closing of the issuance to and
purchase by each Purchaser of the Convertible  Note (the  "CLOSING")  shall take
place at the  principal  office of the  Company on August 21, 2002 at 10:00 a.m.
Pacific  Time, or at such time and place as the  Purchasers  and the Company may
set by mutual  agreement.  The date of the  Closing is referred to herein as the
"CLOSING DATE."

        2.2 CLOSING.  At the Closing,  the Company shall deliver the DBR Note to
DBR and the SFI Note to SFI upon the  Company's  receipt  of wire  transfers  of
$8,250,000 and $2,750,000,  respectively.  At the Closing,  each Purchaser shall
deliver to the Company, and the Company shall deliver to each Purchaser,  a duly

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executed copy of the  Registration  Rights Agreement in the form attached hereto
as EXHIBIT B.

Section 3:        REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The Company
hereby represents and warrants to each Purchaser as follows:

        3.1  ORGANIZATION  AND GOOD STANDING.  The Company is a corporation duly
incorporated,  validly existing and in good standing under the laws of the State
of California.

        3.2  AUTHORIZATION.  The company has all requisite  corporate  power and
authority  to enter into this  Agreement  and,  subject to  satisfaction  of the
conditions set forth herein, to consummate the transactions contemplated hereby.
The  execution  and  delivery  of this  Agreement  and the  consummation  of the
transactions  contemplated  hereby have been duly  authorized  by all  necessary
corporate action on the part of the Company.

        3.3  ENFORCEABILITY.  This Agreement and the Convertible Note, when each
is executed and delivered by the Company,  shall  constitute a valid and binding
obligation of the Company,  enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, and other similar
laws affecting creditors' rights generally and to general principles of equity.

        3.4 RESERVE OF COMMON STOCK; VALID ISSUANCE. The Company has on the date
hereof  and  will,  at all  times  while the  Convertible  Note is  outstanding,
maintain an adequate reserve of duly authorized shares of Common Stock, reserved
for issuance to the  Purchaser,  to enable the Company to perform the conversion
of the  Convertible  Note.  The Common Stock  issuable  upon  conversion  of the
Convertible  Note,  when issued in accordance  with the terms of the Convertible
Note,  will  be  duly  and  validly  authorized  and  issued,   fully  paid  and
nonassessable.

Section 4:        REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
PURCHASERS.  Each Purchaser hereby  represents,  warrants,  covenants and agrees
severally and not jointly that:

        4.1  AUTHORIZATION.  The Purchaser has all requisite power and authority
to enter into this Agreement and,  subject to the satisfaction of the conditions
set forth herein,  to  consummate  the  transactions  contemplated  hereby.  The
execution  and  delivery  of  this  Agreement  and  the   consummation   of  the
transactions  contemplated  hereby have been duly  authorized  by all  necessary
action by the Purchaser.

        4.2   INVESTMENT   REPRESENTATIONS.   The  Purchaser  will  acquire  the
Convertible  Note (and the Common Stock issuable  thereunder) for investment for
the Purchaser's own account,  not as a nominee or agent,  and not with a view to
the sale or distribution  of any part thereof,  and the Purchaser has no present
intention of selling,  granting  participation in or otherwise  distributing the
same. The Purchaser:

              (a)  represents  that  it  does  not  have  any  contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations  to such person or to any third person with respect to any of the
Convertible Note or the Common Stock issuable on conversion thereof;

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              (b) represents  that it understands  that the  Convertible  Note,
and the Common Stock issuable on the conversion of the Convertible Note, are not
registered  under  the  Securities  Act  of  1933  (the  "Securities  Act")  and
applicable  state  securities  laws on the ground that the sale  provided for in
this Agreement and the issuance of securities is exempt pursuant to Section 4(2)
of the  Securities  Act or  Rule  506 of  Regulation  D  promulgated  under  the
Securities Act, and state law exemptions relating to offers and sales in private
placements to accredited investors;

              (c) agrees that it shall not make a disposition of the Convertible
Note (to the extent  transfer is  permitted  by the  Convertible  Note),  or the
Common  Stock  issuable  upon  conversion  thereof  (i)  except  pursuant  to an
effective registration statement under the Securities Act and in compliance with
applicable  state  securities  laws or (ii)  unless  and until it shall have (A)
notified the Company of the proposed  disposition  and shall have  furnished the
Company  with  a  statement  of  the  circumstances   surrounding  the  proposed
disposition,   and  (B)  furnished  the  Company  with  an  opinion  of  counsel
satisfactory  to the  Company  and its  counsel to the effect  that  appropriate
action necessary for compliance with the Securities Act and any applicable state
securities  laws  has been  taken  or an  exemption  from  the  registration  or
qualification  requirements  of the  Securities  Act  and  such  state  laws  is
available, and that the proposed transfer will not violate any of such laws;

