SCHEID VINEYARDS INC, SB-2, 1997-05-28

SCHEID VINEYARDS INC
SB-2, 1997-05-28

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 1997

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM SB-2

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
------------------------

SCHEID VINEYARDS INC.

(Name of small business issuer in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 0172 95-2766024
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) Number)
</TABLE>

------------------------------

13470 WASHINGTON BLVD., SUITE 300
MARINA DEL REY, CALIFORNIA 90292
(310) 301-1555
(Address and telephone number of principal executive offices and principal place
of business)
------------------------------

ALFRED G. SCHEID
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SCHEID VINEYARDS INC.
13470 WASHINGTON BLVD., SUITE 300
MARINA DEL REY, CALIFORNIA 90292
(310) 301-1555

(Name, address and telephone number of agent for service)
------------------------------

COPIES TO:

V. JOSEPH STUBBS, ESQ. BRIAN W. COPPLE, ESQ.
THOMAS B. YOUTH, ESQ. MONTE M. BREM, ESQ.
BROBECK, PHLEGER & HARRISON LLP GIBSON, DUNN & CRUTCHER LLP
550 SOUTH HOPE STREET JAMBOREE CENTER
LOS ANGELES, CALIFORNIA 90071 4 PARK PLAZA
(213) 489-4060 IRVINE, CALIFORNIA 92614-8557
(714) 451-3800

------------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------------

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. / /
------------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH AMOUNT OFFERING PROPOSED MAXIMUM AMOUNT
CLASS OF SECURITIES TO BE PRICE PER SHARE AGGREGATE OF REGISTRATION
TO BE REGISTERED REGISTERED (2) OFFERING PRICE (2) FEE (2)
<S> <C> <C> <C> <C>
Class A Common Stock, par value $.001 2,300,000
per share........................... Shares(1) $10.00 $23,000,000 $6,970
Underwriters' Warrants................ 200,000 Shares $12.00 $2,400,000 $728
Class A Common Stock, par value $.001
per share, underlying Underwriters'
Warrants............................ 200,000 Shares $12.00 $2,400,000 --
</TABLE>

(1) Includes up to 300,000 shares of Class A Common Stock which may be purchased
by the Underwriters to cover over-allotments, if any.

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act.
------------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SCHEID VINEYARDS INC.

CROSS REFERENCE SHEET SHOWING LOCATION IN

PROSPECTUS OF PART I OF FORM SB-2

<TABLE>
<CAPTION>
ITEM NO. HEADING CAPTION OR LOCATION IN PROSPECTUS
- --------- ----------------------------------------------------- -----------------------------------------------------

<C> <S> <C>
1. Front of Registration Statement and Outside Front
Cover Page of Prospectus............................ Outside Front Cover Page

2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover Page; Outside Back Cover Page

3. Summary Information and Risk Factors................. Prospectus Summary; The Company; Risk Factors

4. Use of Proceeds...................................... Prospectus Summary; Risk Factors; Use of Proceeds

5. Determination of Offering Price...................... Outside Front Cover Page; Risk Factors; Underwriting

6. Dilution............................................. Risk Factors; Dilution

7. Selling Security Holders............................. Not Applicable

8. Plan of Distribution................................. Outside Front Cover Page; Underwriting

9. Legal Proceedings.................................... Legal Matters

10. Directors, Executive Officers, Promoters and Control
Persons............................................. Management; Principal Stockholders

11. Security Ownership of Certain Beneficial Owners and
Management.......................................... Principal Stockholders

12. Description of Securities............................ Outside Front Cover Page; Risk Factors; Prospectus
Summary; Description of Capital Stock

13. Interests of Named Experts and Counsel............... Not Applicable

14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Management

15. Organization Within Last Five Years.................. Management; Certain Transactions

16. Description of Business.............................. Prospectus Summary; Risk Factors; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Business

17. Management's Discussion and Analysis or Plan of
Operation........................................... Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business

18. Description of Property.............................. Business

19. Certain Relationships and Related Transactions....... Certain Transactions

20. Market for Common Equity and Related Stockholder
Matters............................................. Management; Description of Capital Stock; Shares
Eligible for Future Sale
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. HEADING CAPTION OR LOCATION IN PROSPECTUS
- --------- ----------------------------------------------------- -----------------------------------------------------

21. Executive Compensation............................... Management
<C> <S> <C>

22. Financial Statements................................. Combined Financial Statements

23. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED MAY 28, 1997 [LOGO]

2,000,000 SHARES

SCHEID VINEYARDS INC.

CLASS A COMMON STOCK

------------

All of the 2,000,000 shares (the "Shares") of Class A common stock (the
"Class A Common Stock") offered hereby are being offered for sale by Scheid
Vineyards Inc. ("SVI" or the "Company"). It is currently estimated that the
initial public offering price per share of Class A Common Stock will be between
$9.00 and $10.00.

The Company has two classes of Common Stock, Class A Common Stock, which is
offered hereby, and Class B Common Stock. Holders of Class A Common Stock are
entitled to one vote per share, and holders of Class B Common Stock are entitled
to five votes per share. Class A Common Stock is freely transferable and Class B
Common Stock is transferable only to certain permitted transferees but is
convertible into Class A Common Stock. Immediately after the completion of this
offering, the holders of Class A Common Stock will be entitled to elect 25% of
the Company's authorized directors, and the holders of Class B Common Stock will
be entitled to elect 75% of the Company's authorized directors.

Prior to this offering, there has been no public market for the Class A
Common Stock of the Company. See "Underwriting" for a discussion of factors
considered in determining the initial public offering price. Application has
been made for inclusion of the Class A Common Stock for quotation on the Nasdaq
National Market under the symbol "SVIN."
------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN RISKS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share....................................... $ $ $
Total (3)....................................... $ $ $
</TABLE>

(1) Excludes a non-accountable expense allowance payable by the Company to the
Representatives of the Underwriters and issuance by the Company to the
Representatives for nominal consideration of five-year warrants to purchase
up to 200,000 shares of Class A Common Stock at a price per share equal to
120% of the Price to Public. The Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at
$ , including the Representative's nonaccountable expense
allowance.

(3) The Company has granted to the Underwriters a 45-day option to purchase up
to 300,000 additional shares of Class A Common Stock on the same terms per
share solely to cover over-allotments, if any. If this option is exercised
in full, the total Price to Public, Underwriting Discounts and Commissions
and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."

---------------------

The shares of Class A Common Stock are being offered severally by the
Underwriters named herein, subject to prior sale, when, as and if delivered to
and accepted by the Underwriters, and subject to other conditions. It is
expected that delivery of the certificates representing the shares of Class A
Common Stock will be made against payment therefor at the offices of Cruttenden
Roth Incorporated, Irvine, California, on or about , 1997.

------------------
CRUTTENDEN ROTH
I N C O R P O R A T E D
LAIDLAW EQUITIES, INC.
RODMAN & RENSHAW, INC.

THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
[GRAPHIC OF MAP SHOWING CALIFORNIA'S 17 GRAPE GROWING DISTRICTS AND LOCATIONS OF
THE COMPANY'S OPERATIONS]
<PAGE>
[PHOTO #1 OF THE COMPANY'S VINEYARD WORKERS HARVESTING GRAPES; PHOTO #2 OF THE
COMPANY'S VINEYARD WORKERS PLACING STAKES IN A NEW VINEYARD; PHOTO #3 OF
PANORAMIC VIEW OF ONE OF THE COMPANY'S VINEYARDS]
<PAGE>
[PHOTO #1 OF ONE OF THE COMPANY'S HARVESTING MACHINES IN OPERATION; PHOTO #2 OF
FIVE BOTTLES OF THE COMPANY'S WINES; PHOTO #3 OF PANORAMIC VIEW OF ONE OF THE
COMPANY'S VINEYARDS]
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION, INCLUDING THE COMPANY'S
COMBINED FINANCIAL STATEMENTS, INCLUDING THE RELATED NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN
THIS PROSPECTUS (I) GIVES EFFECT TO THE COMPANY'S REINCORPORATION IN DELAWARE,
(II) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION, AND (III)
ASSUMES NO EXERCISE OF OPTIONS GRANTED UNDER THE COMPANY'S 1997 STOCK
OPTION/STOCK INCENTIVE PLAN.

THE COMPANY

Over the past 17 years, the market for California wines has grown at a
compound annual rate of 18%, according to Gomberg, Frederickson & Associates, a
wine industry consulting firm in San Francisco. The same source indicates that
in 1996, approximately 90% of all wine made in the United States was produced in
California and total California wine sales reached approximately $4.3 billion,
of which $2.9 billion, or 67%, represented the premium wine segment. The Company
believes that nearly all of the grapes it produces are used to make wines for
the premium segment of the California wine market.

The Company currently produces 12 varieties of premium wine grapes,
primarily Chardonnay, Merlot, Cabernet Sauvignon, Chenin Blanc, Gewurztraminer
and Sauvignon Blanc. The Company believes that its customers contract with SVI
to assure a consistent, reliable source of high-quality premium grapes for their
wines. The Company's two largest winery customers are Canandaigua Wine Company,
Inc. ("Canandaigua") and Heublein, Inc., a subsidiary of Grand Metropolitan, plc
("Heublein"), the second and sixth largest U.S. wineries in terms of 1996 case
shipments, respectively. These customers' labels include GLEN ELLEN, BEAULIEU
VINEYARD, BLOSSOM HILL, CHRISTIAN BROS., INGLENOOK, PAUL MASSON, ALMADEN, DEER
VALLEY, DUNNEWOOD, and TAYLOR CALIFORNIA CELLARS. Grape purchase contracts with
Heublein cover 77% of the Company's acreage and accounted for approximately 85%
of the Company's 1996 total revenues.

The Company also has long-term grape purchase agreements with other
well-known producers of ultra premium wines, including The Chalone Wine Group,
Ltd., The Hess Collection Winery, Joseph Phelps Vineyards, and Independence Wine
Company. The terms of the Company's long-term grape purchase contracts extend to
between 2001 and 2013, and have "evergreen" provisions requiring two or three
years prior written notice of termination. These contracts generally require the
customers to purchase substantially all of the Company's production from
specified vineyards at a formula price based upon the previous harvest year's
sales prices in California's leading coastal regions, including Napa, Sonoma,
Mendocino and Monterey Counties.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING BIDS AND PURCHASES, SYNDICATE SHORT
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."

3
<PAGE>
The Company believes that selling its production through long-term contracts
allows it to attain reliable sources of revenues and profits not available
through sales on the yearly spot market or short-term contracts with wineries.
This, in turn, has allowed the Company to implement long-term programs for
upgrading vineyard productivity, increasing product quality and mechanizing its
field operations. Because increased yields per acre do not significantly
increase the Company's costs of operating vineyards, productivity improvements
contribute substantially to gross profits. The Company has increased its yields
of higher value and better quality wine grapes in recent years through a
continuing redevelopment and improvement program begun in 1993, and anticipates
continued increases in average yields until its redeveloped vineyards reach full
maturity.

The Company's strategic objective is to become the leading independent
producer of premium varietal wine grapes in California. In furtherance of this
strategy, the Company recently leased, for a term of up to 50 years, 207 acres
of open land which is currently being planted into premium varietal wine grape
vineyards, and executed an option to lease, for up to 50 years, approximately
450 additional acres which it intends to plant in 1998. Due to the significant
capital required to own and operate vineyards and what the Company believes to
be the demographic structure of wine grape vineyard ownership in California, SVI
believes there are significant opportunities for growth of its business through
additional acquisitions. The Company plans to utilize a portion of the net
proceeds of this offering to purchase existing vineyards and purchase or lease
land that is suitable for vineyards in Monterey County and other regions of
California.

The Company's executive offices are located at 13470 Washington Blvd., Suite
300, Marina del Rey, California 90292, telephone number (310) 301-1555, and its
vineyard headquarters' compound is located at 1972 Hobson Avenue, Greenfield,
California 93927.

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock Offered by the
Company................................... 2,000,000 shares
Common Stock Outstanding after the offering:
Class A Common Stock...................... 2,000,000 shares (1)
Class B Common Stock...................... 4,400,000 shares
Total................................... 6,400,000 shares (1)
Voting Rights (2):
Class A Common Stock...................... One vote per share; entitled to elect 25% of
the authorized directors rounded up to the
nearest whole number.
Class B Common Stock...................... Five votes per share;entitled to elect the
remainder of the authorized directors.
Use of Proceeds............................. Repayment of indebtedness, planting and
development of new vineyards, potential
acquisitions and working capital. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol for
Class A Common Stock...................... SVIN
</TABLE>

- ------------------------

(1) Excludes (i) 200,000 shares of Class A Common Stock reserved for issuance
under the Company's 1997 Stock Option/Stock Issuance Plan, (ii) 200,000
shares of Class A Common Stock issuable upon exercise of the
Representatives' Warrants and (iii) 300,000 shares of Class A Common Stock
which may be purchased by the Underwriters to cover over-allotments, if any.

(2) Except with respect to voting rights and convertibility, the Class A Common
Stock and the Class B Common Stock have identical rights. See "Description
of Capital Stock."

4
<PAGE>
SUMMARY COMBINED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
----------------------------- --------------------------
1995 1996 1996 1997
------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................ $ 7,639,847 $ 11,691,163 $ 210,609 $ 347,273
Gross profit........................................ 3,970,658 7,147,516 210,609 347,273
Operating income (loss)............................. 1,387,082 4,542,978 (467,979) (281,315)
Income (loss) before income taxes................... 480,793 3,889,233 (561,588) (466,078)
Net income (loss)................................... 479,993 3,845,232 (561,588) (466,078)

PRO FORMA AMOUNTS (1)(2):
Income (loss) before income taxes as reported....... 480,793 3,889,233 (561,588) (466,078)
Pro Forma income tax benefit (provision)............ (192,317) (1,555,693) 224,635 186,431
Pro Forma net income (loss)......................... $ 288,476 $ 2,333,540 $ (336,953) $ (279,647)
Pro Forma net income (loss) per share............... $ 0.07 $ 0.53 $ (0.08) $ (0.06)
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------------------------------
PRO FORMA
DECEMBER 31, AS ADJUSTED
1996 ACTUAL PRO FORMA (2) (3)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................... $ 2,254,625 $ 3,112,434 $ (392,978) $ 16,207,022
Current assets................................ 5,220,262 5,008,683 2,847,271 19,447,271
Total assets.................................. 24,069,009 25,582,547 23,421,135 40,021,135
Current liabilities........................... 2,965,637 1,896,249 3,240,249 3,240,249
Long-term liabilities (4)..................... 12,042,198 15,091,202 16,391,202 16,391,202
Total liabilities............................. 15,007,835 16,987,451 19,631,451 19,631,451
Equity........................................ 9,061,174 8,595,096 3,789,684 20,389,684
</TABLE>

- ------------------------------

(1) The offering will result in termination of the Company's S Corporation
status. The Pro Forma statement of operations data reflect provisions for
federal and state income taxes as if the Company had been subject to federal
and state income taxation as a C Corporation at an assumed 40% combined
federal and state income tax rate during the periods presented. See "S
Corporation Conversion." In addition, Pro Forma net income (loss) per share
is based upon 4,400,000 shares of Class B Common Stock which will be
outstanding immediately prior to the offering. See "Principal Stockholders."

(2) Pro Forma Balance Sheet Data reflect the assumed conversion to C Corporation
status, the establishment of $1,300,000 of related deferred income taxes,
certain distributions of approximately $3,475,000 to the Company's principal
stockholder and certain partners, and the issuance of 4,400,000 shares of
Class B Common Stock to be outstanding prior to the offering, resulting from
a 30.2691 for one stock split and an exchange of limited partnership units
and limited liability company interests. See "S Corporation Conversion" and
"Certain Transactions--Exchange of Partnership Units and Limited Liability
Company Interests for Class B Common Stock."

(3) Adjusted to reflect the sale of 2,000,000 shares of Class A Common Stock
offered by the Company hereby at an assumed offering price of $9.50 per
share and the anticipated application of the estimated net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."

(4) Long-term liabilities include borrowings of $2,233,400 at December 31, 1996
and $2,800,212 at March 31, 1997 used for costs incurred for the development
of certain vineyards owned by Heublein. Heublein is obligated to reimburse
the Company for these costs and has provided a letter of credit to secure
repayment. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."

5
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY
AND ITS BUSINESS PROSPECTS BEFORE PURCHASING SHARES OFFERED BY THIS PROSPECTUS.

AGRICULTURAL RISKS

Wine grape production is subject to many risks common to agriculture that
can materially and adversely affect the quality and quantity of grapes produced.
These hazards include, among other things, adverse weather such as drought,
frost, excessive rain, excessive heat or prolonged periods of cold weather.
These weather conditions can materially and adversely affect the quality and
quantity of grapes produced by the Company and its profitability. For example,
in 1995 and 1996, poor weather (combined with a planned reduction in producing
acreage for redevelopment during this period) contributed to a significant
decline in the tonnage of grapes produced by the Company. To the extent a grape
producer's properties are geographically concentrated, the effects of local
weather can be material. The vineyards owned by SVI are spread over a distance
of approximately 50 miles, north to south, close to Highway 101 in Monterey
County. There can be no assurance that adverse weather in the future could not
affect a substantial portion of the Company's vineyards in any year and have a
material adverse effect on the Company's business, financial condition and
results of operations.

Vineyards are also susceptible to certain diseases, insects and pests, which
can increase operating expenses, reduce yields or kill vines. In recent years
phylloxera, a louse that feeds on the roots of grape vines, has infested many
vineyards in the wine grape producing regions of California and caused grape
yields to decrease. Within a few years of the initial infestation, phylloxera
can leave a vine entirely unproductive. Phylloxera infestation has been
widespread in California, particularly in Napa, Sonoma, Mendocino and Monterey
Counties, and most of the other wine grape producing areas of the state are
affected to some degree. Phylloxera infestation can be reduced through use of
the chemical pesticides Furadan-TM- and Enzone-TM-. While Furadan-TM- is still
approved for use in Monterey County, its use is no longer legal in certain other
viticultural regions of California, including Napa, Sonoma and Mendocino
Counties. There can be no assurance that Furadan-TM- will continue to be a
viable method of controlling phylloxera for the Company. If Furadan-TM- use is
restricted in Monterey County, the Company will rely more on the use of
Enzone-TM-. If the use of Enzone-TM- is prohibited in Monterey County, however,
there can be no assurance that the Company will be able to find a safe,
cost-effective alternative.

As a result of this widespread problem, thousands of vineyard acres
throughout the State of California have been replanted with phylloxera-resistant
rootstock or, in some cases, taken out of production completely. It takes
approximately four to five years for a replanted vineyard to bear grapes in
quantities sufficient for profitable operations. The Company estimates that it
currently costs approximately $15,000 per acre to replant vineyards. Of the
Company's approximately 2,669 net vine acres (I.E., excluding acreage devoted to
roads, storage areas, equipment yards or uses other than vineyards) of wine
grapes, approximately 2,238 net vine acres, or 84%, are planted or interplanted
with phylloxera-resistant rootstock. The remaining approximately 431 acres are
planted on non-resistant rootstock and are, therefore, potentially susceptible
to phylloxera infestation. The Company is managing the non-resistant acres
through application of Furadan-TM- and a program of selective replantings. See
"Business--The Company's Grape Production Operations--Property Development and
Capital Investment." There can be no assurance that the Company's vineyards will
not have serious phylloxera infestations in the future, causing reduced yields
and requiring significant investments in replanting.

Other pests that may infest vineyards include leafhoppers, thrips,
nematodes, mites, insects, orange tortrix, twigbore, microflora and various
grapevine diseases. Pesticides and the selection of

6
<PAGE>
resistant rootstocks reduce losses from these pests, but do not eliminate the
risk of such loss. Gophers, rabbits, deer, wild hogs and birds can also pose a
problem for vineyards, and wine grape vines are also susceptible to certain
virus infections which may cause reduction of yields. None of these currently
poses a major threat to the Company's vineyards, although they could do so in
the future and, at that time, will have the potential to subject the vineyards
to severe damage.

The Company currently maintains multi-peril crop insurance coverage
protection against reduced harvests on 1,907 of the Company's acreage of vines
more than four years of age. Insurance coverage under this policy is available
under certain limited circumstances, and there can be no assurance that
coverage, if available, will be sufficient. In the event of a major crop
failure, for example, this insurance would not cover lost revenue. Therefore,
any crop failure would have a material adverse effect on the Company's business,
financial condition and results of operations.

DEPENDENCE ON MAJOR CUSTOMERS; RENEWAL OF GRAPE PURCHASE AGREEMENTS

Substantially all of SVI's current grape production is contracted for sale
to two winery customers, Heublein, Inc., a subsidiary of Grand Metropolitan plc
("Heublein"), which accounted for approximately 92% of the Company's grape sales
revenues and approximately 85% of its total revenues in 1996, and Canandaigua
Wine Company, Inc. ("Canandaigua"), which accounted for approximately 7% of both
the Company's grape sales revenues and its total revenues in 1996. The terms of
the long-term grape purchase contracts with these customers extend to between
2001 and 2013. The majority of the contracts extend to 2006 and have an
"evergreen" provision whereby the contract continues unless either party gives a
three-year advance written notice of termination. Although these contracts do
not specifically provide for termination prior to expiration of their stated
terms, they could nevertheless be terminated under various circumstances,
including material breach. If these contracts are terminated, there can be no
assurance that the Company will be able to replace Heublein or Canandaigua as
significant purchasers of its grape production or that the Company will be able
to enter into agreements with other purchasers on similar terms. Termination of
these contracts with Heublein or Canandaigua could have a material adverse
effect on the Company's business, financial condition and results of operations.
Furthermore, the original terms of the Heublein and Canandaigua contracts were
for longer terms than typical purchase contracts currently being entered into
for Monterey County premium wine grapes and utilize pricing based in part upon
prices for Napa, Sonoma and Mendocino County grapes, which tend to be higher
than prices for Monterey County premium wine grapes. Renewal or replacement of
the Heublein and Canandaigua agreements and agreements covering new vineyards
will have different terms than the original contracts and pricing that may be
based more heavily on Monterey County harvests.

UNCERTAINTY OF REVENUE GROWTH

Approximately 63% of the Company's net vine acres are at or near full
production, and a certain portion of the Company's vineyards will always be out
of production or below maximum production due to replanting, regrafting and
various other factors. See "Business--The Company's Grape Production
Operations--Maturity Levels of SVI's Net Vine Acres." While some productivity
increases may be expected from further development of vineyard acreage not yet
in full production or from enhancements of fully productive vineyards, the
growth potential of the Company's existing properties is limited and the
Company's ability to increase revenue depends ultimately upon its ability to
acquire more vineyard properties. To the extent that market prices for wine
grapes decline, vineyard acquisitions become even more essential to revenue
growth. There can be no assurance that suitable properties will be available to
the Company at prices that would make the Company's growth plans viable.

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FIXED COSTS AND REVENUE FLUCTUATIONS; UNCERTAINTY OF PROFITABILITY

The Company incurs annual farming costs averaging approximately $1,500 to
$2,500 per acre in production, depending upon the specific characteristics of
the vineyards, including vine spacing and the viticultural characteristics of
specific varieties, among other factors. These costs are incurred throughout the
year preceding harvest and are relatively fixed. Revenues from grape sales are
not realized until harvest and vary depending upon yields and prices. Vineyard
productivity varies from year to year depending upon a number of factors, and
significant variations in annual yields should be expected from time to time.
Furthermore, grape prices have fluctuated significantly in the past and should
be expected to continue to fluctuate from year to year and to decrease at times
in the future. Because production costs are not significantly adjustable in
light of productivity or revenue levels, weak harvests or lower grape prices
cannot be mitigated by cost reductions and should be expected to have
significant adverse effects upon profitability.

CAPITAL REQUIREMENTS

The farming of vineyards in production requires substantial amounts of
working capital. The Company's annual production costs range from approximately
$1,500 to $2,500 per acre, which the Company must finance until harvest is
completed each year. The Company relies heavily on short-term credit to finance
its working capital requirements, and has entered into a line of credit
agreement with the Company's major bank that provides for maximum borrowings of
$10.5 million through June 1998. This arrangement is for a one-year term and
must be renewed annually. Working capital requirements are expected to grow to
support the expansion anticipated by the Company. There can be no assurance that
the Company will be able to obtain financing when required or that such
financing will be available on reasonable terms, and lack of access to adequate
lines of credit could impair the Company's ability to grow and adversely affect
the Company's business, financial condition and results of operations.

Substantial capital expenditures are required to develop and acquire new
vineyards and improve existing vineyards. Over the next three years, the
Company's planned development of new vineyard properties already leased or
subject to lease option are expected to require approximately $8,400,000 in
capital investment and continued improvements of existing vineyards are expected
to require approximately $3,000,000. The Company has made and intends to
continue to make such expenditures to finance its expansion, and has incurred
and plans to continue to incur indebtedness. In addition, it costs approximately
$15,000 to $18,000 per acre in capital expenditures over a three-year period to
develop open land into a producing premium wine grape vineyard, before taking
into account the cost of land, and additional indebtedness may be required to
finance these costs. As a consequence, (i) the Company has and will continue to
have significant interest and principal repayment obligations, (ii) the
Company's earnings and cash flows would be adversely affected by increases in
interest rates, and (iii) the presence of this debt will limit the Company's
ability to pay dividends on its common stock.

RISKS ASSOCIATED WITH BUSINESS EXPANSION AND ACQUISITION STRATEGY; LONG-TERM
STRATEGIES

SVI intends to expand its business in several areas, which will create new
demands on management. The Company has recently leased, for a term of up to 50
years, approximately 207 acres of undeveloped land in Hames Valley, Monterey
County, and has also acquired an option to lease approximately 450 additional
undeveloped acres in Hames Valley. The Company plans to develop these
approximately 657 acres into premium varietal vineyards beginning in 1997 and
1998. The Company expects to continue to seek additional property for vineyard
development and it may purchase or lease developed vineyards. However, there can
be no assurance that the Company will exercise its option to lease the
additional 450 Hames Valley acres or be able to locate other suitable properties
to buy or lease at viable prices, and any additional undeveloped properties
acquired by the

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Company will require significant capital investment and development before
becoming fully productive. In addition, the Company's ability to increase
profits through acquisition depends to a significant degree upon the prices at
which properties can be purchased or leased. Market factors have contributed to
high prices for vineyard properties in recent years, and if prices continue to
increase or the Company's productivity expectations decrease, the Company's
acquisition strategy might not be viable. Furthermore, increased acreage under
management will create additional demands on Company management in operations,
quality control and other areas and may require the Company to hire and
integrate more employees.

In addition, the Company is initiating wine production and limited marketing
operations in 1997. The Company has not previously engaged in this business and
it will be competing against hundreds of larger and more experienced
competitors. The Company produced only 2,000 cases of wine in 1996 and has made
no significant commercial wine sales. The Company does not expect wine sales to
make a material contribution to revenues or profits for several years, if at
all. The Company has no experience as a vintner, and the Company's wines are
produced under contract by an independent winemaker. There can be no assurance
that this winemaking contract will remain in effect, and if the Company is
required to find a new winemaker, it may suffer an interruption in supply and
inconsistencies in the characteristics of its wines, which could adversely
affect its wine sales revenue. See "Business--Wine Production and Sales."

The Company's strategies are long-term strategies designed to increase the
Company's production capacity and expand the Company's business. The Company
does not expect to receive the full benefit from any newly planted vineyards as
described herein for at least four to five years after their acquisition due to
the length of time required for newly-planted grape vines to reach economic
levels of production. As a result, the full economic impact in terms of
projected earnings and the other beneficial effects of the Company's expansion
program will not be fully realized for several years, if at all.

WINE GRAPE SUPPLY AND DEMAND; PRICING

The California wine industry has recently experienced a shortage of grapes
due to insufficient plantings of premium varieties in the late 1980s, acreage
taken out of production due to phylloxera infestation, and reduced yields due to
poor weather in 1995 and 1996. The Company believes that the demand for wine
grapes has also increased substantially over recent years and has generally
outpaced the supply. As a result, prices for premium California wine grapes are
at historically high levels. Recent plantings of new vineyards, yield
enhancements through technological advances, availability of wine from foreign
sources and other factors are expected to increase supply. Furthermore, there
can be no assurance that demand for premium wine grapes will not decline.
Increases in supply or reductions in demand may cause California premium wine
grape prices to decline significantly, and there can be no assurance that the
prices received by the Company will continue to increase or will match or exceed
historical prices received by the Company. Some declines in prices received by
the Company should be expected, and these declines may be significant.

CONTROL BY SCHEID FAMILY

The Company has two classes of Common Stock: Class A Common Stock, which is
entitled to one vote per share; and Class B Common Stock, which is entitled to
five votes per share. Following completion of this offering, Alfred G. Scheid,
Scott D. Scheid, Heidi M. Scheid (all of whom are officers of the Company), Kurt
J. Gollnick (an officer of the Company who is not related to the Scheid family),
Emanty LLC, a California limited liability company, of which Emily K. Liberty (a
daughter of Alfred G. Scheid who is not involved with the Company) and Tyler P.
Scheid (a son of Alfred G. Scheid who is not involved with the Company) are
members and Alfred G. Scheid is the managing member and certain other members of
the Scheid family will own or control all of the outstanding shares of Class B

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Common Stock, having the power to elect 75% of the Board of Directors of the
Company and representing approximately 92% of the combined voting power of both
classes of Common Stock, assuming no exercise of the Underwriters'
over-allotment option. The holders of Class B Common Stock are parties to a
Buy-Sell Agreement which provides that no holder of Class B Common Stock may,
with limited exceptions, transfer Class B Common Stock without first offering
such stock to the Company and then to the other parties to such agreement. So
long as these stockholders hold greater than 50% of the outstanding shares of
Class B Common Stock they will be entitled to elect 75% of the Company's Board
of Directors, thereby ensuring that they will for the foreseeable future be able
to control the management and policies of the Company, determine the outcome of
any matter submitted to a vote of the Company's stockholders, including any
merger, consolidation, sale of all or substantially all of the Company's assets
or "going private" transactions, and cause or prevent a change in control of the
Company. This concentration of voting control may have the effect of delaying,
deferring or preventing a change in control of the Company, including any
business combination with an unaffiliated party, or of impeding the ability of
the stockholders to replace management even if factors warrant such a change.
This concentration of voting control may also affect the price that investors
might be willing to pay in the future for shares of Class A Common Stock. See
"Principal Stockholders."

Most of the Company's senior management positions are currently held by
members of the Scheid family. Alfred G. Scheid is Chairman of the Board of
Directors and Chief Executive Officer. His son, Scott D. Scheid, is Vice
President, Chief Operating Officer and a director, and his daughter, Heidi M.
Scheid, is Vice President Finance, Chief Financial Officer, Treasurer and a
director. This family relationship may affect, among other things, the
management style and decision-making process of these members of the Company's
senior management team and may produce results different from those that would
be expected if the Company's senior management consisted of unrelated persons.

COMPETITION; INDUSTRY FRAGMENTATION

The wine grape industry is extremely competitive. Many of the Company's
current and prospective competitors have substantially greater financial,
production, personnel and other resources than the Company. The Company competes
with many other producers of premium wine grapes in California, including a few
thousand small independent (I.E., not winery controlled) wine grape producers
who sell their production to wineries. Many wineries also own vineyards, and
there has been a significant trend among major wineries to develop additional
acreage to produce wine grapes for their own use. To meet recent shortfalls in
supply of premium grape varieties in California, there have been significant new
plantings of vineyards which can be expected to result in increased production
of California wine grapes in future years. In order to meet near-term shortfalls
in supply, a number of wineries have commenced purchases of wine from foreign
sources. Because of higher production costs in the United States and the high
prices of grapes in California, especially in comparison to the prices of years
past, some wineries can achieve significant cost savings, even after taking into
account shipping costs, by importing wine from abroad. Some countries, such as
France, have launched marketing campaigns to increase their sales in the United
States. Foreign competition can be expected to continue and increase. Moreover,
to a significant extent, wine grapes of a particular variety are fungible, and
the ability of foreign producers to compete with the Company on the basis of
price due to their lower production costs may have a negative impact upon the
Company's profitability. In addition, the Company's principal winery customers
compete with each other and with other wineries located in the United States,
Europe, South America, South Africa, Australia and New Zealand.

SEASONALITY OF BUSINESS; HARVEST REVENUES; REPORTING

The wine grape business is extremely seasonal. Similar to most
nondiversified agricultural crop producers, the Company recognizes all of its
crop sales revenues at the time of its annual harvest in

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September and October. SVI is not managed to maximize quarter-to-quarter
results, but seeks instead to achieve maximum production of wine grapes at
harvest and long-term productivity of its vineyards. Because success of the
Company's operations is dependent upon the results of the Company's annual
harvest, its quarterly results are not considered indicative of those to be
expected for a full year and little or no information about annual grape sales
revenues or profitability will be available until year end. SVI has historically
recognized losses for the first two fiscal quarters. Profits, if any, are
recognized in the last two fiscal quarters of the year when revenues from grape
sales are realized. Seasonality of revenue also affects the Company's cash flow
requirements. In the past, SVI has borrowed funds under annual lines of credit
beginning in February or March to finance crop production costs through harvest
and repaid such borrowings from the proceeds of each harvest. See "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

In 1997, the Company plans to change its fiscal year-end from December 31st
to November 30th to make its reported financial results better reflect the
seasonality of its business and to match revenues more accurately to crop
production expenses. The annual cycle of vineyard farming begins about December
1st with pruning activity, and ends with the completion of harvest in late
October or early November. With the change of its fiscal year end, the Company
expects to recognize losses for the first three fiscal quarters and expects to
recognize profits, if any, in the last quarter of the year when 100% of the
revenues from grape sales will be recognized.

POSSIBLE TERMINATION OF VINEYARD MANAGEMENT AGREEMENTS

Each of the Company's vineyard management agreements with Heublein,
Canandaigua and Joseph Phelps Vineyards may be terminated in the event that
Alfred G. Scheid, a major stockholder of the Company and its Chairman of the
Board and Chief Executive Officer, and certain members of his family, cease to
beneficially own, directly or indirectly, at least 51% of the capital stock of
the Company. Sales to the public by members of the Scheid family or further
public offerings by the Company may result in a change of control of the
Company, which could result in termination of these agreements.

LABOR REGULATIONS AND UNION CONTRACT

California has many laws and regulations concerning labor in general and
farm labor in particular. The Agricultural Labor Relations Board has promulgated
many regulations concerning farm labor and a body of court decisions has
developed. SVI is subject to many of these regulations, laws and precedents.

The United Farm Workers, AFL-CIO ("UFW") is the major union representing
farm labor. In 1993, the UFW organized SVI's farm workers and now represents
them. The Company currently has a two-year contract with the UFW which expires
at the end of 1997. SVI believes that this contract is fair to both the workers
and the Company and intends to negotiate a new contract to succeed the one
currently in force. No assurances, however, can be given that the Company's
satisfactory labor relations will continue or that a new contract can be
negotiated without picketing, walk-outs, sit-downs, slow-downs and strikes and
the threat of these actions by the UFW.

The Company has never had a walk-out, sit-down, slow-down or strike, and the
existing contract has a "no strike" clause. The Company has, however, been
picketed, particularly during the organizing effort by the UFW and during
negotiation of the first contract in 1995. A walk-out, sit-down, slow-down or
strike during the Company's harvest "window," when grapes reach optimal sugar
content and the Company's grape purchase agreements require prompt delivery to
its winery customers, could have a material adverse effect upon the Company's
business, financial condition and results of operations.

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DEPENDENCE ON CONSUMER DEMAND

In recent years there has been substantial publicity regarding the possible
health benefits of moderate wine consumption. The results of a number of
studies, including research conducted at Brigham and Women's Hospital, Harvard
Medical School and the University of Illinois, suggest that moderate consumption
of wine (or other alcoholic beverages) could result in decreased mortality and
other health benefits. See "Business--California Wine and Grape Industry--Grape
Demand and Supply." Anti-alcohol groups have, in the past, successfully
advocated more stringent labeling requirements and other regulations designed to
discourage consumption of alcoholic beverages, including wine. More restrictive
regulations, negative publicity regarding alcohol consumption, publication of
studies that indicate a significant health risk from moderate consumption of
alcohol or changes in consumer perceptions of the relative healthfulness or
safety of wine generally could adversely affect the sale and consumption of wine
and the demand for wine and wine grapes and could have a material adverse effect
on the Company's business, financial condition and results of operations.

Trends in consumer spending have a substantial impact on the wine industry
and the Company's business. Factors that influence consumer spending include the
general condition of the economy, federal, state and local taxation, the
deductibility of business entertainment expenses under federal and state tax
laws and general levels of consumer confidence. Imposition of excise or other
taxes on wine could negatively impact the wine industry by increasing wine
prices for consumers. These factors are especially relevant to premium wines,
which constitute the majority of wines for which the Company produces grapes.
The wine industry is also subject to changes in consumer tastes and preferences.
To the extent wine consumers reduce consumption of wine in favor of other
beverages, demand for wine grapes could decrease. Similarly, to the extent wine
consumers shift their preferences to different varieties of wines or imports,
the Company and other producers of certain grape varieties may experience
reduced demand for their grape production. Increasing demand for wine products,
and therefore wine grapes, may depend on advertising expenditures and expanded
new product introductions by the wineries.

GOVERNMENT REGULATION; TAXES

SVI is subject to a broad range of federal and state regulatory requirements
regarding its operations and practices. The Company's current operations and
future expansion are subject to regulations governing the storage and use of
fertilizers, fungicides, herbicides, pesticides, fuels, solvents and other
chemicals. These regulations are subject to change and conceivably could have a
significant impact on operating practices, chemical usage, and other aspects of
the Company's business. There can be no assurance that new or revised
regulations pertaining to the wine grape production industry will not have a
material adverse effect on the Company's business, financial condition and
results of operations.

Wine production and sales are subject to extensive regulation by the Federal
Bureau of Alcohol, Tobacco and Firearms ("BATF"), the California Department of
Alcohol Beverage Control and other state and federal governmental authorities
that regulate licensing, trade and pricing practices, labeling, advertising and
other activities. In recent years, federal and state authorities have required
warning labels on beverages containing alcohol. Restrictions imposed by
government authorities on the sale of wine could increase the retail price of
wine, which could have an adverse effect on demand for wine in general. There
can be no assurance that there will not be new or revised laws or regulations
pertaining to the wine industry which could have a negative impact on the
Company's business. On January 1, 1991, the federal excise tax on table wine
increased by over 500% from $0.41 per case to $2.55 per case. Various states,
including California, also impose excise taxes on wine. Further increases in
excise taxes on wine, if enacted, could reduce demand for wine and wine grapes,
which could materially and adversely affect the Company's business, financial
condition and results of operations.

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RELIANCE ON KEY PERSONNEL

The Company believes its continued success depends to a significant extent
on the active involvement of certain members of the Scheid family and the
retention of its senior non-family executives. Alfred G. Scheid, age 65, serves
as Chairman of the Board and Chief Executive Officer. Mr. Scheid's son, Scott D.
Scheid, age 37, is Vice President and Chief Operating Officer, Heidi M. Scheid,
his daughter, age 34, is Vice President Finance, Chief Financial Officer and
Treasurer, and Kurt J. Gollnick, a senior non-family executive, age 38, is Vice
President Vineyard Operations. There can be no assurance that these persons will
remain in their management positions with the Company, and the loss of the
services of any one of these persons could have a material adverse effect on the
Company's business, financial condition and results of operations. The continued
success and expansion of SVI will depend on its ability to retain key executives
and to attract additional highly-skilled personnel.

DILUTION

The initial public offering price is substantially higher than the book
value per share of the Class A Common Stock. Investors purchasing shares of
Class A Common Stock in this offering will therefore incur immediate,
substantial dilution in the net tangible book value of their shares. In
addition, investors purchasing shares of Class A Common Stock in this offering
will incur additional dilution upon exercise of stock options and issuances of
Class A Common Stock in public offerings and in connection with future
acquisitions. See "Dilution."

ABSENCE OF TRADING MARKET; DETERMINATION OF OFFERING PRICE; VOLATILITY OF STOCK
PRICE

Prior to this offering, there has been no public market for the Class A
Common Stock. Although the Company has applied to have the Class A Common Stock
accepted for quotation on the Nasdaq National Market, there can be no assurance
that an active trading market will develop, or if one does develop, that it will
be maintained. The initial public offering price of the Class A Common Stock
will be established by negotiation among the Company and Cruttenden Roth
Incorporated, Laidlaw Equities, Inc. and Rodman & Renshaw, Inc. who are acting
as representatives (the "Representatives") of the Underwriters and may not be
indicative of the market price of the Class A Common Stock after this offering.
See "Underwriting." Trading activity in the Class A Common Stock and any
associated market price volatility may be concentrated at year-end after
harvest, when grape sales revenues are known, and in early February and early
March, when the Grape Crush Report is issued by the CDFA. There can be no
assurance that the market price of the Class A Common Stock after this offering
will equal or exceed the public offering price set forth on the cover page of
this Prospectus. In addition, the stock market from time to time has experienced
price and volume fluctuations that have affected the market price for many
companies and that frequently have been unrelated to the operating performance
of those companies. Such market fluctuations may adversely affect the market
price of the Class A Common Stock. After the offering, the Company's market
float will be small and the shares of Class A Common Stock will be thinly
traded, so sales of Class A Common Stock by a few stockholders, or even a single
significant stockholder, may have a significant adverse impact on the market
price of the Class A Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Class A Common Stock (including shares
issued upon the exercise of employee stock options or upon conversion of the
Class B Common Stock) in the public market following this offering could
adversely affect the market price of the Class A Common Stock. Although only the
2,000,000 shares being sold in this offering will be available for sale in the
public market immediately after the offering, 4,400,000 shares of Class A Common
Stock issuable upon conversion of outstanding shares of Class B Common Stock
will be eligible for sale in the public market beginning 90

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days (subject to the one-year lock-up period described below) after the date of
this Prospectus, subject to certain rights of first refusal held by the Company
and the other Class B stockholders and subject to the volume and manner of sale
limitations imposed by Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act"). See "Principal Stockholders--Agreement Among Class B
Stockholders." Rule 144 generally provides that beneficial owners of common
stock who have held such common stock for one year may sell within a three-month
period a number of shares not exceeding the greater of 1% of the total
outstanding shares or the average weekly trading volume of the shares during the
four calendar weeks preceding such sale. Future sales of restricted Class A
Common Stock under Rule 144 could negatively impact the market price of the
Class A Common Stock. Pursuant to the terms of the underwriting agreement
between the Company and the Representatives, the Representatives have required
that the Class A Common Stock issuable upon conversion of the Class B Common
Stock owned by officers, directors and certain holders of the Company's Class B
Common Stock, as well as option holders, may not be sold for one year from the
date of this Prospectus, but Cruttenden Roth Incorporated may waive this
requirement. See "Shares Eligible for Future Sale."

BROAD MANAGEMENT DISCRETION OVER USE OF PROCEEDS

Management of the Company will have broad discretion with respect to the use
of the proceeds derived from the offering and there can be no assurance that
management's actual use of the proceeds will correlate exactly with the
Company's intended use of proceeds. See "Use of Proceeds."

FORMER S CORPORATION STATUS AND SHAREHOLDER DISTRIBUTIONS; NO PAYMENT OF
DIVIDENDS

The Company has been a Subchapter S Corporation for federal and California
state income tax purposes since 1989. As a result, the net income of the Company
for federal and certain state income tax purposes for such periods was reported
by, and taxed directly to the Company's principal stockholder, Alfred G. Scheid,
whether or not such earnings were distributed. Upon termination of its
Subchapter S status and conversion to C Corporation status, the Company will
determine its cumulative S Corporation earnings and make a distribution to Mr.
Scheid. This amount is estimated at $3,000,000. In addition, a distribution of
approximately $475,000 will be made to the limited partners of Vineyard
Investors 1972 to pay income taxes on income from the partnership. See "Certain
Transactions--Exchange of Partnership Units and Limited Liability Company
Interests for Class B Common Stock."

The Company currently intends to retain its future earnings, if any, to fund
the development and growth of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future. See "S Corporation
Conversion" and "Dividend Policy."

IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act. These forward-looking statements
include the plans and objectives of management for future operations, including
plans and objectives relating to the business and future economic performance of
the Company. The forward-looking statements and associated risks set forth in
this Prospectus may include or relate to, among other things, (i) planting and
harvesting of new vineyards, including Hames Valley, (ii) potential acquisitions
of additional properties for vineyard development and related businesses, (iii)
consumer demand and preferences for the wine grape varieties produced by the
Company, (iv) general health and social concerns regarding consumption of wine
and spirits, (v) the size and growth rate of the California wine industry, (vi)
seasonality of the wine grape producing business, (vii) increases or changes in
government regulations regarding environmental impact, water use, labor or
consumption of alcoholic beverages, (viii) competition from other producers and
wineries and (ix) proposed expansion of the Company's wine business.

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The forward-looking statements included herein are based upon current
expectations that involve a number of risks and uncertainties. These
forward-looking statements are based upon assumptions that the Company will
continue to manage and operate vineyards effectively, that competitive
conditions within the California wine industry will not change materially or
adversely, that demand for California varietal wine grapes will remain strong
and that there will be no material adverse change in the Company's business,
financial condition and results of operations. Assumptions relating to the
foregoing involve judgments with respect, among other things, to future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and most of which are
beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in forward-looking information will be realized.
In addition, as disclosed above, the business and operations of the Company are
subject to substantial risks that increase the uncertainty inherent in such
forward-looking statements. Any of the other factors disclosed above could cause
the Company's net sales or net income, or growth in net sales or net income, to
differ materially from prior results. Growth in absolute amounts of cost of
sales and general and administrative expenses or the occurrence of extraordinary
events could cause actual results to vary materially from the results
contemplated in the forward-looking statements. Budgeting and other management
decisions are subjective in many respects and thus susceptible to
interpretations and periodic revisions based on actual experience in business
developments, the impact of which may cause the Company to alter its marketing,
capital expenditure or other budgets, which may in turn affect the Company's
results of operations. In light of the significant uncertainties inherent in the
forward-looking information included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives or plans of the Company will be achieved.

ANTITAKEOVER EFFECTS OF CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW;
"BLANK CHECK"
PREFERRED STOCK

Certain provisions of the Delaware General Corporation Law (the "DGCL") and
the Company's Certificate of Incorporation and Bylaws (the "Bylaws") could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of the Company.
Such provisions could limit the price that investors might be willing to pay in
the future for the Class A Common Stock.

The Board of Directors of the Company has the authority to issue up to
2,000,000 shares of Preferred Stock (the "Preferred Stock") and to determine the
price, rights, preferences, privileges and restrictions, including voting
rights, of those shares without any further vote or action by the stockholders.
The rights of the holders of Class A Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any Preferred Stock that may
be issued in the future. The issuance of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue shares of Preferred Stock. In
addition, the Company will, upon consummation of the offering, be subject to the
anti-takeover provisions of Section 203 of the DGCL. In general, this statute
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested stockholder
unless such business combination is approved in the prescribed manner. See
"Management--Executive Officers and Directors," "Description of Capital Stock--
Preferred Stock" and "--Certain Provisions of the Delaware General Corporation
Law."

ENVIRONMENTAL RISKS

Ownership of real property creates a potential for environmental liability
on the part of the Company. If hazardous substances are discovered on or
emanating from any of the Company's vineyards and the release of hazardous
substances (including fuels and chemicals kept by the Company on its properties
for use in its business) presents a threat of harm to public health or the
environment, the Company may be held strictly liable for the cost of remediation
of these hazardous substances.

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COMPANY HISTORY

The Company was founded in 1972 to act as general partner for several
limited partnerships using vineyards as an investment vehicle to create tax
shelter and eventual cash flow for high income investors. In addition to acting
as general partner of these partnerships, the Company's responsibilities
included buying land and developing it as vineyards and marketing the resultant
grape production. The Company also developed new vineyards for its own account.
Alfred G. Scheid, the Company's principal stockholder, has been Chief Executive
Officer of the Company from the time of its founding and concurrently engaged in
several other business enterprises until 1988 when he acquired complete
ownership of the Company. All of the interests of the limited partners were
acquired by the Company, the Scheid family and Kurt J. Gollnick, in three
transactions in 1988, 1994 and 1996, and the partnership vineyards are all being
transferred to the Company simultaneously on the date of this offering. See
"Certain Transactions--Exchange of Partnership Units and Limited Liability
Company Interests for Class B Common Stock." Until Mr. Scheid acquired the
Company, the vineyards owned by the partnerships and the Company were managed
principally for maximum current income and were not substantially upgraded or
improved. Since 1993, the Company has installed improved irrigation systems, new
stakes and trellising systems, and has selectively replanted, grafted and
implemented other improvements for a total incremental investment of over
$6,000,000. These improvements were funded primarily with internally generated
cash, loans from Mr. Scheid, and bank borrowings. As of the date of this
Prospectus, the Company operates for its own account approximately 2,900 acres
of vineyards, at various stages ranging from new plantings in 1997 to fully
mature.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
2,000,000 shares of Class A Common Stock offered hereby are estimated to be
approximately $16,600,000 ($19,165,000 if the Underwriters' over-allotment
option is exercised in full), assuming an initial public offering price of $9.50
per share and after deducting the estimated underwriting discount and offering
expenses.

The Company intends to use the proceeds it receives from this offering to
repay borrowings under its short-term line of credit which management estimates
will be approximately $6,000,000, continue development of approximately 374
acres in Monterey County (including 207 acres in Hames Valley), plant
approximately 450 additional acres in 1998 in Hames Valley, finance working
capital requirements of its existing properties and conduct a limited expansion
of its wine business. The Company also plans to utilize a portion of the net
proceeds of this offering to buy or lease and develop existing vineyards or land
that is suitable for vineyards in Monterey County and potentially other regions
in California if, among other things, the size, configuration, grape variety mix
and anticipated earnings and cash flow of such properties satisfy the Company's
acquisition criteria. There can be no assurance, however, that any acquisitions
will be consummated in the future. Any such acquisitions and vineyard
development may also be effected in whole or in part through bank debt or
similar financing. The following table sets forth the anticipated use of
proceeds from this offering:

<TABLE>
<CAPTION>
<S> <C>
Repayment of working capital indebtedness..................................... $ 6,000,000
Development of vineyards in Hames Valley...................................... 4,500,000
Acquisitions.................................................................. 4,100,000
Working capital for existing vineyards and general corporate purposes......... 2,000,000
--------------
Total Net Proceeds........................................................ $ 16,600,000
--------------
--------------
</TABLE>

Pending such uses, the Company intends to invest the net proceeds in
short-term, interest-bearing securities, including government obligations and
money market instruments. The working

16
<PAGE>
capital indebtedness to be repaid from proceeds of the offering accrues interest
at the bank's "reference" rate plus 1/4% per year and matures on June 5, 1998.

S CORPORATION CONVERSION

The Company has been treated for federal and California income tax purposes
as an S Corporation under Subchapter S of the Internal Revenue Code since 1989.
As a result of the Company's status as an S Corporation, the Company's principal
stockholder, rather than the Company, has been taxed directly on the earnings of
the Company for federal and certain state income tax purposes, whether or not
such earnings were distributed. Simultaneously with this offering, the Company
will terminate its status as an S Corporation and will thereafter be subject to
federal and state income taxes at applicable C Corporation rates.

DISTRIBUTIONS

Upon termination of its Subchapter S status and conversion to C Corporation
status, the Company will determine its cumulative S Corporation earnings and
make a distribution to Alfred G. Scheid. This amount is estimated at $3,000,000.
In addition, a distribution of approximately $475,000 will be made to the
limited partners of Vineyard Investors 1972 to pay income taxes on income from
the partnership.

In March 1997, the Company repaid $1,000,000 of indebtedness to Mr. Scheid
for repayment of a working capital loan made by Mr. Scheid to the Company.

ACCOUNTING EFFECT

In connection with the conversion of its S Corporation status to C
Corporation status, the Company is required by FASB No. 109 to record deferred
tax liabilities and deferred tax assets. Such change will result in a net charge
to earnings of approximately $1,300,000 in the fiscal quarter in which the
conversion to C Corporation takes place. This one-time charge is a result of
differences in the accounting and tax treatment of certain of the Company's
assets and liabilities and is reflected through (i) an increase in deferred
income tax liabilities, partially offset by (ii) an increase in the Company's
deferred tax assets.

DIVIDEND POLICY

17
<PAGE>
DILUTION

The Pro Forma net tangible book value of the Company at March 31, 1997 was
approximately $3,789,684, or $0.86 per share of the Company's then single class
of Common Stock after giving effect to a 30.2691 for one stock split effected in
connection with the offering, which resulted in 2,948,604 shares of Class B
Common Stock outstanding. "Pro Forma net tangible book value per share"
represents the total amount of tangible assets less total liabilities, divided
by the number of shares of Common Stock (Class A and Class B) outstanding. After
giving effect to (i) the sale of 2,000,000 shares of Class A Common Stock
offered hereby (after deducting the estimated underwriting discount and offering
expenses) at an assumed initial public offering price of $9.50 per share, (ii)
the issuance, effective the date of this offering, of 1,451,396 shares of Class
B Common Stock in exchange for the limited partnership units and limited
liability company interests of the holders of limited partnership units in
Vineyard Investors 1972, a California limited partnership of which the Company
was the general partner, and in Vineyard 405, a California limited partnership
of which the Company was the general partner and Vineyard Investors 1972 was the
limited partner, and of limited liability company interests in Quadra Partners
LLC, a California limited liability company of which the Company was the
managing member (collectively, the "Interest Holders"), (iii) a 30.2691 for one
stock split with respect to the Company's Class B Common Stock effected in
connection with the offering, and (iv) the initial application of the net
proceeds of this offering in the manner described under "Use of Proceeds," the
pro forma net tangible book value of the Company at March 31, 1997 would have
been $20,389,684 or $3.19 per share of the Company's Common Stock. This
represents an immediate increase in Pro Forma net tangible book value of $2.33
per share to the Company's stockholders and an immediate, substantial dilution
of approximately 66.4% or $6.31 per share to investors purchasing shares of
Class A Common Stock offered hereby (the "New Investors"). "Dilution" per share
represents the difference between the price per share to be paid by the New
Investors and the Pro Forma net tangible book value per share after giving
effect to this offering. The following table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Assumed public offering price per share of Class A Common
Stock (1).................................................. $ 9.50
Pro Forma net tangible book value per share before giving
effect to the public offering (2)........................ $ 0.86
Increase in Pro Forma net tangible book value per share
attributable to New Investors............................ 2.33
---------
Pro Forma net tangible book value per share after giving
effect to the public offering (2).......................... 3.19
---------
Dilution per share to New Investors.......................... $ 6.31
---------
---------
</TABLE>

- ------------------------------

(1) Before deduction of underwriting discounts and commissions and estimated
expenses payable by the Company in connection with this offering.

(2) Excludes (i) 200,000 shares of Class A Common Stock reserved for issuance
under the Company's 1997 Stock Option/Stock Issuance Plan, (ii) 200,000
shares of Class A Common Stock issuable upon exercise of the
Representatives' Warrants and (iii) 300,000 shares of Class A Common Stock
which may be purchased by the Underwriters to cover over-allotments, if any.
See "Management--1997 Stock Option/Stock Issuance Plan" and "Underwriting."

The following table summarizes, on a Pro Forma basis as of March 31, 1997,
the number of shares of Class A Common Stock purchased from the Company, the
total consideration paid to the Company and the average price per share paid by
the Company's principal stockholder, by the Interest Holders

18
<PAGE>
and by the New Investors, assuming the sale of 2,000,000 shares by the Company
at an assumed initial public offering price of $9.50 per share:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- --------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Principal stockholder........................... 2,955,851 46.19% $ 2,536,703 11.13% $ 0.86
Interest Holders................................ 1,444,149 22.56% 1,252,981 5.50% 0.87
New Investors................................... 2,000,000 31.25% 19,000,000 83.37% 9.50
----------- --------- -------------- ---------
Total....................................... 6,400,000 100.00% $ 22,789,684 100.00%
----------- --------- -------------- ---------
----------- --------- -------------- ---------
</TABLE>

19
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company (i) as of
March 31, 1997, after giving effect to a 30.2691 for one stock split that was
effected in May 1997, (ii) pro forma as of March 31, 1997, after giving effect
to the issuance of 1,451,396 shares of Class B Common Stock to the Interest
Holders and (iii) adjusted as of March 31, 1997 to reflect the sale of 2,000,000
shares of Class A Common Stock offered by the Company hereby (after deducting
the estimated underwriting discount and offering expenses) at an assumed initial
public offering price of $9.50 per share and the application of the estimated
net proceeds therefrom. This table should be read in conjunction with the "Use
of Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Company's Combined Financial Statements,
including the related notes thereto, and other financial information included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------------------------------
PRO FORMA AS
HISTORICAL PRO FORMA (1) ADJUSTED (2)
-------------- -------------- --------------
<S> <C> <C> <C>
Total debt....................................................... $ 15,549,202 $ 16,849,202 $ 16,849,202
Stockholders' equity:
Preferred Stock, par value $.001 per share; 2,000,000 shares
authorized; no shares issued and outstanding historical; no
shares issued and outstanding Pro Forma; no shares issued and
outstanding Pro Forma as adjusted............................ 0 0 0
Class A Common Stock, par value $.001 per share; 20,000,000
shares authorized; no shares issued and outstanding
historical; no shares issued and outstanding Pro Forma;
2,000,000 shares issued and outstanding Pro Forma as adjusted
(3).......................................................... 0 0 2,000
Class B Common Stock, par value $.001 per share; 10,000,000
shares authorized; 97,413 shares issued and outstanding
historical; 4,400,000 shares issued and outstanding Pro
Forma; 4,400,000 shares issued and outstanding Pro Forma as
adjusted..................................................... 2,215 4,400 4,400
Paid-in capital.................................................. 123,625 121,440 16,719,440
Retained earnings................................................ 8,469,256 3,663,844 3,663,844
-------------- -------------- --------------
Total stockholders' equity....................................... 8,595,096 3,789,684 20,389,684
-------------- -------------- --------------
Total capitalization............................................. $ 24,144,298 $ 20,638,886 $ 37,238,886
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

- ------------------------------

(1) Gives effect to the issuance of 1,451,396 shares of Class B Common Stock to
the Interest Holders in exchange for their limited partnership interests in
Vineyard Investors 1972 and in Vineyard 405 and for their limited liability
company interests in Quadra Partners LLC. See "Certain
Transactions--Exchange of Partnership Units and Limited Liability Company
Interests for Class B Common Stock."

(2) Adjusted to give effect to the receipt and application of the estimated net
proceeds of this offering. See "Use of Proceeds."

(3) Excludes (i) 200,000 shares of Class A Common Stock reserved for issuance
under the Company's restated 1997 Stock Option/Stock Issuance Plan, as of
the date of this offering, (ii) 200,000 shares of class A Common Stock
issuable upon exercise of the Representatives' Warrants and (iii) 300,000
shares of Class A Common Stock which may be purchased by the Underwriters to
cover over-allotments, if any. See "Management--1997 Stock Option/Stock
Issuance Plan" and "Underwriting."

20
<PAGE>
SELECTED COMBINED FINANCIAL DATA

The following selected combined financial data at December 31, 1996 and for
the fiscal years ended December 31, 1995 and 1996 have been derived from the
Company's financial statements, which have been audited by Deloitte & Touche
LLP, independent auditors, whose report thereon is included elsewhere in this
Prospectus. The selected combined financial data at March 31, 1997 and for the
three months ended March 31, 1996 and 1997 have been derived from unaudited
combined financial statements of the Company. In the opinion of the Company, its
unaudited combined financial statements have been prepared on the same basis as
the audited combined financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for such
periods. The financial data for March 31, 1997 and for the three months ended
March 31, 1996 and 1997, however, are not necessarily indicative of results to
be expected for the full fiscal year. The financial data should be read in
conjunction with, and are qualified in their entirety by, the Company's Combined
Financial Statements, including the related notes thereto. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------- ----------------------
1995 1996 1996 1997
----------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Sales................................................................. $ 7,163,610 $ 10,768,611 $ 0 $ 0
Vineyard management, service and other fees........................... 476,237 922,552 210,609 347,273
----------- ------------- ---------- ----------
Total............................................................. 7,639,847 11,691,163 210,609 347,273
Cost of sales........................................................... 3,669,189 4,543,647 0 0
----------- ------------- ---------- ----------
Gross profit............................................................ 3,970,658 7,147,516 210,609 347,273
General and administrative.............................................. 2,583,576 2,604,538 678,588 628,588
----------- ------------- ---------- ----------
Operating income (loss)................................................. 1,387,082 4,542,978 (467,979) (281,315)
Other income (expense):
Interest, net......................................................... (906,289) (653,745) (93,609) (184,763)
----------- ------------- ---------- ----------
Income (loss) before income taxes....................................... 480,793 3,889,233 (561,588) (466,078)
Provision for income taxes.............................................. 800 44,001 0 0
----------- ------------- ---------- ----------
Net income (loss)....................................................... $ 479,993 $ 3,845,232 $ (561,588) $ (466,078)
----------- ------------- ---------- ----------
----------- ------------- ---------- ----------
PRO FORMA AMOUNTS (1)(2):
Income (loss) before income taxes as reported........................... $ 480,793 $ 3,889,233 $ (561,588) $ (466,078)
Pro Forma income tax benefit (provision)................................ (192,317) (1,555,693) 224,635 186,431
----------- ------------- ---------- ----------
Pro Forma net income (loss)............................................. $ 288,476 $ 2,333,540 $ (336,953) $ (279,647)
----------- ------------- ---------- ----------
----------- ------------- ---------- ----------
Pro Forma net income (loss) per share................................... $ 0.07 $ 0.53 $ (0.08) $ (0.06)
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------------------------
DECEMBER 31, PRO FORMA AS
1996 ACTUAL PRO FORMA (2) ADJUSTED (3)
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................................. $ 2,254,625 $ 3,112,434 $ (392,978) $ 16,207,022
Current assets.................................................. 5,220,262 5,008,683 2,847,271 19,447,271
Total assets.................................................... 24,069,009 25,582,547 23,421,135 40,021,135
Current liabilities............................................. 2,965,637 1,896,249 3,240,249 3,240,249
Long-term liabilities (4)....................................... 12,042,198 15,091,202 16,391,202 16,391,202
Total liabilities............................................... 15,007,835 16,987,451 19,631,451 19,631,451
Equity.......................................................... 9,061,174 8,595,096 3,789,684 20,389,684
</TABLE>

- ------------------------------

(1) This offering will result in termination of the Company's S Corporation
status. The Pro Forma statement of operations data reflect provisions for
federal and state income taxes as if the Company had been subject to federal
and state income taxation as a C Corporation at an assumed 40% combined
federal and state income tax rate during the periods presented. See "S
Corporation Conversion." In addition, Pro Forma net income (loss) per share
is based upon 4,400,000 shares of Class B Common Stock which will be
outstanding immediately prior to the offering. See "Principal Stockholders."

21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
COMBINED FINANCIAL STATEMENTS, INCLUDING THE RELATED NOTES THERETO, AND OTHER
FINANCIAL INFORMATION INCLUDED HEREIN. THE FOLLOWING INFORMATION ALSO INCLUDES
FORWARD-LOOKING STATEMENTS, THE REALIZATION OF WHICH MAY BE IMPACTED BY CERTAIN
IMPORTANT FACTORS DISCUSSED UNDER "RISK FACTORS."

OVERVIEW

Scheid Vineyards Inc. ("SVI" or the "Company") is a leading independent
(I.E., not winery controlled) producer of premium varietal wine grapes. The
Company currently operates approximately 4,550 acres of wine grape vineyards. Of
this total, approximately 2,900 acres are operated for the Company's own
account, of which apporimately 88% are subject to long-term grape purchase
agreements, and 1,650 acres are operated under management contracts for others.
The Company recently leased, for a term of up to 50 years, 207 acres of open
land which is currently being planted into premium varietal wine grape
vineyards, and executed an option to lease, for up to 50 years, approximately
450 additional acres which it intends to plant in 1998. All of the properties
currently operated by the Company are located in Monterey and San Benito
Counties in California, both of which are generally recognized as excellent
regions for growing high quality wine grape varieties. The Company leases the
underlying land for certain of its vineyards. See "Business--The Company's Grape
Production Operations--Vineyard Operations."

The Company has had grape purchase contracts with Heublein and its
predecessors since 1972 and with Canandaigua and its predecessors since 1979.
For the year ended December 31, 1996, the Company's long-term purchase contracts
with Heublein accounted for approximately 92% of grape sales revenues and
approximately 85% of total revenues, and the Company's long-term purchase
contracts with Canandaigua accounted for approximately 7% of both grape sales
revenues and total revenues. In the past year, the Company has signed several
long-term purchase contracts with new winery clients, including The Chalone Wine
Group, Ltd. and The Hess Collection Winery. These new contracts cover
approximately 172 acres, or 6.4% of the Company's net vine acreage, and such
acres were planted by the Company in 1996 and 1997 and should be at or near full
production in 2000 or 2001. Thus, the Company is substantially dependent on
Heublein and termination of its contracts with Heublein could have a material
adverse effect on the Company's business, financial condition and results of
operations. In the long term, the Company will continue its efforts to broaden
its customer base and will seek additional long-term grape purchase contracts
with new winery clients.

The revenue growth potential of the Company's existing vineyards is limited
and the Company's ability to increase revenue long term depends upon its ability
to acquire additional mature vineyard properties and/or develop new vineyards.
Recent prices for premium California wine grapes are at historically high
levels. A decline in the prices received by the Company should be expected, and
these declines may be significant. This expected decline in prices makes
execution of the Company's vineyard acquisition strategy even more essential to
revenue growth.

QUARTERLY RESULTS

The following table sets forth certain unaudited quarterly combined
financial data for the four quarters in fiscal 1996 and the first quarter of
1997. In the opinion of the Company's management, this unaudited information has
been prepared on the same basis as the audited information and includes all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly

22
<PAGE>
the information set forth therein. The operating results for any quarter are not
necessarily indicative of results for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------
FISCAL 1996 FISCAL 1997
-------------------------------------------------------- ------------
MAR 31 JUNE 30 SEPT 30 DEC 31 MAR 31
------------ ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Sales................................... $ 0 $ 0 $ 6,414,368 $ 4,354,243 $ 0
Vineyard management, services and other
fees.................................. 210,609 219,366 154,597 337,980 347,273
------------ ------------ ------------- ------------- ------------
210,609 219,366 6,568,965 4,692,223 347,273
Cost of sales............................. 0 0 2,499,006 2,044,641 0
------------ ------------ ------------- ------------- ------------
Gross profit.............................. 210,609 219,366 4,069,959 2,647,582 347,273
General and administrative................ 678,588 423,199 664,631 838,120 628,588
------------ ------------ ------------- ------------- ------------
Operating income (loss)................... (467,979) (203,833) 3,405,328 1,809,462 (281,315)
Other income (expense):
Interest (net).......................... (93,609) (155,511) (129,186) (275,439) (184,763)
------------ ------------ ------------- ------------- ------------
Income (loss) before income taxes......... (561,588) (359,344) 3,276,142 1,534,023 (466,078)
Provision for income taxes................ 0 0 0 44,001 0
------------ ------------ ------------- ------------- ------------
Net income (loss)......................... $ (561,588) $ (359,344) $ 3,276,142 $ 1,490,022 $ (466,078)
------------ ------------ ------------- ------------- ------------
------------ ------------ ------------- ------------- ------------
</TABLE>

RESULTS OF OPERATIONS

SVI derives its revenues from two sources: sales of wine grapes pursuant to
long-term purchase contracts, and vineyard management and services revenues
consisting primarily of management and harvest fees and equipment rentals for
services provided to owners of vineyards. Sales of the Company's wines have not
significantly contributed to revenues. Revenue from grape sales varies from year
to year primarily due to yield and price fluctuations which can be significantly
influenced by weather conditions. Approximately 92% of the Company's revenues
for the year ended December 31, 1996 were derived from grape sales and
approximately 8% of revenues were derived from vineyard management, services and
other fees. Because grape sales revenues are not recognized until September and
October, the first two fiscal quarters have historically resulted in a loss.

In 1997,the Company plans to change its fiscal year-end from December 31st
to November 30th to make its reported financial results better reflect the
seasonality of its business and to match revenues more accurately to crop
production expenses. The annual cycle of vineyard farming begins about December
1st with pruning activity, and ends with the completion of harvest in late
October or early November. See "Business--Vineyard Production Cycle." With the
change of its fiscal year end, the Company expects to recognize losses for the
first three fiscal quarters and expects to recognize profits,

23
<PAGE>
if any, in the last quarter of the year when 100% of the revenues from grape
sales will be recognized. See "Business--The Company's Grape Production
Operations--Vineyard Production Cycle."

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Revenues:
Sales........................................................................................ 93.8% 92.1%
Vineyard management, services and other fees................................................. 6.2 7.9
--------- ---------
100.0 100.0
Cost of sales.................................................................................. 48.0 38.9
--------- ---------
Gross profit................................................................................... 52.0 61.1
General and administrative..................................................................... 33.8 22.3
--------- ---------
Operating income............................................................................... 18.2 38.8
Interest (net)................................................................................. 11.9 5.6
--------- ---------
Income before income taxes..................................................................... 6.3 33.2
Provision for income taxes..................................................................... -- 0.3
--------- ---------
Net income..................................................................................... 6.3% 32.9%
--------- ---------
--------- ---------
</TABLE>

YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995

REVENUES. Grapes sales increased by 50.3% to $10,768,611 for the year ended
December 31, 1996 from $7,163,610 in 1995, an increase of $3,605,001. This
increase was primarily due to higher prices and increased yields in 1996 brought
about by the maturation of vines which had been grafted or replanted to higher
value varieties as part of the Company's overall improvement and refurbishment
program which began in 1993. Declines in grape prices should be expected from
time to time and the revenue growth potential of the Company's existing
vineyards is limited, so there can be no assurance that comparable increases
will be realized in future years. Revenue from vineyard management, services and
other fees increased by 93.7% to $922,552 for the year ended December 31, 1996
from $476,237 in 1995, an increase of $446,315. This increase was due primarily
to the addition of two long-term management contracts which became operative in
early 1996.

GROSS PROFIT. As a result of the factors discussed above, gross profit
increased by 80.0% to $7,147,516 for the year ended December 31, 1996 from
$3,970,658 in 1995, an increase of $3,176,858. Gross profit as a percentage of
revenues increased from 52.0% in 1995 to 61.1% in 1996. Excluding the Company's
revenue derived from management contracts, gross profit as a percentage of
revenue was approximately 55.4% in 1995 and 66.4% in 1996. The increase in gross
profit is primarily the result of higher revenues related to increased yields
and higher grape prices per ton in relationship to relatively stable farming
costs. Cost of sales consists entirely of farming costs.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
by less than 1% to $2,604,538 for the year ended December 31, 1996 from
$2,583,576 in 1995, an increase of $20,962. Increased yields of grapes harvested
or higher grape prices per ton generally do not influence general and
administrative expenses.

INTEREST EXPENSE, NET. Net interest expense decreased by 27.9% to $653,745
for the year ended December 31, 1996 from $906,289 in 1995, a decrease of
$252,544. This decrease was due primarily to the capitalization of interest
expense on acreage being improved or developed and lower interest rates on bank
borrowings. Interest capitalized was $291,064 and $430,233 in 1995 and 1996,
respectively.

24
<PAGE>
NET INCOME. As a result of the above factors, and in particular, increases
in yields and prices, net income increased to $3,845,232 for the year ended
December 31, 1996 from $479,993 in 1995, an increase of $3,365,239. Net income
as a percentage of sales increased to 32.9% in 1996 from 6.3% in 1995.

THREE MONTH PERIODS ENDED MARCH 31, 1997 AND MARCH 31, 1996

REVENUES. Revenues, consisting entirely of vineyard management, services
and other fees, increased by 64.9% to $347,273 for the quarter ended March 31,
1997 from $210,609 for the same period in 1996, an increase of $136,664. This
increase was due primarily to the addition of a 445 acre long-term management
contract which became operative in early 1997.

GROSS PROFIT. Because the costs incurred throughout the year to farm and
harvest the Company's wine grape crop are capitalized until the revenues
associated with such costs are recognized, gross profit for the quarters ended
March 31, 1997 and 1996 are equal to the revenues for the same periods. The
costs associated with provision of management services are reimbursed by the
Company's clients.

GENERAL AND ADMINISTRATIVE. General and administrative costs decreased by
7.4% to $628,588 for the quarter ended March 31, 1997 from $678,588 for the same
period in 1996, a decrease of $50,000, due to, among other things, a slight
decrease in office expenditures.

INTEREST EXPENSE, NET. Net interest expense increased to $184,763 for the
quarter ended March 31, 1997 from $93,609 for the same period in 1996, an
increase of $91,154. This increase in net interest expense was due to increased
levels of borrowing by the Company to finance crop growing costs and vineyard
development, and decreased income from earned interest.

NET LOSS. Due to the above factors, the Company had a net loss for the
first quarter ended March 31, 1997 of $466,078, compared to a net loss of
$561,588 for the same period in 1996.

LIQUIDITY AND CAPITAL RESOURCES

SVI's primary sources of cash have historically been funds provided by
internally generated cash flow and bank borrowings. The Company has made
substantial capital expenditures to redevelop its existing vineyard properties
and develop new acreage, and it intends to continue these types of expenditures.
Cash generated from operations has not been sufficient to satisfy all of the
Company's working capital and capital expenditure needs. As a consequence, the
Company has depended upon, and continues to rely upon, both short and long-term
bank borrowings.

Under the Company's historical working capital cycle, working capital is
required primarily to finance the costs of growing and harvesting its wine grape
crop. The Company normally delivers substantially all of its crop in September
and October, and receives the majority of its cash from grape sales in November.
In order to bridge the gap between incurrence of expenditures and receipt of the
majority of its cash from grape sales, large working capital outlays are
required for approximately eleven months each year. Historically, SVI has
obtained these funds pursuant to credit lines with banks.

The Company currently has credit lines that provide both short-term and
long-term funds. The short-term "crop" line has maximum credit available of
$10,500,000 and is intended to finance the Company's anticipated working capital
needs through early 1998. This crop line expires on June 5, 1998 and replaces
the lines of credit in place at December 31, 1996 which totaled $3,900,000. The
increased levels of borrowing by the Company are primarily due to: (i)
approximately 374 additional vineyard acres which are being planted by the
Company; (ii) repayment of indebtedness of $1,000,000 to Alfred G. Scheid; (iii)
certain distributions of approximately $3,475,000; and (iv) capital equipment

25
<PAGE>
expenditures of approximately $500,000. See "S Corporation Conversion." SVI also
has a long-term credit line which expires on July 5, 2005 and provides for a
maximum borrowing of $2,785,714 diminishing annually through the expiration date
to a maximum allowable commitment of $1,071,426. As of the date of this
Prospectus, the outstanding amount owed by the Company is the maximum allowable
commitment. The annual interest rates on these lines are based on the bank's
"reference rate" and ranged from 8 1/2% to 9% at December 31, 1996.

The Company also has various long-term notes payable which, as of March 31,
1997, totaled approximately $9,350,000. These notes are primarily secured by
deeds of trust, leasehold interests or equipment and have interest rates based
on the bank's reference rate plus 3/4% to 1 1/4%. The Company has a note payable
with principal due on December 31, 1998 of $1,434,000 and may opt to either pay
off the note or refinance it to a longer term.

Management expects that capital requirements will expand significantly to
support expected future growth and that this will result in additional borrowing
under credit lines and/or new arrangements for term debt. The Company's planned
new vineyard developments are expected to require approximately $8,400,000 in
capital investment over the next three years and continued improvements of
existing vineyards are expected to require approximately $3,000,000. Management
believes it should be able to obtain long-term funds from its present lender,
but there can be no assurance that the Company will be able to obtain financing
when required or that such financing will be available on reasonable terms.

Cash provided by operating activities for the years ended December 31, 1996
and 1995, generated $4,460,861 and $2,286,472, respectively. The increase was
primarily a result of increased net income. Cash used in operating activities
for the quarters ended March 31, 1997 and 1996, was $4,862,710 and $1,193,298,
respectively. The increase in cash used was primarily a result of a $2,161,412
receivable from the Company's principal stockholder resulting from advances
related to the Company's S Corporation status and the repayment of short-term
notes payable.

Cash used in investing activities increased for the year ended December 31,
1996 to $5,961,696 from $2,453,828 in 1995. The increase was principally the
result of a long-term receivable of $2,233,400 and additions to property, plant
and equipment. The long-term receivable is for the costs incurred for the
development of certain vineyards owned by Heublein. Heublein is obligated to
reimburse the Company for these costs and has provided a letter of credit to
secure repayment. The original management agreement with Heublein called for the
expenditure of approximately $5,600,000 over a three-year period, such contract
amended subsequent to December 31, 1996 to an expenditure amount of
approximately $7,500,000. The amended contract calls for the repayment of the
loan and concurrent reduction of the long-term receivable in six annual
installments beginning January 5, 2000. Cash used in investing activities
increased for the quarter ended March 31, 1997 to $1,988,117 from $824,198 for
the same period in 1996. The increase was principally the result of a further
increase of $566,812 in the long-term receivable due from Heublein described
above and additions to property, plant and equipment.

Cash provided by financing activities was $1,966,274 for the year ended
December 31, 1996. This was an increase from 1995 of $3,178,587. The increase
reflects $7,267,120 of proceeds from long-term debt (which includes borrowings
of $2,233,400 under the Heublein arrangement), reduced by $4,832,204 of
repayments on long-term debt in 1996. In the prior year, the Company borrowed
$5,040,062 in long-term debt and repaid $5,866,798. Cash provided by financing
activities was $3,029,381 for the quarter ended March 31, 1997. This was an
increase from the same period in 1995 of $3,390,475. The increase reflects
$3,029,381 of proceeds from long-term debt, which includes additional borrowings
of $566,812 under the Heublein arrangement.

26
<PAGE>
BUSINESS

OVERVIEW

The Company believes that selling its production through long-term contracts
allows it to attain reliable sources of revenues and profits not available
through sales on the yearly spot market or short-term contracts with wineries.
This, in turn, has allowed the Company to implement long-term programs for
upgrading vineyard productivity, increasing product quality and mechanizing its
field operations. Because increased yields per acre do not significantly
increase the Company's costs of operating vineyards, productivity improvements
contribute substantially to gross profits. The Company has increased its yields
of higher value and better quality wine grapes in recent years through a
continuing redevelopment and improvement program begun in 1993, and anticipates
continued increases in average yields until its redeveloped vineyards reach full
maturity.

27
<PAGE>
wine grape vineyards, and executed an option to lease, for up to 50 years,
approximately 450 additional acres which it intends to plant in 1998. Due to the
significant capital required to own and operate vineyards and what the Company
believes to be the demographic structure of wine grape vineyard ownership in
California, SVI believes there are significant opportunities for growth of its
business through additional acquisitions. The Company plans to utilize a portion
of the net proceeds of this offering to purchase existing vineyards and purchase
or lease land that is suitable for vineyards in Monterey County and other
regions of California.

CALIFORNIA WINE AND GRAPE INDUSTRY
WINE CONSUMPTION

Table wines are still (I.E., nonsparkling) wines usually containing less
than 14% alcohol and are generally consumed with food or as cocktails. Table
wines represent about 84% of total U.S. wine consumption, with dessert and
sparkling wines accounting for most of the remaining 16%. Table wines are
characterized as either "non-varietal" or "varietal." Non-varietal, also
referred to as "generic" wines include wines named after the European regions
where similar types of wines were originally produced (E.G., Burgundy), as well
as wines labeled simply red or white and relatively small quantities of niche
products and proprietary blends. Generic wines are packaged primarily in large-
size containers (E.G., three, four and five liter sizes) and usually retail for
less than $3.00 per equivalent 750 ml. unit. Varietal wines are those named for
the grape that comprises the principal component of the wine (E.G., Chardonnay),
are generally considered "premium" wines and typically retail for more than
$3.00 per 750 ml. unit. The premium category often is divided by the wine trade
into three major segments: "popular premium" wines, which retail for between
$3.00 and $7.00 per 750 ml. unit; "super premium" wines, which retail for
between $7.00 and $14.00 per 750 ml. unit; and "ultra premium" wines, which
retail for $14.00 and over per 750 ml. unit. The Company's grapes are generally
used to produce popular premium and super premium wines, while its own limited
wine production is aimed at the ultra premium level. Chardonnay, Cabernet
Sauvignon, Sauvignon Blanc and Merlot are among the most popular California
premium varietal table wines. The table below shows 1996 California premium
table wine shipments by category, as estimated by Gomberg, Fredrikson &
Associates.

1996 CALIFORNIA PREMIUM WINE SHIPMENTS BY MARKET SEGMENT

<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
CASES SHIPPED (1) WINERY REVENUES
-------------------------------------------------------------------
----------------------
RETAIL PRICE MILLIONS
MARKET SEGMENT PER 750 ML. UNIT MILLIONS % ($) %
- ------------------------------------------------------- ------------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Ultra premium.......................................... $ 14.00 and over 3.4 6% $ 380 13%
Super premium.......................................... $ 7.00 to $14.00 12.7 22% 990 34%
Popular premium........................................ $ 3.00 to $7.00 41.4 72% 1,570 53%
--- --- ----------- ---
Total premium wine................................. 57.5 100% 2,940 100%
--- --- ----------- ---
--- --- ----------- ---
</TABLE>

- ------------------------

Source: Gomberg, Fredrikson & Associates.

(1) A case of twelve 750 ml. units contains nine liters or approximately 2.38
gallons.

The market for California premium varietal table wines has grown
significantly over the last 17 years. Since 1980, unit sales of these California
wines have increased at a 14% compound annual rate from approximately 6.6
million nine-liter cases to approximately 57.5 million nine-liter cases in 1996,
according to Gomberg, Fredrikson & Associates. During the same time period,
premium wine revenues grew at an 18% compound annual rate to approximately $2.9
billion, or approximately 67% of total California table wine sales of
approximately $4.3 billion, in 1996. Over 90% of all wines made in the United
States and 77% of all table wine consumed in the United States are made in
California. The following chart shows estimated revenues for California premium
and generic wines since 1980.

28
<PAGE>
CALIFORNIA GENERIC AND PREMIUM WINE REVENUES FROM 1980 TO 1996
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
CHARTS #2, # 3,#4
<S> <C> <C> <C> <C> <C> <C> <C>
1980 1981 1982 1983 1984 1985 1986
Premium Wine Shipments (millions of gallons) 15.8 19.6 22.9 26.9 32.5 38.5 48.9
Jug Wine Shipments (millions of gallons) 232.8 249.3 250.4 245.1 231.9 213.3 205.3
248.6 268.9 273.3 272.0 264.4 251.8 254.2
1980 1981 1982 1983 1984 1985 1986
Premium Wine Shipments (millions of nine liter
cases) 6.6 8.2 9.6 11.3 13.7 16.2 20.6
52.2
Jug Wine Shipments (millions of nine liter cases) 97.9 104.9 105.3 103.1 97.5 89.7 86.4
1980 1981 1982 1983 1984 1985 1986
Jug Wine Revenues (millions of $) $ 930 $ 1,022 $ 1,053 $ 1,031 $ 984 $ 905 $ 876
Premium Wine Revenues (millions of $) $ 211 $ 269 $ 318 $ 337 $ 478 $ 572 $ 750
$ 1,141 $ 1,291 $ 1,371 $ 1,368 $ 1,462 $ 1,477 $ 1,626

<CAPTION>
CHARTS #2, # 3,#4
<S> <C> <C> <C>
1987 1988 1989 1990 1991 1992 1993
Premium Wine Shipments (millions of gallons) 58 67.2 71.5 81.5 88.5 102.8 105.6
Jug Wine Shipments (millions of gallons) 201.5 199.4 199.1 186.6 176.5 182.9 176.4
259.5 266.6 270.6 268.1 265.0 285.7 282.0
1987 1988 1989 1990 1991 1992 1993
Premium Wine Shipments (millions of nine liter
cases) 24.4 28.3 30.1 34.3 37.2 43.2 44.4
52.2
Jug Wine Shipments (millions of nine liter cases) 84.8 83.9 83.7 78.5 74.2 76.9 74.2
1987 1988 1989 1990 1991 1992 1993
Jug Wine Revenues (millions of $) $ 848 $ 841 $ 858 $ 922 $ 1,076 $ 1,154 $ 1,150
Premium Wine Revenues (millions of $) $ 891 $ 1,094 $ 1,204 $ 1,392 $ 1,616 $ 1,883 $ 2,002
$ 1,739 $ 1,935 $ 2,063 $ 2,314 $ 2,693 $ 3,037 $ 3,152

<CAPTION>
CHARTS #2, # 3,#4
1994 1995
Premium Wine Shipments (millions of gallons) 113.1 124.2
Jug Wine Shipments (millions of gallons) 179.6 182.3
292.7 306.5
1994 1995
Premium Wine Shipments (millions of nine liter
cases) 47.6
52.2
Jug Wine Shipments (millions of nine liter cases) 75.5 76.7
1994 1995 1996
Jug Wine Revenues (millions of $) $ 1,209 $ 1,242 $ 1,310
Premium Wine Revenues (millions of $) $ 2,224 $ 2,518 $ 2,942
$ 3,433 $ 3,760 $ 4,252
</TABLE>

- ------------------------

Source: Gomberg, Fredrikson & Associates.

The growth in California premium wine revenues reflects, among other things,
an increase in U.S. per capita consumption of premium California table wines
from 0.2 gallons in 1986 to 0.5 gallons in 1996. During the same period, per
capita consumption of all California table wines increased from 1.1 gallons to
1.2 gallons and U.S. per capita consumption of all table wines (domestically
produced and imported) increased from 1.5 gallons to 1.6 gallons. These data may
be indicative of both increased wine consumption and increased popularity of
California premium wines among wine drinkers.

Notwithstanding the growth in table wine sales and per capita consumption,
industry reports indicate that approximately 88% of all table wine sold in the
U.S. is still consumed by only 16% of the adult population between the ages of
21 and 59. Accordingly, the Company perceives significant room for growth in
sales of California table wines, including premium wines.

GRAPE DEMAND AND SUPPLY

GRAPE DEMAND FACTORS. The demand for premium wine grapes is driven by the
demand for premium wine. The Company believes that the growth in the wine market
and shifts in consumer preferences from generic to premium categories reflect
several factors, including medical studies linking possible health benefits to
moderate wine consumption, growing awareness and interest in wines, especially
by adults over 30 years of age, greater consumer education with respect to
higher quality wines and general consumer preferences. The results of recent
studies, including research conducted at Brigham and Women's Hospital and
Harvard Medical School published in THE NEW ENGLAND JOURNAL OF MEDICINE and THE
COPENHAGEN HEART STUDY, have indicated there may be positive health benefits
associated with moderate consumption of wine. These studies have been reported
in the news, including the November 1991 and November 1995 CBS television 60
MINUTES broadcasts concerning the "French Paradox," which suggested that
moderate red wine consumption may reduce the risk of heart disease. The paradox
focused on the lower incidence of heart disease among the French, compared to
Americans, despite a French diet that includes cheese and other rich foods. In
addition, revised dietary guidelines issued by the U.S. Department of
Agriculture currently state that

29
<PAGE>
moderate wine drinking is associated with a lower risk of heart disease for some
individuals. More recently, studies have been published that confirm a more
favorable mortality profile for moderate male wine drinkers compared to
nondrinkers (the Physician's Health Study from Harvard University), and that
resveratrol, a compound found in wine, inhibits processes that result in the
formation and spreading of cancerous tumors (University of Illinois). These
reports and others like them are believed to have contributed to recent
increases in the consumption of premium wines. Changes in consumer perceptions
of the potential health benefits of wine, however, could have an adverse effect
on the demand for wine and result in a reduction in wine grape prices.

Wine grapes are produced in many regions in California. The climate of the
coastal valleys, extending approximately 350 miles from Mendocino County in the
north to Santa Barbara County in the south, is characterized by warm days and
cool nights moderated by proximity to the Pacific Ocean. These are excellent
conditions for production of high quality varietal wine grapes. Monterey County,
the Company's focus of operations, is located approximately in the middle of
this area. In contrast, the inland areas of California have more extreme summer
heat conditions and are less well-suited to the production of high quality
varietals. Wine grapes produced in those areas are generally better suited for
use as generic wines or inexpensive premium wines. Consequently, the prices of
the premium varieties produced in the inland regions are lower than the prices
of the same varieties produced in the coastal regions. For example, according to
the California Department of Food and Agriculture (the "CDFA") the weighted
average price in 1996 for Chardonnay grapes purchased and crushed for wine was
$1,543 in Napa County and $1,421 in Monterey County, compared to a range from
$687 to $773 in the inland area known as the San Joaquin Valley, and the 1996
weighted average prices per ton of all grapes purchased and crushed for wine
ranged from $1,020 to $1,510 in the eight coastal districts, compared to a range
from $278 to $899 in California's remaining nine grape producing districts. The
following table shows production and prices for grapes crushed for wine in
California's 17 grape producing districts.

30
<PAGE>
GRAPES PURCHASED AND CRUSHED IN CALIFORNIA IN 1996 (1)

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
TONS OF GROWER RETURN
GRAPES % OF GRAPES PER TON
DISTRICT REGION CRUSHED CRUSHED PURCHASED (2)
- ----------- ---------------------------------------------------------------- ----------- ----------- -------------
<C> <S> <C> <C> <C>
1 Mendocino County................................................ 44,023 2.3% $ 1,175
2 Lake County..................................................... 9,297 0.5 1,023
3 Sonoma & Marin Counties......................................... 89,675 4.7 1,359
4 Napa County..................................................... 67,586 3.6 1,510
5 Solano County................................................... 8,202 0.4 1,020
6 San Francisco Bay Area Counties (3)............................. 7,445 0.4 1,257
7 Monterey and San Benito Counties................................ 76,462 4.0 1,144
8 South Central Coast (4)......................................... 50,881 2.7 1,138
9 Northern Sacramento Valley (5).................................. 24,335 1.3 445
10 Sierra Foothills (6)............................................ 9,766 0.5 868
11 San Joaquin and Sacramento Counties (7)......................... 263,401 13.9 628
12 Northern San Joaquin Valley (8)................................. 228,300 12.1 392
13 Central San Joaquin Valley (9).................................. 719,712 38.1 278
14 Southern San Joaquin Valley (10)................................ 256,103 13.6 289
15 Los Angeles and San Bernardino Counties......................... 2,508 0.1 569
16 Orange, Riverside, San Diego and Imperial Counties.............. 6,253 0.3 899
17 Southern Yolo County............................................ 24,642 1.3 687
----------- -----
Statewide Totals................................................ 1,888,591 100.0%
----------- -----
----------- -----
</TABLE>

- ------------------------------

Source: CDFA, Final 1996 Grape Crush Report.

Note: Districts are shown on the Location Map located on the inside front cover
of this Prospectus.

(1) This table includes tonnage of all grapes purchased for wine, concentrate,
juice, vinegar and beverage brandy by California processors. Grapes pooled
by cooperatives, grown by processors and used for their own wine production
and crushed to growers' accounts are not included.

(2) Weighted average grower return per ton represents the weighted average
price per ton (delivered basis) of all tonnage purchased for wine,
concentrate, juice, vinegar and beverage brandy by California's processors
from annual crops.

(3) Alameda, Contra Costa, Santa Clara, San Francisco, San Mateo and Santa Cruz
Counties.

(4) Santa Barbara, San Luis Obispo and Ventura Counties.

(5) Northern portion of Yolo and Sacramento Counties, and Del Norte, Siskiyou,
Modoc, Humboldt, Trinity, Shasta, Lassen, Tehama, Plumas, Glenn, Butte,
Colusa, Sutter, Yuba and Sierra Counties.

(6) Nevada, Placer, El Dorado, Amador, Calaveras, Tuolumne and Mariposa
Counties.

(7) Northern portion of San Joaquin County and southern portion of Sacramento
County.

(8) Southern portion of San Joaquin County and Stanislaus and Merced Counties.

(9) Madera and Fresno Counties, northern portions of Tulare and Kings Counties
and Alpine, Mono and Inyo Counties.

(10) Kern County and southern portions of Kings and Tulare Counties.

The most important coastal wine grape districts in terms of price and tons
purchased are districts one through eight, as shown in the preceding table.
While, to some extent, grapes from all districts compete, SVI considers the
eight coastal regions to be its primary competitive environment and intends to
focus its acquisition strategy on these areas. See "--New Vineyards." The
following chart shows recent production and price history for these eight
districts.

31
<PAGE>
GRAPES PURCHASED AND CRUSHED AND AVERAGE PRICES RECEIVED
IN EIGHT COASTAL DISTRICTS FROM 1992 TO 1996
<TABLE>
<CAPTION>
1992 1993 1994 1995
------------------------ ------------------------ ------------------------ -----------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
GROWER GROWER GROWER
TONS RETURN PER TONS RETURN PER TONS RETURN PER TONS
DISTRICT REGION PURCHASED TON ($) PURCHASED TON ($) PURCHASED TON ($) PURCHASED
- ------------- ----------------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Mendocino County....... 50,063 $ 724 49,079 $ 679 36,841 $ 727 47,507
2 Lake County............ 7,860 723 8,782 697 6,554 709 8,511
3 Sonoma and Marin
Counties............. 104,244 980 99,548 935 107,099 980 95,191
4 Napa County............ 81,564 1,218 69,082 1,175 79,742 1,198 70,497
5 Solano County.......... 7,849 634 7,135 591 9,638 626 9,835
6 SF Bay Area Counties... 5,475 909 5,206 850 5,220 854 5,554
7 Monterey and San Benito
Counties............. 68,567 762 81,476 753 67,088 762 51,017
8 South Central Coast.... 44,182 819 59,192 778 49,263 784 47,571
----------- ----------- ----------- -----------
Total Tons Purchased
and Weighted Average
Grower Return Per
Ton.................. 369,804 $ 924 379,500 $ 869 361,365 $ 918 335,683
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

<CAPTION>
1996
------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
GROWER GROWER
RETURN PER TONS RETURN PER
DISTRICT TON ($) PURCHASED TON ($)
- ------------- ----------- ----------- -----------
<S> <C> <C> <C>
1 $ 886 44,023 $ 1,175
2 817 9,297 1,023
3
1,122 89,675 1,359
4 1,282 67,586 1,510
5 748 8,202 1,020
6 937 7,445 1,257
7
882 76,462 1,144
8 851 50,881 1,138
-----------

$ 1,026 353,571 $ 1,268
-----------
-----------
</TABLE>

- ------------------------

Source: CDFA, Final 1992-1996 Grape Crush Reports.