              (d) represents that (i) it is an accredited  investor within the
meaning of Rule 501 of Regulation D  promulgated  under the  Securities  Act and
(ii)  that  it was  not  formed  for  the  specific  purpose  of  acquiring  the
Convertible Note or the Common Stock issuable upon conversion thereof;

              (e) represents that it is capable of evaluating an investment in
the Convertible  Note and the Common Stock issuable upon  conversion  thereof by
reason of its own investment acumen or business experience;

              (f) represents  that, in relation to its income and/or net worth,
the  Purchaser  is able to bear  the  economic  risks  of an  investment  in the
Convertible Note and Common Stock issuable upon conversion thereof;

              (g) agrees that the Common Stock  issuable upon  conversion  of
the  Convertible  Note  must be held  until  subsequently  registered  under the
Securities Act or an exemption from such registration is available;

              (h) agrees that the Company  shall have no  obligation to issue
shares of Common Stock to the Purchasers upon conversion of the Convertible Note
unless the Company,  after consultation with its counsel,  is satisfied that the
issuance of the Common Stock may occur without registration under the Securities
Act  and  applicable   state   securities   laws  pursuant  to  exemptions  from
registration and  qualification  therefrom and agrees to provide such additional
information,  documentation and  certifications  as reasonably  requested by the
Company to confirm the availability of such exemptions; and

              (i) agrees that the Convertible Note and the certificates
evidencing the Common Stock issuable upon conversion of the Convertible Note may
bear a legend in substantially the following form:

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

Section 5:    CONDITIONS TO THE PURCHASER'S OBLIGATIONS AT CLOSING. The
applicable obligations of each Purchaser under this Agreement are subject to the
fulfillment on or before the Closing Date of each of the following conditions:

        5.1 REPRESENTATIONS  AND WARRANTIES.  The representations and warranties
of the Company set forth in SECTION 3 shall be true and correct in all  material
respects as of the date of this Agreement and as of the Closing Date.

        5.2 PERFORMANCE.  The Company shall have performed and complied with all
agreements and conditions required by this Agreement to be performed or complied
with by the Company on or before the Closing Date.

        5.3 SECURITIES LAWS. At the time of the Closing, the issuance,  sale and
delivery  of the  Convertible  Note by the  Company  to the  Purchaser  shall be
legally  permitted by all securities  laws and  regulations to which the Company
and the Purchaser are subject.

        5.4  ABSENCE OF LEGAL  PROCEEDINGS.  As of the Closing  Date,  (a) there
shall be no effective  injunction,  writ,  preliminary  restraining order or any
order  of  any  nature  issued  by a  court  of  competent  directing  that  the
transactions contemplated by this Agreement or any of them not be consummated as
so provided or imposing any conditions on the  consummation of the  transactions
contemplated  hereby,  and (b) there shall not have been  instituted or pending,
or, to the best of the Company's  knowledge,  threatened,  any suit,  action, or
other  proceeding  that seeks to  restrain,  prevent or change the  transactions
contemplated by this Agreement or to otherwise question the validity or legality
of such transaction.

        5.5  LAWFUL  ISSUANCE.  As of the  Closing  Date,  the  purchase  of the
Convertible  Note by the Purchaser,  and the sale of the Convertible Note by the
Company,  shall be legally  permitted by all laws and  regulations  to which the
Company and the Purchaser are subject.

Section 6:    CONDITIONS TO THE COMPANY'S  OBLIGATIONS AT CLOSING.  The
applicable obligations of the Company to each Purchaser under this Agreement are
subject  to the  fulfillment  on or  before  the  Closing  Date  of  each of the
following conditions:

        6.1 REPRESENTATIONS  AND WARRANTIES.  The representations and warranties
of the  Purchaser  set  forth in  SECTION  4 shall be true  and  correct  in all
material respects as of the date of this Agreement and as of the Closing Date.

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        6.2  PERFORMANCE.  The Purchaser  shall have performed and complied with
all  agreements  and  conditions  required by this  Agreement to be performed or
complied with by the Purchaser on or before the Closing Date.

        6.3  QUALIFICATION  OF  PURCHASER.   The  Company  shall  be  reasonably
satisfied  that  the  Purchaser  is an  investor  fully  qualified  to  make  an
investment  in the  Convertible  Note so as to permit the sale to occur  without
registration under the Securities Act.

        6.4  ABSENCE OF LEGAL  PROCEEDINGS.  As of the Closing  Date,  (a) there
shall be no effective  injunction,  writ,  preliminary  restraining order or any
order  of  any  nature  issued  by a  court  of  competent  directing  that  the
transactions contemplated by this Agreement or any of them not be consummated as
so provided or imposing any conditions on the  consummation of the  transactions
contemplated  hereby,  and (b) there shall not have been  instituted or pending,
or, to the best of the Purchaser's knowledge,  threatened,  any suit, action, or
other  proceeding  that seeks to  restrain,  prevent or change the  transactions
contemplated by this Agreement or to otherwise question the validity or legality
of such transaction.