GRAPE SUPPLY FACTORS. The supply and price of available grapes are subject
to considerable fluctuations caused by, among other things, poor weather
conditions, such as excessive rain, drought, frost, excessive heat and prolonged
periods of cold weather, and phylloxera infestation. The California wine
industry has recently experienced a shortage of grapes due to growth in consumer
demand which has outpaced supply increases because of insufficient plantings of
grapes in the late 1980s, acreage taken out of production due to phylloxera
infestation and reduced yields due to below average weather conditions during
the growing seasons in 1995 and 1996. These factors have led to substantial
price increases for wine grapes, including those produced by the Company. The
Company believes that these conditions may continue for the next two to three
years because new vineyards planted in recent years in response to this supply
shortfall take four to six years to reach full levels of production. However,
due to unpredictable factors such as consumer demand and foreign competition, no
assurances can be given that grape prices will sustain recent levels.

Phylloxera infestation has had, and is expected to have in the future, a
significant impact on the California wine industry. Phylloxera is a tiny louse
that feeds on the roots of non-resistant vines, generally rendering them
unproductive within a few years following initial infestation. Approved
pesticides, most notably Furadan-TM- and Enzone-TM-, do not eliminate, but only
kill part of the phylloxera population, thus reducing the speed with which it
spreads. The only reliable, long-term solution is to remove infested vines and
replant them with phylloxera-resistant rootstock. Phylloxera infestation has
been widespread in Napa, Sonoma, Mendocino and Monterey Counties, and most of
the other wine grape producing areas in California are affected to some degree.
Of the Company's approximately 2,669 net vine acres of wine grapes,
approximately 2,238 net vine acres, or 84%, are planted or interplanted with
phylloxera-resistant rootstock.

PRODUCTION AND MARKETING OF CALIFORNIA PREMIUM WINE AND GRAPES

The most popular California premium wine varieties are Chardonnay, Cabernet
Sauvignon, Sauvignon Blanc and Merlot. According to estimates by Gomberg,
Fredrikson & Associates, case shipments for these varietal wines in 1996 were
22.5 million, 10.8 million, 4.8 million and 4.7 million cases, respectively.
Varietal grapes grown in the coastal wine grape producing districts of
California

32
<PAGE>
tend to have sugar, flavor and other characteristics that allow wineries to make
wines that consumers value more highly than varietal wines produced with grapes
from other regions of the state.

The California grape production industry is highly fragmented and consists
of several thousand vineyard owners. Most wine grape producers have small,
privately owned operations and sell their production to wineries, often at spot
market prices from year to year. To supplement the grapes they buy from
independent producers, many wineries also own or lease vineyards to supply some
of their grape needs. Certain major wineries, such as Robert Mondavi, are large
grape producers and produce a significant proportion of the grapes they need to
make wine. There are no published data regarding ownership or contractual
relationships in the California wine grape production industry and individual
holdings of properties are not publicly reported. However, the Company believes
it is one of the largest independent producers of premium wine grapes in
California, and that there are approximately four or five independent producers
of comparable size.

California wine is produced and marketed by approximately 800 commercial
wineries. However, seven wineries, E&J Gallo, Canandaigua, The Wine Group,
Sutter Home, Sebastiani, Robert Mondavi and Heublein, accounted for
approximately 77% of total California wine shipments in 1996. The Company
historically has been, and currently is, a supplier to Heublein and Canandaigua.
In 1996, Heublein was the sixth largest winery in terms of case shipments, and
its brands include GLEN ELLEN, BEAULIEU VINEYARD, BLOSSOM HILL and CHRISTIAN
BROS. Canandaigua was the second largest winery in 1996, and its brands include
DEER VALLEY, DUNNEWOOD, TAYLOR CALIFORNIA CELLARS, INGLENOOK, PAUL MASSON and
ALMADEN. The Company believes its relationships with Heublein and Canandaigua
have contributed significantly to its success.

COMPANY STRATEGY

The Company's strategic objective is to become the leading independent
producer of premium varietal wine grapes in California. The Company believes
that its success to date has resulted from execution of a coherent strategy that
includes the following elements:

PRODUCE HIGH VALUE PREMIUM WINE GRAPES. The Company has consistently
emphasized production of high value wine grapes that its customers can use
to produce premium varietal wine. These varieties principally include
Chardonnay, Cabernet Sauvignon and Merlot, in addition to other varieties
that command premium prices. Throughout its history, SVI has consistently
provided its customers with wine grapes that meet demanding specifications
for quality, as measured by sugar content and other objective
characteristics. The Company maintains an ongoing program of grafting,
replanting and new vineyard development to conform its product mix to take
advantage of trends in the wine industry. The Company believes it has
developed an excellent reputation in the grape producing industry due to its
emphasis on quality and performance. See "--The Company's Grape Production
Operations--Grape Production."

CONTINUE LONG-TERM RELATIONSHIPS WITH LEADING WINE PRODUCERS. The
Company has had grape purchase contracts with Heublein and its predecessors
since 1972 and with Canandaigua and its predecessors since 1979. More
recently, SVI has begun contracting for grape sales to smaller wineries with
reputations for producing excellent wines such as The Chalone Wine Group,
Ltd., Joseph Phelps Vineyards and The Hess Collection Winery. Substantially
all of the Company's production is contracted at least through the harvest
of 2001, and the majority is contracted at least through the harvest of 2006
with pricing arrangements the Company considers favorable. See "--The
Company's Grape Production Operations--Grape Sales." The Company believes
that its utilization of long-term contracts allows it to build long-term and
mutually beneficial relationships with its customers and attain reliable
sources of revenues not readily available to producers relying on the yearly
spot market or short-term contracts with wineries.

33
<PAGE>
MAXIMIZE REVENUES AND PROFITABILITY PER ACRE. The Company consistently
invests in new equipment and the development of new and improved
viticultural practices in order to increase the productivity and efficiency
of its vineyards. These practices include methods of interplanting grape
vines to increase vine density, new trellising systems designed to support
more grape production while maintaining quality, and other state-of-the-art
vineyard practices that facilitate increased production and mechanization.
Because increased yields per acre do not significantly increase fixed or
variable costs of operating vineyards, productivity improvements contribute
substantially to gross profits. Due to its continuing redevelopment and
improvement program begun in 1993 on approximately 1,900 acres, the Company
believes that much of its acreage now produces significantly more higher
value and better quality grapes. See "--The Company's Grape Production
Operations--Viticultural Practices" and "--Property Development and Capital
Investment."

ACQUIRE HIGH QUALITY VINEYARD PROPERTIES. The Company has developed a
disciplined property acquisition strategy in order to increase its
productive capacity and leverage its available management and equipment
resources. Due to the significant capital required to own and operate
vineyards and the demographic structure in the California wine grape
industry, SVI believes that there may be significant opportunities for
acquisitions of existing vineyards. The Company plans to capitalize on the
experience and reputation of its senior management to purchase existing
vineyards and purchase or lease, for terms of up to 50 years, land that is
suitable for vineyards in Monterey County and other regions in California.
See "--New Vineyards."

THE COMPANY'S GRAPE PRODUCTION OPERATIONS

VINEYARD OPERATIONS

SVI currently owns or manages approximately 4,550 acres of wine grape
vineyards in Monterey and San Benito Counties. These properties consist of
approximately 2,900 acres in Monterey County operated for the Company's own
account (including approximately 207 new acres currently under development in
Hames Valley) and approximately 1,650 acres operated under management contracts
for others (including approximately 445 acres being developed in Hames Valley).
As shown in the table below, the Company leases the underlying land for certain
of its vineyards. Of the Company's approximately 2,669 net vine acres of wine
grapes, approximately 2,050 net vine acres, or 77%, have been contracted for
sale to Heublein under long-term grape purchase contracts, approximately 300 net
vine acres have been contracted for sale to other winery clients, including
Canandaigua, The Hess Collection Winery and The Chalone Wine Group, Ltd., and
approximately 320 net vine acres represent newly developed acreage which was
planted by the Company in 1996 and 1997. In addition, the Company has acquired
an option to lease an additional 450 acres in Hames Valley, all of which it
intends to plant with premium varietal wine grapes in 1998. See "Location Map"
and "--New Vineyards--The Hames Valley Properties." The following table sets
forth a description of the Company's vineyards and the wine grape varieties
planted thereon.

34
<PAGE>
THE COMPANY'S VINEYARD PROPERTIES

<TABLE>
<CAPTION>
APPROXIMATE PROPERTY
VINEYARD NAME ACRES INTEREST (1) VARIETIES
- ---------------------------- ------------- ---------------- -------------------------------------------------
<S> <C> <C> <C>
Scheid Vineyard............. 352 Land Lease(2) Chardonnay, Cabernet Sauvignon, Merlot, Chenin
Blanc, Gewurztraminer, Napa Gamay, Sauvignon
Blanc

Viento Vineyard............. 231 Owned Chardonnay, Merlot, Gewurztraminer, White
Riesling

Baja Viento Vineyard........ 175 Owned Chardonnay, Merlot, Sauvignon Blanc

Central Avenue Vineyard..... 264 Owned Chardonnay, Merlot, Chenin Blanc, Gewurztraminer,
Sauvignon Blanc

Hacienda Vineyard........... 147 Owned Chardonnay, Cabernet Sauvignon, Merlot,
Gewurztraminer, Napa Gamay, Sauvignon Blanc,
Zinfandel

Elm Avenue Vineyard......... 67 Owned Chardonnay

Pueblo Vineyard............. 90 Owned Chardonnay

El Camino Vineyard.......... 47 Owned Chardonnay, Zinfandel

Wild Horse Vineyard......... 446(3) Owned Chardonnay, Cabernet Sauvignon, Merlot, Grenache,
Zinfandel

San Lucas Vineyard.......... 874 Land Lease(4) Chardonnay, Cabernet Sauvignon, Merlot, Sauvignon
Blanc, Syrah

Hames Valley................ 207(5) Land Lease(6) Rootstock planted in 1997 and varieties to be
determined in 1998
-----

Total................... 2,900
-----
-----
</TABLE>

- ------------------------------

(1) All of the real property owned and leased by the Company is encumbered by
deeds of trust to secure indebtedness.

(2) The initial term of this land lease expires on October 31, 2002, and SVI has
an option to extend it for an additional 20 years.

(3) 28 acres of this vineyard are leased to Joseph Phelps Vineyards and managed
by the Company.

(4) Comprised of two land leases with the initial term of 707 acres expiring on
November 30, 2009 and the initial term of 167 acres expiring on December 31,
2026. SVI has an option to extend either or both leases for an additional 20
years.

(5) The Company has an option to lease an additional 450 contiguous acres for up
to 50 years, which it plans to plant in 1998.

(6) The initial term of the land lease for the 207 acres already leased and the
450 acres subject to lease option expires on December 31, 2026, and SVI has
an option to extend it for an additional 20 years.

GRAPE PRODUCTION

SVI's tons per acre and overall yields of higher value varieties (E.G.,
Chardonnay and Merlot) have increased in recent years due to, among other
factors, changes in product mix through grafting, replanting, increased vine
density and improvements in wine grape production technology and know-how. See
"--Viticultural Practices." In 1993, the Company began a major improvement and
refurbishment program and took many acres out of production temporarily in order
to graft or replant new rootstock. This planned decline in grape production,
along with poor weather, resulted in a significant decline in tonnage produced
in 1995 and 1996. In 1996, as replanted acreage started to mature, production of
high value premium varieties increased. The Company believes that its production
of high value wine grapes in these vineyards will continue to increase for the
next few years as replanted and interplanted vines continue to mature. However,
actual grape production varies according to the

35
<PAGE>
variety of grape produced, vine density, the quality and type of soil, water
conditions, weather and other factors and no assurances can be given that such
production increases will occur with any predictability or at all. See "Risk
Factors--Agricultural Risks." The following table shows SVI's net vine acres by
variety from 1993 to 1997 and wine grape tonnage produced by SVI for 1996.

NET VINE ACRES OWNED BY SVI AND TONS PRODUCED (1)

<TABLE>
<CAPTION>
NET VINE ACRES TONS
----------------------------------------------------- ---------
VARIETY 1993 1994 1995 1996 1997 1996
- ------------------------------------------------------ --------- --------- --------- --------- --------- ---------

<S> <C> <C> <C> <C> <C> <C>
Chardonnay............................................ 552 574 656 756 778 4,045

Merlot................................................ 66 150 307 454 508 1,727

Cabernet Sauvignon.................................... 286 286 286 274 295 1,372

Chenin Blanc.......................................... 350 302 228 187 84 1,055

Sauvignon Blanc....................................... 171 133 133 133 133 816

Gewurztraminer........................................ 103 103 103 103 103 827

Zinfandel............................................. 138 107 107 83 83 324

White Riesling........................................ 183 124 103 83 39 463

Napa Gamay............................................ 39 39 39 39 39 428

Grenache(2)........................................... 49 49 28 28 28 180

Early Burgundy........................................ 34 13 13 -- -- --

French Colombard...................................... 20 -- -- -- -- --

Replants/Grafts(3).................................... 325 436 313 164 205 --

New Acreage(4)........................................ -- -- -- 54 374
--------- --------- --------- --------- ---------

Total Net Vine Acres.............................. 2,316 2,316 2,316 2,358 2,669
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
---------

Total Tons Produced............................... 12,734 11,158 8,384 11,237 -- 11,237
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

- ------------------------------

(1) The underlying land on approximately 1,433 acres is subject to long-term
leases.

(2) Includes 28 acres leased to Joseph Phelps Vineyards and managed by the
Company.

(3) Replants/grafts are acres which are temporarily taken out of production due
to grafting or replanting to change varieties. Acres are deemed to be back
in production in the third crop year.

(4) New acreage represents newly acquired bare ground which the Company has
planted in the year shown.

GRAPE SALES

PRIMARY CUSTOMERS. The wine grape tonnage harvested from the Company's
approximately 2,900 acres is largely subject to grape purchase contracts with a
small number of well-known wine producing companies. The largest of these
contracts, representing approximately 92% of the Company's 1996 grape sales
revenues and 85% of the Company's 1996 total revenues, is with Heublein, a
subsidiary of Grand Metropolitan, plc, which is headquartered in the United
Kingdom and is one of the world's largest wine and spirits sales companies. In
1996, Heublein was California's sixth largest wine producing company with sales
of approximately 6.4 million cases of wine. The Company's contractual
relationship with Heublein's predecessor began in 1972 and has been continuous
since that time. The Company believes that it is currently the largest supplier
of wine grapes to Heublein. The Company has sales contracts for substantially
all of the balance of its wine grape production with

36
<PAGE>
Canandaigua, the second largest marketer of wine in the United States, and other
wine producers, including The Chalone Wine Group, Ltd., Joseph Phelps Vineyards
and The Hess Collection Winery. The Company also manages, as a contract vineyard
operator, an aggregate of approximately 1,533 acres of wine grapes for Heublein
and Canandaigua. See "--Vineyard Management Contracts."

The terms of the Company's grape purchase contracts generally require the
customers to purchase substantially all of the Company's production from
specified vineyards at a formula price based upon the previous harvest year's
sales prices as reported in the Final Grape Crush Report published by the CDFA.
See "--Pricing." The contracts require the Company to deliver grapes meeting
specified sugar levels and other quality measurements. Substantially all of the
contracts call for payment in full within 30 days of delivery of the crop to the
customer.

The terms of the Company's long-term grape purchase contracts extend to
between 2001 and 2013. Contracts covering most of SVI's acreage extend to 2006
and have "evergreen" provisions whereby the contracts continue until either
party gives a three-year prior written notice of termination. The Company
believes that these evergreen provisions allow it time either to renegotiate the
contract with its contracting customer or to find a new customer for the grape
production before the contract terminates. If these contracts are terminated,
there can be no assurance that the Company will be able to replace Heublein or
Canandaigua as significant purchasers of its grape production or that the
Company will be able to enter into agreements with other purchasers on similar
terms. Termination of these contracts with Heublein or Canandaigua could have a
material adverse effect on the Company's business, financial condition and
results of operations.

The Company has enjoyed excellent relationships with its customers that have
been built over many years of satisfying customer needs for quality, timely
delivery and service. Long-term supply arrangements benefit customers by
providing a significant, reliable supply of high-quality grapes at predictable
prices, and the Company believes that in many respects Heublein and Canandaigua
prefer their supply arrangements with the Company to the purchase of comparable
amounts of grapes on the open market from multiple producers. These contracts
also benefit the Company by providing reliable sources of revenues. SVI believes
that these contracts are one of the major reasons for its past success, and it
plans to rely upon these and similar contracts in the future. While contract
terms are typically a function of market factors and it is not possible to know
what the terms of the Company's future grape purchase arrangements will be, it
is probable that any renewal or replacement of the Company's Heublein and
Canandaigua contracts, which will expire in 2006, and any purchase agreements
covering new vineyards will have different terms.

PRICING. Each year the CDFA publishes the Grape Crush Report on a
preliminary basis on February 10, with a final report published on March 10. The
Grape Crush Report discloses the prices, tons and certain quality standards of
all grapes crushed for wine from each of California's 17 wine grape producing
districts in the grape harvest of the previous autumn. The report is relied upon
heavily by wineries and wine grape producers to negotiate contracts and
establish grape prices, as well as by financial and other institutions who serve
the wine industry.

SVI's contract grape prices are established each year by formulas which are
different for each of its customers. However, substantially all of its contracts
utilize a formula which is used to calculate a price for each wine grape variety
based on the previous year's prices in several specified CDFA reporting
districts. For example, grapes from the Company's 1997 harvest, subject to these
contracts, will be sold at prices based on the actual prices for the 1996
harvest reported in the Final Grape Crush Report. This enables both the Company
and its customers to know final grape prices (on a per ton basis by variety)
approximately eight months in advance of each year's harvest. These multiple
district formula prices, as opposed to sales on the short-term spot market, tend
to moderate year-to-year swings in prices. The Company's grape purchase
contracts typically utilize pricing based in part upon prices for Napa, Sonoma
and Mendocino County grapes, which tend to be higher than prices for

37
<PAGE>
the same varieties produced in Monterey County. Renewal or replacement of the
Heublein and Canandaigua agreements and agreements covering new vineyards may
result in pricing that may be based more heavily on Monterey County harvests.
The chart below shows the weighted average prices SVI has received per ton of
grapes since 1994 and the prices it will receive for the 1997 harvest (which
will occur in September and October) based on the pricing formulas of its
various contracts.

WEIGHTED AVERAGE PRICES PER TON RECEIVED BY SVI (1)

<TABLE>
<CAPTION>
VARIETY 1994 1995 1996 1997 (2)
- ------------------------------------------------------------------------ --------- --------- --------- ---------

<S> <C> <C> <C> <C>
Chardonnay.............................................................. $ 1,092 $ 1,060 $ 1,188 $ 1,445

Merlot.................................................................. 1,083 1,090 1,183 1,436

Cabernet Sauvignon...................................................... 1,129 1,113 1,193 1,420

Zinfandel............................................................... 582 623 790 971

Sauvignon Blanc......................................................... 649 682 742 898

Gewurztraminer.......................................................... 590 589 663 823

White Riesling.......................................................... 512 514 624 754

Chenin Blanc............................................................ 417 420 482 666
</TABLE>

- ------------------------------

(1) Prices for premium varieties have increased in recent years largely as a
result of supply and demand conditions. Supply and demand factors will
change over time and there can be no assurance that the prices received by
the Company in the future will continue to increase or will match or exceed
historical prices.

(2) Prices established by formula from the 1996 Final Grape Crush Report
published by CDFA on March 10, 1997, assuming that delivered grapes meet the
quality standards established in the relevant contracts.

VITICULTURAL PRACTICES

The Company continually investigates and experiments to develop enhanced
viticultural practices in order to improve the yields of its vineyards and the
quality of grapes it produces. Innovations developed by SVI over the past ten
years have included new grafting methods, interplanting, new trellis designs and
improved machine harvesting technology. In addition, the Company has
experimented with increased vine densities in order to improve productivity.

The vineyards owned by the Company were originally planted in the early
1970s with 454 vines to the acre, but in recent years wine grape producers and
wineries have found that larger, more reliable production can be achieved by
increasing vineyard density. SVI has increased vine density in approximately
1,750 acres by either removing the acres from production and completely
replanting them at increased densities or interplanting grafted or low vine
density acreage. These replanted, grafted and interplanted acres generally now
range from 709 to 792 vines per acre. The Company believes that these greater
vine densities are well-suited for the climate and local conditions at its
vineyard properties.

The Company frequently uses grafting to change the varieties of grapes it
produces from low value varieties, such as French Colombard, to high value
varieties, such as Chardonnay and Merlot. Since 1994, the Company has grafted
approximately 325 acres of its vineyards, thereby changing the vineyard to a
different variety. SVI has experimented with and adapted to use in vineyards
grafting techniques originally developed in apple orchards. Using this method,
the graft can be more precisely aligned with the vascular tissue of the rooted
vine trunk and the vascular tissue of the grafting stock. This method is
particularly useful when grafting mature vines and provides excellent bonding of
the graft to the trunk, leading to more vigorous growth and a stronger graft
union. The increased vigor encourages more grape production earlier in the
productive life of the vine. While this technique was

38
<PAGE>
originally considered unusual for the wine grape industry, it has proven to be
very effective in the Company's vineyards and has been adopted by others. The
Company frequently uses other commonly accepted and proven grafting techniques
on young vines and when conditions require them.

Interplanting is a process whereby a new rootstock is planted between two
mature vines, thus approximately doubling the vine density per acre. When the
new interplanted rootstock has grown sufficiently (generally one or two years),
it is grafted to the same variety as the mature vines on either side of it. The
interplanted vine will then begin bearing small amounts of fruit after one
additional year and will reach relatively full production in three more years.
The cost of interplanting is far less than planting a new vineyard, and it has
proven to be a very effective means of increasing production of low vine density
vineyards. Due to crowding, it is necessary to prune the vines each pruning
season (December, January and February) in a manner that allows sufficient space
and sunlight for the grapes to ripen at the appropriate time for harvest. The
Company believes that doubling the vine count, in conjunction with certain
trellis changes, increases production approximately 60% in most wine grape
varieties. SVI believes it was a leader in developing this technique and
employed it on hundreds of its acres before it became a widely accepted
practice.

The Company's original vineyards, planted in the early 1970s, had overhead
sprinkler or furrow irrigation, wooden stakes and a two or three-wire vertical
trellis. Over the past eight years all of the Company's vineyards have been
converted to drip irrigation, steel stakes have replaced wood and most acres
have been converted to more complex, multiple wire trellising systems. Drip
irrigation permits the placement of water at the base of each vine in controlled
quantities and time frames with minimal evaporation and weed growth between
rows, and the system is also used to deliver fertilizer and other chemical
treatments to the base of the vines. Steel stakes last longer than wood and
their strength is needed to support a large trellis configuration.

Trellis design and coordinated vine training practices are two key elements
for maximizing production and quality. Improved trellising systems increase per
acre yields by exposing more leaf surface to sunlight and by supporting a larger
crop load. Through several years of experimentation, the Company has developed a
divided canopy trellis system with alternating bilateral cordons. The system
promotes excellent sunlight penetration and is easily machine harvestable. SVI's
divided canopy trellis system is an adaptation from the Geneva Double Curtain
system developed in New Zealand. While both systems provide for even sunlight
penetration on the fruit, the system developed by SVI works well with California
mechanization and machine harvesting practices. Recent advances in machine
harvest technology and complementary techniques and innovations have been
employed on the Company's machine harvesters, which shake fruit off the vines
efficiently with little or no plant injury while maintaining high quality
standards. Vine foliage remains intact for post-harvest growth thereby promoting
vine carbohydrate storage, which is necessary for healthy winter dormancy.

VINEYARD PRODUCTION CYCLE

The vineyard production cycle begins each year in December, after completion
of harvest. From December through March vines are pruned and tied to trellises,
and damaged stakes, trellises, irrigation systems and other vineyard components
are repaired or refurbished. After winter rains end, irrigation and cultivation
of the vineyards begin and continue through the harvest season. Herbicides are
applied as needed through the summer. Necessary applications of pesticides and
fertilizer begin in the spring and continue until harvest. Grafting and planting
also take place in the first four or five months of the year. As growth of the
vines accelerates beginning in late spring, they are trained and tied, and
excess leaves are sometimes pulled to promote more efficient growth of vines and
fruit. Depending on the rate at which fruit ripens, harvest typically begins in
late-August to mid-September and is completed by the end of October or early
November. Direct production costs range from $1,500 to $2,500 per acre over the
course of the year for vineyards in full production, and revenues are realized
at the time of harvest. Approximately one-half of annual production costs are
incurred by June 30.

39
<PAGE>
PROPERTY DEVELOPMENT AND CAPITAL INVESTMENT

Many factors affect the productive capacity of a vineyard, including
geographic location, age of the vines, variety of grape grown, vine density,
quality and type of soil, water quality and weather conditions. While actual
grape production varies according to the combined effect of these various
factors, certain growth patterns based on the maturity of the vine are generally
accepted by experienced grape producers and have been confirmed by the Company's
experience. Generally, newly planted vines do not produce significant amounts of
fruit for the first three years and grafted vines for the first two years.
During this time, the Company incurs significant development and production
costs that are not offset by revenues from these vineyards and must be financed
from other sources. Newly planted vines that are four to five years of age and
grafted vines that are three to four years of age generally produce grapes in
sufficient quantities to cover production costs and contribute to gross profit.

In 1993, SVI began a major improvement and refurbishment program on its
vineyards in order to increase production and to upgrade its variety mix to
those grapes that are expected to be in greater demand and sell at higher
prices. Since that time, the Company has made capital expenditures in its
vineyards of over $6 million through the end of 1996 and is continuing its
improvement and refurbishment program in 1997. From 1993 through 1997, the
Company will have replanted or grafted approximately 995 acres to higher value
varieties and interplanted an additional 870 acres. See
"--Net Vine Acres Owned by SVI and Tons Produced"

The Company's vineyard redevelopment investments during the last four years
were in addition to the Company's original costs of developing its properties.
It has been the Company's experience that it currently costs approximately
$15,000 to $18,000 per acre over a three-year period to develop open land into a
producing premium wine grape vineyard, before taking into account the cost of
land. Accordingly, the Company estimates that the current replacement value of
its existing 2,900 acres is approximately $40.5 to $48.6 million, before cost of
land and ignoring the amount of time necessary to produce grapes economically.

As indicated below, much of the Company's vineyard acreage has not yet
reached full productive capacity. While there can be no assurance that the
Company's properties will achieve their full productive capacity at the rate
indicated, if at all, the Company believes that its existing acreage represents
significant potential for revenue growth. The following table shows current and
anticipated maturity of the Company's vineyards.

MATURITY LEVELS OF SVI'S NET VINE ACRES (1)

<TABLE>
<CAPTION>
CROP YEAR
----------------------------------------------------------------
1996 1997 1998 1999 2000 2001
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Acres five or more years old (at or near full
production)........................................ 1,454 1,688 1,914 2,031 2,195 2,670
Acres three and four years old (partial
production)........................................ 615 343 281 639 925 450
Acres one and two years old (not in production)..... 281 639 925 450 -- --
--------- --------- --------- --------- --------- ---------
Total Acres..................................... 2,350 2,670(2) 3,120(3) 3,120 3,120 3,120
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>

- ------------------------------

(1) The net vine acreage shown above is SVI's planted acreage only. It does not
include acreage devoted to roads, storage areas, equipment yards or uses
other than vineyards.

(2) In 1997, SVI began development on approximately 320 additional acres.

(3) The Company has an option to lease an additional 450 acres of undeveloped
land located in Hames Valley, which it intends to plant in 1998.

40
<PAGE>
If the Company's vineyards (excluding the 450 optioned acres in Hames
Valley) mature consistently with historical experience and no significant
problems are encountered, they should be at or near their full productive
capacity in or about 2002. Therefore, acquisitions of producing vineyards will
be required prior to 2002 to achieve production increases in excess of what the
Company anticipates from its existing vineyards. In addition, acquisitions of
producing vineyards or open land suitable for development into vineyards will be
required to sustain productivity increases after 2002 and moderate any
productivity losses from the Company's existing vineyards due to grafting to new
varieties, replanting with phylloxera-resistant rootstock, and various other
factors that take vineyards out of production from time to time.

NEW VINEYARDS

THE HAMES VALLEY PROPERTIES

The Company has recently leased, for a term of up to 50 years, approximately
207 undeveloped acres and acquired an option to lease approximately 450
additional undeveloped acres in Hames Valley, which is located approximately 45
miles south of the Company's vineyard headquarters and approximately 20 miles
south of the Company's San Lucas Vineyard. The Company is currently planting the
207 leased acres and plans to exercise its option and plant the additional 450
acres as vineyards in 1998. This acquisition is expected to allow the Company to
leverage its existing resources, and it establishes SVI in a region where the
Company believes additional property suitable for premium wine grape production
is available. The Company intends to secure long-term grape purchase contracts
for the grape production from these new vineyards. There can be no assurance,
however, that the Company will be successful in finding a winery or wineries
which will agree to such long-term wine grape purchase contracts. See "Location
Map."

After negotiating its own Hames Valley lease, SVI arranged for Canandaigua
to lease an additional approximately 445 acres in Hames Valley. Pursuant to a
long-term contract with Canandaigua, in 1997 SVI began to develop this acreage
into vineyards that it will manage thereafter for Canandaigua. Under the
contract, SVI receives monthly fees, equipment rental income and, when the
vineyard begins to produce wine grapes, harvest fees. The Company has no
investment in the vineyard because development money and working capital will be
provided by Canandaigua.

FUTURE VINEYARD ACQUISITIONS AND CAPITAL INVESTMENT

Because of the increasing demand for premium wine, the Company's customers
as well as other wineries have been seeking additional long-term sources of
premium wine grapes. Accordingly, the Company plans to expand its operations,
and it believes that with adequate capital it will have opportunities to obtain
additional properties by acquiring existing vineyards and by developing new
vineyards. The goals of SVI's property acquisition strategy are to increase and
diversify the vineyard assets it manages, to leverage its existing management
and equipment resources, to better serve its customers and develop new customers
by helping them solve their grape supply problems on a long-term basis, and, in
general, to capitalize on the Company's experience in vineyard management and
development.

The Company believes it will have opportunities to acquire existing vineyard
properties due to a number of recent trends in the California wine grape
industry. These include the increase in the scale of operations the Company
perceives as necessary to satisfy the requirements of expanding wineries, large
amounts of capital required to develop and service up-to-date vineyards and what
the Company believes to be the demographic structure of wine grape vineyard
ownership in California. The Company believes that, in comparison, many smaller
property owners do not have the management, know

41
<PAGE>
how or access to capital necessary to own, develop or operate vineyards on a
scale that will be competitive in the long run.

Prior to acquisition of an existing vineyard, the Company plans to evaluate
carefully the size, location and configuration of the property, the varieties
and quantities of the grapes it produces, historical yield patterns, vineyard
density, trellising configurations, irrigation systems, water quality, other
operating assets that are part of the proposed acquisition (E.G., farming
equipment), proximity to other SVI operations and the anticipated cash flow from
the property. Another important consideration in any prospective acquisition of
existing vineyards will be the opportunity to increase revenues by upgrading or
redeveloping the property. The Company's goal is to acquire properties on terms
that will increase earnings. In addition, the Company anticipates that
acquisitions can be structured in several ways, and could include components
such as cash, equity securities, seller financed debt or mortgage debt.

The Company also believes that it can develop new vineyards. Land may be
acquired either through fee-simple purchase or through long-term ground leases.
In connection with new developments, the Company will consider, among other
things, size, location, topography, soil characteristics, the quality, type and
yields of wine grapes produced in the vicinity, access to reliable water supply
and proximity to other Company operations. It has been the Company's experience
that it costs approximately $15,000 to $18,000 per acre in capital expenditures
over a three-year period to develop open land into a producing premium wine
grape vineyard, before taking into account the cost of land. In general, a
vineyard will become partially productive approximately three years after
development has begun and at or near full productivity in approximately five
years.

While the Company is aware of many operating vineyards that could
efficiently be added to the Company's operations and several properties that
would be suitable for future development of vineyards, there can be no assurance
that the Company will acquire additional properties.

ADDITIONAL OPERATIONAL MATTERS

CROP INSURANCE. The Company currently maintains multi-peril crop insurance
coverage protection against reduced harvests on 1,907 of the Company's acreage
of vines more than four years of age. Insurance coverage under this policy is
available under certain limited circumstances, and there can be no assurance
that coverage, if available, will be sufficient. In the event of a major crop
failure, for example, this insurance would not cover lost revenue. Therefore,
any crop failure would have a material adverse effect on the Company's business,
financial condition and results of operations.

AGRICULTURAL HAZARDS. Wine grape production is subject to many risks common
to agriculture that can materially and adversely affect the quality and quantity
of grapes produced. These hazards include, among other things, adverse weather
such as drought, frost, excessive rain, excessive heat or prolonged periods of
cold weather. These weather conditions can materially and adversely affect the
quality and quantity of grapes produced by the Company and its profitability.
For example, in 1995 and 1996, poor weather (combined with a planned reduction
in producing acreage for redevelopment during this period) contributed to a
significant decline in the tonnage of grapes produced by the Company. To the
extent a grape producer's properties are geographically concentrated, the
effects of local weather can be material. The vineyards owned by SVI are spread
over a distance of approximately 50 miles, north to south, close to Highway 101
in Monterey County. There can be no assurance that adverse weather in the future
could not affect a substantial portion of the Company's vineyards in any year
and have a material adverse effect on the Company's business, financial
condition and results of operations.

42
<PAGE>
vines, has infested many vineyards in the wine grape producing regions of
California and caused grape yields to decrease. Within a few years of the
initial infestation, phylloxera can leave a vine entirely unproductive.
Phylloxera infestation has been widespread in California, particularly in Napa,
Sonoma, Mendocino and Monterey Counties, and most of the other wine grape
producing areas of the state are affected to some degree. Phylloxera infestation
can be reduced through use of the chemical pesticides Furadan-TM- and
Enzone-TM-. While Furadan-TM- is still approved for use in Monterey County, its
use is no longer legal in certain other viticultural regions of California,
including Napa, Sonoma and Mendocino Counties. There can be no assurance that
Furadan-TM- will continue to be a viable method of controlling phylloxera for
the Company. If Furadan-TM- use is restricted in Monterey County, the Company
will rely more on the use of Enzone-TM-. If the use of Enzone-TM- is prohibited
in Monterey County, however, there can be no assurance that the Company will be
able to find a safe, cost-effective alternative.

As a result of this widespread problem, thousands of vineyard acres
throughout the State of California have been replanted with phylloxera-resistant
rootstock or, in some cases, taken out of production completely. It takes
approximately four to five years for a replanted vineyard to bear grapes in
quantities sufficient for profitable operations. The Company estimates that it
currently costs approximately $15,000 per acre to replant vineyards. Of the
Company's approximately 2,669 net vine acres of wine grapes, approximately 2,238
net vine acres, or 84%, are planted or interplanted with phylloxera-resistant
rootstock. The remaining approximately 431 acres are planted on non-resistant
rootstock and are, therefore, potentially susceptible to phylloxera infestation.
The Company is managing the non-resistant acres through application of
Furadan-TM- and a program of selective replantings. There can be no assurance
that the Company's vineyards will not have serious phylloxera infestations in
the future, causing reduced yields and requiring significant investments in
replanting.

Other pests that may infest vineyards include leafhoppers, thrips,
nematodes, mites, insects, orange tortrix, twigbore, microflora and various
grapevine diseases. Pesticides and the selection of resistant rootstocks reduce
losses from these pests, but do not eliminate the risk of such loss. Gophers,
rabbits, deer, wild hogs and birds can also pose a problem for vineyards, and
wine grape vines are also susceptible to certain virus infections which may
cause reduction of yields. None of these currently poses a major threat to the
Company's vineyards, although they could do so in the future and, at that time,
will have the potential to subject the vineyards to severe damage.

WATER SUPPLY. The Company's vineyards are located in the Salinas Valley
through which flows the Salinas River. The watershed of the Salinas Valley is
from the Ventana Wilderness in the Los Padres National Forest and Santa Lucia
range of coastal mountains. The Salinas River supplies a very large aquifer
which is tapped by agricultural users. In addition, the Salinas River is fed by
two large reservoirs, Lake Nacimiento and Lake San Antonio, which were built
primarily for agricultural water supply purposes to serve the Salinas Valley.
These reservoirs are maintained by the Monterey County Water Resource Agency.

The Company drip irrigates its vineyards from wells located on or near its
vineyards. The quality of the water obtained from the wells is good, and the
wells have proven to be a plentiful and reliable source of water for the
Company's operations, even during the drought years of the late 1980s. The
Company believes its sources of water will be available for the foreseeable
future, but various factors such as drought or contamination could impair the
Company's water supply and adversely affect its business, financial condition
and results of operations.

ENVIRONMENTAL ISSUES

SVI currently maintains 14 above-ground fuel storage tanks on its own
vineyard properties to provide fuel to its various vehicles and machinery. These
tanks have capacities ranging from approximately 500 to 10,000 gallons and are
installed on concrete slabs with catch basins to protect the

43
<PAGE>
ground surface from any inadvertent release. No underground storage tanks are
located on the Company's properties.

The Company's current operations require the periodic usage of various
chemical herbicides, fungicides and pesticides, some of which contain hazardous
or toxic substances. The usage and storage of these chemicals are, to varying
degrees, subject to federal and state regulation. To the extent that the Company
stores such chemicals, they are contained in a secured storage facility at the
Company's vineyard headquarters' compound. The most toxic pesticide used by the
Company, Furadan-TM-, is not stored on-site, but is delivered as needed by an
unaffiliated company and applied to the vineyard under the supervision of a
state licensed applicator. The Company also maintains a comprehensive safety
program supervised by the Company's human resources safety director and a
licensed pest control advisor.

VINEYARD MANAGEMENT CONTRACTS

The Company manages, as a contract vineyard operator, approximately 1,656
acres in Monterey and San Benito Counties for four vineyard owners, including
approximately 1,533 acres managed for Heublein and Canandaigua. Pursuant to its
management and harvest contracts, the Company is reimbursed for the costs of
labor and equipment it provides and receives management fees based on the
acreage managed and harvested. The Company's vineyard management contracts
generally expire no earlier than the completion of harvest in years ranging from
2004 to 2012, and otherwise may be terminated by either party with one or two
years' advance notice. In certain cases the Company has also received fees for
financing vineyard improvements, securing property and designing vineyards. The
Company may enter into similar arrangements for other vineyard properties in the
future.

WINE PRODUCTION AND SALES

SVI began limited production of its own ultra premium varietal wines under
the SCHEID VINEYARDS and SAN LUCAS VINEYARD labels in 1991. The Company has
contracted for its wine production with Storrs Winery, a small producer of award
winning wines located in Santa Cruz, California, approximately 50 miles from the
Company's vineyard headquarters' compound. The Company currently subleases space
in a 1,600 square foot building from Storrs Winery, including certain space
dedicated for the Company's exclusive use in connection with its winemaking
activities. In 1996, the Company obtained a winery license, and a tasting room
was opened in April 1997 at the Company's vineyard headquarters' compound
located on U.S. Highway 101 (a major north-south thoroughfare between San
Francisco and Los Angeles) just south of Greenfield and north of King City in
Monterey County.

Production and sales have been limited to date. In 1996, SVI produced
approximately 2,000 cases of ultra premium varietal wines, including Chardonnay,
Cabernet Sauvignon, Merlot and White Riesling, using portions of the Company's
grapes. While its actual wine production will depend on various factors, the
Company currently plans to increase its annual production to approximately 5,000
cases by late 1998. As it increases wine production, the Company intends to
distribute directly through its tasting room, restaurants, clubs and a few
selected retailers. It also intends to offer its wines at discounts from retail
to holders of at least 100 shares of its Class A Common Stock. SVI has not yet
earned a profit on its wine business and cannot predict when, or if, these
operations will become profitable. Further, SVI does not expect its wine
business to have a material impact on sales or earnings in the foreseeable
future. No assurances can be given that wine production and sales ever will be a
major source of profit for the Company.

COMPETITION

Wine grape growing and wine production are extremely competitive. There are
an estimated 800 commercial wineries which produce and market California table
wine, approximately half of which

44
<PAGE>
produce fewer than 5,000 cases per year. Seven wineries account for
approximately 77% of sales based on total California wine shipments in 1996. In
addition, there are many sources of supply of wine grapes in California and in
countries outside the United States. At the end of 1995, approximately 360,000
acres were planted to wine grapes in California according to the CDFA, and the
number of planted acres is growing. Most wine grape producers have small,
privately owned operations and sell their production to wineries, often at spot
market prices from year to year. Quality of production and yields can vary
widely from vineyard to vineyard in the same geographic area. To supplement the
grapes they buy from independent producers, many wineries also own or lease
vineyards to supply some of their grape needs. Certain major wineries, such as
Robert Mondavi, are large wine grape producers and produce a significant
proportion of the grapes they need to make wine. Substantial vineyard acreage is
also owned by other wineries and more is being developed. There are no published
data regarding the size of the wine grape production industry in California, and
holdings of properties are not publicly reported. However, the Company believes
it is one of the largest independent producers of premium wine grapes in
California, and that there are approximately four or five independent producers
of comparable size in terms of acreage.

In addition, there are numerous wine producers in Europe, South America,
South Africa, Australia and New Zealand. All of these regions export wine into
the United States. California grape and wine supply shortages, especially in red
wines, have prompted some domestic national brand marketers to purchase wine
from foreign sources. Most imports are bottled wines; however, some wineries
have imported bulk wine in large tanks for bottling and sale in the United
States. Imports to California for these purposes increased from approximately
279,300 gallons in 1995 to approximately 5,994,000 gallons in 1996. Over 90% of
the bulk wine imported for this purpose came from Chile and France.

TRADEMARKS AND LABELS

The Company has commenced the trademark registration process with respect to
a specific slogan which the Company wishes to use on souvenirs and paraphernalia
to be sold at the Company's wine-tasting room. The Company also has wine labels
approved by BATF, including the SCHEID VINEYARDS and SAN LUCAS VINEYARD brand
names.

EMPLOYEES AND LABOR RELATIONS

The Company has approximately 53 full-time employees and employs seasonal
and contract labor for vineyard development, pruning, harvesting and other
related tasks during peak seasons. Field labor needs are seasonal, normally
peaking at approximately 280 field workers at harvest, and dropping to a low of
approximately 50 immediately after harvest. The Company also uses contracted
labor for specialized work, such as grafting, and otherwise when necessary.

SVI entered into a two-year contract with the UFW in January 1996. The
contract calls for an increase of approximately 2% in field labor costs through
1997. The Company believes its labor relations are satisfactory. The Company has
never had a walk-out, sit-down, slow-down or strike, and the existing contract
has a "no strike" clause. The Company has, however, been picketed, particularly
during the organizing effort by the UFW and during negotiation of the first
contract in 1995.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings.

PROPERTIES

CORPORATE HEADQUARTERS. The Company's executive corporate office occupies
approximately 5,685 square feet in Marina del Rey, California under a five-year
lease with Tesh Partners, L.P., a

45
<PAGE>
limited partnership of which SVI is the general partner and four members of the
Scheid family are limited partners. See "Certain Transactions." The lease
expires in 1999. The Company believes that its existing facilities will be
adequate to meet the Company's needs for the foreseeable future. Should the
Company need additional space, management believes it will be able to secure
additional space at commercially reasonable rates.

VINEYARDS. The Company currently owns approximately 1,467 acres of land and
leases approximately 1,433 acres of land underlying its vineyards, all of which
are located in Monterey County, California. See "--The Company's Vineyard
Properties." The four leases to which the Company is a party were entered into
in 1973, 1979, 1996 and 1997, respectively, and each of the land leases has an
initial term of approximately 30 years and options to extend for an additional
20 years. In addition, if the owner of any leased property decides to sell, the
Company has rights of first purchase or first refusal.

46
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Set forth below are the names, ages, positions and a brief description of
the business experience of the Company's executive officers and directors.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- ---------------------------------------------------------------------
<S> <C> <C>
Alfred G. Scheid (1)................. 65 Chairman of Board of Directors and Chief Executive Officer
Scott D. Scheid...................... 37 Vice President and Chief Operating Officer and a Director
Heidi M. Scheid (2).................. 34 Vice President Finance, Chief Financial Officer, Treasurer and a
Director
Kurt J. Gollnick..................... 38 Vice President Vineyard Operations
Ernest M. Brown...................... 70 Vice President, Controller and Secretary
John L. Crary (1)(2)(3).............. 43 Director
Robert P. Hartzell (1)(2)(3)......... 63 Director
</TABLE>

- ------------------------------

(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

(3) Member of the Stock Plan Administrative Committee.

ALFRED G. SCHEID, the Company's Chairman and Chief Executive Officer, was
one of the founders of SVI in 1972 and has served continuously as its Chief
Executive Officer since that time. Mr. Scheid has been engaged full-time in the
business of SVI since 1988, when he became the sole owner of the Company. Prior
to 1988, Mr. Scheid had other business affairs outside SVI. Mr. Scheid is a
founder of the California Association of Winegrape Growers, a trade association
that represents the interests of California wine grape producers and has served
as its chairman. He is also a founder of Monterey Wine Country Associates, a
trade association composed primarily of wine grape and wine producers, and has
been an associate member of the Wine Institute, a San Francisco-based trade
organization, for 25 years. Mr. Scheid is a graduate of the Harvard Graduate
School of Business, and is the father of Scott D. and Heidi M. Scheid.

SCOTT D. SCHEID became Chief Operating Officer and a Director of the Company
in 1997. Mr. Scheid joined the Company in 1986 as Vice President and has been
engaged full-time in the business of the Company since that time. Prior to
joining SVI, he was employed as an options trader with E.F. Hutton & Company
Inc. Mr. Scheid holds a B.A. degree in economics from Claremont Mens College and
is a director of Monterey Wine Country Associates.

HEIDI M. SCHEID became the Company's Vice President Finance, Chief Financial
Officer and a Director in 1997. Ms. Scheid joined the Company in 1992 as
Director of Planning after serving as a senior valuation analyst at Ernst &
Young, LLP for two years. Prior to that, she was an associate with Interven
Partners, a venture capital firm. Ms. Scheid holds an M.B.A. degree from the
University of Southern California.

KURT J. GOLLNICK has been the Company's Vice President Vineyard Operations,
since 1997. Mr. Gollnick joined SVI in 1988 as General Manager, Vineyard
Operations. For seven years prior to joining the Company, Mr. Gollnick was a
vineyard manager for Thornhill Ranches of Santa Maria, California, where he
managed 1,200 acres of vineyards. He has served as a director of the California
Association of Winegrape Growers since 1989. Mr. Gollnick has also served as
president of the Central Coast Grape Growers and Monterey Grape Growers
Associations. Mr. Gollnick holds a B.S. degree in agricultural economics from
the California Polytechnic State University, San Luis Obispo.

ERNEST M. BROWN joined the Company in 1972, and at various times has served
as the Company's Vice President, Controller and Secretary. Mr. Brown currently
holds all three of these positions.

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<PAGE>
Mr. Brown is a licensed certified public accountant and was formerly a partner
with the accounting firm of Lee, Sperling, Brown and Hisamune.

JOHN L. CRARY became a Director of the Company in 1997. Since 1988 Mr. Crary
has been a corporate financial advisor and venture capital investor active with
companies in the agricultural, bioscience and energy industries. From 1980 to
1988 Mr. Crary was an investment banker in the corporate finance department of
E.F. Hutton & Company Inc. Mr. Crary has been a consultant to SVI and its
predecessors since 1993 in connection with financial matters, acquisitions and
business strategy. Mr. Crary is a founder and director of Petroleum Capital
Associates, Inc., a privately held oil and gas investment concern, and is a
graduate of the University of California, Irvine and the Columbia University
Graduate School of Business.

ROBERT P. HARTZELL became a Director of the Company in 1997. Mr. Hartzell is
the owner of Harmony Vineyards, a producer of premium Zinfandel wine grapes near
Lodi, California. From 1978 to 1996 Mr. Hartzell was President of the California
Association of Winegrape Growers. For six years during this period, Mr. Hartzell
also served on the Agricultural Policy Advisory Committee to the U.S. Secretary
of Agriculture and the U.S. Trade Representative in connection with the General
Agreement on Trade and Tariffs negotiations. Mr. Hartzell has also served as
Deputy Director of the California Department of Food and Agriculture. Mr.
Hartzell holds a B.S. degree from the University of California, Davis.

All directors hold office until the next annual meeting of stockholders and
until their successors have been duly elected and qualified. The total number of
directors comprising the Board of Directors is currently set at five. See
"Description of Capital Stock--Class A Common Stock and Class B Common
Stock--Voting Rights."

BOARD OF DIRECTORS, COMMITTEES AND COMPENSATION

The Board of Directors has appointed an Audit Committee, a Compensation
Committee and a Stock Plan Administrative Committee. The members of the Audit
Committee are Messrs. Crary and Hartzell and Ms. Scheid. Responsibilities of the
Audit Committee include reviewing financial statements and consulting with the
independent auditors concerning the Company's financial statements, accounting
and financial policies and internal controls and reviewing the scope of the
independent auditors' activities and fees. The members of the Compensation
Committee are Messrs. Alfred G. Scheid, Crary and Hartzell. The Company's
Compensation Committee establishes and reviews salary, bonus and other forms of
compensation for officers of the Company, provides recommendations for the
salaries and incentive compensation of the employees and consultants of the
Company, reviews training and human resources policies and makes recommendations
to the Board of Directors regarding such matters. The members of the Stock Plan
Administrative Committee are Messrs. Crary and Hartzell. The Stock Plan
Administrative Committee administers the 1997 Stock Option/Stock Issuance Plan.

The Company pays each non-employee director an annual fee of $5,000 and $500
for each Board meeting attended in person and reimburses such director for all
expenses incurred by him in his capacity as a director of the Company. Under the
Company's 1997 Stock Option/Stock Issuance Plan, each non-employee director will
receive a 10,000-share option grant on the date such individual joins the Board,
provided such individual has not been in the prior employ of the Company. See
"--1997 Stock Option/Stock Issuance Plan."

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid, during the year ended
December 31, 1996, to (i) the Chief Executive Officer of the Company and (ii)
the Company's only other executive officers whose total compensation for the
1996 fiscal year exceeded $100,000 (the "Named Executive

48
<PAGE>
Officers") for services rendered in all capacities to the Company. No other
Company employee earned more than $100,000 during the 1996 fiscal year.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
1996 COMPENSATION (1)
----------------------
NAME AND PRINCIPAL POSITION SALARY BONUS
- ------------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Alfred G. Scheid
Chairman of Board and
Chief Executive Officer...................................................... $ 400,000 --
Scott D. Scheid
Vice President and Chief Operating Officer................................... $ 90,000 $ 75,000
Heidi M. Scheid
Vice President Finance, Chief Financial Officer
and Treasurer................................................................ $ 75,000 $ 30,000
Kurt J. Gollnick
Vice President Vineyard Operations........................................... $ 92,700 $ 85,000
Ernest M. Brown
Vice President, Controller and Secretary..................................... $ 118,000 $ 72,000
</TABLE>

- ------------------------

(1) With respect to each of the Named Executive Officers, the aggregate amount
of perquisites and other personal benefits, securities or property received
was less than either $50,000 or 10% of the total annual salary and bonus
reported for such Named Executive Officer.

STOCK OPTION GRANTS

No stock options or appreciation rights were granted to any Named Executive
Officers during the 1996 fiscal year. In 1997 prior to the offering, the Stock
Plan Administrative Committee intends to grant options to purchase 118,000
shares of Class A Common Stock in the aggregate under the Company's 1997 Stock
Option/Stock Issuance Plan to certain employees of the Company, including the
following option grants to executive officers: Scott D. Scheid (20,000 shares);
Heidi M. Scheid (20,000 shares); Kurt J. Gollnick (20,000 shares); and Ernest M.
Brown (20,000 shares). The options become exercisable in a series of
installments over the four-year period of service measured from the grant date
and have an exercise price at the fair market value.

1997 STOCK OPTION/STOCK ISSUANCE PLAN

An aggregate of 200,000 shares of Class A Common Stock have been authorized
for direct issuance to, or issuance upon exercise of options that may be granted
to, directors, officers, employees and consultants of the Company under the 1997
Stock Option/Stock Issuance Plan (the "Plan"). In no event, however, may any one
participant in the Plan receive option grants or direct stock issuances for more
than 100,000 shares of Class A Common Stock in the aggregate per calendar year.
The terms and provisions of the outstanding options are substantially the same
as those which will be in effect for grants made under the Discretionary Option
Grant Program of the Plan, except outstanding options are not subject to
acceleration upon the termination of an optionee's employment following a change
in control in the same manner as described below for other options.

The Plan is divided into three separate components: (i) the Discretionary
Option Grant Program under which eligible individuals may, at the discretion of
the Plan Administrator, be granted options to purchase shares of Class A Common
Stock at an exercise price not less than 100% of the fair market value of those
shares on the grant date; (ii) the Stock Issuance Program under which such
individuals may, in the Plan Administrator's discretion, be issued shares of
Class A Common Stock directly,

49
<PAGE>
through the purchase of such shares at a price not less than 100% of their fair
market value at the time of issuance or as a bonus tied to the performance of
services; and (iii) the Automatic Option Grant Program under which option grants
will automatically be made at periodic intervals to eligible non-employee
directors to purchase shares of Class A Common Stock at an exercise price equal
to 100% of their fair market value on the grant date.

The Discretionary Option Grant Program and the Stock Issuance Program will
be administered by the Stock Plan Administrative Committee. The Stock Plan
Administrative Committee, as Plan Administrator, will have complete discretion
to determine which eligible individuals are to receive option grants or stock
issuances, the time or times when such option grants or stock issuances are to
be made, the number of shares subject to each such grant or issuance, the status
of any granted option as either an incentive stock option or a non-statutory
stock option under the federal tax laws, the vesting schedule to be in effect
for the option grant or stock issuance and the maximum term for which any
granted option is to remain outstanding.

In the event that the Company is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program which is not to
be assumed by the successor corporation will automatically accelerate in full,
and all unvested shares under the Stock Issuance Program will immediately vest,
except to the extent the Company's repurchase rights with respect to those
shares are to be assigned to the successor corporation. However, the Plan
Administrator has the discretionary authority to structure option grants and
repurchase rights under the Discretionary Option Grant and Stock Issuance
Programs so that the shares subject to those options or repurchase rights will
vest immediately upon (i) a merger or asset sale in which those options are
assumed or those repurchase rights are assigned or (ii) the termination of the
individual's service, whether involuntarily or through a resignation for good
reason, within a designated period following a merger or asset sale in which
those options are assumed or those repurchase rights are assigned or following a
change in control of the Company effected by a successful tender offer for more
than 50% of the Company's outstanding voting securities or by proxy contest for
the election of directors.

The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Plan in return for the grant of new options for
the same or different number of option shares with an exercise price per share
based upon the fair market value of the shares of Class A Common Stock on the
new grant date.

Under the Automatic Option Grant Program, each individual who is serving as
a non-employee director on the date the Underwriting Agreement between the
Company and the Representatives is executed will receive an option grant on such
date for 10,000 shares of Class A Common Stock, provided such individual has not
otherwise been in the prior employ of the Company and has not previously
received an option grant from the Company in his or her capacity as a
non-employee director. Each individual who first becomes a non-employee director
at any time after such date will receive a 10,000-share option grant on the date
such individual joins the Board, provided such individual has not been in the
prior employ of the Company. In addition, at each Annual Stockholders Meeting,
beginning with the 1998 Annual Meeting, each individual with at least six months
of Board service who is to continue to serve as a non-employee director after
the meeting will receive an additional option grant to purchase 2,500 shares of
Class A Common Stock, whether or not such individual has been in the prior
employ of the Company.

Each automatic grant will have a term of ten years, subject to earlier
termination following the optionee's cessation of Board service. The initial
10,000-share option grant will become exercisable in a series of four successive
equal annual installments over the optionee's period of Board service. Each
additional 2,500-share option grant will become exercisable upon the optionee's
completion of one

50
<PAGE>
year of Board service measured from the grant date. However, each outstanding
option will immediately vest upon (i) certain changes in the ownership or
control of the Company or (ii) the death or disability of the optionee while
serving as a director.

The Board may amend or modify the Plan at any time. The Plan will terminate
in June 2007, unless sooner terminated by the Board.

LIMITATION OF DIRECTORS' LIABILITY; INDEMNIFICATION

The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that a
corporation's certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director for monetary damages for breach
of their fiduciary duties as directors, except for liability (i) for any breach
of their duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law (the "DGCL") or (iv) for any transaction from which the
director derived an improper personal benefit.

The Company's Bylaws provide that the Company shall indemnify its directors
and officers and may indemnify its employees and agents to the fullest extent
permitted by law. Indemnification under the Company's Bylaws covers at least
negligence and gross negligence on the part of indemnified parties.

The Company has entered into agreements to provide indemnification for the
Company's directors and certain officers in addition to the indemnification
provided for in the Bylaws. These agreements, among other things, will indemnify
the Company's directors and certain officers to the fullest extent permitted by
Delaware law for certain expenses (including attorneys' fees), and all losses,
claims, liabilities, judgments, fines and settlement amounts incurred by such
person arising out of or in connection with such persons' service as directors
or officers of the Company or an affiliate of the Company.

There is no pending litigation or proceeding involving a director, officer,
employee or agent of the Company, and the Company is not aware of any threatened
litigation or proceeding which may result in a claim for such indemnification.

RETIREMENT PLANS

The Company has two 401(k) profit sharing plans. The first plan is for the
benefit of the Company's employees who are covered by the United Farm Workers of
America Collective Bargaining Agreement. All union employees of the Company are
eligible to participate after having worked 500 hours within a one-year period.
The Company contributes 15 cents for each hour worked by eligible employees. The
second plan covers SVI's non-union employees. All non-union employees of the
Company are eligible to participate in the plan after one year of employment.
Employees may contribute between 1% and 15% of their annual compensation. The
Company matches 50 cents for every dollar of an employee's contributions up to
6% of the employee's annual salary.

In addition to its 401(k) plans, SVI has an individual retirement agreement
with Ernest M. Brown, Vice President, Controller and Secretary of the Company,
age 70. This agreement provides for SVI to pay to Mr. Brown $100,000 per annum
at the time of his retirement or disability for the rest of his life. Mr. Brown
has not set a date for his retirement and this retirement agreement is unfunded;
therefore, it is not possible to determine the absolute dollar amount for which
the Company is liable in the future. The Company has, however, reserved $584,237
for this contingency as of December 31, 1996.

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<PAGE>
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

The Company has entered into an employment agreement (collectively, the
"Employment Agreements") with each of Alfred G. Scheid, Scott D. Scheid, Heidi
M. Scheid and Kurt J. Gollnick (collectively, the "Employees") providing for a
minimum employment of five years beginning on June 1, 1997. Under their
respective Employment Agreements, Alfred G. Scheid currently is entitled to an
annual base salary of $400,000, Scott D. Scheid currently is entitled to an
annual base salary of $130,000 and each of Heidi M. Scheid and Kurt J. Gollnick
is entitled to an annual base salary of $120,000. The base salary under each
Employment Agreement is subject to upward adjustment and each Employee is
eligible for bonus compensation pursuant to bonus arrangements, as determined by
the Compensation Committee. The Company may terminate each Employee's employment
at any time with or without cause, and no severance payment obligations are
provided. A Buy-Sell Agreement by and among the holders of Class B Common Stock
provides, among other things (see "Principal Stockholders--Agreement Among Class
B Stockholders"), that the shares of Class B Common Stock held by Mr. Gollnick
(currently 290,093) are purchasable at the option first of the Company, next of
Alfred G. Scheid if the Company does not exercise such option, and thereafter of
Scott D. Scheid and Heidi M. Scheid if the Company and Alfred G. Scheid do not
exercise such options, if Mr. Gollnick's employment with the Company terminates
for any reason other than death. If such termination occurs within five years
following the date of the Buy-Sell Agreement, the per share purchase price for
Mr. Gollnick's shares of Class B Common Stock will be equal to the price per
share he paid for such shares, and if such termination occurs five years or more
following such date, the per share purchase price will be the lower of the
weighted average trading price of the Class A Common Stock on the immediately
preceding 20 trading days on which such Class A Common Stock actually was traded
and the per share offering price for such Class A Common Stock in this offering.

The Stock Plan Administrative Committee, as Plan Administrator of the Plan,
will have the authority to provide for the accelerated vesting of the shares of
Class A Common Stock subject to outstanding options held by any of the executive
officers of the Company in connection with certain changes in control of the
Company or the subsequent termination of such executive officer's employment
following the change in control event.

CONSULTING AGREEMENTS

SVI entered into a Consulting Agreement (the "Consulting Agreement"),
effective June 1, 1997, with John L. Crary, a director of the Company. Under the
Consulting Agreement, Mr. Crary consults with SVI generally on matters relating
to the wine grape industry and to the development and implementation of the
Company's strategic objectives, including acquisition of vineyard properties.
The Consulting Agreement has a one year term, ending on May 31, 1998, unless
extended by mutual agreement of Mr. Crary and the Company. The Company pays
$7,500 per month to Mr. Crary for his services under the Consulting Agreement.

SVI periodically consults with Robert P. Hartzell, a wine industry
consultant and a director of the Company, on various matters relating to its
business activities. The Company pays Mr. Hartzell on an hourly basis, at
varying rates depending on the nature of service being provided.

CERTAIN TRANSACTIONS

CORPORATE HEADQUARTERS LEASE

Pursuant to a five-year lease (the "Lease"), SVI leases the third floor of a
newly remodeled, three-story office building in Marina del Rey, a suburb of Los
Angeles, from Tesh Partners, L.P., a limited partnership comprised of members of
the Scheid family. The Company occupies 5,685 square feet and the rest of the
building (approximately 5,300 square feet) is leased to unrelated parties. SVI
is the general partner and the limited partners of Tesh Partners, L.P. are
Alfred G. Scheid's four children,

52
<PAGE>
two of whom are Scott D. Scheid, Vice President, Chief Operating Officer and a
director of the Company, and Heidi M. Scheid, Vice President Finance, Chief
Financial Officer, Treasurer and a director of the Company. The lease runs until
1999 and the rent is $91,416 annually, plus an additional annual amount of
$3,660 for parking. The Company believes that the terms of the Lease are at
least as favorable to the Company as if the Lease were entered into with an
unaffiliated third party.

S CORPORATION TERMINATION

EXCHANGE OF PARTNERSHIP UNITS AND LIMITED LIABILITY COMPANY INTERESTS FOR CLASS
B COMMON STOCK

Prior to the date of this offering, the Company was the general partner of
(i) Vineyard Investors 1972 ("VI-1972"), a California limited partnership having
as its limited partners the Company, Big Vines Limited Liability Company ("Big
Vines"), a California limited liability company having Scott D. Scheid (the son
of Alfred G. Scheid, Vice President, Chief Operating Officer and a director of
the Company) and Heidi M. Scheid (the daughter of Alfred G. Scheid, Vice
President Finance, Chief Financial Officer, Treasurer and a director of the
Company) as its members, Emanty Limited Liability Company, a California limited
liability company having Alfred G. Scheid (Chairman of the Board and Chief
Executive Officer of the Company), Tyler P. Scheid (the son of Alfred G. Scheid)
and Emily K. Liberty (the daughter of Alfred G. Scheid) as its members, and Kurt
J. Gollnick (Vice President Vineyard Operations of the Company); and (ii)
Vineyard 405 ("V-405"), a California limited partnership having as its limited
partners SVI and VI-1972. Prior to such date, the Company also was a member of
Quadra Partners LLC ("Quadra Partners"), a California limited liability company
having Alfred G. Scheid, Scott D. Scheid, Heidi M. Scheid and Kurt J. Gollnick
as additional members. During their respective existences, VI-1972 was the owner
of the vineyard properties currently owned by the Company known as Central
Avenue Vineyard, Hacienda Vineyard, Elm Avenue Vineyard, Pueblo Vineyard, El
Camino Vineyard and Wild Horse Vineyard; V-405 was the owner of the vineyard
properties currently owned by the Company known as Viento Vineyard and Baja
Viento Vineyard; and Quadra Partners was the ground lessee of approximately 167
acres of the vineyard property known as San Lucas Vineyard. See "Business--The
Company's Vineyard Properties." In connection with this offering, the membership
interests held by all members of Quadra Partners and the limited partnership
units held by all limited partners in VI-1972 and by VI-1972 in V-405, other
than those held by SVI in each case, were exchanged for Class B Common Stock of
the Company (the "Exchange Transaction"). As a result, each of Quadra Partners,
VI-1972 and V-405 was terminated and dissolved, and their respective former
members and limited partners received an aggregate of 1,451,396 shares of Class
B Common Stock, representing approximately 33% of the pre-offering issued and
outstanding common stock of the Company on a fully-diluted basis. In addition,
Big Vines was terminated and dissolved on the date of this offering, and as a
result its members, Scott D. Scheid and Heidi M. Scheid, received the shares of
Class B Common Stock to which Big Vines was entitled. The following table sets

53
<PAGE>
forth the number and percentage of shares of Class B Common Stock of SVI
received by the members of and limited partners in Quadra Partners, VI-1972 and
V-405 a result of the Exchange Transaction:

<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHARES OF CLASS B CLASS B COMMON
NAME OF MEMBER OR PARTNER COMMON STOCK RECEIVED STOCK OUTSTANDING
- ------------------------------------------------------------- ---------------------- -------------------
<S> <C> <C>
Emanty Limited Liability Company............................. 573,870 13.0%
Alfred G. Scheid(1).......................................... 7,247(1) 0.2%
Scott D. Scheid.............................................. 290,093 6.6%
Heidi M. Scheid.............................................. 290,093 6.6%
Kurt J. Gollnick............................................. 290,093 6.6%
---------- ---
Total...................................................... 1,451,396 33.0%
---------- ---
---------- ---
</TABLE>

- ------------------------

(1) All of the shares are owned by Mr. Scheid as Trustee of the Alfred G.
Scheid Revocable Trust, dated 10/8/92.

GOLLNICK NOTE

On December 30, 1994, Kurt J. Gollnick, the Vice President of Vineyard
Operations of the Company, purchased 555 limited partnership units of VI-1972
from SVI in exchange for the delivery by Mr. Gollnick to the Company of a
Promissory Note (the "Gollnick Note") in the original principal amount of
$98,790. The Gollnick Note bears interest at the rate of 8.23% per annum, and is
payable interest only on the 30th day of December of each year until December
30, 2004, at which time the entire principal balance and all accrued, unpaid
interest is payable in full.

54
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of shares of the Company's Class B Common Stock, immediately prior to
the offering, as adjusted to reflect the sale of the shares offered hereby
(assuming no exercise of the Underwriters' over-allotment option) (i) by each
person known to the Company to beneficially own more than 5% of the outstanding
shares of the Company's Class A and Class B Common Stock, (ii) by each of the
Company's directors, (iii) by each of the Named Executive Officers and (iv) by
all directors and executive officers of the Company as a group. Such persons do
not own any shares of Class A Common Stock. Unless otherwise indicated, each
person has sole voting and investment power (or shares such powers with his or
her spouse) with respect to the shares set forth in the following table.

<TABLE>
<CAPTION>
PERCENT OF TOTAL VOTING
POWER BASED ON SHARES OF
NUMBER OF SHARES OF CLASS B COMMON STOCK
CLASS B COMMON BENEFICIALLY OWNED
STOCK BENEFICIALLY ----------------------------
OWNED PRIOR TO AND PRIOR TO THE AFTER THE
NAME AND ADDRESS (1) AFTER THE OFFERING OFFERING (2) OFFERING (3)
- ----------------------------------------------------------------- ------------------- ------------- -------------
<S> <C> <C> <C>
Alfred G. Scheid (4)............................................. 2,949,851 67.0% 61.5%
Scott D. Scheid (5).............................................. 291,093 6.6 6.1
Heidi M. Scheid (6).............................................. 293,093 6.7 6.1
Kurt J. Gollnick................................................. 290,093 6.6 6.0
Ernest M. Brown.................................................. 0 0 0
John L. Crary.................................................... 0 0 0
Robert P. Hartzell............................................... 0 0 0
Emanty LLC....................................................... 573,870 13.0 12.0

All directors and officers as a group (7 persons)................ 3,774,130 85.8 78.6
</TABLE>

- ------------------------------

* Less than 1%.

(1) Each stockholder's address is at the Company's principal executive offices.

(2) Based on 4,400,000 shares of Class B Common Stock outstanding.

(3) Based on 6,400,000 shares of Class A and Class B Common Stock outstanding.

(4) All of the shares are owned by Mr. Scheid as Trustee of the Alfred G. Scheid
Revocable Trust, dated 10/8/92. Includes 50,000 shares of Class B Common
Stock owned by Mr. Scheid's wife.

(5) Also includes 1,000 shares of Class B Common Stock owned by Mr. Scheid's
wife.

(6) Also includes 2,000 shares of Class B Common Stock held in trusts for the
benefit of Heidi M. Scheid's children, for which Ms. Scheid serves as a
trustee and with respect to which she disclaims beneficial ownership and
1,000 shares of Class B Common Stock owned by Ms. Scheid's husband.

AGREEMENT AMONG CLASS B STOCKHOLDERS

The holders of the outstanding shares of Class B Common Stock and the
Company are parties to a Buy-Sell Agreement (the "Buy-Sell Agreement"). Pursuant
to the Buy-Sell Agreement, no holder of shares of Class B Common Stock may, with
limited exceptions, transfer Class B Common Stock or convert Class B Common
Stock into Class A Common Stock without first offering such stock to the Company
and then to other parties to the Buy-Sell Agreement in a specified order. The
Buy-Sell Agreement applies to a broad range of transfers and dispositions other
than transfers to (i) the Company, (ii) any other Class B stockholder, (iii) a
current spouse or direct lineal descendant of any Class B stockholder including,
without limitation, adopted persons (if adopted during minority) and persons
born out of wedlock, and excluding foster children and stepchildren, and (iv) a
trust under which all of the beneficiaries are persons described in clauses (ii)
or (iii) above.

55
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 20,000,000 shares of
Class A Common Stock, par value $0.001 per share, 10,000,000 shares of Class B
Common Stock, par value $0.001 per share, and 2,000,000 shares of Preferred
Stock, par value $0.001 per share. Immediately prior to the offering, there were
no shares of Class A Common Stock outstanding, 4,400,000 shares of Class B
Common Stock outstanding held by twelve holders of record and no shares of
Preferred Stock outstanding.

CLASS A COMMON STOCK AND CLASS B COMMON STOCK
VOTING RIGHTS

Each share of Class A Common Stock is entitled to one vote and each share of
Class B Common Stock is entitled to five votes on all matters submitted to a
vote of the stockholders. Except for matters where applicable law requires the
approval of one or both classes of Common Stock voting as a separate class and
except as described below, the Class A Common Stock and the Class B Common Stock
vote together as a single class on all matters presented for a vote of the
stockholders. However, the holders of the Class A Common Stock, voting as a
separate class, will elect 25% of the authorized number of directors rounded up
to the nearest whole number, and the holders of the Class B Common Stock, voting
as a separate class, will elect the remaining directors. Immediately following
the offering, the holders of Class B Common Stock will retain effective control,
and will continue to direct the business, management and policies of the Company
through holding approximately 92% of the combined voting power of the
outstanding Class A and Class B Common Stock and the ability to elect three of
the five members of the Board of Directors.

Directors may be removed with or without cause by the holders of the class
of stock that elected them or, to the extent permitted by applicable law, with
cause by the Board of Directors. A vacancy on the Board created by the removal
or resignation of a director may be filled either by directors in office or, if
the directors have not filled the vacancy, by the stockholders upon application
to the Court of Chancery.

The holders of Class A Common Stock are entitled to vote as a separate class
on any proposed modification to the rights, preferences, privileges or
restrictions of such class of stock and as otherwise required by law. The
holders of Class B Common Stock are also entitled to vote as a separate class as
required by law, and the Company's Certificate of Incorporation requires a vote
of 60% of the number of shares of Class B Common Stock outstanding to approve
any modification to the rights, preferences, privileges and restrictions of such
class of stock or any reclassification or recapitalization of the Company's
outstanding capital stock.

DIVIDENDS

Each share of Class A Common Stock is entitled to receive dividends if, as
and when declared by the Board of Directors of the Company out of any funds
legally available therefor. Identical dividends, if any, must be paid on both
the Class A Common Stock and the Class B Common Stock at any time that dividends
are paid on either, except that dividends and distributions payable in shares of
Class B Common Stock may be paid only on shares of Class B Common Stock and
dividends and distributions payable in shares of Class A Common Stock may be
paid only on shares of Class A Common Stock. If a dividend or distribution
payable in Class A Common Stock is made on the Class A Common Stock, the Company
must also make a pro rata and simultaneous dividend or distribution of Class B
Common Stock on the Class B Common Stock. If a dividend or distribution payable
in Class B Common Stock is made on the Class B Common Stock, the Company must
also make a pro rata and simultaneous dividend or distribution of Class A Common
Stock on the Class A Common Stock.

56
<PAGE>
CONVERTIBILITY

Subject to the terms of the Buy-Sell Agreement, each share of Class B Common
Stock is convertible at any time at the option of the holder into Class A Common
Stock on a share-for-share basis. Shares of Class B Common Stock will be
automatically converted into shares of Class A Common Stock on the happening of
certain events described below. Transfers of shares of Class B Common Stock are
also subject to the terms of the Buy-Sell Agreement. The Company has reserved
4,400,000 shares of its Class A Common Stock for issuance upon the exercise of a
conversion right or automatic conversion. See "Principal Stockholders--Agreement
Among Class B Stockholders." The Class A Common Stock is not convertible.

Each share of Class B Common Stock shall automatically be converted into
Class A Common Stock, on a share-for-share basis, in the event that the
beneficial or record ownership of such share of Class B Common Stock shall be
transferred (including, without limitation, by way of gift, settlement, will or
intestacy) to any person or entity that was not (i) the Company, (ii) any other
Class B stockholder, (iii) a current spouse or direct lineal descendant of any
Class B stockholder including, without limitation, adopted persons (if adopted
during minority) and persons born out of wedlock, and excluding foster children
and stepchildren, and (iv) a trust under which all of the beneficiaries are
persons described in clauses (ii) or (iii) above.

LIQUIDATION RIGHTS

In the event of the liquidation, dissolution or winding up of the Company,
after satisfaction of amounts payable to creditors and distribution to the
holders of outstanding Preferred Stock, if any, of amounts to which they may be
preferentially entitled, holders of the Class A Common Stock and Class B Common
Stock are entitled to share ratably in the assets available for distribution to
the stockholders.

OTHER PROVISIONS

There are no preemptive rights to subscribe to any additional securities
which the Company may issue and there are no redemption provisions or sinking
fund provisions applicable to the Class A Common Stock or the Class B Common
Stock, nor is either class subject to calls or assessments by the Company. All
outstanding shares are, and all shares to be outstanding upon completion of this
offering will be, legally issued, fully paid and nonassessable.

PREFERRED STOCK

The Board of Directors has the authority, subject to any limitations
prescribed by law, without further action by the stockholders, to issue up to an
aggregate of 2,000,000 shares of Preferred Stock in one or more series and to
fix the rights, preferences, privileges and restrictions granted to or imposed
upon any unissued shares of Preferred Stock and to fix the number of shares
constituting any series and the designations of such series. The shares noted
above constitute "blank check" Preferred Stock, and, as of the date of the
offering, the Board of Directors has not yet designated any series thereof or
any rights, preferences, privileges or restrictions attaching thereto. The
issuance of Preferred Stock could adversely affect the voting power of the
holders of Class A Common Stock and the likelihood that such holders will
receive dividend payments and payments upon liquidation and may have the effect
of delaying, deferring or preventing a change in control of the Company. The
Company has no present plan to issue any Preferred Stock.

REPRESENTATIVE'S WARRANTS; REGISTRATION RIGHTS

The Company has issued to the Representatives of the Underwriters warrants
(the "Representatives' Warrants") to purchase up to 200,000 shares of Class A
Common Stock at an exercise price per

57
<PAGE>
share equal to 120% of the price to public in this offering. The
Representatives' Warrants are exercisable for a period of five years commencing
one year after the effective date of the Registration Statement of which this
Prospectus forms a part. The holders of the Representatives' Warrants have the
right, on one occasion while such warrants are exercisable, to require the
Company at the Company's expense to register under the Securities Act the offer
and sale of such warrants or the underlying shares of Class A Common Stock. In
addition, the holders of the Representatives' Warrants may include them or the
underlying Class A Common Stock in any registration (other than on Form S-8)
filed by the Company while such warrants are exercisable. See "Underwriting."

BYLAW PROVISIONS

The Company's Bylaws provide that special meetings of stockholders may be
called only by the Chairman of the Board, the Chief Executive Officer, a
majority of the Board of Directors or the holders of shares entitled to cast not
less than 50% of the voting power at the meeting. The Bylaws also provide that
any action which may be taken at any meeting of stockholders may be taken
without a meeting, without prior notice and without a vote if written consents
approving the action are signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to take such
action at a meeting of stockholders. Accordingly, immediately following this
offering, the holders of Class A Common Stock will have insufficient voting
power, in the aggregate, to call special meetings of stockholders and the
holders of Class B Common Stock may take certain actions by written consent
without formally convening a meeting of stockholders. In addition, the Bylaws
provide that stockholders may not raise new matters or nominate directors at a
meeting of stockholders unless certain advance notice requirements are
satisfied.

CERTAIN PROVISIONS OF THE DELAWARE GENERAL CORPORATION LAW

Generally, Section 203 of the DGCL prohibits a publicly held Delaware
corporation from engaging in a broad range of "business combinations" with an
"interested stockholder" (defined generally as a person owning 15% or more of
the corporation's outstanding voting stock) for three years following the date
such person became an interested stockholder unless (i) before the person
becomes an interested stockholder, the transaction resulting in such person
becoming an interested stockholder or the business combination is approved by
the board of directors of the corporation, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owns at least 85% of the outstanding
voting stock of the corporation (excluding shares owned by directors who are
also officers of the corporation or shares held by employee stock plans that do
not provide employees with the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender offer or exchange offer)
or (iii) on or after such date on which such person became an interested
stockholder the business combination is approved by the board of directors and
authorized at an annual or special meeting, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock excluding
shares owned by the interested stockholders. The restrictions of Section 203 do
not apply, among other reasons, if a corporation, by action of its stockholders,
adopts an amendment to its certificate of incorporation or bylaws expressly
electing not to be governed by Section 203, provided that, in addition to any
other vote required by law, such amendment to the certificate of incorporation
or bylaws must be approved by the affirmative vote of a majority of the shares
entitled to vote. Moreover, an amendment so adopted is not effective until
twelve months after its adoption and does not apply to any business combination
between the corporation and any person who became an interested stockholder of
such corporation on or prior to such adoption. The Company's Certificate of
Incorporation and Bylaws do not currently contain any provisions electing not to
be governed by Section 203 of the DGCL.

Section 203 of the DGCL may discourage persons from making a tender offer
for or acquisitions of substantial amounts of the Class A Common Stock. This
could have the effect of inhibiting changes in

58
<PAGE>
management and may also prevent temporary fluctuations in the Class A Common
Stock that often result from takeover attempts.

Section 228 of the DGCL allows any action which is required to be or may be
taken at a special or annual meeting of the stockholders of a corporation to be
taken without a meeting with the written consent of holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted, provided that the certificate of incorporation
of such corporation does not contain a provision to the contrary. The Company's
Certificate of Incorporation contains no such provision, and therefore
stockholders holding a majority of the voting power of the Common Stock will be
able to approve a broad range of corporate actions requiring stockholder
approval without the necessity of holding a meeting of stockholders.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar of the Class A and Class B Common Stock is
ChaseMellon Shareholder Services, L.L.C.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have outstanding
2,000,000 shares of Class A Common Stock and 4,400,000 shares of Class B Common
Stock (assuming the Underwriters' over-allotment option is not exercised). The
Class B Common Stock is convertible on a share-for-share basis into Class A
Common Stock and must be converted to effect any public sale of such stock. Of
these outstanding shares, the 2,000,000 shares of Class A Common Stock sold in
this offering will be freely tradeable without restriction under the Securities
Act, except for any shares purchased by an "affiliate" of the Company (as that
term is defined in the Securities Act), which will be subject to the resale
limitations and saleable under Rule 144 adopted under the Securities Act.

The 4,400,000 shares of Class B Common Stock held by members of the Scheid
family are "restricted" securities within the meaning of Rule 144 and may not be
resold in a public distribution (before or upon conversion into Class A Common
Stock) except in compliance with the registration requirements of the Securities
Act or pursuant to Rule 144.

In general, under Rule 144 as currently in effect, an affiliate of the
Company, or person (or persons whose shares are aggregated) who has beneficially
owned restricted shares for at least one year but less than two years, will be
entitled to sell in any three-month period a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of Class A Common
Stock (approximately 2,000,000 shares immediately after the offering) or (ii)
the average weekly trading volume during the four calendar weeks immediately
preceding the date on which notice of the sale is filed with the Commission.
Sales pursuant to Rule 144 are subject to certain requirements relating to
manner of sale, notice and availability of current public information about the
Company. A person (or persons) other than an "affiliate" who has beneficially
owned his or her shares for at least two years is entitled to sell such shares
pursuant to Rule 144(k) without regard to the limitations described above. As
defined in Rule 144, an "affiliate" of an issuer is a person who directly, or
indirectly through the use of one or more intermediaries, controls, or is
controlled by, or is under common control with, such issuer. Rule 144A under the
Securities Act as currently in effect permits the immediate sale by current
holders of restricted shares of all or a portion of their shares to certain
qualified institutional buyers described in Rule 144A, subject to certain
conditions.

The members of the Scheid family and the Company's other officers and
directors, who in the aggregate hold beneficially 4,400,000 shares of Class B
Common Stock, have agreed that they will not sell any shares of capital stock of
the Company, either publicly or privately, without the prior consent of
Cruttenden Roth Incorporated for a period of one year from the date of this
Prospectus.

59
<PAGE>
The Company has reserved an aggregate of 200,000 shares of Class A Common
Stock for issuance pursuant to the Plan. The Company intends to file a
registration statement on Form S-8 under the Securities Act within 30 days after
the date of this Prospectus to register the shares to be issued pursuant to the
Plan. Shares of Class A Common Stock issued under the Plan after the effective
date of such registration statement will be freely tradeable in the public
market, subject to the lock-up restrictions and subject in the case of sales by
affiliates to the amount, manner of sale notice and public information
requirements of Rule 144.

There has been no prior market for the Class A Common Stock and there can be
no assurance that a significant public market for the Class A Common Stock will
develop or be sustained after the offering contemplated by this Prospectus.
Sales of substantial amounts of Class A Common Stock in the public market could
adversely affect the market price of the Class A Common Stock.

60
<PAGE>
UNDERWRITING

The Underwriters named below, for whom Cruttenden Roth Incorporated, Laidlaw
Equities, Inc. and Rodman & Renshaw, Inc. are acting as Representatives, have
severally agreed, subject to the terms and conditions of the Underwriting
Agreement, to purchase from the Company the number of shares of Class A Common
Stock set forth opposite their respective names below at the price to public
less underwriting discounts and commissions set forth on the cover page of this
Prospectus. The nature of the Underwriters' obligations is such that if any such
shares are purchased, all must be purchased.

<TABLE>
<CAPTION>
UNDERWRITER PARTICIPATION
- -------------------------------------------------------------------------------- ------------
<S> <C>
Cruttenden Roth Incorporated....................................................
Laidlaw Equities, Inc...........................................................
Rodman & Renshaw, Inc...........................................................

------------
Total....................................................................... 2,000,000
------------
------------
</TABLE>

The several Underwriters propose to offer the shares of Class A Common Stock
in part directly to the public at the price to public set forth on the cover
page of this Prospectus, and in part to certain dealers who are members of the
National Association of Securities Dealers, Inc. (the "NASD") at the price to
public less a concession not exceeding $0. per share. The Underwriters may
allow, and such dealers may reallow, to members of the NASD a concession not
exceeding $0. per share. After the shares of Common Stock are released for sale
to the public, the Representatives may change the initial price to public and
other selling terms. No change in such terms shall change the amount of proceeds
to be received by the Company as set forth on the cover page of this Prospectus.

The Company has granted the Underwriters an option, exercisable for 45 days
after the date of this Prospectus, to purchase up to 300,000 additional shares
of Class A Common Stock at the price to public less the underwriting discount
set forth on the cover page of this Prospectus. The Underwriters may exercise
the option solely to cover over-allotments, if any. To the extent the
Underwriters exercise the over-allotment option, each Underwriter will be
committed, subject to certain conditions, to purchase that number of additional
shares which is proportionate to such Underwriter's initial commitment.

The Company has also agreed to pay the Representatives a nonaccountable
expense allowance equal to 3% of the gross proceeds of the offering, and to sell
to the Representatives or their designees, for nominal consideration, the
Representatives' Warrants to purchase up to 200,000 shares of Class A Common
Stock (subject to certain antidilution adjustments). The Representatives'
Warrants will be exercisable for a period of five years commencing one year
after the effective date of the Registration Statement of which this Prospectus
forms a part, and cannot be transferred for a period of one year from the date
of issuance except to Underwriters, selling group members and their officers or
partners. The exercise price per share for the Representatives' Warrants is
equal to 120% of the initial price to public and may be paid in cash or on a
cashless net issuance basis by foregoing receipt of a number of shares otherwise
issuable upon exercise having a fair market value equal to the aggregate
exercise price. During the exercise period, holders of the Representatives'
Warrants are entitled to certain demand and incidental registration rights with
respect to the securities issuable upon exercise.

The Company has granted to Cruttenden Roth Incorporated the right of first
refusal to manage or co-manage any private offering through an investment banker
or placement agent, or any public offering, of any debt or equity securities
(other than bank debt or similar financing) by the Company or any of its
stockholders owning at least five percent of the Class A Common Stock and Class
B

61
<PAGE>
Common Stock. This right of first refusal will terminate two years after
consummation of this offering or if Cruttenden Roth Incorporated earlier
declines to exercise the right.

Except in connection with acquisitions or pursuant to the exercise of
options granted under the Plan, the Company has agreed, for a period of one year
from the consummation of this offering, not to issue or sell or purchase any
equity securities without the prior written consent of Cruttenden Roth
Incorporated. In addition, the Company's officers, directors and pre-offering
stockholders have agreed not to transfer any equity securities of the Company
for a period of one year after the consummation of this offering, other than
intra-family transfers or transfers to family trusts, without the prior written
consent of Cruttenden Roth Incorporated.

Prior to this offering, there has not been a public market for the Class A
Common Stock. The public offering price of the Class A Common Stock has been
determined by arms-length negotiation between the Company and the
Representatives. There is no direct relation between the offering price of the
Class A Common Stock and the assets, book value or net worth of the Company.
Among the factors considered by the Company and the Representatives in pricing
the Class A Common Stock were the Company's results of operations, the current
financial condition and future prospects of the Company, the experience of
management, the amount of ownership to be retained by pre-offering stockholders,
the general condition of the economy and the securities markets, the rights,
preferences, privileges and restrictions of the Class A Common Stock, and the
demand for similar securities of companies considered comparable to the Company.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.

In connection with the offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Class A Common
Stock. Such transactions may include stabilization transactions effected in
accordance with the Securities Exchange Act of 1934 pursuant to which such
persons may bid for or purchase Class A Common Stock for the purpose of
stabilizing its market price. The Underwriters also may create a short position
for the account of the Underwriters by selling more Class A Common Stock in
connection with the offering than they are committed to purchase from the
Company, and in such case may purchase Class A Common Stock in the open market
following completion of the offering to cover all or a portion of such shares of
Class A Common Stock or may exercise the Underwriter's over-allotment option
referred to above. In addition, the Representatives, on behalf of the
Underwriters, may impose "penalty bids" under contractual arrangements with the
Underwriters whereby they may reclaim from an Underwriter (or dealers
participating in the offering), for the account of the other Underwriters, the
selling concession with respect to Class A Common Stock that is distributed in
the offering but subsequently purchased for the account of the Underwriters in
stabilization or syndicate covering transactions or otherwise. Any of these
activities may stabilize or maintain the price of the Class A Common Stock at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and if they are undertaken
they may be discontinued at any time.

The Representatives have advised the Company that the Underwriters do not
expect to confirm any sales to accounts over which they exercise discretionary
authority.

LEGAL MATTERS

Certain legal matters with respect to the validity of the shares of Class A
Common Stock offered hereby are being passed upon for the Company by Brobeck,
Phleger & Harrison LLP, Los Angeles, California. Certain legal matters are being
passed upon for the Underwriters by Gibson, Dunn & Crutcher LLP, Orange County,
California.

62
<PAGE>
EXPERTS

The Combined Financial Statements at December 31, 1996 and for the years
ended December 31, 1995 and 1996 included in this Prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein and are included in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 (the "Registration
Statement") under the Securities Act with respect to the Class A Common Stock
offered hereby. This Prospectus, which is part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto, certain items of which are omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Class A Common Stock offered
hereby, reference is made to the Registration Statement and to the Company's
Combined Financial Statements, including the related notes thereto, schedules
and exhibits filed as a part thereof. The Registration Statement, including all
schedules and exhibits thereto, may be inspected without charge at the public
reference facilities maintained by the Commission at its principal office at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. and at the
Commission's regional offices at 7 World Trade Center, 13th floor, New York, New
York and 500 West Madison Street, Suite 1400, Chicago, Illinois. Copies of such
material may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such
material may also be accessed electronically by means of the Commission's web
site on the Internet at http://www.sec.gov.

Statements contained in this Prospectus concerning the contents of any
contract or other document are not necessarily complete and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement with the Commission, each such statement
being qualified in all respects by such reference.

Prior to this offering, the Company has not been a reporting company under
the Securities Exchange Act of 1934 (the "Exchange Act"). Upon consummation of
this offering, the Company will become subject to the informational requirements
of the Exchange Act and, in accordance therewith, will file reports and other
information with the Commission in accordance with the Commission's rules. Such
reports and other information concerning the Company may be inspected at the
public reference facilities referred to above as well as at certain regional
offices of the Commission, and copies of such material may be obtained upon
payment of certain prescribed rates. The Company intends to furnish its
stockholders with annual reports containing financial statements audited by
independent certified public accountants.

63
<PAGE>
SCHEID VINEYARDS INC.

INDEX TO COMBINED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report............................................................................... F-2

Combined Balance Sheets.................................................................................... F-3

Combined Statements of Operations.......................................................................... F-4

Combined Statements of Cash Flows.......................................................................... F-5

Combined Statements of Stockholders' Equity................................................................ F-6

Notes to Combined Financial Statements..................................................................... F-7
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

Scheid Vineyards Inc.

We have audited the combined balance sheet of Scheid Vineyards Inc. as of
December 31, 1996 and the related combined statements of operations, cash flows
and equity for the years ended December 31, 1995 and 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such financial statements present fairly in all material
respects, the combined financial position of Scheid Vineyards Inc. as of
December 31, 1996 and the results of its combined operations and its combined
cash flows for the years ended December 31, 1995 and 1996 in conformity with
generally accepted accounting principles.

Deloitte & Touche LLP

Los Angeles, CA
April 18, 1997

F-2
<PAGE>
SCHEID VINEYARDS INC.

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31, 1997
DECEMBER 31, ------------------------------
-------------- PRO FORMA
1996 ACTUAL (NOTE 14)
-------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents...................................... $ 4,024,146 $ 202,700 $ 202,700
Accounts receivable, trade..................................... 274,374 533,830 533,830
Accounts receivable, stockholder............................... 0 2,161,412 0
Accounts receivable, other..................................... 2,513 4,863 4,863
Inventories.................................................... 99,905 1,391,911 1,391,911
Supplies and prepaid expenses.................................. 819,324 713,967 713,967
-------------- -------------- --------------
Total current assets....................................... 5,220,262 5,008,683 2,847,271

PROPERTY, PLANT AND EQUIPMENT, NET............................... 16,342,157 17,516,723 17,516,723

LONG-TERM RECEIVABLE............................................. 2,233,400 2,800,212 2,800,212

OTHER ASSETS, NET................................................ 273,190 256,929 256,929
-------------- -------------- --------------
$ 24,069,009 $ 25,582,547 $ 23,421,135
-------------- -------------- --------------
-------------- -------------- --------------

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt.............................. $ 458,000 $ 458,000 $ 458,000
Notes payable to affiliates.................................... 806,720 0 0
Notes payable, crop loan....................................... 0 203,000 203,000
Note due stockholder........................................... 1,000,000 0 0
Distributions payable to stockholder/partners.................. 0 0 1,344,000
Accounts payable and accrued liabilities....................... 496,974 974,385 974,385
Accrued interest payable....................................... 203,943 260,864 260,864
-------------- -------------- --------------
Total current liabilities.................................. 2,965,637 1,896,249 3,240,249

LONG TERM DEBT................................................... 11,457,961 14,487,342 14,487,342
DEFERRED COMPENSATION............................................ 584,237 603,860 603,860
DEFERRED INCOME TAXES............................................ 0 0 1,300,000
COMMITMENTS AND CONTINGENCIES (NOTE 9)...........................

EQUITY:..........................................................
Common stock................................................... 2,215 2,215 4,400
Additional paid-in capital..................................... 123,625 123,625 121,440
Retained earnings.............................................. 5,620,811 5,263,518 1,014,106
Partners' capital.............................................. 3,314,523 3,205,738 2,649,738
-------------- -------------- --------------
9,061,174 8,595,096 3,789,684
-------------- -------------- --------------
$ 24,069,009 $ 25,582,547 $ 23,421,135
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-3
<PAGE>
SCHEID VINEYARDS INC.

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
----------------------------- --------------------------
1996 1995 1997 1996
-------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Sales............................................... $ 10,768,611 $ 7,163,610 $ 0 $ 0
Vineyard management, services and other fees........ 922,552 476,237 347,273 210,609
-------------- ------------- ------------ ------------
11,691,163 7,639,847 347,273 210,609
Cost of sales....................................... 4,543,647 3,669,189 0 0
-------------- ------------- ------------ ------------
GROSS PROFIT.......................................... 7,147,516 3,970,658 347,273 210,609
General and administrative.......................... 2,604,538 2,583,576 628,588 678,588
Interest expense (net of interest income of $86,452
in 1996 and $118,968 in 1995)..................... 653,745 906,289 184,763 93,609
-------------- ------------- ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES..................... 3,889,233 480,793 (466,078) (561,588)
PROVISION FOR INCOME TAXES............................ 44,001 800 0 0
-------------- ------------- ------------ ------------
NET INCOME (LOSS)..................................... $ 3,845,232 $ 479,993 $ (466,078) $ (561,588)
-------------- ------------- ------------ ------------
-------------- ------------- ------------ ------------

PRO FORMA AMOUNTS (NOTE 14):
INCOME BEFORE INCOME TAXES AS REPORTED................ 3,889,233 480,793 (466,078) (561,588)
PRO FORMA INCOME TAX BENEFIT (PROVISION).............. (1,555,693) (192,317) 186,431 224,635
-------------- ------------- ------------ ------------
PRO FORMA NET INCOME.................................. $ 2,333,540 $ 288,476 $ (279,647) $ (336,953)
-------------- ------------- ------------ ------------
-------------- ------------- ------------ ------------
PRO FORMA EARNINGS PER SHARE.......................... $ 0.53 $ 0.07 $ (0.06) $ (0.08)
-------------- ------------- ------------ ------------
-------------- ------------- ------------ ------------
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-4
<PAGE>
SCHEID VINEYARDS INC.

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
YEARS ENDED DECEMBER 31,
---------------------------- ----------------------------
1996 1995 1997 1996
------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................................... $ 3,845,232 $ 479,993 $ (466,078) $ (561,588)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities-
Depreciation, amortization and abandonments.......... 909,002 913,986 263,000 213,500
Deferred compensation................................ 71,110 64,421 19,623 17,777
Changes in operating assets and liabilities-
Accounts receivable, trade........................... (111,548) 104,641 (259,456) (782,843)
Accounts receivable, stockholder..................... -- -- (2,161,412) --
Accounts receivable, other........................... 62,409 738,928 (2,350) 57,265
Inventories.......................................... (46,425) (53,480) (1,292,006) (1,471,585)
Supplies and prepaid expenses........................ (248,982) (315,346) 105,357 176,744
Accounts payable and accrued liabilities............. (19,937) 368,459 534,322 622,854
Borrowings on notes payable, short term.............. -- -- 203,000 536,879
Repayments on notes payable, short term.............. -- -- (1,806,710) --
Income taxes payable................................. -- (15,130) -- (2,301)
------------- ------------- ------------- -------------
Net cash provided by (used in) operations.......... 4,460,861 2,286,472 (4,862,710) (1,193,298)
------------- ------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Long-term receivable................................... (2,233,400) -- (566,812) --
Additions to property, plant and equipment............. (3,742,714) (2,382,793) (1,437,566) (820,972)
Other assets........................................... 14,418 (71,035) 16,261 (3,226)
------------- ------------- ------------- -------------
Net cash used in investing activities.............. (5,961,696) (2,453,828) (1,988,117) (824,198)
------------- ------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt............................. 7,267,120 5,040,062 3,029,381 (15,259)
Repayment of long-term debt............................ (4,832,204) (5,866,798) -- (300,000)
Subchapter S distributions............................. (125,000) (336,000) -- --
Partnership distributions.............................. (343,642) (49,577) -- (45,835)
------------- ------------- ------------- -------------
Net cash provided by (used in) financing
activities....................................... 1,966,274 (1,212,313) 3,029,381 (361,094)
------------- ------------- ------------- -------------
Increase (decrease) in cash and cash equivalents... 465,439 (1,379,669) (3,821,446) (2,378,590)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........... 3,558,707 4,938,376 4,024,146 3,558,707
------------- ------------- ------------- -------------
Cash and cash equivalents, end of period............... $ 4,024,146 $ 3,558,707 $ 202,700 $ 1,180,117
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-5
<PAGE>
SCHEID VINEYARDS INC.

COMBINED STATEMENT OF EQUITY

<TABLE>
<CAPTION>
COMMON STOCK RETAINED
---------------------- ADDITIONAL EARNINGS AND
NUMBER OF PAID-IN PARTNERS
SHARES AMOUNT CAPITAL CAPITAL
----------- --------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994...................................... 97,413 $ 2,215 $ 123,625 $ 5,464,328
Subchapter "S" distribution................................... -- -- -- (336,000)
Partnership distributions..................................... -- -- -- (49,577)
Net Income.................................................... -- -- -- 479,993
----------- --------- ----------- -------------
BALANCE, December 31, 1995...................................... 97,413 $ 2,215 $ 123,625 $ 5,558,744
Subchapter "S" distribution................................... -- -- -- (125,000)
Partnership distributions..................................... -- -- -- (343,642)
Net Income.................................................... -- -- -- 3,845,232
----------- --------- ----------- -------------
BALANCE, December 31, 1996...................................... 97,413 $ 2,215 $ 123,625 $ 8,935,334
Net loss (unaudited).......................................... -- -- -- (466,078)
----------- --------- ----------- -------------
BALANCE, March 31, 1997 (unaudited)............................. 97,413 $ 2,215 $ 123,625 $ 8,469,256
----------- --------- ----------- -------------
----------- --------- ----------- -------------

RETAINED EARNINGS.............................................................................. $ 5,263,518
PARTNERS' CAPITAL.............................................................................. 3,205,738
-------------
$ 8,469,256
-------------
-------------
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-6
<PAGE>
SCHEID VINEYARDS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1996 AND 1995

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF COMBINATION--The accompanying combined financial statements include
the accounts of Scheid Vineyards Inc. ("SVI"), Vineyard Investors 1972, a
California Limited Partnership ("VI-1972"), Vineyard 405, a California Limited
Partnership ("V-405"), and Quadra Partners LLC, a California Limited Liability
Company ("Quadra Partners" and, together, with SVI, VI-1972 and V-405, the
"Company" or "Companies"). SVI and the Scheid family together own 84% of
VI-1972, 93% of V-405 and 70% of Quadra Partners. The Companies are affiliated
through common ownership and management. All significant intercompany balances
and transactions have been eliminated in the combined financial statement (see
Note 14).

ORGANIZATION--The principal business of the Company is the management and
farming of approximately 4,550 acres of premium wine grape vineyards in Monterey
and San Benito Counties, California.

The Company has long-term grape purchase agreements with several wineries
whereby the wineries agree to purchase substantially all of the Company's grape
production. These contracts generally expire no earlier than the completion of
harvest in years ranging from 2001 to 2013 and are extended if neither party
cancels two or three years before the expiration date. The largest winery
contract covers approximately 77% of the Company's acreage and accounted for
approximately 92% and 79% of the Company's revenues from grape sales in 1996 and
1995, respectively.

CASH AND CASH EQUIVALENTS--The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents. At December 31, 1996, substantially all cash balances were held by
the Company's major bank.

INVENTORIES--Inventories are stated at the lower of FIFO (first-in,
first-out) cost or market. Cost includes the cost of grown grapes and
harvesting, production, aging and bottling costs. Wine inventories are
classified as current assets in accordance with recognized trade practice
although certain inventories will be aged for periods longer than one year. Crop
costs associated with farming vineyards prior to the harvest are deferred and
recognized in the year the grapes are harvested.

PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are stated at
cost and are depreciated using straight-line and accelerated methods over the
estimated useful lives of the assets. Vineyards generally have estimated
depreciable lives of 30 years, buildings 30 years, and furniture and equipment 5
to 7 years.

Development costs incurred during the development period of a vineyard
including related interest are capitalized. Depreciation commences in the
initial year the vineyard becomes commercially productive, generally in the
fourth year.

FAIR VALUE OF FINANCIAL INSTRUMENTS--The fair values of accounts receivable
and accounts payable approximate book value because of their short duration.
Long-term receivables and long-term debt approximate book value because such
financial instruments have variable interest rates.

RECENT PRONOUNCEMENTS--In March of 1995, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for Impairment

F-7
<PAGE>
SCHEID VINEYARDS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of Long-Lived Assets to be Disposed of." This statement requires that long-lived
assets and certain identifiable intangibles to be held and used by the Company
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. This statement also
requires that long-lived assets and certain identifiable intangibles to be
disposed of be reported at the lower of carrying amount or fair value, less cost
to sell. The impact of SFAS No. 121 is not expected to have a material effect on
the Company.

INCOME TAXES--SVI has elected to be treated as an S Corporation for federal
income tax and California franchise tax purposes. Pursuant to this election, net
income or loss of SVI is included in the income tax returns of the stockholder.
Consequently, no federal income tax provision has been recorded in the
accompanying financial statements. However, under California state law, a
franchise tax equal to 1 1/2% of taxable income is imposed upon S Corporations
and is provided for in the accompanying financial statements. VI-1972, V-405 and
Quadra Partners are treated as partnerships for federal and state income tax
purposes such that their income or loss is included in the taxable income of the
partners.

INTERIM FINANCIAL INFORMATION--The interim financial statements as of March
31, 1997 and for the three months ended March 31, 1996 and 1997 have been
prepared by the Company without audit. In the opinion of the Company's
management, this unaudited information has been prepared on the same basis as
the audited information and includes all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the information set forth
therein. The operating results for any quarter are not necessarily indicative of
results for any future period.

USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported revenues and expenses during the reporting period.
Actual results could differ from those estimates.

2. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -------------
<S> <C> <C>
Bulk and Bottled Wine........................................... $ 56,241 $ 57,988
Deferred Crop Costs............................................. 43,664 1,333,923
------------ -------------
Total....................................................... $ 99,905 $ 1,391,911
------------ -------------
------------ -------------
</TABLE>

F-8
<PAGE>
SCHEID VINEYARDS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)

3. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1996 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
Land and buildings........................................... $ 3,616,380 $ 3,679,471
Vineyard improvements........................................ 10,332,104 12,254,537
Vineyard improvements under development...................... 6,111,280 5,244,546
Machinery and equipment...................................... 2,695,466 3,014,242
-------------- --------------
Total.................................................... 22,755,230 24,192,796
Less accumulated depreciation and amortization............... 6,413,073 6,676,073
-------------- --------------
Property, plant and equipment--net........................... $ 16,342,157 $ 17,516,723
-------------- --------------
-------------- --------------
</TABLE>

4. LONG-TERM RECEIVABLE

SVI has a contract to redevelop certain vineyards owned or controlled by a
major client. The contract calls for the expenditure of approximately $5,600,000
over a three-year period. The funds for this project were borrowed, as an
accommodation to the client, by SVI. The interest rate and payment terms are the
same as the related note payable. The note payable to the bank is secured by a
letter of credit issued by the client and by the contract. The contract calls
for the payment of this receivable by direct payment by the client on the loan
in ten annual installments beginning January 5, 2000 (see Note 6).

5. LINES OF CREDIT

The Company has two Agricultural Credit Agreements with a bank which provide
for maximum aggregate borrowings of $3,900,000 through July 5, 1997. Borrowings
are secured by crops and other assets with interest due quarterly at 1/4% over
the bank's "reference rate" (8 1/4% at December 31, 1996). No amounts were
outstanding under these agreements at December 31, 1996.

F-9
<PAGE>
SCHEID VINEYARDS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)

6. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1996 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
The Company has a Revolving/Declining Line of Credit Agreement with a bank which
provides for a maximum borrowing of $3,000,000 diminishing annually through July
5, 2005 to a maximum allowable commitment of $1,071,426. The line of credit,
secured by a leasehold interest in 707 vineyard acres, is payable in annual
installments equal to the outstanding amount exceeding the relevant maximum
commitment then in effect. Interest is payable quarterly at 3/4% over the bank's
reference rate (8 1/4% at December 31, 1996).................................... $ 327,000 $ 2,785,714

Note payable to bank, with interest at the bank's reference rate plus 3/4%,
principal due in annual installments through July 5, 2005, secured by trust
deed on 707 vineyard acres...................................................... 1,425,000 1,425,000

Note payable to bank, with interest at the bank's reference rate plus 1/4%,
principal due in annual installments through December 31, 1998, secured by
first deed of trust on real property............................................ 1,434,000 1,434,000

Note payable to bank, with interest at the bank's reference rate plus 3/4%,
principal due in annual installments through October 5, 2004, secured by first
deed of trust on 1,063 acres of real property................................... 5,200,000 5,200,000

Note secured by business residential real property, due November 1, 2014, variable
interest payable monthly based on the Wall Street Journal Index with maximum
ceiling of 18%; 8 3/4% at December 31, 1996..................................... 435,000 435,000

Various notes payable, with terms of interest at 3/4% to 1 1/4% over the bank's
reference rate, secured by deeds of trust, leasehold interest or equipment...... 861,561 865,416

Note payable to bank represents borrowings on a $5,600,000 line of credit, which
bears interest at the bank's reference rate. The note is secured by a letter of
credit issued by a major client, and is used for costs incurred for the
development of certain vineyards owned by the client. Principal due in ten
annual installments beginning January 5, 2000. Subsequent to December 31, 1996,
this line of credit was refinanced (see Note 4 and Note 13)..................... 2,233,400 2,800,212
-------------- --------------

Total......................................................................... 11,915,961 14,945,342

Less current maturities........................................................... 458,000 458,000
-------------- --------------

Long-term portion................................................................. $ 11,457,961 $ 14,487,342
-------------- --------------
-------------- --------------
</TABLE>

F-10
<PAGE>
SCHEID VINEYARDS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)

6. LONG-TERM DEBT (CONTINUED)

Principal payments required on long-term debt for each of the next five
years ending December 31 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
1996 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
1997......................................................... $ 458,000 $ 458,000
1998......................................................... 1,894,884 2,109,170
1999......................................................... 342,000 556,286
2000......................................................... 342,000 556,286
2001......................................................... 633,677 851,818
Thereafter................................................... 8,245,400 10,413,782
-------------- --------------
Total........................................................ $ 11,915,961 $ 14,945,342
-------------- --------------
-------------- --------------
</TABLE>

Substantially all of the Company's property, plant and equipment serves as
collateral for long-term debt.

7. NOTES PAYABLE

<TABLE>
<S> <C>
Note payable to various affiliates, with interest at the federal rate of
5.75%, payable on January 10, 1997....................................... $ 806,720
</TABLE>

8. NOTE PAYABLE TO STOCKHOLDER

SVI has a note payable to its stockholder of $1,000,000 which bears interest
at the bank's reference rate (8 1/4% at December 31, 1996) plus 1/4%. The note
was repaid in March 1997.

9. COMMITMENTS AND CONTINGENCIES

LEASE OBLIGATIONS--The Company has various operating lease agreements for
office space and farm land. The lease for office space is with a related
partnership and runs until 1999. The rent is $91,416 annually. Farm land leases
cover approximately 1,426 acres with unexpired terms ranging from 7 to 30 years.

Certain leases provide for options to renew, contain adjustment clauses
based upon the prevailing market rate or Consumer Price Index, and also provide
for payments of taxes, insurance and maintenance costs.

F-11
<PAGE>
SCHEID VINEYARDS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)

9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Aggregate minimum rental expense for each of the next five years ending
December 31 is as follows:

<TABLE>
<S> <C>
1997........................................................... $ 454,819
1998........................................................... 454,819
1999........................................................... 402,250
2000........................................................... 383,923
2001........................................................... 383,923
Thereafter..................................................... 3,908,960
</TABLE>

Rent charged to operations in 1995 and 1996 was $388,074 in each period.

PENSION PLANS--SVI has two 401(k) Profit Sharing Plans. The first plan is
for the benefit of SVI's employees who are covered by the United Farm Workers of
America Collective Bargaining Agreement. All union employees of SVI are eligible
to participate after having worked 500 hours within a one-year period. The
Company contributes 15 cents for each hour worked by eligible employees, subject
to the limitations imposed by the Internal Revenue Code. The Company's
contribution to the union employees' plan amounted to $28,501 and $34,914 for
the years ended December 31, 1995 and 1996, respectively.

The second plan covers SVI's non-union employees. All non-union employees of
SVI are eligible to participate in the plan after one year of employment.
Employees may contribute between 1% and 15% of their annual compensation. SVI
matches 50 cents for every dollar of employee contributions up to 6% of their
annual salaries, subject to the limitations imposed by the Internal Revenue
Code. SVI's contribution to this plan amounted to $11,883 and $27,311 for the
years ended December 31, 1995 and 1996, respectively.

10. DEFERRED COMPENSATION

SVI has a non-qualified deferred compensation arrangement with an employee.
The arrangement provides for annual payments of $100,000 commencing upon the
employee's retirement. The deferred compensation liability included in the
accompanying combined balance sheet represents the net present value at 7% of
the expected future payments. Compensation expense related to the arrangement
was $64,421 and $71,110 in 1995 and 1996, respectively.

F-12
<PAGE>
SCHEID VINEYARDS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)

11. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosures to the combined statements of cash flows are as
follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31 31
------------------------ ------------------------
1996 1995 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest paid (net amount capitalized).... $ 653,745 $ 906,289 $ 184,763 $ 93,609
Interest capitalized...................... 430,233 291,064 35,317 107,556
Income taxes paid......................... 0 16,000 41,700 0
</TABLE>

12. STOCK OPTION PLAN

SVI has a Stock Option Plan (the "Plan") whereby it may grant options to
purchase shares of SVI's Class A Common Stock. SVI may issue a maximum of
200,000 shares of Class A Common Stock under the Plan, which amount may be
changed due to stock splits, stock dividends and other adjustments to SVI's
outstanding shares. Options can be either qualified or non-qualified and no
stock options have been granted to date (see Note 14).

13. SUBSEQUENT EVENTS

NOTE PAYABLE--On March 28, 1997, SVI replaced its note payable to bank
representing a $5,600,000 line of credit with a new line of credit with maximum
borrowings of $7,500,000, which bears interest at the bank's reference rate
minus 1/2%. The note is secured by a letter of credit issued by a major client.
The line of credit is for costs incurred for the development of certain
vineyards owned by the client. Principal due in six annual installments
beginning January 5, 2000.

14. PRO FORMA AMOUNTS (UNAUDITED)

EXCHANGE OF PARTNERSHIP UNITS AND LIMITED LIABILITY COMPANY INTERESTS FOR
CLASS B COMMON STOCK--Prior to the date of the Company's contemplated initial
public stock offering, the Company was the general partner of two California
limited partnerships (VI-1972 and V-405) and a member of a California limited
liability company (Quadra Partners). Effective with the stock offering, the
limited partnership units held by all limited partners in VI-1972 and V-405, and
the membership interests held by all members of Quadra Partners, other than
those held by SVI in each case, will be exchanged for Class B Common Stock of
SVI. As a result, each of VI-1972, V-405 and Quadra Partners will be terminated
and dissolved, and their respective former limited partners and members will
receive an aggregate of 1,451,396 shares of Class B Common Stock. Prior to the
initial public offering, 4,400,000 shares of Class B Common Stock will be
outstanding.

DISTRIBUTIONS--Upon termination of its Subchapter S status and conversion to
C Corporation status, SVI will determine its cumulative S Corporation earnings
and make a distribution to its stockholder. This amount is estimated at
$3,000,000. In addition, a distribution of approximately $475,000 will be made
to the limited partners of VI-1972 to pay income taxes on income from the
partnership.

F-13
<PAGE>
SCHEID VINEYARDS INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

(INFORMATION AS OF MARCH 31, 1997 AND FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)

14. PRO FORMA AMOUNTS (UNAUDITED) (CONTINUED)

DEFERRED INCOME TAXES--In connection with the conversion of its S
Corporation status to C Corporation status, SVI is required by FASB No. 109 to
record deferred tax liabilities and deferred tax assets. Such change will result
in a net charge to earnings of approximately $1,300,000 in the fiscal quarter in
which the conversion to C Corporation takes place. This one-time charge is a
result of differences in the accounting and tax treatment of certain of the
Company's assets and liabilities and is reflected through (i) an increase in
deferred income tax liabilities, partially offset by (ii) an increase in the
Company's deferred tax assets.

EARNINGS PER SHARE AND CLASSES OF COMMON STOCK--The pro forma earnings per
share in the combined statements of operations is based upon 4,400,000 shares of
Class B Common Stock. In connection with the contemplated stock offering, the
Company will offer 2,000,000 shares of Class A Common Stock. Each share of Class
A Common Stock will be entitled to one vote and each share of Class B Common
Stock will be entitled to five votes on all matters submitted to a vote of the
shareholders. The holders of the Class A Common Stock, voting as a separate
class, elect 25% of the total Board of Directors, rounded up to the nearest
whole number, of the Company and the holders of the Class B Common Stock, voting
as a separate class, elect the remaining directors. Each share of Class B Common
Stock is convertible into one share of Class A Common Stock at the option of the
holder or automatically upon transfer to a person other than certain specified
persons.

S CORPORATION CONVERSION--SVI's contemplated initial public stock offering
will result in termination of its S Corporation status. As a result, SVI will
pay income taxes at the corporate level. The pro forma income tax provision in
the combined statements of operations is based upon an assumed 40% federal and
state income tax rate.

F-14
<PAGE>
[PHOTO #1 OF WINE GRAPES AND LEAVES ON ONE OF THE COMPANY'S VINEYARDS]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE CLASS
A COMMON STOCK TO WHICH IT RELATES, OR AN OFFER IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AT ANY TIME AFTER THE DATE HEREOF.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Company History........................................................... 16
Use of Proceeds........................................................... 16
S Corporation Conversion.................................................. 17
Dividend Policy........................................................... 17
Dilution.................................................................. 18
Capitalization............................................................ 20
Selected Combined Financial Data.......................................... 21
Management's Discussion and
Analysis of Financial Condition and
Results of Operations.................................................... 22
Business.................................................................. 27
Management................................................................ 47
Certain Transactions...................................................... 52
Principal Stockholders.................................................... 55
Description of Capital Stock.............................................. 56
Shares Eligible for Future Sale........................................... 59
Underwriting.............................................................. 61
Legal Matters............................................................. 62
Experts................................................................... 63
Available Information..................................................... 63
Index to Combined Financial Statements.................................... F-1
</TABLE>

------------------------

UNTIL [ ], 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS AND
SUBSCRIPTIONS.

2,000,000 SHARES

SCHEID VINEYARDS INC.

CLASS A COMMON STOCK

---------------------

PROSPECTUS

---------------------

CRUTTENDEN ROTH

I N C O R P O R A T E D

LAIDLAW EQUITIES, INC.

RODMAN & RENSHAW, INC.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law (the "DGCL"), which permits a corporation in its certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director for violations of the director's fiduciary duty, except
(i) for any breach of the director's fiduciary duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the DGCL (providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions), or
(iv) for any transaction from which the director derived an improper personal
benefit. The Registrant's Certificate of Incorporation contains provisions
permitted by Section 102(b)(7) of the DGCL

Reference is made to Section 145 of the DGCL which provides that a
corporation may indemnify any person, including directors and officers, who are,
or are threatened to be made, parties to any threatened, pending or completed
legal action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was a director, officer, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
director, officer, employee or agent acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the corporation's best
interests and, with respect to any criminal actions or proceedings, had no
reasonable cause to believe that his or her conduct was unlawful. A Delaware
corporation may indemnify directors and/or officers in an action or suit by or
in the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the director or
officer is adjudged to be liable to the corporation. Where a director or officer
is successful on the merits or otherwise in the defense of any action referred
to above, the corporation must indemnify him or her against the expenses which
such director or officer actually and reasonably incurred.

The Registrant's Certificate of Incorporation filed as Exhibit 3.1 to this
Registration Statement provides for indemnification of directors of the
Registrant to the fullest extent permitted by the DGCL.

Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Underwriters have agreed to indemnify the directors,
officers and controlling persons of the Registrant against certain civil
liabilities that may be incurred in connection with the Public Offering,
including certain liabilities under the Securities Act.

The Bylaws of the Company filed as Exhibit 3.2 to this Registration
Statement contain provisions requiring indemnification of directors and officers
to the maximum extent permitted by Delaware Law.

The Registrant may provide liability insurance for each director and officer
for certain losses arising from claims or charges made against them while acting
in their capacities as directors or officers of the Registrant.

II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses to be paid by the
Company in connection with the sale of the Class A Common Stock being
registered. All of the amounts shown are estimates except the registration fee
and the NASD filing fee.

<TABLE>
<CAPTION>
SEC registration fee.............................................. $ 7,698
<S> <C>
NASD filing fee................................................... 2,800
Nasdaq National Market listing fee................................ 16,000
Blue sky fees and expenses........................................ *
Accounting fees and expenses...................................... *
Legal fees and expenses of the Company............................ *
Printing and engraving............................................ *
Transfer agent and registrar fees and expenses.................... *
Miscellaneous..................................................... *
---------
Total......................................................... $ *
---------
---------
</TABLE>

- -------------------

* To be completed by amendment.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

(a) There have been no sales of unregistered securities by the Registrant
during the past three years, except that simultaneously with the offering, the
Registrant will issue an aggregate of 1,451,396 shares of Class B Common Stock
to the limited partners of Vineyards Investors 1972, a California limited
partnership, and Vineyard 405, a California limited partnership, and the members
of Quadra Partners LLC, a California limited liability company, other than the
Registrant, as applicable, in exchange for all of their partnership and
membership interests, respectively. These shares were issued in reliance on
Section 4(2) of the Act.

(b) There will be no underwriters employed in connection with the
transaction set forth in Section (a).

(c) The issuances of the securities set forth in this Item 26 are deemed to
be exempt from registration under the Securities Act in reliance on Section 4(2)
of the Act, Regulation D promulgated thereunder or Rule 701 promulgated under
Section 3(b) of the Act as transactions by an issuer not involving any public
offering or transactions pursuant to compensatory benefit plans and contracts
relating to compensation as provided under Rule 701. It is a condition in all
such transactions that the recipients of securities represent their intentions
to acquire the securities for investment only and not with a view to or for sale
in connection with any distribution thereof and appropriate legends are affixed
to the share certificates issued in such transactions. All recipients have
adequate access, through their relationships with the Registrant, to information
about the Registrant.

II-2
<PAGE>
ITEM 27. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------
<S> <C>
1.1 * Form of Underwriting Agreement.

3.1 * Certificate of Incorporation.

3.2 * Bylaws.

4.1 * Warrant Agreement, dated as of , 1997, by and among the Company, Cruttenden Roth Incorporated,
Laidlaw Equities, Inc. and Rodman & Renshaw, Inc.

5.1 * Opinion of Brobeck, Phleger & Harrison LLP as to the legality of the securities being registered.

10.1 * 1997 Stock Option/Stock Issuance Plan.

10.2 * Form of Stock Option Agreement.

10.3 Lease, dated January 1, 1997, by and among Sam Avila and Margaret J. Avila, as trustees under
declaration of trust dated August 16, 1989, and Margaret J. Avila and Valarie Bassetti successor
co-trustees of the testamentary trust of Joseph Laberere, and Sam Avila, and Margaret J. Avila, and
Scheid Vineyards and Management Co.

10.4 Lease, dated January 1, 1996, by and between Echenique Ranch and Scheid Vineyards and Management Co.

10.5 Land Lease, dated September 26, 1973, by and between William McHenry Bland and Monterey Farming
Corporation.

10.6 Lease, dated September 27, 1979, by and among Luis Echenique, Francis D. Echenique, Ricardo Echenique
and Monterey Farming Corporation, as amended by (i) a Memorandum of Lease, dated September 27, 1979,
(ii) an Amendment to Memorandum of Lease, dated September 4, 1987, (iii) a First Amendment to Lease,
dated September 4, 1987, and (iv) a Second Amendment of Lease, dated September 4, 1987.

10.7 + Vineyard Management Agreement, dated January 1, 1997, by and among Scheid Vineyards and Management Co.,
Canandaigua West, Inc. and Canandaigua Wine Company, Inc.

10.8 + Vineyard Management Agreement, dated January 1, 1996, by and among Scheid Vineyards and Management Co.,
Canandaigua West, Inc. and Canandaigua Wine Company, Inc.

10.9 + Grenache Vineyard Management Agreement, dated April 1, 1995, by and between Scheid Vineyards and
Management Co. and Joseph Phelps Vineyards.

10.10+ Vineyard Management Agreement, dated April 1, 1995, by and between Scheid Vineyards and Management Co.
and Joseph Phelps Vineyards.

10.11+ Vineyard Management Agreement, dated February 1, 1992, by and among Scheid Vineyards and Management Co.
and John Hill and Richard Hill as co-trustees of the Hill Living Trust.

10.12+ Vineyard Development and Management Agreement, dated December 1, 1995, by and between Heublein, Inc. and
Scheid Vineyards and Management Co., as amended by Amendment No. 1, dated March 28, 1997.

10.13 Term Loan Agreement, dated September 30, 1991, between Vineyard 405 and Sanwa Bank California.

10.14 Term Loan Agreement, dated June 15, 1992, between Scheid Vineyards and Management Co. and Sanwa Bank
California.

10.15 Agricultural Credit Agreement, dated October 6, 1994, between Vineyard Investors 1972 and Sanwa Bank
California.
</TABLE>

II-3
<PAGE>
<TABLE>
<S> <C>
10.16 Term Loan Agreement, dated July 24, 1995, between Scheid Vineyards and Management Co. and Sanwa Bank
California.

10.17 Line of Credit Agreement, dated July 24, 1995, between Scheid Vineyards and Management Co. and Sanwa
Bank California.

10.18 Agricultural Credit Agreement, dated April 1, 1994, between Scheid Vineyards and Management Co. and
Sanwa Bank California.

10.19 Term Loan Agreement, dated September 30, 1991, between Scheid Vineyards and Management Co. and Sanwa
Bank California.

10.20 Business Loan Agreement, dated March 28, 1997, between Scheid Vineyards and Management Co. and Bank of
America National Trust and Savings Association.

10.21+ Long Term Grape Purchase Contract, dated February 12, 1973, between Monterey Farming Corporation and
Almaden Vineyards, Inc., as amended by (i) a Memorandum of Understanding, dated August 6, 1987, (ii) a
Letter Agreement, dated May 14, 1990, and (iii) an Amendment to Long Term Grape Purchase Contract,
dated March 12, 1993, between Scheid Vineyards and Management Co. and Heublein, Inc.

10.22+ Long Term Grape Purchase Contract, dated December 21, 1972, between Vineyard Investors 1972 and Almaden
Vineyards, Inc., as amended by (i) a Memorandum of Understanding, dated August 6, 1987, (ii) an
Amendment to Long Term Grape Purchase Contract, dated April 19, 1988, between Vineyard Investors 1972
and Heublein, Inc., (iii) a Second Amendment to Long Term Grape Purchase Contract, dated June 2, 1988,
(iv) a Third Amendment to Long Term Grape Purchase Contract, dated March 12, 1993 and (v) a letter
agreement, dated April 6, 1990.

10.23+ Long Term Grape Purchase Contract, dated February 12, 1973, between Monterey Farming Corporation, as
General Partner on behalf of Vineyard 405, and Almaden Vineyards, Inc., as amended by (i) a certain
Memorandum of Understanding, dated August 6, 1987, and (ii)an Amendment to Long Term Grape Purchase
Contract, dated March 12, 1993, between Vineyard 405 and Heublein, Inc.

10.24+ Long Term Grape Purchase Agreement, dated March 12, 1993, by and between Scheid Vineyards and Management
Co. and Heublein, Inc.

10.25+ Grape Purchase Agreement, dated April 1, 1996, by and between Scheid Vineyards and Management Co. and
The Hess Collection Winery.

10.26+ Grape Purchase Agreement, July 1, 1996, by and between Scheid Vineyards and Management Co., Stephen
Dooley Wine Co., Inc. and The Chalone Wine Group, Ltd.

10.27 Alternating Winery Agreement, dated November 30, 1995, by and between Scheid Vineyards and Management
Co. and Storrs Winery.

10.28 Winery Services Agreement, dated January 1, 1996, by and between Scheid Vineyards and Management Co. and
Storrs Winery.

10.29 Standard Office Lease, dated July 1, 1994, by and between Scheid Vineyards and Management Co. and Tesh
Partners, L.P.

10.30 Collective Bargaining Agreement, dated January 1, 1996, by and between Scheid Vineyards and Management
Co. and United Farm Workers of America, AFL-CIO.

10.31* Buy-Sell Agreement, dated June , 1997, by and between Scheid Vineyards Inc., Alfred G. Scheid, Scott
D. Scheid, Heidi M. Scheid, Emanty LLC and Kurt J. Gollnick.

10.32 Promissory Note, dated December 30, 1994, by Kurt Gollnick for the benefit of Scheid Vineyards and
Management Co.
</TABLE>

II-4
<PAGE>
<TABLE>
<S> <C>
10.33* Consulting Agreement, effective June 1, 1997, by and between Scheid Vineyards Inc. and John L. Crary.

10.34* Individual Retirement Agreement, dated May , 1997, by and between Scheid Vineyards Inc. and Ernest M.
Brown.

10.35 Joint Agreement, dated March 27, 1997, by and among Samuel R. Avila and Margaret J. Avila, individually
and as trustees under declaration of trust dated August 16, 1989, and Margaret J. Avila and Valarie
Bassetti, as successor co-trustees of the testamentary trust of Joseph Labarere, Metropolitan Life
Insurance Company, Scheid Vineyards and Management Co., Canandaigua West, Inc. and Canandaigua Wine
Company, Inc.

10.36 Water Supply Agreement, dated as of January 1, 1997, by Scheid Vineyards and Management Co. and
Canandaigua West, Inc.

10.37 Agreement Regarding Water, dated as of January 1, 1996, by Luis Echenique, Ricardo Echenique and
Margaret Echenique, Executrix of the Estate of Francis D. Echenique, in favor of each of Scheid
Vineyards and Management Co. and Canandaigua West, Inc.

10.38 Easement Agreement, dated January 1, 1997, by Sam Avila and Margaret J. Avila, as trustees under
declaration of trust dated August 16, 1989, and Margaret J. Avila and Valarie Bassetti successor
co-trustees of the testamentary trust of Joseph Labarere and Sam Avila and Margaret J. Avila and
Scheid Vineyards and Management Co., in favor of Canandaigua West, Inc.

10.39 Adjustable Rate Note, dated October 6, 1989, between Alfred G. Scheid and The Boston Safe Deposit and
Trust Company.

10.40* Agricultural Credit Agreement, dated May , 1997, between Scheid Vineyards Inc. and Sanwa Bank.

10.41 Lease, dated April 1, 1995, by and between Vineyard Investors 1972 and Joseph Phelps Vineyards.

10.42+ Grape Purchase Agreement, dated May 9, 1997, by and between Scheid Vineyards Inc. and The Hess
Collection Winery.

10.43+ Grape Purchase Agreement, dated April 1, 1997, by and between Vineyard Investors 1972 and Stephen Dooley
Wine Co., Inc.

10.44* Employment Agreement, dated June , 1997, by and between Scheid Vineyards Inc. and Alfred G. Scheid.

10.45* Employment Agreement, dated June , 1997, by and between Scheid Vineyards Inc. and Scott D. Scheid.

10.46* Employment Agreement, dated June , 1997, by and between Scheid Vineyards Inc. and Heidi M. Scheid.

10.47* Employment Agreement, dated June , 1997, by and between Scheid Vineyards Inc. and Kurt J. Gollnick.

23.1 Independent Auditors' Consent.

23.2 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1 hereto).

24.1 Power of Attorney (see signature page of this Registration Statement).

27.1 Financial Data Schedule.
</TABLE>

- ------------------------------

* To be filed by amendment

+ Portions of this Exhibit have been deleted pursuant to the Registrant's
request for confidential treatment pursuant to Rule 406 promulgated under
the Securities Act.

II-5
<PAGE>
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes therein.

ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes:

(1) For purposes of determining liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance on Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(b)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(3) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.

(4) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on this 28th day of May, 1997.

SCHEID VINEYARDS INC.

By: /s/ ALFRED G. SCHEID
-----------------------------------------
Alfred G. Scheid
CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alfred G. Scheid, Scott D. Scheid and Heidi M.
Scheid, and each or any one of them, his or her true and lawful
attorneys-in-fact and agents, each acting alone, with full powers of
substitution and resubstitution, for such person and in his or her name, place,
and stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this registration statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, each
acting alone, or his or her substitute or substitutes, may lawfully do or cause
to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

Chairman of the Board and
/s/ ALFRED G. SCHEID Chief Executive Officer
- ------------------------------ (Principal Executive May 28, 1997
Alfred G. Scheid Officer)

Vice President Finance,
/s/ HEIDI M. SCHEID Chief Financial Officer,
- ------------------------------ Treasurer and Director May 28, 1997
Heidi M. Scheid (Principal Financial and
Accounting Officer)

/s/ SCOTT D. SCHEID Vice President, Chief
- ------------------------------ Operating Officer and May 28, 1997
Scott D. Scheid Director

/s/ JOHN L. CRARY
- ------------------------------ Director May 28, 1997
John L. Crary

/s/ ROBERT P. HARTZELL
- ------------------------------ Director May 28, 1997
Robert P. Hartzell

II-7

<PAGE>

LEASE

THIS LEASE ("Lease") is made as of January 1, 1997, by and between SAM
AVILA and MARGARET J. AVILA, as trustees under declaration of trust dated August
16, 1989, and MARGARET J. AVILA and VALARIE BASSETTI (also known as Valerie
Bassetti) successor co-trustees of the testamentary trust of Joseph Laberere,
deceased, and SAM AVILA, also known as Samuel R. Avila, Jr., and MARGARET J.
AVILA, husband and wife, hereinafter collectively called "Lessor," and SCHEID
VINEYARDS AND MANAGEMENT CO., a California corporation, hereinafter called
"Lessee."

Lessor hereby leases to Lessee, and Lessee hereby takes and hires from
Lessor, up to 1100 acres (or such amount of acres deemed to be plantable as
determined by a survey (the "Survey"), at the expense of Lessee, of the property
and agreed to by Lessor and Lessee) of farming land located in Monterey County,
California, as more specifically described on "Exhibit A" attached hereto and
made a part hereof. Said land is hereinafter referred to as the "Property" and
the portion of the Property leased from time to time, as determined pursuant to
Paragraph 1 below, is hereinafter referred to as the "Premises."

The terms and conditions of this Lease are as follows:

1. PREMISES. Lessor hereby grants to Lessee the option to lease all
or any portion of the Property on the terms of this Lease, to be exercised as
follows: (a) on or before March 31, 1997, Lessee shall have the option to lease
not less than 100 acres of the Property (the "Initial Takedown") and (b) on or
before March 31 of each of 1998, 1999 and 2000, Lessee shall have the option to
lease additional acres of the Property (each, a "Subsequent Takedown") in an
amount not less than the lesser of (i) the balance of the Property then subject
to this option to lease and (ii) (A) for the option to be exercised on or before
March 31, 1998, the excess (if

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any) of 500 acres over the number of acres in the Initial Takedown, (B) for the
option to be exercised on or before March 31, 1999, the excess (if any) of 900
acres over the aggregate number of acres in the Initial Takedown and any prior
Subsequent Takedowns, and (C) for the option to be exercised on or before
March 31, 2000, 400 acres. Lessee shall exercise any such option by providing
written notice thereof to Lessor, which notice shall set forth the number of
acres subject to such option exercise and the legal description of such acreage.
In the event that Lessee shall fail to make the Initial Takedown, Lessor shall
have the right to terminate this Lease, in which event the parties shall have no
further rights or obligations under this Lease. In the event that Lessee shall
fail to make a Subsequent Takedown in any applicable year AND the amount of
acres determined under clause (b)(ii) above is greater than zero (0), the
aggregate maximum acres of the Property that Lessee may lease pursuant to this
option to lease shall be reduced by 100 acres.

Lessor acknowledges and agrees that Lessee may farm and manage all or
any portion of the Premises for one or more wineries and that any such winery
may require that the portion of the Premises allocable to such winery be leased
by Lessor directly to such winery. Lessor agrees that any such direct lease (on
terms substantially similar to the terms of this Lease) to a winery approved by
Lessor (which approval shall not be unreasonably withheld or delayed) shall be
deemed to constitute all or part of the Initial Takedown or any Subsequent
Takedown for purposes of this Paragraph. Lessor agrees to cooperate with Lessee
and any such winery in the negotiation, execution and delivery of any such
direct lease.

The portion of the Property that is not included in the Premises, at
any relevant time, is referred to hereinafter as the "Option Acreage." Lessor
agrees that Lessor shall not sell, lease or otherwise transfer all or any
portion of the Option Acreage, or agree to do any of the foregoing, on or prior
to the date (the "Option Termination Date") that is the earlier of (x)

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March 31, 2000 and (y) the date Lessee shall have made the final Subsequent
Takedown or shall have waived its option to make all unexercised Subsequent
Takedowns.

2. TERM. The term (as extended from time to time, the "Term") of
this Lease is thirty (30) years commencing as of the date hereof, and ending
December 31, 2026, subject to the options to extend referred to in Paragraph 24
below. Notwithstanding the foregoing, in the event that on or before March 31,
1997 (the "Sale Agreement Date"), Lessee shall not have entered into a sale
agreement (in form and substance acceptable to Lessee) with respect to the crops
to be grown on the Premises to be included in the Initial Takedown (a "Sale
Agreement"):

(a) Lessor or Lessee, by written notice provided to the other party,
may elect to terminate this Lease, in which event the parties shall have no
further rights or obligations under this Lease; or

(b) Lessor and Lessee may agree to extend the Sale Agreement Date
from March 31, 1997 to a later date.

3. USE. The Premises shall be used for the planting, growing and
harvesting of crops, including but not limited to wine grapes, and uses
incidental thereto as set forth in Paragraph 10 below, but for no other purpose.
All farming operations of Lessee shall be conducted in accordance with the
methods practiced in the vicinity, including the taking of necessary precautions
to prevent erosion or other damage to the Premises, so that at the termination
of this Lease said Premises will be returned to Lessor in the same condition as
when received at the beginning of this Lease or as improved pursuant to the
terms of this Lease, reasonable use, wear and damage by the elements excepted.
Lessee shall make diligent effort to prevent the spread of all noxious weeds and
crop-destroying rodents upon the Premises during the Term.

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Notwithstanding the foregoing provisions of this Section 3, the Lessor
hereby reserves for the benefit of Lessor, his immediate family and his heirs
(a) a right of way through the Property for reasonable ingress and egress to
adjacent property currently owned by Lessor; provided that the route of such
right of way shall be mutually agreed upon by Lessor and Lessee and (b) the
right to hunt on the Property; provided that such activity does not interfere
with Lessee's use of the Premises or result in any damage to the improvements on
the Premises. In addition, from the date of execution hereof through December
31, 1999, Lessee hereby grants the following access to the Premises to Mr. Sam
Avila: (i) access to the existing shop (the "Shop") on the Premises during
normal business hours when personnel of Lessee are present and the Shop is open;
(ii) unlimited access to the concrete slab located immediately adjacent to the
Shop within the fenced area surrounding the Shop for the purpose of cleaning
Mr. Avila's cattle trucks; and (iii) unlimited access to the air compressor
located in the Shop area; provided that, in each such case, such access and
related activities of Mr. Avila do not interfere with Lessee's use and operation
of the Premises and the Shop or result in any damages to the improvements on the
Premises.

4. RENT. As and for the rental of the Premises during the Term,
Lessee agrees to pay to Lessor (a) with respect to each of calendar years 1997
and 1998 the sum of $200.00 per acre, (b) with respect to each of calendar years
1999 and 2000, the sum of $225.00 per acre, and (c) with respect to each
calendar year thereafter, the sum of $250.00 per acre (subject, however to
adjustment as set forth in Paragraph 5 below), payable in advance without
deduction or offset, except as provided in Paragraphs 8 and 23 below. The
annual rental shall be paid (i) for calendar year 1997, in full on the date of
the Initial Takedown and (ii) for each calendar year thereafter, in equal
semi-annual installments on the 1st day of January and the 1st day of July of
each such year.

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5. PERIODIC RENT ADJUSTMENT. The annual rental to be paid by
Lessee, as set forth in Paragraph 4 above, shall be adjusted at the end of the
tenth (10th) full calendar year of the Term and, thereafter, at the end of each
successive five (5)-year period during the Term. The rent adjustment shall be
made to reflect the prevailing rental rate at the time of each adjustment for
land of like kind and quality with a comparable water supply and comparable
improvements, located in Monterey County, California south of San Ardo;
provided, that no consideration shall be given to the value of improvements made
by Lessee upon the Premises; provided further, that if at the time of a
particular adjustment the Premises are planted to vineyard, the lands to be used
for comparison purposes shall consist solely of Monterey County vineyards
located south of San Ardo ("Comparable Vineyards"), but only (i) those
Comparable Vineyards which have had a rent adjustment within the previous three
(3) years, and (ii) there shall be excluded from the rental rates of such
Comparable Vineyards any rental paid for the value of the vineyards thereon and
the value of any improvements thereon comparable to the improvements made by
Lessee upon the Premises. Lessor and Lessee acknowledge and agree that rental
rates on properties underlying Comparable Vineyards may include amounts being
paid in consideration of obligations and liabilities other than the rental of
such property (for example, the performance of services, contracts and other
agreements or the payment of fees, costs or other expenses), and consideration
paid for such other liabilities and obligations shall not be taken into account
in the determination of the prevailing rental rates.

6. ARBITRATION. If the parties hereto are unable to reach agreement
as to any rent adjustment to be made pursuant to the provisions of Paragraph 5
above, the matter shall be determined by arbitration. Except as otherwise
specifically provided in this lease, the arbitration proceedings shall be
conducted according to the rules and procedures set forth in Title 9 of Part III
(commencing with Section 1280) of the Code of Civil Procedure. A panel of three
(3)

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arbitrators shall be selected by mutual agreement of the parties, but if the
parties cannot agree on such selection, then each party shall appoint one (l)
arbitrator and the third or "neutral" arbitrator shall be appointed as provided
in Section 1281.6 of the Code of Civil Procedure upon the petition of either
party hereto. No person shall be appointed to serve as an arbitrator unless he
or she is qualified by membership in the American Institute of Appraisers of the
National Association of Realtors ("M.A.I.") and has been regularly engaged in
making appraisals of agricultural property in Monterey, San Luis Obispo and/or
San Benito Counties, California, during the previous five (5) years (a
"Certified Appraiser"). The decision of any two (2) of said arbitrators, made
and entered as provided in Sections 1282 and 1282.2 of the Code of Civil
Procedure, shall be conclusive and binding upon the parties hereto. Costs of
said arbitration proceedings shall be borne and paid by the parties hereto in
equal shares, except that attorneys' fees, fees paid to witnesses, and other
expenses incurred by a party for that party's own benefit, shall be paid by the
party incurring the same. Pending completion of said arbitration proceedings,
Lessee shall continue to make all rental payments as the same become due
hereunder, upon the understanding and agreement that when said proceedings have
been completed said rental payments will be adjusted, up or down, in accordance
with the arbitration award and the excess or deficient portion of said rental
payments shall be remitted by Lessor or Lessee, as applicable.

7. TAXES AND ASSESSMENTS; LAND CONSERVATION AGREEMENTS. Lessee
shall pay, prior to delinquency, all real and personal property taxes and
assessments levied on or assessed against the Premises and against improvements
now or hereafter located on the Premises, prorated for the Term of this Lease.
During the period commencing on the date hereof and ending on the Option
Termination Date, Lessee shall pay, prior to delinquency, all real property
taxes and assessments levied on or assessed against that portion of the Option
Acreage deemed

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to be plantable as determined by the Survey (the "Plantable Option Acreage") and
against improvements now located on the Plantable Option Acreage, prorated for
any partial tax year; provided that the amount of any such taxes and assessments
for any tax year shall not exceed $5.00 per acre, prorated for any partial tax
year. Lessor shall be liable for the payment of any taxes and assessments
levied on or assessed against the Plantable Option Acreage and against
improvements now located on the Plantable Option Acreage in excess of such
amount. Lessee shall have the right at Lessee's sole expense, to protest or
contest the validity or amount of any such taxes or assessment. If Lessee
protests or contests any such tax or assessment, Lessee may withhold or defer
payment thereof, but shall protect Lessor and the Premises or the Plantable
Option Acreage, as applicable, from any lien by adequate surety bond or other
appropriate security acceptable to Lessor. Lessor hereby appoints Lessee as
Lessor's attorney-in-fact for the purpose of making all payments to taxing
authorities and for the purpose of protesting or contesting any tax or
assessment payable by Lessee. Lessor shall, at Lessee's expense, cooperate with
Lessee in the contest or adjustment of taxes payable by Lessee. Without
Lessee's prior written consent, Lessor shall neither give any notice of
non-renewal of any land conservation agreement (executed under the California
Land Conservation Act of 1965) relating to the Premises or the Option Acreage,
nor agree with the County of Monterey to a mutual cancellation thereof.

8. REPRESENTATION AND WARRANTIES.

(a) Lessor represents and warrants to Lessee as follows: (i) Lessor
owns good title to the Property; and (ii) no zoning or other governmental
laws, ordinances, rules or regulations prohibit or restrict the use of the
Property by Lessee as contemplated by this Lease.

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(b) Each party hereto represents and warrants to the other party as
follows: (i) such party has full power and authority to execute and
deliver, and to perform the obligations of such party under, this Lease;
and (ii) the execution, delivery and performance of this Lease by such
party does not and will not constitute a breach or default under any
material agreement, lease or instrument to which such person is a party or
by which such person or the Property is bound.

(c) Lessee acknowledges that Lessor has not made any express or
implied warranty or representation concerning the availability of water or
water quality. Notwithstanding the foregoing, if water rights relating to
the Premises and the Option Acreage are challenged, Lessor and Lessee shall
jointly pursue the protection and preservation of said rights, and shall
equally bear the reasonable expenses thereof. Notwithstanding the
foregoing, if at any time there shall not be water of sufficient quantity
and quality from existing wells to properly irrigate vineyards which Lessee
has placed on the Premises or to otherwise farm the Premises in a proper
manner, Lessee shall give notice thereof to Lessor and, thereafter, Lessee
may, at Lessee's option, make a reasonable effort (after consultation with
Lessor with respect thereto) to restore the water supply including, at
Lessee's option, the drilling of a new well or wells; provided that Lessee
shall be entitled to a credit against the rental payable hereunder for all
costs incurred by Lessee in connection with the restoration of the water
supply (the "Water Costs"), as follows: (i) if the Water Costs are less
than the aggregate rental to be paid over the five-year period beginning
with the first semi-annual rental installment due after the commencement of
such restoration (the "Water Cost Recapture Period"), the credit for the
Water Costs shall be prorated against the rental installments payable
during the Water Cost Recapture Period; and (ii) if the Water Costs exceed
the aggregate rental to

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be paid during the Water Recapture Period, the credit for the Water Costs
shall be offset against each rental installment payable during the Water
Cost Recapture Period and each rental installment payable thereafter until
the aggregate offset equals the Water Costs. If Lessee's efforts to
restore the water supply are unsuccessful or Lessee does not elect to
undertake such efforts, Lessee shall have the right to terminate this Lease
by giving thirty (30) days prior written notice of such termination to
Lessor (any such termination being a "Water Deficiency Termination"). For
purposes of this Paragraph, "sufficient quantity" of water means a combined
production of 4,500 gallons of water per minute from the two (2) wells
operating on the Property as of the date hereof.

9. REPAIRS. Subject to the terms of Paragraph 8(c), Lessee shall,
at Lessee's sole cost and expense, keep and maintain the Premises, including
improvements now or hereafter installed thereon while the same are reasonably
needed for agricultural purposes, in good order and condition at all times.
Except as provided in Paragraph 8(c), Lessor shall not be called upon to make
any repairs, replacements or improvements whatsoever upon the said Premises, or
any part thereof. Notwithstanding the foregoing, Lessee shall not be
responsible for, and Lessor shall indemnify and hold Lessee harmless from, any
environmental or other condition affecting the Premises which constitutes a
violation of any applicable law, regulation, rule or order; provided, however,
that Lessor shall not be required to indemnify and hold Lessee harmless from any
such condition that is caused by Lessee or its employees, agents or contractors.

10. IMPROVEMENTS. This Lease is executed with the understanding and
agreement that the Lessee is not obligated to make any improvements to the
Property, but that if Lessee elects to do so, said improvements shall consist of
the planting of a wine grape vineyard and the installation of buildings,
equipment and facilities which Lessee may require for the development and
operation of said property as a vineyard. Except as provided in

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Paragraph 8(c), the full cost of said improvements shall be borne and paid by
Lessee, without any contribution whatsoever by Lessor. The construction and
installation of these or any other improvements made to the Property by the
Lessee shall be subject to the following conditions:

(a) At least ten (10) days but not more than thirty (30) days before
commencement of any construction on or improvement to the Property which
will cost in excess of $10,000.00, Lessee shall notify Lessor of Lessee's
intention to commence said work. The notice shall specify the approximate
location and nature of the intended improvements and shall state the
approximate date on or after which work is to commence. Lessor shall have
the right to post and maintain on the Property any notices of
nonresponsibility provided for under applicable law.

(b) Lessee shall not suffer or permit to be enforced against the
Property or any part thereof any mechanic's, materialman's, contractor's,
or subcontractor's lien arising from any work of improvement made by
Lessee, however it may arise. However, Lessee may in good faith and at
Lessee's own expense contest the validity of any such asserted lien,
provided Lessee has furnished the bond required in Civil Code Section 3143
(or any comparable statute hereafter enacted for providing a bond or other
assurance freeing the Property from the effect of such a lien claim.)

(c) Lessee shall indemnify Lessor against all liability and loss of
any type arising out of work performed on the Property by or for Lessee,
together with reasonable attorneys' fees and all costs and expenses
incurred by Lessor in negotiating, settling, defending, or otherwise
protecting against such claim should Lessee fail to do so.

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for the foreclosure of a mechanic's, materialman's, contractor's or
subcontractor's lien claim, and if Lessee fails to stay an execution of the
judgment by lawful means or to pay the judgment, Lessor shall have the
right, but not the duty, to pay or otherwise discharge, stay, or prevent
the execution of any such judgment or lien or both. Lessee shall reimburse
Lessor for all sums paid by Lessor under this subparagraph (d), together
with all Lessor's reasonable attorneys' fees and costs, plus interest on
those sums, fees, and costs at the highest legal rate allowed under the
laws of California from the date of payment until the date of
reimbursement.

All improvements constructed or installed on the Property by Lessee shall be
owned by Lessee during the Term. At the conclusion of the Term, or upon any
earlier termination of this Lease however occurring, Lessee shall surrender the
Property and improvements, if any, to Lessor and as of said date said
improvements shall become part of the real property and shall belong solely to
Lessor; provided that, in the event of a Water Deficiency Termination, at the
option of Lessee, Lessee shall be entitled to retain ownership of and remove all
improvements constructed or installed on the Property by Lessee.

11. WATER. Lessee shall have the full use of any and all water
rights appurtenant to the Property and shall have the right, for its own use, to
develop such reservoirs and drill such wells as it may deem necessary to furnish
sufficient water for agricultural use on the Premises; provided, however, that,
without the prior written consent of Lessor, no irrigation water produced by
Lessee on the Property shall be transported for use off the Premises. Lessor
shall be entitled to use a reasonable amount of water from the Property for a
water truck and/or a fire truck owned and operated by Mr. Jeff Avila for the
following purposes: (a) emergency fire fighting and (b) refilling the cattle
water trough of Mr. Avila in the event of a failure of Mr. Avila's water system;
provided, however, that, in each such case, the use of such water by

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Mr. Avila shall not result in Lessee having insufficient water for its own use
on the Premises. Mr. Avila shall provide advance notice to Lessee of his
intended use of water for refilling his cattle water trough but shall not be
required to provide such notice with respect to emergency fire fighting use.
Lessee agrees that Lessor shall reserve an easement to extend a pipeline from
well sites existing as of the date hereof on the parcels of Messrs. Jeff Avila
and George Wygal (which parcels are referenced on "Exhibit A" hereto, but are
excluded from the Property described on "Exhibit A" hereto), or any replacement
well sites on such parcels, over a route to be mutually agreed upon by Lessee
and Lessor. Said pipeline easement shall provide for reasonable access to the
Property for the purposes of installation, repair, maintenance and replacement
of said pipeline, and said pipeline shall transport water only from such
existing or replacement well sites.

12. UTILITIES AND SERVICES. Lessee shall pay for all utilities and
services used by Lessee upon the Property during the Term.

13. INSURANCE. During the Term, Lessee shall, at Lessee's sole cost
and expense, maintain insurance with reputable insurance carriers against such
risks and in such amounts as is customarily carried by companies of established
reputation engaged in the same or similar business and similarly situated,
including public liability, property damage and workers' compensation; provided
that the public liability insurance shall be in an amount not less than
$1,000,000 for each occurrence. Lessee shall cause such policy or policies of
insurance to show Lessor as an additional insured thereunder and to provide that
such policy or policies may not be cancelled or amended without at least thirty
(30) days prior written notice to Lessor. Upon the request of Lessor, a
certificate of insurance evidencing such coverage shall be provided to Lessor.
Each party to this Lease waives any right of action such party may later acquire
against the other for the recovery of any loss or damage to any of such party's
property which

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is insured under valid and collectible insurance policies, to the extent of any
recovery collectible under such insurance.

14. ENTRY, INSPECTION AND USE BY LESSOR. Lessee shall permit Lessor,
and Lessor's agents and assigns, at all reasonable times, to enter the Premises
and to use the roads established on the Premises now or in the future for the
purpose of inspection, reasonable ingress and egress to and from public roads
and to and from other lands owned by the Lessor, the posting of notices, the
exercise of any right given to or retained by Lessor under the provisions of
this Lease, or any other lawful purpose. To facilitate such access, Lessee
shall supply Lessor, its agents and assigns, with keys to gates to the Premises.

15. OIL AND GAS LEASES. Notwithstanding anything to the contrary
contained in this Lease, Lessor shall have the right at any time or from time to
time to execute oil, gas or mineral leases with respect to the Premises;
provided, that neither Lessor nor said mineral lessee shall have the right,
without prior written consent of Lessee, to enter upon the surface of the
Premises or the upper 500 feet thereof to explore for, produce, or extract oil,
gas or other minerals. All oil, gas or mineral leases hereafter executed by
Lessor with respect to the Premises shall contain a provision making the lessee
therein primarily liable to Lessor and Lessee, as their respective interests may
appear, for all damages to livestock, crops, vines, trees, fences, roads,
ditches, buildings and other improvements on the Premises, caused by said
lessee's operations thereon. Lessor hereby agrees to indemnify and hold
harmless Lessee from and against all such damages.

16. NUISANCE; COMPLIANCE WITH LAWS. Lessee shall not knowingly do,
or permit to be done, or knowingly keep, or permit to be kept, in or about the
Premises, anything which shall be a nuisance or which shall be in violation of
any law, ordinance, rule or regulation of any governmental authority.

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17. CONDEMNATION. If during the Term all or any portion of the
Premises is condemned, or conveyed under threat of condemnation, for public use,
the parties hereto agree as follows:

(a) The respective rights of the parties shall depend upon whether
there is a "Total Taking," a "Substantial Taking," or a "Partial Taking,"
said terms being defined as follows:

TOTAL TAKING means the taking of the fee title to all of the
Premises and the improvements on said Premises;

SUBSTANTIAL TAKING means the taking of so much of the Premises or
improvements or both that the conduct of Lessee's business on the
Premises would be prevented or impaired to the extent that
agricultural operations could not be conducted on the Premises at an
economically feasible level of profit;

PARTIAL TAKING means any taking of the fee title that is not
either a total taking or a substantial taking.

(b) In the event of a Total Taking (or a Substantial Taking if Lessee
gives Lessor notice of intent to treat such taking as a Total Taking within
fifteen (15) days after the nature and extent of the taking have been
finally determined), Lessee's interest in the leasehold and Lessee's
obligations under this Lease, including but not limited to the obligation
to pay rent, shall continue until the date on which the condemnor takes
possession, and Lessee's right to apportionment of the award shall accrue
as of that date. Upon delivery of possession to the condemnor, this Lease
shall terminate.

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Lessee's obligation to pay rent shall be reduced at the rate per acre then
payable under the provisions of Paragraphs 4 and 5 above for each acre so
taken.

(d) Upon a Total, Substantial, or Partial Taking, all sums, including
damages and interest, awarded for the fee or leasehold or both shall be
deposited with a bank, savings and loan association, or other mutually
agreeable escrow holder, with instructions to distribute the same as
follows:

(i) If the award separately values the interests of Lessee and
Lessor in the property taken:

TO LESSEE: that portion of the award allocable to the interests
of Lessee; and

TO LESSOR: that portion of the award allocable to the interests
of Lessor.

(ii) If the award values the property taken as a whole, the award
shall be prorated between Lessee and Lessor in accordance with (A) the
value of the interests of the Lessee in the property taken (including,
without limitation, the fair market value of the leasehold estate of the
Lessee therein for the then unexpired Term (including renewal option
periods)) and (B) the value of the interests of the Lessor in the property
taken (including, without limitation, the fair market value of the fee
estate of the Lessor therein). In the event that the parties are unable to
agree upon such proration within ten (10) days after the date of the award,
either party may give notice to the other party and submit the controversy
for arbitration under the Commercial Rules of Arbitration of the American
Arbitration Association. The venue for such proceeding shall be Monterey
County and any decision in such proceeding shall be binding and not
appealable.

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(e) The party receiving any formal or informal notice of intended
taking under eminent domain from a public agency shall give the other party
prompt notice of the contents of the notice received and the date on which
it was received.

(f) Lessor, Lessee, and all persons and entities holding under Lessee
shall each have the right to represent their respective interests in each
proceeding or negotiation with respect to a taking of all or any part of
the Premises under eminent domain, and to make full proof of their
respective claims. No agreement, settlement, sale, or transfer to the
condemning agency shall be made without the consent of Lessor and Lessee.
Lessor and Lessee each agree to execute and deliver to the other any
instruments that may be required to effectuate or facilitate the provisions
of this Lease relating to condemnation.

18. DEVELOPMENT FINANCING. If during the Term, Lessee elects to
develop or otherwise to construct improvements on the Premises, as set forth in
Paragraph 10 above, the parties hereto agree as follows:

(a) The total cost of the work shall be paid for by Lessee.

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Lessor will provide a copy of any notice of default by Lessee to the
mortgage holder and will accept performance by the mortgage holder of any
term of this Lease to be performed by Lessee. The mortgage holder shall
have thirty (30) days in which to cure any Event of Default by Lessee after
the time for Lessee to cure it has expired; provided, however, that if the
Event of Default cannot be cured by the payment of money, Lessor will not
terminate this Lease if the mortgage holder commences and thereafter
diligently pursues to completion foreclosure of its mortgage and pays to
Lessor all sums then due and unpaid under the terms of this Lease. The
loan documents shall contain a provision allowing, but not obligating,
Lessor to cure any default thereunder if Lessee fails to do so. Such
mortgage shall provide that a copy of any notice of default served
thereunder shall be sent by mail to Lessor at the address given in this
Lease for the service of notices hereunder. A duplicate original or
certified copy of such mortgage, showing recording data, shall be given to
Lessor within ten (10) days after the same is returned from the recorder's
office.

19. PERMANENT FINANCING; SUBORDINATION OF FEE. In the event Lessee
desires to obtain long-term financing of its improvements and operations on the
Premises (the "Loan"), it shall have the right to do so pursuant to this
Paragraph 19 at any time after not less than four hundred (400) acres of the
Premises is planted to vineyard and an irrigation system has been installed and
is operating on such portion of the Premises. The Loan shall be in the form of
a long-term loan from a bank, savings and loan association, insurance company or
other lending institution authorized to do business in the State of California.

Lessor agrees that if requested to do so by Lessee it will execute and
deliver to such lender a deed of trust sufficient to subordinate or encumber
Lessor's fee title to the Premises to the lien securing the Loan, together with
such other loan documents in the standard

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form then in use by the lender as the lender may reasonably require as a
condition of making the Loan. Lessor and Lessee shall negotiate in good faith
with respect to such amendments to this Lease as the lender of each Loan
requires as a condition to providing the financing, and neither Lessee nor
Lessor shall unreasonably withhold its consent to such amendments.

Lessor represents, warrants and covenants as follows: (a) the
Property is encumbered solely by a deed of trust in favor of Metropolitan Life
Insurance Company ("MetLife") securing a loan in the principal amount, as of the
date hereof, of $800,000 (the "MetLife Loan"); (ii) upon payment of the rental
with respect to the Initial Takedown, Lessor shall apply all or part of such
payment (together with funds of Lessor, if necessary) to amounts due under the
MetLife Loan such that the MetLife Loan shall be brought current; (iii) Lessor
shall make all future payments on the MetLife Loan when due and shall perform
all other obligations of Lessor with respect thereto when due; (iv) as of the
date hereof, Lessor has provided Lessee with true and complete copies of all
documents evidencing the MetLife Loan; (v) Lessor shall not amend or otherwise
modify the terms of the MetLife Loan without the prior written consent of Lessee
(in its sole discretion); and (vi) Lessor shall provide, and shall cause MetLife
to provide, to Lessee copies of all notices sent or received by Lessor or Met
Life in connection with the MetLife Loan promptly following such sending or
receipt. In connection with the obtaining of the Loan and notwithstanding
Paragraph 23 below, Lessor agrees to cooperate with Lessee and the Loan lender
with respect to any requested refinancing of the MetLife Loan with such Loan
lender or any other lender requested by Lessee; provided that Lessor shall not
be required to refinance the MetLife Loan upon terms more onerous in the
aggregate than the then existing terms of the MetLife Loan. Such refinancing
shall be negotiated in good faith by Lessor, Lessee and the refinancing lender.
If requested by Lessee, Lessor

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<PAGE>

further agrees to consent to the purchase by Lessee of the MetLife Loan from
MetLife and to cooperate with Lessee and MetLife in connection with any such
purchase.

The foregoing provisions of this Paragraph 19 are subject, however, to
the following terms, conditions and agreements:

(a) No Event of Default shall have occurred and be continuing at the
time the Loan is to be made.

(b) The Loan shall be repaid in full on or before termination of this
Lease.

(c) The principal amount of the Loan shall not exceed sixty percent
(60%) of the appraised value of the Premises, as determined on or before
the date of the Loan, at the expense of Lessee, by a Certified Appraiser
(as defined in Paragraph 6 above) mutually acceptable to Lessor and Lessee.

(d) Lessor's obligation to subordinate their fee title to the
Premises to any financing is limited to the Loan and the deed of trust and
other loan documents for the Loan.

(e) The loan documents for each Loan shall contain provisions that
(i) Lessor has joined in the execution of the same solely for the purpose
of creating a lien against the fee title to the Premises in favor of the
lender, and that no personal judgment will be sought or obtained against
Lessor by reason of its having joined in the execution of said documents;
and (ii) require all notices of default to be served on both Lessor and
Lessee and provide that Lessor shall have the right to cure any default if
Lessee fails to do so.

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<PAGE>

owing by Lessee to Lessor under the terms of this Lease; and third, the
remaining proceeds, if any, shall be paid to Lessee.

20. EVENTS OF DEFAULT. Any of the following events shall
constitute a default (an "Event of Default") under the terms of this Lease:

(a) The nonpayment of rent or any other sum to be paid by Lessee to
Lessor under the terms of this Lease, and the failure of Lessee to make
such payment within ten (10) days after receipt of written notice to do so
is given to Lessee and to any lender then holding a security interest in
the leased land or in the leasehold estate of Lessee pursuant to the
provisions of Paragraph 18 or Paragraph 19 above.

(b) Default by Lessee in the performance of or compliance with any
other covenant, condition or restriction contained in this Lease, including
by way of this specific reference Paragraph 3 above, as wells as other
covenants, conditions or restrictions contained herein, and the failure of
Lessee to perform or comply with the same within thirty (30) days after
receipt of written notice to do so is given to the Lessee and to any lender
then holding a security interest in the Premises or in the leasehold estate
of Lessee pursuant to the provision of Paragraph 18 or Paragraph 19 above;
provided, however, that if the nature of Lessee's default is such that more
than thirty (30) days are reasonably required for its cure, then no Event
of Default shall be deemed to have occurred if Lessee commences the cure
within that thirty (30)-day period and thereafter diligently prosecutes the
cure to completion.

(d) The subjection of any material right or interest of Lessee
hereunder to attachment, execution or other levy, or to seizure under legal
process (except a

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<PAGE>

foreclosure of security given by Lessee to a lender pursuant to the
provisions of Paragraph 18 or Paragraph 19 above), if not released within
thirty (30) days after receipt of written notice thereof.

(e) The filing by Lessee of a petition in bankruptcy or insolvency,
or for an arrangement or reorganization, or the making of an assignment for
the benefit of creditors.

(f) The filing against Lessee of a petition in bankruptcy or
insolvency, or for reorganization, or for the appointment of a receiver to
take possession of the Premises or improvements thereon or of Lessee's
interest in the leasehold or of Lessee's operations on the Premises for any
reason (other than a receivership pursuant to any security given by Lessee
to any lender referred to in Paragraph 18 or Paragraph 19 above), if not
dismissed within ninety (90) days.

(g) Any default by Lessee in the payment of any loan or other
monetary obligation secured by a mortgage or other security instrument
given to secure an obligation to any lender referred to in Paragraph 18 or
Paragraph 19 above provided that Lessee's default shall have continued
beyond any grace or cure period allowed by the applicable loan document.

21. REMEDIES OF LESSOR ON DEFAULT. Upon the occurrence and during
the continuance of any Event of Default, Lessor shall have the following
remedies in addition to all other rights and remedies, provided by law or
equity, to which Lessor may resort cumulatively or in the alternative:

(a) Lessor may at Lessor's election terminate this Lease by giving
written notice of termination. On the giving of the notice, all Lessee's
rights in the Premises shall terminate. Promptly after notice of
termination, Lessee shall surrender and vacate

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<PAGE>

the Premises and all improvements thereon, and Lessor may reenter and take
possession of the Premises and improvements and eject all parties in
possession. Termination under this subparagraph shall not relieve Lessee
from any claim for damages previously accrued or then accruing against
Lessee. Said damages shall include the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the award
exceeds the amount of such rental loss for the same period that Lessee
proves could be reasonably avoided.

(b) Lessor may at Lessor's election reenter the Premises and, without
terminating this Lease, at any time and from time to time relet said
Premises and improvements or any part or parts of them for the account and
in the name of Lessee or otherwise. Any reletting may be for the remainder
of the Term or for a longer or shorter period. Lessor may execute any
leases made under this provision either in Lessor's name or in Lessee's
name and shall be entitled to all rents from the use, operation, or
occupancy of the Premises and improvements. Lessee shall nevertheless pay
to Lessor on the due dates specified in this Lease the equivalent of all
sums required of Lessee under the terms of this Lease, plus Lessor's
expenses, less the net amount realized by Lessor upon any such reletting.
No act by or on behalf of Lessor under this provision shall constitute a
termination of this Lease unless Lessor gives Lessee written notice of
termination.

(c) Lessor shall be entitled at Lessor's election to each installment
of rent or to any combination of installments for any period before
termination, plus interest on delinquent installments at the highest
interest rate then allowable under the laws of the State of California.

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<PAGE>

(d) Upon any reentry of the Premises by Lessor pursuant to the
provisions of subparagraphs (a) or (b) above, Lessor may at Lessor's
election take possession of all crops on the Premises, harvested and
unharvested, and shall thereupon become the owner of the same, without any
obligation to compensate Lessee or any other person therefor, except that
Lessor shall pay to Lessee all moneys received from the sale of said crops,
less all reasonable costs and expenses incurred or expended by Lessor in
cultivating, harvesting, processing, handling and selling said crops, less
amounts owed to the holder of a security interest given to secure crop
financing, and less all sums which may then be due to Lessor from Lessee
under the terms of this Lease. Lessor may at Lessor's election use any of
Lessee's machinery, equipment, trade fixtures or other personal property
left upon the Premises, without compensation and without liability for the
use or damage of the same, unless due to Lessor's negligence, or store said
property for the account of and at the cost of Lessee.

The waiver by Lessor of any Event of Default shall not be deemed or held to be a
waiver of any subsequent or other Event of Default.

22. SURRENDER AND REMOVAL BY LESSEE; QUITCLAIM. Upon the expiration
of the Term or any earlier termination thereof, Lessee shall surrender to Lessor
the possession of the Premises and all improvements located thereon. If no
Event of Default shall have occurred and be continuing at the time of such
termination, Lessee may remove or cause to be removed all of its machinery,
equipment, trade fixtures and other personal property located upon the Premises
and then owned by Lessee; any of said property not so removed within thirty (30)
days after the date of termination shall be considered to have been abandoned
and thereafter shall belong to Lessor without the payment of any consideration.
Upon such expiration or earlier termination of this Lease, the Lessee agrees to
execute, acknowledge and deliver to Lessor in

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<PAGE>

recordable form a proper instrument releasing and quitclaiming to Lessor all
right, title and interest of Lessee in and to the Premises and all improvements
located thereon. No holding over of the possession of the Premises by Lessee
beyond the Term shall be deemed an extension of the Term or create the right to
an additional term in the absence of a written agreement executed by Lessor.

23. LESSOR'S ENCUMBRANCES. Lessor shall not encumber (or refinance
any existing encumbrance on) the Premises, the Option Acreage, or any part
thereof during the Term without Lessee's prior written consent (in its sole
discretion). In the event of a default by Lessor under an encumbrance of
Lessor's interest in the Premises or the Option Acreage, or in the event
Lessor's interest in the Premises becomes subject to any lien for which Lessee
is not responsible under the terms of this Lease and which jeopardizes Lessee's
interest in the Premises, Lessee shall have the right, at its sole option, (i)
to cure the default or discharge the lien and to deduct the funds expended in
connection with such cure or discharge from subsequent rental payments becoming
due under the terms of this Lease or (ii) to terminate this Lease without
penalty. Lessor shall use its best efforts to cause holders of encumbrances on
Lessor's interest in the Premises to agree to accept performance thereunder by
Lessee.

24. OPTION TO EXTEND. So long as no Event of Default shall have
occurred and is then continuing, Lessee shall be entitled to extend the term of
this lease for four (4) successive five (5)-year terms upon giving to Lessor
written notice of Lessee's election to exercise the option to extend the term at
least ninety (90) days prior to the expiration of the then existing term hereof.
Such renewal shall be upon the same terms and conditions as are herein stated.
References in this Lease to the Term shall, to the extent exercised, include the
four (4) successive five (5)-year options provided for above.

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<PAGE>

25. FIRST RIGHT TO PURCHASE. During the Term and so long as no Event
of Default shall have occurred and is then continuing, Lessee shall have the
first right to purchase the Premises if Lessor receives a bona fide offer to
purchase the same from a third party which it desires to accept, or if Lessor
offers to sell the same. In either such case Lessor shall give Lessee written
notice of such offer and of all of the terms and conditions thereof, and
thereafter Lessee shall have twenty (20) days in which to exercise this first
right to purchase by giving to Lessor written notice of Lessee's election to do
so. If this first right to purchase is so exercised by Lessee within said
twenty (20)-day period, such purchase shall be consummated upon the material
terms and conditions specified in such offer; provided, however, that the date
for closing of such purchase shall be not less than sixty (60) days after the
date of Lessee's notice of election. If this first right to purchase is not so
exercised by Lessee within said twenty (20)-day period, it shall lapse and shall
be of no further force or effect and Lessor thereafter shall be free to sell the
Premises to a third party within one hundred and eighty (180) days after
Lessee's first right to purchase lapses, but not for a lesser price or on terms
more favorable in any material respect to the purchaser. Any such sale to a
third party shall be subject to this Lease, it being expressly understood and
agreed that this Lease shall continue in full force and effect notwithstanding
said sale.

26. ASSIGNMENT AND SUBLETTING. Lessee shall not assign this Lease or
any interest herein, or underlet the Premises or any part thereof, without the
prior written consent of Lessor, except to (a) an affiliate or affiliates of
Lessee (I.E., a partnership in which Lessee is a general partner, a joint
venture in which Lessee is a joint venturer, or a limited liability company in
which Lessee is a member) or (b) a winery in connection with a direct lease
pursuant to the provisions of Paragraph 1 above; and neither this Lease, nor any
interest herein of Lessee, shall be assignable in proceedings by or against
Lessee in bankruptcy, or in

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<PAGE>

insolvency, or in any other manner by operation of law; provided, that Lessor's
consent shall not be unreasonably withheld; provided further, that Lessor's
consent shall not be required in connection with the transfer of this Lease to
any lender who has provided financing under the provisions of Paragraph 18 or
Paragraph 19 above and who holds a security interest in the leasehold estate of
Lessee, in a foreclosure or other like proceedings instituted by the lender
under the terms of any such security instrument, or by an assignment or other
conveyance given in lieu of foreclosure. No assignment under the provisions of
this paragraph shall be effective, however, until (i) the assignee has given
written notice of such assignment to Lessor, stating the name and address of the
assignee and the date of transfer, accompanied by a copy of the assignment and
the written agreement of the assignee expressly assuming and agreeing to keep
and perform all of the obligations of Lessee under this Lease or (ii) the
provisions of Paragraph 1 above shall have been satisfied for a direct lease to
a winery.

27. TIME OF THE ESSENCE. Time and specific performance are of the
essence of this agreement and of every provision hereof.

28. SUCCESSORS AND ASSIGNS. Subject to the restriction on assignment
hereinabove set forth, this Lease and all of the provisions hereof shall inure
to the benefit of and shall be binding upon the heirs, legal representatives,
successors and assigns of the respective parties hereto.

29. ATTORNEYS' FEES. In case either party shall bring suit against
the other party or otherwise commence any proceeding to compel the performance
of, or to recover for the breach of, any covenant, agreement or condition herein
written, or, in the case of Lessor, to recover possession of the Premises or to
remove from the record this Lease or any lien or encumbrance thereon created by
Lessee, the prevailing party shall be entitled to a reasonable

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<PAGE>

attorneys' fee, to be fixed by the court or arbitrator, as applicable, and made
a part of any judgment or decision rendered thereby.

30. NOTICES. Any notice to be given hereunder will be deemed to have
been given if (a) personally served upon the person to whom it is directed, or
(b) deposited in the United States mail, registered or certified, addressed to
the party to whom it is directed at the address shown below its signature
hereto, or at such other address as said party hereafter may designate for
notices hereunder.

31. MEMORANDUM OF LEASE. The parties agree to execute and have
acknowledged a memorandum of lease for purposes of recording in Monterey County,
California, which said memorandum shall describe the Premises as being subject
to the rights, covenants and restrictions herein contained.

32. ESTOPPEL CERTIFICATE.

(a) Lessor shall at any time upon not less than fifteen (15) days
prior written notice from Lessee execute, acknowledge and deliver to Lessee
a statement in writing (i) certifying that this Lease is unmodified and in
full force and effect or, if modified, stating the nature of the
modification and certifying that this Lease, as modified, is in full force
and effect, and (ii) acknowledging that there are not, to Lessor's
knowledge, any uncured defaults on the part of Lessee hereunder, or
specifying the defaults if any are claimed. Any such statement may be
conclusively relied upon by any prospective encumbrancer of the Premises or
Lessee's interest therein.

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<PAGE>

defaults in Lessee's performance, and (iii) that not more than one
semi-annual installment of rent has been paid in advance.

33. SEVERABILITY. If any term, covenant, condition or provision of
this Lease or the application thereof to any person or circumstances shall, at
any time or to any extent, be invalid or unenforceable, the remainder of this
Lease, or the application of such term or provision to persons or circumstances
other than those as to which such term or provision is held invalid or
unenforceable, shall not be affected thereby, and shall continue to be valid and
to be enforced to the fullest extent permitted by law.

34. INTERPRETATION. This Lease shall be construed in accordance with
the internal laws of the State of California without application of the
conflicts of laws provisions thereof. Whenever the contents of any provision
shall require, the singular number shall be deemed to include the plural number,
and vice versa, and the reference to any gender shall be deemed to include
reference to all other genders. For purposes of interpretation or construction
in the event of ambiguity, this Lease shall be deemed draft by both parties.
The captions and headings of the paragraphs of this Lease are solely for
convenience and shall not be deemed to be a part of this Lease for the purpose
of construing the meaning hereof or for any other purpose.

35. ENTIRE AGREEMENT. This Lease contains the entire agreement of
the parties hereto with respect to the letting and hiring of the Premises
described above and this Lease may not be amended, modified, released or
discharged, in whole or in part, except by an instrument in writing signed by
the parties hereto or their respective successors or assigns.

36. COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.

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<PAGE>

37. QUIET ENJOYMENT. Lessor covenants and agrees with Lessee that,
so long as no Event of Default shall have occurred and be continuing, Lessee may
peaceably and quietly have, hold, occupy and enjoy the Premises hereby demised,
for the Term of this Lease.

38. CONFIDENTIALITY. Lessor acknowledges and agrees that, except to
the extent set forth in the memorandum of lease recorded pursuant to Paragraph
31 above, this Lease, the terms and provisions set forth herein, and the matters
discussed in the negotiation of this Lease are confidential and shall not be
disclosed by Lessor without the prior written consent of Lessee, except that
Lessor may disclose such matters (a) to Lessor's immediate family members and
professional representatives (who shall be informed of and bound by this
confidentiality provision) and (b) to the extent compelled to do so by law.

39. LESSOR REPRESENTATIVE. Lessor hereby designates each of Sam
Avila and Margaret J. Avila as its representatives (each, a "Lessor
Representative"). Each Lessor Representative is hereby authorized to act
individually on behalf of Lessor, and Lessee is entitled to rely upon the
actions of any Lessor Representative on behalf of Lessor, for all purposes under
or in connection with this Lease, including, without limitation, the execution
and delivery of any amendment, waiver or other modification of the terms of this
Lease; provided, however, that each payment of rent or any other amount payable
by Lessee to Lessor under this Lease shall be delivered and made payable as
follows: (a) one-half (1/2) to Sam Avila and Margaret J. Avila, and (b)
one-half (1/2) to Valerie Bassetti, as successor co-trustee of the testamentary
trust of Joseph Laberere, deceased. Lessor may replace any Lessor
Representative by providing five (5) days prior written notice (executed by all
members of Lessor) to Lessee, which notice shall set forth the name and address
of such replacement Lessor Representative.

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<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
date first above set forth.

LESSOR: LESSEE:
- ------ ------

SCHEID VINEYARDS AND
/s/ Sam Avila MANAGEMENT CO., a California
- ----------------------------- corporation
SAM AVILA, individually and as
trustee under declaration of
trust dated August 16, 1989

By /s/ Scott D. Scheid
---------------------------------
/s/ Margaret J. Avila Title: Vice President
- ------------------------------
MARGARET J. AVILA, individually Address:
and as trustee under declaration 13470 Washington Boulevard
of trust dated August 16, 1989 Suite 300
Marina del Rey, California 90292

Address:
P.O. Box 419
San Ardo, California 93450

/s/ Margaret J. Avila
- ------------------------------
MARGARET J. AVILA, as successor
co-trustee of the testamentary
trust of Joseph Laberere,
deceased

/s/ Valerie Bassetti
- ------------------------------
VALERIE BASSETTI, as successor
co-trustee of the testamentary
trust of Joseph Laberere,
deceased

Address:

c/o Valerie Bassetti
402 Bassett Street
King City, California 93930

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<PAGE>

STATE OF CALIFORNIA )
) ss
COUNTY OF ______________)

On _____________, before me, ________________, Notary Public, personally
appeared SAM AVILA and MARGARET J. AVILA, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the persons whose names
are subscribed to the within instrument and acknowledged to me that they
executed the same in their authorized capacities, and that by their
signatures on the instrument the persons, or the entity upon behalf of which
the persons acted, executed the instrument.

WITNESS my hand and official seal.

---------------------------------------
Signature

[SEAL]

STATE OF CALIFORNIA )
) ss
COUNTY OF_______________)

On _______________, before me, __________________, Notary Public,
personally appeared ___________________, personally known to me or proved to me
on the basis of satisfactory evidence to be the person whose name is subscribed
to the within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.

WITNESS my hand and official seal.

---------------------------------------
Signature

[SEAL]

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<PAGE>

STATE OF CALIFORNIA )
) ss
COUNTY OF Monterey )

On Feb. 19, 1997, before me, Camille Sundahl, Notary Public, personally
appeared VALERIE BASSETTI, personally known to me or proved to me on the
basis of satisfactory evidence to be the person whose name is subscribed to
the within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.

WITNESS my hand and official seal.

/s/ Camille Sundahl
---------------------------------------
Signature

[SEAL]

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<PAGE>

LEASE

THIS LEASE ("Lease") is made as of January 1, 1996, by and between
ECHENIQUE RANCH, a California general partnership, hereinafter collectively
called Lessor, and SCHEID VINEYARDS AND MANAGEMENT CO., a California
corporation, hereinafter called Lessee.

Lessor hereby leases to Lessee, and Lessee hereby takes and hires from
Lessor, 145 acres (or such amount of acres determined after survey of the
property and agreed to by Lessor and Lessee) of farming land located on the
Echenique Ranch near the town of San Lucas in Monterey County, California, as
more specifically described on "Exhibit A" attached hereto and made a part
hereof. Said leased land is hereinafter referred to as the "Premises."

The terms and conditions of this Lease are as follows:

1. TERM. The term (as extended from time to time, the "Term") of
this Lease is twenty-nine (29) years commencing as of January 1, 1997, and
ending December 31, 2025, subject to the options to extend referred to in
Paragraph 24.

2. USE. The Premises shall be used for the planting, growing and
harvesting of crops, including but not limited to wine grapes, and uses
incidental thereto as set forth in Paragraph 10 below, but for no other
purpose. All farming operations of Lessee shall be conducted in accordance
with the methods practiced in the vicinity, including the taking of necessary
precautions to prevent erosion or other damage to the Premises, so that at
the termination of this Lease said Premises will be returned to Lessor in the
same condition as when received at the beginning of this Lease or as improved
pursuant to the terms of this Lease, reasonable use, wear and damage by the
elements excepted. Lessee shall make diligent effort

<PAGE>

to prevent the spread of all noxious weeds and crop-destroying rodents upon
the Premises during the Term.

Lessee shall not hunt on the Premises and shall use reasonable efforts
to prohibit all others from hunting on the Premises. Notwithstanding the
foregoing, Lessee shall use reasonable efforts to control damage to crops and
grapevines caused by animals, including, without limitation, by from time to
time obtaining and operating under depredation permits; provided, however, that
Lessee shall provide notice to Lessor prior to obtaining any depredation permit.

3. RENT AND DEPOSIT. As and for the rental of the Premises during
the Term, Lessee agrees to pay to Lessor (a) with respect to each of calendar
years 1997, 1998 and 1999, the sum of $165.00 per acre, and (b) with respect to
each calendar year thereafter, the sum of $275.00 per acre, payable in advance
without deduction or offset, except as provided in Paragraph 23 below, in equal
semi-annual installments on the 31st day of January and the 31st day of July of
each year during the Term, commencing January 31, 1997; subject, however to
adjustment as set forth in Paragraph 4 below. A survey of the Premises shall be
obtained by Lessee, at its sole expense. Prior to execution and delivery of
this Lease, Lessee has paid to Lessor the sum of $10,000.00 (the "Deposit").
The Deposit will be credited against the rental installment to be paid on
January 31, 1997.

4. PERIODIC RENT ADJUSTMENT. The annual rental to be paid by
Lessee, as set forth in Paragraph 3 above, shall be adjusted at the end of the
sixth (6th) full calendar year of the Term, at the end of the eleventh (11th)
full calendar year of the Term and, thereafter, at the end of each successive
five (5)-year period during the Term. The rent adjustment shall be made to
reflect the prevailing rental rate at the time of each adjustment for land of
like kind and quality with a comparable water supply and comparable
improvements, located in Monterey

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<PAGE>

County, California; provided, that no consideration shall be given to the value
of improvements made by Lessee upon the Premises; provided further, that if at
the time of a particular adjustment the Premises are planted to vineyard, the
lands to be used for comparison purposes shall consist solely of Monterey County
vineyards ("Comparable Vineyards"), but only (i) those Comparable Vineyards
which have had a rent adjustment within the previous three (3) years, and (ii)
there shall be excluded from the rental rates of such Comparable Vineyards any
rental paid for the value of the vineyards thereon and the value of any
improvements thereon comparable to the improvements made by Lessee upon the
Premises. Lessor and Lessee acknowledge and agree that rental rates on
comparable properties may include amounts being paid in consideration of
obligations and liabilities other than the rental of such property (for example,
the performance of services, contracts and other agreements or the payment of
fees, costs or other expenses), and consideration paid for such other
liabilities and obligations shall not be taken into account in the determination
of the prevailing rental rates.

5. RENT ADJUSTMENT FOR OTHER USES. In the event Lessee desires to
use any portion of the Premises for purposes beyond those set forth and referred
to in Paragraph 2 above, such as (by way of example and not by way of
limitation) the operation of a winery, warehousing, administrative offices, or a
wine-tasting room catering to the public, it shall have the right to do so but
in any such event the rental to be paid for the portion of the Premises devoted
to such use shall be redetermined and paid to Lessor upon the basis of its
reasonable rental value for such other purposes, by mutual agreement or by
arbitration as provided in Paragraph 6 below.

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<PAGE>

lease, the arbitration proceedings shall be conducted according to the rules and
procedures set forth in Title 9 of Part III (commencing with Section 1280) of
the Code of Civil Procedure. A panel of three (3) arbitrators shall be selected
by mutual agreement of the parties, but if the parties cannot agree on such
selection, then each party shall appoint one (l) arbitrator and the third or
"neutral" arbitrator shall be appointed as provided in Section 1281.6 of the
Code of Civil Procedure upon the petition of either party hereto. No person
shall be appointed to serve as an arbitrator unless he or she is qualified by
membership in the American Institute of Appraisers of the National Association
of Realtors ("M.A.I.") and has been regularly engaged in making appraisals of
agricultural property in Monterey County, California, during the previous five
(5) years (a "Certified Appraiser"). The decision of any two (2) of said
arbitrators, made and entered as provided in Sections 1282 and 1282.2 of the
Code of Civil Procedure, shall be conclusive and binding upon the parties
hereto. Costs of said arbitration proceedings shall be borne and paid by the
parties hereto in equal shares, except that attorneys' fees, fees paid to
witnesses, and other expenses incurred by a party for that party's own benefit,
shall be paid by the party incurring the same. Pending completion of said
arbitration proceedings, Lessee shall continue to make all rental payments as
the same become due hereunder, upon the understanding and agreement that when
said proceedings have been completed said rental payments will be adjusted, up
or down, in accordance with the arbitration award and the excess or deficient
portion of said rental payments shall be remitted by Lessor or Lessee, as
applicable.

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<PAGE>

protest or contest the validity or amount of any such taxes or assessment. If
Lessee protests or contests any such tax or assessment, Lessee may withhold or
defer payment thereof, but shall protect Lessor and the Premises from any lien
by adequate surety bond or other appropriate security acceptable to Lessor.
Lessor hereby appoints Lessee as Lessor's attorney-in-fact for the purpose of
making all payments to taxing authorities and for the purpose of protesting or
contesting any tax or assessment payable by Lessee. Lessor shall, at Lessee's
expense, cooperate with Lessee in the contest or adjustment of taxes payable by
Lessee. Without Lessee's prior written consent, Lessor shall neither give any
notice of non-renewal of any land conservation agreement (executed under the
California Land Conservation Act of 1965) relating to the Premises, nor agree
with the County of Monterey to a mutual cancellation thereof.

8. REPRESENTATION AND WARRANTIES.

(a) Lessor represents and warrants to Lessee as follows: (i) Lessor
owns good title to the Premises; and (ii) no zoning or other governmental
laws, ordinances, rules or regulations prohibit or restrict the use of the
Premises by Lessee as contemplated by this Lease.

(c) Lessee acknowledges that Lessor has not made any express or
implied warranty or representation concerning the availability of water or
water quality or quantity. Notwithstanding the foregoing, if water rights
relating to the Premises are

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<PAGE>

challenged, Lessor and Lessee shall jointly pursue the protection and
preservation of said rights, and shall equally bear the reasonable
expenses thereof. Notwithstanding the foregoing, if at any time there
shall not be sufficient water from existing wells to properly irrigate
vineyards which Lessee has placed on the Premises or to otherwise farm
the Premises in a proper manner, Lessee shall give notice thereof to
Lessor and Lessor shall thereafter promptly and diligently make all
reasonable efforts, at Lessor's expense, to restore the water supply,
including at Lessor's option, the drilling of a new well or wells. If
Lessor's efforts are unsuccessful, the Lessee shall have the right to
terminate this Lease by giving thirty (30) days prior written notice of
such termination to Lessor.

9. REPAIRS. Subject to the terms of Paragraph 8(c), Lessee shall,
at Lessee's sole cost and expense, keep and maintain the Premises,
including improvements now or hereafter installed thereon while the same
are reasonably needed for agricultural purposes, in good order and
condition at all times. Except as provided in Paragraph 8(c), Lessor shall
not be called upon to make any repairs, replacements or improvements
whatsoever upon the said Premises, or any part thereof. Notwithstanding
the foregoing, Lessee shall not be responsible for, and Lessor shall
indemnify and hold Lessee harmless from, any environmental or other
condition affecting the Premises which constitutes a violation of any
applicable law, regulation, rule or order; provided, however, that Lessor
shall not be required to indemnify and hold Lessee harmless from any such
condition that (a) is caused by Lessee or its employees, agents or
contractors, or (b) first occurs on the Premises during the Term, in which
case Lessee shall indemnify and hold Lessor harmless from such condition.