        6.5  LAWFUL  ISSUANCE.  As of the  Closing  Date,  the  purchase  of the
Convertible  Note by the Purchaser,  and the sale of the Convertible Note by the
Company,  shall be legally  permitted by all laws and  regulations  to which the
Company and the Purchaser are subject.

Section 7:    REPAYMENT OF CONVERTIBLE NOTES. If the Company repays the out-
standing  indebtedness under the Convertible Notes in cash in lieu of converting
the  Convertible  Notes into shares of the Company's  Common Stock,  the Company
shall not use the  proceeds of an offering of its equity  securities  to pay any
part of the  outstanding  indebtedness  under the  Convertible  Notes unless the
average  closing  price per share of the  Company's  Common  Stock over the five
consecutive  trading days  immediately  preceding the repayment date is at least
$15.00.  The foregoing  limitation on the Company's use of proceeds of an equity
financing  to repay  the  Convertible  Notes  shall  terminate  upon a Change of
Control Transaction (as such term is defined in the Convertible Notes).

Section 8:    INDEMNIFICATION.

        8.1 INDEMNIFICATION BY THE COMPANY. Subject to the limitations contained
in this  SECTION 8, the  Company  hereby  agrees to  indemnify,  defend and hold
harmless each Purchaser, and its officers, directors,  employees,  attorneys and
agents,  and successors in interest as to any and all claims,  demands,  losses,
costs, expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest,  penalties and reasonable  attorneys' fees and expenses that
any such person shall incur or suffer,  that arise, result from or relate to any
breach of, or failure by the  Company to  perform,  any of its  representations,
warranties, covenants or agreements in this Agreement.

        8.2  INDEMNIFICATION  BY THE  PURCHASERS.  Subject  to  the  limitations
contained in this SECTION 8, each Purchaser  hereby agrees to indemnify,  defend
and hold harmless the Company, and its officers, directors, employees, attorneys
and agents,  and  successors  in  interest  as to any and all  claims,  demands,
losses,  costs,  expenses,  obligations,  liabilities,  damages,  recoveries and
deficiencies,  including interest,  penalties and reasonable attorneys' fees and

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expenses that any such person shall incur or suffer,  that arise, result from or
relate to any  breach of, or failure by the  Purchaser  to  perform,  any of its
representations, warranties, covenants or agreements in this Agreement.

        8.3  SURVIVAL.  The  representations,  warranties  and  covenants of the
parties contained in this Agreement shall survive the Closing.

Section 9:    MISCELLANEOUS.

        9.1  ENTIRE   AGREEMENT.   This   Agreement,   including  the  Exhibits,
constitutes the entire agreement among the parties, and no party shall be liable
or bound to any other party in any manner by any warranties,  representations or
covenants except as specifically set forth herein.

        9.2  AMENDMENTS  AND  WAIVERS.  This  Agreement  may not be  amended  or
terminated, or any right or obligation hereunder waived, other than by a written
instrument  signed by the party  against  whom  enforcement  of such  amendment,
termination or waiver is sought.

        9.3 SUCCESSORS  AND ASSIGNS.  The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective  successors and
assigns of the parties.  Except as expressly provided herein,  this Agreement is
not  intended  to  confer  upon any other  third  party  any  rights,  remedies,
obligations or liabilities.

        9.4 GOVERNING LAW.  Except for applicable  federal  securities laws this
Agreement  shall  be  governed  in all  respects  by the  laws of the  State  of
California.

        9.5  COUNTERPARTS.  This  Agreement  may  be  signed  in any  number  of
counterparts  with the same effect as if the signatures to each counterpart were
upon a single  instrument  and is intended to be binding  when all parties  have
delivered their signatures to the other parties.  Signatures may be delivered by
facsimile  transmission.  All  counterparts  shall be deemed an original of this
Agreement.

        9.6  HEADINGS.  The table of contents and headings  used herein are used
for convenience only, are not part of this Agreement and shall not be considered
in construing or interpreting this Agreement.