10. IMPROVEMENTS. This Lease is executed with the understanding and
agreement that the Lessee is not obligated to make any improvements to the
Premises, but that if Lessee elects to do so, said improvements shall
consist of the planting of a wine grape

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<PAGE>

vineyard and the installation of buildings, equipment and facilities which
Lessee may require for the development and operation of said property as a
vineyard. Except as provided in Paragraph 11, the full cost of said
improvements shall be borne and paid by Lessee, without any contribution
whatsoever by Lessor. The construction and installation of these or any
other improvements made to the Premises by the Lessee shall be subject to
the following conditions:

(a) At least ten (10) days but not more than thirty (30) days before
commencement of any construction on or improvement to the Premises which
will cost in excess of $10,000.00, Lessee shall notify Lessor of Lessee's
intention to commence said work. The notice shall specify the
approximate location and nature of the intended improvements and shall
state the approximate date on or after which work is to commence.
Lessor shall have the right to post and maintain on the Premises any
notices of nonresponsibility provided for under applicable law.

(b) Lessee shall not suffer or permit to be enforced against the
Premises or any part thereof any mechanic's, materialman's, contractor's,
or subcontractor's lien arising from any work of improvement made by
Lessee, however it may arise. However, Lessee may in good faith and at
Lessee's own expense contest the validity of any such asserted lien,
provided Lessee has furnished the bond required in Civil Code
Section 3143 (or any comparable statute hereafter enacted for
providing a bond or other assurance freeing the Premises from the
effect of such a lien claim.)

(c) Lessee shall indemnify Lessor against all liability and loss of
any type arising out of work performed on the Premises by or for Lessee,
together with reasonable attorneys' fees and all costs and expenses
incurred by Lessor in negotiating, settling, defending, or otherwise
protecting against such claim should Lessee fail to do so.

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<PAGE>

(d) If Lessee does not cause to be recorded the bond described in
Civil Code Section 3143 or otherwise protect the property under any
alternative or successor statute, and if a final judgment is rendered
against Lessee by a court of competent jurisdiction for the foreclosure of
a mechanic's, materialman's, contractor's or subcontractor's lien claim,
and if Lessee fails to stay an execution of the judgment by lawful means or
to pay the judgment, Lessor shall have the right, but not the duty, to pay
or otherwise discharge, stay, or prevent the execution of any such judgment
or lien or both. Lessee shall reimburse Lessor for all sums paid by Lessor
under this subparagraph (d), together with all Lessor's reasonable
attorneys' fees and costs, plus interest on those sums, fees, and costs at
the highest legal rate allowed under the laws of California from the date
of payment until the date of reimbursement.

All improvements constructed or installed on the Premises by Lessee shall be
owned by Lessee during the Term. At the conclusion of the Term, or upon any
earlier termination of this Lease however occurring, Lessee shall surrender the
Premises and improvements, if any, to Lessor and as of said date said
improvements shall become part of the real property and shall belong solely to
Lessor.

11. WATER. Lessee shall have the full use of any and all water
rights appurtenant to the Premises and shall have the right to drill for its use
such wells as it may deem necessary to furnish sufficient water for agricultural
use on the Premises; provided, however, that, without the prior written consent
of Lessor, no irrigation water produced by Lessee on the Premises shall be
transported for use off the Premises. Lessor shall be entitled to use a
reasonable amount of water from the Premises for its livestock; provided,
however, that (a) Lessor shall not operate a feed lot or other large livestock
operation, and (b) the use of such

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<PAGE>

water by Lessor shall not result in Lessee having insufficient water for its own
use on the Premises.

12. UTILITIES AND SERVICES. Lessee shall pay for all utilities and
services used by Lessee upon the Premises during the Term.

13. INSURANCE. During the Term, Lessee shall, at Lessee's sole cost
and expense, maintain insurance with reputable insurance carriers against such
risks and in such amounts as is customarily carried by companies of established
reputation engaged in the same or similar business and similarly situated,
including public liability, property damage and workers' compensation; provided,
however, that the public liability insurance shall initially be in an amount not
less that $1,000,000 for each occurrence, and, at the time of each rent
adjustment pursuant to Paragraph 4 above, such amount shall be increased to such
greater amount as may be reasonable under the then circumstances, such greater
amount to be mutually agreed upon by Lessor and Lessee. Lessee shall cause such
policy or policies of insurance to show Lessor as an additional insured
thereunder and to provide that such policy or policies may not be cancelled or
amended without at least thirty (30) days prior written notice to Lessor. Upon
the request of Lessor, a certificate of insurance evidencing such coverage shall
be provided to Lessor. Each party to this Lease waives any right of action such
party may later acquire against the other for the recovery of any loss or damage
to any of such party's property which is insured under valid and collectible
insurance policies, to the extent of any recovery collectible under such
insurance.

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<PAGE>

the posting of notices, the exercise of any right given to or retained by Lessor
under the provisions of this Lease, or any other lawful purpose. To facilitate
such access, Lessee shall supply Lessor, its agents and assigns, with keys to
gates to the Premises.

17. CONDEMNATION. If during the Term all or any portion of the
Premises is condemned, or conveyed under threat of condemnation, for public use,
the parties hereto agree as follows:

(a) The respective rights of the parties shall depend upon whether
there is a "Total Taking," a "Substantial Taking," or a "Partial Taking,"
said terms being defined as follows:

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<PAGE>

TOTAL TAKING means the taking of the fee title to all of the
Premises and the improvements on said Premises;

PARTIAL TAKING means any taking of the fee title that is not
either a total taking or a substantial taking.

(c) In the event of a Partial Taking (or a Substantial Taking if
Lessee does not elect to treat it as a Total Taking as provided in
subparagraph (b) of this paragraph), this Lease shall remain in full force
and effect with respect to the remaining property and Lessee's obligation
to pay rent shall be reduced at the rate per acre then payable under the
provisions of Paragraphs 3 and 4 above for each acre so taken.

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<PAGE>

(i) If the award separately values the interests of Lessee and
Lessor in the property taken:

TO LESSEE: that portion of the award allocable to the interests
of Lessee; and

TO LESSOR: that portion of the award allocable to the interests
of Lessor.

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<PAGE>

(a) The total cost of the work shall be paid for by Lessee.

(b) Notwithstanding anything herein to the contrary, Lessee is hereby
given the absolute right without Lessor's consent to mortgage its interest
in this Lease for the purpose of securing any loan to be used by Lessee for
the development, improvement and operation of the Premises, but Lessor
shall not be required to join or participate in said loan, or to accept any
personal responsibility for the repayment of same. No such mortgage shall
extend to or affect the fee title or the reversionary interest of Lessor in
and to the Premises, or the reversionary interest of Lessor in and to any
improvements now or hereafter installed upon the Premises. No such
mortgage or assignment thereof shall be binding upon the Lessor in the
enforcement of its rights under this Lease, but Lessor will provide a copy
of any notice of default by Lessee to the mortgage holder and will accept
performance by the mortgage holder of any term of this Lease to be
performed by Lessee. The mortgage holder shall have thirty (30) days in
which to cure any Event of Default by Lessee after the time for Lessee to
cure it has expired; provided, however, that if the Event of Default cannot
be cured by the payment of money, Lessor will not terminate this Lease if
the mortgage holder commences and thereafter diligently pursues to
completion foreclosure of its mortgage and pays to Lessor all sums then due
and unpaid under the terms of this Lease. The loan documents shall contain
a provision allowing, but not obligating, Lessor to cure any default
thereunder if Lessee fails to do so. Such mortgage shall provide that a
copy of any notice of default served thereunder shall be sent by mail to
Lessor at the address given in this Lease for the service of

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<PAGE>

notices hereunder. A duplicate original or certified copy of such
mortgage, showing recording data, shall be given to Lessor within ten (10)
days after the same is returned from the recorder's office.

19. PERMANENT FINANCING; SUBORDINATION OF FEE. In the event Lessee
desires to obtain long-term financing of its improvements and operations on the
Premises, it shall have the right to do so pursuant to this Paragraph 19 at any
time after substantially all of the cultivable portion of the Premises is
planted to vineyard and an irrigation system has been installed and is operating
on the Premises. Lessee shall be entitled to obtain two financings of the
Premises: the first financing (the "First Loan") shall be undertaken, if at
all, on or before December 31, 2005; and the second financing (the "Second
Loan") shall be undertaken before December 31, 2015.

Each of the First Loan and the Second Loan (each, a "Loan" and
together the "Loans") shall be in the form of a long-term loan from a bank,
savings and loan association, insurance company or other lending institution
authorized to do business in the State of California. With respect to each
Loan, Lessor agrees that if requested to do so by Lessee it will execute and
deliver to such lender a deed of trust sufficient to subordinate or encumber
Lessor's fee title to the Premises to the lien securing such Loan, together with
such other loan documents in the standard form then in use by the lender as the
lender may reasonably require as a condition of making the Loan. Lessor and
Lessee shall negotiate in good faith with respect to such amendments to this
Lease as the lender of each Loan requires as a condition to providing the
financing, and neither Lessee nor Lessor shall unreasonably withhold its consent
to such amendments. Each encumbrance shall constitute a first lien against the
fee title to the Premises.

The foregoing provisions of this Paragraph 19 are subject, however, to
the following terms, conditions and agreements:

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<PAGE>

(a) No Event of Default shall have occurred and be continuing at the
time any Loan is to be made.

(b) The term of each Loan must not extend beyond the Term.

(c) The principal amount of the First Loan shall not exceed the sum
of $5,000.00 per acre for the acreage subject to this Lease. The principal
amount of the Second Loan shall not exceed fifty percent (50%) of the
appraised value of the Premises, as determined at the expense of Lessee by
a Certified Appraiser (as defined in Paragraph 6 above) mutually acceptable
to Lessor and Lessee.

(d) Lessor's obligation to subordinate their fee title to the
Premises to any financing is limited to the First Loan and the Second Loan
and the respective deed of trust and other loan documents for each Loan.

(e) The loan documents for each Loan shall contain provisions that
(i) Lessor has joined in the execution of the same solely for the purpose
of creating a lien against the fee title to the Premises in favor of the
lender, and that no personal judgment will be sought or obtained against
Lessor, or any of its partners, by reason of its having joined in the
execution of said documents; and (ii) require all notices of default to be
served on both Lessor and Lessee and provide that Lessor shall have the
right to cure any default if Lessee fails to do so.

(f) The proceeds of each Loan shall be applied by the lender: first,
to the full payment of any outstanding loan taken out by the Lessee
pursuant to the provisions of Paragraph 18 above, and, in the case of the
Second Loan, to the full payment of any First Loan then outstanding (the
payment in full of the First Loan on or before the closing of the Second
Loan shall be a condition to the Second Loan); second to the

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<PAGE>

payment of any and all obligations then due and owing by Lessee to Lessor
under the terms of this Lease; and third, the remaining proceeds, if any,
shall be paid to Lessee.

20. EVENTS OF DEFAULT. Any of the following events shall
constitute a default (an "Event of Default") under the terms of this Lease:

(b) Default by Lessee in the performance of or compliance with any
other covenant, condition or restriction contained in this Lease and the
failure of Lessee to perform or comply with the same within thirty (30)
days after receipt of written notice to do so is given to the Lessee and to
any lender then holding a security interest in the Premises or in the
leasehold estate of Lessee pursuant to the provision of Paragraph 18 or
Paragraph 19 above; provided, however, that if the nature of Lessee's
default is such that more than thirty (30) days are reasonably required for
its cure, then no Event of Default shall be deemed to have occurred if
Lessee commences the cure within that thirty (30)-day period and thereafter
diligently prosecutes the cure to completion.

(d) The subjection of any material right or interest of Lessee
hereunder to attachment, execution or other levy, or to seizure under legal
process (except a foreclosure of security given by Lessee to a lender
pursuant to the provisions of

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<PAGE>

Paragraph 18 or Paragraph 19 above), if not released within thirty (30)
days after receipt of written notice thereof.

(e) The filing by Lessee of a petition in bankruptcy or insolvency,
or for an arrangement or reorganization, or the making of an assignment for
the benefit of creditors.

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<PAGE>

of the Premises and improvements and eject all parties in possession.
Termination under this subparagraph shall not relieve Lessee from any claim
for damages previously accrued or then accruing against Lessee. Said
damages shall include the worth at the time of award of the amount by which
the unpaid rent for the balance of the term after the award exceeds the
amount of such rental loss for the same period that Lessee proves could be
reasonably avoided.

(d) Upon any reentry of the Premises by Lessor pursuant to the
provisions of subparagraphs (a) or (b) above, Lessor may at Lessor's
election take possession of all

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crops on the Premises, harvested and unharvested, and shall thereupon
become the owner of the same, without any obligation to compensate Lessee
or any other person therefor, except that Lessor shall pay to Lessee all
moneys received from the sale of said crops, less all reasonable costs and
expenses incurred or expended by Lessor in cultivating, harvesting,
processing, handling and selling said crops, less amounts owed to the
holder of a security interest given to secure crop financing, and less all
sums which may then be due to Lessor from Lessee under the terms of this
Lease. Lessor may at Lessor's election use any of Lessee's machinery,
equipment, trade fixtures or other personal property left upon the
Premises, without compensation and without liability for the use or damage
of the same, or store said property for the account of and at the cost of
Lessee.

The waiver by Lessor of any Event of Default shall not be deemed or held to be a
waiver of any subsequent or other Event of Default.

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<PAGE>

of the possession of the Premises by Lessee beyond the Term shall be deemed
an extension of the Term or create the right to an additional term in the
absence of a written agreement executed by Lessor.

23. LESSOR'S ENCUMBRANCES. Lessor shall not encumber the Premises or
any part thereof during the Term without Lessee's prior written consent. In the
event of a default by Lessor under an encumbrance of Lessor's interest in the
Premises, or in the event Lessor's interest in the Premises becomes subject to
any lien for which Lessee is not responsible under the terms of this Lease and
which jeopardizes Lessee's interest in the Premises, Lessee shall have the right
to cure the default or discharge the lien and to deduct the funds expended in
connection with such cure or discharge from subsequent rental payments becoming
due under the terms of this Lease. Lessor shall use its best efforts to cause
holders of encumbrances on Lessor's interest in the Premises to agree to accept
performance thereunder by Lessee.

24. OPTION TO EXTEND. So long as no Event of Default shall have
occurred and is then continuing, Lessee shall be entitled to extend the term
of this lease for four (4) successive five (5)-year terms upon giving to
Lessor written notice of Lessee's election to exercise the option to extend
the term at least ninety (90) days prior to the expiration of the then
existing term hereof. Such renewal shall be upon the same terms and
conditions as are herein stated. References in this Lease to the Term shall,
to the extent exercised, include the four (4) successive five (5)-year
options provided for above.

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<PAGE>

Lessee shall have twenty (20) days in which to exercise this first right to
purchase by giving to Lessor written notice of Lessee's election to do so. If
this first right to purchase is so exercised by Lessee within said twenty
(20)-day period, such purchase shall be consummated upon the terms and
conditions specified in such offer; provided, however, that the date for closing
of such purchase shall be not less than sixty (60) days after the date of
Lessee's notice of election. If this first right to purchase is not so
exercised by Lessee within said twenty (20)-day period, it shall lapse and shall
be of no further force or effect and Lessor thereafter shall be free to sell the
Premises to a third party within one hundred and eighty (180) days after
Lessee's first right to purchase lapses, but not for a lesser price or on terms
more favorable in any material respect to the purchaser. Any such sale to a
third party shall be subject to this Lease, it being expressly understood and
agreed that this Lease shall continue in full force and effect notwithstanding
said sale.

26. ASSIGNMENT AND SUBLETTING. Lessee shall not assign this lease or
any interest herein, or underlet the Premises or any part thereof, without the
prior written consent of Lessor, except to an affiliate or affiliates of Lessee
(I.E., a partnership in which Lessee is a general partner, a joint venture in
which Lessee is a joint venturer, or a limited liability company in which Lessee
is a member), and neither this Lease, nor any interest herein of Lessee, shall
be assignable in proceedings by or against Lessee in bankruptcy, or in
insolvency, or in any other manner by operation of law; provided, that Lessor's
consent shall not be unreasonably withheld; provided further, that Lessor's
consent shall not be required in connection with the transfer of this Lease to
any lender who has provided financing under the provisions of Paragraph 18 or
Paragraph 19 above and who holds a security interest in the leasehold estate of
Lessee, in a foreclosure or other like proceedings instituted by the lender
under the terms of any such security instrument, or by an assignment or other
conveyance given

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in lieu of foreclosure. No assignment under the provisions of this paragraph
shall be effective, however, until the assignee has given written notice of such
assignment to Lessor, stating the name and address of the assignee and the date
of transfer, accompanied by a copy of the assignment and the written agreement
of the assignee expressly assuming and agreeing to keep and perform all of the
obligations of Lessee under this Lease.

27. TIME OF THE ESSENCE. Time and specific performance are of the
essence of this agreement and of every provision hereof.

29. ATTORNEYS' FEES. In case either party shall bring suit against
the other party to compel the performance of, or to recover for the breach of,
any covenant, agreement or condition herein written, or, in the case of Lessor,
to recover possession of the Premises or to remove from the record this Lease or
any lien or encumbrance thereon created by Lessee, the prevailing party shall be
entitled to a reasonable attorneys' fee, to be fixed by the court and made a
part of any judgment entered therein.

31. MEMORANDUM OF LEASE. The parties agree to execute and have
acknowledged a memorandum of lease for purposes of recording in Monterey
County,

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California, which said memorandum shall describe the Premises as being subject
to the rights, covenants and restrictions herein contained.

32. ESTOPPEL CERTIFICATE.

(a) Lessor shall at any time upon not less than fifteen (15) days
prior written notice from Lessee execute, acknowledge and deliver to Lessee a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect or, if modified, stating the nature of the modification and
certifying that this Lease, as modified, is in full force and effect, and (ii)
acknowledging that there are not, to Lessor's knowledge, any uncured defaults on
the part of Lessee hereunder, or specifying the defaults if any are claimed.
Any such statement may be conclusively relied upon by any prospective
encumbrancer of the Premises or Lessee's interest therein.

(b) Lessor's failure to deliver such statement within the time
specified shall be conclusive upon Lessor (i) that this Lease is in full force
and effect, without modification except as may be represented by Lessee, (ii)
that there are no uncured defaults in Lessee's performance, and (iii) that not
more than one semi-annual installment of rent has been paid in advance.

34. INTERPRETATION. This Lease shall be construed in accordance with
the internal laws of the State of California without application of the
conflicts of laws provisions

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thereof. Whenever the contents of any provision shall require, the singular
number shall be deemed to include the plural number, and vice versa, and the
reference to any gender shall be deemed to include reference to all other
genders. This Lease has been drafted by both parties and shall not be construed
either for or against Lessor or Lessee. The captions and headings of the
paragraphs of this Lease are solely for convenience and shall not be deemed to
be a part of this Lease for the purpose of construing the meaning hereof or for
any other purpose.

36. COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.

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<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
date first above set forth.

LESSOR: LESSEE:
- ------- -------

ECHENIQUE RANCH, a SCHEID VINEYARDS AND
California general partnership MANAGEMENT CO., a California
corporation
/s/ Jerry D. Echenique
- -----------------------------------
JERRY D. ECHENIQUE, Partner By /s/ Alfred G. Scheid
----------------------------
Title: President
/s/ James J. Echenique
- -----------------------------------
JAMES J. ECHENIQUE, Partner By /s/ Scott D. Scheid
----------------------------
Title: Vice President

/s/ Julie Trescony
- ----------------------------------- Address:
JULIE TRESCONY, Partner 13470 Washington Boulevard
Suite 300
Marina del Rey, California 90292
/s/ Jane Johnson
- -----------------------------------
JANE JOHNSON, Partner

Address:
P.O. Box 108
San Lucas, California 93954

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<PAGE>

STATE OF CALIFORNIA )
) ss
COUNTY OF MONTEREY )
---------------

On Feb. 15, before me, Paul M. Hamerly, Notary Public, personally
appeared Jerry D. Echenique, James J. Echenique, Julie Trescony and Jane
Johnson, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the persons whose names are subscribed to the within
instrument and acknowledged to me that they executed the same in their
authorized capacities, and that by their signatures on the instrument the
persons, or the entity upon behalf of which the persons acted, executed the
instrument.

WITNESS my hand and official seal.

/s/ Paul M. Hamerly
----------------------------------
Signature

[SEAL]

STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
---------------

On 1-30-96, before me, Kenneth T. Wang, Notary Public, personally
appeared Alfred G. Scheid and Scott D. Scheid, personally known to me or
proved to me on the basis of satisfactory evidence to be the persons whose
names are subscribed to the within instrument and acknowledged to me that
they executed the same in their authorized capacities, and that by their
signatures on the instrument the persons, or the entity upon behalf of which
the persons acted, executed the instrument.

WITNESS my hand and official seal.

/s/ Kenneth T. Wang
-----------------------------
Signature

[SEAL]

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<PAGE>

STATE OF CALIFORNIA

COUNTY OF SAN LUIS OBISPO
---------------

On FEB. 14, 1996 before me SUSAN BEARCE
------------- ------------

a Notary Public in and for said State, personally

appeared JULIE TRESCONY AND
--------------------------
JANE JOHNSON
--------------------------
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.

WITNESS my hand and official seal, -------------------------------
SEAL SUSAN BEARCE
Comm. #996126
Notary Public
California
SAN LUIS OBISPO COUNTY
My Comm. Expires May 31, 1997
------------------------------

Signature: /s/ Susan Bearce (This area for notarial seal or stamp)
------------------------

<PAGE>

[LETTERHEAD]

March 27, 1996

Partners of Echenique Ranch
P.O. Box 108
San Lucas, CA 93954

Dear Partners of Echenique Ranch,

As was discussed and agreed to with Jerry Echenique and Julie Trescony
on the telephone last week, the lease ("Lease"), made as of January 1, 1996 by
and between Echenique Ranch ("Lessors") and Scheid Vineyards and Management Co.
("Lessee") is amended as follows:

1. Lessee will begin planting immediately on 54 acres of the
approximately 145 acres subject to the Lease.

2. Lessee agrees to pay to Lessors (a) with respect to each of calendar
years 1996, 1997 and 1998, the sum of $150.00 per acre for 54 acres
and (b) with respect to each calendar year thereafter, the sum of
$275.00 per acre for 54 acres.

3. Enclosed herewith is a check in the amount of $4,050 which is the
first installment for 1996. The second installment in the amount of
$4,050 will be due on July 31, 1996.

4. The deposit of $10,000 which was previously paid to Lessors will be
credited against the rental installment to be paid on January 31,
1997.

5. All other terms and conditions of the Lease shall continue in full
force and effect.

Thank you for your cooperation in this matter. We are glad to be able
to accelerate the payment of rent beyond what was anticipated in January.

SCHEID VINEYARDS AND MANAGEMENT CO. ECHENIQUE RANCH

By: /s/ Heidi M. Scheid By: /s/ Jerry Echenique /partner
-------------------------------- -------------------------------
Heidi M. Scheid
Vice President of Planning

<PAGE>

LAND LEASE

ARTICLE I

CONCURRENT CONTRACT OF SALE

This lease is executed concurrently with a CONTRACT OF SALE described more
particularly in Exhibit "A" attached hereto and incorporated herein and made a
part of this Land Lease.

ARTICLE II

DEFINITIONS

Reference in this lease to any of the following terms shall be construed to
incorporate the definition for that term as set forth in this Article I.

2.1 LESSOR. William McHenry Bland, a married man dealing with a
separate property. Hereinafter called "Lessor".

2.2 LESSEE. Monterey Farming Corporation, a corporation.

2.3 LEASED PREMISES. All that real and personal property located in
the County of Monterey, State of California, and described more particularly' as
Parcels I & II in Exhibit "A" attached hereto and incorporated herein by
reference, and all easements, licenses and rights appurtenant thereto.

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ARTICLE III

PREMISES, USE, TERM AND RENT

3.1 PREMISES. Lessor hereby leases to Lessee the leased premises
subject to and with the benefits of the provisions of this lease.

3.2 USE.

(a) The leased premises shall be used for vineyards and any
other agricultural use Lessee may choose. In connection with Lessee's use,
Lessee may construct on the leased premises residences, offices, warehouses,
storage buildings, utilities, roads, irrigation facilities and any other related
items. Lessee shall be entitled to withdraw for use on the leased premises and
any other premises owned or occupied by the Lessee unlimited water from the
leased premises.

(b) In addition to taking water from the leased premises, Lessee
may use any and all existing wells on the property and further, Lessee may
construct new wells on any portion of the property and extract water there from
for use on the leased and any other premises owned or occupied by the
Lessee. Lessor hereby grants Lessee unlimited rights of access, and all
necessary easements, and licenses, to the property for said purpose.

3.3 TERM. The term of this lease shall be for thirty (30) years
commencing on November 1, 1973, or such earlier date as the present tenant
relinquishes his leasehold, and ending on the 31st day of October, 2002. The
Lessee shall have the

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option to renew this lease for two (2) consecutive ten (10) year periods
following the expiration of the original lease term at rentals determined in
accordance with Section 3.4.

3.4 RENT.

(a) Lessee shall pay semiannually in advance, on or before the
15th day of July of each year, and on or before the 15th day of January of each
year, and a pro rata portion of said sum for any fraction of a semi-annual
period at the beginning and the end of the lease term, rental at the rate of
$85.00 per acre per year, based on the area of the leased premises. For
purposes of rental the total acreage is agreed to be 351 acres and the lease
rental is $29,835. This acreage and the total rent due is subject to increase
or decrease on the basis of a survey and certification of acreage by a licensed
surveyor, to be made at Lessee's option and expense. When such survey is made
and certificate received, the rent shall be adjusted to the nearest whole acre
prospectively from the date of the surveyor's certificate, a copy of which
Lessee shall furnish to Lessor. The rent per acre is further subject to
adjustment under paragraph 3.4(b) below.

(b) The annual rental due here under shall be adjusted at the
end of the fifth (5th) year of this lease, and at the end of each successive
5-year period during the period of this lease.

The rent adjustment shall be made to reflect any increase or decrease in
the Consumer Price Index as published by the Bureau

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of Labor Statistics of the United State Government or such other index as the
Lessor and Lessee may agree if the Consumer Price Index is no longer published.
Any rent adjustments shall be proportioned to changes in the Index from a
beginning date of December 31, 1972. If Lessor and Lessee have not agreed on
the adjusted rent amount within thirty (30) days of the end of any said 5-year
period, both parties agree the adjusted rent shall be resolved by a board of
three (3) impartial arbitrators, acting in accordance with the rules of the
American Arbitration Association, except they shall be selected as follows:

Within sixty (60) days after the termination of said 5-year period, each
party shall select a qualified arbitrator and shall give written notice of
such selection to the other party. In the event of failure of either party
to select a qualified arbitrator within said sixty (60) days, such
arbitrator shall be selected by the presiding judge of the Superior Court
of the County of Monterey, acting in his individual capacity and not his
judicial capacity. upon application of the party which has selected a
qualified administrator, made after ten (10) days' written notice to the
other party, of the time and place of such application. The two
arbitrators thus appointed (by either method) shall select and appoint a
third qualified arbitrator and shall give written notice thereto to the
parties. In the event that two qualified arbitrators so appointed in
either matter shall fail to appoint a third qualified arbitrator within

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fifteen (15) days after the second qualified arbitrator shall be selected
by said presiding judge upon application of either party made after ten
(10) days' written notice to the other party of the time and place of said
application. The question of whether or not any person selected hereunder
is qualified to act as an arbitrator shall be determined by said presiding
judge upon the application of either party made after ten (10) day's
written notice to the other party of the time and place of such
application. When duly selected, the three arbitrators shall meet to settle
the dispute between the parties on the basis of the terms of this contract,
and the decision of any two of them shall be final, conclusive and binding
upon both parties. Upon the failure of any two of said arbitrators to
agree upon the settlement of the dispute within sixty (60) days after the
appointment of the third arbitrator, the dispute shall be settled by a
newly constituted board selected in the manner set forth above. This
process shall be repeated until a determination is finally reached by any
two of the arbitrators. The cost of such arbitration shall be split equally
by the parties hereto.

The rent adjustment shall be effective as of the commencement of the appropriate
5-year period. Until said value is determined, Lessee shall pay the rent
applicable in the immediately preceding 5-year period, provided that if the
adjustment has not been determined in time for the first rental payment of the
subject 5-

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year period, Lessee shall at the time of the first rental payment after
determination of the adjusted rent add or subtract (as the case-may be) an
amount equal to the difference between the rent for the period starting with
the commencement of the subject 5-year period and ending with the first
payment of the adjusted rent.

ARTICLE IV

TAXES

(a) During the term hereof lessee shall pay and discharge as and
when they shall become due all real estate and personal property and similar
taxes and assessments of any type whatsoever upon the leased premises or any
portion thereof, including the improvements on the leased premises.

(b) Lessee shall have the right to contest any taxes, assessment
or government imposition levied or assessed against the leased premises or
against any buildings, improvements, fixtures or equipment now or hereafter
existing thereon during the term of this lease. In connection with any such
contest Lessor shall cooperate with Lessee by signing any claims, complaints,
etc. that are reasonably necessary for the orderly process of Lessee's contest.

ARTICLE V

EMINENT DOMAIN

(a) If title to all or any part of the leased premises is taken
for any public or quasi-public use or under any

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statute or by right of eminent domain or by private purchase in lieu of eminent
domain, with the result that the remaining property or portion of the leased
premises is not reasonably suitable for Lessee's continued use and occupancy in
a manner consistent with the use and occupancy of said premises prior to the
taking, then Lessee may, at its option, terminate this lease on the date that
the possession of the leased premises or part thereof which is taken occurs. In
such event, and if Lessee continues under its option to occupy the remaining
portion of the leased premises, the rent of the remaining portion shall be
reduced in accordance with the number of conveniently useable acres remaining.

(b) In the event the leased premises or any portion thereof are
taken by condemnation, the condemnation award shall be divided as follows:

(i)Lessee shall receive the value of its leasehold
estate;

(ii)Lessee shall receive the value of any improvements
added by Lessee including grapevines, crops, buildings and irrigation
systems; and

(iii)The remainder of the award shall belong to Lessor.

(c) Lessor agrees immediately upon service of process or other
type, of notice in connection with any appropriation or taking to give Lessee
notice in writing thereof. Each party agrees to execute and deliver to the
other all

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instruments that may be required to effectuate the provisions of this paragraph.

ARTICLE VI

MAINTENANCE AND CONDITION OF LEASED PREMISES

(a) Lessor agrees to place the leased premises in good operating
condition at the commencement of the term hereof. Lessor shall have in good
operating condition all pumps, fittings, pipelines, wells, reservoirs and other
irrigation facilities on the leased premises and serving the leased premises.
Lessor further agrees that all roads and roadways shall be placed in serviceable
condition appropriate to the type of roadway surface that is in place, and that
all drains, drainage ditches, and above-ground and underground drainage lines
shall be clear and clean and in serviceable condition.

(b) Lessee shall, during the term hereof, keep and maintain at
its own cost, in a manner sufficient for Lessee's own use, all reservoirs,
pumps, wells, casings, pipelines, fittings and related irrigation facilities.

ARTICLE VII

LESSOR COVENANTS

Lessor covenants that:

(a) there is good and sufficient access to the leased premises
from a public highway;

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(b) all reservoirs, pumps, wells, casings, pipes, fittings, and
related facilities in connection with the irrigation system are in good working
condition;

(c) Lessor shall not during the term of this lease take water by
pumping or any other means from the property or from beneath the property, or
pursuant to any riparian or other rights of Lessor in or to the Salinas River,
nor grant the right so to do to any other person.

(d) Lessor has the right to make this lease and Lessee, on
paying the rent and performing all its obligations in this lease shall
peacefully and quietly have, hold and enjoy the leased premises throughout the
lease term or unless sooner terminated as provided herein.

(e) Lessor's title to the leased premises is such that Lessee
will be able to obtain at standard rates a California Land Title Association
Standard Coverage Form of title insurance policy on its leasehold interest
showing as exceptions a lien for taxes not due, and exceptions as may be
approved in writing by Lessee.

(f) Lessor shall not during the term hereof sell or agree to
sell, any part or all of the leased premises except according to the terms of
this agreement.

(g) The leased premises and the adjacent property are the
subject of that certain Land Conservation Agreement between Lessor and the
County of Monterey, dated February 26, 1968 and recorded February 29, 1968,
in Reel 545 page 861 of the official

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records of the County of Monterey (hereinafter called the Conservation
Agreement). Lessor covenants and agrees to make no "Notice of Nonrenewal" or
any request for cancellation as provided in paragraphs ___ and ___ of the
Conservation Agreement, nor to do any other act or fail to do any act when to do
so or fail to do so would result in the termination of the Conservation
Agreement or alteration of any of the terms or conditions thereof, unless the
consent in writing of Lessee is first had and obtained.

ARTICLE VIII

LEASEHOLD IMPROVEMENTS

All improvements of any type whatsoever, whether real or personal property,
and including agricultural plantings, additional pipes, pumps, fittings;
buildings, barns, sheds, machinery, tractors, and fixtures, etc., that are
installed or placed upon or about the premises by Lessee shall remain the sole
property of Lessee and may be removed by Lessee at any time during the term of
the lease or at the termination of the lease. Lessee shall be entitled to place
or construct any of the foregoing improvements at any time and at any location
on the leased premises without obtaining the approval of Lessor. All
improvements upon the leased premises at the commencement of the lease and not
installed by Lessee are and shall remain the property of Lessor.

<PAGE>

ARTICLE IX

ASSIGNMENT AND RIGHT OF FIRST REFUSAL

9.1 RIGHT TO ASSIGN. Lessee shall have the right to assign or sublet
all or any part of the leased premises to any person or for any use not
inconsistent with Lessee's permitted use without obtaining the consent of
Lessor. This right of assignment or subletting shall include the right to
mortgage any of the crops or other improvements Lessee produces upon the leased
premises.

9.2 SUCCESSORS. The covenants and conditions herein contained shall
apply to and bind the grantees, transferees, assigns, heirs, successors,
executors, and administrators of all the parties hereto, and all the parties
hereto shall be jointly and severally liable hereunder.

9.3 RIGHT OF FIRST REFUSAL. Lessees shall have during the term of
this lease a Right of First Refusal to purchase the leased premises at any time
Lessor determines to sell the premises or receives a bona fide offer from an
unrelated person to buy the premises.

ARTICLE X

AGREEMENT TO PURCHASE AND AGREEMENT TO SUBORDINATE

10.1 Lessee agrees to purchase and Lessor agrees to sell the leased
premises at a price which is the higher of $1,950 per acre or fair market value
for farmland in the Greenfield, California vicinity within 120 days of the death
of William

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McHenry Bland. This obligation to purchase and sell shall be binding upon all
heirs, assigns, nominees, successors, executors, grantees and transferees of the
Lessor and the Lessee.

10.2 Whereas Lessee proposes to develop the leased premises to a
vineyard and expects to incur indebtedness to finance such development, Lessor
shall execute an Agreement of Subordination or similar instrument subordinating
the Lessor's interests to the institution or institutions providing the
financing of the Lessee's development (Lender) and Lessor agrees; if requested
in writing by the Lessee, to execute a Deed of Trust in favor of such Lender
provided such Lender has assets in excess of $500,000,000 (five hundred million
dollars). The subordination shall be only to such indebtedness in the ratio of
$55 of debt to $45 of equity invested in the premises by the Lessee for the
purpose of developing vineyards.

ARTICLE XI

DEFAULTS

(a) If default is made by Lessee in payment of any rental or any
monies due here under or in the performance of any term, covenant or condition
hereof, and such default shall not be made good within thirty (30) days after
written notice by Lessor of the existence thereof, Lessor may, at its option,
re-enter the leased premises, take possession of the same, and terminate this
lease or, as an alternative, Lessor may re-enter the leased premises without
terminating this lease and rent the

<PAGE>

premises to a third party for the account of Lessee. All covenants of Lessee
herein contained are expressly made conditions, for the failure to perform which
the right of re-entry is hereby given. Waiver by Lessor of any default
hereunder shall not constitute a waiver of any other or subsequent default. All
rights and remedies of Lessor expressed herein are cumulative and in addition to
any other remedies of law or equity.

(b) Upon Lessor's failure to perform any of the obligations
herein contained, including maintenance, repair, placing the leased premises in
the required condition at the commencement of the term hereof, or any other
obligation, Lessee may, at its option cure or have cured such default hereunder
and deduct from future rent payment due hereunder any sums expended or costs
incurred in connection therewith. Lessee shall not be in default hereunder for
failure to pay rent if Lessee makes any such deduction from rent otherwise due.

ARTICLE XII

MISCELLANEOUS

12.1 HOLDING OVER. In the event of any holding over with the consent
of Lessor beyond the end of the term of any extension thereof, this lease shall
be deemed a monthly tenancy upon the covenants and conditions herein contained
and upon one-twelfth of the annual rental as provided herein.

12.2 COMPLIANCE WITH LAWS. Lessee and Lessor shall both promptly
comply with all laws, ordinances, rules and

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regulations of all federal, state and municipal governments now in force or that
may be enacted hereafter, and, applicable to the leased premises.

12.3 NOTICES. Notices required to be given hereunder shall be in
writing and shall be sent by United States Mail, Postage Prepaid to the Lessee
as follows: Monterey Farming Corporation, 1800 Century Park East, Los Angeles,
California 90067, and to Lessor as follows: William McHenry Bland, Route 1, Box
5, Greenfield, California 93927.

12.4 CHANGE OF OWNERSHIP. No change of ownership of the leased
premises or assignment of this lease or of the rental provided for herein shall
be binding upon Lessee for any purpose whatever, until Lessee has been furnished
with notice thereof by Lessor.

12.5 COMPLETE AGREEMENT. It is expressly agreed that this lease
together with Exhibits "A" and "B" which are a part hereof, contains all terms,
conditions, warranties and agreements of the parties relating in any manner to
the rental, use and occupancy of the leased premises, and that no prior
agreement or understanding pertaining to the same shall be valid or of any force
or effect and that the terms, covenants, conditions and provisions of the lease
cannot be altered, changed, modified or added to except in writing signed by the
parties hereto.

12.6 TIME. Time is of the essence hereof.

12.7 SHORT FORM LEASE. The parties agree to execute and have
acknowledged a short form lease for purposes of

14
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recording, in Monterey County, which said short form shall describe the leased
premises as being subject to the rights, covenants, and restrictions herein
contained. With respect to the adjacent property, the short form of lease shall
comply with California Civil Code, Section 1469 as necessary to create a
covenant running with the land and binding on assignees and transferees of
Lessor.

12.8 CAPTIONS. The captions of the paragraphs and parts of this lease
are for convenience only and shall not be considered or referred to in resolving
questions of interpretation or construction.

IN WITNESS WHEREOF, the parties hereto have executed this lease on the
day and year set opposite their signatures below.

Lessor Lessee
- ------ ------

/s/ William McHenry Bland /s/ William Savage
- ------------------------- -------------------------
William McHenry Bland Monterey Farming Corporation

<PAGE>

ADDENDUM TO LAND LEASE

The parties to that certain Land Lease (the "Lease") by and between William
McHenry Bland ("Lessor") and Monterey Farming Corporation ("Lessee"), as
evidenced by that certain Short Form of Lease executed by Lessor and Lessee on
August 18, 1972, and recorded in Monterey County, California, relating to all
that real and personal property located in Monterey County, California, and
described more particularly as Parcels I and II in Exhibit "A" hereto, hereby
amend the Lease as follows:

Article X of the Lease which presently reads as follows:

"ARTICLE X

"Agreement to Purchase
AND AGREEMENT TO SUBORDINATE

"10.1 Lessee agrees to purchase and Lessor agrees to sell the
leased premises at a price which is the higher of $1,950 per acre or
fair market value for farmland in the Greenfield, California vicinity
within 120 days of the death of William McHenry Bland. This
obligation to purchase and sell shall be binding upon all heirs,
assigns, nominees, successors, executors, grantees and transferees of
the Lessor and the Lessee.

"10.2 Whereas Lessee proposes to develop the leased premises to a
vineyard and expects to incur indebtedness to finance such
development, Lessor shall execute an Agreement of Subordination or
similar instrument subordinating the Lessor's interests to the
institution or institutions providing the financing of the Lessee's
development (Lender) and Lessor agrees, if requested in writing by the
Lessee, to execute a Deed of Trust in favor of such Lender provided
such Lender has assets in excess of $500,000,000 (five hundred million
dollars). The subordination shall be only to such indebtedness in the
ratio of $55 of debt to $45 or

<PAGE>

equity invested in the premises by the Lessee for the purpose of developing
vineyards."

is hereby amended to read in its entirety as follows:

"ARTICLE X

"AGREEMENT TO SUBORDINATE

"10.1 Whereas Lessee,proposes to develop the leased premises to a
vineyard and expects to incur indebtedness to finance such
development, Lessor shall execute an Agreement of Subordination or
similar instrument subordinating the Lessor's interests to the
institution or institutions providing the financing of the Lessee's
development (Lender) and Lessor agrees, if requested in writing by the
Lessee, to execute a Deed of Trust in favor of such Lender provided
such Lender has assets in excess of $500,000,000 (five hundred million
dollars). The subordination shall be only to such indebtedness to the
ratio of $55 of debt to $45 of equity invested in the premises by the
Lessee for the purpose of developing vineyards."

IN WITNESS WHEREOF, the parties hereto have executed this Addendum of Land
Lease this 26th day of September, 1973.

Lessor Lessee
- ------ ------

MONTEREY FARMING CORPORATION

/s/ William McHenry Bland By /s/ E. William Savage
- ------------------------- ------------------------
William McHenry Bland E. William Savage
Vice President

<PAGE>

DESCRIPTION OF PROPERTY

The land referred to in this report is situated in
the State of California, County of Monterey, and
is described as follows:

PARCEL I:
A part of Rancho Poso de Los Ositos, being a part of that certain Lot 8,
allotted to Salvadore Sspinosa (by Geo. S. Gould, Jr. Trustee) in Action No.
7106 in the Superior Court of the State of California, in and for the County of
Monterey, and shown on Partition Map Accompanying Report of Referees filed July
10, 1926, in Volume 2 of Surveys, at page 30, records of Monterey County,
particularly described as follows: BEGINNING at and underground Granite
Monument marked 1,7,8, at the most westerly corner of said Lot 8, and in the
center line of a Road Right of Way "B" (40 feet wide) from which a 6" x 6" post
marked R/W B,7,1, bears N. 46DEG. 38' W., 20.4 feet distant, and a pile of
rocks bears N. 53DEG. 12' E., 599.5 feet distant, and a pile of rocks bears S.
46DEG. 08' E., 370.0 feet distant; thence along the line between Lots 1 and 8,

(1) S. 46DEG. 38' E., 2033.8 feet, at 20.4 feet at a 6" x 6" post marked
R/W.B,8,1, standing in southeasterly line of Right of Way B, 2033.8 feet to a 6"
x 6" post marked 1,8,9, standing at the corner of Lots 8 and 9; thence along the
line between Lots 8 and 9;

(2) N. 55DEG. 23' 45" E., 2932.1 feet, at 1060.3 feet a 4" x 4" post marked
LINE, 8,9, in fence, 2932.1 feet to a 4" x 4" post marked SE5; thence leave line
of Lots 8 and 9;

(3) N. 22DEG. 34 1/2' W., 2033.8 feet at 53.5 feet'a 4" x 4" post marked SE4,
at 2013.4 feet, a 4" x 4" post marked SE,2, in southeasterly line of said Right
of Way B, 2033.8 feet to a point in the center line of said Road Right of Way B;
thence along said center line;

(4) S. 55DEG. 23' 45" W., 3780.2 feet, to the place of beginning.

PARCEL II:
A portion of Rancho Poso de Los Ositos, beginning at a 6" x 6" post marked
R/W,B1,8, standing at the most northwesterly corner of Lot 8 of the Partition of
said Rancho, as indicated in the Final Decree of Partition filed February 8th,
1926 in Volume 78 of Official Records at page 1, Records of Monterey County;
thence South 46DEG. 38' East along the boundary line of Lot 1 of said
partition, at 2013.4 feet a 6" x 6" white post marked 1,8,9, at the common
corner of Lots 8 and 9 of said partition, 2363.4 feet to a 4" x 4" white post
marked 1,9, standing in the line of a fence; thence along said fence, South
55DEG. 27' 37 1/2" West 3793.9 feet to a 6" x 6" white post marked C4, HB,III,
standing at a fence corner; thence North 46DEG. 24' 30" West along a fence line
2357.0 feet to a fence post marked SSC, WEB; thence North 55DEG. 23' 45" East
3783.6 feet to the place of beginning.

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ACKNOWLEDGMENTS

STATE OF CALIFORNIA )
) ss.
COUNTY OF LAKE )

On this 24th day of September, 1973, before me, Gene Rimmer, a Notary
Public for said county and state, personally appeared WILLIAM McHENRY BLAND,
known to me to be the same person who executed the foregoing instrument, and
acknowleged the execution thereof for the purposes therein set forth.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal.

[NOTARIAL SEAL] /s/ Gene Rimmer
- ------------------------------------ -------------------------
[SEAL] OFFICIAL SEAL Notary Public in and for
GENE RIMMER said County and State
NOTARY PUBLIC - CALIFORNIA
PRINCIPAL OFFICE IN
LAKE COUNTY
My Commission Expires Mar. 18, 1977
- ------------------------------------

STATE OF CALIFORNIA )
) ss.
COUNTY OF )

On this 26th day of September, 1973, before me, Judith A. King, a
Notary Public for said county and state, personally appeared B. WILLIAM
SAVAGE, known personally to me to be the Vice President of Monterey Farming
Corporation, and that he, as such officer, being authorized to do so,
executed the foregoing instrument for the purposes therein set forth, by
signing the name of the corporation by him as such officer.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal.

[NOTARIAL SEAL] /s/ Judith A. King
- -------------------------------------- -------------------------
[SEAL] OFFICIAL SEAL Notary Public in and for
JUDITH A. KING said County and State
NOTARY PUBLIC - CALIFORNIA
PRINCIPAL OFFICE IN
LOS ANGELES COUNTY
My Commission Expires November 2, 1976
- --------------------------------------
1800 Century Park East, Ste. 1110, L.A., Ca. 90067

<PAGE>

L E A S E

THIS LEASE is made by and between LUIS ECHENIQUE, a married man
dealing with his separate property, FRANCIS D. ECHENIQUE, a married man dealing
with his separate property, and RICARDO ECHENIQUE, a single man, hereinafter
collectively called Lessors, and MONTEREY FARMING CORPORATION, a corporation,
hereinafter called Lessee.

Lessors hereby lease to Lessee, and Lessee hereby takes and hires from
the Lessors, approximately 707 acres of sprinkler-irrigated farming land located
on the Echenique Ranch near the town of San Lucas in Monterey County,
California. Hereunto attached and incorporated herein by reference are a
description of said land, marked "Exhibit A," and a map showing the location and
boundaries of the same, marked "Exhibit B." Said leased land is hereinafter
referred to as the "Premises."

The terms and conditions of this lease are as follows:

1. TERM. The term of this lease is thirty (30) years and one (1)
month commencing November 1, 1979, and ending November 30, 2009, subject to the
options to extend referred to in Paragraph 27.

2. USE. The Premises shall be used for the planting, growing and
harvesting of crops, including but not limited to wine grapes, and uses
incidental thereto as set forth in Paragraph 10 below, but for no other purpose.
All farming operations of Lessee shall be conducted in accordance with the best
methods practiced in the vicinity, including the taking of necessary precautions
to prevent erosion or other damage to the Premises, so that at the termination
of this lease said Premises will be returned to the Lessors in the same
condition as when received at the beginning of this lease, reasonable use, wear
and damage

<PAGE>

by the elements excepted. Lessee shall make diligent effort to prevent the
spread of all noxious weeds and crop -destroying rodents upon the Premises
during the term hereof.

3. RENT. As and for the rental of the Premises during said term,
Lessee agrees to pay to Lessors the sum of $230.00 per acre per year for the 707
acres subject to this lease, or a total of $162,610 per year, payable in advance
without deduction or offset, except as provided in Paragraph 25, in semi-annual
installments of $81,305 each on the 1st day of November and the 1st day of May
of each year during the lease term, commencing November 1, 1979; subject,
however to adjustment as set forth in Paragraph 4 below. Rent for the final
month of the lease term shall be added to and paid with the final semi-annual
installment provided for above.

4. PERIODIC RENT ADJUSTMENT. The annual rental to be paid by
Lessee, as set forth in Paragraph 3 above, shall be adjusted at the end of the
fifth (5th) year of the lease term and at the end of each successive five-year
period during said term. The rent adjustment shall be made to reflect the
prevailing rental rate at the time of each adjustment for land of like kind and
quality with a comparable water supply and comparable improvements, located in
Monterey County, California; provided, that no consideration shall be given to
the value of improvements made by Lessee upon the Premises; provided further,
that if at the time of a particular adjustment the Premises are planted to
vineyard, the lands to be used for comparison purposes shall consist solely of
Monterey County vineyards, but only those vineyards which have had a rent
adjustment within the previous three (3) years.

5. RENT ADJUSTMENT FOR OTHER USES. In the event Lessee desires to
use any portion of the Premises for purposes beyond those set forth and referred
to in Paragraph 2, such as (by way of example and not by way of limitation) the
operation of a winery, warehousing, administrative offices, or a wine-tasting
room catering to the public, it shall

-2-

<PAGE>

have the right to do so but in any such event the rental to be paid for the
portion of the Premises devoted to such use shall be redetermined and paid to
Lessors upon the basis of its reasonable rental value for such other purposes,
by mutual agreement or by arbitration as provided in Paragraph 6 below.

6. ARBITRATION. If the parties hereto are unable to reach agreement
as to any rent adjustment to be made pursuant to the provisions of Paragraph 4
or Paragraph 5 above, the matter shall be determined by arbitration. Except as
otherwise specifically provided in this lease, the arbitration proceedings shall
be conducted according to the rules and procedures set forth in Title 9 of Part
III (commencing with Section 1280) of the Code of Civil Procedure. A panel of
three (3) arbitrators shall be selected by mutual agreement of the parties, but
if the parties cannot agree on such selection, then each party shall appoint one
(l) arbitrator and the third, or "neutral" arbitrator, shall be appointed as
provided in Section 1281.6 of the Code of Civil Procedure upon the petition of
either party hereto. No person shall be appointed to serve as an arbitrator
unless he or she is qualified by membership in the American Institute of
Appraisers of the National Association of Realtors ("M.A.I.") and has been
regularly engaged in making appraisals of agricultural property in Monterey
County, California, during the previous five (5) years. The decision of any two
(2) of said arbitrators, made and entered as provided in Sections 1282 and
1282.2 of the Code of Civil Procedure, shall be conclusive and binding upon the
parties hereto. Costs of said arbitration proceedings shall be borne and paid
by the parties hereto in equal shares, except that attorneys' fees, fees paid to
witnesses, and other expenses incurred by a party for that party's own benefit,
shall be paid by the party incurring the same. Pending completion of said
arbitration proceedings, Lessee shall continue to make all rental payments as
the same become due hereunder, upon the understanding and agreement that when
said proceedings

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have been completed said rental payments will be adjust"'ed, up or down, in
accordance with the arbitration award.

7. TAXES AND ASSESSMENTS. Lessee shall pay, prior to delinquency,
all real and personal property taxes and assessments levied on or assessed
against the Premises and against improvements now or hereafter located on the
Premises, prorated for the term of this lease. Lessee's obligation to pay such
taxes and assessments shall not include the following, whatever they may be
called: business, income, or profits taxes levied or assessed against Lessors by
federal, state, or other governmental agency; estate, succession, inheritance,
or transfer taxes of Lessors; or corporation, franchise or profits taxes imposed
on any corporate owner of the fee title to the Premises. If, however, during
the term of this lease any taxes are imposed, assessed, or levied on the rents
derived from the Premises in lieu of all or any part of real property taxes,
personal property taxes, or real and personal property taxes that Lessee would
have been obligated to pay under the foregoing provisions of this paragraph, and
if the purpose of the new taxes is more closely akin to that of an ad valorem or
use tax than to an income or franchise tax on Lessors' income, Lessee shall pay
the taxes as provided above for property taxes and assessments; provided,
however, if the amount or rate of such substitute tax payable by Lessee is
increased because of rents or income received by Lessors from property other
than the Premises, then Lessee shall be obligated to pay only that portion of
such substitute tax as shall be applicable to the Premises as if the Premises
were the only property owned by Lessors. Lessee may contest the legal validity
or amount of any taxes or assessment for which Lessee is responsible under this
lease, and may institute such proceedings as Lessee considers necessary. If
Lessee contests any such tax or assessment, Lessee may withhold or defer payment
or pay under protest but shall protect Lessors and the Premises from any lien by
adequate surety bond or other appropriate security

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acceptable to Lessors. Lessors hereby appoint Lessee as Lessors
attorney-in-fact for the purpose of making all payments to taxing authorities
and for the purpose of contesting any tax, assessment or charge payable by
Lessee. Lessors shall, at Lessee's expense, cooperate with Lessee in the contest
or adjustment of taxes payable by Lessee. Without Lessee's prior written
consent, Lessors shall neither give any notice of non-renewal of any land
conservation agreement (executed under the California Land Conservation Act of
1965), relating to the Premises, nor agree with the County of Monterey to a
mutual cancellation thereof.

8. NO WARRANTIES BY LESSORS. The Premises are being leased by
Lessee in reliance upon its own inspection and investigation of said real
property and all improvements thereon and upon Lessee's own evaluation of the
fitness of the property for its intended use. Lessee acknowledges that neither
Lessors nor anyone representing them have made any express or implied warranty
or representation whatsoever concerning soil conditions, the availability of
water, water quality or quantity, the condition of improvements to said real
property, zoning or other governmental laws, ordinances, rules or regulations
affecting the use of the Premises, the suitability of the Premises for the
Lessee's purposes, or any other matter not expressly set forth in this lease.
Lessee has likewise made its own investigation into the condition of the title
to the Premises, including water rights, and this lease is made by Lessors
without warranty of title, express or implied. Notwithstanding the foregoing,
if water rights relating to the Premises are challenged, Lessors and Lessee
shall jointly pursue the protection and preservation of said rights, and shall
equally bear the reasonable expenses thereof.

9. REPAIRS. Subject to the terms of Paragraph 11, Lessee shall, at
Lessee's sole cost and expense, keep and maintain the Premises, including
improvements

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now or hereafter installed thereon while the same are reasonably needed for
agricultural purposes, in good order and condition at all times. Except as
provided in Paragraph Il, Lessors shall not be called upon to make any repairs,
replacements or improvements whatsoever upon the said Premises, or any part
thereof.

10. IMPROVEMENTS. This lease is executed with the understanding and
agreement that the Lessee is not obligated to make any improvements to the
Premises, but that if Lessee elects to do so, said improvements shall consist of
the planting of a premium wine grape vineyard and the installation of buildings,
equipment and facilities which Lessee may require for the development and
operation of said 'property as a vineyard. Except as provided in Paragraph 11,
the full cost of said improvements shall be borne and paid by Lessee, without
any contribution whatsoever by Lessors. The construction and installation of
these or any other improvements made to the Premises by the Lessee shall be
subject to the following conditions:

(a) At least ten (10) days but not more than thirty (30) days
before commencement of any construction on or improvement to the
Premises which will cost in excess of $10,000.00, Lessee shall notify
Lessors of Lessee's intention to commence said work. The notice shall
specify the approximate location and nature of the intended
improvements and shall state the approximate date on or after which
work is to commence. Lessors shall have the right to post and
maintain on the Premises any notices of nonresponsibility provided for
under applicable law.

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however it may arise. However,Lessee may in good faith and at
Lessee's own expense contest the validity of any such asserted lien,
provided Lessee has furnished the bond required in Civil Code Section
3143 (or any comparable statute hereafter enacted for providing a bond
or other assurance freeing the Premises from the effect of such a lien
claim.)

(c) Lessee shall indemnify Lessors against all liability and
loss of any type arising out of work performed on the Premises by or
for Lessee, together with reasonable attorneys' fees and all costs and
expenses incurred by Lessors in negotiating, settling, defending, or
otherwise protecting against such claim should Lessee fail to do so.

(d) If Lessee does not cause to be recorded the bond described
in Civil Code Section 3143 or otherwise protect the property under any
alternative or successor statute, and if a final judgment is rendered
against Lessee by a court of competent jurisdiction for the
foreclosure of a mechanic's, materialman's, contractor's or
subcontractor's lien claim, and if Lessee fails to stay an execution
of the judgment by lawful means or to pay the judgment, Lessors shall
have the right, but not the duty, to pay or otherwise discharge, stay,
or prevent the execution of any such judgment or lien or both. Lessee
shall reimburse Lessors for all sums paid by Lessors under this
subparagraph (d), together with all Lessors' reasonable attorneys'
fees and costs, plus interest on those sums, fees, and costs at the
highest legal rate allowed under the laws of California from the date
of payment until the date of reimbursement.

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All improvements constructed or installed on the Premises by Lessee shall be
owned by Lessee during the term of this lease. At the conclusion of the lease
term as defined in Paragraph 1 hereof, or upon any earlier termination of this
lease however occurring, Lessee shall surrender the Premises and improvements
to Lessors and as of said date said improvements shall become part of the real
property and shall belong solely to Lessors.

11. WATER. Lessee shall have the full use of any and all water
rights appurtenant to the Premises and shall have the right to drill fob its use
such wells as it may deem necessary to furnish sufficient water for agricultural
use on the Premises; but no irrigation water produced by Lessee on the Premises
shall be transported for use off the Premises. Lessors shall not be responsible
to Lessee in any way or to any extent for any deficiency in the quantity or
quality of water which may be available for Lessee's use on the Premises, but if
at any time there shall not be sufficient water from existing wells to properly
irrigate vineyards which Lessee has placed on the Premises or to otherwise farm
the Premises in a proper manner, Lessee shall give reasonable notice thereof to
Lessors. Notwithstanding anything to the contrary in this lease, Lessors shall
thereafter promptly and diligently make all reasonable efforts to restore the
water supply, including the drilling of a new well or wells, at Lessors' option
and expense. If Lessors' efforts are unsuccessful, the Lessee shall have the
right to terminate this lease by giving thirty (30) days' prior written notice
of such termination to Lessors. Notwithstanding the foregoing, Lessors shall
have the personal right to take and use water from the Premises for the
irrigation of approximately acres of other land owned by Lessors described in
the attached "Exhibit C" and designated as Parcel 4 on the attached "Exhibit B,"
for domestic use at ranch dwellings now or hereafter located on the Echenique
Ranch and for watering livestock on said ranch, provided those uses of water by
Lessors neither unreasonably interfere with Lessee's irrigation schedule nor

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diminish the water supply necessary for the proper irrigation of vineyards or
other crops on the Premises. Lessors shall pay to Lessee the cost of power used
to pump the water used by Lessors under this Paragraph 11.

12. UTILITIES AND SERVICES. Lessee shall pay for all utilities and
services used by Lessee upon the Premises during the term of this lease.

13. NONLIABILITY OF LESSORS; INSURANCE. Lessee agrees to keep
Lessors free from all liability and claim for damages arising from any injury
from any cause to any person, including Lessee, or to property of any kind
belonging to anyone, including Lessee, while in, upon, or in any way connected
with the Premises during the term of this lease, except any such liability or
claim arising out of an act or omission on the part of one of the Lessors, an
agent, guest, invitee or lessee of Lessors other than Lessee. Lessee shall
obtain, at its expense, public liability insurance in an amount not less than
$500,000.00 for one person and $1,000,000.00 for more than one person showing
Lessors as additional insured thereunder and providing that said policy or
policies may not be cancelled or amended without at least thirty (30) days'
prior written notice to Lessors. A certificate of insurance evidencing such
coverage shall be provided to Lessors. At the time any such policy is to be
renewed or replaced, if it then appears that because of a change of
circumstances since the policy was issued the amount of coverage is not
reasonably equivalent, in terms of the protection afforded to Lessors, to the
prior coverage required under the terms of this paragraph, the Lessee shall
increase the amount of such coverage to a figure that will provide equivalent
protection to Lessors.

14. FIRE AND EXTENDED COVERAGE INSURANCE. During the term of this
lease the Lessee shall, at Lessee's sole cost and expense, keep insured for the
mutual benefit of Lessee and Lessors all improvements now or hereafter located
on or appurtenant to the

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<PAGE>
Premises against loss or-damage by fire and such other risks as are now or
hereafter included in an extended coverage endorsement in common use for farm
buildings and structures, including vandalism and malicious mischief.

The amount of such insurance shall be sufficient to prevent either Lessors or
Lessee from becoming a co-insurer under the provisions of the policies, but in
no event shall the amount be less than ninety per cent (90%) of the then actual
replacement cost of said improvements (exclusive of excavations and
foundations), without deduction for depreciation (herein called full insurable
value.) At the time any such policy is to be renewed or replaced the Lessors may
request the carrier of the insurance then in force to determine the full
insurable value as defined in this paragraph, and the resulting determination
shall be conclusive between the parties as to the amount of such coverage to be
required under the provisions of this paragraph. Lessee may include the holder
of any mortgage on the leasehold or on the fee, or both, as a loss payee; on
Lessors' written demand Lessee shall include the holder of any mortgage on the
fee as a loss payee to the extent of that mortgage interest. The proceeds shall
be applied first to the repair, restoration, or reconstruction of said
improvements, and any excess shall belong solely to Lessee.

15. ENTRY, INSPECTION AND USE BY LESSORS. Lessee shall permit
Lessors, and Lessors' agents and assigns, at all reasonable times, to enter the
Premises and to use the roads established on the Premises now or in the future
for the purpose of inspection, reasonable ingress and egress to and from public
roads and to and from other lands owned by the Lessors, the posting of notices,
the exercise of any right given to or retained by Lessors under the provisions
of this lease, or any other lawful purpose. To facilitate such access, Lessee
shall supply Lessors, their agents and assigns, with keys to gates to the
Premises.

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<PAGE>

16. OIL AND GAS LEASES. This lease is subject and subordinate to a
certain oil and, gas lease affecting the Premises, dated August 8, 1973, taken
by Getty Oil Company, a Delaware corporation, as lessee, recorded August 24,
1973, on Reel 866, at Page 930, and re-recorded August 29, 1973, on Reel 867, at
Page 823, Official Records of Monterey County, California; said lessee's
interest therein was subsequently assigned to and is now held by Husky Oil
Company of Delaware, a corporation. Notwithstanding anything to the contrary
contained in this lease, Lessors shall have the right at any time or from time
to time to execute other oil, gas or mineral leases with respect to the Premises
(or to extend the existing oil and gas lease held by Husky Oil Company of
Delaware); provided, that neither Lessors nor said mineral lessee shall have the
right, without the prior written consent of the Lessee, to enter upon 'the
surface of the Premises or the upper 500 feet thereof to explore for, produce,
or extract oil, gas or other minerals. All oil, gas or mineral leases hereafter
executed by Lessors with respect to the Premises shall contain a provision
making the lessee therein primarily liable to Lessors and Lessee, as their
respective interests may appear, for all damages to livestock, crops, vines,
trees, fences, roads, ditches, buildings and other improvements on the Premises,
caused by said lessee's operations thereon. Lessors hereby agree to indemnify
and hold harmless the Lessee from and against all such damages.

17. NUISANCE; COMPLIANCE WITH LAWS. Lessee shall not knowingly do,
or permit to be done, or knowingly keep, or permit to be kept, in or about the
Premises, anything which shall be a nuisance or which shall be in violation of
any law, ordinance, rule or regulation of any governmental authority.

18. CONDEMNATION. If during the term of this lease all or any
portion of the Premises is condemned, or conveyed under threat of condemnation,
for public use, the parties hereto agree as follows:

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(a) The respective rights of the parties shall depend
upon whether there is a "total taking," a "substantial
taking," or a "partial taking," said terms being defined as
follows:

TOTAL TAKING means the taking of the fee title to all of the
Premises and the improvements on said Premises;

SUBSTANTIAL TAKING means the taking of so much of the
Premises or improvements or both that the conduct of Lessee's
business on the Premises would be prevented or impaired to the
extent that agricultural operations could not be conducted on the
Premises at an economically feasible level of profit;

PARTIAL TAKING means any taking of the fee title that is not
either a total taking or a substantial taking.

(b) In the event of a TOTAL TAKING (or a SUBSTANTIAL TAKING if
Lessee gives Lessors notice of intent to treat such taking as total taking
within fifteen(15)days after the nature and extent of the taking have been
finally determined), Lessee's interest in the leasehold and Lessee's obligations
under this lease, including but not limited to the obligation to pay rent, shall
continue until the date on which the condemnor takes possession, and Lessee's
right to apportionment of the award shall act rue as of that date. Upon
delivery of possession to the condemnor, this lease shall terminate.

(c) In the event of a PARTIAL TAKING (or a SUBSTANTIAL TAKING if
Lessee does not elect to treat it as a total taking as provided in
subparagraph (b) of this paragraph), this lease shall remain in full
force and effect with respect to the remaining property and Lessee's
obligation to pay rent shall be reduced at

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the rate per acre then payable under the provisions of Paragraphs 3
and 4 above for each acre so taken.

(d) Upon a total, substantial, or partial taking, all sums,
including damages and interest, awarded for the fee or leasehold or
both shall be deposited with a bank, savings and loan association, or
other mutually agreeable escrow holder, with instruction's to
distribute the same as follows:

TO LESSEE, that portion of the award representing the value
of the leasehold estate of the Lessee in the property taken for
the then unexpired term of this lease (including renewal option
periods); provided, however, that Lessee's portion of the award
as it relates to improvements taken shall not exceed an amount
equal to the then unamortized cost of all improvements (including
capitalized development costs for labor, materials and
preproduction interest on funds borrowed and used for
installation and development of said improvements) made to the
said property by Lessee, computed on a straight-line basis over
the term of the lease remaining at the time the improvements were
installed.

TO LESSORS, the balance of said award.

(e) The party receiving any formal or informal notice of
intended taking under eminent domain from a public agency shall give
the other party prompt notice of the contents of the notice received
and the date on which it was received.

(f) Lessors, Lessee, and all persons and entities holding under
Lessee shall each have the right to represent their respective
interests in each

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proceeding or negotiation with respect to a taking of all or any part
of the Premises under eminent domain, and to make full proof of their
respective claims. No agreement, settlement, sale, or transfer to the
condemning agency shall be made without the consent of Lessors and
Lessee. Lessors and Lessee each agree to execute and deliver to the
other any instruments that may be required to effectuate or facilitate
the provisions of this lease relating to condemnation.

19. DEVELOPMENT FINANCING. If during the term of this lease the
Lessee elects to do work of development or to construct improvements on the
Premises, as set forth in Paragraph 10 above, the parties hereto agree as
follows:

(a) The total cost of the work shall be paid for by Lessee.

(b) Notwithstanding anything herein to the contrary, Lessee is
hereby given the absolute right without the Lessors' consent to
mortgage its interest in this lease for the purpose of securing any
loan to be used by Lessee for the development and improvement of the
Premises, but Lessors shall not be required to join or participate in
said loan, or to accept any personal responsibility for the repayment
of the same. No such mortgage shall extend to or affect the fee title
or the reversionary interest of the Lessors in and to the Premises, or
the reversionary interest of the Lessors in and to any improvements
now or hereafter installed upon said Premises. No such mortgage or
assignment thereof shall be binding upon the Lessors in the
enforcement of their rights under this lease, but Lessors will give
notice of default by Lessee to the mortgage holder and will accept
performance by the mortgage holder of any term of this lease to be
performed by Lessee. The

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mortgage holder shall have thirty (30) days in which to cure any
default by Lessee after the time for Lessee to cure it has expired;
provided, however, that if the default cannot be cured by the payment
of money, Lessors will not terminate this lease if the mortgage holder
commences and thereafter diligently pursues to completion foreclosure
of its mortgage and pays to the Lessors all sums then due and unpaid
under the terms of this lease, as well as all other sums due from
Lessee to Lessors under other agreements with respect to which Lessors
have given prior written notice to mortgage holders referred to in
this subparagraph (b). The loan documents shall contain a provision
allowing, but not obligating, the Lessors to cure any default
thereunder if the Lessee fails to do so. Such mortgage shall provide
that a copy of any notice of default served thereunder shall be sent
by mail to the Lessors at the address given in this lease for the
service of notices hereunder. A duplicate original or certified copy
of such mortgage, showing recording data, shall be given to Lessors
within ten (10) days after the same is returned from the recorder's
office.

20. PERMANENT FINANCING; SUBORDINATION OF FEE. In the event Lessee
desires to obtain permanent, long-term financing of improvements it has made' to
the Premises pursuant to the provisions of Paragraph 10 above it shall have the
right to do so at any time after five (5) years from the commencement of the
lease term, provided the entire cultivable portion of the Premises is planted to
vineyard during calendar year 1980, all other improvements necessary to the
operation of the Premises as a vineyard are installed as needed, and said
improvements thereafter are maintained in place and in good condition in
accordance with the terms of this lease; said right to terminate at the
expiration of ten (10)

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years after the commencement' of the lease term. Said financing shall be in the
form of a long-term loan from a bank, savings and loan association, or insurance
company authorized to do business in the State of California, or any similar
financial institution acceptable to the Lessors. In such event Lessors agree
that if requested to do so by Lessee they will execute and deliver to such
lender a deed of trust sufficient to subordinate or encumber Lessors' fee title
to the Premises to the lien of an encumbrance represented by said deed of trust,
together with such other loan documents in the standard form then in use by the
lender as the lender may reasonably require as a condition of making the loan.
Lessors and Lessee shall negotiate in good faith with respect to such amendments
to this lease as the lender requires as a condition to providing the long-term
financing, and neither Lessee nor Lessors shall unreasonably withhold their
consent to such amendments. Said encumbrance shall constitute a first lien
against the fee title to the Premises. If, however, the holder of the existing
lien represented by a first deed of trust executed by Lessors in favor of flank
of America National Trust and Savings Association on November 15, 1976, recorded
December 10, 1976, on Reel 1103, at Page 158, Official Records of Monterey
County-(the "Bank of America loan") will not subordinate that lien to the long
term loan contemplated hereby, the provisions of subparagraph 20(k) below shall
apply. 'The foregoing provisions of this paragraph are subject, however, to the
following terms, conditions and agreements:

(a) The Lessee must not then be in default in the
performance of any of its obligations under this lease.

(b) The term of the loan must be not less than fifteen
(15) years, nor more than twenty (20) years.

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(d) Neither the note nor the deed of trust shall
contain any provisions making said deed of trust security
for future advances to the borrower (Lessee), nor shall they
contain any "dragnet" or similar provision making said deed
of trust security for any other obligation of the borrower
(Lessee) to the lender.

(e) The rate of interest provided for in said note
shall not exceed the rate then prevailing among banks,
savings and loan associations and insurance companies for
similar loans.

(f) Said note shall provide for repayment of the loan
in equal monthly, quarter-annual, semi-annual or annual
installments of both principal and interest, amortized over
a term not to exceed twenty-five (25) years. No provision
shall be made for deferment of principal payments, other
than a provision allowing the lender, at the lender's sole
discretion, to permit such deferment for not more than two
(2) years at a time and for a total of not more than four
(4) years during the term of the loan. Both the note and
the deed of trust securing the same shall expressly provide
that there can be no extension of the maturity date,
additions to the balance of the loan, alteration of any
provision in the documents, or any refinancing of the unpaid
principal balance without the Lessors' prior written
approval, which written approval shall not be unreasonably
withheld; provided, that nothing in this subparagraph shall

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preclude the mortgagee (lender) from making any payment required to be
made by Lessee under the terms of this lease in order to avoid or cure
a default on the part of Lessee.

(g) The loan documents and the deed of trust shall
contain a provision that the Lessors have joined in the
execution of the same solely for the purpose of creating a
lien against the fee title to the Premises in favor of the
lender, and that no personal judgment will be sought or
obtained against the Lessors, or any of them, by reason of
their having joined in the execution of said documents.

(h) The proceeds of said loan shall be applied by the
lender first to the full payment of any construction loan
taken out by the Lessee pursuant to the provisions of
Paragraph 19 above, and second to the payment of any and all
obligations then due and owing by Lessee to Lessors, whether
under the terms of this lease or otherwise; the remaining
proceeds, if any, shall be paid to Lessee.

(i) Lessors' obligation to subordinate their fee title
to the Premises to said loan is limited to one such loan and
one such note and deed of trust (subject, however, to
subparagraph (k) below.)

(j) The loan documents and deed of trust shall contain
a provision requiring that all notices of default shall be
served on both Lessors and Lessee and that Lessors shall
have

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the right to cure any default if Lessee fails to do so. Lessors shall
have thirty (30) days in which to cure any default after the time for
Lessee to cure it has expired. Neither Lessors' right to cure any
default nor any exercise of such a right shall constitute an
assumption of liability under the,note or deed of trust. If any
default is noncurable, it shall not be grounds for foreclosure of the.
deed of trust, under power of sale or judicially, if the Lessors, or
the Lessee in possession of the premises, promptly perform all other
provisions of the note and deed of trust.

(k) If the holder of the Bank of America loan referred
to above will not subordinate that lien to the long-term
financing contemplated hereby, and it is therefore necessary
that such long-term financing include an amount sufficient
to pay off the then unpaid balance of the Bank of America
loan so that the deed of trust to be given the lender will
constitute a first lien upon the fee title to the Premises,
Lessors agree to allow the amount of the loan to be so
increased; provided, that so much of the loan proceeds as
may be necessary shall be delivered by the lender to the
holder of the Bank of America loan to pay in full all sums
due under the note and deed of trust held as security
therefor. In this event, Lessors shall be directly
responsible to the lender for all payments of principal and
interest on the amount by which the loan is increased
(whether such payments are provided for in a single note or
in multiple notes); provided,

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however, that if the rate of interest charged by the lender on that
portion of the loan that is used to pay off the obligation represented
by the Bank of America loan exceeds the rate of interest then provided
for in the note to the Bank of America, Lessee will pay to the lender
the additional amount of interest being charged as the same becomes
due and will indemnify the Lessors against all liability for such
additional interest.

21. EVENTS OF DEFAULT. Any of the following events shall constitute
a default under the terms of this lease:

(a) The nonpayment of rent or any other sum to be paid
by Lessee to Lessors under the terms of this lease, and the
failure of Lessee to make such payment within ten (10) days
after written notice to do so is given to the Lessee and to
any lender then holding a security interest in the leased
land or in the leasehold estate of the Lessee pursuant to
the provisions of Paragraph 19 or Paragraph 20 above.

(b) Delinquency by the Lessee in the performance of or
compliance with any other covenant, condition or restriction
contained in this lease and the failure of the Lessee to
perform or comply with the same within thirty (30) days
after written notice to do so is given to the Lessee and to
any lender then holding a security interest in the Premises
or in the leasehold estate of the Lessee pursuant to the
provisions of Paragraph 19 or Paragraph 20 above; provided,
however, that if the nature of

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Lessee's default is such that more than thirty (30) days are
reasonably required for its cure, then Lessee shall not be deemed to
be in default if Lessee commences the cure within that thirty (30)
days' period and thereafter diligently prosecutes the cure to
completion.

(d) The subjection of any right or interest of Lessee
hereunder to attachment, execution or other levy, or to
seizure under legal process (except a foreclosure of
security given by Lessee to a lender pursuant to the
provisions of Paragraph 19 or Paragraph 20 above), if not
released within thirty (30) days.

(e) The filing by Lessee of a petition in bankruptcy
or insolvency, or for an arrangement or reorganization, or
the making of an assignment for the benefit of creditors.

(f) The filing against Lessee of a petition in
bankruptcy or insolvency, or for reorganization, or for the
appointment of a receiver to take possession of the Premises
or improvements thereon or of Lessee's interest in the
leasehold or of Lessee's operations on the Premises for any
reason (other than a receivership pursuant to any security
given by the Lessee to a lender referred to in Paragraph 19
or in Paragraph 20 above), if not dismissed within ninety
(90) days.

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(g) Any default or delinquency by Lessee in the
payment of any loan or other obligation secured by a
mortgage or other security instrument given to secure an
obligation to a lender referred to in Paragraph 19 or in
Paragraph 20 above where Lessee's default continues beyond
any period of grace allowed by the applicable loan document.

(h) Any act or event which by the terms of this lease
is expressly made an event of default.

22. REMEDIES OF LESSOR ON DEFAULT. Upon any default of Lessee under
the terms of this lease the Lessors shall, at any time prior to the cure of the
default, have the following remedies in addition to all other rights and
remedies provided by 1aw or equity, to which Lessors may resort cumulatively or
in the alternative:

(a) Lessors may at Lessors' election terminate this
lease by giving written notice of termination. On the giving
of the notice, all Lessee's rights in the Premises shall
terminate. Promptly after notice of termination, Lessee
shall surrender and vacate the Premises and all improvements
thereon, and Lessors 'may reenter and take possession of the
Premised and improvements and eject all parties in
possession. Termination under this subparagraph shall not
relieve Lessee from any claim for damages previously accrued
or then accruing against the Lessee. Said damages shall
include the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the
award exceeds the amount of such rental loss

-22-

<PAGE>

for the same period that the Lessee proves could be reasonably
avoided.

(b) Lessors may at Lessors' election reenter the
Premises and, without terminating this lease, at any time
and from time to time relet said Premises and improvements
or any part or parts of them for the account and in the name
of Lessee or otherwise. Any reletting may be for the
remainder of the term or for a longer or shorter period.
Lessors may execute any leases made under this provision
either in Lessors' name or in Lessee's name and shall be
entitled to all rents from the use, operation, or occupancy
of the Premises and improvements. Lessee shall nevertheless
pay to Lessors on the due dates specified in this lease the
equivalent of all sums required of Less&e under the terms of
this lease, plus Lessors' expenses, less the net amount
realized by Lessors upon any such reletting. No act by or
on behalf of Lessors under this provision shall constitute a
termination of this lease unless Lessors give Lessee written
notice of termination.

(c) Lessors shall be entitled at Lessors' election to
each installment of rent or to any combination of
installments for any period before termination, plus
interest on delinquent installments at the highest interest
rate then allowable under the laws of the State of
California.

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<PAGE>

(d) Upon any reentry of the Premises by Lessors
pursuant to the provisions of subparagraphs (a) or (b)
above, the Lessors may at Lessors'. election take possession
of all crops on the Premises, harvested and unharvested, and
shall thereupon become the owner of the same, without any
obligation to compensate Lessee or any other person
therefor, except that Lessors shall pay to Lessee all moneys
received from the sale of said crops, less all reasonable
costs and expenses incurred or expended by Lessors in
cultivating, harvesting, processing, handling and selling
said crops, less amounts owed to the holder of a security
interest given to secure crop financing, and less all sums
which may then be due to Lessors under the terms of this
lease or otherwise. Lessors may at Lessors' election use
any of Lessee's machinery, equipment, trade fixtures or
other personal property left upon the Premises, without
compensation and without liability for the use or damage of
the same, or store said property for the account of and at
the cost of Lessee.

The waiver by Lessors of any default or breach of this lease by the Lessee shall
not be deemed or held to be a waiver of any subsequent or other default or
breach hereby by Lessee.

23. SURRENDER AND REMOVAL BY LESSEE; QUITCLAIM. Upon the expiration
of the term of this lease or any earlier termination thereof, the Lessee shall
surrender to Lessors the possession of the Premises and all improvements located
thereon. If Lessee is not at the time of such termination in default under the
terms of this lease, Lessee may remove or

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<PAGE>

cause to be removed all of its machinery, equipment, trade fixtures and other
personal property located upon the Premises and then owned by the Lessee; any of
said property not so removed within thirty (,30) days after the date of
termination shall be considered to have been abandoned and thereafter shall
belong to Lessors without the payment of any consideration. Upon such
expiration or earlier termination of this lease, the Lessee agrees to execute,
acknowledge and deliver to Lessors in recordable form a proper instrument
releasing and quitclaiming to Lessors all right, title and interest of the
Lessee in and to the Premises and all improvements located thereon. No holding
over of the possession of the Premises by Lessee beyond the term of this lease
shall be deemed an extension of said term or create the right to an additional
term in the absence of a written agreement executed by Lessors.

24. LEASE SUBJECT TO UTILITY EASEMENTS. This lease is accepted by
Lessee with knowledge of the number, kind and location of all utility easements
located on the Premises, including but not limited to an underground natural gas
pipeline which runs through the same. Lessee agrees to conduct its farming
operations on the Premises in such a manner as will avoid injury to or
interference with any such easement. Lessee hereby indemnifies Lessors against
any and all liability to the owner or owners of such easements for damage
thereto caused by Lessee's operations on the Premises.

25. LESSORS' ENCUMBRANCES. Except as contemplated by Paragraph 20,
Lessors shall not further encumber the Premises or any part thereof during the
first ten (10) years of the lease term without Lessee's prior written consent.
In the event of default by the Lessors under an encumbrance of Lessors' interest
in the Premises, or in the event Lessors' interest in the Premises becomes
subject to-any lien for which Lessee is not responsible under the terms of this
lease and which jeopardizes Lessee's interest in the Premises, Lessee

-25-

<PAGE>

shall have the right to cure the default or discharge the lien and. to deduct
the, funds expended in connection with such cure or discharge from subsequent
rental payments becoming due under the terms of this lease. Lessor shall use
its best efforts to cause holders of encumbrances on Lessors' interest in the
Premises to agree to accept performance thereunder by the Lessee.

26. WAIVER OF RIGHT OF ACTION FOR INSURED LOSSES. Each party to this
lease waives any right of action such party may later acquire against the other
for the recovery of any loss or damage to any of such party's property which is
insured under valid and collectible insurance policies, to the extent of any
recovery collectible under such-insurance.

27. OPTION TO EXTEND. Provided that Lessee is not then in default
under the terms of this lease, Lessee shall be entitled to extend the term of
this lease for four (4) successive five-year terms upon giving to Lessors
written notice of Lessee's election to exercise the option to extend the term at
least ninety (90) days prior to the expiration of the then existing term hereof.
Such renewal shall be upon the same terms and conditions as are herein stated.
References in this lease to the term of this lease shall, to the extent
exercised, include the four (4) successive five-year options provided for above.

28. FIRST RIGHT TO PURCHASE. During the term of this lease, provided
Lessee is not in default in the performance of any of its obligations hereunder,
the Lessee shall have the first right to purchase the Premises if the Lessors
receive a bona fide offer to purchase the same from a third party which they
desire to accept, or if the Lessors offer to sell the same. In either such case
the Lessors shall give Lessee written notice of such offer and of all of the
terms and conditions thereof, and thereafter the Lessee shall have twenty (20)
days in which to exercise this first right to purchase by giving to Lessors
written notice of Lessee's election so to do. If this first right to purchase
is not so exercised by Lessee within

-26-

<PAGE>

said twenty (20) days' period, it shall lapse and shall be of no further force
or effect and Lessors thereafter shall be free to sell the Premises to a third
party within one hundred and eighty (180) days after Lessee's first right to
purchase lapses, but not for a lesser price or on terms substantially more
favorable to the purchaser. Any such sale to a third party shall be subject to
this lease, it being expressly understood and agreed that this lease shall
continue in full force and effect notwithstanding said sale.

29. ASSIGNMENT AND SUBLETTING. Lessee shall not assign this lease or
any interest herein, or underlet the Premises or any part thereof, without the
prior written consent of the Lessors, except to an affiliate or affiliates of
MONTEREY FARMING CORPORATION (i.e., a partnership in which MONTEREY FARMING
CORPORATION is a general partner, or a joint venture in which MONTEREY FARMING
CORPORATION is a joint venturer), and neither this lease, nor any interest
herein of the Lessee, shall be assignable in proceedings by or against the
Lessee in bankruptcy, or in insolvency, or in any other manner by operation of
1aw; provided, that such consent shall not be unreasonably withheld; provided
further, that Lessors' consent shall not be required in connection with the
transfer of this lease to a lender who has financed improvements to the Premises
under the provisions of paragraph 19 or Paragraph 20 above and who holds a
security interest in the lease hold estate of the Lessee, in a foreclosure or
other like proceedings instituted by the lender under the terms of any such
security instrument, or by an assignment or other conveyance given in lieu of
foreclosure. No assignment under the provisions of this paragraph shall be
effective, however, until the assignee has given written notice of such
assignment to the Lessors, stating the name and address of the assignee and the
date of transfer, accompanied by a copy of the assignment and the written
agreement of the assignee

-27-

<PAGE>

expressly assuming and agreeing to keep and perform all of the obligations of
the Lessee under this lease.

30. TIME OF THE ESSENCE. Time and specific performance are of the
essence of this agreement, and of every provision hereof.

31. SUCCESSORS AND ASSIGNS. Subject to the restriction on assignment
hereinabove set forth, this lease and all of the provisions hereof shall inure
to the benefit of and shall be binding upon the heirs, legal representatives,
successors and assigns of the respective parties hereto.

32. ATTORNEYS' FEES. In case either party shall bring suit against
the other to compel the performance of, or to recover for the breach of, any
covenant, agreement or condition herein written, or, in the case of the Lessors,
to recover possession of the Premises or to remove from the record this lease or
any lien or encumbrance thereon created by the Lessee, the prevailing party
shall be entitled to a reasonable attorneys' fee, to be fixed by the court and
made a part of any judgment entered therein.

33. NOTICES. Any notice to be given hereunder will be sufficiently
served if given personally to the person to whom it is addressed, or if
deposited in the United States mail, registered or certified, addressed to the
party to be served at the address shown below his signature hereto, or at such
other address as said party hereafter may designate for the service of notices
hereunder.

34. SHORT FORM LEASE. The parties agree to execute and have
acknowledged a short form lease for purposes of recording in Monterey County,
California, which said short form shall describe the Premises as being subject
to the rights, covenants and restrictions herein contained.

35. ESTOPPEL CERTIFICATE.

-28-

<PAGE>

(a) Lessors shall at any time upon not less than fifteen (15)
days prior written notice from Lessee execute, acknowledge and deliver to Lessee
a statement in writing (i) certifying that this lease is unmodified and in full
force and effect or, if 'modified, stating the nature of the modification and
certifying that this lease, as modified, is in full force and effect, and (ii)
acknowledging that there are not, to Lessor knowledge, any uncured defaults on
the part of Lessee hereunder or specifying the defaults if any are claimed. Any
such statement may be conclusively relied upon by any prospective encumbrancer
of the Premises, or Lessee's interest therein.

(b) Lessors' failure to deliver such statement within the time
specified shall be conclusive upon Lessors (i) that this lease is in full force.
and effect, without modification except as may be represented by Lessee, (ii)
that there are no uncured defaults in Lessee's performance, and (iii) that not
more than one semi-annual installment of rent has been paid in advance.

-29-

<PAGE>

IN WITNESS WHEREOF, the said parties have executed this lease in
duplicate this 27th day of September, 1979.

LESSOR: LESSEE:
- ------ ------

MONTERY FARMING
/s/ Luis Echenique CORPORATION, a corporation
- ------------------------------
Luis Echenique

By /s/ Alfred G. Scheid
------------------------
/s/ Ricardo Enchenique President
- ------------------------------
Ricardo Enchenique

By /s/ Alvin J. Portnoy
------------------------
/s/ Francis D. Echenique Secretary
- ------------------------------
Francis D. Echenique

Address:
501 Santa Monica Boulevard
By /s/ Luis Echenique Suite 312
------------------------- Santa Monica, California 90401
His Attorney-in-fact

Address:
P.O. Box 108
San Lucas, California 93954

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<PAGE>

CONSENT

MARY R. ECHENIQUE, wife of LUIS ECHENIQUE, and MARGARET ANN ECHENIQUE,
wife of FRANCIS D. ECHENIQUE, hereby consent to the foregoing lease.

DATED: September 27, 1979.

/s/ Mary R. Echenique
---------------------------------------------
Mary R. Echenique

/s/ Margaret Ann Echenique
---------------------------------------------
Margaret Ann Echenique

By /s/ Luis Echenique
-------------------------------------------
Her Attorney-in-fact

STATE OF CALIFORNIA )
) ss.
COUNTY OF MONTEREY )

On September 27, 1979, before me, the undersigned, a Notary
Public in and for said county and state, personally appeared LUIS ECHENIQUE,
RICARDO ECHENIQUE and MARY R. ECHENIQUE, known to me to be the persons whose
names are subscribed to the within instrument, and acknowledged to me that they
executed the same.

/s/ John W. Hutton
---------------------------------------------
Notary Public

STATE OF CALIFORNIA )
) ss.
COUNTY OF MONTEREY )

On September 27, 1979, before me, the undersigned, a Notary
Public in and for said county and state, personally appeared LUIS ECHENIQUE,
known to me to be the persons whose name is subscribed to the within instrument
as the attorney-in-fact of FRANCIS D. ECHENIQUE and MARGARET ANN ECHENIQUE, and
acknowledged to me that he subscribed the names of FRANCIS D. ECHENIQUE and
MARGARET ANN ECHENIQUE thereto as principals, and his own name as
attorney-in-fact.

-31-

<PAGE>

/s/ John W. Hutton
---------------------------------------------
Notary Public

-32-

<PAGE>

STATE OF CALIFORNIA )
) ss.
COUNTY OF )

On September 28, 1979, before me, the undersigned, a Notary
Public in and for said county and state, personally appeared Alfred G. Scheid
and Alvin J. Portnoy, known to me to be the President and the Secretary of the
corporation that executed the within instrument, and also known to me to be the
persons who executed it on behalf of such corporation, and acknowledged to me
that such corporation executed the within instrument pursuant to its by-laws or
a resolution of its Board of Directors.

/s/ John S. Thompson
---------------------------------------------
Notary Public

-33-

<PAGE>

Luis Echenique, et al to:

EXHIBIT "A"

PARCEL 1

Certain real property situate in the Rancho San Lucas, Monterey County,
California, being a part of Lot 1 as shown on map filed in Volume l of Surveys
at Page 34, records of said county, said part being particularly described as
follows:

Beginning at a point in the southeasterly boundary of said Lot 1, at the
northeasterly side of the farm road, running along the southwesterly side of
California State Highway US 101 as described in deed from Luis Echenique, et al
to the State of California dated May 29, 1969 and recorded in Reel 615 of
Official Records at Page 698, records of said county, and running thence along
said southeasterly lot boundary.

(1) S 44DEG. 41' W, 651.6 feet; thence
(2) N 37DEG. 14' W, 376.8 feet; thence
(3) N 36DEG. 26' W, 4046.4 feet; thence
(4) N 36DEG. 04' W, 457.8 feet; thence
(5) N 44DEG. 04' W, 405.7 feet; thence
(6) N 36DEG. 29' W, 496.4 feet; thence
(7) N 36DEG. 53' W, 410.2 feet; thence
(8) N 30DEG. 47' W, 603.5 feet; thence
(9) N 52DEG. 04' E, 154.0 feet to the northeasterly side of a farm road
running along said highway line; thence along said road line
(10) S 48DEG. 43' E, 265.6 feet; thence
(11) S 45DEG. 11' E, 409.8 feet; thence
(12) S 41DEG. 36' E, 541.1 feet; thence
(13) S 36DEG. 07' E, 358.9 feet; thence
(14) S 40DEG. 01' E, 4419.5 feet; thence
(15) S 40DEG. 20' E, 722.0 feet; to the point of beginning.

</TABLE>

CONTAINING AN AREA OF 69.3 ACRES OF LAND, MORE OR LESS

PARCEL 2

Certain real property situate in the Rancho San Lucas and the Rancho San
Bernardo, Monterey County, California, being a part of Lot 1 as shown on map
filed in Volume l of Surveys at Page 34, records of said county, said part being
particularly described as follows:

Beginning at a point in the southeasterly boundary of said Lot 1, at the
southwesterly line of a farm road running along the northeasterly line of said
State Highway and running thence along said southwesterly road line

(1) N 40DEG. 02' W, 1166.1 feet; thence
(2) N 36DEG. 35 W, 450.2 feet; thence
(3) N 44DEG. 14' W, 302.1 feet; thence
(4) N 39DEG. 49' W, 1198.9 feet; thence
(5) N 36DEG. 20' W, 249.7 feet; thence
(6) N 37DEG. 45' W, 601.0 feet; thence

-1-

<PAGE>

(7) N 45DEG. 16' W, 351.9 feet; thence continuing along the line
of said farm road, but leaving said highway line
(8) N 39DEG. 49' W, 2499.9 feet; thence
(9) N 49DEG. 48' W, 1773.8 feet; thence
(10) N 38DEG. 14' W, 443.2 feet; thence
(11) N 18DEG. 34' PARA4, 539.6 feet; thence
(12) N 38DEG. 38' W, 203.5 feet; thence
(13) N 50DEG. 30' W, 312.3 feet; thence
(14) N 44DEG. 43' W, 224.8 feet; thence
(15) N 64DEG. 13' W, 247.8 feet; thence
(16) N 33DEG. 19' W, 445.7 feet; thence
(17) N 31DEG. 29' W, 486.7 feet: thence
(18) N 27DEG. 30' E, 243.3 feet; thence
(19) N 44DEG. 05' W, 195.0 feet; thence
(20) N 50DEG. 32' W, 141.6 feet; thence
(21) N 40DEG. 41' W, 201.7 feet; thence
(22) N 50DEG. 51' W, 247.7 feet; thence
(23) N 46DEG. 48' W, 206.2 feet; thence
(24) N 52DEG. 59' E, 270.0 feet; thence
(25) S 42DEG. 40' E, 483.4 feet; thence
(26) S 38DEG. 29' E, 343.3 feet; thence
(27) N 68DEG. 04' E, 206.6 feet; thence
(28) N 86DEG. 50' E, 102.1 feet; thence
(29) S 86DEG. 24' E, 224.0 feet; thence
(30) S 55DEG. 29' E, 126.1 feet; thence
(31) S 39DEG. 52' E, 308.5 feet; thence
(32) N 49DEG. 33' E, 62.0 feet; thence
(33) N 22DEG. 53' E, 160.3 feet; thence
(34) S 78DEG. 48' E, 234.9 feet; thence
(35) S 54DEG. 54' E, 174.2 feet; thence
(36) N 86DEG. 20' E, 192.4 feet; thence
(37) S 83DEG. 52' E, 282.8 feet; thence
(38) S 89DEG. 24' E, 329.5 feet; thence
(39) S 80DEG. 13' E, 291.6 feet; thence
(40) S 39DEG. 08' E, 230.0 feet; thence
(41) S 24DEG. 24' E, 300.9 feet; thence
(42) S 66DEG. 49' E, 234.6 feet; thence
(43) N 19DEG. 13' E, 182.3 feet; thence
(44) N 35DEG. 08' W, 199.1 feet; thence
(45) N 51DEG. 46' E, 232.9 feet; to a point now designated
"A"; thence
(46) N 70DEG. 15' E, 133.2 feet; thence
(47) S 75DEG. 35' E, 295.5 feet; thence
(48) S 69DEG. 24' E, 211.9 feet; thence
(49) S 79DEG. 01' E, 157.6 feet; thence
(50) S 44DEG. 20' E, 213.1 feet; thence
(51) S 73DEG. 03' E, 249.7 feet; thence

-2-

<PAGE>

(52) S 48DEG. 18' E, 146.1 feet; thence
(53) S 36DEG. 36' E, 345.1 feet; thence
(54) S 32DEG. 30' E, 296.1 feet; thence
(55) S 13DEG. 53' E. 106.3 feet; thence
(56) N 53DEG. 47' E, 303.9 feet; thence
(57) S 42DEG. 42' E, 588.7 feet; thence
(58) N 49DEG. 25' E. 474.6 feet; thence
(59) S 51DEG. 50' E, 265.2 feet; thence
(60) S 0DEG. 30' E, 164.2 feet; thence
(61) S 41DEG. 03' E, 793.3 feet; thence
(62) S 26DEG. 53' W, 130.7 feet; thence
(63) S 74DEG. 01' w, 208.9 feet; thence
(64) S 37DEG. 38' W, 131.6 feet; thence
(65) S 34DEG. 54' E, 321.8 feet; thence
(66) S 32DEG. 47' E, 190.2 feet; thence
(67) S 52DEG. 55' W, 252.5 feet; thence
(68) S 27DEG. 00' E, 471.3 feet; thence
(69) S 8DEG. 03' E, 131.1 feet; thence
(70) S 43DEG. 52' W, 224.5 feet; thence
(71) S 88DEG. 52' W, 80.9 feet; thence
(72) N 36DEG. 49' W, 745.5 feet; thence
(73) N 54DEG. 47' W, 204.7 feet; thence
(74) N 25DEG. 04' W, 225.1 feet; thence
(75) N 44DEG. 35' W, 144.7 feet; thence
(76) S 56DEG. 21' W, 159.3 feet; thence
(77) S 22DEG. 48' E, 136.1 feet; thence
(78) S 50DEG. 14' E, 88.7 feet; thence
(79) S 28DEG. 40' E, 720.6 feet; thence
(80) S 34DEG. 50' W, 83.2 feet; thence
(81) S 04DEG. 57' W, 106.7 feet; thence
(82) S 39DEG. 55' E, 73.2 feet; thence
(83) S 78DEG. 25' E, 212.3 feet; thence
(84) S 43DEG. 45' E, 146.5 feet: thence
(85) S 26DEG. 20' E, 247.4 feet; thence
(86) S 54DEG. 52' W, 447.4 feet; thence
(87) N 87DEG. 29' W, 123.3 feet; thence
(88) N 62DEG. 22' W, 263.4 feet; thence
(89) N 40DEG. 44' W, 380.9 feet; thence
(90) S 30DEG. 43' W, 223.1 feet; thence
(91) S 14DEG. 31' E, 78.2 feet; thence
(92) S 38DEG. 35' E, 267.5 feet; thence
(93) S 62DEG. 13' E, 322.9 feet; thence
(94) S 57DEG. 18' E, 325.2 feet; thence
(95) S 80DEG. 01' E, 88.1 feet; thence
(96) S 43DEG. 57' E, 122.8 feet; thence
(97) S 02DEG. 46' W, 207.1 feet; thence
(98) S 34DEG. 23' E, 497.4 feet; thence

-3-

<PAGE>

(99) S 26DEG. 30' E, 266.2 feet; thence
(100) S 33DEG. 16' E, 309.4 feet; thence
(101) S 23DEG. 25' E, 263.8 feet; thence
(102) S 42DEG. 31' E, 314.4 feet; thence
(103) N 85DEG. 46' E, 194.1 feet; thence
(104) S 19DEG. 41' E, 201.0 feet; thence
(105) S 34DEG. 35' E, 241.7 feet; thence
(106) S 29DEG. 31' E, 620.3 feet; thence
(107) S 56DEG. 13' E, 106.3 feet; thence
(108) S 71DEG. 54' E, 149.0 feet; thence
(109) S 54DEG. 13' E, 125.7 feet; thence
(110) S 35DEG. 55' E, 152.0 feet: thence
(111) S 54DEG. 24' E, 536.3 feet to intersection with said
southeasterly line of Lot 1: thence along said lot line
(112) S 44DEG. 41' W, 1457.8 feet to the place of beginning
CONTAINING AN AREA OF 573.8 ACRES OF LAND, MORE OR LESS

PARCEL 3

Certain real property situate in the Rancho San Bernardo, Monterey County,
California, being a part of Lot 4 as shown as map filed in Volume 1 of Surveys
at Page 34, records of said county, said part being particularly described as
follows:

Beginning at a point from which the hereinbefore mentioned Point "A" bears
S 40DEG. 55' 50" E, 399.0 feet distant and running thence

(1) N 72DEG. 36' W, 140.5 feet; thence
(2) S 86DEG. 03' W, 619.0 feet; thence
(3) N 77DEG. 00' W, 179.3 feet; thence
(4) S 83DEG. 10' W, 234.7 feet; thence
(5) N 82DEG. 37' W, 612.0 feet; thence
(6) N 76DEG. 58' W, 311.8 feet; thence
(7) N 85DEG. 33' W, 467.4 feet; thence
(8) N 61DEG. 20' W, 151.2 feet; thence
(9) N 43DEG. 23' W, 328.0 feet; thence
(10) N 36DEG. 53' W, 619.6 feet; thence
(11) N 17DEG. 33' W, 269.3 feet; thence
(12) N 28DEG. 32' E, 389.8 feet; thence
(13) N 82DEG. 55' E, 158.7 feet; thence
(14) S 66DEG. 58' E, 365.8 feet; thence
(19) S 67DEG. 34' E, 777.4 feet; thence
(16) S 64DEG. 30' E, 1024.0 feet; thence
(17) S 73DEG. 04' E, 388.8 feet; thence
(18) S 55DEG. 49' E, 329.3 feet; thence
(19) S 80DEG. 07' E, 331.0 feet; thence
(20) S 53DEG. 18' E, 79.3 feet; thence
(21) S 1DEG. 26' E, 261.6 feet; thence

-4-

<PAGE>

(22) S 12DEG. 02' W, 79.5 feet to the place of beginning
CONTAINING AN AREA OF 63.8 ACRES OF LAND, MORE OR LESS

PARCEL 4

EXHIBIT "C"

Certain real property situate in the Rancho San Bernardo, Monterey County,
California, being a part of Lot 1 as shown on map filed in Volume 1 of Surveys
at Page 34, records of said county, said part being particularly described as
follows:

Beginning at a point from which the hereinbefore mentioned Point "A" bears
S 30DEG. 11' 20" E, 326.1 feet distant and running thence

(1) N 2DEG. 51' E, 293.9 feet: thence
(2) N 62DEG. 06' E, 65.2 feet; thence
(3) N 67DEG. 11' E, 779.4 feet; thence
(4) S 40DEG. 01' E, 232.0 feet; thence
(5) S 76DEG. 42' E, 422.9 feet; thence
(6) S 81DEG. 29' E, 876.2 feet; thence
(7) S 67DEG. 41' E, 553.4 feet; thence
(8) S 65DEG. 16' E, 492.0 feet; thence
(9) S 62DEG. 20' E, 265.4 feet; thence
(10) S 69DEG. 09' W, 225.0 feet; thence
(11) N 77DEG. 14' W, 270.0 feet; thence
(12) fl 73DEG. 54' W, 209.7 feet; thence
(13) N 84DEG. 52' W, 325.5 feet; thence
(14) N 89DEG. 47' W, 366.5 feet; thence
(15) N 74DEG. 52' W, 61.3 feet; thence
(16) N 12DEG. 38' E, 160.5 feet; thence
(17) S 60DEG. 48' W, 330.7 feet; thence
(18) N 84DEG. 30' W, 393.1 feet; thence
(19) N 81DEG. 03' W, 215.4 feet; thence
(20) N 76DEG. 45' W, 859.9 feet; thence
(21) S 84DEG. 08' W, 293.9 feet to the place of beginning

CONTAINING AN AREA OF 33.5 ACRES OF LAND, MORE OR LESS

-5-

<PAGE>

COURSES ALL TRUE

This description was prepared under my
direction.

/s/ Alan G. Miller
---------------------------------------------
Alan G. Miller LS 3880

-6-

<PAGE>

MEMORANDUM OF LEASE

For and in consideration of the mutual covenants contained in that
unrecorded lease between the parties, executed simultaneously with this
instrument and hereinafter cal led the lease agreement," Lessors lease to
Lessee, and Lessee takes and hires from Lessors, on and subject to the terms,
provisions and conditions set forth in the lease agreement, approximately 707
acres of sprinkler-irrigated farming land located on the Echenique Ranch near
the town of San Lucas in Monterey County, California. Hereunto attached and
incorporated herein by reference are a description of said land, marked "Exhibit
A," and a map showing the location and boundaries of the same, marked "Exhibit
B." Said lease land is hereinafter referred to as the "Premises."

The terms and conditions of the lease agreement include the following:

TERM. The term of this lease is thirty (30) years and one (1)
month commencing November 1, 1979, and ending November 30, 2009,
subject to the option to extend referred to below.

OIL AND CAS LEASES. This lease is subject and subordinate to a
certain oil and gas lease affecting the Premises, dated August 8,
1973, taken by Getty Oil Company, a Delaware corporation, as lessee,
recorded August 24, 1973, on Reel 866, at Page 930, and re-recorded
August 29, 1973, on Reel 867, at Page 823, Official Records of
Monterey County, California; said lessee's interest therein was
subsequently assigned to and is now held by Husky Oil Company of
Delaware, a corporation. Notwithstanding anything to the contrary
contained in this lease, Lessors shall have the right at any time

<PAGE>

or from time to time to execute other oil, gas or mineral-leases with
respect to the Premises (or to extend the existing oil and gas lease
held by Husky Oil Company of Delaware); provided, that neither Lessors
nor said mineral lessee shall have the right, without the prior
written consent of the Lessee, to enter upon the surface of the
Premises or the upper 500 feet thereof to explore for, produce, or
extract oil, gas or other minerals. All oil, gas or mineral leases
hereafter executed by Lessors with respect to the Premises shall
contain a provision making the lessee therein primarily liable to
Lessors and Lessee, as their respective interests may appear, for all
damages to livestock, crops, vines, trees, fences, roads, ditches,
buildings and other improvements on the Premises, caused by said
lessee's operations thereon. Lessors hereby agree to indemnify and
hold harmless the Lessee from and against all such damages.

LESSORS' ENCUMBRANCES. Except as contemplated by Paragraph 20 of
the lease agreement, Lessors shall not further encumber the Premise's
or any part thereof during the first ten (10) years of the lease term
without Lessee's prior written consent.

OPTION TO EXTEND. Provided that Lessee is not then in default
under the terms of this lease, Lessee shall be entitled to extend the
term of this lease for four (4) successive five-year terms upon giving
to Lessors written notice of Lessee's election to exercise the option
to extend the term at least ninety (90) days prior to the expiration
of the then existing term hereof. Such renewal shall be upon the same
terms and conditions as are herein stated. References in this lease
to the term of this lease shall, to the extent exercised, include the
four (4) successive five-year options provided for above.

FIRST RIGHT TO PURCHASE. During the term of this lease, provided
Lessee is not in default in the performance of any of its obligations
hereunder, the Lessee shall have the first right to purchase the
Premises if the Lessors receive a bona fide offer to purchase

-2-

<PAGE>

the same from a third party which they desire to accept, or if the
Lessors offer to sell the same. In either such case the Lessors shall
give Lessee written notice of such offer and of all of the terms and
conditions thereof, and thereafter the Lessee shall have twenty (20)
days in which to exercise this first right to purchase by, giving to
Lessors written notice of Lessee's election so to do. If this first
right to purchase is not so exercised by Lessee within said twenty
(20) days' period, it shall lapse and shall be of no further force or
effect and Lessors thereafter shall be free to sell the Premises to a
third party within one hundred and eighty (180) days after Lessee's
first right to purchase lapses, but not for a lesser price or on
terms substantially more favorable to the purchaser. Any such sale to
a third party shall be subject to this lease, it being expressly
understood and agreed that this lease shall continue in full force and
effect notwithstanding said sale.

ASSIGNMENT AND SUBLETTING. Lessee shall not assign this lease or
any interest heroin, or underlet the Premises or any part thereof,
without the prior written consent of the Lessors, except to an
affiliate or affiliates of MONTEREY FARMING CORPORATION (i.e., a
partnership in which MONTEREY FARMING CORPORATION is a general
partner, or a joint venture in which MONTEREY FARMING CORPORATION is a
joint venturer), and neither this lease, nor any interest herein of
the Lessee, shall be assignable in proceedings by or against the
Lessee in bankruptcy or in insolvency, or in any other manner by
operation of law; provided, that such consent shall not be
unreasonably withheld; provided further, that Lessors' consent shall
not be required in connection with the transfer of this lease to a
lender who has financed improvements to the Premises under the
provisions of Paragraph 19 or Paragraph 20 of the lease agreement and
who holds a security interest in the leasehold estate of the Lessee,
in a foreclosure or other like proceedings instituted by the lender

-3-

<PAGE>

under the terms of any such security instrument, or by an assignment
or other conveyance given in lieu of foreclosure. No assignment under
the provisions of this paragraph shall be effective, however, until
the assignee has given written notice of such assignment to the
Lessors, stating the name and address of the assignee and the date of
transfer, accompanied by a copy of the assignment and the written
agreement of the assignee expressly assuming and agreeing to keep and
perform all of the obligations of the Lessee under this lease.

All of the terms, provisions and conditions of the lease agreement
executed by the parties simultaneously with this memorandum agreement are
incorporated in and made a part hereof by reference.

-4-

<PAGE>

IN WITNESS WHEREOF, the said parties have executed this lease in
duplicate this 27th day of September, 1979.

LESSOR: LESSEE:
- ------ ------

MONTERY FARMING
/s/ Luis Echenique CORPORATION, a corporation
- ------------------------------
Luis Echenique

By /s/ Alfred G. Scheid
-------------------------
/s/ Ricardo Enchenique President
- ------------------------------
Ricardo Enchenique

By /s/ Alvin J. Portnoy
-------------------------
/s/ Francis D. Echenique Secretary
- ------------------------------
Francis D. Echenique

Address:
501 Santa Monica Boulevard
Suite 312
By /s/ Luis Echenique Santa Monica, California 90401
-------------------------
His Attorney-in-fact

Address:
P.O. Box 108
San Lucas, California 93954

-5-

<PAGE>

CONSENT

MARY R. ECHENIQUE, wife of LUIS ECHENIQUE, and MARGARET ANN ECHENIQUE,
wife of FRANCIS D. ECHENIQUE, hereby consent to the foregoing lease.

DATED: September 27, 1979.

/s/ Mary R. Echenique
---------------------------------------------
Mary R. Echenique

/s/ Margaret Ann Echenique
---------------------------------------------
Margaret Ann Echenique

By /s/ Luis Echenique
-------------------------------------------
Her Attorney-in-fact

STATE OF CALIFORNIA )
) ss.
COUNTY OF MONTEREY )

/s/ John W. Hutton
---------------------------------------------
Notary Public

STATE OF CALIFORNIA )
) ss.
COUNTY OF MONTEREY )

/s/ John W. Hutton
---------------------------------------------
Notary Public

-6-

<PAGE>

STATE OF CALIFORNIA )
) ss.
COUNTY OF )

/s/ John S. Thompson
---------------------------------------------
Notary Public

-7-

<PAGE>

Luis Echenique, et al to:

EXHIBIT "A"

PARCEL 1

Certain real property situate in the Rancho San Lucas, Monterey County,
California, being a part of Lot 1 as shown on map filed in Volume 1 of Surveys
at Page 34, records of said county, said part being particularly described as
follows:

Beginning at a point in the southeasterly boundary of said Lot 1, at the
northeasterly side of the farm road running along the southwesterly side of
California State Highway US 101 as described in deed from Luis Echenique, et al
to the State of California dated May 29,1969 and recorded in Reel 615 of
Official Records at Page 698, records of said county, and running thence along
said southeasterly lot boundary.

(1) S 44DEG. 41' W, 651.6 feet; thence
(2) N 37DEG. 14' W, 376.8 feet; thence
(3) N 36DEG. 26' W, 4046.4feet; thence
(4) N 36DEG. 04' W, 457.8 feet; thence
(5) N 44DEG. 04' W, 405.7 feet; thence
(6) N 36DEG. 29' W, 496.4 feet; thence
(7) N 36DEG. 53' W, 410.2 feet; thence
(8) N 30DEG. 47' W, 603.5 feet; thence
(9) N 52DEG. 04' E, 154.0 feet to the northeasterly side of a
farm road running along and said highway line; thence along said road
line
(10) S 48DEG 43' E, 265.6 feet; thence
(11) S 45DEG 11' W, 409.8 feet; thence
(12) S 41DEG. 36' E, 541.1 feet; thence
(13) S 36DEG. 07' E, 353.9 feet; thence
(14) S 40DEG. 01' E, 4419.5 feet; thence
(15) S 40DEG. 20' E, 722.0 feet; to the point of beginning.

PARCEL 2

(1) N 40DEG. 02' W, 1166.1 feet; thence
(2) N 36DEG. 35' W, 450.2 feet; thence
(3) N 44DEG. 14' W, 302.1 feet; thence
(4) N 39DEG. 49' W, 1198.9 feet; thence
(5) N 36DEG. 20' W, 249.7 feet; thence
(6) N 37DEG. 45' W, 601.0 feet; thence
(7) N 45DEG. 16' W, 351.9 feet; thence continuing along the line
of said farm road, but leaving said county highway line

-1-

<PAGE>

(8) N 39DEG. 49' W, 2499.9 feet; thence
(9) N 49DEG. 43' W, 1773.8 feet; thence
(10) N 33DEG. 14' W, 443.2 feet; thence
(II) N 18DEG. 34' W, 539.6 feet; thence
(12) N 33DEG. 38' W, 203.5 feet; thence
(13) N 50DEG. 30' W, 312.3 feet; thence
(14) N 44DEG. 43' W, 224.8 feet; thence
(15) N 64DEG. 13' W, 247.8 feet; thence
(16) N 33DEG. 19' W, 445.7 feet; thence
(17) N 31DEG. 29' W, 486.7 feet: thence
(18) N 27DEG. 30' E, 243.3 feet; thence
(19) N 44DEG. 05' W, 195.0 feet; thence
(20) N 50DEG. 32' W, 141.6 feet; thence
(21) N 40DEG. 41' W, 201.7 feet; thence
(22) N 50DEG. 51' W, 247.7 feet; thence
(23) N 46DEG. 48' W, 206.2 feet; thence
(24) N 52DEG. 59' E, 270.0 feet; thence
(25) S 42DEG. 40' E, 483.4 feet; thence
(26) S 38DEG. 29' E, 343.3 feet; thence
(27) N 68DEG. 04' E, 206.6 feet; thence
(28) N 86DEG. 50' E, 102.1 feet; thence
(29) S 86DEG. 24' E, 224.0 feet; thence
(30) S 55DEG. 29' E, 126.1 feet; thence
(31) S 39DEG. 52' E, 308.5 feet; thence
(32) N 49DEG. 33' E, 62.0 feet; thence
(33) N 22DEG. 53' E, 160.3 feet; thence
(34) S 78DEG. 48' E, 234.9 feet; thence
(35) S 54DEG. 54' E, 174.2 feet; thence
(36) N 86DEG. 20' E, 192.4 feet; thence
(37) S 83DEG. 52' E, 282.8 feet; thence
(38) S 89DEG. 24' E, 329.5 feet; thence
(39) S 80DEG. 13' E, 291.6 feet; thence
(40) S 39DEG. 08' E, 230.0 feet; thence
(41) S 24DEG. 24' E, 300.9 feet; thence
(42) S 66DEG. 49' E, 234.6 feet; thence
(43) N 19DEG. 13' E, 182.3 feet; thence
(44) N 35DEG. 08' W, 199.1 feet; thence
(45) N 51DEG. 46' E, 232.9 feet; to a point now designated "A";
thence
(46) N 70DEG. 15' E, 133.2 feet; thence
(47) S 75DEG. 35' E, 295.5 feet; thence
(48) S 69DEG. 24' E, 211.9 feet; thence
(49) S 79DEG. 01' E, 157.6 feet; thence
(50) S 44DEG. 20' E, 213.1 feet; thence
(51) S 73DEG. 03' E, 249.7 feet; thence
(52) S 48DEG. 18' E, 146.1 feet; thence
(53) S 36DEG. 36' E, 345.1 feet; thence
(54) S 32DEG. 30' E, 296.1 feet; thence

-2-

<PAGE>

(55) S 13DEG. 53' E. 106.3 feet; thence
(56) N 53DEG. 47' E, 303.9 feet; thence
(57) S 42DEG. 42' E, 588.7 feet; thence
(58) N 49DEG. 25' E. 474.6 feet; thence
(59) S 51DEG. 50' E, 265.2 feet; thence
(60) S 0DEG. 30' E, 164.2 feet; thence
(61) S 41DEG. 03' E, 793.3 feet; thence
(62) S 26DEG. 53' W, 130.7 feet; thence
(63) S 74DEG. 01' w, 208.9 feet; thence
(64) S 37DEG. 38' W, 131.6 feet; thence
(65) S 34DEG. 54' E, 321.8 feet; thence
(66) S 32DEG. 47' E, 190.2 feet; thence
(67) S 52DEG. 55' W, 252.5 feet; thence
(68) S 27DEG. 00' E, 471.3 feet; thence
(69) S 8DEG. 03' E, 131.1 feet; thence
(70) S 43DEG. 52' W, 224.5 feet; thence
(71) S 88DEG. 52' W, 80.9 feet; thence
(72) N 36DEG. 49' W, 745.5 feet; thence
(73) N 54DEG. 47' W, 204.7 feet; thence
(74) N 25DEG. 04' W, 225.1 feet; thence
(75) N 44DEG. 35' W, 144.7 feet; thence
(76) S 56DEG. 21' W, 159.3 feet; thence
(77) S 22DEG. 48' E, 136.1 feet; thence
(78) S 50DEG. 14' E, 88.7 feet; thence
(79) S 28DEG. 40' E, 720.6 feet; thence
(80) S 34DEG. 50' W, 83.2 feet; thence
(81) S 04DEG. 57' W, 106.7 feet; thence
(82) S 39DEG. 55' E, 73.2 feet; thence
(83) S 78DEG. 25' E, 212.3 feet; thence
(84) S 43DEG. 45' E, 146.5 feet: thence
(85) S 26DEG. 20' E, 247.4 feet; thence
(86) S 54DEG. 52' W, 447.4 feet; thence
(87) N 87DEG. 29' W, 123.3 feet; thence
(88) N 62DEG. 22' W, 263.4 feet; thence
(89) N 40DEG. 44' W, 380.9 feet; thence
(90) S 30DEG. 43' W, 223.1 feet; thence
(91) S 14DEG. 31' E, 78.2 feet; thence
(92) S 38DEG. 35' E, 267.5 feet; thence
(93) S 62DEG. 13' E, 322.9 feet; thence
(94) S 57DEG. 18' E, 325.2 feet; thence
(95) S 80DEG. 01' E, 88.1 feet; thence
(96) S 43DEG. 57' E, 122.8 feet; thence
(97) S 02DEG. 46' W, 207.1 feet; thence
(98) S 34DEG. 23' E, 497.4 feet; thence
(99) S 26DEG. 30' E, 266.2 feet; thence
(100)S 33DEG. 16' E, 309.4 fe&t; thence
(101)S 23DEG. 25' E, 263.8 feet; thence

-3-

<PAGE>

(102)S 42DEG. 31' E, 314.4 feet; thence
(103)N 85DEG. 46' E, 194.1 feet; thence
(104)S 19DEG. 41' E, 201.0 feet; thence
(105)S 34DEG. 35' E, 241.7 feet; thence
(106)S 29DEG. 31' E, 620.3 feet; thence
(107)S 56DEG. 13' E, 106.3 feet; thence
(108)S 71DEG. 54' E, 149.0 feet; thence
(109)S 54DEG. 13' E, 125.7 feet; thence
(110)S 35DEG. 55' E, 152.0 feet: thence
(111)S 54DEG. 24' E, 536.3 feet to intersection with said
southeasterly line of Lot 1: thence along said lot line
(112)S 44DEG. 41' W, 1457.8 feet to the place of beginning
CONTAINING AN AREA OF 573.8 ACRES OF LAND, MORE OR LESS

PARCEL 3

Beginning at a point from which the hereinbefore mentioned Point "A" bears
S 40DEG. 55' 50" E, 399.0 feet distant and running thence

CONTAINING AN AREA OF 63.8 ACRES OF LAND, MORE OR LESS

-4-

<PAGE>

-5-

<PAGE>

Recorded at the Request of

RETURN TO:
MONTEREY FARMING CORPORATION
2716 Ocean Park Blvd., Suite 1064
Santa Monica, CA 90405

AMENDMENT TO MEMORANDUM OF LEASE
--------------------------------

This Amendment to Memorandum of Lease is made with reference to that
certain Memorandum of Lease executed on September 27, 1979, and recorded in Reel
1376 at Page 379, Series G 50142, at the Office of the Recorder for the County
of Monterey, State of California, wherein LUIS ECHENIQUE, FRANCIS D. ECHENIQUE,
and RICARDO ECHENIQUE were therein named "Lessors," and MONTEREY FARMING
CORPORATION, a corporation, was named therein as "Lessee."

SAID LEASE IS HEREBY AMENDED to include and annex certain additional real
property consisting of certain easements for pipeline purposes, and easements
for well lot purposes which shall hereafter be fully subject to all of the terms
and conditions of said Lease and this Amendment hereto. Said easements are more
fully described in Exhibit "A" attached hereto and by-reference made a part
hereof.

Lessee shall have the right to use said easements for ingress, egress,
installment, maintenance, and operation of water wells and water transmission
lines, including necessary utilities for their operation, on the property
described herein in Exhibit "A" for the balance of the lease term and any
extensions thereto as provided in said Lease.

-1-

<PAGE>

In all other respects, the parties hereto confirm and agree to be bound by
each and every term and condition of said Lease.

/s/ Luis Echenique
---------------------------------------------
Luis Echenique

/s/ Francis D. Echenique
---------------------------------------------
Francis D. Echenique

/s/ Ricardo Echenique
---------------------------------------------

Ricardo Echenique

LESSORS

MONTEREY FARMING CORPORATION

By /s/ Albert A. Oliveira
-------------------------------------------

By /s/ Ernest M. Brown
-------------------------------------------

LESSEE

STATE OF CALIFORNIA )
) ss.
COUNTY OF MONTEREY )

On September 4, 1987, before me, the undersigned Notary Public in and for
said State, personally appeared LUIS ECHENIQUE, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person whose
name is subscribed to this instrument, and acknowledged that he executed it.

/s/ John W. Hutton
---------------------------------------------
Notary Public

-2-

<PAGE>

STATE OF CALIFORNIA )
) ss.
COUNTY OF MONTEREY )

On September 4, 1987, before me, the undersigned Notary Public in and for
said State, personally appeared FRANCIS D. ECHENIQUE, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to this instrument, and acknowledged that he
executed it.

/s/ John W. Hutton
---------------------------------------------
Notary Public

STATE OF CALIFORNIA )
) ss.
COUNTY OF MONTEREY )

On September 4, 1987, before me, the undersigned Notary Public
in and for said State, personally appeared RICARDO ECHENIQUE, personally known
to me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to this instrument, and acknowledged that he executed
it.

/s/ John W. Hutton
---------------------------------------------
Notary Public

STATE OF CALIFORNIA )
) ss.
COUNTY OF )

On September 4, 1987, before me, the undersigned Notary Public in and for
said State, personally appeared Albert A. Oliveira personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) who
executed the within instrument as Vice President and _________________ of the
corporation therein named and acknowledged to me that such corporation
executed the within instrument pursuant to its by-laws or a resolution of its
board of directors.

/s/ John W. Hutton
---------------------------------------------
Notary Public

-3-

<PAGE>

Luis Echenique, et al, to:

Certain real property situate in the Rancho San Bernardo, County of
Monterey, State of California, being a part of Lot 1 as said lot is shown and so
delineated on the Map filed in Volume 1 of Surveys at Page 34, records of said
county, said portion being more particularly described as follows:

FIRST

AN EASEMENT for pipeline purposes, 15 feet wide, lying 7.50 feet equally on
each side of the following described centerline:

Beginning at a point on an existing pipeline, from which a - -point in the
southeasterly boundary of said Lot 1, at the southwesterly line of a farm road
running along the northeasterly line of the California State Highway - U.S. 101
(as described in -Deed from Luis Echenique, et al, to the State of California,
dated May 29, 1969 and recorded in Reel 615 of Official Records at Page 698,
records of said county) bears S.12DEG. 01' 13" E., 7,925.84 feet distant;
thence running along an existing pipeline

1. N.40DEG. 17'10"E., 2,329.53 feet; thence

2. N.12DEG. 49'57"E., 275.00 feet; thence

3. N.33DEG. 33'08"E., 209.02 feet to a point herein and now designated a
point "A" for the reference thereto in further description hereinafter
to be made; thence

4. N.33DEG. 33'08"E., 209.02 feet to a point herein and now designated
as point "C" for the reference thereto in further description
hereinafter to be made; thence

5. N.33DEG. 33'08"E., 124.06 feet to a point herein and now designated
as point "D" for the reference thereto in further description
hereinafter to be made.

SECOND

AN EASEMENT for pipeline purposes, 15 feet wide, lying equally 7.50 feet on
each side of the following described centerline:

Beginning at the hereinbefore mentioned point "A" and running thence along
an existing pipeline

1. N.19DEG. 31'48"W., 369.65 feet to a point herein and now designated
as point "B" for the reference thereto in further description
hereinafter to be made.

THIRD

AN EASEMENT for pipeline purposes, 15 feet wide, lying equally 7.50 feet on
each side of the following described centerline:

Beginning at the hereinbefore mentioned point "C" and running thence along
an existing pipeline

<PAGE>

1. N.56DEG. 26'52"W., 27.71 feet to a point herein and now designated as
point "E" for the reference thereto in further description hereinafter
to be made.

FOURTH

AN EASEMENT for well lot purposes beginning at the hereinbefore mentioned
point "B" and running thence

1. N.70DEG. 12" E., 10.00 feet; thence

2. N.19DEG. 31'48"W., 20.00 feet; thence

3. S.70DEG. 27'12"W., 20.00 feet; thence

4. S.19DEG. 31'48E., 20.00 feet; thence

5. N.70DEG. 28'12"E., 10.00 feet to the point of beginning.

FIFTH

AN EASEMENT for well lot purposes beginning at the hereinbefore mentioned
point "E" and running thence

1. N.33DEG. 33'08"E., 10.00 feet; thence

2. N.56DEG. 26'52"W., 20.00 feet; thence

3. S.33DEG. 33'08"W., 20.00 feet; thence

4. S.56DEG. 26'52"E., 20.00 feet; thence

5. N.33DEG. 33'08"E., 10.00 feet to the point of beginning.

SIXTH

AN EASEMENT for well lot purposes beginning at the hereinbefore mentioned
point "D" and running thence

1. S.56DEG. 26'52"E., 10.00 feet; thence

2. N.33DEG. 33'08"E., 20.00 feet; thence

3. N.56DEG. 26'52"W., 20.00 feet; thence

4. S.33DEG. 33'08"W., 20.00 feet; thence

-2-

<PAGE>

5. S.56DEG. 26'52"E., 10.00 feet to the point of beginning.

COURSES ALL TRUE.

This description was prepared under my direction

/s/ Philip L. Pearman
--------------------------------------------------
Philip L. Pearman L.S. 4448

-3-

<PAGE>

FIRST AMENDMENT TO LEASE
------------------------

THIS AMENDMENT TO LEASE is made with reference to that certain Lease dated
September 27, 1979, wherein LUIS ECHENIQUE, FRANCIS D. ECHENIQUE, and RICARDO
ECHENIQUE were therein named "Lessors," and MONTEREY FARMING CORPORATION, a
corporation, was therein named "Lessee." A Memorandum of said Lease was recorded
in Reel 1376, at Page 379, Series G 50142, in the Office of the County Recorder
for the County of Monterey, State of California.

The parties hereto desire to amend said Lease to include and annex certain
additional real property consisting of certain easements for pipeline purposes,
and easements for well lot purposes which shall hereafter be fully subject to
all of the terms and conditions of said Lease and this Amendment hereto. Said
easements are more fully described in Exhibit "A" attached hereto and by
reference made a part hereof.

In all other respects, the parties hereto confirm and agree to be bound by
each and every term and term and condition of said Lease.

-1-

<PAGE>

IN WITNESS WHEREOF, the said parties have executed this Amendment to Lease
this 4 day of September, 1987.

/s/ Luis Echenique
---------------------------------------------
Luis Echenique

/s/ Francis D. Echenique
---------------------------------------------
Francis D. Echenique

/s/ Ricardo Echenique
---------------------------------------------
Ricardo Echenique

LESSORS

MONTEREY FARMING CORPORATION

By /s/ Albert A. Oliveira
-------------------------------------------
Vice President

By
-------------------------------------------

LESSEE

-2-

<PAGE>

Luis Echenique, et al, to:

FIRST

AN EASEMENT for pipeline purposes, 15 feet wide, lying 7.50 feet equally on
each side of the following described centerline:

1. N.40DEG. 17'10"E., 2,329.53 feet; thence

2. N.12DEG. 49'57"E., 275.00 feet; thence

3. N.33DEG. 33'08"E., 209.02 feet to a point herein and now designated a
point "A" for the reference thereto in further description hereinafter
to be made; thence

4. N.33DEG. 33'08"E., 209.02 feet to a point herein and now designated
as point "C" for the reference thereto in further description
hereinafter to be made; thence

5. N.33DEG. 33'08"E., 124.06 feet to a point herein and now designated
as point "D" for the reference thereto in further description
hereinafter to be made.

SECOND

AN EASEMENT for pipeline purposes, 15 feet wide, lying equally 7.50 feet on
each side of the following described centerline:

Beginning at the hereinbefore mentioned point "A" and running thence along
an existing pipeline

1. N.19DEG. 31'48"W., 369.65 feet to a point herein and now designated
as point "B" for the reference thereto in further description
hereinafter to be made.

THIRD

AN EASEMENT for pipeline purposes, 15 feet wide, lying equally 7.50 feet on
each side of the following described centerline:

Beginning at the hereinbefore mentioned point "C" and running thence along
an existing pipeline

<PAGE>

1. N.56DEG. 26'52"W., 27.71 feet to a point herein and now designated as
point "E" for the reference thereto in further description hereinafter
to be made.

FOURTH

AN EASEMENT for well lot purposes beginning at the hereinbefore mentioned
point "B" and running thence

1. N.70DEG. 12" E., 10.00 feet; thence

2. N.19DEG. 31'48"W., 20.00 feet; thence

3. S.70DEG. 27'12"W., 20.00 feet; thence

4. S.19DEG. 31'48E., 20.00 feet; thence

5. N.70DEG. 28'12"E., 10.00 feet to the point of beginning.

FIFTH

AN EASEMENT for well lot purposes beginning at the hereinbefore mentioned
point "E" and running thence

1. N.33DEG. 33'08"E., 10.00 feet; thence

2. N.56DEG. 26'52"W., 20.00 feet; thence

3. S.33DEG. 33'08"W., 20.00 feet; thence

4. S.56DEG. 26'52"E., 20.00 feet; thence

5. N.33DEG. 33'08"E., 10.00 feet to the point of beginning.

SIXTH

AN EASEMENT for well lot purposes beginning at the hereinbefore mentioned
point "D" and running thence

1. S.56DEG. 26'52"E., 10.00 feet; thence

2. N.33DEG. 33'08"E., 20.00 feet; thence

3. N.56DEG. 26'52"W., 20.00 feet; thence

4. S.33DEG. 33'08"W., 20.00 feet; thence

-2-

<PAGE>

5. S.56DEG. 26'52"E., 10.00 feet to the point of beginning.

COURSES ALL TRUE.

This description was prepared under my direction

/s/ Philip L. Pearman
--------------------------------------------------
Philip L. Pearman L.S. 4448

-3-

<PAGE>

SECOND AMENDMENT OF LEASE
-------------------------

(ECHENIQUE/MONTEREY FARMING CORPORATION)

THIS AMENDMENT OF LEASE is made and entered into by and between LUIS
ECHENIQUE, a married man dealing with his separate property, FRANCIS D.
ECHENIQUE, a married man dealing with his separate property, and RICARDO
ECHENIQUE, a single man, as Lessors, and MONTEREY FARMING CORPORATION, a
corporation, as Lessee.

RECITALS:

A. Under date of September 27, 1979, the Lessors and the Lessee
entered into a written Lease covering approximately 707 acres of
sprinkler-irrigated farming land in Monterey County, California, therein
particularly described, a short form of which was recorded on December 12, 1970,
in the office of the County Recorder of Monterey County, California, under
Recorder's Serial No. G-50142. Lessee thereupon took possession of said
premises and developed the same as a vineyard in accordance with the terms of
said lease.

B. Paragraph 20 of said lease defines the terms and conditions under
which the Lessors will subordinate their fee title to the leased lands to a
long-term loan obtained by Lessee to refinance the cost of improvements
installed thereon by the Lessee. One such condition, set forth in subparagraph
(b), limits the term of the loan to not less than fifteen (15) nor more than
twenty (20) years; another such condition, set forth in subparagraph (f),
requires that the note evidencing the loan be payable in annual or more frequent
installments of both principal and interest amortized over a term not to exceed
twenty-five (25) years.

C. Lessee has arranged a refinancing loan with a bank in the amount
of $1,397,000.00, the terms of which will conform in all respects to the
provisions of Paragraph 20 of the lease, except that the term of the proposed
loan will be ten (10) years, with-payments amortized over twenty (20) years,
thereby requiring a balloon payment of $698,000.00 at the end of said term.
Lessee

<PAGE>

has requested that the provisions of Paragraph 20 of said lease be amended to
allow a loan on those terms.

AGREEMENT:

It is therefore mutually agreed by and between the said parties
hereto, as follows:

1. In consideration of an increase -in rental agreed to by Lessee
and set forth in a separate instrument entitled "Agreement for Adjustment of
Rental" executed by the parties hereto concurrently with this instrument and as
a part of the same transaction, paragraph 20 of said lease is hereby amended in
the following particulars:

FIRST, subparagraph (b) thereof is hereby amended to read as follows:

"(b) The term of the loan must be not less than ten (10) years,
nor more than twenty (20) years.

SECOND, subparagraph (f) thereof is hereby amended to read as follows:

"(f) Said note shall provide for the repayment of the loan in
equal monthly, quarterly, semi-annual or annual installments of both
principal and interest, amortized over a period of not more than
twenty (20) years and payable in full not sooner than ten (10) years
after the date thereof. No provision shall be made for de ferment of
principal payments, other than a provision allowing the lender, at the
lender's sole discretion, to permit such deferment for not more than
two (2) years at a time and for a total of not more than four (4)
years during the term of the loan. Both the note and the deed of
trust securing the same shall expressly provide that there can be no
extension of the maturity date, additions to the balance of the loan,
alteration of any provision in the documents, or any refinancing of
the unpaid principal balance without the Lessors' prior written
approval, which written approval shall not be unreasonably withheld;
provided, that nothing in this subparagraph shall preclude the
mortgagee (lender) from making any

-2-

<PAGE>

payment required to be made by Lessee under the terms of this lease in
order to avoid or cure a default on the part of Lessee."

2. Except as hereinabove specifically amended, said lease shall
remain in full force and effect, without any change or modification whatsoever.

3. This agreement, and all of the provisions hereof, shall be
binding upon, and shall inure to the benefit of, the heirs, legal
representatives, successors and assigns of the respective parties hereto.

IN WITNESS WHEREOF, the said parties have executed this Amendment of
Lease this 4 day of September, 1987.

LESSOR LESSEE
------ ------

/s/ Luis Echenique MONTERY FARMING
- ------------------------------
Luis Echenique CORPORATION, a California corporation

/s/ Francis D. Echenique
- ------------------------------
Francis D. Echenique By /s/ Albert A. Oliveira
---------------------------------
Vice President

/s/ Ricardo Echenique
- ------------------------------
Ricardo Echenique By
---------------------------------
Secretary

-3-

<PAGE>

VINEYARD MANAGEMENT AGREEMENT

This Vineyard Management Agreement (this "Agreement") is made and entered
into as of the 1st day of January, 1997, by and between SCHEID VINEYARDS AND
MANAGEMENT CO., a California corporation ("Scheid"), CANANDAIGUA WEST, INC., a
New York corporation ("Canandaigua"), and CANANDAIGUA WINE COMPANY, INC., a
Delaware corporation ("CWC").

A. Canandaigua, as lessee, proposes to enter into a lease (the "Lease")
with Sam Avila and Margaret J. Avila as trustees under declaration of trust,
dated August 16, 1989 and Margaret J. Avila and Valarie Bassetti (also known as
Valerie Bassetti) successor co-trustee of the testamentary trust of Joseph
Labarere, deceased, and Sam Avila, also known as Samuel R. Avila, Jr., and
Margaret J. Avila, husband and wife, as lessor (the "Lessor"), for four hundred
forty-four and seven-tenths (444.7) acres of real property situated in Monterey
County, California, which property is more particularly described in Exhibit A
attached hereto (the "Property"), with rent commencing at the rate of $200.00
per acre per year as of January 1, 1997.

B. Canandaigua desires to engage Scheid to develop, farm and manage the
Property as a wine grape vineyard (the "Vineyard") and Scheid desires to perform
such services, all on the terms and conditions set forth in this Agreement.

AGREEMENT

In consideration of the mutual covenants contained herein and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

SECTION 1. MANAGEMENT OF THE VINEYARD

1.1 ENGAGEMENT OF SCHEID. On the terms and conditions set forth in this
Agreement, Canandaigua hereby engages Scheid as an independent contractor to
develop, farm and manage approximately four hundred forty-four and seven-tenths
(444.7) acres of Vineyard, as specifically described in Exhibit A, on an
exclusive basis during the term of this Agreement, and Scheid hereby accepts
such engagement.

Scheid shall NOT be required to farm and manage the Property as its sole
and exclusive function, and it retains the right to have other business
interests and may engage in other activities, including but not limited to
performance of farm management services for itself and for parties other than
Canandaigua, whether or not in conflict with the business interests and
activities of Canandaigua. Scheid, on behalf of itself and its employees,
agents and independent contractors, agrees to keep confidential, and not to
disclose to any third parties information about Canandaigua ("Confidential
Information"), whether learned in the course of performing its duties hereunder
or otherwise. Confidential Information shall include, without limitation,
information about the Vineyard, varieties planted, yields, costs and any other
data pertaining thereto; provided, however, that Confidential Information shall
not include any information that (a) is generally available to or known by the
public or (b) was available to Scheid prior to

<PAGE>

disclosure by Canandaigua or becomes available to Scheid on a non-confidential
basis, provided that the source of any such information was not known by Scheid
to be bound by any confidentiality agreement or obligation to Canandaigua.

1.2 DUTIES AND RESPONSIBILITIES OF SCHEID. Notwithstanding the engagement
of Scheid in other activities as set forth in Section 1.1 above, in developing,
farming and managing the Vineyard, Scheid agrees to perform or to cause to be
performed in a timely, efficient and economical manner, all acts and services
which reasonably may be necessary or desirable in order to ensure that the
Property is cared for, maintained and operated as a wine grape vineyard. Scheid
hereby represents and warrants that it has, or will obtain, all necessary
licenses and permits to perform all services and tasks required of Scheid
hereunder. In performing its duties and obligations hereunder, Scheid shall
follow the viticultural practices reasonably necessary to produce fruit of
premium quality and fully developed varietal character, and shall do the
following:

A. Prepare for planting and plant such wine grape varieties as may
be determined by Canandaigua as of the date hereof and from time
to time;

B. Prune, sucker and, if necessary, thin the Vineyard;

C. Irrigate, fertilize and cultivate the Vineyard;

D. Control weeds, diseases and pests in the Vineyard;

E. Care for and maintain wells, pumps, pipelines, irrigation systems
and other improvements as reasonably necessary;

F. Use the irrigation system that is shared with other parties so
that all power charges incurred by or on behalf of Canandaigua
are accounted for and reported to Canandaigua in a timely manner;

G. Harvest the grapes grown on the Vineyard and arrange for delivery
of them to such point of delivery as Canandaigua shall designate;

H. Provide labor, machinery, equipment and materials reasonably
required or useful to manage the Vineyard to accomplish the
foregoing;

I. Comply with the terms of the Lease, as such terms relate to
Canandaigua's use of the Property; and

J. Manage the frost protection system.

1.3 AUTHORITY OF MANAGER. Scheid shall have general power and authority
to perform its duties and obligations hereunder, and to act in all matters
relating to or concerning the care, maintenance and operation of the Property as
a wine grape vineyard.

<PAGE>

1.4 SCHEID TO CONSULT WITH CANANDAIGUA. Scheid agrees to keep Canandaigua
or its designated agent fully advised on a monthly basis, and at such other
times as the circumstances reasonably require, of the progress of the Vineyard.

Scheid specifically agrees to advise Canandaigua or its designated agent of
all events which materially affect or might reasonably be expected to materially
affect the growth or development of the Vineyard and/or the amount or quality of
the wine grapes produced and harvested therefrom. To this end, Scheid agrees to
consult with Canandaigua or its designated agent as to any material decisions
which are NOT included in the Plan or the Budget (as those terms are defined in
Section 1.6 below), and which may arise with respect to the Vineyard, and to
obtain the written consent of Canandaigua or of its designated agent prior to
making and implementing any such decision.

Canandaigua may, from time to time, provide reasonable instructions to
Scheid with respect to specific aspects of the development, care and maintenance
of the Vineyard, and Scheid shall follow such instructions. If such
instructions are outside of the scope of the then current Plan and Budget and
require additional expenditures, Canandaigua and Scheid shall negotiate, in good
faith, an adjustment, based on the reasonable cost to Scheid of carrying out
such instructions, to the Budget.

The parties acknowledge and agree that the amounts (the "Yield Amounts") of
the yields per net vine acre set forth in Sections 5.3C and 8.3 are based upon
the assumption that certain viticultural practices (including, without
limitation, rootstock and clonal selection, trellis system design, irrigation
and pruning) will be followed with respect to the Vineyard. In the event that
Canandaigua shall instruct Scheid to utilize viticultural practices different
from those upon which the Yield Amounts set forth in those Sections were
determined, the net vine acres that are the subject of such instructions shall
be excluded from the computation of any Yield Amounts under Sections 5.3C and
8.3. Upon receipt by Scheid of any such differing instructions, Scheid shall
provide written notice to Canandaigua confirming the net vine acres affected by
such instruction and that such net vine acres will be excluded from the
computation of Yield Amounts under Sections 5.3C and 8.3.

1.5 EMERGENCIES. Notwithstanding the fact that Scheid may be required to
obtain the consent of Canandaigua or its designated agent under this Agreement
before taking certain actions, in the event emergency circumstances arise with
respect to the Vineyard which would require prompt action on the part of a
reasonably prudent vineyard farmer in Monterey County, and in the event time
does not reasonably permit the obtaining of any required consent hereunder or
such consents otherwise are not reasonably obtainable, Scheid may take all
actions which under the circumstances would be taken by a reasonably prudent
vineyard farmer in Monterey County to prevent or mitigate damage, and any such
actions shall be taken in accordance with the standards set forth herein.

<PAGE>

Canandaigua. The parties agree that Canandaigua shall have final approval of
the Budget and the Plan. Notwithstanding that Canandaigua may not have approved
the Plan and Budget for any season, Scheid may commence pruning in December if,
in Scheid's judgment, such commencement is reasonably necessary to complete
pruning for the next growing season in a timely manner.

Attached as Exhibit B hereto and made a part hereof is the Budget for the
period January 1, 1997 through December 31, 1997 (the calendar year which
defines the 1997 Vineyard management year and each calendar year thereafter,
hereinafter referred to as "Farm Year") which has been approved by Canandaigua.
Such Exhibit B shall be modified annually to reflect any agreed changes to the
Budget for the next following growing season.

Attached as Exhibit C hereto and made a part hereof is the Plan, as
prepared and submitted by Scheid for the 1997 Farm Year, which has been approved
by Canandaigua. Such Exhibit C shall be modified annually to reflect any agreed
changes to the Plan for the next following growing season.

1.7 THE PLAN. The initial Plan (attached as Exhibit C) does, and future
Plans (to be attached as replacements for Exhibit C) shall, set forth the
following information with respect to the subject growing season:

A. The approximate amount and timing of irrigation which Scheid
expects to undertake under normal conditions;

B. The approximate amount and types of nitrogen-containing
fertilizers and other nutrients which Scheid expects to apply,
and the expected times of application;

C. The pruning and vine training techniques to be followed and any
other specific plans for vine management;

D. A plan to control weeds, diseases, pests and animals on the
Property, including birds; and

E. Such other information as may be reasonably required concerning
viticultural practices to be followed by Scheid.

1.8 THE BUDGET. The initial Budget (attached as Exhibit B) does, and
future Budgets (to be attached as replacements for Exhibit B) shall, set forth,
as to each month, an estimate of expenditures for each of the items constituting
the Direct Farming Costs (as defined below) with respect to the Vineyard which
shall be funded by Canandaigua to Scheid. For purposes of this Agreement, the
term "Direct Farming Costs" shall mean all ordinary and necessary expenses for
the operation of the Vineyard, including but not limited to:

A. Development of the Vineyard (as set forth in Section 2 below);

B. Planting, grafting, training and trellising;

<PAGE>

C. Pruning, tying, suckering and thinning;

D. Pest control including birds, rodents and insects;

E. Spray operations including herbicides, mildew and disease
control;

F. Cultivation, fertilization, mowing, hoeing and vine trimming;

G. Irrigation;

H. General Vineyard maintenance, fence repair and erosion control;

I. Pro rata share of pumps, water lines and reservoir; and

J. Harvest and delivery.

Direct Farming Costs shall NOT include amounts paid by Scheid for salaries,
bonuses, vacation pay, insurance and other fringe benefits to its office and/or
senior management personnel. Scheid undertakes and agrees that the Direct
Farming Costs billed to Canandaigua shall be no greater than the going rate for
such labor, equipment, or services in Monterey County, and Canandaigua may, at
its option, obtain bids for such elements of labor, equipment or services of
equivalent quality as Canandaigua may desire to satisfy itself of the
appropriateness of the amounts of the Direct Farming Costs. If Canandaigua
identifies elements of Direct Farming Costs of lower cost, Canandaigua shall
consult with Scheid regarding the use of such providers of labor, equipment or
services and Scheid shall, in its reasonable business judgment, determine
whether or not to use such providers or whether to reduce its costs to an
equivalent amount.

1.9 PERFORMANCE OF OBLIGATIONS IN ACCORDANCE WITH PLAN AND BUDGET. Upon
adoption of a Plan and a Budget by Scheid and Canandaigua in accordance with
Section 1.6 above, Scheid shall perform its obligations hereunder in accordance
therewith.

1.10 REPORT BY SCHEID AFTER GROWING SEASON. Scheid agrees to supply to
Canandaigua on or before December 31 of each year during the term hereof a
written report (the "Report") setting forth in reasonable detail for the Farm
Year then completed, the major farming activities relating to fertilizer,
irrigation, pesticides, environmental or legal matters, yields and sugar
contents with respect to the Vineyard, and to make available to Canandaigua or
its designated agent, all records for such Farm Year concerning the tasks
described in Section 1.8 above. The foregoing records shall also contain
information concerning other significant viticultural practices followed by
Scheid which Canandaigua may reasonably request from time to time during the
term hereof.

SECTION 2 DEVELOPMENT OF THE VINEYARD

2.1 DEVELOPMENT DUTIES AND RESPONSIBILITIES. The Property will be in a
"Development Period" for the 1997 and 1998 Farm Years. During the Development
Period, Scheid will commit the resources reasonably necessary to carry out its
duties and responsibilities under this Section as listed below:

<PAGE>

A. Design preliminary vineyard layout;

B. Plan vineyard development and construction costs and prepare
detailed budgets;

C. Secure vineyard material, supply and service bids;

D. Order, receive and install vineyard materials;

E. Coordinate and supervise vineyard service contractors during the
ripping and surveying of the Property and the irrigation system
installation;

F. Supervise the installation of the trellis system, drip system
emitters and planting;

G. Care for the newly planted vines such that they are prepared for
spring whip grafting;

H. Oversee the preparation and implementation of grafting as
required into dormancy; and

I. Exercise reasonable diligence in the continuing demands of a
newly planted vineyard by maintaining replant and regraft
programs, animal control, weed control, timely irrigations and
other action reasonably necessary to the success of a new
vineyard.

2.2 GRAFTING. During the Development Period, Scheid agrees to retain only
contract grafters who will guarantee that ninety percent (90%) of the grafts of
the varietals designated by Canandaigua will successfully take hold, which
guarantee shall include the regrafting of any shortfall without additional
charge. In the event of such a shortfall, Scheid shall diligently prosecute the
regrafting and enforcement of such guarantee on behalf of Canandaigua.

SECTION 3. EXPENSE STATEMENTS AND PAYMENTS

3.1 REIMBURSEMENT OF DIRECT FARMING COSTS. In addition to paying Scheid
the compensation provided in Section 8 below, Canandaigua shall advance to
Scheid, on a monthly basis, all Direct Farming Costs as set forth in the Budget.

<PAGE>

disbursement in accordance with the terms of this Agreement. On or before the
twentieth calendar day of each month, Scheid shall deliver to Canandaigua a
written statement (the "Budget Reconciliation") which shall include in detail,
for the month just ended, the Direct Farming Costs paid by Scheid, any
out-of-pocket expenses incurred by Scheid in excess of that month's advanced
budget amount and any advanced funds not expended in that month. It is
acknowledged and understood that farming is subject to many variables (including
weather) which may cause timing differences from month to month from the
projections set forth in the Budget.

SECTION 4. ACCESS TO INFORMATION

4.1 WHAT SCHEID MUST MAKE AVAILABLE TO CANANDAIGUA. Scheid agrees to make
available and to supply to Canandaigua, following reasonable notice and during
normal business hours, all information, documents, records and reports which
Canandaigua reasonably may request in order to permit Canandaigua or its
designated agents to verify or determine:

A. Any of the amounts, calculations or items set forth in the Budget
or on any of the statements described in Section 1.6 above;

B. Any of the viticultural practices employed by Scheid with respect
to the Property;

C. Compliance by Scheid with the terms and provisions of this
Agreement;

D. Compliance by Scheid with all federal, state and local laws and
regulations; and

E. That Scheid has in effect all required licenses and permits
reasonably required to perform its duties and obligations
hereunder.

In addition, Scheid agrees that Canandaigua may, from time to time, contact the
regular auditors of Scheid to obtain verification of the financial solvency of
Scheid.

SECTION 5. TERM AND TERMINATION

5.1 TERM. This Agreement shall become effective as of the date first
written above and shall remain in effect until December 31, 2013. This
Agreement shall continue in effect after December 31, 2013 on a rolling two
(2)-year basis, such that, at any time on or after December 31, 2011, either
party may terminate this Agreement by providing two (2) years prior written
notice to the other party.

5.2 TERMINATION FOR CAUSE. Either party (hereinafter, the "Nonbreaching
Party") shall have the right to terminate this Agreement for cause in the event
the other party (hereinafter, the "Breaching Party"):

A. breaches any material provision or condition of this Agreement,
and such breach remains uncured for a period of thirty (30) days
following the

<PAGE>

Nonbreaching Party giving written notice of such breach to the
Breaching Party or, if any such breach is curable, but not
reasonably susceptible of cure within such thirty (30) day
period, the Breaching Party shall fail to take steps reasonably
designed to cure such breach and such breach is not cured as
expeditiously as reasonably possible and within such period of
time as may be mutually agreed upon by the parties at the time of
such breach;

B. files a voluntary petition in bankruptcy; or

C. is the subject of an involuntary petition in bankruptcy or has a
trustee or receiver appointed with respect to all or
substantially all of its assets, provided that such petition or
appointment is not dismissed within ninety (90) days of such
filing or appointment.

5.3 ADDITIONAL TERMINATION EVENTS. Further, Canandaigua may terminate
this Agreement by providing written notice to Scheid after the occurrence of any
of the following:

A. Alfred G. Scheid, members of his family and Kurt Gollnick,
together, shall fail to beneficially own, directly or indirectly,
at least 51% of the capital stock of Scheid; Scheid shall provide
prompt written notice to Canandaigua of any such failure;

B. the termination of the Lease, other than as the result of the
intentional, material breach or material default of Canandaigua;
or

C. for any Farm Year ending December 31, 2005 or thereafter, if
(subject to Section 1.4) the average yield of wine grapes from
the Property, as a whole, for the just completed Farm Year and
the immediately preceding two (2) Farm Years is less than six and
one-fourth (6.25) tons per net vine acre per Farm Year.

SECTION 6. HAZARDS OF FARMING

6.1 SCHEID NOT LIABLE FOR CERTAIN DAMAGE OR LOSS. Except as expressly set
forth in Section 1.6 (with respect to the delivery of annual Plans and Budgets),
Section 1.10 (with respect to the delivery of annual Reports) and Section 3.2
(with respect to the delivery of monthly Budget Reconciliations) hereof, Scheid
shall not be liable to Canandaigua for any failure to perform any of its duties
or obligations hereunder, or for any loss or damage of any kind, so long as such
failure to perform or loss or damage is the result of any act of God or any
normal hazard of farming, including, without limitation, rain, hail, heat,
frost, drought, flooding, windstorm or other action of the elements, strike,
work slow-down, worker unavailability, fire, truck, car, rail, labor, equipment
or material shortage or unavailability, freight embargo, governmental action or
any other cause beyond Scheid's reasonable control.

<PAGE>

SECTION 7. LIABILITY AND INSURANCE

7.1 LIABILITY. Scheid shall indemnify and hold Canandaigua harmless
against any claim, cause of action, damages or expense of any nature whatsoever
(including reasonable attorneys' fees and expenses) arising in connection with a
breach of this Agreement by Scheid, except to the extent any such claim, cause
of action, damages or expense is proven in a final judgment to have been caused
by the negligence or the intentional act or omission of Canandaigua; provided,
however, that in no event shall Scheid be liable for, or be required to
indemnify and hold Canandaigua harmless from, special, incidental or
consequential damages (including, without limitation, lost profits).

7.2 SCHEID TO PROVIDE INSURANCE. Scheid shall, at its expense, maintain
throughout the term hereof the following insurance policies:

A. Liability. Scheid shall provide all risk insurance with respect
to its operations on and in connection with the Property, naming
Canandaigua as an additional insured, in amounts not less than
$1,000,000 for each occurrence, and $10,000,000 in the aggregate.
Scheid shall provide Canandaigua with a certificate of insurance
evidencing that such insurance is in effect and providing for at
least thirty (30) days advance notice to Canandaigua of its
cancellation. Scheid shall also require that its contractors or
subcontractors employed in the operations on the Property carry
liability insurance, reasonably acceptable to Scheid, and shall
maintain in its files written documentation of such coverage.

B. Worker's Compensation. Scheid shall provide Worker's
Compensation insurance insuring Scheid's employees engaged in the
operation of the Property under this Agreement. Scheid shall
also require that its contractors or subcontractors employed in
the operations of the Property carry Worker's Compensation
insurance for the benefit of their employees, and shall maintain
in its files written documentation of such coverage.

7.3 COMPLIANCE WITH LAW.

A. Scheid shall comply in all material respects with all statutes,
ordinances, regulations, rules and other enactments by federal,
state, local or other regulatory agencies having jurisdiction
over the Property including, without limitation, all
Environmental Laws. Scheid and Canandaigua shall cooperate in
obtaining all necessary permits and approvals required for the
development and operation of a Vineyard on the Property.

B. During the term of this Agreement, Scheid shall use only
herbicides, pesticides and other treatments that are approved by
the State of California for use in connection with the
development and operation of a Vineyard on the Property at the
relevant time.

<PAGE>

C. Definitions:

"ENVIRONMENTAL LAWS" means all federal, state and local
environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances and codes relating to the
protection of the environment and/or governing the use, storage,
treatment, generation, transportation, processing, handling,
production or disposal of Hazardous Substances and the rules,
relations, policies, guidelines, interpretations, decisions,
orders and directives of federal, state, and local governmental
agencies and authorities with respect thereto.

"HAZARDOUS SUBSTANCES" means, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls,
petroleum and petroleum based products, methane, hazardous
materials, hazardous wastes, hazardous or toxic substances or
related materials, as defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Sections 9601, ET SEQ.), the Hazardous Material
Transportation Act, as amended (49 U.S.C. Sections 1801, ET
SEQ.), the Resource Conservation and Recovery Act, as amended (42
U.S.C. Sections 6901, ET SEQ.), or any other applicable
Environmental Law.

D. Scheid undertakes and agrees to indemnify and hold harmless
Canandaigua against any and all costs, damages, claims, suits,
actions or other liabilities (including reasonable attorneys'
fees) incurred by or threatened against Canandaigua in connection
with a breach by Scheid of Scheid's undertakings in this
Section 7.3; provided however, that such indemnity does not
include any costs, damages, claims, suits, actions or other
liabilities that may at any time be imposed upon, incurred by or
asserted or awarded against Canandaigua as the result of or
relating to any action or omission of Canandaigua in connection
with the Property.

SECTION 8 MANAGEMENT FEE

8.1 MONTHLY FEE. The monthly management fee (the "Management Fee") to be
paid, in advance, by Canandaigua to Scheid for services rendered hereunder shall
be an amount for each acre of the Property equal to the amount set forth below
for the applicable Farm Year:

FARM YEAR MONTHLY FEE PER ACRE
1997 $[ ]*
1998 $[ ]*
1999 and each
year thereafter $[ ]*

The amounts set forth in the foregoing table are referred to herein as the
"Basic Management Fees." Notwithstanding the foregoing, in the event that
Canandaigua elects to have all or any

- --------------------
*Confidential Treatment Requested for Redacted Portion.

<PAGE>

part of the Vineyard replanted after Farm Year 1998, the Management Fee for the
ten (10)-month period commencing the month Scheid begins preparation of the
Vineyard for such replanting shall be $[ ]* per acre for those acres being
replanted. The Management Fee is to be included in the Budget and its payment
procedure is described in Section 3.2 above.

8.2 RENEGOTIATION OF MANAGEMENT FEE. The parties acknowledge that the
United States has had a nearly continuous history of monetary inflation in the
past fifty-five years. Therefore, provision should be made for an adjustment in
the Management Fee to provide protection to Scheid against unforeseen
devaluation of the dollar and effects of inflation on Scheid's costs and
expenses. Thus, notwithstanding the terms of Section 8.1 above, at any time
after December 31, 2005, Scheid may give notice to Canandaigua requesting
renegotiation of the amount of the Management Fee to be paid for Farm Year 2007
and each year thereafter. Following delivery of such a notice, the parties
agree to negotiate, in good faith, the amount of the Management Fee to be
applicable for such next following Farm Years. In the event that the parties
are unable to agree upon such Management Fee within sixty (60) days after the
commencement of such negotiations, Scheid may, upon notice to Canandaigua,
submit the matter to arbitration in accordance with the rules and procedures of
the American Arbitration Association. Any such arbitration shall take place
before a single arbitrator in Monterey County, California. Any such arbitration
shall be governed by and subject to the applicable laws of the State of
California and the then prevailing rules of the American Arbitration
Association. The arbitrator's decision in any such arbitration shall be final
and binding, and a judgment upon such award may be enforced by any court of
competent jurisdiction.

8.3 REDUCTION OF MANAGEMENT FEE. Notwithstanding the foregoing provisions
of this Section 8, for any Farm Year ending December 31, 2003 or thereafter, if
(subject to Section 1.4) the yield of wine grapes from the Property, as a whole,
for such Farm Year is less than three and three-fourths (3.75) tons per net vine
acre, Scheid shall not receive the Basic Management Fees for the following Farm
Year.

SECTION 9 MISCELLANEOUS

9.1 ASSIGNMENT. Neither Scheid nor Canandaigua shall assign or transfer
this Agreement or any interest herein or suffer any such assignment by operation
of law without the prior written consent of the other party; provided, however,
that either party may without the other party's consent assign this Agreement to
any wholly-owned subsidiary of, or affiliate under common control with, that
party if:

A. such subsidiary or affiliate shall assume in a writing reasonably
satisfactory to the other party all of the assigning party's
obligations hereunder; and

B. the assigning party shall fully guarantee such subsidiary's or
affiliate's performance hereunder in a writing reasonably
satisfactory to the other party.

Notwithstanding the foregoing, Canandaigua may assign this Agreement to any
third party whose creditworthiness is reasonably acceptable to Scheid.

- --------------------
*Confident Treatment Requested for Redacted Portion.

<PAGE>

9.2 INTERPRETATION. Each of the parties agrees that it has reviewed and
drafted this Agreement and the normal rule of construction to the effect that
any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any revision or addenda
hereto. In this Agreement, captions of sections and paragraphs are for
convenience of reference only, and the words contained therein shall in no way
be held to explain, modify, amplify or aid in the interpretation, construction
or meaning of the provisions hereof.

9.3 LABOR AND EQUIPMENT. Scheid shall be solely responsible for selecting
and hiring its own employees and for their supervision, direction and control.
Moreover, Scheid shall be solely responsible for setting wages, benefits, hours
and working conditions for such employees; for paying wages and social security;
for paying unemployment insurance and disability insurance contributions; and
for withholding taxes with respect to such employees.

9.4 SOLE AGRICULTURAL EMPLOYER. Scheid acknowledges and agrees that
Scheid is the sole agricultural employer of persons engaged to perform
agricultural services pursuant to this Agreement. In performing its duties and
obligations under this Agreement, Scheid shall direct the operation of its labor
and equipment in all respects and shall determine the method, means and manner
of its performance.

9.5 EMPLOYMENT OF OTHERS. Scheid may, with the prior written consent of
Canandaigua (which consent shall not be unreasonably withheld or delayed),
contract with other entities to furnish portions of the services required of
Scheid under this Agreement, and Scheid shall remain fully liable and
responsible to Canandaigua for the adequacy of, and payment for, any such
services; provided, however, that Scheid shall not be liable or responsible for
any adverse effect of any delayed or withheld consent of Canandaigua. Scheid
shall indemnify and hold harmless Canandaigua in the event any of such providers
makes any claim against Canandaigua for any payment for such provider's
services, provided Canandaigua has paid Scheid for such services.

9.6 DELIVERY OF STATEMENTS, NOTICES AND PAYMENTS. All statements,
notices, demands and requests which are required to be sent or permitted to be
given to another party under this Agreement shall be in writing, and shall be
provided in person or sent by U.S. Mail, recognized courier service, or
telefacsimile with proof of transmission (followed by sending by U.S. Mail), to
the recipient party at the address shown below, or to such other address of
which the notifying party has received actual notice from the recipient party.
Notices are effective upon receipt. Two (2) copies of any notice must be sent
to both parties as follows:

If to Canandaigua or CWC:
One copy to: Second copy to:
Mark Gabrielli Robert Sands, Esq.
Vice President Vice President and General Counsel
Canandaigua West, Inc. Canandaigua West, Inc.
12667 Road 24 116 Buffalo Street
Madera, CA 93637 Canandaigua, NY 14424
Telefacsimile: (209) 675-7020 Telefacsimile: (716) 394-6017

<PAGE>

If to Scheid:

One copy to: Second copy to:
Scott D. Scheid Kurt Gollnick
Scheid Vineyards and Scheid Vineyards and
Management Co. Management Co.
13470 Washington Blvd., Ste. 300 1972 Hobson Avenue
Marina del Rey, CA 90292 Greenfield, CA 93927
Telefacsimile: (310) 301-1569 Telefacsimile: (408) 385-0136

9.7 ATTORNEY FEES AND COSTS. If legal action or other proceeding is
brought for the enforcement of this Agreement or because of any alleged dispute,
breach, default or misrepresentation in connection with the provisions of this
Agreement, the prevailing party shall be entitled to recover reasonable attorney
fees and other costs incurred in that action or proceeding in addition to any
other relief to which such party may be entitled.

9.8 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement
shall be deemed or construed by the parties or by a third party to create the
relationship of principal and agent or of partnership or of joint venture or of
any association between Canandaigua and Scheid, and neither shall any of the
provisions contained in this Agreement nor any act of the parties be deemed to
create any relationship between Canandaigua and Scheid, other than the
relationship of Scheid as an independent contractor of Canandaigua.

9.9 SEVERABILITY. If any part or parts of this Agreement are found to be
illegal or unenforceable, the remainder shall be considered severable, shall
remain in full force and effect, and shall be enforceable.

9.10 GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with and subject to the laws of the State of California.

9.11 SURVIVAL OF COVENANTS. The covenants set forth in this Agreement are
intended to, and shall survive termination of, this Agreement.

9.12 ACCESS BY CANANDAIGUA. Canandaigua employees shall, at all times,
have the right of access to the Property.

9.13 CWC GUARANTY. CWC unconditionally and irrevocably guarantees the
payment and performance of the obligations of Canandaigua under this Agreement.
CWC hereby waives all formalities legally required to charge it with liability
hereunder and agrees that its liability will not be affected by (a) any
extension of the time for performance of any of such obligations of Canandaigua,
(b) any forbearance or waiver of performance of any such obligations of
Canandaigua, or (c) any modification of the terms or provisions of this
Agreement or other instruments or agreements delivered by Canandaigua hereunder.
CWC agrees that, with respect to such obligations of Canandaigua, it may be
joined in any action against Canandaigua and that recovery may be had against
CWC either in such action or other actions without exhausting any remedy or
claim against Canandaigua.

<PAGE>

9.14 WATER ALLOCATION. As of the date hereof, Scheid has entered into a
lease with the Lessor with respect to certain property adjoining the Property
(the "Scheid Property"). In the event that water of sufficient quality and
quantity is not available for the operation of the vineyards on the Scheid
Property and the Property, Scheid and Canandaigua agree to apportion the water
available to all such properties among such properties in proportion to the
respective vineyard acres of each such property; provided, however, that, in any
such apportionment, Canandaigua shall be entitled to receive not less than forty
percent (40%) of the available water.

9.15 CONDITION PRECEDENT. Notwithstanding any other terms of this
Agreement, the obligation of the parties hereunder are conditioned upon the
execution and delivery of the Lease by the Lessor, Canandaigua and CWC. In the
event that the Lease is not so executed and delivered within sixty (60) days
after the date hereof, this Agreement shall be of no further force or effect.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

CANANDAIGUA WEST, INC.

By: /s/ Daniel Barnett
-----------------------------------------

Its: Vice President
-----------------------------------------

SCHEID VINEYARDS AND MANAGEMENT CO.

By: /s/ Scott D. Scheid
-----------------------------------------

Its: Vice President
-----------------------------------------

AGREED AS TO SECTIONS 9.2, 9.6, 9.7, 9.10,
9.11, 9.13 AND 9.15:

CANANDAIGUA WINE COMPANY, INC.

By: /s/ Daniel Barnett
-----------------------------------------

Its: Vice President
-----------------------------------------

<PAGE>

STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )

On _______________, before me, __________________, Notary Public,
personally appeared __________________, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledged to me that he or she executed the same
in his or her authorized capacity, and that by his or her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.

WITNESS my hand and official seal.

---------------------------------------
Signature

[SEAL]

STATE OF NEW YORK )
-----------------
) ss
COUNTY OF ONTARIO )
----------------

On 3/26/97, before me, Robert L. Sands, Notary Public,
personally appeared Daniel Barnett, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledged to me that he or she executed the same
in his or her authorized capacity, and that by his or her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.

WITNESS my hand and official seal.

/s/ Robert L. Sands
---------------------------------------
Signature

[SEAL]

<PAGE>

STATE OF CALIFORNIA )
-----------------
) ss
COUNTY OF LOS ANGELES )
----------------

On 3/28/97, before me, Robert Romero, Notary Public,
personally appeared Scott D. Scheid, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledged to me that he or she executed the same
in his or her authorized capacity, and that by his or her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.

WITNESS my hand and official seal.

/s/ Robert Romero
---------------------------------------
Signature

[SEAL]

F<PAGE>

VINEYARD MANAGEMENT AGREEMENT

This Vineyard Management Agreement (this "Agreement") is made and entered
into as of the 1st day of January, 1996, by and between SCHEID VINEYARDS AND
MANAGEMENT CO., a California corporation ("Scheid"), CANANDAIGUA WEST, INC., a
New York corporation ("Canandaigua"), and CANANDAIGUA WINE COMPANY, INC., a
Delaware corporation ("CWC").

A. Canandaigua, as lessee, proposes to enter into a lease (the "Lease")
with Jerry D. Echenique, James J. Echenique, Julie Trescony and Jane Johnson, as
lessors (the "Lessors"), for three hundred thirty (330) acres (or such other
amount of acres determined after survey of the property and agreed to by
Canandaigua and Lessors) of real property situated in Monterey County,
California, which property is more particularly described in Exhibit A attached
hereto (the "Property"), with rent commencing at the rate of $150.00 per acre
per year as of January 1, 1996.

AGREEMENT

In consideration of the mutual covenants contained herein and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

SECTION 1. MANAGEMENT OF THE VINEYARD

1.1 ENGAGEMENT OF SCHEID. On the terms and conditions set forth in this
Agreement, Canandaigua hereby engages Scheid as an independent contractor to
develop, farm and manage approximately three thirty hundred (330) acres of
Vineyard, as specifically described in Exhibit A, on an exclusive basis during
the term of this Agreement, and Scheid hereby accepts such engagement.

<PAGE>

that the source of any such information was not known by Scheid to be bound by
any confidentiality agreement or obligation to Canandaigua.

A. Prepare for planting and plant such wine grape varieties as may
be determined by Canandaigua as of the date hereof and from time
to time;

B. Prune, sucker and, if necessary, thin the Vineyard;

C. Irrigate, fertilize and cultivate the Vineyard;

D. Control weeds, diseases and pests in the Vineyard;

E. Care for and maintain wells, pumps, pipelines, irrigation systems
and other improvements as reasonably necessary;

F. Use the irrigation system that is shared with other parties so
that all power charges incurred by or on behalf of Canandaigua
are accounted for and reported to Canandaigua in a timely manner;

G. Harvest the grapes grown on the Vineyard and arrange for delivery
of them to such point of delivery as Canandaigua shall designate;

H. Provide labor, machinery, equipment and materials reasonably
required or useful to manage the Vineyard to accomplish the
foregoing; and

I. Comply with the terms of the Lease, as such terms relate to
Canandaigua's use of the Property.

<PAGE>

1.6 PLAN AND BUDGET SUBMITTED BY SCHEID BEFORE THE GROWING SEASON. On or
before December 31 of each year during the term of this Agreement, Scheid agrees
to submit to Canandaigua a written plan (the "Plan") and budget (the "Budget")
covering the next growing season. Representatives of Scheid and Canandaigua
will meet to discuss, revise (if necessary) and approve the Plan and Budget
within ten (10) days following its submission by Scheid to Canandaigua. The
parties agree that Canandaigua shall have final approval of the Budget and the
Plan. Notwithstanding that Canandaigua may not have approved the Plan and
Budget for any season, Scheid may commence pruning in December if, in Scheid's
judgment, such commencement is reasonably necessary to complete pruning for the
next growing season in a timely manner.

Attached as Exhibit B hereto and made a part hereof is the Budget for the
period January 1, 1996 through December 31, 1996 (the calendar year which
defines the 1996 Vineyard management year and each calendar year thereafter,
hereinafter referred to as "Farm Year") which has been approved by Canandaigua.
Such Exhibit B shall be modified annually to reflect any agreed changes to the
Budget for the next following growing season.

Attached as Exhibit C hereto and made a part hereof is the Plan, as
prepared and submitted by Scheid for the 1996 Farm Year, which has been approved
by Canandaigua. Such Exhibit C shall be modified annually to reflect any agreed
changes to the Plan for the next following growing season.

<PAGE>

A. The approximate amount and timing of irrigation which Scheid
expects to undertake under normal conditions;

B. The approximate amount and types of nitrogen-containing
fertilizers and other nutrients which Scheid expects to apply,
and the expected times of application;

C. The pruning and vine training techniques to be followed and any
other specific plans for vine management;

D. A plan to control weeds, diseases, pests and animals on the
Property, including birds; and

E. Such other information as may be reasonably required concerning
viticultural practices to be followed by Scheid.

A. Development of the Vineyard (as set forth in Section 2 below);

B. Planting, grafting, training and trellising;

C. Pruning, tying, suckering and thinning;

D. Pest control including birds, rodents and insects;

E. Spray operations including herbicides, mildew and disease
control;

F. Cultivation, fertilization, mowing, hoeing and vine trimming;

G. Irrigation;

H. General Vineyard maintenance, fence repair and erosion control;

I. Pro rata share of pumps, water lines and reservoir; and

J. Harvest and delivery.

<PAGE>

SECTION 2 DEVELOPMENT OF THE VINEYARD

2.1 DEVELOPMENT DUTIES AND RESPONSIBILITIES. The Property will be in a
"Development Period" for the 1996 and 1997 Farm Years. During the Development
Period, Scheid will commit the resources reasonably necessary to carry out its
duties and responsibilities under this Section as listed below:

A. Design preliminary vineyard layout;

B. Plan vineyard development and construction costs and prepare
detailed budgets;

C. Secure vineyard material, supply and service bids;

D. Order, receive and install vineyard materials;

E. Coordinate and supervise vineyard service contractors during the
ripping and surveying of the Property and the irrigation system
installation;

F. Supervise the installation of the trellis system, drip system
emitters and planting;

<PAGE>

G. Care for the newly planted vines such that they are prepared for
spring whip grafting;

H. Oversee the preparation and implementation of grafting as
required into dormancy; and

SECTION 3. EXPENSE STATEMENTS AND PAYMENTS

3.2 MONTHLY REQUIREMENT. On or before the fifth business day of each
month, Canandaigua shall advance to Scheid an amount equal to that month's
approved Budget amount plus any out-of-pocket expenses incurred by Scheid or
less any advanced funds not expended by Scheid in accordance with a previously
received Budget Reconciliation (as defined below). Such funds shall be
deposited by Canandaigua in an account of which Scheid shall have unrestricted
withdrawal authority for the purposes set forth in this Agreement. Such account
shall not be used by Scheid for any other purpose, nor shall the assets of such
account constitute assets of Scheid. Regular statements of such account shall
be provided to both Scheid and Canandaigua. Scheid shall have the authority to
transfer funds from such account to its own account for further disbursement in
accordance with the terms of this Agreement. On or before the twentieth
calendar day of each month, Scheid shall deliver to Canandaigua a written
statement (the "Budget Reconciliation") which shall include in detail, for the
month just ended, the Direct Farming Costs paid by Scheid, any out-of-pocket
expenses incurred by Scheid in excess of that month's advanced budget amount and
any advanced funds not expended in that month. It is acknowledged and
understood that farming is subject to many variables (including weather) which
may cause timing differences from month to month from the projections set forth
in the Budget.

SECTION 4. ACCESS TO INFORMATION

<PAGE>

A. Any of the amounts, calculations or items set forth in the Budget
or on any of the statements described in Section 1.6 above;

B. Any of the viticultural practices employed by Scheid with respect
to the Property;

C. Compliance by Scheid with the terms and provisions of this
Agreement;

D. Compliance by Scheid with all federal, state and local laws and
regulations; and

E. That Scheid has in effect all required licenses and permits
reasonably required to perform its duties and obligations
hereunder.

In addition, Scheid agrees that Canandaigua may, from time to time, contact the
regular auditors of Scheid to obtain verification of the financial solvency of
Scheid.

SECTION 5. TERM AND TERMINATION

5.1 TERM. This Agreement shall become effective as of the date first
written above and shall remain in effect until December 31, 2012. This
Agreement shall continue in effect after December 31, 2012 on a rolling two
(2)-year basis, such that, at any time on or after December 31, 2010, either
party may terminate this Agreement by providing two (2) years prior written
notice to the other party.

A. breaches any material provision or condition of this Agreement,
and such breach remains uncured for a period of thirty (30) days
following the Nonbreaching Party giving written notice of such
breach to the Breaching Party or, if any such breach is curable,
but not reasonably susceptible of cure within such thirty (30)
day period, the Breaching Party shall fail to take steps
reasonably designed to cure such breach and such breach is not
cured as expeditiously as reasonably possible and within such
period of time as may be mutually agreed upon by the parties at
the time of such breach;

B. files a voluntary petition in bankruptcy; or

<PAGE>

5.3 ADDITIONAL TERMINATION EVENTS. Further, Canandaigua may terminate
this Agreement by providing written notice to Scheid after the occurrence of any
of the following:

A. Alfred G. Scheid and members of his family, together, shall fail
to beneficially own, directly or indirectly, at least 51% of the
capital stock of Scheid; Scheid shall provide prompt written
notice to Canandaigua of any such failure;

B. the termination of the Lease, other than as the result of the
intentional, material breach or material default of Canandaigua;
or

C. for any Farm Year ending December 31, 2004 or thereafter, if the
average yield of wine grapes from the Property, as a whole, for
the just completed Farm Year and the immediately preceding two
(2) Farm Years is less than five (5) tons per net vine acre per
Farm Year (other than as the result of instructions given by
Canandaigua).

SECTION 6. HAZARDS OF FARMING

SECTION 7. LIABILITY AND INSURANCE

7.2 SCHEID TO PROVIDE INSURANCE. Scheid shall, at its expense, maintain
throughout the term hereof the following insurance policies:

<PAGE>

occurrence, and $10,000,000 in the aggregate. Scheid shall
provide Canandaigua with a certificate of insurance evidencing
that such insurance is in effect and providing for at least
thirty (30) days advance notice to Canandaigua of its
cancellation. Scheid shall also require that its contractors or
subcontractors employed in the operations on the Property carry
liability insurance, reasonably acceptable to Scheid, and shall
maintain in its files written documentation of such coverage.

7.3 COMPLIANCE WITH LAW.

C. Definitions:

<PAGE>

of 1980, as amended (42 U.S.C. Sections 9601, ET SEQ.), the
Hazardous Material Transportation Act, as amended (49 U.S.C.
Sections 1801, ET SEQ.), the Resource Conservation and Recovery
Act, as amended (42 U.S.C. Sections 6901, ET SEQ.), or any other
applicable Environmental Law.

D. Scheid undertakes and agrees to indemnify and hold harmless
Canandaigua against any and all costs, damages, claims, suits,
actions or other liabilities (including reasonable attorneys
fees) incurred by or threatened against Canandaigua in connection
with a breach by Scheid of Scheid's undertakings in this
Section 7.3; provided however, that such indemnity does not
include any costs, damages, claims, suits, actions or other
liabilities that may at any time be imposed upon, incurred by or
asserted or awarded against Canandaigua as the result of or
relating to any action or omission of Canandaigua in connection
with the Property.

SECTION 8 MANAGEMENT FEE

Farm Year Monthly Fee Per Acre
--------- --------------------
1996 $[ ]*
1997 $[ ]*
1998 and each
year thereafter $[ ]*

The amounts set forth in the foregoing table are referred to herein as the
"Basic Management Fees." Notwithstanding the foregoing, in the event that
Canandaigua elects to have all or any part of the Vineyard replanted after Farm
Year 1997, the Management Fee for the ten (10)-month period commencing the month
Scheid begins preparation of the Vineyard for such replanting shall be $[ ]*
per acre for those acres being replanted. The Management Fee is to be included
in the Budget and its payment procedure is described in Section 3.2 above.

8.2 RENEGOTIATION OF MANAGEMENT FEE. The parties acknowledge that the
United States has had a nearly continuous history of monetary inflation in the
past fifty-five years. Therefore, provision should be made for an adjustment in
the Management Fee to provide protection to Scheid against unforeseen
devaluation of the dollar and effects of inflation on Scheid's costs and
expenses. Thus, notwithstanding the terms of Section 8.1 above, at any time
after December 31, 2004, Scheid may give notice to Canandaigua requesting
renegotiation of the amount of the Management Fee to be paid for Farm Year 2006
and each year thereafter. Following delivery of such a notice, the parties
agree to negotiate, in good faith, the amount of the Management Fee to be
applicable for such next following Farm Years. In the event that the parties
are unable to agree upon such Management Fee within sixty (60) days after the
commencement of such negotiations, Scheid may, upon notice to Canandaigua,
submit the matter to arbitration in accordance with the rules and procedures of
the American Arbitration

- ---------------
* Confidential Treatment Requested for Redacted Portion

<PAGE>

Association. Any such arbitration shall take place before a single arbitrator
in Monterey County, California. Any such arbitration shall be governed by and
subject to the applicable laws of the State of California and the then
prevailing rules of the American Arbitration Association. The arbitrator's
decision in any such arbitration shall be final and binding, and a judgment upon
such award may be enforced by any court of competent jurisdiction.

8.3 REDUCTION OF MANAGEMENT FEE. Notwithstanding the foregoing provisions
of this Section 8, for any Farm Year ending December 31, 2002 or thereafter, if
the yield of wine grapes from the Property, as a whole, for such Farm Year is
less than three (3) tons per net vine acre (other than as the result of
instructions given by Canandaigua), Scheid shall not receive the Basic
Management Fees for the following Farm Year.

SECTION 9 MISCELLANEOUS

A. such subsidiary or affiliate shall assume in a writing reasonably
satisfactory to the other party all of the assigning party's
obligations hereunder; and

B. the assigning party shall fully guarantee such subsidiary's or
affiliate's performance hereunder in a writing reasonably
satisfactory to the other party.

Notwithstanding the foregoing, Canandaigua may assign this Agreement to any
third party whose creditworthiness is reasonably acceptable to Scheid.

9.4 SOLE AGRICULTURAL EMPLOYER. Scheid acknowledges and agrees that
Scheid is the sole agricultural employer of persons engaged to perform
agricultural services pursuant to this

<PAGE>

Agreement. In performing its duties and obligations under this Agreement,
Scheid shall direct the operation of its labor and equipment in all respects and
shall determine the method, means and manner of its performance.

If to Canandaigua or CWC:
One copy to: Second copy to:
Bertram E. Silk Robert Sands, Esq.
Senior Vice President Vice President and General Counsel
Canandaigua West, Inc. Canandaigua West, Inc.
12667 Road 24 116 Buffalo Street
Madera, CA 93637 Canandaigua, NY 14424
Telefacsimile: (209) 675-7020 Telefacsimile: (716) 394-6017

If to Scheid:

<PAGE>

9.10 GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with and subject to the laws of the State of California.

9.11 SURVIVAL OF COVENANTS. The covenants set forth in this Agreement are
intended to, and shall survive termination of, this Agreement.

9.12 ACCESS BY CANANDAIGUA. Canandaigua employees shall, at all times,
have the right of access to the Property.

9.14 WATER ALLOCATION. As of the date hereof, Scheid has leased (a) from
the Lessors, certain property adjoining the Property and (b) from Luis
Echenique, Ricardo Echenique and Margaret Echenique, as executrix of the estate
of Francis D. Echenique (collectively, the "Echenique Lessors"), certain
property as more particularly described in the Agreement Regarding Water of even
date herewith, among the Echenique Lessors, Scheid and Canandaigua
(collectively, the "Scheid Leased Properties"). In the event that water of
sufficient quality and quantity is not available for the operation of the
vineyards on the Scheid Leased Properties and the Property, Scheid and
Canandaigua agree to apportion the water available to all such properties among
such properties in proportion to the respective vineyard acres of each such
property.

9.15 CONDITION PRECEDENT. Notwithstanding any other terms of this
Agreement, the obligation of the parties hereunder are conditioned upon the
execution and delivery of the Lease by the Lessors, Canandaigua and CWC. In the
event that the Lease is not so executed and delivered within sixty (60) days
after the date hereof, this Agreement shall be of no further force or effect.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

CANANDAIGUA WEST, INC.

By: /s/ Robert Sands
-----------------------------------------

Its: Secretary
----------------------------------------

SCHEID VINEYARDS AND MANAGEMENT CO.

By: /s/ Scott D. Scheid
-----------------------------------------

Its: Vice President
----------------------------------------

AGREED AS TO SECTIONS 9.2, 9.6, 9.7, 9.10,
9.11, 9.13 AND 9.15:

CANANDAIGUA WINE COMPANY, INC.

By: /s/ Daniel Barnett
-----------------------------------------

Its: President, Wine Division
----------------------------------------

<PAGE>

STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )

On 2/2/96, before me, Kenneth T. Wang, Notary Public,
personally appeared Scott D. Scheid, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledged to me that he or she executed the same
in his or her authorized capacity, and that by his or her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.

WITNESS my hand and official seal.

/s/ Kenneth T. Wang
---------------------------------------
Signature

[SEAL]

STATE OF NEW YORK, )
) ss
COUNTY OF ONTARIO )

On 3/13/96, before me, Karen J. Megaffee, Notary Public,
personally appeared Robert Sands, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledged to me that he or she executed the same
in his or her authorized capacity, and that by his or her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.

WITNESS my hand and official seal.

/s/ Karen J. Megaffee
---------------------------------------
Signature

[SEAL]

<PAGE>

STATE OF NEW YORK )
) ss
COUNTY OF ONTARIO )

On 3/13/96, before me, Janis A. Stickler, Notary Public,
personally appeared Daniel Barnett, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledged to me that he or she executed the same
in his or her authorized capacity, and that by his or her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.

WITNESS my hand and official seal.

/s/ Janis A. Stickler
---------------------------------------
Signature

[SEAL]

<PAGE>

GRENACHE VINEYARD MANAGEMENT AGREEMENT

This Vineyard Management Agreement (the "Agreement") is made and entered into as
of the 1st day of April, 1995, by and between Scheid Vineyards and Management
Co., a California corporation (hereinafter "SCHEID") and Joseph Phelps
Vineyards, a California corporation (hereinafter "JPV").

A. SCHEID is the general partner of Vineyard Investors 1972, a limited
partnership (hereinafter "VI-72").

B. VI-72 owns a vineyard of approximately 407 acres (the "Wild Horse
Vineyard") situated in Monterey County, and more particularly described in
Exhibit A hereto.

C. Simultaneously with the execution of this Agreement, JPV is entering into a
lease agreement with VI-72 (the "Vineyard Lease Agreement") pursuant to
which JPV will lease an approximate 28-acre portion of the Wild Horse
Vineyard currently planted to the winegrape variety Grenache (hereinafter
"Grenache Vineyard"), and more particularly described in Exhibit B hereto.

D. JPV desires to engage SCHEID to farm and manage the Grenache Vineyard and
SCHEID desires to perform such services, all on the terms and conditions
set forth in this Agreement.

AGREEMENT

In consideration of the mutual covenants contained herein and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:

SECTION 1. MANAGEMENT OF THE VINEYARD

1.1 ENGAGEMENT OF SCHEID. On the terms and conditions set forth in this
Agreement, JPV hereby engages SCHEID as an independent contractor to farm and
manage the Grenache Vineyard, as specifically described in Exhibit B, on an
exclusive basis, and SCHEID hereby accepts such engagement.

SCHEID shall not be required to farm and manage the Grenache Vineyard
as its sole and exclusive function, and it

<PAGE>

retains the right to have other business interests and may engage in other
activities, including but not limited to performance of farm management services
for itself and for parties other than JPV, whether or not in conflict with the
business interests and activities of JPV.

1.2 DUTIES AND RESPONSIBILITIES OF SCHEID. In farming and managing the
Grenache Vineyard, SCHEID agrees to perform or cause to be performed in a
timely, efficient and economical manner, all acts and services which reasonably
may be necessary or desirable in order to ensure that the Grenache Vineyard is
cared for, maintained and operated as a winegrape vineyard. SCHEID hereby
represents and warrants that it has, or will obtain, all necessary licenses and
permits to perform all services and tasks envisioned hereunder. In performing
its duties and obligations hereunder, SCHEID shall:

A. Follow the viticultural requirements reasonably requested by JPV
to produce fruit of premium quality and fully developed varietal
character;

B. Prune, sucker, thin and leaf pull the Grenache Vineyard;

C. Irrigate, fertilize and cultivate the Grenache Vineyard;

D. Control weeds, diseases and pests in the Grenache Vineyard;

E. Care for and maintain wells, pumps, pipelines, irrigation systems
and other improvements on the Grenache Vineyard;

F. Harvest the grapes grown on the Grenache Vineyard and deliver
them to such point of delivery as JPV shall designate; and,

G. Provide labor, machinery, equipment and materials reasonably
required or useful to manage the Grenache Vineyard to accomplish
the foregoing.

1.3 AUTHORITY OF MANAGER. SCHEID shall have general power and authority
to perform its duties and obligations hereunder, and

<PAGE>

to act in all matters relating to or concerning the care, maintenance and
operation of the Grenache Vineyard as a winegrape vineyard.

1.4 SCHEID TO CONSULT WITH JPV. SCHEID agrees to keep JPV or JPV's
designated agent fully advised on at least a monthly basis, and in any event at
such time as the circumstances reasonably require, of the progress of the
Grenache Vineyard.

SCHEID specifically agrees to advise JPV or JPV's designated agent of all events
which materially adversely affect or might reasonably be expected to materially
adversely affect the growth or development of the Grenache Vineyard and/or the
amount or quality of the winegrapes produced and harvested therefrom. To this
end SCHEID agrees to consult with JPV or JPV's designated agent as to any major
decisions which are not included in the "Plan", or the "Budget", as described in
Section 1.6 below, and which may arise with respect to the Grenache Vineyard,
and to obtain the written consent of JPV or of JPV's designated agent prior to
making and implementing any such decision.