        9.7 NOTICES.  All notices,  requests,  consents and other communications
required or permitted  hereunder  shall be in writing and will be effective  (a)
immediately  upon delivery in person or by messenger,  (b) the next business day
after  deposit  with a  commercial  courier  or  delivery  service  for next day
delivery, (c) upon receipt by facsimile as established by evidence of successful
transmission  or (d) three  business  days after  deposit with the United States
Postal Service,  certified mail, return receipt requested,  postage prepaid. All
notices  must be properly  addressed  as follows (or to such other  address as a
party may specify by notice in pursuant to this SECTION 9.7):

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(a)      If to the Company:

         The Chalone Wine Group, Ltd.
         621 Airpark Road
         Napa, CA  94558
         Attention:  Thomas Selfridge
         Facsimile No.:  (707) 254-4204

         with a copy to:

         Farella Braun + Martel LLP
         235 Montgomery Street
         San Francisco, CA  94104
         Attention:  Daniel E. Cohn, Esq.
         Facsimile No.:  (415) 954-4480

(b)      If to DBR:

         __________________________________
         __________________________________
         __________________________________
         __________________________________

         Facsimile No.:

         with a copy to:

         Piper Rudnick LLP
         1251 Avenue of the Americas
         New York, NY  10020
         Attention:  Michael A. Varet, Esq.
         Facsimile No.:  (212) 835-6001

(c)      If to SFI:

         __________________________________
         __________________________________
         __________________________________
         __________________________________
         __________________________________

         with a copy to:

         Baker & Botts, L.L.P.
         One Shell Plaza
         910 Louisiana
         Houston, TX  77002
         Attention:  Gray Jennings, Esq.
         Facsimile No.:  (713) 229-1522

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        9.8 SEVERABILITY. If any one or more of the provisions of this Agreement
or of any amendment thereto is determined to be void or unenforceable, all other
provisions  of this  Agreement  (and  such  amendment)  shall  be  given  effect
separately   from  the  provision  or  provisions   determined  to  be  void  or
unenforceable.

        9.9  ATTORNEY'S  FEES. In the event of any breach of this Agreement that
results in arbitration or litigation  between the parties,  the prevailing party
shall be entitled to its  reasonable  attorney's  fees,  expert witness fees and
costs  of  suit.  The  prevailing  party  shall be  determined  by the  court or
arbitrator,  as  applicable,  based upon an  assessment  of which  party's major
arguments or  positions  taken in the  proceedings  could fairly be said to have
prevailed over the other party's major  arguments or positions on major disputed
issues in the court's or arbitrator's decision.

         IN WITNESS  WHEREOF  the  parties  hereto  have  signed or caused  this
Agreement to be signed as of the date first written above.

COMPANY:                          THE CHALONE WINE GROUP, LTD.

                                  By: __________________________________________
                                  Name:
                                  Title:

PURCHASERS:                       LES DOMAINES BARON DE ROTHSCHILD (LAFITE)

                                  By:___________________________________________
                                  Name:
                                  Title:

                                  SFI INTERMEDIATE LIMITED

                                  By:___________________________________________
                                  Name:
                                  Title:

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                                    EXHIBIT A

                                CONVERTIBLE NOTE

<PAGE>

                                    EXHIBIT B

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

                    CONVERTIBLE SUBORDINATED PROMISSORY NOTE

$8,250,000                                                       August 19, 2002

         FOR  VALUE  RECEIVED,  The  Chalone  Wine  Group,  Ltd.,  a  California
corporation  ("MAKER")  promises  to pay to Les  Domaines  Baron  de  Rothschild
(Lafite), a French company ("HOLDER"), in lawful money of the United States, the
principal sum of Eight Million Two Hundred Fifty Thousand  Dollars  ($8,250,000)
together with interest thereon and other amounts  specified herein, as specified
below.  This Note is issued  pursuant to a Convertible  Note Purchase  Agreement
dated August 21, 2002 among Maker,  Holder and SFI  Intermediate  Limited ("NOTE
PURCHASE AGREEMENT").

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

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

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

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

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

         6.  MECHANICS OF CONVERSION.   Upon either Holder's or Maker's election
to convert  this Note,  the  specified  part of the  outstanding  principal  and
accrued  interest of the Note shall be converted  without any further  action by
Holder  and  whether  or not the Note is  surrendered  to Maker or its  transfer
agent. Maker shall not be obligated to issue certificates  evidencing the shares
of Common Stock issuable upon conversion  unless the Note is either delivered to
Maker or its transfer  agent.  Maker shall,  as soon as  practicable  after such
delivery,  issue and  deliver to Holder,  a  certificate  or  certificates  with
appropriate  restrictive  legends  for the  number of shares of Common  Stock to
which  Holder  shall be  entitled.  If a  fractional  share would  otherwise  be

                                       2

<PAGE>

issuable upon  conversion of this Note,  Maker will in lieu of such issuance pay
the cash value of that fractional share.

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

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

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

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

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

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

         13.      MISCELLANEOUS.

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

                                       3

<PAGE>

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

                  c.       This Note shall be governed by California law.

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

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

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

                                      MAKER
                                      The Chalone Wine Group, Ltd.

                                      By:  _____________________________________
                                      Name:  ___________________________________
                                      Title:  __________________________________

Notice Addresses:

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

Holder: 33 rue de la Baume, 75008 Paris, France, Attn:  Christophe Salin
        Facsimile:  011-33-1-53-89-7801

                                       4

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