1.5 EMERGENCIES. Notwithstanding the fact that SCHEID may be required to
obtain the consent of JPV or JPV's designated agent under this Agreement before
taking certain actions, in the event emergency circumstances arise with respect
to the Grenache Vineyard which would require prompt action on the part of a
reasonably prudent vineyard farmer, and in the event time does not reasonably
permit the obtaining of any required consent hereunder or such consents
otherwise are not reasonably obtainable, SCHEID may take all actions which under
the circumstances would be taken by a reasonably prudent vineyard farmer to
prevent or mitigate damage, and any such actions shall be taken in accordance
with the standards set forth herein.

1.6 PLAN AND BUDGET SUBMITTED BY SCHEID BEFORE THE GROWING SEASON. On or
before December 31 of each year during the term of this Agreement, SCHEID agrees
to submit to JPV a written plan (the "Plan") and budget (the "Budget") covering
the next growing season. Representatives of SCHEID and JPV will meet to
discuss, revise (if necessary) and approve the Plan and Budget within ten (10)
days following its submission by SCHEID to JPV. The parties agree that JPV
shall have the final word on approval of the Budget and the Plan.

<PAGE>

Attached as Exhibit C hereto is the Budget for the period January 1, 1995
through December 31, 1995 (the calendar year which defines the 1995 Grenache
Vineyard management year and each calendar year thereafter, hereafter referred
to as "Farm Year") which has been approved by JPV.

Attached as Exhibit D hereto is the Plan, as prepared and submitted by SCHEID
for the 1995 Farm Year which has been approved by JPV.

1.7 THE PLAN. The Exhibit D Plan does, and future Plans shall, set forth
for the Grenache Vineyard the following information with respect to the growing
season in question:

A. The approximate amount and timing of irrigation which SCHEID
expects to undertake under normal conditions;

B. The approximate amount and types of nitrogen-containing
fertilizers and other nutrients which SCHEID expects to apply,
and the expected times of application;

C. Any significant change from pruning and vine training techniques
followed by SCHEID in the past, and any specific plans for
thinning;

D. SCHEID'S proposed plan to control weeds, diseases, pests and
animals on the Grenache Vineyard, including birds; and,

E. Such other information as JPV reasonably may request concerning
viticultural practices which may be followed by SCHEID.

1.8 THE BUDGET. The Exhibit C Budget does, and future Budgets shall, set
forth, as to each month, a reasonable estimate for the budget period in question
of the amount of each of the items constituting the "Direct Farming Costs" (as
defined below) with respect to the Grenache Vineyard which shall be reimbursed
by JPV to SCHEID. For purposes of this Agreement, the term "Direct Farming
Costs" shall mean all ordinary and necessary expenses incurred by SCHEID in
providing the services and performing the

<PAGE>

duties and obligations required of SCHEID under this Agreement, including but
not limited to:

A. Pruning, tying, suckering, thinning and leaf removal;

B. Pest control including rodents and insects;

C. Spray operations including herbicides and disease
control;

D. Cultivation, fertilization, mowing, hoeing and vine trimming;

E. Irrigation;

F. General maintenance, and erosion control;

G. Harvest and delivery.

Direct Farming Costs shall not include amounts paid by SCHEID for salaries,
bonuses, vacation pay, insurance and other fringe benefits to its office and/or
management personnel.

1.9 PERFORMANCE OF OBLIGATIONS IN ACCORDANCE WITH PLAN AND BUDGET. Upon
adoption of a Plan and a Budget by SCHEID and JPV in accordance with Section 1.6
above, SCHEID shall perform its obligations hereunder in accordance therewith.

1.10 REPORT BY SCHEID AFTER GROWING SEASON. SCHEID agrees to supply to
JPV on or before December 31 of each year during the term hereof a written
report (the "Report") setting forth in reasonable detail for the Farm Year for
which the Report is given, the major farming activities relating to fertilizer,
irrigation, pesticides, yields and sugar contents with respect to the Grenache
Vineyard, and to make available to JPV or JPV's designated agent, all records
for such Farm Year for which the Report is given concerning the tasks described
in Section 1.8 herein.

The foregoing records also shall contain information concerning other
significant viticultural practices followed by SCHEID which JPV reasonably may
request from time-to-time during the term hereof.

<PAGE>

SECTION 2. EXPENSE STATEMENTS AND PAYMENTS

2.1 REIMBURSEMENT OF DIRECT FARMING COSTS. In addition to paying SCHEID
the compensation provided in Section 8 below, JPV shall reimburse SCHEID for all
Direct Farming Costs incurred by SCHEID as defined in Section 1.8 above.

2.2 MONTHLY REQUIREMENT. On or before the fifth business day of each
month, JPV shall advance to SCHEID an amount equal to that month's approved
Budget amount plus any out-of-pocket expenses incurred by SCHEID or less any
advanced funds not expended in accordance with a previously received Budget
Reconciliation (as defined below). On or before the twentieth calendar day of
each month, SCHEID shall deliver to JPV a written statement (the "Budget
Reconciliation") which shall include in detail, for the month just ended, the
Direct Farming Costs paid by SCHEID, any out-of-pocket expenses incurred by
SCHEID in excess of that month's advanced budget amount and any advanced funds
not expended in that month. It is acknowledged and understood that farming is
subject to many variables, including weather, and it is not always possible to
make expenditures according to the Budget.

SECTION 3. ACCESS TO INFORMATION

3.1 WHAT SCHEID MUST MAKE AVAILABLE TO JPV. SCHEID agrees to make
available and supply to JPV, following reasonable notice and during normal
business hours, all information, documents, records and reports which JPV
reasonably may request in order to permit JPV or its designated agents to verify
or determine:

A. Any of the amounts, calculations or items set forth in the Budget
or on any of the statements described in Section 1.6 above;

B. Any of the viticultural practices employed by SCHEID with respect
to the Grenache Vineyard;

C. Compliance by SCHEID with the terms and provisions of this
Agreement;

D. Compliance by SCHEID with all federal, state and local laws and
regulations; and,

<PAGE>

E. That SCHEID has, in effect, all required licenses and permits
reasonably required to perform its duties and obligations
hereunder.

SECTION 4. TERM AND TERMINATION

4.1 TERM. This Agreement shall become effective on April 1, 1995 and
shall remain in effect for three (3) harvest seasons until December 31, 1997.
JPV may extend this Agreement by one (1) additional year to December 31, 1998 by
giving written notice to SCHEID of its desire to do so on or before July 1,
1997.

SECTION 5. HAZARDS OF FARMING

5.1 SCHEID NOT LIABLE FOR CERTAIN DAMAGE OR LOSS. SCHEID shall not be
liable to JPV for any failure to perform any of its duties or obligations
hereunder, or for any loss or damage of any kind, so long as such failure to
perform or loss or damage is the result of any Act of God or any normal hazard
of farming, including, without limitation, rain, hail, heat, frost, drought,
flooding, windstorm or other action of the elements, strike, work slow-down,
worker unavailability, fire, truck, car, rail, labor, equipment or material
shortage or unavailability, freight embargo, governmental action or any other
cause beyond SCHEID'S reasonable control.

SECTION 6. INSURANCE

6.1 SCHEID TO PROVIDE INSURANCE. SCHEID shall, at its expense, maintain
throughout the term hereof the following insurance policies:

A. LIABILITY. SCHEID shall provide public liability and property
damage insurance insuring JPV and SCHEID, their respective officers,
directors, shareholders, employees, agents, and representatives,
against any liability for accidents occurring on the Grenache Vineyard
or for any injury or damage of any nature claimed to have resulted
from or in any way connected with the activities of the person or
entity insured in connection with the operation of the Grenache
Vineyard in amounts not less than $1,000,000 for each occurrence.
SCHEID shall also direct that its contractors or subcontractors
employed in the

<PAGE>

operations of the Grenache Vineyard carry liability insurance and
shall require and maintain in its files written documentation of such
coverage.

B. WORKER'S COMPENSATION. SCHEID shall provide Worker's Compensation
insurance insuring SCHEID'S employees engaged in the operation of the
Grenache Vineyard under this Agreement. SCHEID shall also direct that
its contractors or subcontractors employed in the operations of the
Grenache Vineyard carry Worker's Compensation insurance for the
benefit of their employees, and shall require and maintain in its
files, with copies to JPV, written documentation of such coverage.

SECTION 7 MANAGEMENT FEE

7.1 MONTHLY FEE. The monthly management fee to be paid in advance each
month by JPV to SCHEID for services rendered hereunder, shall be [ ]*
dollars ($[ ]*) for each acre of the Grenache Vineyard. This management fee is
included in the Budget and its payment procedure is described in Section 2.2
above.

SECTION 8 MISCELLANEOUS

8.1 ASSIGNMENT. Neither SCHEID nor JPV shall assign or transfer this
Agreement or any interest herein or suffer any such assignment by operation of
law without the prior written consent of the other party; provided, however,
that either party may without the other party's consent assign this Agreement to
any wholly-owned subsidiary of that party if:

A. such subsidiary shall assume in a writing reasonably satisfactory
to the other party all of the assigning party's obligations
hereunder, and

B. the assigning party shall fully guarantee such subsidiary's
performance hereunder in a writing reasonably satisfactory to the
other party.

8.2 INTERPRETATION. Each of the parties agrees that it has reviewed and
revised this Agreement and the normal rule of construction to the effect that
any ambiguities are to be resolved

- -----------------
* Confidential Treatment Requested for Redacted Portion.

<PAGE>

against the drafting party shall not be employed in the interpretation of this
Agreement or any revision or addenda hereto. In this Agreement, captions of
sections and paragraphs are for convenience of reference only, and the words
contained therein shall in no way be held to explain, modify, amplify or aid in
the interpretation, construction or meaning of the provisions hereof.

8.3 LABOR AND EQUIPMENT. SCHEID shall be solely responsible for
selecting and hiring its own employees and for their supervision, direction and
control. Moreover, SCHEID shall be solely responsible for setting wages,
benefits, hours and working conditions for such employees; for furnishing,
during the entire period of this Agreement, Worker's Compensation insurance
coverage; for paying wages and social security; for paying unemployment
insurance and disability insurance contributions; and for withholding taxes with
respect to such employees.

8.4 SOLE AGRICULTURAL EMPLOYER. SCHEID acknowledges and agrees that
SCHEID is the sole agricultural employer of persons engaged to perform
agricultural services pursuant to this Agreement. In performing its duties and
obligations under this agreement, SCHEID shall direct the operation of its labor
and equipment in all respects and shall determine the method, means and manner
of its performance.

8.5 EMPLOYMENT OF OTHERS. SCHEID may contract with other entities to
furnish portions of the services required of SCHEID under this Agreement.
SCHEID shall remain fully liable and responsible to JPV for the adequacy of any
such services.

8.6 DELIVERY OF STATEMENTS, NOTICES AND PAYMENTS. All statements,
notices, demands and requests which are required to be sent or permitted to be
given to another party under this Agreement shall be in writing, and shall be
provided in person or sent by U.S. Mail to the recipient party at the address
shown below. Notices are effective upon receipt. Two (2) copies of any notice
must be sent to both parties as follows:

JPV

One copy to: Second copy to:

Joseph Phelps Craig Williams

<PAGE>

Joseph Phelps Vineyards Joseph Phelps Vineyards
200 Taplin Road 200 Taplin Road
P.O. Box 1031 P.O. Box 1031
St. Helena, CA 94574 St. Helena, CA 94574

SCHEID

One copy to: Second copy to:

Scott D. Scheid Kurt Gollnick
Scheid Vineyards and Scheid Vineyards and
Management Co. Management Co.
13470 Washington Blvd. Ste. 300 1972 Hobson Avenue
Marina del Rey, CA 90292 Greenfield, CA 93927

8.7 ATTORNEY FEES AND COSTS. If legal action or other proceeding is
brought for the enforcement of this Agreement or because of any alleged dispute,
breach, default or misrepresentation in connection with the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorney fees and other costs incurred in that action or proceeding
in addition to any other relief to which such party may be entitled.

8.8 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement
shall be deemed or construed by the parties or by a third party to create the
relationship of principal and agent or of partnership or of joint venture or of
any association between JPV and SCHEID, and neither shall any of the provisions
contained in this Agreement nor any act of the parties be deemed to create any
relationship between JPV and SCHEID, other than the relationship of SCHEID as an
independent contractor of JPV.

8.9 SEVERABILITY. If any part or parts of this Agreement are found to be
illegal or unenforceable, the remainder shall be considered severable, shall
remain in full force and effect, and shall be enforceable.

8.10 GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with and subject to the laws of the State of California.

<PAGE>

8.11 SURVIVAL OF COVENANTS. The covenants set forth in this Agreement
are intended to, and shall survive termination of, this Agreement.

8.12 ACCESS BY JPV. JPV employees shall, at all times, have right to
access to the Grenache Vineyard.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

Joseph Phelps Vineyards

By: /s/ Craig Williams
----------------------------

Its: V.P. Production
----------------------------

Scheid Vineyards and Management Co.

By: /s/ Scott D. Scheid
----------------------------

Its: Vice President
----------------------------

<PAGE>

VINEYARD MANAGEMENT AGREEMENT

A. Joseph Phelps, an individual, owns a parcel of real property (the
"Property") situated in Monterey County, California, more particularly described
in Exhibit A hereto.

B. Joseph Phelps has authorized JPV to develop and farm the Property as a
winegrape vineyard and to enter into and perform this Agreement.

C. JPV desires to engage SCHEID to develop, farm and manage such vineyard
(the "Vineyard") hereafter located on the Property and SCHEID desires to perform
such services, all on the terms and conditions set forth in this Agreement.

AGREEMENT

In consideration of the mutual covenants contained herein and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:

SECTION 1. MANAGEMENT OF THE VINEYARD

1.1 ENGAGEMENT OF SCHEID. On the terms and conditions set forth in this
Agreement, JPV hereby engages SCHEID as an independent contractor to develop,
farm and manage approximately forty (40) acres of Vineyard, as specifically
described in Exhibit A, on an exclusive basis, and SCHEID hereby accepts such
engagement.

SCHEID shall not be required to farm and manage the Property as its sole
and exclusive function, and it retains the right to have other business
interests and may engage in other activities, including but not limited to
performance of farm management services for itself and for parties other than
JPV, whether or not in conflict with the business interests and activities of
JPV.

1.2 DUTIES AND RESPONSIBILITIES OF SCHEID. In developing, farming and
managing the Vineyard, SCHEID agrees to perform or

<PAGE>

cause to be performed in a timely, efficient and economical manner, all acts and
services which reasonably may be necessary or desirable in order to ensure that
the Property is cared for, maintained and operated as a winegrape vineyard.
SCHEID hereby represents and warrants that it has, or will obtain, all necessary
licenses and permits to perform all services and tasks envisioned hereunder. In
performing its duties and obligations hereunder, SCHEID shall:

A. Follow the viticultural requirements reasonably requested by JPV
to produce fruit of premium quality and fully developed varietal
character;

B. Prepare for planting and plant such winegrape varieties as may
be determined by JPV from time to time;

C. Prune, sucker, thin and leaf pull the Vineyard;

D. Irrigate, fertilize and cultivate the Vineyard;

E. Control weeds, diseases and pests in the Vineyard;

F. Care for and maintain wells, pumps, pipelines, irrigation systems
and other improvements on the Property;

G. Control the use of any JPV irrigation system that is shared with
any third party or parties so that all electrical charges
incurred by such third party or parties are accounted for and
reported to JPV in a timely manner;

H. Harvest the grapes grown on the Vineyard and deliver them to
such point of delivery as JPV shall designate; and,

I. Provide labor, machinery, equipment and materials reasonably
required or useful to manage the Vineyard to accomplish the
foregoing.

1.3 AUTHORITY OF MANAGER. SCHEID shall have general power and authority
to perform its duties and obligations hereunder, and

<PAGE>

to act in all matters relating to or concerning the care, maintenance and
operation of the Property as a winegrape vineyard.

SCHEID specifically agrees to advise JPV or JPV's designated agent of all events
which materially adversely affect or might reasonably be expected to materially
adversely affect the growth or development of the Vineyard and/or the amount or
quality of the winegrapes produced and harvested therefrom. To this end SCHEID
agrees to consult with JPV or JPV's designated agent as to any major decisions
which are not included in the "Plan", or the "Budget", as described in Section
1.6 below, and which may arise with respect to the Vineyard, and to obtain the
written consent of JPV or of JPV's designated agent prior to making and
implementing any such decision.

1.5 EMERGENCIES. Notwithstanding the fact that SCHEID may be required to
obtain the consent of JPV or JPV's designated agent under this Agreement before
taking certain actions, in the event emergency circumstances arise with respect
to the Vineyard which would require prompt action on the part of a reasonably
prudent vineyard farmer, and in the event time does not reasonably permit the
obtaining of any required consent hereunder or such consents otherwise are not
reasonably obtainable, SCHEID may take all actions which under the circumstances
would be taken by a reasonably prudent vineyard farmer to prevent or mitigate
damage, and any such actions shall be taken in accordance with the standards set
forth herein.

<PAGE>

Attached as Exhibit B hereto is the Budget for the period January 1, 1995
through December 31, 1995 (the calendar year which defines the 1995 Vineyard
management year and each calendar year thereafter, hereafter referred to as
"Farm Year") which has been approved by JPV.

Attached as Exhibit C hereto is the Plan, as prepared and submitted by SCHEID
for the 1995 Farm Year which has been approved by JPV.

1.7 THE PLAN. The Exhibit C Plan does, and future Plans shall, set forth
for the Vineyard the following information with respect to the growing season in
question:

A. The approximate amount and timing of irrigation which SCHEID
expects to undertake under normal conditions;

B. The approximate amount and types of nitrogen-containing
fertilizers and other nutrients which SCHEID expects to apply,
and the expected times of application;

C. Any significant change from pruning and vine training techniques
followed by SCHEID in the past, and any specific plans for
thinning;

D. SCHEID'S proposed plan to control weeds, diseases, pests and
animals on the Property, including birds; and,

E. Such other information as JPV reasonably may request concerning
viticultural practices which may be followed by SCHEID.

1.8 THE BUDGET. The Exhibit B Budget does, and future Budgets shall, set
forth, as to each month, a reasonable estimate for the budget period in question
of the amount of each of the items constituting the "Direct Farming Costs" (as
defined below) with respect to the Vineyard which shall be reimbursed by JPV to
SCHEID. For purposes of this Agreement, the term "Direct Farming Costs" shall
mean all ordinary and necessary expenses incurred by SCHEID in providing the
services and performing the duties and obligations required of SCHEID under this
Agreement, including but not limited to:

<PAGE>

A. Development of the Vineyard (as set forth in Section 2 below);

B. Planting, grafting, training and trellising;

C. Pruning, tying, suckering, thinning and leaf
removal;

D. Pest control including rodents and insects;

E. Spray operations including herbicides and disease
control;

F. Cultivation, fertilization, mowing, hoeing and vine
trimming;

G. Irrigation;

H. General Vineyard maintenance, fence repair and erosion control;
and

I. Harvest and delivery.

Direct Farming Costs shall not include amounts paid by SCHEID for salaries,
bonuses, vacation pay, insurance and other fringe benefits to its office and/or
management personnel.

1.10 REPORT BY SCHEID AFTER GROWING SEASON. SCHEID agrees to supply to
JPV on or before December 31 of each year during the term hereof a written
report (the "Report") setting forth in reasonable detail for the Farm Year for
which the Report is given, the major farming activities relating to fertilizer,
irrigation, pesticides, yields and sugar contents with respect to the Vineyard,
and to make available to JPV or JPV's designated agent, all records for such
Farm Year for which the Report is given concerning the tasks described in
Section 1.8 herein.

The foregoing records also shall contain information concerning other
significant viticultural practices followed by SCHEID which

<PAGE>

JPV reasonably may request from time-to-time during the term hereof.

SECTION 2 DEVELOPMENT OF THE VINEYARD

2.1 DEVELOPMENT DUTIES AND RESPONSIBILITIES. The Property will be in a
"Development Period" for the 1995 and 1996 Farm Years. During the Development
Period, Scheid Vineyards will commit the resources reasonably necessary to carry
out its duties and responsibilities under this Section as listed below:

A. Design preliminary vineyard layout.

B. Plan vineyard development and construction costs and prepare
detailed budgets.

C. Secure vineyard material, supply and service bids.

D. Order, receive and install vineyard materials.

E. Coordinate and supervise vineyard service contractors during the
ripping and surveying of the Property and the irrigation system
installation.

F. Supervise the installation of the trellis system, drip system
emitters and planting.

G. Care for the newly planted vines such that they are prepared for
either fall chip budding or spring whip grafting to be decided by
JPV.

H. Oversee the preparation and implementation of chip budding and
the care required into dormancy.

J. Provide the personal supervision of the General Manager of
Vineyard Operations, Kurt Gollnick,

<PAGE>

where required or desirable to carry out the above duties and
responsibilities.

SECTION 3. EXPENSE STATEMENTS AND PAYMENTS

3.1 REIMBURSEMENT OF DIRECT FARMING COSTS. In addition to paying SCHEID
the compensation provided in Section 8 below, JPV shall reimburse SCHEID for all
Direct Farming Costs incurred by SCHEID as defined in Section 1.8 above.

3.2 MONTHLY REQUIREMENT. On or before the fifth business day of each
month, JPV shall advance to SCHEID an amount equal to that month's approved
Budget amount plus any out-of-pocket expenses incurred by SCHEID or less any
advanced funds not expended in accordance with a previously received Budget
Reconciliation (as defined below). On or before the twentieth calendar day of
each month, SCHEID shall deliver to JPV a written statement (the "Budget
Reconciliation") which shall include in detail, for the month just ended, the
Direct Farming Costs paid by SCHEID, any out-of-pocket expenses incurred by
SCHEID in excess of that month's advanced budget amount and any advanced funds
not expended in that month. It is acknowledged and understood that farming is
subject to many variables, including weather, and it is not always possible to
make expenditures according to the Budget.

SECTION 4. ACCESS TO INFORMATION

4.1 WHAT SCHEID MUST MAKE AVAILABLE TO JPV. SCHEID agrees to make
available and supply to JPV, following reasonable notice and during normal
business hours, all information, documents, records and reports which JPV
reasonably may request in order to permit JPV or its designated agents to verify
or determine:

A. Any of the amounts, calculations or items set forth in the Budget
or on any of the statements described in Section 1.6 above;

B. Any of the viticultural practices employed by SCHEID with respect
to the Property;

C. Compliance by SCHEID with the terms and provisions of this
Agreement;

<PAGE>

D. Compliance by SCHEID with all federal, state and local laws and
regulations; and,

E. That SCHEID has, in effect, all required licenses and permits
reasonably required to perform its duties and obligations
hereunder.

SECTION 5. TERM AND TERMINATION

5.1 TERM. This Agreement shall become effective on April 1, 1995 and
shall remain in effect until December 31, 2004. This Agreement shall continue
in effect after December 31, 2004 on a year-to-year basis unless JPV or SCHEID
gives notice of termination to the other on or before November 1, 2004, or
thereafter on or before the first day of November of any year in which case this
Agreement would terminate on December 31 following the giving of such notice.

5.2 TERMINATION FOR CAUSE. Either party, herinafter referred to as the
"Nonbreaching Party", shall have the right to terminate this Agreement for cause
in the event the other party, hereinafter referred to as the "Breaching Party",
breaches any material provision or condition of this Agreement; and

A. such breach remains uncured for a period of thirty (30) days
following the Nonbreaching Party giving written notice of such
breach to the Breaching Party, or if any such breach shall not
reasonably be susceptible of cure within such thirty (30) day
period; then

B. the Breaching Party shall fail to take steps reasonably designed
to cure such breach and such breach is not cured as expeditiously
as reasonably possible.

5.3 CHANGE OF CONTROL OF SCHEID. In the event that Alfred G. Scheid and
members of his family, together, cease to beneficially own, directly or
indirectly, at least 51% of the stock of SCHEID, then (A) SCHEID shall give
written notice thereof to JPV and (B) JPV shall have the right to terminate this
Agreement by giving written notice of termination to SCHEID; provided, however,
that any such termination shall be effective on December 31 following the giving
of such termination notice.

<PAGE>

SECTION 6. HAZARDS OF FARMING

6.1 SCHEID NOT LIABLE FOR CERTAIN DAMAGE OR LOSS. SCHEID shall not be
liable to JPV for any failure to perform any of its duties or obligations
hereunder, or for any loss or damage of any kind, so long as such failure to
perform or loss or damage is the result of any Act of God or any normal hazard
of farming, including, without limitation, rain, hail, heat, frost, drought,
flooding, windstorm or other action of the elements, strike, work slow-down,
worker unavailability, fire, truck, car, rail, labor, equipment or material
shortage or unavailability, freight embargo, governmental action or any other
cause beyond SCHEID'S reasonable control.

SECTION 7. INSURANCE

7.1 SCHEID TO PROVIDE INSURANCE. SCHEID shall, at its expense, maintain
throughout the term hereof the following insurance policies:

A. LIABILITY. SCHEID shall provide public liability and property
damage insurance insuring JPV and SCHEID, their respective officers,
directors, shareholders, employees, agents, and representatives,
against any liability for accidents occurring on the Property or for
any injury or damage of any nature claimed to have resulted from or in
any way connected with the activities of the person or entity insured
in connection with the operation of the Property in amounts not less
than $1,000,000 for each occurrence. SCHEID shall also direct that
its contractors or subcontractors employed in the operations of the
Property carry liability insurance and shall require and maintain in
its files written documentation of such coverage.

B. WORKER'S COMPENSATION. SCHEID shall provide Worker's Compensation
insurance insuring SCHEID'S employees engaged in the operation of the
Property under this Agreement. SCHEID shall also direct that its
contractors or subcontractors employed in the operations of the
Properties carry Worker's Compensation insurance for the benefit of
their employees, and shall require and

<PAGE>

maintain in its files written documentation of such coverage.

SECTION 8 MANAGEMENT FEE

8.1 MONTHLY FEE. The monthly management fee to be paid in advance each
month by JPV to SCHEID for services rendered hereunder, shall be [ ]*
dollars ($[ ]*) for each vineyard acre of the Property, or as modified from
time to time by mutual agreement of JPV and SCHEID. This management fee is
included in the Budget and its payment procedure is described in Section 3.2
above.

SECTION 9 DEVELOPMENT FEE

9.1 DEVELOPMENT FEE. It is agreed that JPV will pay to SCHEID a fixed
development fee (the "Development Fee") for the services described in Section
2.1 rendered during the Development Period in accordance with the payment
procedure in Section 9.2 below. The Development Fee for the 1995 Farm Year will
be $[ ]*. The Development Fee for the 1996 Farm Year will be $[ ]*.

9.2 PAYMENT PROCEDURE. The Development Fee shall be paid as follows:

A. The Development Fee for the 1995 Farm Year will be paid in [ ]*
equal installments of $[ ]* on the following dates:

[ ]*

B. The Development Fee for the 1996 Farm Year will be paid in [ ]*
equal installments of $[ ]* on the following dates:

[ ]*

SECTION 10 MISCELLANEOUS

- ------------------------
* Confidential Treatment Requested for Redacted Portion.

<PAGE>

10.1 ASSIGNMENT. Neither SCHEID nor JPV shall assign or transfer this
Agreement or any interest herein or suffer any such assignment by operation of
law without the prior written consent of the other party; provided, however,
that either party may without the other party's consent assign this Agreement to
any wholly-owned subsidiary of that party if:

A. such subsidiary shall assume in a writing reasonably satisfactory
to the other party all of the assigning party's obligations
hereunder, and

B. the assigning party shall fully guarantee such subsidiary's
performance hereunder in a writing reasonably satisfactory to the
other party.

10.2 INTERPRETATION. Each of the parties agrees that it has reviewed and
revised this Agreement and the normal rule of construction to the effect that
any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any revision or addenda
hereto. In this Agreement, captions of sections and paragraphs are for
convenience of reference only, and the words contained therein shall in no way
be held to explain, modify, amplify or aid in the interpretation, construction
or meaning of the provisions hereof.

10.3 LABOR AND EQUIPMENT. SCHEID shall be solely responsible for
selecting and hiring its own employees and for their supervision, direction and
control. Moreover, SCHEID shall be solely responsible for setting wages,
benefits, hours and working conditions for such employees; for furnishing,
during the entire period of this Agreement, Worker's Compensation insurance
coverage; for paying wages and social security; for paying unemployment
insurance and disability insurance contributions; and for withholding taxes with
respect to such employees.

10.4 SOLE AGRICULTURAL EMPLOYER. SCHEID acknowledges and agrees that
SCHEID is the sole agricultural employer of persons engaged to perform
agricultural services pursuant to this Agreement. In performing its duties and
obligations under this agreement, SCHEID shall direct the operation of its labor
and equipment in all respects and shall determine the method, means and manner
of its performance.

<PAGE>

10.5 EMPLOYMENT OF OTHERS. SCHEID may contract with other entities to
furnish portions of the services required of SCHEID under this Agreement.
SCHEID shall remain fully liable and responsible to JPV for the adequacy of any
such services.

10.6 DELIVERY OF STATEMENTS, NOTICES AND PAYMENTS. All statements,
notices, demands and requests which are required to be sent or permitted to be
given to another party under this Agreement shall be in writing, and shall be
provided in person or sent by U.S. Mail to the recipient party at the address
shown below. Notices are effective upon receipt. Two (2) copies of any notice
must be sent to both parties as follows:

JPV

One copy to: Second copy to:
Joseph Phelps Craig Williams
Joseph Phelps Vineyards Joseph Phelps Vineyards
200 Taplin Road 200 Taplin Road
P.O. Box 1031 P.O. Box 1031
St. Helena, CA 94574 St. Helena, CA 94574

SCHEID

One copy to: Second copy to:
Scott D. Scheid Kurt Gollnick
Scheid Vineyards and Scheid Vineyards and
Management Co. Management Co.
13470 Washington Blvd. Ste. 300 1972 Hobson Avenue
Marina del Rey, CA 90292 Greenfield, CA 93927

10.7 ATTORNEY FEES AND COSTS. If legal action or other proceeding is
brought for the enforcement of this Agreement or because of any alleged dispute,
breach, default or misrepresentation in connection with the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorney fees and other costs incurred in that action or proceeding
in addition to any other relief to which such party may be entitled.

10.8 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement
shall be deemed or construed by the parties or by a third party to create the
relationship of principal and agent or of

<PAGE>

partnership or of joint venture or of any association between JPV and SCHEID,
and neither shall any of the provisions contained in this Agreement nor any act
of the parties be deemed to create any relationship between JPV and SCHEID,
other than the relationship of SCHEID as an independent contractor of JPV.

10.9 SEVERABILITY. If any part or parts of this Agreement are found to be
illegal or unenforceable, the remainder shall be considered severable, shall
remain in full force and effect, and shall be enforceable.

10.10 GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with and subject to the laws of the State of California.

10.11 SURVIVAL OF COVENANTS. The covenants set forth in this Agreement
are intended to, and shall survive termination of, this Agreement.

10.12 ACCESS BY JPV. JPV employees shall, at all times, have right to
access to the Property.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

Joseph Phelps Vineyards

By: /s/ Craig Williams
-------------------------------

Its: V.P. Production
------------------------------

Scheid Vineyards and Management Co.

By: /s/ Scott D. Scheid
-------------------------------

Its: Vice President
------------------------------

<PAGE>

VINEYARD MANAGEMENT AGREEMENT

This Vineyard Management Agreement, hereinafter referred to as "Agreement",
is made and entered into as of the 1st day of February, 1992, by and between
SCHEID VINEYARDS AND MANAGEMENT CO., hereinafter referred to as "Scheid", and
JOHN HILL AND RICHARD HILL, Co-Trustees of the HILL LIVING TRUST, hereinafter
referred to as "Hill".

Hill owns or leases certain parcels of real property, hereinafter referred
to as the "Property", situated in San Benito County, California, more
particularly described in Exhibit "A" attached hereto and incorporated herein by
reference.

Scheid is a corporation whose primary business is the management of
vineyards throughout the State of California, which are the property of absentee
owners.

Hill desires to engage Scheid to farm and manage the vineyards, hereinafter
referred to as the "Vineyards", now or hereafter located on the Property, and
Scheid desires to perform such services, all on the terms and conditions set
forth in this Agreement.

AGREEMENT

In consideration of the mutual covenants contained herein and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

SECTION 1

<PAGE>

MANAGEMENT OF VINEYARDS

1.1 ENGAGEMENT OF SCHEID. On the terms and conditions set forth in this
Agreement, Hill hereby engages Scheid as an independent contractor to farm and
manage eighty-three (83) acres of Vineyards as specifically described in Exhibit
"A" on an exclusive basis, and Scheid hereby accepts such engagement. Scheid
will not be required to farm and manage the Property as its sole and exclusive
function and it retains the right to have other business interests and may
engage in other activities, including, but not limited to, performance of farm
management services for itself and for clients other than Hill, whether or not
in conflict with the business interest and activities of Hill.

1.2 DUTIES AND RESPONSIBILITIES OF SCHEID. In farming and managing the
Vineyards, Scheid agrees to perform or cause to be performed in a timely,
efficient and economical manner, all acts and services which reasonably may be
necessary in order to ensure that the Property is cared for, maintained and
operated as a wine grape vineyard. In performing its duties and obligations
hereunder, Scheid shall:

A. prune, thin and cultivate the Vineyards;

B. irrigate the Vineyards;

C. control weeds, diseases and pests in the Vineyards;

D. harvest the grapes grown on the Property by hand or with
permission of Hill by machine and deliver them to such

<PAGE>

point of delivery as Hill shall designate; and

E. provide labor, machinery, equipment and materials reasonably
required to accomplish the foregoing.

F. keep the pump used in connection with the wells serving the
Vineyards property lubricated.

G. Maintain in good condition and repair the irrigation lines,
valves and sprinklers serving the vineyards.

H. keep the vineyards and any improvements thereon in a clean and
neat condition.

1.3 AUTHORITY OF MANAGER. Scheid shall have general power and authority
to perform its duties and obligations hereunder and to act in all matters
relating to or concerning the care, maintenance and operation of the Property as
a wine grape vineyard.

1.4 SCHEID TO CONSULT WITH HILL. Scheid agrees to keep Hill advised on a
monthly basis, and at such time as the circumstances reasonably require, of the
progress of the Vineyards and of all significant actions taken on the vineyard
by Scheid to date during the growing season in question.

Scheid specifically agrees to advise Hill of all events which
materially adversely affect or might reasonably be expected to materially
adversely affect the growth or development of the Vineyards

<PAGE>

and/or the amount or quality of the wine grapes produced. To this end, Scheid
agrees to consult with Hill as to any major decisions which are not included in
the Budget as described in Section 1.6 below, and which may arise with respect
to the Vineyards, and to obtain the written consent of Hill prior to making and
implementing any such decision.

1.5 EMERGENCIES. Notwithstanding the fact that Scheid may be required to
obtain the consent of Hill under this Agreement before taking certain actions,
in the event emergency circumstances arise with respect to the Vineyards which
would require prompt action on the part of a reasonably prudent vineyard farmer,
and in the event time does not reasonably permit the obtaining of any required
consent hereunder or such consents otherwise are not reasonably obtainable,
Scheid may take all actions which, under the circumstances, would be taken by a
reasonably prudent vineyard farmer to prevent or mitigate such damage.

1.6 BUDGET SUBMITTED BY SCHEID BEFORE THE GROWING SEASON. On or before
December 15 of each year during the term of this Agreement, Scheid agrees to
submit to Hill a written budget, hereinafter referred to as "Budget", covering
the next growing season. Representatives of Scheid and Hill will meet to
discuss, revise, if necessary, and approve the Budget within ten (10) days
following its submission by Scheid to Hill. The parties agree that Hill shall
have the final word in the approval of the Budget. If Scheid does not agree
that the final Budget

<PAGE>

approved by Hill is a reasonable estimate for the next Budget period then,
until, but not after, January 15 of the growing season year to which the Budget
applies, either party hereto may terminate this contract forthwith on written
notice to the other parties specifying the grounds of termination. Such
termination shall not affect obligations in existence at the time of
termination.

Attached as Exhibit "B" is the Budget for the period February 1, 1992
through November 30, 1992, which is the ten (10) month period which defines the
1992 Vineyard Management Year. Commencing December 1, 1992 and ending November
30, 1993, and each such period after November 30, 1993 will be hereinafter
referred to as "Farming Year".

1.7 THE BUDGET. The Budget does, and future Budgets shall, set forth as
to each month a reasonable estimate for the Budget period in question of the
amount of each of the items constituting the "Direct Farming Costs" with respect
to the Vineyards, which shall be reimbursed by Hill to Scheid. For purposes of
this Agreement, the term "Direct Farming Costs" shall mean all ordinary and
necessary expenses incurred by Scheid in providing the services and performing
the duties and obligations required of Scheid under this Agreement.

SECTION 2

EXPENSE STATEMENTS AND PAYMENTS

2.1 REIMBURSEMENT OF DIRECT FARMING COSTS. In addition to paying

<PAGE>

Scheid the compensation provided in Section 7 below, Hill shall reimburse Scheid
for all Direct Farming Costs incurred by Scheid as defined in Subsection 1.7
above.

2.2 MONTHLY ADVANCES AND BILLINGS. On or before the fifth (5th) business
day of each month, Hill shall advance to Scheid an amount equal to that month's
approved Budget. Scheid shall deliver to Hill a detailed written statement
setting forth, for the month just ended, the Direct Farming Costs paid by
Scheid, and any additional amounts which may be payable by Hill to Scheid. This
statement shall be given to Hill not later than the fifteenth (15th) of the same
month. Any advanced funds not expended in the month for which advanced will be
carried over to the following month. It is acknowledged and understood that
farming is subject to many variables, including weather, and it is not always
possible to make expenditures according to budgets or time plans.

SECTION 3

ACCESS TO INFORMATION

3.1 WHAT SCHEID MUST MAKE AVAILABLE TO HILL. Scheid agrees to make
available and supply to Hill, following reasonable notice and during normal
business hours, all information, documents, records and reports which Hill
reasonably may request in order to permit Hill to verify or determine:

<PAGE>

A. any of the amounts, calculations or items set forth in the Budget
or on any of the statements described in Subsection 1.6 above;

B. any of the viticultural practices employed by Scheid with respect
to the Property;

C. compliance by Scheid with the terms and provisions of this
Agreement;

D. compliance by Scheid with all federal, state and local laws and
regulations; and

E. that Scheid has, in effect, all required licenses and permits
reasonably required to perform its duties and obligations
hereunder.

SECTION 4

TERM AND TERMINATION

4.1 TERM. This Agreement shall become effective on February 1, 1992, and
unless sooner terminated in the manner provided in Subsection 4.2, shall remain
in effect until November 30, 1993. Thereafter, this Agreement shall continue on
a year-to-year basis unless Hill or Scheid gives notice of termination to the
other on or before November 5, 1993, or thereafter on or before the fifth (5th)
day of November of any year, in which case this Agreement would terminate on
November 30 following the giving of such notice.

<PAGE>

4.2 TERMINATION. Either Party, hereinafter referred to as the
"Nonbreaching Party", shall have the right to terminate this Agreement for cause
and subject to Subsection 4.3 below, all of the Nonbreaching Party's obligations
hereunder thereafter shall terminate in the event any of the following occurs:

A. the other party, hereinafter referred to as the "Breaching
Party", breaches any material provision or condition hereof; and

(i) such breach remains uncured for a period of fifteen (15)
days following the Nonbreaching Party giving written notice
of such breach to the Breaching Party, or if any such breach
shall not reasonably be susceptible of cure within such
thirty (30) day period; then

(ii) the Breaching Party shall fail to take steps reasonably
designed to cure such breach and such breach is not cured as
expeditiously as reasonably possible;

B. the Breaching Party becomes bankrupt or insolvent or a petition
is filed seeking reorganization of the Breaching Party under the
bankruptcy laws or any other applicable debtor's relief laws or
statutes of the United States or

<PAGE>

of any state, or a receiver or assignee in bankruptcy is
appointed for the Breaching Party's assets shall be condemned,
seized, attached or appropriated;

C. the Breaching Party is voluntarily or involuntarily dissolved or
proceedings are commenced therefore;

D. the Breaching Party sells or transfers all or substantially all
of its assets or foreclosure proceedings are instituted by any
creditor of the Breaching Party with respect to a substantial
portion of the Breaching Party's assets.

The provisions of subparagraph C and D of this Section 4.2 shall not apply
to any distribution from the Hill Living Trust, to any transfer at the death of
a party hereto, or to any transfers from or to any living trusts of Hill or
Hill's successors in interest.

4.3 OBLIGATIONS UPON TERMINATION. The termination of this Agreement under
any provisions hereof shall not release either party from liability to the other
for failure to perform its duties or obligations to the other party under this
Agreement which are required to be performed prior to such termination.

A. Hill forthwith shall pay Scheid its management fee as provided in
Subsection 7.1 below, prorated through the

<PAGE>

effective date of termination, and further shall pay Scheid any
unreimbursed expenses in accordance with Subsection 2.1 above.
However, Hill shall be entitled to offset against such payments
all damages suffered by Hill if Scheid is a Breaching Party, as a
result of Scheid's acts or omissions.

SECTION 5

HAZARDS OF FARMING

5.1 SCHEID NOT LIABLE FOR CERTAIN DAMAGE OR LOSS. Scheid shall not be
liable to Hill for any failure to perform any of its duties or obligations
hereunder or for any loss or damage of any kind, so long as such failure to
perform or loss or damage is the result of (a) any Act of God or any normal
hazard of farming, including, without limitation, rain, hail, heat, frost,
drought or lack of well water, flooding, windstorm or other action of the
elements, or (b) strike, work slow down, worker unavailability, fire, truck,
car, rail, labor, equipment or material shortage or unavailability, embargo,
governmental action or any other cause, provided that such specified or other
cause is beyond Scheid's reasonable control.

SECTION 6

INSURANCE

6.1 SCHEID TO PROVIDE INSURANCE. Scheid shall, at its expense,

<PAGE>

maintain throughout the term hereof, the following insurance policies insuring
Scheid:

A. LIABILITY. Public liability and property damage insurance with
endorsements insuring Hill against any liability for accidents
occurring on the Property or for any injury or damage of any
nature claimed to have resulted from or in any way connected with
the activities of the person or entity insured in connection with
the operation of the Property, in amounts not less then One
Million Dollars ($1,000,000) for each occurrence. Scheid shall
also direct that its contractors or subcontractors employed in
the operation of the Property carry liability insurance of the
same type and in the same amounts and insuring the same parties
and shall require and maintain in its files, with copies to Hill,
written documentation of such coverage.

B. WORKERS' COMPENSATION. Workers' compensation insurance insuring
Scheid's employees engaged in the operation of the Property under
this Agreement. Scheid shall also direct that its contractors or
subcontractors employed in the operations of the Property carry
workers' compensation insurance for the benefit of their
employees

<PAGE>

and shall require and maintain in its files written documentation
of such coverage.

6.2 GENERAL REQUIREMENTS. General requirements are as follows:

A. CONDUCT OF SCHEID. Scheid shall comply with all reasonable
requirements of insurance carriers and shall use its reasonable
efforts to avoid committing any act which would result in
cancellation of coverage or increase in premium.

B. POLICY PROVISIONS. The insurance policies procured by Scheid and
by its contractors and subcontractors shall:

(i) except for workers' compensation insurance, name Hill and
Scheid as insureds as their respective interests may appear
and include as effective waiver by the carrier of all rights
of subrogation against any named insured or such insured's
interest in the Property or any income derived from the
Property:

(ii) provide that no cancellation, reduction in amount or
material change in coverage thereof, shall be effective
until at least thirty (30) days after receipt by Hill and
Scheid of written notice

<PAGE>

thereof; and

(iii) be primary and noncontributing with any insurance that may
be carried by Scheid.

6.3 EXCULPATION AND INDEMNITY. Hill shall not be liable for any loss,
injury or damage to any property upon or used by Scheid in connection with the
vineyards, whether the same be Scheid's property or any other person's property,
except to the extent directly or indirectly caused by Hill's negligence.
Scheid, as a material part of the consideration to be rendered to Hill, hereby
waives all claims against Hill for damage to equipment, product or any other
property in, upon or about the vineyards, and for injuries to Scheid's
employees, agents, invitees, independent contractors or other persons in or
about the vineyards, from any cause arising at any time, other than from any
cause arising directly or indirectly from Hill's negligence, and Scheid will
indemnify and hold Hill exempt and harmless from any claims for personal
injuries and for damage or injury to the property of any person or party,
arising from the use of the premises by Scheid or from the failure of Scheid to
properly maintain the vineyards as herein provided, except to the extent
directly or indirectly caused by Hill's negligence.

SECTION 7

MANAGEMENT FEE

7.1 MONTHLY FEE. The monthly fee to be paid in advance each month

<PAGE>

by Hill to Scheid for services rendered hereunder, shall be [ ]* dollars
($[ ]*) for each of the 83 acres of the vineyards covered by this Agreement, or
as modified from time to time by the parties in continuation of this Agreement.
The management fee is included in the Budget and its payment procedure is
described in Subsection 2.2 above.

SECTION 8

MISCELLANEOUS

8.1 ASSIGNMENT. Neither Scheid nor Hill shall assign or transfer this
Agreement or any interest herein or suffer any such assignment by operation of
law to be made without the prior written consent of the other party; provided,
however, that either party may, without the other party's consent, assign this
Agreement to any wholly-owned subsidiary of that party, if:

A. such subsidiary shall assume in a writing reasonably satisfactory
to the other party all of the assigning party's obligations
hereunder; and

B. the assigning party shall fully guarantee such subsidiary's
performance hereunder in a writing reasonably satisfactory to the
other party.

8.2 COMPLIANCE WITH LAW. Scheid shall use reasonable efforts to comply
with all statutes, ordinances, regulations, rules and other enactments by
federal, state, county or other regulatory agencies having
- ----------------------------
* Confidential Treatment Requested for Redacted Portion.

<PAGE>

jurisdiction over the Property, including, without limitations, zoning
ordinances, building codes and requirements of state and federal environmental
laws and regulations. Scheid and Hill shall cooperate in obtaining all
necessary permits and approvals relating to use of the Property as vineyards.

8.3 RESTRICTIONS ON SCHEID. Scheid shall not place the Property under any
agricultural program offered by a governmental agency or negotiate or enter into
any labor agreement which may be binding upon Hill or the Property.

8.4 INTERPRETATION. Each of the parties agree that it has reviewed and
revised this Agreement and the normal rule of construction to the effect that
any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any revision or addenda
thereto hereto. In this Agreement, captions of the sections and subsections are
for convenience and reference only and the words contained therein shall in no
way be held to explain, modify, amplify or aid in the interpretation,
construction or meaning of the provisions hereof.

8.5 LABOR FORCE. Scheid shall be responsible for selecting and hiring its
own employees and for their supervision, direction and control. Moreover,
Scheid shall be solely responsible for setting

<PAGE>

wages, benefits, hours and working conditions for such employees; for
furnishing, during the entire period of this Agreement, workers' compensation
insurance coverage; for paying wages and Social Security; for paying
unemployment insurance and disability insurance contributions, and; for
withholding taxes with respect to such employees. It is specifically agreed
that Hill shall not be responsible for any of the undertakings set forth in this
Subsection 9.5 relative to Scheid's employees.

8.6 SOLE AGRICULTURAL EMPLOYER. Scheid acknowledges and agrees that
Scheid is the sole agricultural employer of persons engaged to perform
agricultural services pursuant to this Agreement. In performing its duties and
obligations under this Agreement, Scheid shall direct the operation of its labor
and equipment in all respects and shall determine the method, means and manner
of its performance.

8.7 EMPLOYMENT OF OTHERS. Scheid may contract with other entities to
furnish portions of the services required of Scheid under this Agreement.

8.8 DELIVERY OF STATEMENTS, NOTICES AND PAYMENTS. All statements,
notices, demands and requests which are required to be sent or permitted to be
given to another party under this Agreement, shall be in writing and shall be
provided in person or sent by U.S. Mail to the recipient

<PAGE>

party at the address shown below. Notices provided in person are effective on
receipt. Notices sent by U.S. Main are deemed to be effective two (2) days
after the date of mailing. Two (2) copies of any notice must be sent to both
parties as follows:

HILL:

One copy to: Richard Hill
712 West Street
Hollister, CA 95023

Second copy to: John Hill
1524 Marlborough Avenue
Los Altos, CA 94024

SCHEID:

One copy to: Alfred G. Scheid
Scheid Vineyards and
Management Co.
1632 5th Street, Suite 220
Santa Monica, CA 90401

Second copy to: Kurt Gollnick
Scheid Vineyards and
Management Co.
1972 Hobson Avenue
Greenfield, CA 93927

8.9 ATTORNEYS' FEES AND COSTS. If legal action or other proceeding is
brought for the enforcement of this Agreement or because of any alleged dispute,
breach, default or misrepresentation in connection with the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to

<PAGE>

any other relief to which such party may be entitled. The proper venue for any
such action shall be San Benito County, California.

8.10 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement
shall be deemed or construed by the parties or by a third party to create the
relationship of principal and agent or of partnership or of joint venture or of
any association between Hill and Scheid, and neither shall any of the provisions
contained in this Agreement nor any act of the parties be deemed to create any
relationship between Hill and Scheid other than the relationship of independent
contractor.

8.11 SEVERABILITY. If any part or parts of this Agreement are found to be
illegal or unenforceable, the remainder shall be considered severable, shall
remain in full force and effect and shall be enforceable.

8.12 GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with and subject to the laws of the State of California.

8.13 SURVIVAL OF COVENANTS. The covenants set forth in this Agreement are
intended to and shall survive termination of this Agreement.

8.14 ACCESS BY HILL. Hill shall at all times have the right of

<PAGE>

access to the Property covered by this Agreement.

8.15 WARRANTY. Hill warrants that by the execution of this Agreement, it
is a binding and valid agreement on the parties, including, but not limited to,
all the beneficiaries of the Hill Living Trust and that the Co-Trustees signing
this Agreement on behalf of said Trust, have full power and authority to execute
the documents and bind the Trust to the terms and conditions of this
Agreement.

8.16 ESTOPPEL CERTIFICATE. Each party hereto shall, upon not less than ten
(10) days' prior written notice from the other party, execute, acknowledge, and
deliver to the other party a statement in writing (i) certifying that this
Agreement is unmodified and in full force and effect, or if modified, stating
the nature of such modification and certifying that this Agreement, as so
modified, is in full force and effect, and the date to which fees and charges
have been paid and (ii) acknowledging that there are not, to the certifying
party's knowledge, any uncured defaults, or breaches on the part of the other
party hereunder, or specifying such defaults or breaches if any are claimed.
Any such statement may be conclusively relied upon by any prospective purchaser
of property or business of Scheid, or any encumbrancer or lender to either of
these parties.

The failure of either party to deliver such statement within such time
shall be conclusive upon the other party that this Agreement is in

<PAGE>

full force and effect, without modification except as may be represented by the
party requesting the certificate and there are no uncured defaults or breaches
in the performance by the other party.

8.17 INTEGRATION. This Agreement contains the complete Agreement between
the parties hereto and shall supersede all other oral agreements and writings of
these parties. No supplement, amendment or other commitment will be binding on
these parties unless in writing and signed by the obligated party.

8.18 SUCCESSORS AND ASSIGNS. This Agreement and all of the rights and
obligations hereunder are binding upon and inure to the benefit of the parties
hereto, and their respective representatives, administrators, executors, heirs,
successors, and assigns.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

HILL LIVING TRUST

By /s/ John A. Hill
-------------------------------

By /s/ Richard F. Hill
-------------------------------

Its Co-Trustees

SCHEID VINEYARDS AND MANAGEMENT CO.

By /s/ Scott D. Scheid
--------------------------------

Its Vice President
-------------------------------

<PAGE>

TABLE OF CONTENTS

Page
----

1. DEFINITIONS............................................................. 2

2. VINEYARD DEVELOPMENT.................................................... 4
2.1 Redevelopment of Development Property........................... 4
2.2 Development Costs............................................... 5

3. DEVELOPMENT FINANCING................................................... 5
3.1 Development Loan................................................ 5
3.2 Letter of Credit................................................ 6
3.3 Repayment of Development Costs.................................. 6
3.4 Draws Under Letter of Credit.................................... 6
3.5 Prepayment...................................................... 7
3.6 Lender Notices, Etc............................................. 7
3.7 No Modification................................................. 7

4. MANAGEMENT OF PROPERTIES................................................ 7
4.1 Engagement of Scheid............................................ 7
4.2 Duties and Responsibilities of Scheid........................... 8
4.3 Authority of Manager............................................ 9
4.4 Scheid to Consult with Heublein................................. 9
4.5 Emergencies..................................................... 9
4.6 Plan and Budget Submitted by Scheid............................. 9
4.7 The Plan........................................................ 10
4.8 The Budget...................................................... 10
4.9 Performance of Obligations in Accordance with Plan and Budget... 11
4.10 Reports by Scheid............................................... 11
4.11 Use of Heublein-Owned Residences by Scheid...................... 12

5. EXPENSE STATEMENTS AND PAYMENTS......................................... 12
5.1 Reimbursement of Farming Costs.................................. 12
5.2 Monthly Requirement............................................. 12

6. ACCESS TO INFORMATION................................................... 13
6.1 What Scheid Must Make Available to Heublein..................... 13

7. HAZARDOUS MATERIALS..................................................... 14
7.1 Use of Chemical, Fertilizers, Etc............................... 14
7.2 Hazardous Materials............................................. 14
7.3 Environmental Notices........................................... 15

8. TAXES................................................................... 15
8.1 Real Property Taxes............................................. 15
8.2 Reimbursement for Improvements.................................. 15

9. LIENS; DEVELOPMENT LOAN................................................. 15
9.1 Liens........................................................... 15
9.2 Postings........................................................ 16
9.3 Development Loan................................................ 16

<PAGE>

Page
----

10. TERM AND TERMINATION..................................................... 16
10.1 Term............................................................ 16
10.2 Early Termination by Heublein Without Cause..................... 17
10.3 Termination..................................................... 17
10.4 Termination Upon Sale, Etc...................................... 18
10.5 Obligations Upon Termination.................................... 19

11. HAZARDS OF FARMING...................................................... 19

12. INSURANCE............................................................... 20
12.1 Scheid to Provide Insurance..................................... 20
A. Casualty................................................... 20
B. Liability.................................................. 20
C. Worker's Compensation...................................... 20
12.2 General Requirements............................................ 21
A. Conduct of Scheid.......................................... 21
B. Policy Provisions.......................................... 21
C. Insurance Certificates..................................... 21

13. INDEMNITY............................................................... 21

14. FEES.................................................................... 21
14.1 Management Fee.................................................. 22
14.2 Financing Fee................................................... 22
14.3 Construction Fee................................................ 22
14.4 Termination Fee................................................. 22

15. MISCELLANEOUS........................................................... 23
15.1 Assignment...................................................... 23
15.2 Compliance with Legal Requirements.............................. 25
15.3 Restrictions on Scheid.......................................... 25
15.4 Interpretation.................................................. 25
15.5 Labor and Equipment............................................. 25
15.6 Sole Agricultural Employer...................................... 25
15.7 Engagement of Others............................................ 26
15.8 Delivery of Statements, Notices, Etc............................ 26
15.9 Arbitration of Disputes......................................... 27
15.10 Attorneys' Fees and Costs....................................... 27
15.11 Relationship of the Parties..................................... 28
15.12 Severability.................................................... 28
15.13 Governing Law................................................... 28
15.14 Survival of Covenants........................................... 28
15.15 Access by Heublein.............................................. 28
15.16 Waiver.......................................................... 28
15.17 Entire Agreement and Modification............................... 28

<PAGE>

Page
----
EXHIBITS
- --------

EXHIBIT A-1 DESCRIPTION OF DEVELOPMENT PROPERTY
EXHIBIT A-2 DESCRIPTION OF SOUTH HART RANCH
EXHIBIT A-3 DESCRIPTION OF SAGE RANCH
EXHIBIT A-4 DESCRIPTION OF MURPHY RANCH
EXHIBIT B DEVELOPMENT PLAN
EXHIBIT C BUDGET FOR 1996 - MANAGED PROPERTIES
EXHIBIT D BUDGET FOR 1996 - DEVELOPMENT PROPERTY
EXHIBIT E INDIRECT COSTS
EXHIBIT F FORM OF LETTER OF CREDIT
EXHIBIT G FORM OF BUDGET RECONCILIATION

<PAGE>
VINEYARD DEVELOPMENT AND MANAGEMENT AGREEMENT

THIS VINEYARD DEVELOPMENT AND MANAGEMENT AGREEMENT (the "Agreement") is
entered into to be effective as of December 1, 1995 by and between HEUBLEIN,
INC., a Connecticut corporation ("Heublein") and SCHEID VINEYARDS AND MANAGEMENT
CO., a California corporation ("Scheid").

RECITALS

A. Heublein is the owner of that certain property consisting of
approximately 414.56 acres located in San Benito County, California and more
specifically described in EXHIBIT A-1 hereto (the "Development Property").

B. Heublein also owns those properties more specifically described in
EXHIBIT A-2 and EXHIBIT A-3 attached hereto and commonly known as the "South
Hart Ranch" (consisting of approximately 10.82 acres) and the "Sage Ranch"
(consisting of approximately 132.22 acres), and Heublein leases that certain
property more specifically described in EXHIBIT A-4 attached hereto and commonly
known as the "Murphy Ranch" (consisting of approximately 54.23 acres). The
properties described in EXHIBITS A-2, A-3 and A-4 (other than the approximately
138 farmable acres on the South Hart Ranch that are leased to a third party (as
designated on EXHIBIT A-2) are referred to herein as the "Managed Properties."

C. Heublein desires to engage Scheid for the purpose of (i) redeveloping
the Development Property as a vineyard and managing and farming the same, and
(ii) managing and farming the Managed Properties.

D. The cost of developing the Development Property will be financed by
Scheid through the Development Loan (as defined herein), and the parties wish to
set forth certain understandings and agreements relating to the Development
Loan.

AGREEMENT

For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:

1. DEFINITIONS

In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the respective meaning ascribed to them below:

<PAGE>

"Affiliate" - Any Person that directly or indirectly controls, is
controlled by, or is under common control with a specified Person.

"Budget" - The yearly budget required to be provided by Scheid to
Heublein pursuant to Section 4.6.

"Budget Reconciliation" - As defined in Section 5.2.

"Construction Fee" - As defined in Section 14.3.

"Damages" - Any loss, liability, claim, damage, injury, expense
(including costs of investigation and defense and reasonable attorneys' fees and
costs) or diminution of value, whether or not involving a third-party claim, but
excluding consequential and exemplary damages.

"Development Costs" - All of the costs set forth in the Development
Plan attached hereto as EXHIBIT B and incurred by Scheid in redeveloping the
Development Property pursuant to such Development Plan and an approved Budget.

"Development Loan" - The credit facility obtained by Scheid from the
Lender pursuant to which the Lender has agreed to lend to Scheid up to
$5,600,000 for the redevelopment of the Development Property.

"Development Loan Advance" - As defined in Section 3.1.

"Development Loan Documents" - All of the documents and instruments
executed and delivered by Scheid (and/or any of its Affiliates) in connection
with the Development Loan.

"Development Loan Repayment Schedule" - The schedule set forth in the
Development Loan Documents for repaying the Development Loan.

"Development Plan" - The plan for the redevelopment of the Development
Property which is attached as EXHIBIT B.

"Direct Farming Costs" - Those farming costs which are described in
Section 4.8.

"Environmental Law" - Legal Requirements designed to minimize,
prevent, punish or remedy the consequences of actions that damage or threaten
the environment or public health and safety.

"Farmed Acreage" - That portion of the Properties designated by
Heublein which is actually farmed as a winegrape vineyard by Scheid for a
particular period, as such portion may be adjusted pursuant to Section 4.1
and/or Section 10.4.

"Farming Costs" - Collectively, the Direct Farming Costs and the
Indirect Farming Costs.

<PAGE>

"Farming Year" - The twelve month period beginning on December 1 of
each year and ending on the following November 30th.

"Financing Fee" - The fee to be paid by Heublein to Scheid pursuant to
Section 14.2 in consideration for Scheid's taking down the Development Loan.

"Hazardous Materials" - Any substance that is, at any time, listed,
defined, designated or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic, or a pollutant or a contaminant under or pursuant to any
Environmental Law, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.

"Indirect Farming Costs" - As defined in Section 4.8.

"Legal Requirement" - Any federal, state, local, municipal or other
law, ordinance, regulation or statute.

"Lender" - Sanwa Bank California, or any successor to or participant
with such lender.

"Letter of Credit" - The standby letter of credit to be provided by
Heublein to the Lender pursuant to Section 3.2, or any renewals or replacements
thereof.

"Lien" - Any charge, claim, equitable interest, lien, encumbrance,
mortgage, security interest or restriction of any kind, other than any
mechanic's, materialman's, construction or contractor's lien for construction in
progress or other similar statutory lien provided that such lien does not secure
amounts past due or otherwise in default.

"Management Fee" - The fee to be paid by Heublein to Scheid pursuant
to Section 14.1 for managing the Properties pursuant to this Agreement.

"Murphy Lease" - That certain Lease between Norman E. Murphy and Jewel
Murphy, as lessors, and Heublein, as lessee, covering the Murphy Ranch.

"Person" - Any individual, corporation, partnership, limited liability
company, joint venture, estate, trust, association, organization or other entity
or governmental body.

"Plan" - The yearly plan to be submitted by Scheid to Heublein for
each Farming Year pursuant to Section 4.6.

"Properties" - Collectively, the Development Property and the Managed
Properties.

"Other Party" - As defined in Section 10.3.

<PAGE>

"Related Parties" - With respect to a specified party, such party's
agents, representatives, employees, contractors, officers, directors,
shareholders, licensees, and Affiliates.

"Report" - The reports to be submitted by Scheid to Heublein pursuant
to Section 4.10.

"Term" - The term of this Agreement as described in Section 10.

"Terminating Party" - As defined in Section 10.3.

"Termination Fee" - The fee to be paid by Heublein to Scheid pursuant
to Section 14.4 in the event Heublein determines to terminate this Agreement in
accordance with the provisions of Section 10.2 or this Agreement is terminated,
in whole or in part, pursuant to Section 10.4.

"Vineyards" - All of the winegrape vineyards now or hereafter located
on the Properties.

2. VINEYARD DEVELOPMENT

2.1 REDEVELOPMENT OF DEVELOPMENT PROPERTY. Heublein hereby engages
Scheid as an independent contractor to redevelop the Development Property as a
winegrape vineyard. Such redevelopment shall be conducted in accordance with,
and Scheid agrees to comply with the requirements and take the actions with
respect to the Development Property which are set forth in, the Development Plan
attached hereto as EXHIBIT B. All redevelopment undertaken by or on behalf of
Scheid with respect to the Development Property, or any portion thereof, shall
be undertaken in compliance with each of the following provisions:

(i) all such redevelopment shall be conducted in a good and
workmanlike manner and in compliance with all applicable Legal
Requirements;

(ii) in connection with such redevelopment, Scheid shall not
cause or permit the Development Property, or any grapevines or other
improvements thereon, to become subject to any Liens of any nature
whatsoever;

(iii) Scheid shall obtain any and all material permits, and
approvals required by applicable Legal Requirements and shall comply in all
material respects with all such permits and approvals;

(iv) Upon expiration or termination of this Agreement (or at
such earlier time as Heublein may request) Scheid shall assign to Heublein
all warranties received from subcontractors, suppliers or others providing
services or materials relating to the redevelopment; and

<PAGE>

(v) Scheid shall otherwise follow such reasonable
instructions as Heublein may provide from time to time relating to the
redevelopment.

2.2 DEVELOPMENT COSTS. All of the Development Costs incurred in
connection with the redevelopment of the Development Property shall be borne and
paid by Scheid; provided, however, that Scheid shall not be required to expend
funds in connection with the Development Plan in excess of the amounts advanced
from time to time under the Development Loan and any amounts otherwise advanced
by Heublein at its option (collectively, the "Available Funds"). Heublein will
provide reimbursement to Scheid in the amounts and in the manner described in
Section 3.3. Scheid shall use its reasonable efforts to obtain such advances
from the Lender in accordance with the Development Plan. In the event that for
any reason (other than a breach of or default under this Agreement or the
Development Loan Documents by Scheid which breach or default results in the use
or application of Available Funds for a purpose not permitted under this
Agreement), the Available Funds shall be insufficient to complete the
Development Plan, Scheid's duties with respect to the redevelopment shall be
limited to the completion of so much of the Development Plan as may be
practicable with such Available Funds.

3. DEVELOPMENT FINANCING

3.1 DEVELOPMENT LOAN. Concurrently with the execution and delivery
of this Agreement, Scheid is executing and delivering the Development Loan
Documents, pursuant to which the Lender is agreeing to provide the Development
Loan to Scheid for the purpose of redeveloping the Development Property pursuant
to the Development Plan. The Development Loan will be funded by Lender in
installments (each, a "Development Loan Advance") as such redevelopment
proceeds, as provided in the Development Loan Documents. Scheid agrees to
comply with all of the provisions of the Development Loan Documents and all
other requirements of the Lender imposed in connection with the Development
Loan. Without limiting the foregoing, Scheid specifically agrees that all
Development Loan Advances shall be taken down substantially in accordance with
Schedule B-1 attached to the Development Plan and shall be used solely to pay
the Development Costs for the redevelopment of the Development Property in the
manner provided in the Development Plan and in amounts consistent with
applicable approved Budgets as described in Sections 4.6 and 4.8. It is
acknowledged and understood that the redevelopment is subject to many variables
(including weather) which may cause timing differences from month to month from
the projections set forth in the Budgets. The aggregate of all Development Loan
Advances over the term of the redevelopment shall not exceed the amount shown on
Schedule B-1 attached to the Development Plan unless Heublein otherwise
expressly agrees in writing.

3.2 LETTER OF CREDIT. In order to facilitate the making of the
Development Loan by the Lender, Heublein has provided to the Lender a standby
letter of credit substantially

<PAGE>

in the form of Exhibit F attached hereto (which letter of credit, or any
modifications, renewals or replacements thereof, is referred to herein as the
"Letter of Credit"). So long as an event of default under or relating to this
Agreement has not occurred with respect to Scheid and until the Development Loan
has been repaid in full, Heublein shall cause the Letter of Credit to remain in
effect, with the amount of the Letter of Credit at any time to be not less than
the unpaid and outstanding balance of the Development Loan.

3.3 REPAYMENT OF DEVELOPMENT COSTS. In consideration for Scheid's
redeveloping the Development Property in the manner provided in this Agreement,
and subject to the provisions of Section 3.4, Heublein shall pay to Scheid an
amount (the "Repayment Amount") equal to the aggregate principal amount borrowed
under the Development Loan (the "Principal Amount") and all interest accrued
thereon (but excluding the loan fee in the amount of $[ ]* payable to the
Lender upon execution of the Development Loan Documents and interest amounts
accrued and payable with respect thereto prior to January 5, 1999, which amounts
are payable from the proceeds of the Development Loan and are or will be
included in applicable Budgets); PROVIDED, HOWEVER, that in no event will the
Principal Amount exceed $[ ]* plus accrued interest unless Heublein
otherwise expressly agrees in writing. The Repayment Amount shall be paid to
Scheid as follows: (a) in quarterly installments commencing January 5, 1999,
with each such installment to be in an amount equal to the corresponding
interest owing for each such quarter by Scheid to the Lender under the
Development Loan Documents, and (b) in ten yearly installments commencing
January 5, 2000, with each such installment to be in an amount equal to the
corresponding installment of principal owing for each such year by Scheid to the
Lender under the Development Loan Documents. All Repayment Amount installments
(and all other payments and prepayments of the Repayment Amount) paid by
Heublein shall be applied by Scheid to amounts then owing under the Development
Loan and shall not be used for any other purpose whatsoever. Scheid hereby
irrevocably authorizes Heublein to pay all Repayment Amount installments (and
all other payments and prepayments of the Repayment Amount) to such account or
accounts as the Lender may specify and Heublein may approve, to be applied to
the Development Loan.

3.4 DRAWS UNDER LETTER OF CREDIT. In the event that the Lender at
any time draws any amount under the Letter of Credit, such draw amount shall be
automatically credited to the installments of the Repayment Amount otherwise
required to be paid by Heublein pursuant to Section 3.3, in the order in which
such payments are due. In the event the entire face amount of the Letter of
Credit is drawn by the Lender and the Development Loan is repaid in full, the
Repayment Amount shall be deemed fully paid and satisfied, and Heublein shall
have no further obligations with respect thereto.

- --------------------
* Confidential Treatment Requested for Redacted Portion.

<PAGE>

3.5 PREPAYMENT. Except to the extent that Heublein prepays the
Repayment Amount, Scheid shall not prepay any amounts owing under the
Development Loan without the prior written consent of Heublein. Heublein shall
have the right to prepay all or any portion of the Repayment Amount at any time
and from time to time, and all such prepayments shall be applied and paid in the
manner described in Section 3.3. Except to the extent that Heublein shall have
consented to any fixed interest rate option pursuant to Section 3.7, no
prepayment charge or penalty shall be payable by Heublein in connection with any
such prepayment.

3.6 LENDER NOTICES, ETC. Scheid shall provide to Heublein promptly
(and in any event no later than five business days after the same are received
by Scheid or any of Scheid's Related Parties) a copy of all notices, reports,
statements, and demands received at any time by Scheid from the Lender,
including without limitation all notices of default or delinquency. Scheid
shall otherwise keep Heublein reasonably informed as to the status of the
Development Loan and all significant developments that hereafter occur with
respect to the Development Loan and/or the repayment thereof.

3.7 NO MODIFICATION. Scheid shall not cause or permit the
Development Loan Documents or the terms of the Development Loan to be amended,
supplemented or otherwise revised in any respect without the prior written
consent of Heublein. Scheid shall not elect any fixed interest rate option
under the Development Loan Documents without the prior written consent of
Heublein.

4. MANAGEMENT OF PROPERTIES

4.1 ENGAGEMENT OF SCHEID. On the terms and conditions set forth in
this Agreement, Heublein hereby engages Scheid as an independent contractor to
farm and manage the Properties and Scheid hereby accepts such engagement. In
addition to Heublein's rights under Section 10.4, the Farmed Acreage to be
farmed and managed by Scheid under this Agreement may be increased or decreased
at Heublein's option on any December 1st during the term of this Agreement, so
long as at least 30 days notice is given to Scheid. Scheid shall not be
required to farm and manage the Properties as its sole and exclusive function,
and it retains the right to have other business interests and may engage in
other activities, including but not limited to performance of farm management
services for itself and for clients other than Heublein, whether or not in
conflict with the business interests and activities of Heublein.

4.2 DUTIES AND RESPONSIBILITIES OF SCHEID. In farming and managing
the Properties, Scheid agrees to perform or cause to be performed in a good and
farmerlike manner and otherwise in a timely, efficient and economical manner all
acts and services which reasonably may be necessary or desirable in order to
ensure that the Properties are cared for, maintained and operated as winegrape
vineyards. Scheid hereby represents and warrants that

<PAGE>

it has, or will obtain, all necessary licenses and permits to perform all
services and tasks envisioned under this Agreement. In performing its duties
and obligations hereunder, Scheid shall:

(i) prepare for planting and plant such winegrape varieties
as set forth in the Development Plan or as may be agreed upon by Heublein
and Scheid from time to time;

(ii) prune, thin and cultivate the Vineyards located on the
Properties;

(iii) irrigate and fertilize such Vineyards;

(iv) control weeds, diseases and pests in such Vineyards;

(v) care for and maintain wells, pumps, pipelines,
irrigation systems and other improvements on the Properties;

(vi) control the use of any Heublein irrigation system that
is shared with any third party or parties so that all electrical charges
incurred by such third party or parties are accounted for and reported to
Heublein in a timely manner;

(vii) operate in a timely manner all frost protection and
cooling systems now or hereafter located on the Properties;

(viii) harvest the grapes grown on the Properties by hand or
by machine (as designated by Heublein) and deliver them to such point of
delivery as Heublein shall designate;

(ix) conduct its activities in a manner consistent with, and
not in violation of, the provisions of the Murphy Lease; and

(x) provide labor, machinery, equipment and materials
reasonably required or useful to manage the Properties to accomplish the
foregoing.

4.3 AUTHORITY OF MANAGER. Scheid shall have general power and
authority to perform its duties and obligations hereunder, and to act in all
matters relating to or concerning the care, maintenance and operation of the
Properties as winegrape vineyards. However, except as expressly otherwise
provided in this Agreement or in the Development Plan, Scheid shall not, and
shall have no authority to, create any liabilities or obligation, on the part of
Heublein or any of Heublein's Related Parties.

<PAGE>

4.4 SCHEID TO CONSULT WITH HEUBLEIN. Scheid agrees to keep Heublein
or Heublein's designated agent fully advised on at least a monthly basis, and in
any event at such time as the circumstances reasonably require, of the progress
of the Vineyards and of all significant actions taken by Scheid to date during
the Farming Year in question. Scheid specifically agrees to advise Heublein or
Heublein's designated agent of all events which materially adversely affect the
growth or development of the Vineyards and/or the amount or quality of the
winegrapes produced and harvested therefrom. To this end, Scheid agrees to
consult with Heublein or Heublein's designated agent as to any major decisions
which are not specifically included in the applicable Plan or Budget as
described in Section 4.6, and which may arise with respect to the Vineyards, and
to obtain the written consent of Heublein or of Heublein's designated agent
prior to making and implementing any such decision.

4.5 EMERGENCIES. Notwithstanding the fact that Scheid may be
required to obtain the consent of Heublein or Heublein's designated agent under
this Agreement before taking certain actions, in the event emergency
circumstances arise with respect to the Vineyards which would require prompt
action on the part of a reasonably prudent vineyard farmer, and in the event
time does not reasonably permit the obtaining of any required consent hereunder
or such consent otherwise is not reasonably obtainable, Scheid may take all
actions which under the circumstances would be taken by a reasonably prudent
vineyard farmer to prevent or mitigate damage, and any such actions shall be
taken in accordance with the standards set forth herein.

4.6 PLAN AND BUDGET SUBMITTED BY SCHEID. On or before December 31 of
each year during the term of this Agreement, Scheid agrees to submit to Heublein
a written plan (the "Plan") and budget (the "Budget") covering work reasonably
anticipated to be performed by Scheid under or relating to this Agreement for
that Farming Year, including, without limitation work reasonably anticipated to
be performed and expenses reasonably anticipated to be incurred in connection
with the redevelopment of the Development Property. Representatives of Scheid
and Heublein will meet to discuss, revise (if necessary) and approve the Plan
and Budget within ten (10) days following its submission by Scheid to Heublein.
The parties agree that Heublein shall have the final word in approval of each
Plan and Budget. Attached as EXHIBIT C is the Budget for the Managed Properties
for the period December 1, 1995 through November 30, 1996, which has been
approved by Heublein. The parties agree that this 1996 Budget, in the amount of
$635,300, is a maximum Budget for the Managed Properties and shall not be
exceeded by Scheid unless approved in advance in writing by Heublein. Attached
as EXHIBIT D is the Budget for the Development Property for the period December
1, 1995 through November 30, 1996, which has been approved by Heublein. The
parties agree that this 1996 Budget, in the amount of $2,281,532 (excluding
interest), is a maximum Budget for the Development Property and shall not be
exceeded by Scheid unless approved in advance in writing by Heublein.
Similarly, the

<PAGE>

Budget for each subsequent Farming Year, once approved by Heublein, shall be a
maximum Budget and shall not be exceeded by Scheid unless approved in advance in
writing by Heublein.

4.7 THE PLAN. Attached as EXHIBIT D is the Plan, as prepared and
submitted by Scheid, for the period commencing December 1, 1995 and ending
November 30, 1996, which has been approved by Heublein. Each Plan shall set
forth in detail for the Vineyards the following information with respect to the
Farming Year in question:

(i) during the period of the redevelopment of the
Development Property, a detailed description and schedule of the
redevelopment work to be undertaken pursuant to the Development Plan;

(ii) the approximate amount and timing of irrigation which
Scheid expects to undertake under normal conditions;

(iii) the approximate amount and types of nitrogen-containing
fertilizers and other nutrients which Scheid expects to apply, and the
expected times of application;

(iv) any significant change from pruning and vine training
techniques followed by Scheid in the past and any specific plans for
thinning;

(v) Scheid's proposed plan to control rodents and animals
on the Properties, including deer and wild hogs;

(vi) a description of proposed projects of major emphasis,
proposed major changes not followed by Scheid in the past, and
recommendations for capital improvements; and

(vii) such other information as Heublein reasonably may
request concerning viticultural practices which may be followed by Scheid.

4.8 THE BUDGET. During the period of redevelopment of the
Development Property, each Budget shall set forth in detail, as to each month, a
reasonable estimate for the Farming Year in question, of the amount of each item
constituting Development Costs to be incurred by Scheid in redeveloping the
Development Property pursuant to the Development Plan. In addition, each Budget
shall set forth, as to each month, a reasonable estimate of the amount of each
of the items constituting Direct Farming Costs with respect to the Vineyards
which shall be reimbursed under this Agreement by Heublein to Scheid. For
purposes of this Agreement, the term "Direct Farming Costs" shall mean all
ordinary and necessary direct farming expenses incurred by Scheid in providing
the services and performing the duties and

<PAGE>

obligations required of Scheid under this Agreement, including but not limited
to:

(i) pruning, tying and suckering;

(ii) rodent control, fertilizing and chemical spraying;

(iii) irrigation power;

(iv) irrigation;

(v) cultivation and vine trimming;

(vi) vineyard, well and fence repair and maintenance, and
general maintenance; and

(vii) harvest and delivery.

Direct Farming Costs shall NOT include Development Costs paid or incurred by
Scheid for redeveloping the Development Property or amounts paid by Scheid for
salaries, bonuses, vacation pay, insurance and other fringe benefits to its
office and/or management personnel, or other similar overhead expenses. Those
indirect farming expenses described in EXHIBIT E incurred by Scheid which relate
to the performance by Scheid of its obligations under Section 4.2 of this
Agreement ("Indirect Farming Costs") shall also be included in the Budget, but
only to the extent provided in EXHIBIT E.

4.9 PERFORMANCE OF OBLIGATIONS IN ACCORDANCE WITH PLAN AND BUDGET.
Upon adoption of a Plan and a Budget by Scheid and Heublein in accordance with
Section 4.6, Scheid shall perform its obligations hereunder in accordance
therewith. Once so adopted, the Plan and Budget shall not be modified or
amended without Heublein's prior written consent.

4.10 REPORTS BY SCHEID. Scheid agrees to supply to Heublein on or
before December 31 of each year during the term hereof, a written report (the
"Report") setting forth in reasonable detail for the Farming Year then ending
the progress of the redevelopment of the Development Property and the major
farming activities relating to fertilizer, irrigation, pesticides, yields, sugar
contents and other significant farming matters with respect to the Vineyards,
and to make available to Heublein or to Heublein's designated agent, all records
for such Farming Year concerning the tasks described in Sections 4.7 and 4.8.
The foregoing records also shall contain information concerning other
significant viticultural practices followed by Scheid to the date of the Report
and other related matters which Heublein reasonably may request from time to
time during the term hereof.

4.11 USE OF HEUBLEIN-OWNED RESIDENCES BY SCHEID. The parties agree
that Scheid shall, during the term of this

<PAGE>

Agreement only, have the use of two residences on the Properties (both located
on the Sage Ranch) for the following purposes:

(i) Residence No. 1, the southerly most structure
(approximately 2,800 sq. ft. including a basement and swimming pool), is to
be used as a residence to be occupied by a Scheid employee.

(ii) Residence No. 2, the northerly most structure
(approximately 1,600 sq. ft.), is to be used by Scheid as an office.

Scheid will maintain such residences in good repair, and will return such
residences to Heublein at the conclusion of this Agreement in the same
condition, except for reasonable wear and tear, that they were in when this
Agreement was executed. Scheid will pay all utility and normal maintenance
costs related to these residences during the term of this Agreement. In
addition, Scheid shall pay to Heublein in the manner described in Section 5.2
the monthly rent of $250 for residence No. 1 and $150 for Residence No. 2.

5. EXPENSE STATEMENTS AND PAYMENTS

5.1 REIMBURSEMENT OF FARMING COSTS. In addition to paying Scheid the
fees provided in Section 14 but subject to the provisions of Sections 4.6 and
4.8, Heublein shall reimburse Scheid for all Farming Costs incurred by Scheid as
defined and described in Section 4.8.

5.2 MONTHLY REQUIREMENT. On or before the fifth business day of each
month, Heublein shall advance to Scheid an amount equal to (i) that month's
approved Budget amount, less (ii) $400 as payment by Scheid for the two
residences as described in Section 4.11, plus (iii) any unreimbursed
out-of-pocket expenses which constitute Farming Costs reflected in an applicable
Budget previously incurred by Scheid, and (iv) less any funds previously
advanced by Heublein but not expended by Scheid in accordance with a previously
received Budget Reconciliation (as defined below). On or before the twentieth
calendar day of each month, Scheid shall deliver to the persons designated by
Heublein (a) a written statement, properly coded in the format required by
Heublein (a "Budget Reconciliation"), which shall include in detail, for the
month just ended, the Farming Costs paid by Scheid, any such out-of-pocket
expenses incurred by Scheid in excess of that month's advanced budget amount
(but which are otherwise in accordance with the overall Budget for such year)
and any such advanced funds not expended in that month (an example of the Budget
Reconciliation is attached hereto as Exhibit G), and (b) during the period of
redevelopment of the Development Property, a Budget Reconciliation which shall
include in detail, for the month just ended, the Development Costs and any
Development Loan Advances. It is acknowledged and understood that farming is
subject to many variables (including

<PAGE>

weather) which may cause timing differences from month to month from the
projections set forth in the Budget.

6. ACCESS TO INFORMATION

6.1 WHAT SCHEID MUST MAKE AVAILABLE TO HEUBLEIN. Scheid agrees to
provide to Heublein within the time periods described in this Agreement the
notices, reports, statements, demands, requests, claims and inquiries described
in Sections 3.6, 7.1 and 7.3, and the Reports described in Section 4.10. In
addition, Scheid agrees to make available and supply to Heublein, following
reasonable notice and during normal business hours, all information, documents,
records and reports which Heublein reasonably may request in order to permit
Heublein or its designated agents or accountants to verify or determine:

(i) any of the amounts, calculations or items set forth in
any Budget or on any of the notices, reports (including the Reports),
statements, demands or requests described or referred to in this Agreement;

(ii) all expenditures under the Development Plan, and the
payment of all subcontractors and suppliers engaged or used by Scheid;

(iii) all Development Loan Advances and the uses to which
such funds have been put;

(iv) all payments under the Development Loan;

(v) any of the viticultural practices employed by Scheid
with respect to the Properties;

(vi) compliance by Scheid with the terms and provisions of
this Agreement and of the Development Loan Documents;

(vii) that Scheid has, in full force and effect, all licenses
and permits reasonably required to perform its duties and obligations
hereunder;

(viii) compliance with all Environmental Laws relating to the
Properties or the performance of services hereunder;

(ix) the accuracy and completeness of the records described
in Section 7.1; and

(x) compliance by Scheid with all of the other provisions
of this Agreement and any document executed pursuant to or in connection
with this Agreement.

In addition, each year Scheid shall submit to Heublein Scheid's County
Agricultural Permit Number and will permit Heublein and its Related Parties to
have access to the agricultural chemical

<PAGE>

use information of Scheid through such permit number and other records of
Scheid.

7. HAZARDOUS MATERIALS

7.1 USE OF CHEMICAL, FERTILIZERS, ETC. Scheid shall keep and
maintain, during the term of this Agreement, accurate and complete records of
the amount, the time when used, the location of use, and the conditions under
which used, with respect to each type of pesticide or weed control chemicals,
agricultural fertilizers and/or other agricultural chemicals used by Scheid on,
under, in or about the Properties, which records shall evidence Scheid's
compliance with all Legal Requirements.

7.2 HAZARDOUS MATERIALS. Except as specifically contemplated by the
Development Plan and except for normal and customary pesticide and weed control
chemicals, agricultural fertilizers and other agricultural chemicals used in
accordance with the Plan and with all applicable Legal Requirements, and
ordinary course use (in accordance with all applicable Legal Requirements) of
gasoline, diesel and hydraulic and other petroleum fluids for the operation and
maintenance of machinery and equipment, (a) Scheid shall not permit or suffer
placement, storage, disposal or discharge of any Hazardous Materials on, under
or at the Properties, (b) Scheid shall not erect, emplace or maintain any tank,
vessel or container designed or suitable for holding Hazardous Materials on or
about the Properties without the prior written consent of Heublein, which
consent may be withheld or denied or made subject to conditions in the sole
discretion of Heublein, and (c) if Scheid or any agent or contractor of Scheid
proposes to store, discharge, apply, use, remove or dispose of any Hazardous
Materials on, under, in or about the Properties, Scheid shall notify Heublein in
writing at least ten (10) days prior to such activity, which notice shall set
forth in detail the action which Scheid proposes to take to comply with the
storage, discharge, application, use, removal or disposal of such Hazardous
Materials in accordance with all applicable Legal Requirements.

7.3 ENVIRONMENTAL NOTICES. Scheid shall promptly notify Heublein of
and provide to Heublein a copy of the following environmental notices, claims
and inquiries related to the Properties or the operations thereon: third party
claims, notices of violation, notices to comply, citations, and reports filed
pursuant to any Legal Requirement relating to underground tanks or Hazardous
Materials.

8. TAXES

8.1 REAL PROPERTY TAXES. Heublein shall pay directly prior to
delinquency all real property taxes imposed on the Properties during the term of
this Agreement by any authority having the direct or indirect power to tax.

<PAGE>

8.2 REIMBURSEMENT FOR IMPROVEMENTS. Scheid shall reimburse Heublein
within ten (10) days after demand therefor (which demand shall be accompanied by
a copy of the applicable property tax statement) for that portion of the real
property taxes described in Section 8.1 which relate to the improvements made to
the Development Property during the term of this Agreement, including, without
limitation, improvements consisting of vines, trellises, irrigation systems, and
the like. If such improvements are not separately assessed, Scheid's liability
shall be an equitable proportion of the real property taxes for such
improvements, such proportion to be determined by Heublein from the respective
valuations assigned in the assessor's worksheets or such other information as
may be reasonably available. Heublein's reasonable determination thereof, in
good faith, shall be conclusive.

9. LIENS; DEVELOPMENT LOAN

9.1 LIENS. Scheid agrees that it will pay or cause to be paid all
costs of work done by it or caused to be done by it on the Properties which will
or may result in a Lien on the Properties, and Scheid shall keep the Properties
free and clear of all mechanics' liens and other Liens on account of work done
by or for Scheid or Persons claiming under Scheid. If such Liens shall at any
time be filed against any part of the Properties, then Scheid shall either cause
such Lien to be discharged within ninety (90) days after the recording thereof,
or if Scheid, in Scheid's discretion and in good faith determines that such Lien
should be contested, then Scheid shall furnish a bond or other security as may
be necessary or required to prevent any foreclosure proceedings against or other
loss of the Properties (or any portion thereof) during the pendency of such
contest; provided, however, that Heublein shall, upon demand, reimburse Scheid
for the cost of any such bond or other security; provided further, that Heublein
shall not be required to provide such reimbursement (or otherwise bear any cost
or expense relating to such bond or other security) in the event that the sole
reason that such Lien has not been released is the failure of Scheid or any of
Scheid's Related Parties to pay the amount due to the holder of such Lien. If
Scheid shall fail to furnish such bond or security, then in addition to any
other right or remedy of Heublein resulting from Scheid's default, Heublein may,
but shall not be obligated to, discharge the same either by paying the amount
claimed to be due or by procuring the discharge of such Lien by giving security
or a bond or in such other manner as is, or may be, prescribed by law; provided,
however, that Heublein shall provide not less than two (2) business days notice
to Scheid prior to making any such payment or otherwise procuring such
discharge. Scheid shall reimburse and repay to Heublein, on demand, all sums
disbursed or deposited by Heublein pursuant to the provisions of this Section 9,
including all costs and expenses and reasonable attorneys' fees incurred by
Heublein in connection therewith.

<PAGE>

9.2 POSTINGS. Should any claims of Lien be filed against any portion
of the Properties or any action affecting title to any portion of the Properties
be commenced, the party receiving notice of such Lien or action shall promptly
give to the other party written notice thereof. Heublein and each of its
representatives shall have the right to post and keep posted upon the Properties
or any portion thereof notices of nonresponsibility or such other notices as
Heublein may deem proper for the protection of Heublein's interest in the
Properties. Scheid shall, before commencement of any work which might result in
such Lien, give Heublein written notice of its intention to do so specifying the
time of commencement of such work in sufficient time prior to such work to
enable the posting of such notices.

9.3 DEVELOPMENT LOAN. Notwithstanding anything to the contrary in
this Agreement, Scheid shall not grant to the Lender or to any other Person any
Lien which in any way affects the Properties or any portion thereof or any
grapevines or other improvements thereon or any grapes grown thereon.

10. TERM AND TERMINATION

10.1 TERM. This Agreement shall become effective on December 1, 1995
and, unless sooner terminated in the manner provided in this Agreement, shall
remain in effect until November 30, 2008 (the "Initial Term"). This Agreement
shall continue in effect after November 30, 2008 on a year-to-year basis unless
Heublein or Scheid gives notice of termination to the other on or before May 31,
2008, or thereafter on or before the 31st day of May of any year thereafter, in
which event this Agreement shall terminate on the November 30 next following the
giving of such notice. As used in this Agreement, the phrase "term of this
Agreement" shall refer to the Initial Term and any extensions thereof pursuant
to this Section 10.1, or if this Agreement is sooner terminated, to the period
from December 1, 1995 until the date of such termination.

10.2 EARLY TERMINATION BY HEUBLEIN WITHOUT CAUSE. In addition to the
termination rights described in Section 10.3, in the event the Repayment Amount
is paid or otherwise satisfied in full on or prior to the date of termination,
Heublein shall have the right at any time after January 1, 2000, to cause this
Agreement to be terminated on November 30, 2000, or on November 30th of any year
thereafter, by giving notice of such termination no later than May 31st of the
year during which such termination shall occur. If Heublein exercises such
termination right, it shall pay to Scheid the Termination Fee described in
Section 14.4.

10.3 TERMINATION. In addition to all other rights and remedies
available to it, either party (the "Terminating Party") shall have the right to
terminate this Agreement for cause, and, subject to Sections 10.5 and 15.14, all
of the Terminating Party's obligations hereunder thereafter shall terminate, in
the

<PAGE>

event any of the following occurs (each of which shall, subject to the
provisions of Section 15.1, be deemed to constitute an event of default and
breach of this Agreement on the part of the other party ("Other Party"):

(i) the Other Party breaches any material provision of this
Agreement or any documents executed in connection herewith and (x) such
breach remains uncured for a period of thirty (30) days following the
Terminating Party's giving of written notice of such breach to the Other
Party, or if any such breach shall not reasonably be susceptible of cure
within such thirty (30) day period, then (y) the Other Party shall fail to
take steps reasonably designed to cure such breach and such breach is not
cured as expeditiously as reasonably possible;

(ii) the Other Party becomes bankrupt or insolvent or a
petition is filed seeking reorganization of the Other Party under the
bankruptcy laws or any other applicable debtor's relief laws or statutes of
the United States or of any state, or a receiver or assignee in bankruptcy
is appointed for all or a substantial portion of the Other Party's assets,
or all or a substantial portion of the Other Party's assets shall be
condemned, seized, attached or appropriated;

(iii) subject to the provisions of Section 15.1, the Other
Party is voluntarily or involuntarily dissolved or proceedings are
commenced therefor;

(iv) subject to the provisions of Section 15.1, the Other
Party is a party to a merger, consolidation or other form of reorganization
in which the Other Party is not the surviving or resulting corporation;

(v) subject to the provisions of Section 15.1, the Other
Party sells or transfers all or substantially all of its assets or
foreclosure proceedings are instituted by any creditor of the Other Party
with respect to a substantial portion of the Other Party's assets;

(vi) if Heublein is the Terminating Party, an "event of
default" (as described in the Development Loan Documents) shall occur and
not be cured within any applicable cure period thereunder; provided,
however, that if such event of default is a failure to make any payment to
the Lender and Heublein shall have failed to pay the installment of the
Repayment Amount corresponding to such payment prior to the end of any such
cure period (or shall have failed to pay any other installment of the
Repayment Amount due on or before the occurrence of such event of default
and shall not have cured any such failure), such

<PAGE>

event of default shall not constitute an event of default for purposes of
this Agreement;

(vii) if Heublein is the Terminating Party, Alfred G. Scheid
and members of his family, together, shall fail to beneficially own,
directly or indirectly, at least 51% of the capital stock of Scheid; Scheid
shall provide prompt written notice to Heublein of any such failure; or

(viii) if Scheid is the Terminating Party, subject to the
provisions of Section 15.1, Grand Metropolitan plc or its Affiliates shall
fail to beneficially own, directly or indirectly, at least 51% of the
capital stock of Heublein; Heublein shall provide prompt written notice to
Scheid of any such failure.

Failure or delay on the part of a Terminating Party to exercise the termination
rights described in this Section 10.3 shall not operate as a waiver of any such
rights.

10.4 TERMINATION UPON SALE, ETC. The parties understand that Heublein may
sell all or a portion of the Properties owned by Heublein that are covered by
this Agreement. In the event Heublein sells, leases or otherwise transfers the
Properties or any portion thereof to any other Person (except to any Heublein
Affiliate), then Heublein shall have the right at its option upon thirty (30)
days prior written notice to Scheid to immediately terminate this Agreement with
respect to the portion or portions of the Properties being sold, leased or
transferred. Scheid also understands that the Murphy Ranch is leased by
Heublein under the Murphy Ranch Lease. In the event that the Murphy Ranch Lease
is not renewed or is terminated as to all or any portion of the Murphy Ranch
property for any reason, then effective as of the date of such termination this
Agreement shall terminate with respect to all or such portion of the Properties
no longer leased by Heublein under the Murphy Ranch Lease. In the event of any
such termination on or prior to November 30, 2004, Heublein shall pay to Scheid
a Termination Fee determined pursuant to Section 14.4; provided, however, that
Heublein shall not be required to pay any Termination Fee upon any lease
termination or expiration as to the Murphy Ranch property.

10.5 OBLIGATIONS UPON TERMINATION. The termination of this Agreement under
any provision hereof shall not release either party from liability to the other
for failure to perform the duties or obligations to the other party under this
Agreement which are required to be performed prior to such termination. Upon
any termination or expiration of this Agreement, Scheid shall:

(i) surrender and deliver to Heublein possession of the
Properties and the residences;

(ii) deliver to Heublein all materials and supplies, keys,
and such other accountings, papers and

<PAGE>

records pertaining to the Properties as may be in Scheid's possession or
under Scheid's control;

(iii) assign to Heublein any and all rights of Scheid in any
existing licenses and permits, if any, relating to the care, maintenance,
development or operation of the Properties; and

Heublein shall pay: (w) to Scheid only that portion of the Management Fee
theretofore earned by and payable to Scheid under this Agreement, prorated
through the effective date of termination or expiration; (x) to Scheid, any
unreimbursed Farming Costs theretofore incurred by Scheid and then owing
hereunder in accordance with Section 5; (y) to Scheid and/or to the Lender on
behalf of Scheid, the Repayment Amount in an amount sufficient to repay in full
the Development Loan; and (z) to Scheid, any Termination Fee payable pursuant to
Section 14.4.

11. HAZARDS OF FARMING

Scheid shall not be liable to Heublein for any failure to perform any
of its duties or obligations hereunder, or for any loss or damage of any kind,
so long as such failure to perform or loss or damage is the result of any Act of
God or any normal hazard of farming, including, without limitation, rain, hail,
heat, frost, drought, flooding, windstorm or other action of the elements,
strike, work slow-down, worker unavailability, fire, truck, car, rail, labor,
equipment or material shortage or unavailability, freight embargo, governmental
action or any other cause beyond Scheid's reasonable control; but in such event
Scheid shall take all reasonable measures within the constraints of the Plan and
Budget to remove the disability, if possible, and resume full performance
hereunder at the earliest possible date. If Scheid is prevented from performing
its obligations hereunder in part or in full as a result of an occurrence set
forth in this Section 11, it shall give prompt notice thereof in writing to
Heublein, which notice shall specify the nature of such occurrence, the steps
being taken and intended to be taken to remove the disability, and an estimate
of the date when full performance will be resumed hereunder.

12. INSURANCE

12.1 SCHEID TO PROVIDE INSURANCE. Scheid shall, at its expense,
maintain throughout the term hereof the following insurance policies:

A. CASUALTY. Insurance with respect to buildings and improvements
of Heublein on the Properties, including but not limited to Residence No. l
and Residence No. 2 as described herein and the improvements made pursuant
to the Development Plan. The insurance shall provide protection against
any peril included with the classification "Fire and Extended Coverage"
together with coverage against vandalism and malicious mischief in the
amount of $1,000,000.

<PAGE>

B. LIABILITY. Public liability and property damage insurance with
endorsements which shall be reasonably satisfactory to Heublein, insuring
Heublein and Scheid, their respective officers, directors, shareholders,
employees, agents, and representatives, against any liability for accidents
occurring on the Properties or for any injury or damage of any nature
claimed to have resulted from or in any way be connected with the
activities of the Person insured in connection with the operation of the
Properties, in amounts not less than $1,000,000 for each occurrence and
$1,000,000 combined single limit. Scheid shall also direct that its
contractors or subcontractors employed or engaged in the development
described in the Development Plan or in the other operations of the
Properties carry liability insurance of the same type and in the same
amounts, and shall require and maintain in its files, with copies sent to
Heublein, written documentation of such coverage.

C. WORKER'S COMPENSATION. Worker's compensation insurance
insuring Scheid's employees engaged in the development described in the
Development Plan or in the other operation of the Properties under this
Agreement. Scheid shall also direct that its contractors or subcontractors
employed in the development described in the Development Plan or in the
other operations of the Properties carry worker's compensation insurance
for the benefit of their employees, and shall require and maintain in its
files, with copies sent to Heublein, written documentation of such
coverage.

12.2 GENERAL REQUIREMENTS. General requirements with respect to
insurance are as follows:

A. CONDUCT OF SCHEID. Scheid shall comply with all reasonable
requirements of insurance carriers and shall use its reasonable best
efforts to avoid committing any act which would result in cancellation of
coverage or increase in premium.

B. POLICY PROVISIONS. The insurance policies procured by Scheid
and by its contractors and subcontractors shall:

(i) except for worker's compensation insurance, name
Heublein and Scheid as insureds as their respective interests may appear
and include an effective waiver by the carrier of all rights of subrogation
against any named insured or such insured's interest in the Properties or
the improvements thereon or any income derived from the Properties;

(ii) provide that no cancellation, reduction in amount or
material change in coverage thereof shall be

<PAGE>

effective until at least thirty (30) days after receipt by Heublein and
Scheid of written notice thereof;

(iii) be primary and noncontributing with any insurance that
may be carried by Scheid; and

(iv) be reasonably satisfactory to Heublein in all other
respects.

C. INSURANCE CERTIFICATES. Scheid shall furnish Heublein with
insurance certificates or policies reasonably satisfactory to Heublein in
substance and form as to the issuance and effectiveness of the foregoing
insurance and the amount of coverage afforded by such insurance, including
evidence of coverage as to Scheid's contractors and subcontractors as
provided in this Section 12.

13. INDEMNITY

Scheid shall indemnify and hold Heublein and each of Heublein's Related
Parties harmless from all Damages arising out of the breach by Scheid of any of
its obligations under this Agreement (other than the obligations of Scheid
pursuant to the last sentence of Section 15.7).

14. FEES

In consideration of the performance by Scheid of its obligations under this
Agreement, Scheid shall receive the following fees:

14.1 MANAGEMENT FEE. A management fee (the "Management Fee") in an
amount equal to the annualized rate of $[ ]* for each acre of Farmed Acreage
of the Properties, as such Farmed Acreage may be modified from time to time by
Heublein as provided in Section 4.1 and Section 10.4. The Management Fee shall
be included in each Budget hereafter provided and shall be paid in monthly
installments in the manner described in Section 5.2.

14.2 FINANCING FEE. A financing fee (the "Financing Fee"), payable
quarterly in arrears commencing with the quarter ending on April 5, 1996 and
continuing thereafter for each quarter ending on each July 5, October 5,
January 5 and April 5 thereafter, in an amount equal to [ ]* ([ ]*)
per quarter times the average outstanding principal balance of the Development
Loan during such quarter. In addition, a pro rata portion of the Financing Fee
shall be paid by Heublein to Scheid for the partial period commencing on the
date that the Development Loan Documents are executed and delivered and ending
on April 5, 1996, and for any partial period ending on the date of repayment in
full of the Development Loan. The Financing Fee shall be paid to Scheid no
later than 15 days after the end of each quarter or partial period.

- -------------------
* Confidential Treatment Requested for Redacted Portion.

<PAGE>

14.3 CONSTRUCTION FEE. A construction fee (the "Construction Fee")
in the amount of $[ ]*. The Construction Fee shall not be paid by Heublein
but instead shall be drawn by Scheid under the Development Loan in equal
installments of $[ ]* with the first installment to be drawn on or after the
date of execution and delivery of this Agreement and the second installment to
be drawn on December 2, 1996. The amount of the Construction Fee so drawn by
Scheid shall be added to and become a part of the Repayment Amount to be paid by
Heublein in the manner provided in Section 3.3. In the event that this
Agreement terminates prior to November 30, 1997, then Scheid shall only be
entitled to retain as a Construction Fee an amount equal to the LESSER of (x)
the Construction Fee drawn by Scheid prior to such termination or (y) an amount
equal to the product of:

(i) $[ ]*; and

(ii) a fraction the numerator of which is the number of days
from December 1, 1995 until the date of such termination and the
denominator of which is 731;

and Scheid shall promptly refund to Heublein the balance of any Construction Fee
drawn by, but not entitled to be retained by, Scheid.

14.4 TERMINATION FEE. In the event Heublein exercises the
termination right described in Section 10.2, then on or before the date as of
which such termination becomes effective, Heublein shall pay to Scheid a
termination fee (the "Termination Fee") in the amount set forth in the following
schedule for the corresponding date of termination, and in the event Heublein
exercises a termination right described in Section 10.4, then on or before the
date as of which such termination becomes effective, Heublein shall pay to
Scheid a Termination Fee equal to the product of (i) the amount set forth below
for the termination date set forth below that is closest in time to the
effective date of such termination and (ii) the Termination Fraction (as defined
below):

Termination Date Amount
---------------- ------

November 30, 1996 $[ ]*
November 30, 1997 $[ ]*
November 30, 1998 $[ ]*
November 30, 1999 $[ ]*
November 30, 2000 $[ ]*
November 30, 2001 $[ ]*
November 30, 2002 $[ ]*
November 30, 2003 $[ ]*
November 30, 2004 $[ ]*
November 30, 2005 or thereafter [ ]*

As used herein, "Termination Fraction" means a fraction of which the numerator
is the number of acres of Farmed Acreage of the Properties as to which the
Agreement is being terminated pursuant
- -------------------------------------------------------------
* Confidential Treatment Requested for Redacted Portion.

<PAGE>

to Section 10.4 and the denominator of which is 612. In the event of any
Termination Fee or Termination Fees have been paid pursuant to a termination in
accordance with Section 10.4, any Termination Fee thereafter payable pursuant to
a termination in accordance with Section 10.2 shall be proportionately reduced.
If this Agreement expires or terminates other than pursuant to Section 10.2 or
Section 10.4, no Termination Fee shall be payable to Scheid.

15. MISCELLANEOUS

15.1 ASSIGNMENT.

(i) Except as set forth in this Section 15.1, neither
Scheid nor Heublein shall assign or transfer this Agreement or any interest
herein or suffer any such assignment by operation of law to be made without
the prior written consent of the other party.

(ii) Scheid may without the consent of Heublein assign this
Agreement to any wholly-owned subsidiary of Scheid if:

A. such subsidiary shall assume in a writing reasonably
satisfactory to Heublein all of Scheid's obligations hereunder; and

B. Scheid shall fully guarantee such subsidiary's performance
hereunder in a writing reasonably satisfactory to Heublein.

(iii) Notwithstanding anything in this Agreement to the
contrary and in addition to Heublein's termination rights set forth in
Section 10, in the event Heublein shall sell, lease or otherwise convey all
or a portion of the Properties (to a third party which is not an Affiliate
of Grand Metropolitan plc), Heublein shall have the right to assign and
transfer this Agreement to the purchasing, leasing or acquiring Person
subject to the prior written approval of Scheid, which approval shall not
be unreasonably withheld so long as (i) such Person assumes in a writing
reasonably satisfactory to Scheid all of Heublein's obligations hereunder,
and (ii) such Person has a net worth, determined in accordance with
generally accepted accounting principles, of not less than $40,000,000,
which net worth shall be demonstrated by evidence reasonably satisfactory
to Scheid. In addition and notwithstanding anything in this Agreement to
the contrary, Heublein shall have the right, without obtaining any consent
or approval on the part of Scheid, to assign and transfer this Agreement to
any Affiliate of Grand Metropolitan plc either directly or indirectly in
connection with any reorganization or other transaction involving Heublein
and one or more other Affiliates of Grand Metropolitan plc; provided that
any such Affiliate assumes in a writing reasonably satisfactory to

<PAGE>

Scheid all of Heublein's obligations hereunder; and any direct or indirect
dissolution, merger, consolidation or reorganization, or sale or transfer
of assets, by or involving Heublein in connection with any such
reorganization or other transaction shall not require the consent or
approval of Scheid or constitute a breach or default by Heublein under this
Agreement. Effective as of the date of any such assignment and transfer by
Heublein, (i) Heublein shall be relieved of all further obligations of
Heublein under or relating to this Agreement, and (ii) such Person or
Affiliate shall thereafter be bound by and have all of the rights and
obligations of Heublein under this Agreement. Heublein shall continue to
have the benefit of all indemnifications provided under this Agreement
notwithstanding any such assignment or transfer. In connection with any
such assignment or transfer by Heublein, Heublein shall have the right to
replace the Letter of Credit posted by Heublein with a Letter of Credit
issued on behalf of the assignee or transferee (or its Related Parties) in
substantially the same form and in the amount of the Letter of Credit then
posted by Heublein; provided that such replacement Letter of Credit shall
be acceptable to the Lender. Scheid shall cooperate with Heublein with
respect to any such replacement of Heublein's Letter of Credit.

15.2 COMPLIANCE WITH LEGAL REQUIREMENTS. Scheid shall comply in all
material respects with all Legal Requirements applicable to Scheid or its
performance hereunder or to the Properties including, without limitation, zoning
ordinances, building codes and requirements of local, state and federal
environmental laws, rules and regulations. Scheid and Heublein shall cooperate
in obtaining all necessary permits and approvals relating to the redevelopment
of the Development Property and to the use of the Properties as vineyards.
Scheid shall also become knowledgeable of the requirements of California
Proposition 65 (Safe Drinking Water and Toxic Enforcement Act of 1986),
including the continually updated list of chemicals and substances which pose a
significant risk of cancer or reproductive toxicity via ground water, food,
environment, occupational or other contamination. The use of any such
prohibited substance without advance written approval of Heublein shall be an
immediate and material breach of this Agreement and Heublein may, in addition to
any other available remedies, terminate this Agreement immediately.

15.3 RESTRICTIONS ON SCHEID. Scheid shall not place the Properties
under any agricultural program offered by a governmental agency or negotiate or
enter into any labor agreement which would be binding upon Heublein or the
Properties.

15.4 INTERPRETATION. Each of the parties agrees that it has
reviewed and revised this Agreement and the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any revision or
addendum

<PAGE>

hereto. In this Agreement captions of the sections and paragraphs are for
convenience and reference only, and the words contained therein shall in no way
be held to explain, modify, amplify or aid in the interpretation, construction
or meaning of the provisions hereof. Unless otherwise specified, all references
to sections and exhibits are to this Agreement.

15.5 LABOR AND EQUIPMENT. Scheid shall be solely responsible for
selecting and hiring its own employees and contractors and for their
supervision, direction and control. Moreover, with respect to its employees,
Scheid shall be solely responsible for setting wages, benefits, hours and
working conditions; for furnishing, during the entire period of this Agreement,
workers' compensation insurance coverage; for paying wages and social security;
for paying unemployment insurance and disability insurance contributions; and
for withholding taxes. It is specifically agreed that Heublein shall not be
responsible for any of the undertakings set forth in this Section 15.5 relative
to Scheid's employees or contractors.

15.6 SOLE AGRICULTURAL EMPLOYER. Scheid acknowledges and agrees
that Scheid is the sole agricultural employer of persons engaged to perform
agricultural services pursuant to this Agreement. In performing its duties and
obligations under this Agreement, Scheid shall direct the operation of its labor
and equipment in all respects and shall determine the method, means and manner
of its performance.

15.7 ENGAGEMENT OF OTHERS. Scheid may contract with other Persons
to furnish portions of the services required of Scheid under this Agreement.
Scheid shall remain fully liable and responsible to Heublein for the adequacy of
any such services. It shall be the responsibility of Scheid to assure Heublein
that Scheid and any labor contractors employed by Scheid are in full compliance
with the Federal Migratory and Seasonal Worker Protection Act and all laws
regulating employees and labor contractors and that all registration and
licensing requirements have been met. Scheid, at its sole expense and without
any reimbursement from Heublein, shall handle all labor difficulties, labor
disputes, union organizing activities, actual or alleged violations of labor
Legal Requirements and other labor issues of whatever nature arising out of or
relating to Scheid's or any of its subcontractors' hiring or use, or failure to
hire or use, any Persons or group of Persons in connection with the services to
be performed by Scheid pursuant to this Agreement.

15.8 DELIVERY OF STATEMENTS, NOTICES, ETC. All statements, notices,
demands and requests which are required to be sent or permitted to be given to
another party under this Agreement shall be in writing, and will be deemed to
have been duly given when (a) delivered by hand, (b) sent by telecopier (with
written confirmation of receipt), or (c) received by the addressee, if sent by
U.S. mail or by a nationally recognized overnight delivery service, in each case
to the appropriate addresses and telecopier numbers set forth below (or to such

<PAGE>

other addresses and telecopier numbers as a party may designate by notice to the
other party):

HEUBLEIN:

President, Heublein Wines Group
Heublein, Inc.
21468 8th Street East
Sonoma, CA 94573
Telecopier No. (707) 938-4986

With a copy to:

General Counsel
Heublein, Inc.
450 Columbus Blvd.
Hartford, CT 06013-1800
Telecopier No. (860) 702-4032

SCHEID:

Alfred G. Scheid
Scheid Vineyards and Management Co.
13470 Washington Boulevard, Suite 300
Marina del Rey, CA 90292
Telecopier No. (310) 301-1569

With a copy to:

Kurt Gollnick
Scheid Vineyards and Management Co.
1972 Hobson Avenue
Greenfield, CA 93927
Telecopier No. (408) 385-0136

15.9 ARBITRATION OF DISPUTES. The parties will attempt to settle
any dispute in a mutually agreeable manner. Any controversy or claim arising
out of or relating to this Agreement or the breach thereof, that is not settled
by the parties, shall be determined by arbitration in San Francisco, California
(or such other location in California as the parties may agree upon) before a
single arbitrator in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. Heublein
and Scheid agree as follows with respect to any arbitration initiated hereunder:

(i) there shall be no discovery prior to the arbitration
initiated hereunder;

(ii) oral presentations to the arbitrator shall be limited
to a total of four hours for Heublein and four hours for Scheid;

<PAGE>

(iii) any briefs or legal memoranda submitted to the
arbitrator shall not exceed fifty (50) pages in length; and

(iv) the arbitrator shall enter its decision within seven
(7) days of the completion of oral presentations to it.

Nothing in this Section 15.9 will prevent either party from resorting to
judicial proceedings if interim resort to a court is necessary to prevent
serious and irreparable harm or injury to a party or to others.

15.10 ATTORNEYS' FEES AND COSTS. If an arbitration or other legal
action or proceeding is brought for the enforcement of this Agreement or because
of any alleged dispute, breach, default or misrepresentation in connection with
the provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
arbitration, action or proceeding in addition to any other relief to which such
party may be entitled.

15.11 RELATIONSHIP OF THE PARTIES. Nothing contained in this
Agreement shall be deemed or construed by the parties or by a third Party to
create the relationship of principal and agent or of Partnership or of joint
venture or of any association between Heublein and Scheid, and neither shall any
of the provisions contained in this Agreement nor any act of the parties be
deemed to create any relationship between Heublein and Scheid, other than the
relationship of independent contractor.

15.12 SEVERABILITY. If any part or parts of this Agreement are
found to be illegal or unenforceable, the remainder shall be considered
severable, shall remain in full force and effect, and shall be enforceable.

15.13 GOVERNING LAW. This Agreement shall be governed by,
construed and enforced in accordance with, and subject to the laws of the State
of California.

15.14 SURVIVAL OF COVENANTS. The covenants set forth in Sections
6, 7, 8.2, 9.1, 10.5, 13 and 15 of this Agreement are intended to and shall
survive termination of this Agreement.

15.15 ACCESS BY HEUBLEIN. Heublein and its Related Parties shall,
at all times, have right to access to the Properties covered by this Agreement.

15.16 WAIVER. Except as otherwise expressly provided herein, the
rights and remedies of the parties with respect to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power or privilege under this Agreement or the documents

<PAGE>

referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege.

15.17 ENTIRE AGREEMENT AND MODIFICATION. This Agreement (together
with the exhibits hereto) supersedes all prior agreements between the parties
with respect to the subject matter hereof and constitutes a complete and
exclusive statement of the terms of the agreements between the parties with
respect to the subject matter hereof. This Agreement may not be amended or
terminated except by a written agreement executed by the parties hereto.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

HEUBLEIN, INC.

By: /s/ James A. Beckman
----------------------------------

Its: Vice President
-----------------------------

SCHEID VINEYARDS AND MANAGEMENT CO.

By: /s/ Alfred G. Scheid
----------------------------------
Its: President
-----------------------------

<PAGE>
TERM LOAN AGREEMENT

THIS TERM LOAN CREDIT AGREEMENT (the "Agreement") is made and entered into
this 30th day of September, 1991, by and between SANWA BANK CALIFORNIA (the
"Bank") and Vineyard 405, A California Limited Partnership (the "Borrower").

SECTION I

AGREEMENT TO LEND

1.01 COMMITMENT TO LEND. Subject to the terms and conditions of this
Agreement and so long as no Event of Default occurs, the Bank agrees to extend
to the Borrower the credit accommodations that follow.

1.02 TERM LOAN. The Bank agrees to lend to the Borrower, upon the
Borrower's request made prior to October 30, 1991, up to the maximum amount of
$1,560,000 (the "Term Loan").

A. PURPOSE. Proceeds from the Term Loan shall be used to provide funds
to payoff Prudential Insurance Company, and to cover various costs including
grafting, drip irrigation, stake replacement, replenish working capital and
cover closing costs.

B. TERM LOAN ACCOUNT. The Bank shall maintain on its books a record of
account in which the Bank shall make entries setting forth all payments made,
the application of such payments to interest and principal, accrued and unpaid
interest (if any) and the outstanding principal balance under the Term Loan (the
"Term Loan Account"). The Bank shall provide the Borrower with a monthly
statement of the Borrower's Term Loan Account, which statement shall be
considered to be correct and conclusively binding on the Borrower unless the
Borrower notifies the Bank to the contrary within 30 days after the Borrower's
receipt of any such statement which it deems to be incorrect.

C. INTEREST. Interest shall accrue on the outstanding principal balance
of the Term Loan at a variable rate equivalent to an index for a variable
interest rate which is quoted, published or announced from time to time by the
Bank as its reference rate and as to which loans may be made by the Bank at,
below or above such reference rate (the "Reference Rate") plus 1.25% per annum
(the "Variable Rate"). Interest shall be adjusted concurrently with any change
in the Reference Rate. Interest shall be calculated on the basis of 360 days
per year, but charged on the actual number of days elapsed. The Borrower hereby
promises and agrees to pay interest quarterly on the last day of each quarter
commencing on December 31, 1991 and continuing on the last day of each quarter
thereafter up to and including December 31, 1998. If interest is not paid as it
becomes due, it shall be added to, become and be treated as a part of the
principal, and shall thereafter bear like interest.

D. PRINCIPAL. The Borrower hereby promises and agrees to pay principal
in 7 equal installments of $21,000.00 per installment commencing on December 31,
1991, and continuing on the last day of each December thereafter up to and
including December 31, 1997. On December 31st, 1998, the Borrower hereby
promises and agrees to pay to the Bank the entire unpaid principal balance,
together with accrued and unpaid interest.

Each payment received by the Bank shall, at the Bank's option, be applied to pay
interest then due and unpaid and the remainder thereof (if any) shall be applied
to pay principal.

SECTION II

GUARANTORS; SUBORDINATED DEBT

2.01 GUARANTORS. The indebtedness incurred under and pursuant to this
Agreement shall be guarantied, in form and substance satisfactory to the Bank
(each a "Guaranty"), by Scheid Vineyards and Management Co., formerly known as
Monterey Farming Corporation (each a "Guarantor").

2.02 SUBORDINATED DEBT. All indebtedness now or hereafter owing by the
Borrower to the creditor(s) listed below shall be subordinated, by a document in
form and substance satisfactory to the Bank [the "Subordination Agreement(s)"],
to all indebtedness from time to time owed by the Borrower to the Bank.

NAME OF CREDITOR AMOUNT OF EXISTING INDEBTEDNESS

Scheid Vineyards and Management Co., any advances now or hereafter
formerly known as Monterey Farming Corporation

-1-
<PAGE>

SECTION III

CONDITIONS PRECEDENT

3.01 DELIVERY OF EXECUTED DOCUMENTATION AND OTHER INFORMATION TO BANK.
The Borrower shall, concurrent with its execution of this Agreement, deliver or
cause to be delivered to the Bank, in form and substance satisfactory to the
Bank:

A. AUTHORITY TO BORROW. Evidence relating to the duly given approval and
authorization of the execution, delivery and performance of this Agreement, all
other documents, instruments or agreements required under this Agreement and all
other actions to be taken by the Borrower hereunder or thereunder.

B. LOAN DOCUMENTS. The documents described in Section II hereof, as
applicable, and all other documents instruments or agreements required or
necessary to consummate the transactions contemplated under this Agreement
(collectively the "Loan Documents"), all fully executed.

C. LOAN FEES. $23,400, Loan Document Fee $1,500, Appraisal Fee $3,500 and
all out-of-pocket expenses incurred by Bank.

D. MISCELLANEOUS DOCUMENTS. Such other documents and opinions as the
Bank may require with respect to the transactions described in this Agreement.

SECTION IV

REPRESENTATIONS AND WARRANTIES

The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:

4.01 STATUS. If the Borrower is other than an individual who is not
conducting business as a sole proprietorship, the Borrower is a Partnership duly
organized and validly existing under the laws of the State of California, and is
properly licensed, qualified to do business and in good standing in, and, where
necessary to maintain the Borrower's rights and privileges, has complied with
the fictitious name statute of every jurisdiction in which the Borrower is doing
business.

4.02 AUTHORITY. The execution, delivery and performance by the Borrower of
this Agreement and the Loan Documents have been duly authorized and do not and
will not: (i) violate any provision of any law, rule, regulation, writ, judgment
or injunction presently in effect affecting the Borrower; (ii) result in a
breach of or constitute a default under any material agreement to which the
Borrower is a party or by which it or its properties may be bound or affected;
(iii) require any consent or approval of its stockholders or violate any
provision of its articles of incorporation or by-laws, if the Borrower is a
corporation; or (iv) violate any provision of its partnership agreement, if the
Borrower is a partnership.

4.03 LEGAL EFFECT. This Agreement constitutes, and any document,
instrument or agreement required hereunder when delivered will constitute,
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms.

4.04 FICTITIOUS TRADE STYLES. All fictitious trade styles used by the
Borrower in connection with its business operations and each state in which such
each fictitious trade styles is used are listed below. The Borrower shall
notify the Bank not less than 30 days prior to effecting any change in the
matters described below or prior to using any other fictitious trade style at
any future date, indicating the trade style and state(s) of its use.

TRADE STYLE STATE OF USE

Vineyard 405 California

4.05 FINANCIAL STATEMENTS. All financial statements, information and other
data which may have been or which may hereafter be submitted by the Borrower to
the Bank are true, accurate and correct and have been or will be prepared in
accordance with generally accepted accounting principles consistently applied
and accurately represent the Borrower's financial condition or, as applicable,
the other information disclosed therein. Since the most recent submission of
any such financial statement, information or other data to the Bank, the
Borrower represents and warrants that no material adverse change on the
Borrower's financial condition or operations has occurred which has not been
fully disclosed to the Bank in writing.

4.06 LITIGATION. Except as have been disclosed to the Bank in writing,
there are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or the Borrower's
properties before any court of administrative agency which, if determined
adversely to the Borrower, would have a material adverse effect on the

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<PAGE>

Borrower's financial condition of operations.

4.07 TITLE TO ASSETS; PERMITTED LIENS. The Borrower has good and
marketable title to all of its assets and the same are not subject to any
security interest, encumbrance, lien or claim of any third person other than:
(i) liens and security interests securing indebtedness owed by the Borrower to
the Bank; (ii) liens for taxes, assessments or similar charges either not yet
due or being duly contested in good faith; (iii) liens of mechanics,
materialmen, warehousemen or other like liens arising in the ordinary course of
business and securing obligations which are not yet delinquent; (iv) liens and
security interests which, as of the date of this Agreement, have been disclosed
to and approved by the Bank in writing; (v) purchase money liens or purchase
money security interests upon or in any property acquired or held by the
Borrower in the ordinary course of business to secure indebtedness outstanding
on the date hereof or permitted to be incurred hereunder; and (vi) those liens
and security interests which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the net value of the Borrower's
assets (collectively "Permitted Lines").

4.08 ERISA. If the Borrower has a pension, profit sharing or retirement
plan subject to the Employee Retirement Income Security Act of 1974, as amended
from time to time, including any rules or regulations promulgated thereunder
("ERISA"), such plan has been and will continue to be funded in accordance with
its terms and otherwise complies with and continues to comply with the
requirements of ERISA.

4.09 TAXES. The Borrower has filed all tax returns required to be filed
and paid all taxes shown thereon to be due, including interest and penalties,
other than taxes which are currently payable without penalty or interest or
those which are being duly contested in good faith.

SECTION V

COVENANTS

The Borrower covenants and agrees that, during the term of this Agreement, and
so long thereafter as the Borrower is indebted to the Bank under this Agreement,
the Borrower shall, unless the Bank otherwise consents in writing:

5.01 PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS. Maintain
and preserve its existence and all rights and privileges now enjoyed; not
liquidate or dissolve, merge or consolidate with or into, or acquire any other
business organization; and conduct its business in accordance with all
applicable laws, rules and regulations.

5.02 MAINTENANCE OF INSURANCE. Maintain insurance in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower operates and maintain such other insurance and coverages as may be
required by the Bank.

5.03 PAYMENT OF OBLIGATIONS AND TAXES. Make timely payment of all
assessments and taxes and all of its liabilities and obligations unless the same
are being contested in good faith.

5.04 INSPECTION RIGHTS. At any reasonable time and from time to time,
permit the Bank or any representative thereof to examine and make copies of the
records and visit the properties of the Borrower and to discuss the business and
operations of the Borrower with any employee or representative thereof. If the
Borrower now or at any time hereafter maintains any records (including, but not
limited to, computer generated records and computer programs for the generation
of such records) in the possession of a third party, the Borrower hereby agrees
to notify such third party to permit the Bank free access to such records at all
reasonable times and to provide the Bank with copies of any records it may
request, all at the Borrower's expense, the amount of which shall be payable
immediately upon demand.

5.05 REPORTING REQUIREMENTS. Deliver or cause to be delivered to the Bank
in form and detail satisfactory to the Bank:

A. ANNUAL STATEMENTS. Not later than 90 days after the end of each of the
Borrower's fiscal years, a copy of the annual financial report of the Borrower
for such year, which report shall be CPA-prepared and audited financial
statement which includes balance sheet, income statement, reconciliation of net
worth and working capital.

B. TAX RETURNS. Not later than n/a days after the end of each
of the Borrower's fiscal years, a copy of the Borrower's federal and state
income tax returns filed for such year.

C. INTERIM STATEMENTS. Not later than n/a days after the end of
each n/a , the Borrower's financial statement as of the end of
such n/a .

D. RECEIVABLES AND PAYABLES AGING. Not later than n/a days
after the end of each n/a , an aging of accounts receivable and an aging
of accounts payable.

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<PAGE>

E. OTHER INFORMATION. Promptly upon the Bank's request, such other
information pertaining to the Borrower or any Guarantor as the Bank may
reasonably request.

F. None at present.

5.06 PAYMENT OF DIVIDENDS; WITHDRAWALS OR DISTRIBUTIONS. If the Borrower
is a corporation, not declare or pay any dividends on any class of stock now or
hereafter outstanding except dividends payable solely in the Borrower's capital
stock. If the Borrower is a partnership, not permit the withdrawal of any
partner or make any distributions (in cash, in kind or otherwise) to any
partners.

5.07 REDEMPTION OR REPURCHASE OF STOCK; REPURCHASE OF PARTNERSHIP
INTERESTS. If the Borrower is a corporation, not redeem or repurchase any class
of the Borrower's stock now or hereafter outstanding. If the Borrower is a
partnership, not purchase or repurchase, in whole or in part, any partnership
interest.

5.08 ADDITIONAL INDEBTEDNESS. Not, after the date hereof, create, incur or
assume, directly or indirectly, any liability or indebtedness other than (i)
indebtedness owed or to be owed to the Bank or (ii) indebtedness to trade
creditors incurred in the ordinary course of the Borrower's business.

5.09 LOANS. Not make any loans or advances or extend credit to any third
person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities or subsidiaries of the Borrower, except
for credit extended in the ordinary course of the Borrower's business as
presently conducted and except up to an aggregate amount not exceeding
$ n/a in any one fiscal year.

5.10 LIENS AND ENCUMBRANCES. Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust or other lien
(including, but not limited to, a lien of attachment, judgement or execution)
affecting any of the Borrower's properties, or execute or allow to be filed any
financing statement or continuation thereof affecting any of such properties,
except for Permitted Liens and as otherwise provided in this Agreement and
except up to an aggregate amount not exceeding $ n/a in any one
fiscal year.

5.11 TRANSFER ASSETS. Not sell, contract for sale, transfer, convey,
assign, lease or sublet any of its assets except in the ordinary course of
business as presently conducted by the Borrower, and then, only for full, fair
and reasonable consideration.

5.12 CHANGE IN THE NATURE OF BUSINESS. Not make any material change in its
financial structure or in the nature of its business as existing or conducted as
of the date of this Agreement.

5.13 FINANCIAL CONDITION. Maintain at all times:

A. NET WORTH. A minimum effective tangible net worth of not less
than $ n/a .

B. DEBT TO NET WORTH RATIO. A debt to effective tangible net worth ratio
of not more than n/a to 1.

C. WORKING CAPITAL. A minimum working capital of not less than
$300,000.00.

D. CURRENT RATIO. A ratio of current assets to current liabilities of not
less than 1.5 to 1.

E. None at present.

For purposes of the foregoing, the term "effective tangible net worth"
shall mean the Borrower's stated net worth less all its intangible assets (i.e.,
goodwill, trademarks, patents, copyrights, organization expense and similar
intangible items) but including leaseholds and leasehold improvements and plus
indebtedness subordinated (by its terms or by written agreement) to indebtedness
owed by the Borrower to the Bank and the term "debt" shall mean all the
Borrower's liabilities excluding indebtedness subordinated (by its terms or by
written agreement) to indebtedness owed by the Borrower to the Bank.

5.14 COMPENSATION OF OFFICERS, ETC./PARTNERS. Not increase total
compensation (which is defined herein to include, but not be limited to,
salaries, withdrawals, fees, bonuses and commissions) during any fiscal year to
all of the Borrower's executives, officers and directors, or, as applicable,
partners, by more than 0% of the total compensation paid in the prior fiscal
year.

5.15 RENTALS. Not incur liability (in addition to that incurred as of the
date of this Agreement) for the payment of, or pay, rentals for the renting,
leasing or use of real or personal property in an aggregate amount exceeding
$25,000.00 in any one fiscal year.

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<PAGE>

capital leases, or purchase any real or personal property in an aggregate amount
exceeding $100,000.00 in any one fiscal year.

5.17 NOTICES. Give prompt written notice to the Bank of any and all Events
of Default and litigation, arbitration or administrative proceedings to which
the Borrower is a party and in which the claim or liability exceeds $25,000.00.

5.18 OTHER COVENANTS. None at present.

SECTION VI

EVENTS OF DEFAULT

Any one or more of the following described events shall constitute an event of
default (an "Event of Default") under this Agreement:

6.01 NON-PAYMENT. The Borrower shall fail to pay any payment of principal
or interest or any other sum referred to in this Agreement within 10 days of
when due.

6.02 PERFORMANCE UNDER THIS AND OTHER AGREEMENTS. The Borrower shall fail
in any material respect to perform or observe any term, covenant or agreement
contained in this Agreement or in any document, instrument or agreement
evidencing or relating to any indebtedness of the Borrower (whether owed to the
Bank or third persons), and any such failure (exclusive of the payment of money
to the Bank under this Agreement or under any other document, instrument or
agreement, which failure shall constitute and be an immediate Event of Default
if not paid when due or when demanded to be due) shall continue for more than 30
days after written notice from the Bank to the Borrower of the existence and
character of such Event of Default.

6.03 REPRESENTATIONS AND WARRANTIES; FINANCIAL STATEMENTS. Any
representation or warranty made by the Borrower under or in connection with this
Agreement or any financial statement given by the Borrower or any Guarantor
shall prove to have been incorrect in any material respect when made or given or
when deemed to have been made or given.

6.04 INSOLVENCY. The Borrower or any Guarantor shall: (i) become insolvent
or be unable to pay its debts as they mature; (ii) make an assignment for the
benefit of creditors or to an agent authorized to liquidate any substantial
amount of its properties or assets; (iii) file a voluntary petition in
bankruptcy or seeking reorganization or to effect a plan or other arrangement
with creditors; (iv) file an answer admitting the material allegations of an
involuntary petition relating to bankruptcy or reorganization or join in any
such petition; (v) become or be adjudicated a bankrupt; (vi) apply for or
consent to the appointment of, or consent that an order be made appointing any
receiver, custodian or trustee, for itself or any of its properties, assets or
businesses; or (vii) any receiver, custodian or trustee shall have been
appointed for all or a substantial part of its properties, assets of business
and shall not be discharged within 30 days after the date of such appointment.

6.05 EXECUTION. Any writ of execution or attachment or any judgement lien
shall be issued against any property of the Borrower and shall not be discharged
or bonded against or released within 30 days after the issuance or attachment of
such writ or lien.

6.06 REVOCATION OF LIMITATION OF GUARANTY. Any Guaranty shall be revoked
or limited or its enforceability or validity shall be contested by any
Guarantor; by operation of law, legal proceeding or otherwise or any Guarantor
who is a natural person shall die.

6.07 SUSPENSION. The Borrower shall voluntarily suspend the transaction of
business or allow to be suspended, terminated, revoked or expired any permit,
license or approval of any governmental body necessary to conduct the Borrower's
business as now conducted.

6.08 CHANGE IN OWNERSHIP. There shall occur a sale, transfer, disposition
or encumbrance (whether voluntary or involuntary), or an agreement shall be
entered into to do so, with respect to more than 10% of the issued and
outstanding capital stock of the Borrower, if a corporation, or there shall
occur a change in any general partner of a change affecting the control of the
Borrower, if a partnership.

SECTION VII

REMEDIES ON DEFAULT

Upon the occurrence of any Event of Default, the Bank may, in its sole and
absolute election, without demand and upon only such notice as may be required
by law:

7.01 ACCELERATION. Declare any or all of the Borrower's indebtedness owing
to the Bank, whether under this Agreement or under any other document,
instrument or agreement, immediately due and payable, whether or not otherwise
due and payable.

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<PAGE>

7.02 CEASE EXTENDING CREDIT. Cease extending credit to or for the account
of the Borrower under this Agreement or under any other agreement now existing
or hereafter entered into between the Borrower and the Bank.

7.03 TERMINATION. Terminate this Agreement as to any future obligation of
the Bank without affecting the Borrower's obligations to the Bank or the Bank's
rights and remedies under this Agreement or under any other document, instrument
or agreement.

7.04 NON-EXCLUSIVITY OF REMEDIES. Exercise one or more of the Bank's
rights set forth herein or seek such other rights or pursue such other remedies
as may be provided by law, in equity or in any other agreement now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.

SECTION VIII

MISCELLANEOUS PROVISIONS

8.01 ACCOUNTING AND OTHER TERMS. All references to financial statements,
assets, liabilities and similar accounting terms not specifically defined in
this Agreement shall mean such financial statements prepared and such terms
determined in accordance with generally accepted accounting principles
consistently applied. Except where otherwise specified in this Agreement, all
financial data submitted or to be submitted to the Bank pursuant to this
Agreement shall be prepared in accordance with generally accepted accounting
principles consistently applied. Terms not otherwise defined in this Agreement
shall have the meanings attributed to such terms in the California Uniform
Commercial Code.

8.02 DEFAULT INTEREST RATE. The Borrower shall pay to the Bank interest on
any indebtedness or amount payable under this Agreement, from the date that such
indebtedness or amount became due or was demanded to be due until paid in full,
at a rate which is 3% in excess of the rate otherwise provided under this
Agreement.

8.03 RELIANCE. Each warranty, representation, covenant and agreement
contained in this Agreement shall be conclusively presumed to have been relied
upon by the Bank regardless of any investigation made or information possessed
by the Bank and shall be cumulative and in addition to any other warranties,
representations, covenants or agreements which the Borrower shall now or
hereafter give, or cause to be given, to the Bank.

8.04 ATTORNEY'S FEES. In the event of any action in relation to this
Agreement or any document, instrument or agreement executed with respect to,
evidencing or securing the indebtedness hereunder, the prevailing party, in
addition to all other sums to which it may be entitled, shall be entitled to
reasonable attorney's fees.

8.05 NOTICES. All notices, payments, information and demands which either
party hereto may desire, or may be required to give or make to the other party,
shall be given or made to such party by hand delivery or through deposit in the
United States mail, postage prepaid, or by Western Union telegram, addressed to
the address set forth below such party's signature to this Agreement or to such
other address as may be specified from time to time in writing by either party
to the other.

8.06 WAIVER. Neither the failure nor delay by the Bank in exercising any
right hereunder or under any document, instrument or agreement mentioned herein
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right hereunder or under any other document, instrument or agreement
mentioned herein preclude other or further exercise thereof or the exercise of
any other right; nor shall any waiver of any right or default hereunder or under
any other document, instrument or agreement mentioned herein constitute a waiver
of any other default of the same or any other term or provision.

8.07 CONFLICTING PROVISIONS. To the extent that any of the terms or
provisions contained in this Agreement are inconsistent with those contained in
any other document, instrument or agreement executed pursuant hereto, the terms
and provisions contained herein shall control. Otherwise, such provisions shall
be considered cumulative.

8.08 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the Bank's prior
written consent. The Bank may sell, assign or grant participants in all or any
portion of its rights and benefits hereunder. The Borrower agrees that, in
connection with any such sale, grant or assignment, the Bank may deliver to the
prospective buyer, participant or assignee financial statements and other
relevant information relating to the Borrower.

8.09 JURISDICTION. This Agreement, any notes issued hereunder, and any
other documents, instruments or agreements mentioned or referred to herein shall
be governed by and construed according to the laws of the State of California,
to the jurisdiction of whose courts the parties hereby submit.

8.10 HEADINGS. The headings set forth herein are solely for the purpose of
identification and have no legal significance.

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<PAGE>

8.11 ENTIRE AGREEMENT. This Agreement and the Loan Documents shall
constitute the entire and complete understanding of the parties with respect to
the transactions contemplated hereunder. All previous conversations, memoranda
and writings between the parties or pertaining to the transactions contemplated
hereunder that are not incorporated or referenced in this Agreement of the Loan
Documents are superseded hereby.

IN WITNESS HEREOF, this Agreement has been executed by the parties hereto as
of the date first hereinabove written.

BANK: BORROWER:

SANWA BANK CALIFORNIA Vineyard 405, A California Limited
Partnership

By: Scheid Vineyards and Management Co.
formerly known as Monterey Farming
Corporation

By: /s/ Gary R. Shaeffer By: /s/ Alfred G. Scheid
--------------------------- -----------------------------------
Gary R. Shaeffer, Vice Alfred G. Scheid, President
President/Loan Team Leader

Address: Fresno Agribusiness By: /s/ Ernest M. Brown
Office -----------------------------------
2035 Fresno St. Ernest M. Brown, Secretary
Fresno, CA 93721 Address: 1632 5th St., Suite 220
Santa Monica, CA 90401

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<PAGE>

TERM LOAN AGREEMENT

THIS TERM LOAN CREDIT AGREEMENT (the "Agreement") is made and entered into
this 15th day of June, 1992, by and between SANWA BANK CALIFORNIA (the "Bank")
and Scheid Vineyards and Management Co. (the "Borrower").

SECTION I

AGREEMENT TO LEND

1.02 TERM LOAN. The Bank agrees to lend to the Borrower, upon the
Borrower's request made prior to July 15, 1992, up to the maximum amount of
$200,000 (the "Term Loan").

A. PURPOSE. Proceeds from the Term Loan shall be used to provide funds
to install drip system on Scheid Vineyard.

C. INTEREST. Interest shall accrue on the outstanding principal balance
of the Term Loan at a variable rate equivalent to an index for a variable
interest rate which is quoted, published or announced from time to time by the
Bank as its reference rate and as to which loans may be made by the Bank at,
below or above such reference rate (the "Reference Rate") plus 1.25% per annum
(the "Variable Rate"). Interest shall be adjusted concurrently with any change
in the Reference Rate. Interest shall be calculated on the basis of 360 days
per year, but charged on the actual number of days elapsed. The Borrower hereby
promises and agrees to pay interest quarterly on the last day of each quarter
commencing on September 30, 1992 and continuing on the last day of each quarter
thereafter up to and including December 31, 2001 If interest is not paid as it
becomes due, it shall be added to, become and be treated as a part of the
principal, and shall thereafter bear like interest.

D. PRINCIPAL. The Borrower hereby promises and agrees to pay principal
in 9 equal installments of $20,000.00 per installment commencing on December 31,
1992, and continuing on the last day of each December thereafter up to and
including December 31, 2000 On December 31st, 2001, the Borrower hereby
promises and agrees to pay to the Bank the entire unpaid principal balance,
together with accrued and unpaid interest.

Each payment received by the Bank shall, at the Bank's option, be applied to pay
interest then due and unpaid and the remainder thereof (if any) shall be applied
to pay principal.

SECTION II

GUARANTORS; SUBORDINATED DEBT

2.01 GUARANTORS. The indebtedness incurred under and pursuant to this
Agreement shall be guarantied, in form and substance satisfactory to the Bank
(each a "Guaranty"), by Alfred G. Scheid (each a "Guarantor").

NAME OF CREDITOR AMOUNT OF EXISTING INDEBTEDNESS

Alfred G. Scheid $500,000.00

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<PAGE>

SECTION III

CONDITIONS PRECEDENT

C. LOAN FEES. $3,000.00 plus out-of-pocket expenses incurred by the Bank.

D. MISCELLANEOUS DOCUMENTS. Such other documents and opinions as the
Bank may require with respect to the transactions described in this Agreement.

SECTION IV

REPRESENTATIONS AND WARRANTIES

The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:

4.01 STATUS. If the Borrower is other than an individual who is not
conducting business as a sole proprietorship, the Borrower is a Corporation duly
organized and validly existing under the laws of the State of California, and is
properly licensed, qualified to do business and in good standing in, and, where
necessary to maintain the Borrower's rights and privileges, has complied with
the fictitious name statute of every jurisdiction in which the Borrower is doing
business.

TRADE STYLE STATE OF USE

None at Present

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<PAGE>

SECTION V

COVENANTS

The Borrower covenants and agrees that, during the term of this Agreement,
and so long thereafter as the Borrower is indebted to the Bank under this
Agreement, the Borrower shall, unless the Bank otherwise consents in writing:

5.03 PAYMENT OF OBLIGATIONS AND TAXES. Make timely payment of all
assessments and taxes and all of its liabilities and obligations unless the same
are being contested in good faith.

5.05 REPORTING REQUIREMENTS. Deliver or cause to be delivered to the Bank
in form and detail satisfactory to the Bank:

A. ANNUAL STATEMENTS. Not later than 120 days after the end of each of
the Borrower's fiscal years, a copy of the annual financial report of the
Borrower for such year, which report shall be CPA-prepared and audited to
include balance sheet, income statement, and statement of cash flow on Scheid
Vineyards and Management Co., Vineyard Investors 1972 and Vineyard 405.

B. TAX RETURNS. Not later than N/A days after the end
of each of the Borrower's fiscal years, a copy of the Borrower's federal and
state income tax returns filed for such year.

C. INTERIM STATEMENTS. Not later than N/A days
after the end of each N/A , the Borrower's financial
statement as of the end of such N/A .

D. RECEIVABLES AND PAYABLES AGING. Not later than N/A
days after the end of each N/A , an aging of accounts receivable and an
aging of accounts payable.

-3-

<PAGE>

E. OTHER INFORMATION. Promptly upon the Bank's request, such other
information pertaining to the Borrower or any Guarantor as the Bank may
reasonably request.

F. Borrower to submit to Bank a new crop budget for the coming year not
later than 120 days after calendar year end each year.

5.10 LIENS AND ENCUMBRANCES. Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust or other lien
(including, but not limited to, a lien of attachment, judgement or execution)
affecting any of the Borrower's properties, or execute or allow to be filed any
financing statement or continuation thereof affecting any of such properties,
except for Permitted Liens and as otherwise provided in this Agreement in any
one fiscal year (with the exception of $3,885,000 and $1,539,000 guarantys with
SBCL in favor of Vineyard Investors 1972 and Vineyard 405).

5.12 CHANGE IN THE NATURE OF BUSINESS. Not make any material change in its
financial structure or in the nature of its business as existing or conducted as
of the date of this Agreement.

5.13 FINANCIAL CONDITION. Maintain at all times:

A. NET WORTH. A minimum effective tangible net worth of not less than
$4,500,000.00 by 12/31/92 (cost basis).

B. DEBT TO NET WORTH RATIO. A debt to effective tangible net worth ratio
of not more than N/A to 1.

C. WORKING CAPITAL. A minimum working capital of not less than
$750,000.00.

D. CURRENT RATIO. A ratio of current assets to current liabilities of not
less than 2.0 to 1 by 12/31/92.

E. Net profit not to be less than $500,000.00 by 12/31/92.

5.14 COMPENSATION OF OFFICERS, ETC./PARTNERS. Not increase total
compensation (which is defined herein to include, but not be limited to,
salaries, withdrawals, fees, bonuses and commissions) during any fiscal year to
all of the Borrower's executives, stockholders, officers and directors, or, as
applicable, partners, greater than $650,000.00.

5.16 CAPITAL EXPENSES. Not make any fixed capital expenditure or any
commitment therefor, including, but not

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<PAGE>

limited to, incurring liability for leases which would be, in accordance with
generally accepted accounting principles, reported as capital leases, or
purchase any real or personal property in an aggregate amount exceeding
$850,000.00 in any one fiscal year, (inclusive of the proposed capital
improvements of $486,000 and equipment purchases of $330,000).

5.18 OTHER COVENANTS. None at present.

SECTION VI

EVENTS OF DEFAULT

Any one or more of the following described events shall constitute an event of
default (an "Event of Default") under this Agreement:

6.01 NON-PAYMENT. The Borrower shall fail to pay any payment of principal
or interest or any other sum referred to in this Agreement within 10 days of
when due.

6.08 CHANGE IN OWNERSHIP. There shall occur a sale, transfer, disposition
or encumbrance (whether voluntary or involuntary), or an agreement shall be
entered into to do so, with respect to more than 10% of the issued and
outstanding capital stock of the Borrower, if a corporation, or there shall
occur a change in any general partner or a change affecting the control of the
Borrower, if a partnership.

SECTION VII

REMEDIES ON DEFAULT

Upon the occurrence of any Event of Default, the Bank may, in its sole and
absolute election, without demand and upon only such notice as may be required
by law:

7.01 ACCELERATION. Declare any or all of the Borrower's indebtedness owing
to the Bank, whether under this

-5-

<PAGE>

Agreement or under any other document, instrument or agreement, immediately due
and payable, whether or not otherwise due and payable.

SECTION VIII

MISCELLANEOUS PROVISIONS

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<PAGE>

8.10 HEADINGS. The headings set forth herein are solely for the purpose of
identification and have no legal significance.

IN WITNESS HEREOF, this Agreement has been executed by the parties hereto as
of the date first hereinabove written.

BANK: BORROWER:

SANWA BANK CALIFORNIA Scheid Vineyards and Management Co.

By: /s/ Gary R. Shaeffer By: /s/ Alfred G. Scheid
------------------------------- ------------------------------------
Gary R. Shaeffer, Vice President/ Alfred G. Scheid, President
Loan Team Leader

Address: Fresno Agribusiness Office By: /s/ Ernest M. Brown
2035 Fresno St. ------------------------------------
Fresno, CA 93721 Ernest M. Brown, Secretary
Address: 1632 5th St., Suite 220
Santa Monica, CA 90401

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<PAGE>

[LOGO]

AGRICULTURAL CREDIT AGREEMENT
(General Term Loan)

This Agricultural Credit Agreement ("Agreement") is made and entered into this
6th day of October, 1994 by and between SANWA BANK CALIFORNIA (the "Bank") and
VINEYARD INVESTORS 1972 (the "Borrower").

SECTION I

DEFINITIONS

1.01 Certain Defined Terms. Unless elsewhere defined in this Agreement the
following terms shall have the following meanings (such meanings to be generally
applicable to the singular and plural forms of the terms defined):

A. "Business Day" shall mean a day, other than a Saturday or Sunday, on
which commercial banks are open for business in California.

B. "Collateral" shall mean the property in which the Bank is granted a
security interest pursuant to provisions of the section herein entitled
"Collateral", together with any other personal or real property in which
the Bank may be granted a lien or security interest to secure payment of
the Obligations.

C. "Debt" shall mean all liabilities of the Borrower less Subordinated
Debt.

D. "Effective Tangible Net Worth" shall mean the Borrower's stated net
worth plus Subordinated Debt but less all intangible assets of the
Borrower (i.e., goodwill, trademarks, patents, copyrights, organization
expense and similar intangible items).

E. "Environmental Claims" shall mean all claims, however asserted, by any
governmental authority or other person alleging potential liability or
responsibility for violation of any Environmental Law or for release or
injury to the environment or threat to public health, personal injury
(including sickness, disease or death), property damage, natural resources
damage, or otherwise alleging liability or responsibility for damages
(punitive or otherwise), cleanup, removal, remedial or response costs,
restitution, civil or criminal penalties, injunctive relief, or other type
of relief, resulting from or based upon (i) the presence, placement,
discharge, emission or release (including intentional and unintentional,
negligent and non-negligent, sudden or non-sudden, accidental or non-
accidental placement, spills, leaks, discharges, emissions or releases) of
any Hazardous Materials at, in, or from property owned, operated or
controlled by the Borrower, or (ii) any other circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.

F. "Environmental Laws" shall mean all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
governmental authorities, in each case relating to environmental, health,
safety and land use matters; including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), the Clean Air
Act, the Federal Water Pollution Control Act of 1972, the Solid Waste
Disposal Act, the Federal Resource Conservation and Recovery Act, the
Toxic Substances Control Act, the Emergency Planning and Community Right-
to-Know Act, the California Hazardous Waste Control Law, the California
Solid Waste Management, Resource, Recovery and Recycling Act, the
California Water Code and the California Health and Safety Code.

G. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, including (unless the context
otherwise requires) any rules or regulations promulgated thereunder.

H. "Event of Default" shall have the meaning set forth in the section
herein entitled "Events of Default".

I. "Hazardous Materials" shall mean all those substances which are
regulated by, or which may form the basis of liability under any
Environmental Law, including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste, hazardous
constituent, special waste, hazardous substance, hazardous material, or
toxic substance, or petroleum or petroleum derived substance or waste.

J. "Indebtedness" shall mean, with respect to the Borrower, (i) all
indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which the Borrower is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which the Borrower otherwise assures a creditor against loss
and (ii) obligations under leases which shall have been or should be in
accordance with generally accepted accounting principles, reported as
capital leases in respect of which the Borrower is liable, contingently or
otherwise, or in respect of which the Borrower otherwise assures a
creditor against loss.

K. "Obligations" shall mean all amounts owing by the Borrower to the Bank
pursuant to this Agreement.

L. "Permitted Liens" shall mean: (i) liens and security interests
securing indebtedness owed by the Borrower to the Bank: (ii) liens for
taxes, assessments or similar charges either not yet due or being
contested in good faith, provided proper reserves are maintained therefor
in accordance with generally accepted accounting procedure; (iii) liens of
materialmen, mechanics, warehousemen, or carriers or other like liens
arising in the ordinary course of business and securing obligations which
are not yet delinquent; (iv) purchase money liens or purchase money
security interests upon or in any property acquired or held by the
Borrower in the ordinary course of business to secure Indebtedness
outstanding on the date hereof or permitted to be incurred pursuant to
this Agreement; (v) liens and security interests which, as of the date
hereof, have been disclosed to and approved by the Bank in writing; and
(vi) those liens and security interests which in the aggregate constitute
an immaterial and insignificant monetary amount with respect to the net
value of the Borrower's assets.

M. "Reference Rate" shall mean an index for a variable interest rate
which is quoted, published or announced from time to time by the Bank as
its reference rate and as to which loans may be made by the Bank at, below
or above such reference rate.

N. "Subordinated Debt" shall mean such liabilities of the Borrower which
have been subordinated to those owed to the Bank in a manner acceptable to
the Bank.

1.02 Accounting Terms. All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein shall
mean such financial statements or such items prepared or determined in
accordance with generally accepted accounting principles consistently applied
and, except where otherwise specified, all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.

1.03 Other Terms. Other terms not otherwise defined shall have the meanings
attributed to such terms in the California Uniform Commercial Code.

(1)

<PAGE>

SECTION II

CREDIT FACILITIES

2.01 Commitment to Lend. Subject to the terms and conditions of this Agreement
and so long as no Event of Default occurs, the Bank agrees to extend to the
Borrower the credit accommodations that follow.

2.01. Term Loan. The Bank agrees to lend to the Borrower up to the maximum
amount of $5,500,000.00 (the "Term Loan").

A. Purpose. This Term Loan shall be used to refinance and increase
existing real estate loan to replenish working capital.

B. Interest Rate. Interest shall accrue on the outstanding principal
balance under this Term Loan at a variable rate equal to the Bank's
Reference Rate, as it may change from time to time, plus 0.750% per annum.
(Such rate is referred to in this Section as the "Variable Rate".) The
Variable Rate shall be adjusted concurrently with any change in the
Reference Rate. Interest shall be calculated on the basis of 360 days per
year but charged on the actual number of days elapsed.

C. Repayment. Unless sooner due in accordance with the terms of this
Agreement, the Borrower hereby promises and agrees to pay principal and
interest on the following terms:

Interest shall be paid quarterly on the fifth day of each quarter,
commencing on January 5, 1995. Principal shall be paid on the fifth day
of each year, up to and including the maturity date hereof, as follows:
three annual installments of $150,000.00 commencing October 5, 1995; three
annual installments of $200,000.00 commencing October 5, 1998; and three
annual installments of $288,000.00 commencing on October 5, 2001.

On October 5, 2004 the Borrower hereby promises and agrees to pay to the
Bank in full the aggregate unpaid principal balance then outstanding,
together with all accrued and unpaid interest thereon. If interest is not
paid as it becomes due, without waiving any Event of Default occasioned by
such non-payment, the Bank may, at its option but without any obligation
to do so, add such unpaid interest to principal and it shall thereafter
become and be treated as part of the principal and shall thereafter bear
like interest.

Any payment received by the Bank shall, at the Bank's option, first be
applied to pay any late fees or other fees then due and unpaid, and then
to interest then due and unpaid and the remainder thereof (if any) shall
be applied to reduce principal.

D. Fixed Rate Alternative Pricing. The Borrower may from time to time
elect (by notice to the Bank as provided below) that the entire amount of
the outstanding principal balance under the Term Loan (the "Term Balance")
shall accrue interest on the amount of such Term Balance at a fixed rate
for such period of time (the "Interest Period") as the Bank may quote and
offer; provided that any such Interest Period (i) shall be for at least 30
days and shall not extend beyond the maturity date of the Term Loan. Such
fixed rate shall be a percentage to be quoted and offered by the Bank from
time to time upon the request of the Borrower (the "Fixed Rate"). Any
telephonic or oral quote or offer by the Bank of a Fixed Rate for a given
Interest Period may be confirmed in writing by the Bank upon the election
(as provided herein) of the Borrower to accept such terms and such
confirmation shall be deemed conclusive as to the terms quoted and
offered.

A Term Balance on which interest is accruing on the basis of the Fixed
Rate is hereinafter referred to as a "Fixed Rate Balance" and a Term
Balance on which the interest is accruing on the basis of the Variable
Rate is hereinafter referred to as a "Variable Rate Balance".

Interest on any Fixed Rate Balance shall be computed on the basis of 360
days per year but charged on the actual number of days elapsed.

The Borrower hereby promises and agrees to pay the Bank interest on any
Fixed Rate Balance on the basis described above with respect to the
Variable Rate. If interest under the Fixed Rate is not paid as and when
it is due, the amount of such unpaid interest shall bear interest until
paid in full, at the then applicable interest rate.

(i) Notice of Election to Adjust Interest Rate.

(a) The Borrower may elect that interest on a Fixed Rate
Balance shall continue to accrue at a newly quoted and offered
Fixed Rate or commence to accrue at the Variable Rate by
telephonic notice to the Bank, provided that such notice shall
be received at or before 11:00 am (California time) on a
Business Day which is two Business Days prior to the last day
of the relevant Interest Period.

(b) The Borrower may elect that interest on a Variable Rate
Balance shall continue to accrue at the Variable Rate or
commence to accrue at a quoted and offered Fixed Rate by
telephonic notice to the Bank, provided that such notice shall
be received at or before 11:00 am (California time) on a
Business Day which is two Business Days prior to the date on
which the elected interest rate shall be effective.

If the Bank shall not have received notice as prescribed herein of the
Borrower's election that interest on the Term Balance shall commence
to accrue at the Fixed Rate or continue to accrue at a newly quoted
Fixed Rate, then the Borrower shall be deemed to have elected that
interest shall accrue thereon at the Variable Rate.

In the event the Bank determines that accrual of interest on the basis
of the Fixed Rate is infeasible because the Bank is unable to
determine the Fixed Rate due to the unavailability of U.S. dollar
deposits, contracts or certificates of deposit in any amount
approximately equal to the amount of the Term Balance and for a period
of time approximately equal to the relevant Interest Period, the Bank
shall give the Borrower prompt notice thereof and the Borrower may
select another available Interest Period (as quoted and offered by the
Bank), subject to the terms and conditions herein. If the Borrower
does not select another available Interest Period or if no other
Interest Period is available, then the Term Balance shall be deemed to
be a Variable Rate Balance and shall accrue interest on the basis of
the Variable Rate.

(ii) PROHIBITION AGAINST PREPAYMENT OF FIXED RATE BALANCES.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, NO
PREPAYMENT SHALL BE MADE ON ANY FIXED RATE BALANCE EXCEPT ON A DAY
WHICH IS THE LAST DAY OF THE INTEREST PERIOD PERTAINING THERETO. IF
THE WHOLE OR ANY PART OF ANY FIXED RATE BALANCE IS PREPAID BY REASON
OF ACCELERATION OR OTHERWISE, THE BORROWER SHALL, UPON THE BANK'S
REQUEST, PROMPTLY PAY TO AND INDEMNIFY THE BANK FOR ALL COSTS AND ANY
LOSS(INCLUDING INTEREST) ACTUALLY INCURRED BY THE BANK AND ANY LOSS
(INCLUDING LOSS OF PROFIT RESULTING FROM THE RE-EMPLOYMENT OF FUNDS)
SUSTAINED BY THE BANK AS A CONSEQUENCE OF SUCH PREPAYMENT.

(iii) Indemnification for Fixed Rate Costs. During any period of time
in which interest is accruing on the basis of a Fixed Rate, the
Borrower shall, upon the Bank's request, promptly pay to and reimburse
the Bank for all costs incurred and payments made by the Bank by
reason of any future assessment, reserve, deposit or similar
requirements or any surcharge, tax or fee imposed upon the Bank or as
a result of the Bank's compliance with any directive or requirement of
any regulatory authority pertaining or relating to funds used by the
Bank in quoting and determining the Fixed Rate.

(2)

<PAGE>

(iv) INVOLUNTARY CONVERSION FROM FIXED RATE TO VARIABLE RATE. In
the event that the Bank shall at any time determine that the accrual
of interest on the basis of the Fixed Rate is or has become unlawful
or infeasible by reason of the Bank's compliance with any new law,
rule, regulation, guideline or order, or any new interpretation of any
present law, rule, regulation, guideline or order, then the Bank shall
give telephonic notice thereof (confirmed in writing) to the Borrower,
in which event any Fixed Rate Balance shall be deemed to be a Variable
Rate Balance and interest shall thereupon immediately accrue at the
Variable Rate.

E. LATE FEE. If any regularly scheduled payment of principal and/or
interest (exclusive of the final payment upon maturity), or any portion
thereof, under this Term Loan is not paid within ten (10) calendar days
after it is due, a late payment charge equal to five percent (5%) of such
past due payment may be assessed and shall be immediately payable.

F. FACILITY FEES. The following fees for this facility shall be paid in
cash upon execution of this Agreement or prior to funding of this
facility: Loan Fees in the amount of $25,000.00.

In addition to the above fees, the Borrower hereby promises and agrees to
pay the following fees in connection with this facility: Reimbursement
for any out-of-pocket expenses incurred by Bank in connection with this
transaction.

G. TERM LOAN ACCOUNT. The Bank shall maintain on its books a record of
account in which the Bank shall make entries setting forth all payments
made, the application of such payments to interest and principal, accrued
and unpaid interest (if any) and the outstanding principal balance under
the Term Loan (the "Term Loan Account"). The Bank shall provide the
Borrower with a statement of the Borrower Term Loan Account, which
statement shall be considered to be correct and conclusively binding on
the Borrower unless the Bank is notified by the Borrower to the contrary
within thirty (30) days after the Borrower's receipt of any such
statement which is deemed to be incorrect.

SECTION III

COLLATERAL

3.01. REAL PROPERTY SECURITY. The Borrower hereby agrees that all of the
Obligations referenced in this Agreement and the Borrower's performance of
each and all of the terms, covenants and agreements contained in this
Agreement shall be secured by a deed of trust, in form and substance
satisfactory to the Bank (the "Deed of Trust"), encumbering as a lien of
first encumbrance certain real property described in the attached "Real
Property Schedule" (the "Real Property") located in the County of Monterey,
State of California, subject only to current taxes and assessments not yet
due and payable and those exceptions (the "Permitted Title Exceptions")
listed on a certain Preliminary Title Report.

3.03. EXCLUSION OF CONSUMER DEBT. The Obligations and performance secured hereby
shall not include any indebtedness of the Borrower incurred for personal, family
or household purposes except to the extent any disclosure required under any
consumer protection law (including but not limited to the Truth in Lending Act)
or any regulation thereto, as now existing, or hereafter amended, is or has been
given.

SECTION IV

CONDITIONS PRECEDENT

4.01. CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT. The obligation
of the Bank to make the initial extension of credit hereunder is subject to the
conditions precedent that the Bank shall have received before the date of such
extension of credit all of the following, in form and substance satisfactory to
the Bank:

A. AUTHORITY TO BORROW. Evidence relating to the duly given approval and
authorization of the execution, delivery and performance of this
Agreement, all other documents, instruments and agreements required under
this Agreement and all other actions to be taken by the Borrower
hereunder or thereunder.

B. GUARANTORS. Continuing guaranties in favor of the Bank, in form and
substance satisfactory to the Bank, executed by Scheid Vineyards &
Management Co. and Alfred G. Scheid (each a "Guarantor"), together with
evidence that the execution, delivery and performance of the Guaranties
by each Guarantor has been duly authorized.

C. LOAN FEES. Evidence that any required loan fees and expenses as set
forth above with respect to each credit facility have been paid or
provided for by the Borrower.

D. AUDIT. The opportunity to conduct an audit of the Borrower's books,
records and operations and the Bank shall be satisfied as to the
condition thereof.

E. REAL PROPERTY DOCUMENTS. The following documents relating to the real
property security provided for in this Agreement:

(i) An appraisal of the Real Property.

(ii) A title insurance policy or binder in the amount of
$5,500,000.00 issued by a title insurance company satisfactory to the
Bank and in such form and substance and with such endorsements as
are satisfactory to the Bank. Such title insurance policy or binder
shall indicate to the Bank's satisfaction that the Deed of Trust
shall contstitute a lien of first encumbrance on the Real Property
subject only to Permitted Title Exceptions.

(iii) Evidence that the Deed of Trust has been recorded and
constitutes a lien on the Real Property subject only to the Permitted
Title Exceptions.

(iv) Reimbursement to the Bank in the amount of all escrow,
recordation and appraisal fees, title guaranty or insurance premiums,
closing costs and all other out-of-pocket expenses incurred by the
Bank with respect to the Real Property.

F. MISCELLANEOUS DOCUMENTS. Such other documents, instruments, agreements
and opinions as are necessary, or as the Bank may reasonably require, to
consummate the transactions contemplated under this Agreement, all fully
executed.

4.02. CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The obligation of the
Bank to make any extensions of credit to or on accounts of the Borrower
(including the initial extension of credit) shall be subject to the further
conditions precedent that, as of the date of each extension of credit, and after
the making of such extension of credit:

A. REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in the Section entitled "Representations and Warranties" herein and
in any other document, instrument, agreement or certificate delivered to
the Bank hereunder are true and correct.

B. COLLATERAL. The security interest in the Collateral has been duly
authorized, created and perfected with first priority and is in full
force and effect and the Bank has been provided with satisfactory
evidence of all filings necessary to establish such perfection and
priority.

C. EVENT OF DEFAULT. No event has occurred and is continuing which
constitutes, or, with the lapse of time or giving of notice or both, would
constitute an

(3)

<PAGE>

Event of Default.

D. SUBSEQUENT APPROVALS, ETC. The Bank shall have received such
supplemental approvals, opinions or documents as the Bank may reasonably
request.

4.03. REAFFIRMATION OF STATEMENTS. For the purposes hereof, the Borrower's
acceptance of the proceeds of any extension of credit and the Borrower's
execution of any document or instrument evidencing or creating any Obligation
hereunder shall each be deemed to constitute the Borrower's representation and
warranty that the statements set forth above in this Section are true and
correct.

SECTION V

REPRESENTATIONS AND WARRANTIES

The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:

5.01. STATUS. The Borrower is a partnership duly organized and validly existing
under the laws of the State of California and is properly licensed, qualified to
do business and in good standing in, and, where necessary to maintain the
Borrower's rights and privileges, has complied with the fictitious name statute
of every jurisdiction in which the Borrower is doing business.

5.02. AUTHORITY. The execution, delivery and performance by the Borrower of
this Agreement and any instrument, document or agreement required hereunder have
been duly authorized and do not and will not: (i) violate any provision of any
law, rule, regulation, writ, judgment or injunction presently in effect
affecting the Borrower; (ii) violate any provision of the partnership agreement
of the Borrower; or (iii) result in a breach of or constitute a default under
any material agreement to which the Borrower is a party or by which it or its
properties may be bound or affected.

5.03. LEGAL EFFECT. This Agreement constitutes, and any document, instrument
or agreement required hereunder when delivered will constitute, legal, valid and
binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms.

5.04. FICTITIOUS TRADE STYLES. The Borrower currently uses no fictitious trade
styles in connection with its business operations. The Borrower shall notify
the Bank within thirty (30) days of the use of any fictitious trade style at
any future date, indicating the trade style and state(s) of its use.

5.05. FINANCIAL STATEMENTS. All financial statements, information and other
data which may have been and which may hereafter be submitted by the Borrower to
the Bank are true, accurate and correct and have been and will be prepared in
accordance with generally accepted accounting principles consistently applied
and accurately represent the Borrower's financial condition and, as applicable,
the other information disclosed therein. Since the most recent submission of
any such financial statement, information or other data to the Bank, the
Borrower represents and warrants that no material adverse change in the
Borrower's financial condition or operations has occurred which has not been
fully disclosed to the Bank in writing.

5.06. LITIGATION. Except as have been disclosed to the Bank in writing, there
are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or the Borrower's
properties before any court or administrative agency which, if determined
adversely to the Borrower, would have a material adverse effect on the
Borrower's financial condition, operations or the Collateral.

5.07. TITLE TO ASSETS. The Borrower has good and marketable title to all of its
assets (including, but not limited to, the Collateral) and the same are not
subject to any security interest, encumbrance, lien or claim of any third person
except for Permitted Liens.

5.08. ERISA. If the Borrower has a pension, profit sharing or retirement plan
subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to comply
with the requirements of ERISA.

5.09. TAXES. The Borrower has filed all tax returns required to be filed and
paid all taxes shown thereon to be due, including interest and penalties, other
than taxes which are currently payable without penalty or interest or those
which are being duly contested in good faith.

5.10. ENVIRONMENTAL COMPLIANCE. The operations of the Borrower comply, and
during the term of this Agreement will at all times comply, in all respects with
all Environmental Laws; the Borrower has obtained licenses, permits,
authorizations and registrations required under any Environmental Law
("Environmental Permits") and necessary for its ordinary operations, all such
Environmental Permits are in good standing, and the Borrower is in compliance
with all material terms and conditions of such Environmental Permits; neither
the Borrower nor any of its present properties or operations are subject to any
outstanding written order from or agreement with any governmental authority nor
subject to any judicial or docketed administrative proceeding, respecting any
Environmental Law, Environmental Claim or Hazardous Material; there are no
Hazardous Materials or other conditions or circumstances existing, or arising
from operations prior to the date of this Agreement, with respect to any
property of the Borrower that would reasonably be expected to give rise to
Environmental Claims; provided however, that with respect to property leased
from an unrelated third party, the foregoing representation is made to the best
knowledge of the Borrower. In addition, (i) the Borrower does not have or
maintain any underground storage tanks which are not properly registered or
permitted under applicable Environmental Laws or which are leaking or
disposing of Hazardous Materials off-site, and (ii) the Borrower has notified
all of its employees of the existence, if any, of any health hazard arising from
the conditions of their employment and have met all notification requirements
under Title III of CERCLA and all other Environmental Laws.

SECTION VI

COVENANTS

6.01. PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS. Maintain and
preserve its existence and all rights and privileges now enjoyed; not liquidate
or dissolve, merge or consolidate with or into, or acquire any other business
organization; and conduct its business in accordance with all applicable laws,
rules and regulations.

6.02. MAINTENANCE OF INSURANCE. Maintain insurance in such amounts and covering
such risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower
operates and maintain such other insurance and coverages as may be required by
the Bank. All such insurance shall be in form and amounts and with companies
satisfactory to the Bank. With respect to insurance covering properties to
which the Bank maintains a security interest or lien, such insurance shall be in
an amount not less than the full replacement value thereof, at the Bank's
request, shall name the Bank as loss payee pursuant to a loss payable
endorsement satisfactory to the Bank and shall not be altered or canceled except
upon ten (10) days' prior written notice to the Bank. Upon the Bank's request,
the Borrower shall furnish the Bank with the original policy or binder of all
such insurance.

(4)

<PAGE>

continue the Bank's security interest in the Collateral and the priority
thereof; maintain accurate and complete records of the Collateral which show
all sales, claims and allowances; and properly care for, house, store and
maintain the Collateral in good condition, free of misuse, abuse and
deterioration, other than normal wear and tear. The Borrower shall also
maintain and preserve all its properties in good working order and condition
in accordance with the general practice of other businesses of similar
character and size, ordinary wear and tear excepted.

6.04. PAYMENT OF OBLIGATIONS AND TAXES. Make timely payment of all
assessments and taxes and all of its liabilities and obligations including,
but not limited to, trade payables, unless the same are being contested in
good faith by appropriate proceedings with the appropriate court or
regulatory agency. For purposes hereof, the Borrower's issuance of a check,
draft or similar instrument without delivery to the intended payee shall not
constitute payment.

6.05. INSPECTION RIGHTS. At any reasonable time and from time to time permit
the Bank or any representative thereof to examine and make copies of the
records and visit the properties of the Borrower and to discuss the business
and operations of the Borrower with any employee or representative thereof.
If the Borrower now or at any time hereafter maintains any records
(including, but not limited to, computer generated records and computer
programs for the generation of such records) in the possession of a third
party, the Borrower hereby agrees to notify such third party to permit the
Bank free access to such records at all reasonable times and to provide the
Bank with copies of any records it may request, all at the Borrower's
expense, the amount of which shall be payable immediately upon demand. In
addition, the Bank may, at any reasonable time and from time to time, conduct
inspections and audits of the Collateral and the Borrower's accounts payable,
the cost and expenses of which shall be paid by the Borrower to the Bank upon
demand.

6.06. REPORTING REQUIREMENTS. Deliver or cause to be delivered to the Bank
in form and detail satisfactory to the Bank:

A. OTHER REPORTING REQUIREMENTS. Borrower to provide a CPA prepared
audited financial statement of Vineyard Investors 1972 and Scheid
Vineyards & Management Co. to include balance sheet, income statement,
reconciliation of net worth and working capital not later than 120
days after calendar year end. Internally prepared consolidating
financial statements to be provided, within same period.

B. OTHER INFORMATION. Promptly upon the Bank's request, such other
information pertaining to the Borrower, the Collateral, or any
Guarantor as the Bank may reasonably request.

6.08. REPURCHASE OF PARTNERSHIP INTERESTS. The Borrower shall not purchase
or repurchase, in whole or in part, any partnership interest.

6.09. ADDITIONAL INDEBTEDNESS. Not after the date hereof, create, incur or
assume, directly or indirectly, any liability or indebtedness other than (i)
indebtedness owed or to be owed to the Bank or (ii) indebtedness to trade
creditors incurred in the ordinary course of the Borrower's business.

6.10. LOANS. Not make any loans or advances or extend credit to any third
person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities or subsidiaries of the Borrower,
except for credit extended in the ordinary course of the Borrower's business
as presently conducted.

6.11. LIENS AND ENCUMBRANCES. Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's properties, or execute or allow to be filed
any financing statement or continuation thereof affecting any such
properties, except for Permitted Liens or as otherwise provided in this
Agreement.

6.12. TRANSFER ASSETS. Not sell, contract for sale, transfer, convey,
assign, lease or sublet any assets of the Borrower, including, but not
limited to, the Collateral, except in the ordinary course of business as
presently conducted by the Borrower, and then, only for full, fair and
reasonable consideration.

6.13. CHANGE IN THE NATURE OF BUSINESS. Not make any material change in the
Borrower's financial structure or in the nature of the Borrower's business as
existing or conducted as of the date of this Agreement.

6.14. FINANCIAL CONDITION. Maintain at all times: On a consolidated basis
with Scheid Vineyards & Management Co.

A. NET WORTH. A minimum Effective Tangible Net Worth of not less than
$5,000,000.00 (cost basis), for Scheid Vineyards & Manager on a
combined basis with Scheid Vineyards & Management.

B. MINIMUM WORKING CAPITAL. A minimum working capital amount of not
less than $2,500,000.00.)

C. CURRENT RATIO. A ratio of current assets to current liabilities of
not less than 2.00 to 1.00.)

6.15. COMPENSATION OF EMPLOYEES. Compensate the employees of the Borrower
for services rendered at an hourly rate at least equal to the minimum hourly
rate prescribed by any applicable federal or state law or regulation.

6.16. OTHER RESTRICTIONS. Borrower: Minimum annual Net Profit plus
Depreciation to Current Portion Long-Term Debt of at least 1.25 times at each
calendar year end.

6.17. ENVIRONMENTAL COMPLIANCE. The Borrower shall:

A. Conduct the Borrower's operations and keep and maintain all of its
properties in compliance with all Environmental Laws.

B. Give prompt written notice to the Bank, but in no event later than
10 days after becoming aware, of the following: (i) any enforcement,
cleanup, removal or other governmental or regulatory actions
instituted, completed or threatened against the Borrower or any of its
affiliates or any of its respective properties pursuant to any
applicable Environmental Laws, (ii) all other Environmental Claims,
and (iii) any environmental or similar condition on any real property
adjoining or in the vicinity of the property of the Borrower or its
affiliates that could reasonably be anticipated to cause such property
or any part thereof to be subject to any restrictions on the
ownership, occupancy, transferability or use of such property under
any Environmental Laws.

C. Upon the written request of the Bank, the Borrower shall submit to
the Bank, at its sole cost and expense, at reasonable intervals, a
report providing an update of the status of any environmental, health
or safety compliance, hazard or liability issue identified in any
notice required pursuant to this Section.

D. At all times indemnify and hold harmless the Bank from and against
any and all liability arising out of any Environmental Claims.

6.18. NOTICE. Give the Bank prompt written notice of any and all (i) Events
of Default; (ii) litigation, arbitration or administrative proceedings to
which the Borrower is a party and in which the claim or liability exceeds
$25,000.00 or which affects the Collateral; (iii) any change in the place of
business of the Borrower or the acquisition of more than one place of
business by the Borrower; (iv) any proposed or actual change in the name,
identity or business nature of the Borrower; and (v) other matters which have
resulted in, or might result in a material adverse change in the Collateral
or the financial condition or business operations of the Borrower.

(5)

<PAGE>

SECTION VII

EVENTS OF DEFAULT

Any one or more of the following described events shall constitute an event
of default under this Agreement:

7.01. NON-PAYMENT. The Borrower shall fail to pay any Obligations within 10
days of when due.

7.02. PERFORMANCE UNDER THIS AND OTHER AGREEMENTS. The Borrower shall fail in
any material respect to perform or observe any term, covenant or agreement
contained in this Agreement or in any document, instrument or agreement
evidencing or relating to any indebtedness of the Borrower (whether owed to
the Bank or third persons), and any such failure (exclusive of the payment of
money to the Bank under this Agreement or under any other document,
instrument or agreement which failure shall constitute and be an immediate
Event of Default if not paid when due or when demanded to be due) shall
continue for more than 30 days after written notice from the Bank to the
Borrower of the existence and character of such Event of Default.

7.03. REPRESENTATION AND WARRANTIES; FINANCIAL STATEMENTS. Any representation
or warranty made by the Borrower under or in connection with this Agreement
or any financial statement given by the Borrower or any Guarantor shall prove
to have been incorrect in any material respect when made or given or when
deemed to have been made or given.

7.04. INSOLVENCY. The Borrower or any Guarantor shall: (i) become insolvent or
be unable to pay its debts as they mature; (ii) make an assignment for the
benefit of creditors or to an agent authorized to liquidate any substantial
amount of its properties or assets; (iii) file a voluntary petition in
bankruptcy or seeking reorganization or to effect a plan or other arrangement
with creditors; (iv) file an answer admitting the material allegations of an
involuntary petition relating to bankruptcy or reorganization or join in any
such petition; (v) become or be adjudicated a bankrupt; (vi) apply for or
consent to the appointment of, or consent that an order be made, appointing
any receiver, custodian or trustee for itself or any of its properties,
assets or businesses; or (vii) any receiver, custodian or trustee shall have
been appointed for all or a substantial part of its properties, assets or
businesses and shall not be discharged within 30 days after the date of such
appointment.

7.05. EXECUTION. Any writ of execution or attachment or any judgment lien
shall be issued against any property of the Borrower and shall not be
discharged or bonded against or released within 30 days after the issuance or
attachment of such writ or lien.

7.06. REVOCATION OR LIMITATION OF GUARANTY. Any Guaranty shall be revoked or
limited or its enforceability or validity shall be contested by any
Guarantor, by operation of law, legal proceeding or otherwise or any
Guarantor who is a natural person shall die.

7.07. SUSPENSION. The Borrower shall voluntarily suspend the transaction of
business or allow to be suspended, terminated, revoked or expired any
permit, license or approval of any governmental body necessary to conduct
the Borrower's business as now conducted.

7.08. CHANGE IN OWNERSHIP. There shall occur a change in any general partner
or a change affecting the control of the Borrower.

7.09. IMPAIRMENT OF COLLATERAL. There shall occur any injury or damage to all
or any part of the Collateral or all or any part of the Collateral shall be
lost, stolen or destroyed, which changes cause the Collateral, in the sole
and absolute judgement of the Bank, to become unacceptable as to character
and value.

SECTION VIII

REMEDIES ON DEFAULT

Upon the occurrence of any Event of Default, the Bank may, at its sole
election, without demand and upon only such notice as may be required by law:

8.01. ACCELERATION. Declare any or all of the Borrower's indebtedness owing
to the Bank, whether under this Agreement or under any other document,
instrument or agreement, immediately due and payable, whether or not
otherwise due and payable.

8.02. CEASE EXTENDING CREDIT. Cease extending credit to or for the account
of the Borrower under this Agreement or under any other agreement now
existing or hereafter entered into between the Borrower and the Bank.

8.03. TERMINATION. Terminate this Agreement as to any future obligation of
the Bank without affecting the Borrower's obligations to the Bank or the
Bank's rights and remedies under this Agreement or under any other document,
instrument or agreement.

8.04. RECORDS OF COLLATERAL. Require the Borrower to periodically deliver to
the Bank records and schedules showing the status, condition and location of
the Collateral and such contracts or other matters which affect the
Collateral. In connection herewith, the Bank may conduct such audits or other
examination of such records as the Bank, in its sole and absolute discretion,
deems necessary.

8.05. PROTECTION OF SECURITY INTEREST. Make such payments and do such acts
as the Bank, in its sole judgment, considers necessary and reasonable to
protect its security interest or lien in the Collateral. The Borrower hereby
irrevocably authorizes the Bank to pay, purchase, contest or compromise any
encumbrance, lien or claim which the Bank, in its sole judgment, deems to be
prior or superior to its security interest. Further, the Borrower hereby
agrees to pay to the Bank, upon demand therefor, all expenses and
expenditures (including attorneys' fees) incurred in connection with the
foregoing.

8.06. FORECLOSURE. Enforce any security interest or lien given or provided
for under this Agreement or under any security agreement, mortgage, deed of
trust or other document relating to the Collateral, in such manner and such
order, as to all or any part of the Collateral, as the Bank, in its sole
judgment, deems to be necessary or appropriate and the Borrower hereby waives
any and all rights, obligations or defenses now or hereafter established by
law relating to the foregoing. In the enforcement of its security interest or
lien, the Bank is authorized to enter upon the premises where any Collateral
is located and take possession of the Collateral or any part thereof,
together with the Borrower's records pertaining thereto, or the Bank may
require the Borrower to assemble the Collateral and records pertaining
thereto and make such Collateral and records available to the Bank at a place
designated by the Bank. The Bank may sell the Collateral or any portions
thereof, together with all additions, accessions and accessories thereto,
giving only such notices and following only such procedures as are required
by law, at either a public or private sale, or both, with or without having
the Collateral present at the time of sale, which sale shall be on such terms
and conditions and conducted in such manner as the Bank determines in its
sole judgment to be commercially reasonable. Any deficiency which exists
after the disposition or liquidation of the Collateral shall be a continuing
liability of any obligor on or any guarantor of the Obligations and shall be
immediately paid to the Bank.

8.07. APPLICATION OF PROCEEDS. All amounts received by the Bank as proceeds
from the disposition or liquidation of the Collateral shall be applied to the
Borrower's indebtedness to the Bank as follows: first, to the costs and
expenses of collection, enforcement, protection and preservation of the
Bank's lien in the Collateral, including court costs and reasonable
attorneys' fees, whether or not suit is commenced by the Bank; next, to those
costs and expenses incurred by the Bank in protecting, preserving, enforcing,
collecting, selling or disposing of the Collateral; next, to the payment of
accrued and unpaid interest on all of the Obligations; next, to the payment
of the outstanding principal balance of the Obligations; and last, to the
payment of any other indebtedness owed by the Borrower to the Bank. Any
excess Collateral or excess proceeds existing after the disposition or
liquidation of the Collateral will be returned or paid by the Bank to the

(6)

<PAGE>

Borrower.

8.08. NON-EXCLUSIVITY OF REMEDIES. Exercise one of more of the Bank's rights
set forth herein or seek such other rights or pursue such other remedies as
may be provided by law, in equity or in any other agreement now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.

SECTION IX

MISCELLANEOUS PROVISIONS

9.01. DEFAULT INTEREST RATE. If an Event of Default has occurred and is
continuing, the Bank, at its option, may require the Borrower to pay to the
Bank interest on any Indebtedness or amount payable under this Agreement at a
rate which is 3% in excess of the rate or rates otherwise then in effect
under this Agreement.

9.02. RELIANCE. Each warranty, representation, covenant and agreement
contained in this Agreement shall be conclusively presumed to have been
relied upon by the Bank regardless of any investigation made or information
possessed by the Bank and shall be cumulative and in addition to any other
warranties, representations, covenants or agreements which the Borrower shall
now of hereafter give, or cause to be given, to the Bank.

9.03. DISPUTE RESOLUTION.

A. DISPUTES. It is understood and agreed that, upon the request of
any party to this Agreement, any dispute, claim or controversy of any
kind, whether in contract or in tort, statuary or common law, legal or
equitable, now existing or hereinafter arising between the parties in
any way arising out of, pertaining to or in connection with: (i) this
Agreement, or any related agreements, documents or instruments, (ii)
all past and present loans, credits, accounts, deposit accounts
(whether demand deposits or time deposits), safe deposit boxes,
safekeeping agreements, guarantees, letters of credit, goods or
services, or other transactions, contracts or agreements of any kind,
(iii) any incidents, omissions, acts, practices, or occurrences
causing injury to any party whereby another party or its agents,
employees or representatives may be liable, in whole or in part, or
(iv) any aspect of the past or present relationships of the parties,
shall be resolved through a two-step dispute resolution process
administered by the Judicial Arbitration & Mediation Services, Inc.
("JAMS") as follows:

B. STEP I - MEDIATION. At the request of any party to the dispute,
claim or controversy, the matter shall be referred to the nearest
office of JAMS for mediation, which is an informal, non-binding
conference or conferences between the parties in which a retired judge
or justice from the JAMS panel will seek to guide the parties to a
resolution of the case.

C. STEP II - ARBITRATION (CONTRACTS NOT SECURED BY REAL PROPERTY).
Should any dispute, claim or controversy remain unresolved at the
conclusion of the Step I Mediation Phase, then (subject to the
restriction at the end of this subparagraph) all such remaining matters
shall be resolved by final and binding arbitration before a different
judicial panelist, unless the parties shall agree to have the mediator
panelist act as arbitrator. The hearing shall be conducted at a
location determined by the arbitrator in Los Angeles, California (or
such other city as may be agreed upon by the parties) and shall be
administered by and in accordance with the then existing Rules of
Practice and Procedure of JAMS and judgement upon any award rendered
by the arbitrator may be entered by any State or Federal Court having
jurisdiction thereof. The arbitrator shall determine which is the
prevailing party and shall include in the award that party's
reasonable attorneys' fees and costs. This subparagraph shall
apply only if, at the time of the submission of the matter to JAMS,
the dispute or issues involved do not arise out of any transaction
which is secured by real property collateral or, if so secured, all
parties consent to such submission.

As soon as practicable after selection of the arbitrator, the
arbitrator, or the arbitrator's designated representative, shall
determine a reasonable estimate of anticipated fees and costs of
the arbitrator, and render a statement to each party setting forth
that party's pro-rata share of said fees and costs. Thereafter, each
party shall, within 10 days of receipt of said statement, deposit said
sum with the arbitrator. Failure of any party to make such a deposit
shall result in a forfeiture by the non-depositing party of the right
to prosecute or defend the claim which is the subject of the
arbitration, but shall not otherwise serve to abate, stay or suspend
the arbitration proceedings.

D. STEP II - TRIAL BY COURT REFERENCE (CONTRACTS SECURED BY REAL
PROPERTY). If the dispute, claim or controversy is not one required
or agreed to be submitted to arbitration, as provided in the above
subparagraph, and has not been resolved by Step I mediation, then any
remaining dispute, claim or controversy shall be submitted for
determination by a trial on Order of Reference conducted by a retired
judge or justice from the panel of JAMS appointed pursuant to the
provisions of Section 638(1) of the California Code of Civil
Procedure, or any amendment, addition or successor section thereto, to
hear the case and report a statement of decision thereon. The parties
intend this general reference agreement to be specifically enforceable
in accordance with said section. If the parties are unable to agree
upon a member of the JAMS panel to act as referee, then one shall be
appointed by the Presiding Judge of the county wherein the hearing is
to be held. The parties shall pay in advance, to the referee, the
estimated reasonable fees and costs of the reference, as may be
specified in advance by the referee. The parties shall initially
share equally, by paying their proportionate amount of the estimated
fees and costs of the reference. Failure of any party to make such a
fee deposit shall result in a forfeiture by the non-depositing party of
the right to prosecute or defend any cause of action which is the
subject of the reference, but shall not otherwise serve to abate, stay
or suspend the reference proceeding.

E. PROVISIONAL REMEDIES, SELF HELP AND FORECLOSURE. No provision of,
or the exercise of any rights under any portion of this Dispute
Resolution provision, shall limit the right of any party to exercise
self help remedies such as set off, foreclosure against any real
property collateral, or the obtaining of provisional or ancillary
remedies, such as injunctive relief or the appointment of a receiver,
from any court having jurisdiction before, during or after the
pendency of any arbitration. At the Bank's option, foreclosure under
a deed of trust or mortgage may be accomplished either by exercise of
power of sale under the deed of trust or mortgage, or by judicial
foreclosure. The institution and maintenance of an action for
provisional remedies, pursuit of provisional or ancillary remedies or
exercise of self help remedies shall not constitute a waiver of the
right of any party to submit the controversy or claim to arbitration.

9.04. WAIVER OF JURY. The Borrower and the Bank hereby expressly and
voluntarily waive any and all rights, whether arising under the California
constitution, any rules of the California Code of Civil Procedure, common law
or otherwise, to demand a trial by jury in any action, matter, claim or cause
of action whatsoever arising out of or in any way related to this Agreement
or any other agreement, document or transaction contemplated hereby.

9.05. RESTRUCTURING EXPENSES. In the event the Bank and the Borrower
negotiate for, or enter into, any restructuring, modification or refinancing
of the Indebtedness under this Agreement for the purposes of remedying an
Event of Default, The Bank, may require the Borrower to reimburse all of the
Bank's costs and expenses incurred in connection therewith, including, but
not limited to reasonable attorneys' fees and the costs of any audit or
appraisals required by the Bank to be performed in connection with such
restructuring, modification or refinancing.

9.06. ATTORNEYS' FEES. In the event of any suit, mediation, arbitration or
other action in relation to this Agreement or any document, instrument or
agreement executed with respect to, evidencing or securing the indebtedness
hereunder, the prevailing party, in addition to all other sums to which it
may be entitled, shall be entitled to reasonable attorneys' fees.

9.07. NOTICES. All notices, payments, requests, information and demands
which either party hereto may desire, or may be required to give or make to
the other party shall be given or made to such party by hand delivery or
through deposit in the United States mail, postage prepaid, or by Western
Union telegram, addressed to the address set forth below such party's
signature to this Agreement or to such other address as may be specified
from time to time in writing by either party to the other.

(7)
<PAGE>

9.08. WAIVER. Neither the failure nor delay by the Bank in exercising any
right hereunder or under any document, instrument or agreement mentioned
herein shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder or under any document, instrument or
agreement mentioned herein preclude other or further exercise thereof or the
exercise of any other right nor shall any waiver of any right or default
hereunder or under any other document, instrument or agreement mentioned
herein constitute a waiver of any other right or default or constitute a
waiver of any other default of the same or any other term or provision.

9.09. CONFLICTING PROVISIONS. To the extent that any of the terms or
provisions contained in this Agreement are inconsistent with those contained
in any other document, instrument or agreement executed pursuant hereto, the
terms and provisions contained herein shall control. Otherwise, such
provisions shall be considered cumulative.

9.10. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the Bank's prior
written consent. The Bank may sell, assign or grant participations in all or
any portion of its rights and benefits hereunder. The Borrower agrees that,
in connection with any such sale, grant or assignment, the Bank may deliver
to the prospective buyer, participant or assignee financial statements and
other relevant information relating to the Borrower and any guarantor.

9.11. JURISDICTION. This Agreement, any notes issued hereunder, the rights
of the parties hereunder to and concerning the Collateral, and any documents,
instruments or agreements mentioned or referred to herein shall be governed
by and construed according to the laws of the State of California, to the
jurisdiction of whose courts the parties hereby submit.

9.12. HEADINGS. The headings set forth herein are solely for the purpose of
identification and have no legal significance.

9.13. ENTIRE AGREEMENT. This Agreement and all documents, instruments and
agreements mentioned herein constitute the entire and complete understanding
of the parties with respect to the transactions contemplated hereunder. All
previous conversations, memoranda and writings between the parties or
pertaining to the transactions contemplated hereunder that are not
incorporated or referenced in this Agreement or in such documents, instruments
and agreements are superseded hereby.

IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first hereinabove written.

BANK: BORROWER:

SANWA BANK CALIFORNIA VINEYARD INVESTORS 1972

By: SCHEID VINEYARDS & MANAGEMENT CO., General
----------------------------- Partner of Vineyard Investors 1972
Name / Title

By: /s/ Alfred G. Scheid
-------------------------------------
Address: Alfred G. Scheid, President of Scheid
Vineyards & Management Co.
Fresno CBC/Agribusiness Office
2035 Fresno Street, 2nd Floor By: /s/ Ernest M. Brown
Fresno, CA 93721 -------------------------------------
Ernest M. Brown, Secretary of
Scheid Vineyards & Management Co.

Address:

13470 Washington Boulevard, Suite 300
Marina Del Ray, CA 90292

(8)

<PAGE>

TERM LOAN AGREEMENT

This Term Loan Agreement ("Agreement") is made and entered into this 24th day of
July, 1995 by and between SANWA BANK CALIFORNIA (the "Bank") and SCHEID
VINEYARDS AND MANAGEMENT CO. (the "Borrower").

SECTION I
DEFINITIONS

1.01. CERTAIN DEFINED TERMS. Unless elsewhere defined in this Agreement the
following terms shall have the following meanings (such meanings to be generally
applicable to the singular and plural forms of the terms defined):

A. "BUSINESS DAY" shall mean a day, other than a Saturday or Sunday, on
which commercial banks are open for business in California.

B. "COLLATERAL" shall mean any personal or real property in which the
Bank may be granted a lien or security interest to secure payment of the
Obligations.

C. "DEBT" shall mean all liabilities of the Borrower less Subordinated
Debt.

D. "EFFECTIVE TANGIBLE NET WORTH" shall mean the Borrower's stated net
worth plus Subordinated Debt but less all intangible assets of the
Borrower (i.e., goodwill, trademarks, patents, copyrights, organization
expense and similar intangible items).

E. "ENVIRONMENTAL CLAIMS" shall mean all claims, however asserted, by
any governmental authority or other person alleging potential liability
or responsibility for violation of any Environmental Law or for release
or injury to the environment or threat to public health, personal injury
(including sickness, disease or death), property damage, natural
resources damage, or otherwise alleging liability or responsibility for
damages (punitive or otherwise), cleanup, removal, remedial or response
costs, restitution, civil or criminal penalties, injunctive relief, or
other type of relief, resulting from or based upon (i) the presence,
placement, discharge, emission or release (including intentional and
unintentional, negligent and non-negligent, sudden or non-sudden,
accidental or non-accidental placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Materials at, in, or from
property owned, operated or controlled by the Borrower, or (ii) any other
circumstances forming the basis of any violation, or alleged violation,
of any Environmental Law.

F. "ENVIRONMENTAL LAWS" shall mean all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
governmental authorities, in each case relating to environmental, health,
safety and land use matters; including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), the Clean
Air Act, the Federal Water Pollution Control Act of 1972, the Solid Waste
Disposal Act, the Federal Resource Conservation and Recovery Act, the
Toxic Substances Control Act, the Emergency Planning and Community
Right-to-Know Act, the California Hazardous Waste Control Law, the
California Solid Waste Management, Resource, Recovery and Recycling Act,
the California Water Code and the California Health and Safety Code.

H. "EVENT OF DEFAULT" shall have the meaning set forth in the section
herein entitled "Events of Default".

I. "HAZARDOUS MATERIALS" shall mean all those substances which are
regulated by, or which may form the basis of liability under any
Environmental Law, including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste, hazardous
constituent, special waste, hazardous substance, hazardous material, or
toxic substance, or petroleum or petroleum derived substance or waste.

J. "INDEBTEDNESS" shall mean, with respect to the Borrower, (i) all
indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which the Borrower is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which the Borrower otherwise assures a creditor against loss
and (ii) obligations under leases which shall have been or should be, in
accordance with generally accepted accounting principles, reported as
capital leases in respect of which the Borrower is liable, contingently
or otherwise, or in respect of which the Borrower otherwise assures a
creditor against loss.

K. "OBLIGATIONS" shall mean all amounts owing by the Borrower to the
Bank pursuant to this Agreement.

L. "PERMITTED LIENS" shall mean: (i) liens and security interests
securing indebtedness owed by the Borrower to the Bank; (ii) liens for
taxes, assessments or similar charges either not yet due or being
contested in good faith, provided proper reserves are maintained therefor
in accordance with generally accepted accounting procedure; (iii) liens
of materialmen, mechanics, warehousemen, or carriers or other like liens
arising in the ordinary course of business and securing obligations which
are not yet delinquent; (iv) purchase money liens or purchase money
security interests upon or in any property acquired or held by the
Borrower in the ordinary course of business to secure Indebtedness
outstanding on the date hereof or permitted to be incurred pursuant to
this Agreement; (v) liens and security interests which, as of the date
hereof, have been disclosed to and approved by the Bank in writing; and
(vi) those liens and security interests which in the aggregate constitute
an immaterial and insignificant monetary amount with respect to the net
value of the Borrower's assets.

M. "REFERENCE RATE" shall mean an index for a variable interest rate
which is quoted, published or announced from time to time by the Bank as
its reference rate and as to which loans may be made by the Bank at,
below or above such reference rate.

N. "SUBORDINATED DEBT" shall mean such liabilities of the Borrower which
have been subordinated to those owed to the Bank in a manner acceptable
to the Bank.

1.02 ACCOUNTING TERMS. All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein shall
mean such financial statements or such items prepared or determined in
accordance with generally accepted accounting principles consistently applied
and, except where otherwise specified, all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.

1.03. OTHER TERMS. Other terms not otherwise defined shall have the meanings
attributed to such terms in the California Uniform Commercial Code.

(1)

<PAGE>

SECTION II
CREDIT FACILITIES

2.01. COMMITMENT TO LEND. Subject to the terms and conditions of this
Agreement and so long as no Event of Default occurs, the Bank agrees to extend
to the Borrower the credit accommodations that follow.

2.02. TERM LOAN. The Bank agrees to lend to the Borrower, upon the Borrower's
request made prior to September 30, 1995, up to the maximum amount of
$1,500,000.00 (the "Term Loan").

A. PURPOSE. The Term Loan shall be used to refinance an existing real
estate loan with the Bank and increase working capital.

B. INTEREST RATE. Interest shall accrue on the outstanding principal
balance under this Term Loan at a variable rate equal to the Bank's
Reference Rate, as it may change from time to time, plus 0.750% per
annum. (Such rate is referred to in this Section 2.02 as the "Variable
Rate".) The Variable Rate shall be adjusted concurrently with any change
in the Reference Rate. Interest shall be calculated on the basis of 360
days per year but charged on the actual number of days elapsed.

C. PAYMENT OF INTEREST. The Borrower hereby promises and agrees to pay
interest quarterly on the 5th day of each quarter, commencing on October
5, 1995. If interest is not paid as it becomes due, without waiving any
Event of Default occasioned by such non-payment, the Bank may, at its
option but without any obligation to do so, add such unpaid interest to
principal and it shall thereafter become and be treated as part of the
principal and shall thereafter bear like interest.

D. REPAYMENT OF PRINCIPAL. Unless sooner due in accordance with the
terms of this Agreement, the Borrower hereby promises and agrees to pay
principal in 9 annual installments of $75,000.00 per installment,
commencing on July 5, 1996 and continuing each July 5th thereafter.

On July 5, 2005 the Borrower hereby promises and agrees to pay to the
Bank in full the aggregate unpaid principal balance then outstanding,
together with all accrued and unpaid interest thereon.

E. FIXED RATE ALTERNATIVE PRICING. The Borrower may from time to time
elect (by notice to the Bank as provided below) that the entire amount of
the outstanding principal balance under the Term Loan (the "Term
Balance") shall accrue interest on the amount of such Term Balance at a
fixed rate for such period of time (the "Interest Period") as the Bank
may quote and offer; provided that any such Interest Period (i) shall be
for at least 30 days and shall not exceed ______________ days and (ii)
shall not extend beyond the maturity date of the Term Loan; and provided
further that the then outstanding Term Balance shall not be less than
$500,000.00. Such fixed rate shall be a percentage to be quoted and
offered by the Bank from time to time upon the request of the Borrower
(the "Fixed Rate"). Any telephonic or oral quote or offer by the Bank of
a Fixed Rate for a given Interest Period may be confirmed in writing by
the Bank upon the election (as provided herein) of the Borrower to accept
such terms and such confirmation shall be deemed conclusive as to the
terms quoted and offered.

Notwithstanding the foregoing, the Term Balance and the Interest Period
for the Term Balance shall not be in an amount or for a period of time
such that, as a result of scheduled payments on the Term Loan, the amount
of the Term Balance would be reduced to an amount less than $100,000.00
at any time prior to the last day of such Interest Period. A Term
Balance on which interest is accruing on the basis of the Fixed Rate is
hereinafter referred to as a "Fixed Rate Balance" and a Term Balance on
which the interest is accruing on the basis of the Variable Rate is
hereinafter referred to as a "Variable Rate Balance".

Interest on any Fixed Rate Balance shall be computed on the basis of 360
days per year but charged on the actual number of days elapsed.

The Borrower hereby promises and agrees to pay the Bank interest on any
Fixed Rate Balance on the basis described above with respect to the
Variable Rate. If interest under the Fixed Rate is not paid as and when
it is due, the amount of such unpaid interest shall bear interest, until
paid in full, at the then applicable interest rate.

(i) NOTICE OF ELECTION TO ADJUST INTEREST RATE.

If the Bank shall not have received notice as prescribed herein of
the Borrower's election that interest on the Term Balance shall
commence to accrue at the Fixed Rate or continue to accrue at a newly
quoted Fixed Rate, then the Borrower shall be deemed to have elected
that interest shall accrue thereon at the Variable Rate.

In the event the Bank determines that accrual of interest on the
basis of the Fixed Rate is infeasible because the Bank is unable to
determine the Fixed Rate due to the unavailability of U.S. dollar
deposits, contracts or certificates of deposit in an amount
approximately equal to the amount of the Term Balance and for a
period of time approximately equal to the relevant Interest Period,
the Bank shall give the Borrower prompt notice thereof and the
Borrower may select another available Interest Period (as quoted and
offered by the Bank), subject to the terms and conditions herein. If
the Borrower does not select another available Interest Period or if
no other Interest Period is available, then the Term Balance shall be
deemed to be a Variable Rate Balance and shall accrue interest on the
basis of the Variable Rate.

(ii) PROHIBITION AGAINST PREPAYMENT OF FIXED RATE BALANCES.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, NO
PREPAYMENT SHALL BE MADE ON ANY FIXED RATE BALANCE EXCEPT ON A DAY
WHICH IS THE LAST DAY OF THE INTEREST PERIOD PERTAINING THERETO. IF
THE WHOLE OR ANY PART OF ANY FIXED RATE BALANCE IS PREPAID BY REASON
OF ACCELERATION OR OTHERWISE, THE BORROWER SHALL, UPON THE BANK'S
REQUEST, PROMPTLY PAY TO AND INDEMNIFY THE BANK FOR ALL COSTS AND ANY
LOSS (INCLUDING INTEREST) ACTUALLY INCURRED BY THE BANK AND ANY LOSS
(INCLUDING LOSS OF PROFIT RESULTING FROM THE RE-EMPLOYMENT OF FUNDS)
SUSTAINED BY THE BANK AS A CONSEQUENCE OF SUCH PREPAYMENT.

(2)

<PAGE>

reserve, deposit or similar requirements or any surcharge, tax or fee
imposed upon the Bank or as a result of the Bank's compliance with
any directive or requirement of any regulatory authority pertaining
or relating to funds used by the Bank in quoting and determining the
Fixed Rate.

(iv) INVOLUNTARY CONVERSION FROM FIXED RATE TO VARIABLE RATE. In
the event that the Bank shall at any time determine that the accrual
of interest on the basis of the Fixed Rate is or has become unlawful
or infeasible by reason of the Bank's compliance with any new law,
rule, regulation, guideline or order, or any new interpretation of
any present law, rule, regulation, guideline or order, then the Bank
shall give telephonic notice thereof (confirmed in writing) to the
Borrower, in which event any Fixed Rate Balance shall be deemed to be
a Variable Rate Balance and interest shall thereupon immediately
accrue at the Variable Rate.

F. LATE FEE. If any regularly scheduled payment of principal and/or
interest (exclusive of the final payment upon maturity), or any portion
thereof, under this Term Loan is not paid within ten (10) calendar days
after it is due, a late payment charge equal to five percent (5%) of such
past due payment may be assessed and shall be immediately payable.

G. FACILITY FEES. The following fees for this facility shall be paid in
cash upon execution of this Agreement or prior to funding of this
facility: Loan Fees in the amount of $11,250.00.

In addition to the above fees, the Borrower hereby promises and agrees to
pay the following fees in connection with this facility: All Bank's out
of pocket expenses.

H. TERM LOAN ACCOUNT. The Bank shall maintain on its books a record of
account in which the Bank shall make entries setting forth all payments
made, the application of such payments to interest and principal, accrued
and unpaid interest (if any) and the outstanding principal balance under
the Term Loan (the "Term Loan Account"). The Bank shall provide the
Borrower with a quarterly statement of the Borrower's Term Loan Account,
which statement shall be considered to be correct and conclusively
binding on the Borrower unless the Bank is notified by the Borrower to
the contrary within thirty (30) days after the Borrower's receipt of any
such statement which is deemed to be incorrect.

SECTION III
CONDITIONS PRECEDENT

3.01. CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT. The obligation
of the Bank to make the initial extension of credit hereunder is subject to the
conditions precedent that the Bank shall have received before the date of such
extension of credit all of the following, in form and substance satisfactory to
the Bank:

A. AUTHORITY TO BORROW. Evidence relating to the duly given approval
and authorization of the execution, delivery and performance of this
Agreement, all other documents, instruments and agreements required under
this Agreement and all other actions to be taken by the Borrower
hereunder or thereunder.

B. GUARANTOR. A continuing guaranty in favor of the Bank, in form and
substance satisfactory to the Bank, executed by Alfred G. Scheid (the
"Guarantor"), together with evidence that the execution, delivery and
performance of the Guaranty by the Guarantor has been duly authorized.

C. LOAN FEES. Evidence that any required loan fees and expenses as set
forth above with respect to each credit facility have been paid or
provided for by the Borrower.

D. AUDIT. The opportunity to conduct an audit of the Borrower's books,
records and operations and the Bank shall be satisfied as to the
condition thereof.

E. MISCELLANEOUS DOCUMENTS. Such other documents, instruments,
agreements and opinions as are necessary, or as the Bank may reasonably
require, to consummate the transactions contemplated under this
Agreement, all fully executed.

3.02. CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The obligation of the
Bank to make any extensions of credit to or on account of the Borrower
(including the initial extension of credit) shall be subject to the further
conditions precedent that, as of the date of each extension of credit and after
the making of such extension of credit:

A. REPRESENTATIONS AND WARRANTIES. The representations and warranties
set forth in the Section entitled "Representations and Warranties" herein
and in any other document, instrument, agreement or certificate delivered
to the Bank hereunder are true and correct.

B. EVENT OF DEFAULT. No event has occurred and is continuing which
constitutes, or, with the lapse of time or giving of notice or both,
would constitute an Event of Default.

C. SUBSEQUENT APPROVALS, ETC. The Bank shall have received such
supplemental approvals, opinions or documents as the Bank may reasonably
request.

3.03. REAFFIRMATION OF STATEMENTS. For the purposes hereof, the Borrower's
acceptance of the proceeds of any extension of credit and the Borrower's
execution of any document or instrument evidencing or creating any Obligation
hereunder shall each be deemed to constitute the Borrower's representation and
warranty that the statements set forth above in this Section are true and
correct.

SECTION IV
REPRESENTATIONS AND WARRANTIES

The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:

4.01. STATUS. The Borrower is a corporation duly organized and validly
existing under the laws of the State of California and is properly licensed,
qualified to do business and in good standing in, and, where necessary to
maintain the Borrower's rights and privileges, has complied with the fictitious
name statute of every jurisdiction in which the Borrower is doing business.

4.02. AUTHORITY. The execution, delivery and performance by the Borrower of
this Agreement and any instrument, document or agreement required hereunder have
been duly authorized and do not and will not: (i) violate any provision of any
law, rule, regulation, writ, judgment or injunction presently in effect
affecting the Borrower; (ii) require any consent or approval of the
stockholders of the Borrower or violate any provision of the articles of
incorporation or by-laws of the Borrower; or (iii) result in a breach of or
constitute a default under any material agreement to which the Borrower is a
party or by which it or its properties may be bound or affected.

(3)

<PAGE>

4.03. LEGAL EFFECT. This Agreement constitutes, and any document, instrument
or agreement required hereunder when delivered will constitute, legal, valid and
binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms.

4.04. FICTITIOUS TRADE STYLES. The Borrower currently uses no fictitious trade
styles in connection with its business operations. The Borrower shall notify
the Bank within thirty (30) days of the use of any fictitious trade style at any
future date, indicating the trade style and state(s) of its use.

4.05. FINANCIAL STATEMENTS. All financial statements, information and other
data which may have been and which may hereafter be submitted by the Borrower to
the Bank are true, accurate and correct and have been and will be prepared in
accordance with generally accepted accounting principles consistently applied
and accurately represent the Borrower's financial condition and, as applicable,
the other information disclosed therein. Since the most recent submission of
any such financial statement, information or other data to the Bank, the
Borrower represents and warrants that no material adverse change in the
Borrower's financial condition or operations has occurred which has not been
fully disclosed to the Bank in writing.

4.06. LITIGATION. Except as have been disclosed to the Bank in writing, there
are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or the Borrower's
properties before any court or administrative agency which, if determined
adversely to the Borrower, would have a material adverse effect on the
Borrower's financial condition or operations.

4.07. TITLE TO ASSETS. The Borrower has good and marketable title to all of
its assets and the same are not subject to any security interest, encumbrance,
lien or claim of any third person except for Permitted Liens.

4.08. ERISA. If the Borrower has a pension, profit sharing or retirement plan
subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to comply
with the requirements of ERISA.

4.09. TAXES. The Borrower has filed all tax returns required to be filed and
paid all taxes shown thereon to be due, including interest and penalties, other
than taxes which are currently payable without penalty or interest or those
which are being duly contested in good faith.

4.10. ENVIRONMENTAL COMPLIANCE. The operations of the Borrower comply, and
during the term of this Agreement will at all times comply, in all respects with
all Environmental Laws; the Borrower has obtained licenses, permits,
authorizations and registrations required under any Environmental Law
("Environmental Permits") and necessary for its ordinary operations, all such
Environmental Permits are in good standing, and the Borrower is in compliance
with all material terms and conditions of such Environmental Permits; neither
the Borrower nor any of its present properties or operations are subject to any
outstanding written order from or agreement with any governmental authority nor
subject to any judicial or docketed administrative proceeding, respecting any
Environmental Law, Environmental Claim or Hazardous Material; there are no
Hazardous Materials or other conditions or circumstances existing, or arising
from operations prior to the date of this Agreement, with respect to any
property of the Borrower that would reasonably be expected to give rise to
Environmental Claims; provided however, that with respect to property leased
from an unrelated third party, the foregoing representation is made to the best
knowledge of the Borrower. In addition, (i) the Borrower does not have or
maintain any underground storage tanks which are not properly registered or
permitted under applicable Environmental Laws or which are leaking or disposing
of Hazardous Materials off-site, and (ii) the Borrower has notified all of its
employees of the existence, if any, of any health hazard arising from the
conditions of their employment and have met all notification requirements under
Title III of CERCLA and all other Environmental Laws.

SECTION V
COVENANTS

5.01. PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS. Maintain and
preserve its existence and all rights and privileges now enjoyed; not liquidate
or dissolve, merge or consolidate with or into, or acquire any other business
organization; and conduct its business in accordance with all applicable laws,
rules and regulations.

5.02. MAINTENANCE OF INSURANCE. Maintain insurance in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower operates and maintain such other insurance and coverages as may be
required by the Bank. All such insurance shall be in form and amount and with
companies satisfactory to the Bank. With respect to insurance covering
properties in which the Bank maintains a security interest or lien, such
insurance shall be in an amount not less than the full replacement value
thereof, at the Bank's request, shall name the Bank as loss payee pursuant to a
loss payable endorsement satisfactory to the Bank and shall not be altered or
canceled except upon ten (10) days' prior written notice to the Bank. Upon the
Bank's request, the Borrower shall furnish the Bank with the original policy or
binder of all such insurance.

5.03. MAINTENANCE OF PROPERTIES. The Borrower shall maintain and preserve all
its properties in good working order and condition in accordance with the
general practice of other businesses of similar character and size, ordinary
wear and tear excepted.

5.04. PAYMENT OF OBLIGATIONS AND TAXES. Make timely payment of all assessments
and taxes and all of its liabilities and obligations including, but not limited
to, trade payables, unless the same are being contested in good faith by
appropriate proceedings with the appropriate court or regulatory agency. For
purposes hereof, the Borrower's issuance of a check, draft or similar instrument
without delivery to the intended payee shall not constitute payment.

5.05. INSPECTION RIGHTS. At any reasonable time and from time to time permit
the Bank or any representative thereof to examine and make copies of the records
and visit the properties of the Borrower and to discuss the business and
operations of the Borrower with any employee or representative thereof. If the
Borrower now or at any time hereafter maintains any records (including, but not
limited to, computer generated records and computer programs for the generation
of such records) in the possession of a third party, the Borrower hereby agrees
to notify such third party to permit the Bank free access to such records at all
reasonable times and to provide the Bank with copies of any records it may
request, all at the Borrower's expense, the amount of which shall be payable
immediately upon demand.

5.06. REPORTING REQUIREMENTS. Deliver or cause to be delivered to the Bank in
form and detail satisfactory to the Bank:

A. ANNUAL STATEMENTS. Not later than 120 days after the end of each of
the Borrower's fiscal years, a copy of the annual financial report of the
Borrower for such year which report is a CPA audited report.

B. ANNUAL BUDGET. Not later than 120 days after the end of each
calendar year, a copy of the Borrower's annual crop budget.

C. OTHER INFORMATION. Promptly upon the Bank's request, such other
information pertaining to the Borrower or any Guarantor as the Bank may
reasonably request.

(4)

<PAGE>

5.07. GENERAL PLEDGE OF PROPERTY IN POSSESSION OF BANK. To secure payment of
all of the Borrower's Obligations under this Agreement and performance of all of
the terms, covenants and agreements contained herein, the Borrower hereby grants
to the Bank a security interest in and to all monies, and property of the
Borrower now or hereafter in the possession of the Bank or the Bank's agents, or
any one of them, including, but not limited to, all deposit accounts,
certificates of deposit, stocks, bonds, indentures, warrants, options and other
negotiable and non-negotiable securities and instruments, together with all
stock rights, rights to subscribe, liquidating dividends, cash dividends,
payments, dividends paid in stock, new securities or other property to which the
Borrower may become entitled to receive on account of such property.

5.08. REDEMPTION OR REPURCHASE OF STOCK. The Borrower shall not redeem or
repurchase any class of its corporate stock now or hereafter outstanding.

5.09. LOANS. Not make any loans or advances or extend credit to any third
person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities or subsidiaries of the Borrower, except
for credit extended in the ordinary course of the Borrower's business as
presently conducted.

5.10. LIENS AND ENCUMBRANCES. Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's properties, or execute or allow to be filed any
financing statement or continuation thereof affecting any such properties,
except for Permitted Liens or as otherwise provided in this Agreement.

5.11. TRANSFER ASSETS. Not sell, contract for sale, transfer, convey, assign,
lease or sublet any assets of the Borrower except in the ordinary course of
business as presently conducted by the Borrower, and then, only for full, fair
and reasonable consideration.

5.12. CHANGE IN THE NATURE OF BUSINESS. Not make any material change in the
Borrower's financial structure or in the nature of the Borrower's business as
existing or conducted as of the date of this Agreement.

5.13. FINANCIAL CONDITION. Maintain at all times:

A. DEBT TO NET WORTH RATIO. A Debt to Effective Tangible Net Worth
ratio of not more than 1.00 to 1.00.

B. CURRENT RATIO. A ratio of current assets to current liabilities of
not less than 2.00 to 1.00.

C. NET WORTH. A minimum Effective Tangible Net Worth of not less than
$5,000,000.00 (cost basis) including subordinated debt.

D. DEBT COVERAGE RATIO. A ratio of net profit after tax plus
depreciation to current portion of long term debt of not less than 1.25
to 1.00, measured at each fiscal year end.

5.14. ENVIRONMENTAL COMPLIANCE. The Borrower shall:

A. Conduct the Borrower's operations and keep and maintain all of its
properties in compliance with all Environmental Laws.

B. Give prompt written notice to the Bank, but in no event later than 10
days after becoming aware, of the following: (i) any enforcement,
cleanup, removal or other governmental or regulatory actions instituted,
completed or threatened against the Borrower or any of its affiliates or
any of its respective properties pursuant to any applicable Environmental
Laws, (ii) all other Environmental Claims, and (iii) any environmental or
similar condition on any real property adjoining or in the vicinity of
the property of the Borrower or its affiliates that could reasonably be
anticipated to cause such property or any part thereof to be subject to
any restrictions on the ownership, occupancy, transferability or use of
such property under any Environmental Laws.

C. Upon the written request of the Bank, the Borrower shall submit to
the Bank, at its sole cost and expense, at reasonable intervals, a report
providing an update of the status of any environmental, health or safety
compliance, hazard or liability issue identified in any notice required
pursuant to this Section.

D. At all times indemnify and hold harmless the Bank from and against
any and all liability arising out of any Environmental Claims.

5.15. NOTICE. Give the Bank prompt written notice of any and all (i) Events
of Default; (ii) litigation, arbitration or administrative proceedings to which
the Borrower is a party and in which the claim or liability exceeds $50,000.00;
and (iii) other matters which have resulted in, or might result in a material
adverse change in the financial condition or business operations of the
Borrower.

SECTION VI
EVENTS OF DEFAULT

Any one or more of the following described events shall constitute an event of
default under this Agreement:

6.01. NON-PAYMENT. The Borrower shall fail to pay any Obligations within 10
days of when due.

6.02. PERFORMANCE UNDER THIS AND OTHER AGREEMENTS. The Borrower shall fail in
any material respect to perform or observe any term, covenant or agreement
contained in this Agreement or in any document, instrument or agreement
evidencing or relating to any indebtedness of the Borrower (whether owed to the
Bank or third persons), and any such failure (exclusive of the payment of money
to the Bank under this Agreement or under any other document, instrument or
agreement, which failure shall constitute and be an immediate Event of Default
if not paid when due or when demanded to be due) shall continue for more than 30
days after written notice from the Bank to the Borrower of the existence and
character of such Event of Default.

6.03. REPRESENTATIONS AND WARRANTIES; FINANCIAL STATEMENTS. Any representation
or warranty made by the Borrower under or in connection with this Agreement or
any financial statement given by the Borrower or any Guarantor shall prove to
have been incorrect in any material respect when made or given or when deemed to
have been made or given.

6.04. INSOLVENCY. The Borrower or any Guarantor shall: (i) become insolvent
or be unable to pay its debts as they mature; (ii) make an assignment for the
benefit of creditors or to an agent authorized to liquidate any substantial
amount of its properties or assets; (iii) file a voluntary petition in
bankruptcy or seeking reorganization or to effect a plan or other arrangement
with creditors; (iv) file an answer admitting the material allegations of an
involuntary petition relating to bankruptcy or reorganization or join in any
such petition; (v) become or be adjudicated a bankrupt; (vi) apply for or
consent to the appointment of, or consent that an order be made, appointing any
receiver, custodian or trustee for itself or any of its properties, assets or
businesses; or (vii) any receiver, custodian or trustee shall have been
appointed for all or a substantial part of its properties, assets or businesses
and shall not be discharged within 30 days after the date of such appointment.

6.05. EXECUTION. Any writ of execution or attachment or any judgment lien
shall be issued against any property of the Borrower and shall not be discharged
or bonded against or released within 30 days after the issuance or attachment of
such writ or lien.

6.06. REVOCATION OR LIMITATION OF GUARANTY. Any Guaranty shall be revoked or
limited or its enforceability or validity shall be contested by any Guarantor,
by operation of law, legal proceeding or otherwise or any Guarantor who is a
natural person shall die.

(5)

<PAGE>

6.07. SUSPENSION. The Borrower shall voluntarily suspend the transaction of
business or allow to be suspended, terminated, revoked or expired any permit,
license or approval of any governmental body necessary to conduct the Borrower's
business as now conducted.

6.08. CHANGE IN OWNERSHIP. There shall occur a sale, transfer, disposition or
encumbrance (whether voluntary or involuntary), or an agreement shall be entered
into to do so, with respect to more than 10% of the issued and outstanding
capital stock of the Borrower.

SECTION VII
REMEDIES ON DEFAULT

Upon the occurrence of any Event of Default, the Bank may, at its sole election,
without demand and upon only such notice as may be required by law:

7.01. ACCELERATION. Declare any or all of the Borrower's indebtedness owing to
the Bank, whether under this Agreement or under any other document, instrument
or agreement, immediately due and payable, whether or not otherwise due and
payable.

7.02. CEASE EXTENDING CREDIT. Cease extending credit to or for the account of
the Borrower under this Agreement or under any other agreement now existing or
hereafter entered into between the Borrower and the Bank.

7.03. TERMINATION. Terminate this Agreement as to any future obligation of the
Bank without affecting the Borrower's obligations to the Bank or the Bank's
rights and remedies under this Agreement or under any other document, instrument
or agreement.

7.04. NON-EXCLUSIVITY OF REMEDIES. Exercise one or more of the Bank's rights
set forth herein or seek such other rights or pursue such other remedies as may
be provided by law, in equity or in any other agreement now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.

SECTION VIII
MISCELLANEOUS PROVISIONS

8.01. DEFAULT INTEREST RATE. If an Event of Default has occurred and is
continuing, the Bank, at its option, may require the Borrower to pay to the Bank
interest on any Indebtedness or amount payable under this Agreement at a rate
which is 3% in excess of the rate or rates otherwise then in effect under this
Agreement.

8.02. RELIANCE. Each warranty, representation, covenant and agreement
contained in this Agreement shall be conclusively presumed to have been relied
upon by the Bank regardless of any investigation made or information possessed
by the Bank and shall be cumulative and in addition to any other warranties,
representations, covenants or agreements which the Borrower shall now or
hereafter give, or cause to be given, to the Bank.

8.03. DISPUTE RESOLUTION.

A. DISPUTES. It is understood and agreed that, upon the request of any
party to this Agreement, any dispute, claim or controversy of any kind,
whether in contract or in tort, statutory or common law, legal or
equitable, now existing or hereinafter arising between the parties in any
way arising out of, pertaining to or in connection with: (i) this
Agreement, or any related agreements, documents or instruments, (ii) all
past and present loans, credits, accounts, deposit accounts (whether
demand deposits or time deposits), safe deposit boxes, safekeeping
agreements, guarantees, letters of credit, goods or services, or other
transactions, contracts or agreements of any kind, (iii) any incidents,
omissions, acts, practices, or occurrences causing injury to any party
whereby another party or its agents, employees or representatives may be
liable, in whole or in part, or (iv) any aspect of the past or present
relationships of the parties, shall be resolved through a two-step
dispute resolution process administered by the Judicial Arbitration &
Mediation Services, Inc. ("JAMS") as follows:

B. STEP I - MEDIATION. At the request of any party to the dispute,
claim or controversy, the matter shall be referred to the nearest office
of JAMS for mediation, which is an informal, non-binding conference or
conferences between the parties in which a retired judge or justice from
the JAMS panel will seek to guide the parties to a resolution of the
case.

C. STEP II - ARBITRATION (CONTRACTS NOT SECURED BY REAL PROPERTY).
Should any dispute, claim or controversy remain unresolved at the
conclusion of the Step I Mediation Phase, then (subject to the
restriction at the end of this subparagraph) all such remaining matters
shall be resolved by final and binding arbitration before a different
judicial panelist, unless the parties shall agree to have the mediator
panelist act as arbitrator. The hearing shall be conducted at a location
determined by the arbitrator in Los Angeles, California (or such other
city as may be agreed upon by the parties) and shall be administered by
and in accordance with the then existing Rules of Practice and Procedure
of JAMS and judgement upon any award rendered by the arbitrator may be
entered by any State or Federal Court having jurisdiction thereof. The
arbitrator shall determine which is the prevailing party and shall
include in the award that party's reasonable attorneys' fees and costs.
This subparagraph shall apply only if, at the time of the submission of
the matter to JAMS, the dispute or issues involved do not arise out of
any transaction which is secured by real property collateral or, if so
secured, all parties consent to such submission.

As soon as practicable after selection of the arbitrator, the arbitrator,
or the arbitrator's designated representative, shall determine a
reasonable estimate of anticipated fees and costs of the arbitrator, and
render a statement to each party setting forth that party's pro-rata
share of said fees and costs. Thereafter, each party shall, within 10
days of receipt of said statement, deposit said sum with the arbitrator.
Failure of any party to make such a deposit shall result in a forfeiture
by the non-depositing party of the right to prosecute or defend the claim
which is the subject of the arbitration, but shall not otherwise serve to
abate, stay or suspend the arbitration proceedings.

D. STEP II - TRIAL BY COURT REFERENCE (CONTRACTS SECURED BY REAL
PROPERTY). If the dispute, claim or controversy is not one required or
agreed to be submitted to arbitration, as provided in the above
subparagraph, and has not been resolved by Step I mediation, then any
remaining dispute, claim or controversy shall be submitted for
determination by a trial on Order of Reference conducted by a retired
judge or justice from the panel of JAMS appointed pursuant to the
provisions of Section 638(1) of the California Code of Civil Procedure,
or any amendment, addition or successor section thereto, to hear the case
and report a statement of decision thereon. The parties intend this
general reference agreement to be specifically enforceable in accordance
with said section. If the parties are unable to agree upon a member of
the JAMS panel to act as referee, then one shall be appointed by the
Presiding Judge of the county wherein the hearing is to be held. The
parties shall pay in advance, to the referee, the estimated reasonable
fees and costs of the reference, as may be specified in advance by the
referee. The parties shall initially share equally, by paying their
proportionate amount of the estimated fees and costs of the reference.
Failure of any party to make such a fee deposit shall result in a
forfeiture by the non-depositing party of the right to prosecute or
defend any cause of action which is the subject of the reference, but
shall not otherwise serve to abate, stay or suspend the reference
proceeding.

(6)

<PAGE>

E. PROVISIONAL REMEDIES, SELF HELP AND FORECLOSURE. No provision of, or
the exercise of any rights under any portion of this Dispute Resolution
provision, shall limit the right of any party to exercise self help
remedies such as set off, foreclosure against any real or personal
property collateral, or the obtaining of provisional or ancillary
remedies, such as injunctive relief or the appointment of a receiver,
from any court having jurisdiction before, during or after the pendency
of any arbitration. At the Bank's option, foreclosure under a deed of
trust or mortgage may be accomplished either by exercise of power of sale
under the deed of trust or mortgage, or by judicial foreclosure. The
institution and maintenance of an action for provisional remedies,
pursuit of provisional or ancillary remedies or exercise of self help
remedies shall not constitute a waiver of the right of any party to
submit the controversy or claim to arbitration.

8.04. WAIVER OF JURY. The Borrower and the Bank hereby expressly and
voluntarily waive any and all rights, whether arising under the California
constitution, any rules of the California Code of Civil Procedure, common law or
otherwise, to demand a trial by jury in any action, matter, claim or cause of
action whatsoever arising out of or in any way related to this Agreement or any
other agreement, document or transaction contemplated hereby.

8.05. RESTRUCTURING EXPENSES. In the event the Bank and the Borrower negotiate
for, or enter into, any restructuring, modification or refinancing of the
Indebtedness under this Agreement for the purposes of remedying an Event of
Default, The Bank, may require the Borrower to reimburse all of the Bank's costs
and expenses incurred in connection therewith, including, but not limited to
reasonable attorneys' fees and the costs of any audit or appraisals required by
the Bank to be performed in connection with such restructuring, modification or
refinancing.

8.06. ATTORNEYS' FEES. In the event of any suit, mediation, arbitration or
other action in relation to this Agreement or any document, instrument or
agreement executed with respect to, evidencing or securing the indebtedness
hereunder, the prevailing party, in addition to all other sums to which it may
be entitled, shall be entitled to reasonable attorneys' fees.

8.07. NOTICES. All notices, payments, requests, information and demands which
either party hereto may desire, or may be required to give or make to the other
party shall be given or made to such party by hand delivery or through deposit
in the United States mail, postage prepaid, or by Western Union telegram,
addressed to the address set forth below such party's signature to this
Agreement or to such other address as may be specified from time to time in
writing by either party to the other.

8.08. WAIVER. Neither the failure nor delay by the Bank in exercising any
right hereunder or under any document, instrument or agreement mentioned herein
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right hereunder or under any document, instrument or agreement mentioned
herein preclude other or further exercise thereof or the exercise of any other
right; nor shall any waiver of any right or default hereunder or under any other
document, instrument or agreement mentioned herein constitute a waiver of any
other right or default or constitute a waiver of any other default of the same
or any other term or provision.

8.09. CONFLICTING PROVISIONS. To the extent that any of the terms or
provisions contained in this Agreement are inconsistent with those contained in
any other document, instrument or agreement executed pursuant hereto, the terms
and provisions contained herein shall control. Otherwise, such provisions shall
be considered cumulative.

8.10. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the Bank's prior
written consent. The Bank may sell, assign or grant participations in all or
any portion of its rights and benefits hereunder. The Borrower agrees that, in
connection with any such sale, grant or assignment, the Bank may deliver to the
prospective buyer, participant or assignee financial statements and other
relevant information relating to the Borrower and any guarantor.

8.11. JURISDICTION. This Agreement, any notes issued hereunder, and any
documents, instruments or agreements mentioned or referred to herein shall be
governed by and construed according to the laws of the State of California, to
the jurisdiction of whose courts the parties hereby submit.

8.12. HEADINGS. The headings set forth herein are solely for the purpose of
identification and have no legal significance.

8.13. ENTIRE AGREEMENT. This Agreement and all documents, instruments and
agreements mentioned herein constitute the entire and complete understanding of
the parties with respect to the transactions contemplated hereunder. All
previous conversations, memoranda and writings between the parties or pertaining
to the transactions contemplated hereunder that are not incorporated or
referenced in this Agreement or in such documents, instruments and agreements
are superseded hereby.

IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of
the date first hereinabove written.

BANK: BORROWER:

SANWA BANK CALIFORNIA SCHEID VINEYARDS AND MANAGEMENT CO.

BY: /s/ Steven R. Edmonston BY: /s/ Alfred G. Scheid
------------------------------------ ------------------------------
STEVEN R. EDMONSTON, AUTHORIZED OFFICER ALFRED G. SCHEID, PRESIDENT

BY: /s/ Ernest M. Brown
ADDRESS: ------------------------------
Fresno CBC/Agribusiness Office ERNEST M. BROWN, SECRETARY
2035 Fresno Street
Fresno, CA 93721

ADDRESS:

13470 Washington Boulevard,
Suite 300
Marina Del Rey, CA 90292

(7)

<PAGE>

LINE OF CREDIT AGREEMENT

This Line of Credit Agreement ("Agreement") is made and entered into this 24th
day of July, 1995 by and between SANWA BANK CALIFORNIA (the "Bank") and SCHEID
VINEYARDS AND MANAGEMENT CO. (the "Borrower").

SECTION I

DEFINITIONS

A. "ADVANCE" shall mean an advance to the Borrower under any line of credit
facility or similar facility provided for in Section II of this Agreement which
provides for draws by the Borrower against an established credit line.

B. "BUSINESS DAY" shall mean a day, other than a Saturday or Sunday, on which
commercial banks are open for business in California.

C. "COLLATERAL" shall mean any personal or real property in which the Bank may
be granted a lien or security interest to secure payment of the Obligations.

D. "DEBT" shall mean all liabilities of the Borrower less Subordinated Debt.

E. "EFFECTIVE TANGIBLE NET WORTH" shall mean the Borrower's stated net worth
plus Subordinated Debt but less all intangible assets of the Borrower (i.e.,
goodwill, trademarks, patents, copyrights, organization expense and similar
intangible items).

F. "ENVIRONMENTAL CLAIMS" shall mean all claims, however asserted, by any
governmental authority or other person alleging potential liability or
responsibility for violation of any Environmental Law or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon (i) the presence, placement, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent, sudden or
non-sudden, accidental or non-accidental placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Materials at, in, or from property
owned, operated or controlled by the Borrower, or (ii) any other circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law.

G. "ENVIRONMENTAL LAWS" shall mean all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authorities, in each case
relating to environmental, health, safety and land use matters; including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Clean Air Act, the Federal Water Pollution Control Act of 1972,
the Solid Waste Disposal Act, the Federal Resource Conservation and Recovery
Act, the Toxic Substances Control Act, the Emergency Planning and Community
Right-to-Know Act, the California Hazardous Waste Control Law, the California
Solid Waste Management, Resource, Recovery and Recycling Act, the California
Water Code and the California Health and Safety Code.

H. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, including (unless the context otherwise requires) any
rules or regulations promulgated thereunder.

I. "EVENT OF DEFAULT" shall have the meaning set forth in the section herein
entitled "Events of Default".

J. "HAZARDOUS MATERIALS" shall mean all those substances which are regulated
by, or which may form the basis of liability under any Environmental Law,
including all substances identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special waste, hazardous
substance, hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.

K. "INDEBTEDNESS" shall mean, with respect to the Borrower, (i) all
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which the Borrower is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which the
Borrower otherwise assures a creditor against loss and (ii) obligations under
leases which shall have been or should be, in accordance with generally accepted
accounting principles, reported as capital leases in respect of which the
Borrower is liable, contingently or otherwise, or in respect of which the
Borrower otherwise assures a creditor against loss.

L. "OBLIGATIONS" shall mean all amounts owing by the Borrower to the Bank
pursuant to this Agreement including, but not limited to, the unpaid principal
amount of Advances.

M. "PERMITTED LIENS" shall mean: (i) liens and security interests securing
indebtedness owed by the Borrower to the Bank; (ii) liens for taxes,
assessments or similar charges either not yet due or being contested in good
faith, provided proper reserves are maintained therefor in accordance with
generally accepted accounting procedure; (iii) liens of materialmen, mechanics,
warehousemen, or carriers or other like liens arising in the ordinary course of
business and securing obligations which are not yet delinquent; (iv) purchase
money liens or purchase money security interests upon or in any property
acquired or held by the Borrower in the ordinary course of business to secure
Indebtedness outstanding on the date hereof or permitted to be incurred pursuant
to this Agreement; (v) liens and security interests which, as of the date
hereof, have been disclosed to and approved by the Bank in writing; and (vi)
those liens and security interests which in the aggregate constitute an
immaterial and insignificant monetary amount with respect to the net value of
the Borrower's assets.

N. "REFERENCE RATE" shall mean an index for a variable interest rate which is
quoted, published or announced from time to time by the Bank as its reference
rate and as to which loans may be made by the Bank at, below or above such
reference rate.

(1)

<PAGE>

O. "SUBORDINATED DEBT" shall mean such liabilities of the Borrower which have
been subordinated to those owed to the Bank in a manner acceptable to the Bank.

1.02. ACCOUNTING TERMS. All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein shall
mean such financial statements or such items prepared or determined in
accordance with generally accepted accounting principles consistently applied
and, except where otherwise specified, all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.

1.03. OTHER TERMS. Other terms not otherwise defined shall have the meanings
attributed to such terms in the California Uniform Commercial Code.

SECTION II

CREDIT FACILITIES

2.02. LINE OF CREDIT FACILITY. The Bank agrees to make loans and Advances to
the Borrower, upon the Borrower's request therefor made prior to the Expiration
Date (as defined below in this Section 2.02), up to a total principal amount
from time to time outstanding of not more than $3,000,000.00. This Line of
Credit facility is on a non-revolving basis and any amounts repaid under this
facility may not be reborrowed.

A. PURPOSE. Advances made under this Line of Credit shall be used to
refinance an existing real estate loan with the Bank and increase working
capital.

B. INTEREST RATE. Interest shall accrue on the outstanding principal
balance of Advances under this Line of Credit at a variable rate equal to
the Bank's Reference Rate, as it may change from time to time, plus 0.750%
per annum. (Such rate is referred to in this Section 2.02 as the "Variable
Rate".) The Variable Rate shall be adjusted concurrently with any change
in the Reference Rate. Interest shall be calculated on the basis of 360
days per year but charged on the actual number of days elapsed.

C. PAYMENT OF INTEREST. The Borrower hereby promises and agrees to pay
interest quarterly on the 5th day of each quarter, commencing on October 5,
1995.

D. REPAYMENT OF PRINCIPAL. Unless sooner due in accordance with the terms
of this Agreement, the Borrower hereby promises and agrees to pay principal
in 9 annual installments of $100,000.00 per installment, commencing on July
5, 1996 and continuing each July 5th thereafter.

On July 5, 2005 the Borrower hereby promises and agrees to pay to the Bank
in full the aggregate unpaid principal balance of all Advances then
outstanding, together with all accrued and unpaid interest thereon.

Any payment received by the Bank shall, at the Bank's option, first be
applied to pay any late fees or other fees then due and unpaid, and then to
interest then due and unpaid and the remainder thereof (if any) shall be
applied to reduce principal.

E. FIXED RATE ALTERNATIVE PRICING. In addition to Advances based upon the
Variable Rate ("Variable Rate Advances"), at the Borrower's election, the
Bank hereby agrees to make Advances to the Borrower under this Line of
Credit at a fixed rate ("Fixed Rate") to be quoted and offered by the Bank
from time to time upon the request of the Borrower. The Bank shall only
quote and offer such Fixed Rate for Advances in the minimum amount of
$______________ and for such period of time (each an "Interest Period") as
the Bank may quote and offer, provided that the Interest Period shall not
extend beyond the Expiration Date (as defined below) of this facility.
Advances based upon the Fixed Rate are hereinafter referred to as "Fixed
Rate Advances".

Interest on any Fixed Rate Advance shall be computed on the basis of 360
days per year but charged on the actual number of days elapsed.

The Borrower hereby promises and agrees to pay the Bank interest on any
Fixed Rate Advance with an Interest Period of 90 days or less on the last
day of the relevant Interest Period. The Borrower further promises and
agrees to pay the Bank interest on any Fixed Rate Advance with an Interest
Period in excess of 90 days on a quarterly basis (i.e., on the last day of
each 90-day period occurring in such Interest Period) and on the last day
of the relevant Interest Period. If interest is not paid as and when it is
due, the amount of such unpaid interest shall bear interest, until paid in
full, at a rate of interest equal to the Variable Rate.

(i) REPAYMENT OF FIXED RATE ADVANCES. Unless sooner due in
accordance with other terms of this Agreement, or unless adjusted at
the end of the relevant Interest Period as described below, the
Borrower hereby promises and agrees to pay the Bank the principal
amount of each Fixed Rate Advance, together with accrued and unpaid
interest thereon, on the last day of the Interest Period pertaining to
such Fixed Rate Advance.

(ii) NOTICE OF ELECTION TO ADJUST INTEREST RATE. Upon telephonic
notice which shall be received by the Bank at or before 2:00 p.m.
(California time) on a Business Day, the Borrower may elect:

(a) That interest on a Variable Rate Advance shall be adjusted
to accrue at a quoted and offered Fixed Rate; provided, however,
that such notice shall be received by the Bank no later than two
business days prior to the day (which shall be a business day) on
which the Borrower requests that interest be adjusted to accrue
at the Fixed Rate.

(b) That interest on a Fixed Rate Advance shall continue to
accrue at a newly quoted Fixed Rate or shall be adjusted to
commence to accrue at the Variable Rate; provided however, that
such notice shall be received by the Bank no later than two
business days prior to the last day of the Interest Period
pertaining to such Fixed Rate Advance. If the Bank shall not
have received notice as prescribed herein of the Borrower's
election that interest on any Fixed Rate Advance shall continue
to accrue at the Fixed Rate, the Borrower shall be deemed to have
elected that interest thereon shall be adjusted to accrue at the
Variable Rate upon the expiration of the Interest Period
pertaining to such Advance.

(iii) PROHIBITION AGAINST PREPAYMENT OF FIXED RATE ADVANCES.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE AGREEMENT, NO
PREPAYMENT SHALL BE MADE ON ANY FIXED RATE ADVANCE EXCEPT ON A DAY
WHICH IS THE LAST DAY OF THE INTEREST PERIOD PERTAINING THERETO. IF
THE WHOLE OR ANY PART OF ANY FIXED RATE ADVANCE IS PREPAID BY REASON
OF ACCELERATION OR OTHERWISE, THE BORROWER SHALL, UPON THE BANK'S
REQUEST, PROMPTLY PAY TO AND INDEMNIFY THE BANK FOR ALL COSTS AND ANY
LOSS (INCLUDING INTEREST) ACTUALLY INCURRED BY THE BANK AND ANY

(2)

<PAGE>

LOSS (INCLUDING LOSS OF PROFIT RESULTING FROM THE RE-EMPLOYMENT OF
FUNDS) SUSTAINED BY THE BANK AS A CONSEQUENCE OF SUCH PREPAYMENT.

(iv) INDEMNIFICATION FOR FIXED RATE COSTS. During any period of time
in which interest on any Advance is accruing on the basis of a Fixed
Rate, the Borrower shall, upon the Bank's request, promptly pay to and
reimburse the Bank for all costs incurred and payments made by the
Bank by reason of any future assessment, reserve, deposit or similar
requirements or any surcharge, tax or fee imposed upon the Bank or as
a result of the Bank's compliance with any directive or requirement of
any regulatory authority pertaining or relating to funds used by the
Bank in quoting and determining the Fixed Rate.

(v) INVOLUNTARY CONVERSION FROM FIXED RATE TO VARIABLE RATE. In the
event that the Bank shall at any time determine that the accrual of
interest on the basis of the Fixed Rate (a) is infeasible because the
Bank is unable to determine the Fixed Rate due to the unavailability
of U.S. dollar deposits, contracts or certificates of deposit in an
amount approximately equal to the amount of the relevant Advance and
for a period of time approximately equal to the relevant Interest
Period; or (b) is or has become unlawful or infeasible by reason of
the Bank's compliance with any new law, rule, regulation, guideline or
order, or any new interpretation of any present law, rule, regulation,
guideline or order, then the Bank shall give telephonic notice thereof
(confirmed in writing) to the Borrower, in which event any Fixed Rate
Advance shall be deemed to be a Variable Rate Advance and interest
shall thereupon immediately accrue at the Variable Rate.

F. LATE FEE. If any regularly scheduled payment of principal and/or
interest (exclusive of the final payment upon maturity), or any portion
thereof, under this Line of Credit is not paid within ten (10) calendar
days after it is due, a late payment charge equal to five percent (5%) of
such past due payment may be assessed and shall be immediately payable.

G. MAKING LINE ADVANCES/NOTICE OF BORROWING. Each Advance made hereunder
shall be conclusively deemed to have been made at the request of and for
the benefit of the Borrower (i) when credited to any deposit account of the
Borrower maintained with the Bank or (ii) when paid in accordance with the
Borrower's written instructions. Subject to any other requirements set
forth in this Agreement, Advances shall be made by the Bank upon telephonic
or written notice received from the Borrower in form acceptable to the
Bank, which notice shall be received by the Bank at or before 2:00 p.m.
(California time) on a Business Day. The Borrower may borrow under the
Line of Credit by requesting either:

(i) A VARIABLE RATE ADVANCE. A Variable Rate Advance may be
made on the Business Day notice is received by the Bank; provided
however, that if the Bank shall not have received notice at or
before 2:00 p.m. (California time) on the day such Advance is
requested to be made, such Variable Rate Advance may be made, at
the Bank's option, on the next Business Day.

(ii) A FIXED RATE ADVANCE. The Borrower may elect that an
Advance be made as a Fixed Rate Advance by requesting the Bank to
provide a quote as to the rate which would apply for a designated
Interest Period and concurrently with receiving such quote,
giving the Bank irrevocable notice of the Borrower's acceptance
of the rate quoted, provided such notice shall be given to the
Bank not later than 10:00 a.m. (California time) on a date (which
shall be a Business Day) at least two days prior to the first day
of the requested Interest Period. Any telephonic or oral quote
or offer by the Bank of a Fixed Rate for a given Interest Period
may be confirmed in writing by the Bank upon the election (as
provided herein) of the Borrower to accept such terms and such
confirmation shall be deemed conclusive as to the terms quoted
and offered.

H. FACILITY FEES. The following fees for this facility shall be paid in
cash upon execution of this Agreement or prior to funding of this facility:
Loan Fees in the amount of $15,000.00.

In addition to the above fees, the Borrower hereby promises and agrees to
pay the following fees in connection with this facility: All Bank's out of
pocket expenses.

I. EXPIRATION OF THE LINE OF CREDIT FACILITY. Unless earlier terminated
in accordance with the terms of this Agreement, the Bank's commitment to
make Advances to the Borrower hereunder shall automatically expire on
September 30, 1995 (the "Expiration Date"), and the Bank shall be under no
further obligation to advance any monies thereafter.

J. LINE ACCOUNT. The Bank shall maintain on its books a record of account
in which the Bank shall make entries for each Advance and such other debits
and credits as shall be appropriate in connection with the Line of Credit
facility (the "Line Account"). The Bank shall provide the Borrower with a
quarterly statement of the Borrower's Line Account, which statement shall
be considered to be correct and conclusively binding on the Borrower unless
the Bank is notified by the Borrower to the contrary within thirty (30)
days after the Borrower's receipt of any such statement which is deemed to
be incorrect.

K. AMOUNTS PAYABLE ON DEMAND. If the Borrower fails to pay on demand any
amount so payable under this Agreement, the Bank may, at its option and
without any obligation to do so and without waiving any default occasioned
by the Borrower's failure to pay such amount, create an Advance in an
amount equal to the amount so payable, which Advance shall thereafter bear
interest as provided under this Line of Credit facility.

In addition, the Borrower hereby authorizes the Bank, if and to the extent
payment owed to the Bank under this Line of Credit facility is not made
when due, to charge, from time to time, against any or all of the deposit
accounts maintained by the Borrower with the Bank any amount so due.

SECTION III

CONDITIONS PRECEDENT

3.01. CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT AND/OR FIRST
ADVANCE. The obligation of the Bank to make the initial extension of credit
and/or the first Advance hereunder is subject to the conditions precedent that
the Bank shall have received before the date of such extension of credit and/or
the first Advance all of the following, in form and substance satisfactory to
the Bank:

A. AUTHORITY TO BORROW. Evidence relating to the duly given approval and
authorization of the execution, delivery and performance of this Agreement,
all other documents, instruments and agreements required under this
Agreement and all other actions to be taken by the Borrower hereunder or
thereunder.

(3)

<PAGE>

C. LOAN FEES. Evidence that any required loan fees and expenses as set
forth above with respect to each credit facility have been paid or provided
for by the Borrower.

D. AUDIT. The opportunity to conduct an audit of the Borrower's books,
records and operations and the Bank shall be satisfied as to the condition
thereof.

E. MISCELLANEOUS DOCUMENTS. Such other documents, instruments, agreements
and opinions as are necessary, or as the Bank may reasonably require, to
consummate the transactions contemplated under this Agreement, all fully
executed.

3.02. CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT AND/OR ADVANCES. The
obligation of the Bank to make any extensions of credit and/or each Advance to
or on account of the Borrower (including the initial extension of credit and/or
the first Advance) shall be subject to the further conditions precedent that, as
of the date of each extension of credit or Advance and after the making of such
extension of credit or Advance:

B. EVENT OF DEFAULT. No event has occurred and is continuing which
constitutes, or, with the lapse of time or giving of notice or both, would
constitute an Event of Default.

C. SUBSEQUENT APPROVALS, ETC. The Bank shall have received such
supplemental approvals, opinions or documents as the Bank may reasonably
request.

SECTION IV

REPRESENTATIONS AND WARRANTIES

The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:

(4)

<PAGE>

Hazardous Materials off-site, and (ii) the Borrower has notified all of its
employees of the existence, if any, of any health hazard arising from the
conditions of their employment and have met all notification requirements under
Title III of CERCLA and all other Environmental Laws.

SECTION V

COVENANTS

5.06. REPORTING REQUIREMENTS. Deliver or cause to be delivered to the Bank in
form and detail satisfactory to the Bank:

B. ANNUAL BUDGET. Not later than 120 days after the end of each calendar
year, a copy of the Borrower's annual crop budget.

C. OTHER INFORMATION. Promptly upon the Bank's request, such other
information pertaining to the Borrower or any Guarantor as the Bank may
reasonably request.

5.08. REDEMPTION OR REPURCHASE OF STOCK. The Borrower shall not redeem or
repurchase any class of its corporate stock now or hereafter outstanding.

5.09. ADDITIONAL INDEBTEDNESS. Not, after the date hereof, create, incur or
assume, directly or indirectly, any liability or indebtedness other than (i)
indebtedness owed or to be owed to the Bank or (ii) indebtedness to trade
creditors incurred in the ordinary course of the Borrower's business.

5.10. LOANS. Not make any loans or advances or extend credit to any third
person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities or subsidiaries of the Borrower, except
for credit extended in the ordinary course of the Borrower's business as
presently conducted.

5.11. LIENS AND ENCUMBRANCES. Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's properties, or execute or allow to be filed any
financing statement or continuation thereof affecting any such properties,
except for Permitted Liens or as otherwise provided in this Agreement.

5.12. TRANSFER ASSETS. Not sell, contract for sale, transfer, convey, assign,
lease or sublet any assets of the Borrower except in the ordinary course of
business as presently conducted by the Borrower, and then, only for full, fair
and reasonable consideration.

5.13. CHANGE IN THE NATURE OF BUSINESS. Not make any material change in the
Borrower's financial structure or in the nature of the Borrower's business as
existing or conducted as of the date of this Agreement.

5.14. FINANCIAL CONDITION. Maintain at all times:

A. CURRENT RATIO. A ratio of current assets to current liabilities of not
less than 2.00 to 1.00.

B. NET WORTH. A minimum Effective Tangible Net Worth of not less than
$5,000,000.00 (cost basis) including subordinated debt.

C. DEBT COVERAGE RATIO. A ratio of net profit after taxes plus
depreciation to current portion of long term debt of not less than 1.25 to
1.00, measured at each fiscal year end.

(5)

<PAGE>

5.15. ENVIRONMENTAL COMPLIANCE. The Borrower shall:

A. Conduct the Borrower's operations and keep and maintain all of its
properties in compliance with all Environmental Laws.

B. Give prompt written notice to the Bank, but in no event later than 10
days after becoming aware, of the following: (i) any enforcement, cleanup,
removal or other governmental or regulatory actions instituted, completed
or threatened against the Borrower or any of its affiliates or any of its
respective properties pursuant to any applicable Environmental Laws, (ii)
all other Environmental Claims, and (iii) any environmental or similar
condition on any real property adjoining or in the vicinity of the property
of the Borrower or its affiliates that could reasonably be anticipated to
cause such property or any part thereof to be subject to any restrictions
on the ownership, occupancy, transferability or use of such property under
any Environmental Laws.

C. Upon the written request of the Bank, the Borrower shall submit to the
Bank, at its sole cost and expense, at reasonable intervals, a report
providing an update of the status of any environmental, health or safety
compliance, hazard or liability issue identified in any notice required
pursuant to this Section.

D. At all times indemnify and hold harmless the Bank from and against any
and all liability arising out of any Environmental Claims.

5.16. NOTICE. Give the Bank prompt written notice of any and all (i) Events
of Default; (ii) litigation, arbitration or administrative proceedings to which
the Borrower is a party and in which the claim or liability exceeds $50,000.00;
and (iii) other matters which have resulted in, or might result in a material
adverse change in the financial condition or business operations of the
Borrower.

SECTION VI

EVENTS OF DEFAULT

Any one or more of the following described events shall constitute an event of
default under this Agreement:

6.01. NON-PAYMENT. The Borrower shall fail to pay any Obligations within 10
days of when due.

SECTION VII

REMEDIES ON DEFAULT

Upon the occurrence of any Event of Default, the Bank may, at its sole election,
without demand and upon only such notice as may be required by law:

7.02. CEASE EXTENDING CREDIT. Cease making Advances or otherwise extending
credit to or for the account of the Borrower under this Agreement or under any
other agreement now existing or hereafter entered into between the Borrower and
the Bank.

(6)

<PAGE>

SECTION VIII

MISCELLANEOUS PROVISIONS

8.03. DISPUTE RESOLUTION.

A. DISPUTES. It is understood and agreed that, upon the request of any
party to this Agreement, any dispute, claim or controversy of any kind,
whether in contract or in tort, statutory or common law, legal or
equitable, now existing or hereinafter arising between the parties in any
way arising out of, pertaining to or in connection with: (i) this
Agreement, or any related agreements, documents or instruments, (ii) all
past and present loans, credits, accounts, deposit accounts (whether demand
deposits or time deposits), safe deposit boxes, safekeeping agreements,
guarantees, letters of credit, goods or services, or other transactions,
contracts or agreements of any kind, (iii) any incidents, omissions, acts,
practices, or occurrences causing injury to any party whereby another party
or its agents, employees or representatives may be liable, in whole or in
part, or (iv) any aspect of the past or present relationships of the
parties, shall be resolved through a two-step dispute resolution process
administered by the Judicial Arbitration & Mediation Services, Inc.
("JAMS") as follows:

B. STEP I - MEDIATION. At the request of any party to the dispute, claim
or controversy, the matter shall be referred to the nearest office of JAMS
for mediation, which is an informal, non-binding conference or conferences
between the parties in which a retired judge or justice from the JAMS panel
will seek to guide the parties to a resolution of the case.

C. STEP II - ARBITRATION (CONTRACTS NOT SECURED BY REAL PROPERTY). Should
any dispute, claim or controversy remain unresolved at the conclusion of
the Step I Mediation Phase, then (subject to the restriction at the end of
this subparagraph) all such remaining matters shall be resolved by final
and binding arbitration before a different judicial panelist, unless the
parties shall agree to have the mediator panelist act as arbitrator. The
hearing shall be conducted at a location determined by the arbitrator in
Los Angeles, California (or such other city as may be agreed upon by the
parties) and shall be administered by and in accordance with the then
existing Rules of Practice and Procedure of JAMS and judgement upon any
award rendered by the arbitrator may be entered by any State or Federal
Court having jurisdiction thereof. The arbitrator shall determine which is
the prevailing party and shall include in the award that party's reasonable
attorneys' fees and costs. This subparagraph shall apply only if, at the
time of the submission of the matter to JAMS, the dispute or issues
involved do not arise out of any transaction which is secured by real
property collateral or, if so secured, all parties consent to such
submission.

As soon as practicable after selection of the arbitrator, the arbitrator,
or the arbitrator's designated representative, shall determine a reasonable
estimate of anticipated fees and costs of the arbitrator, and render a
statement to each party setting forth that party's pro-rata share of said
fees and costs. Thereafter, each party shall, within 10 days of receipt of
said statement, deposit said sum with the arbitrator. Failure of any party
to make such a deposit shall result in a forfeiture by the non-depositing
party of the right to prosecute or defend the claim which is the subject of
the arbitration, but shall not otherwise serve to abate, stay or suspend
the arbitration proceedings.

D. STEP II - TRIAL BY COURT REFERENCE (CONTRACTS SECURED BY REAL
PROPERTY). If the dispute, claim or controversy is not one required or
agreed to be submitted to arbitration, as provided in the above
subparagraph, and has not been resolved by Step I mediation, then any
remaining dispute, claim or controversy shall be submitted for
determination by a trial on Order of Reference conducted by a retired judge
or justice from the panel of JAMS appointed pursuant to the provisions of
Section 638(1) of the California Code of Civil Procedure, or any amendment,
addition or successor section thereto, to hear the case and report a
statement of decision thereon. The parties intend this general reference
agreement to be specifically enforceable in accordance with said section.
If the parties are unable to agree upon a member of the JAMS panel to act
as referee, then one shall be appointed by the Presiding Judge of the
county wherein the hearing is to be held. The parties shall pay in
advance, to the referee, the estimated reasonable fees and costs of the
reference, as may be specified in advance by the referee. The parties
shall initially share equally, by paying their proportionate amount of the
estimated fees and costs of the reference. Failure of any party to make
such a fee deposit shall result in a forfeiture by the non-depositing party
of the right to prosecute or defend any cause of action which is the
subject of the reference, but shall not otherwise serve to abate, stay or
suspend the reference proceeding.

E. PROVISIONAL REMEDIES, SELF HELP AND FORECLOSURE. No provision of, or
the exercise of any rights under any portion of this Dispute Resolution
provision, shall limit the right of any party to exercise self help
remedies such as set off, foreclosure against any real or personal property
collateral, or the obtaining of provisional or ancillary remedies, such as
injunctive relief or the appointment of a receiver, from any court having
jurisdiction before, during or after the pendency of any arbitration. At
the Bank's option, foreclosure under a deed of trust or mortgage may be
accomplished either by exercise of power of sale under the deed of trust or
mortgage, or by judicial foreclosure. The institution and maintenance of
an action for provisional remedies, pursuit of provisional or ancillary
remedies or exercise of self help remedies shall not constitute a waiver of
the right of any party to submit the controversy or claim to arbitration.

(7)

<PAGE>

8.12. HEADINGS. The headings set forth herein are solely for the purpose of
identification and have no legal significance.

IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of
the date first hereinabove written.

BANK: BORROWER:

SANWA BANK CALIFORNIA SCHEID VINEYARDS AND MANAGEMENT CO.

BY: /s/ Steven R. Edmonston BY: /s/ Alfred G. Scheid
------------------------------- ------------------------------
STEVEN R. EDMONSTON, AUTHORIZED OFFICER ALFRED G. SCHEID, PRESIDENT

BY: /s/ Ernest M. Brown
ADDRESS: ------------------------------
Fresno CBC/Agribusiness Office ERNEST M. BROWN, SECRETARY
2035 Fresno Street
Fresno, CA 93721

ADDRESS:
13470 Washington Boulevard, Suite 300
Marina Del Rey, CA 90292

<PAGE>

[LOGO]

AGRICULTURAL CREDIT AGREEMENT
(Crops/General Term Loan)

This Agricultural Credit Agreement ("Agreement") is made and entered into this
1st day of April, 1994 by and between SANWA BANK CALIFORNIA (the "Bank") and
SCHEID VINEYARDS & MANAGEMENT CO, (the "Borrower").

SECTION 1

DEFINITIONS

1.01 CERTAIN DEFINED TERMS. Unless elsewhere defined in this Agreement the
following terms shall have the following meanings (such meanings to be generally
applicable to the singular and plural forms of the terms defined):

A. "ADVANCE" shall mean an advance to the Borrower under any line of credit
facility provided for in Section II of this Agreement which provides draws
by the Borrower against an established credit line.

B. "BUSINESS DAY" shall mean a day, other than a Saturday or Sunday, on
which commercial banks are open for business in California.

C. "COLLATERAL" shall mean the property in which the Bank is granted a
security interest pursuant to provisions of the section herein entitled
"Collateral", together with any other personal or real property in which the
Bank may be granted a lien or security interest to secure payment of the
Obligations.

D. "DEBT" shall mean all liabilities of the Borrower less Subordinated
Debt.

E. "EFFECTIVE TANGIBLE NET WORTH" shall mean the Borrower's stated net worth
plus Subordinated Debt but less all intangible assets of the Borrower
(i.e., goodwill, trademarks, patents, copyrights, organization expense and
similar Intangible items).

F. "ENVIRONMENTAL CLAIMS" shall mean all claims, however asserted, by any
governmental authority or other person alleging potential liability or
responsibility for violation of any Environmental Law or for release or
injury to the environment or threat to public health, personal injury
(including sickness, disease or death), property damage, natural resources
damage, or otherwise alleging liability or responsibility for damages
(punitive or otherwise), cleanup, removal, remedial or response costs,
restitution, civil or criminal penalties, injunctive relief, or other type
of relief, resulting from or based upon (i) the presence, placement,
discharge, emission or release (including intentional and unintentional,
negligent and non-negligent, sudden or non-sudden, accidental or
non-accidental placement, spills, leaks, discharges, emissions or releases)
of any Hazardous Materials at, in, or from property owned, operated or
controlled by the Borrower, or (ii) any other circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.

G. "ENVIRONMENTAL LAWS" shall mean all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
governmental authorities, in each case relating to environmental, health,
safety and land use matters: including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), the Clean Air
Act, the Federal Water Pollution Control Act of 1972, the Solid Waste
Disposal Act, the Federal Resource Conservation and Recovery Act, the Toxic
Substances Control Act, the Emergency Planning and Community Right-to-Know
Act, the California Hazardous Waste Control Law, the California Solid
Waste Management, Resource, Recovery and Recycling Act, the California
Wate Code and the California Health and Safety Code.

H. "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, including (unless the context otherwise
requires) any rules or regulations promulgated thereunder.

I. "EVENT OF DEFAULT" shall have the meaning set forth in the section
herein entitled "Events of Default".

J. "HAZARDOUS MATERIALS" shall mean all those substances which are
regulated by, or which may form the basis of liability under any
Environmental Law, including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste, hazardous
constituent, special waste, hazardous substance, hazardous material, or
toxic substance, or petroleum or petroleum derived substance or waste.

K. "INDEBTEDNESS" shall mean, with respect to the Borrower, (i) all
indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which the Borrower is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or in respect
of which the Borrower otherwise assures a creditor against loss and (ii)
obligations under leases which shall have been or should be, in accordance
with generally accepted accounting principles, reported as capital leases
in respect of which the Borrower is liable, contingently or otherwise, or
in respect of which the Borrower otherwise assures a creditor against loss.

L. "OBLIGATIONS" shall mean all amounts owing by the Borrower to the Bank
pursuant to this Agreement including, but not limited to, the unpaid
principal amount of Advances.

M. "PERMITTED LIENS" shall mean: (i) liens and security interests securing
indebtedness owed by the Borrower to the Bank; (ii) liens for taxes,
assessments or similar charges either not yet due or being contested in
good faith, provided proper reserves are maintained therefor in accordance
with generally accepted accounting procedure; (iii) liens of materialmen,
mechanics, warehousemen, or carriers or other like liens arising in the
ordinary course of business and securing obligations which are not yet
delinquent; (iv) purchase money liens or purchase money security interests
upon or in any property acquired or held by the Borrower in the ordinary
course of business to secure Indebtedness outstanding on the date hereof or
permitted to be incurred pursuant to this Agreement; (v) liens and security
interests which, as of the date hereof, have been disclosed to and approved
by the Bank in writing; and (vi) those liens and security interests which
in the aggregate constitute an immaterial and Insignificant monetary amount
with respect to the net value of the Borrower's assets.

N. "REFERENCE RATE" shall mean an index for a variable interest rate which
is quoted, published or announced form time to time by the Bank as its
reference rate and as to which loans may be made by the Bank at, below or
above such reference rate.

O. "SUBORDINATED DEBT" shall mean such liabilities of the Borrower which
have been subordinated to those owed to the Bank in a manner acceptable to
the Bank.

(1)

<PAGE>

1.03 OTHER TERMS. Other terms not otherwise defined shall have the meanings
attributed to such terms in the California Uniform Commercial Code.

SECTION II

CREDIT FACILITIES

2.01 COMMITMENT TO LEND. Subject to the terms and conditions of this Agreement
and so long as no Event of Default occurs, the Bank agrees to extend to the
Borrower the credit accommodations that follow.

2.02 CROP LINE OF CREDIT. The Bank agrees to make loans and Advances to the
Borrower, upon the Borrower's request therefor made prior to the Expiration Date
(as defined below in the Section 2.02), up to a total principal amount from time
to time outstanding of not more than $3,500,000.00; provided that Advances under
this Crop Line of Credit shall be made in accordance with the crop budget dated
March 11, 1994 for the crop year commencing on December 1, 1993 and ending on
November 30, 1994, which budget is attached hereto as Exhibit "A" (the "Crop
Budget"). Within the foregoing limits, the Borrower may borrow, partially or
wholly prepay, and borrow under this Crop Line of Credit.

A. PURPOSE. Advances made under this Crop Line of Credit shall be used
for 1994 crop expenses.

B. INTEREST RATE. Interest shall accrue on the outstanding principal
balance of Advances under this Crop Line of Credit at a variable rate equal
to the Bank's Reference Rate, as It may change from time to time, plus
0.250% per annum (the "Variable Rate"). The Variable Rate shall be
adjusted concurrently with any change in the Reference Rate. Interest shall
be calculated on the basis of 360 days per year but changed on the actual
number of days elapsed.

C. PAYMENT OF INTEREST. The Borrower hereby promises and agrees to pay
interest monthly on the 5th day of each month, commencing on May 5, 1994.

D. REPAYMENT OF PRINCIPAL. Unless sooner due in accordance with the terms
of this Agreement, on April 5, 1995 the Borrower hereby promises and agrees
to pay to the Bank in full the aggregate unpaid principal balance of all
Advances then outstanding, together with all accrued and unpaid interest
thereon.

Any payment received by the Bank shall, at the Bank's option, first be
applied to pay any late fees or other fees then due and unpaid, and then to
interest then due and unpaid and the remainder thereof (if any) shall be
applied to reduce principal.

E. FIXED RATE ALTERNATIVE PRICING. In addition to Advances based upon the
Variable Rate ("Variable Rate Advances"), at the Borrower's election, the
Bank hereby agrees to make Advances to the Borrower under this Crop Line of
Credit at a fixed rate ("Fixed Rate") to be quoted and offered by the Bank
from time to time upon the request of the Borrower. The Bank shall only
quote and offer such Fixed Rate for Advances in the minimum amount of
$250,000.00 and for such period of time (each an "Interest Period") as the
Bank may quote and offer, provided that the Interest Period shall be for a
minimum of at least 30 days and provided further that any Interest Period
shall not extend beyond the Expiration Date (as defined below) of this
facility. Advances based upon the Fixed Rate are hereinafter referred to as
"Fixed Rate Advances".

Interest on any Fixed Rate Advance shall be computed on the basis of 360
days per year but charged on the actual number of days elapsed.

The Borrower hereby promises and agrees to pay the Bank interest on any
Fixed Rate Advance as per the "Variable Rate". If interest is not paid as
and when it is due, the amount of such unpaid interest shall bear interest,
until paid in full, at a rate of interest equal to the Variable Rate.

(i) REPAYMENT OF FIXED RATE ADVANCES. Unless sooner due in accordance
with other terms of this Agreement, or unless adjusted at the end of
the relevant Interest Period as described below, the Borrower hereby
promises and agrees to pay the Bank the principal amount of each Fixed
Rate Advance, together with accrued and unpaid interest thereon, on
the last day of the Interest Period pertaining to such Fixed Rate
Advance.

(ii) NOTICE OF ELECTION TO ADJUST INTEREST RATE. Upon telephonic
notice which shall be received by the Bank at or before 11:00 am
(California time) on a Business Day, the Borrower may elect:

(a) That interest on a Variable Rate Advance shall be adjusted to
accrue at a quoted and offered Fixed Rate: provided, however,
that such notice shall be received by the Bank no later than two
business days prior to the day (which shall be a business day) on
which the Borrower requests that interest be adjusted to accrue
at the Fixed Rate.

(b) That interest on a Fixed Rate Advance shall continue to
accrue at a newly quoted Fixed Rate or shall be adjusted to
commence to accrue at the Variable Rate; provided however, that
such notice shall be received by the Bank no later than two
business days prior to the last day of the Interest Period
pertaining to such Fixed Rate Advance. If the Bank shall not have
received notice as prescribed herein of the Borrower's election
that interest on any Fixed Rate Advance shall continue to accrue
at the Fixed Rate, the Borrower shall be deemed to have elected
that interest thereon shall be adjusted to accrue at the Variable
Rate upon the expiration of the Interest Period pertaining to
such Advance.

(iii) PROHIBITION AGAINST PREPAYMENT OF FIXED ADVANCES.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE AGREEMENT. NO
PREPAYMENT SHALL BE MADE ON ANY FIXED RATE ADVANCE EXCEPT ON A DAY
WHICH IS THE LAST DAY OF THE INTEREST PERIOD PERTAINING THERETO. IF THE
WHOLE OR ANY PART OF ANY FIXED RATE ADVANCE IS PREPAID BY REASON OF
ACCELERATION OR OTHERWISE, THE BORROWER SHALL, UPON THE BANK'S
REQUEST, PROMPTLY PAY TO AND INDEMNIFY THE BANK FOR ALL COSTS AND ANY
LOSS (INCLUDING INTEREST) ACTUALLY INCURRED BY THE BANK AND ANY LOSS
(INCLUDING LOSS OF PROFIT RESULTING FROM THE RE-EMPLOYMENT OF FUNDS)
SUSTAINED BY THE BANK AS A CONSEQUENCE OF SUCH PREPAYMENT.

(iv) INDEMNIFICATION FOR FIXED RATE COSTS. During any period of time
in which interest on any Advance is accruing on the basis of a Fixed
Rate, the Borrower shall, upon the Bank's request, promptly pay to and
reimburse the Bank for all costs incurred and payments made by the
Bank by reason of any future assessment, reserve, deposit or similar
requirements or any surcharge, tax or fee imposed upon the Bank or
as a result of the Bank's compliance with any directive or requirement
of any regulatory authority pertaining or relating to funds used by the
Bank in quoting and determining the Fixed Rate.

(v) INVOLUNTARY CONVERSION FROM FIXED RATE TO VARIABLE RATE. In the
event that the Bank shall at any time determine that the accrual of
interest on the basis of the Fixed Rate (a) is infeasible because the
Bank is unable to determine the Fixed Rate due to the unavailability
of U.S. dollar deposits, contracts or certificates of deposit in an
amount approximately equal to the amount of the relevant Advance and
for a period of time approximately equal to the relevant Interest
Period; or (b) is or has become unlawful or infeasible by reason of the
Bank's compliance with any new law, rule, regulation, guideline or
order, or any new interpretation of any present law, rule, regulation,
guideline or order, then the Bank shall give telephonic notice thereof
(confirmed in writing) to the Borrower, in which event any Fixed Rate
Advance shall be deemed to be a Variable Rate Advance and interest
shall thereupon immediately accrue at the Variable Rate.

(2)

<PAGE>

F. LATE FEE. If any payment of principal or interest, or any portion
thereof, under this Crop Line of Credit is not paid within ten
(10) calendar days after it is due, a late payment charge equal
to five percent (5%) of such past due payment may be assessed
and shall be immediately payable.

G. MAKING LINE ADVANCES/NOTICE OF BORROWING. Each Advance made hereunder
shall be conclusively deemed to have been made at the request of and
for the benefit of the Borrower (i) when credited to any deposit
account of the Borrower maintained with the Bank or (ii) when paid
in accordance with the Borrower's written instructions. Subject to
any other requirements set forth in this Agreement, Advances shall
be made by the Bank upon telephonic or written notice received from
the Borrower in form acceptable to the Bank, which notice shall be
received by the Bank at or before 11:00 am (California time) on a
business day. The Borrower may borrow under this Crop Line of
Credit by requesting either:

(i) A VARIABLE RATE ADVANCE. A Variable Rate Advance may be
made on the day notice is received by the Bank; provided however,
that if the Bank shall not have received notice at or before
11:00 am (California time) on the day such Advance is requested
to be made, such Variable Rate Advance may be made, at the Bank's
option, on the next business day.

(ii) A FIXED RATE ADVANCE. Notice of any Fixed Rate Advance shall
be received by the Bank no later than two Business Days prior to
the day (which shall be a Business Day) on which the Borrower
requests such Fixed Rate Advance to be made. Any telephonic or
oral quote or offer by the Bank of a Fixed Rate for a given
Interest Period may be confirmed in writing by the Bank upon the
election (as provided herein) of the Borrower to accept such
terms and such confirmation shall be deemed conclusive as to the
terms quoted and offered.

H. FACILITY FEES. The following fees for this security shall be paid in
cash upon execution of this Agreement or prior to funding of this
facility: Loan Fees in the amount of $5,000.00.

In addition to the above fees, the Borrower hereby promises and agrees to
pay the following fees in connection with this facility: Reimbursement for
any out-of-pocket expenses incurred by Bank in connection with this
transaction.

I. EXPIRATION OF THE CROP LINE OF CREDIT. Unless earlier terminated in
accordance with the terms of this Agreement, the Bank's commitment to
make Advances to the Borrower hereunder shall automatically expire on
April 5, 1995 (the "EXPIRATION DATE"), and the Bank shall be under no
further obligation to advance any monies thereafter.

J. LINE ACCOUNT. The Bank shall maintain on its books a record of account
in which the Bank shall make entries for each Advance and such other
debits and credits as shall be appropriate in connection with this
Crop Line of Credit (the "LINE ACCOUNT"). The Bank shall provide the
Borrower with a monthly statement of the Borrower's Line Account, which
statement shall be considered to be correct and conclusively binding on
the Borrower unless the Borrower notifies the Bank to the contrary within
thirty (30) days after the Borrower's receipt of any such statement
which it deems to be incorrect.

In addition, the Borrower hereby authorizes the Bank, if and to the extent
payment owed to the Bank under this Crop Line of Credit is not made when
due, to charge, from time to time, against any or all of the Borrower's
deposit accounts with the Bank any amount so due.

2.03. TERM LOAN. The Bank agrees to lend to the Borrower up to the maximum
amount of $725,000.00 (the "TERM LOAN").

A. PURPOSE. This Term Loan shall be used to purchase farm equipment.
Advances not to exceed 80% of purchase price plus tax and license.

B. INTEREST RATE. Interest shall accrue on the outstanding principal
balance under this Term Loan at a variable rate equal to the Bank's
Reference Rate, as it may change from time to time, plus 0.750% per
annum (the "VARIABLE RATE"). The Variable Rate shall be adjusted
concurrently with any change in the Reference Rate. Interest shall
be calculated on the basis of 360 days per year but charged on the
actual number of days elapsed.

C. PAYMENT OF INTEREST. The Borrower hereby promises and agrees to pay
interest quarterly on the last day of each quarter, commencing on June 30,
1994. If interest is not paid as it becomes due, without waiving any
Event of Default occasioned by such non-payment, the Bank may, at its
option but without any obligation to do so, add such unpaid interest to
principal and it shall thereafter become and be treated as part of the
principal and shall thereafter bear like interest.

D. REPAYMENT OF PRINCIPAL. Unless sooner due in accordance with the
terms of this Agreement, the Borrower hereby promises and agrees to pay
principal in 4 annual installments of $145,000.00 per installment,
commencing on December 31, 1994 and continuing each December 31st
thereafter.

On December 31, 1998 the Borrower hereby promises and agrees to pay to the
Bank in full the aggregate unpaid principal balance then outstanding,
together with all accrued and unpaid interest thereon.

E. FIXED RATE ALTERNATIVE PRICING. The Borrower may from time to time
elect (by notice to the Bank as provided below) that the entire amount
of the outstanding principal balance under the Term Loan (the "TERM
BALANCE") shall accrue interest on the amount of such Term Balance at
a fixed rate for such period of time (the "INTEREST PERIOD") as the Bank
may quote and offer, provided that any such Interest Period (i) shall be
for at least 30 days and shall not extend beyond the maturity date of the
Term Loan. Such fixed rate shall be a percentage to be quoted and offered
by the Bank from time to time upon the request of the Borrower (the
"FIXED RATE"). Any telephonic or oral quote or offer by the Bank of a
Fixed Rate for a given Interest Period may be confirmed in writing by
the Bank upon the election (as provided herein) of the Borrower to accept
such terms and such confirmation shall be deemed conclusive as to the
terms quoted and offered.

Interest on any Fixed Rate Balance shall be computed on the basis of
360 days per year but charged on the actual number of days elapsed.

The Borrower hereby promises and agrees to pay the Bank interest on any
Fixed Rate Balance on the basis described above with respect to the
Variable Rate. If interest under the Fixed Rate is not paid as and when
it is due, the amount of such unpaid interest shall bear interest,
until paid in full, at the then applicable interest rate.

(i) Notice of Election to Adjust Interest Rate.

(a) The Borrower may elect that interest on a Fixed Rate
Balance shall continue to accrue at a newly quoted and
offered Fixed Rate or commence to accrue at the Variable
Rate by telephonic notice to the Bank, provided that
such notice shall be received at or before 11:00 am
(California time) on a Business Day which is two Business
Days prior to the last day of the relevant Interest Period.

(3)
<PAGE>

(b) The Borrower may elect that interest on a Variable
Rate Balance shall continue to accrue at the Variable Rate
or commence to accrue at a quoted and offered Fixed Rate by
telephonic notice to the Bank, provided that such notice
shall be received at or before 11:00 am (California time)
on a Business Day which is two Business Days prior to the
date on which the elected interest rate shall be effective.

If the Bank shall not have received notice as prescribed herein of the
Borrower's election that interest on the Term Balance shall commence to
accrue as the Fixed Rate or continue to accrue at a newly quoted Fixed
Rate, then the Borrower shall be deemed to have elected that interest
shall accrue thereon at the Variable Rate.

In the event the Bank determines that accrual of interest on the basis
of the Fixed Rate is infeasible because the Bank is unable to determine
the Fixed Rate due to the unavailability of U.S. dollar deposits,
contracts or certificates of deposit in an amount approximately equal to
the amount of the Term Balance and for a period of time approximately
equal to the relevant Interest Period, the Bank shall give the Borrower
prompt notice thereof and the Borrower may select another available
Interest Period (as quoted and offered by the bank), subject to the terms
and conditions herein. If the Borrower does not select another available
Interest Period or if no other Interest Period is available, then the
Term Balance shall be deemed to be a Variable Rate Balance and shall
accrue interest on the basis of the Variable Rate.

(ii) PROHIBITION AGAINST PREPAYMENT OF FIXED RATE BALANCES.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, NO PREPAYMENT
SHALL BE MADE ON ANY FIXED RATE BALANCE EXCEPT ON A DAY WHICH IS THE LAST
DAY OF THE INTEREST PERIOD PERTAINING THERETO. IF THE WHOLE OR ANY PART OF
ANY FIXED RATE BALANCE IS PREPAID BY REASON OF ACCELERATION OR, OTHERWISE,
THE BORROWER SHALL, UPON THE BANK'S REQUEST, PROMPTLY PAY TO AND INDEMNIFY
THE BANK FOR ALL COSTS AND ANY LOSS (INCLUDING INTEREST) ACTUALLY INCURRED
BY THE BANK AND ANY LOSS (INCLUDING LOSS OF PROFIT RESULTING FROM THE
RE-EMPLOYMENT OF FUNDS) SUSTAINED BY THE BANK AS A CONSEQUENCE OF SUCH
PREPAYMENT.

(iii) INDEMNIFICATION FOR FIXED RATE COSTS. During any period of time in
which interest is accruing on the basis of a Fixed Rate, the Borrower
shall, upon the Bank's request, promptly pay to and reimburse the Bank for
all costs incurred and payments made by the Bank by reason of any future
assessment, reserve, deposit or similar requirements or any surcharge, tax
or fee imposed upon the Bank or as a result of the Bank's compliance with
any directive or requirement of any regulatory authority pertaining or
relating to funds used by the Bank in quoting and determining the Fixed
Rate.

(iv) INVOLUNTARY CONVERSION FROM FIXED RATE TO VARIABLE RATE. In the event
that the Bank shall at any time determine that the accrual of interest on
the basis of the Fixed Rate is or has become unlawful or infeasible by
reason of the Bank's compliance with any new law, rule, regulation,
guideline or order, or any new interpretation of any present Law, rule,
regulation, guideline or order, then the Bank shall give telephonic notice
thereof (confirmed in writing) to the Borrower, in which event any Fixed
Rate Balance shall be deemed to be a Variable Rate Balance and interest
shall thereupon immediately accrue at the Variable Rate.

F. LATE FEE. If any payment of principal or interest, or any portion thereof,
under this Term Loan is not paid within ten (10) calendar days after it is
due, a late payment charge equal to five percent (5%) of such past due
payment may be assessed and shall be immediately payable.

G. FACILITY FEES. The Borrower hereby promises and agrees to pay the
following fees in connection with this facility: Reimbursement for any
out-of-pocket expenses incurred by Bank in connection with this transaction.

H. TERM LOAN ACCOUNT. The Bank shall maintain on its books a record of
account in which the Bank shall make entries setting forth all payments made,
the application of such payments to interest and principal, accrued and
unpaid interest (if any) and the outstanding principal balance under the Term
Loan (the "TERM LOAN ACCOUNT"). The Bank shall provide the Borrower with a
monthly statement of the Borrower's Term Loan Account, which statement shall
be considered to be correct and conclusively binding on the Borrower unless
the Borrower notifies the Bank to the contrary within thirty (30) days after
the Borrower's receipt of any such statement which it deems to be incorrect.

SECTION III

COLLATERAL

3.01. GRANT OF SECURITY INTEREST. To secure payment and performance of all
of the Borrower's Obligations under this Agreement and the performance of all
the terms, covenants and agreements contained in this Agreement (and any and
all modifications, extensions and renewals of the Agreement) and in any other
document, instrument or agreement evidencing or related to the Obligations or
the Collateral, the Borrower hereby grants to the Bank a security interest in
and to all of the following property:

A. EQUIPMENT. All goods and equipment ("EQUIPMENT") now owned or
hereafter acquired by the Borrower or in which the Borrower now has
or may hereafter acquire any interest including, but not limited
to, all machinery, furniture, furnishings, tools, supplies and
motor vehicles of every kind and description and all additions,
accessories, improvements, replacements and substitutions
thereto and thereof.

B. INVENTORY. All inventory ("INVENTORY") now owned or hereafter
acquired by the Borrower including, but not limited to, all raw
materials, work in process, finished goods, merchandise, parts
and supplies of every kind and description, including inventory
temporarily out of the Borrower's custody or possession,
together with all returns on accounts.

C. ACCOUNTS AND CONTRACT RIGHTS. All accounts and contract rights
now owned or hereafter created or acquired by the Borrower,
including but not limited to, all receivables and all rights and
benefits due to the Borrower under any contract or agreement.

D. GENERAL INTANGIBLES. All general intangibles now owned or hereafter
created or acquired by the Borrower, including but not limited to,
goodwill, trademarks, trade styles, trade names, patents, patent
applications, software, customer lists and business records.

E. CHATTEL PAPER AND DOCUMENTS. All documents, instruments and chattel
paper now owned or hereafter acquired by the Borrower.

F. CROPS. All crops now growing or hereafter to be grown, together with
all products and proceeds thereof, on that certain real property
described in the attached Exhibit "B" (the "CROPS").

G. FARM PRODUCTS. All farm products now owned or hereafter acquired
by or for the benefit of the Borrower consisting of supplies used
or produced in the operations of the Borrower including, but not
limited to, all hay, grain, forage, fodder and other feed
commodities and all feed additives, feed supplements, veterinary
supplies, medicines and related products now owned or hereafter
acquired by or for the benefit of the Borrower.

H. MONIES AND OTHER PROPERTY IN POSSESSION. All monies, and property
of the Borrower now or hereafter in the possession of the Bank or
the Bank's agents, or any one of them, including, but not limited
to, all deposit accounts, certificates of deposit, stocks, bonds,
indentures, warrants, options and other negotiable and non-negotiable
securities and instruments, together with all stock rights, rights
to subscribe, liquidating dividends, cash dividends, payments,
dividends paid in stock, new securities or other property to which
the Borrower may become entitled to receive on account of such
property.

(4)

<PAGE>

3.02. CONTINUING LIEN & PROCEEDS. The Bank's security interest in the
Collateral shall be a continuing lien and shall include all proceeds and
products of the Collateral including, but not limited to, the proceeds of any
insurance thereon as well as all accounts, contract rights, documents,
instruments and chattel paper resulting from the sale or disposition of any
Equipment.

3.03. EXCLUSION OF CONSUMER DEBT. The Obligations and performance secured
hereby shall not include any indebtedness of the Borrower incurred for
personal, family or household purposes except to the extent any disclosure
required under any consumer protection law (including but not limited to the
Truth in Lending Act) or any regulation thereto, as now existing or hereafter
amended, is or has been given.

SECTION IV

CONDITIONS PRECEDENT

4.01. CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT AND/OR FIRST
ADVANCE. The obligation of the Bank to make the initial extension of credit
and/or the first Advance hereunder is subject to the conditions precedent
that the Bank shall have received before the date of such extension of credit
and/or the first Advance all of the following, in form and substance
satisfactory to the Bank:

A. AUTHORITY TO BORROW. Evidence relating to the duly given approval
and authorization of the execution, delivery and performance of this
Agreement, all other documents, instruments and agreements required
under this Agreement and all other actions to be taken by the Borrower
hereunder or thereunder.

C. SUBORDINATIONS. The subordination to all indebtedness from time to
time owed by the Borrower to the Bank of certain indebtedness now or
hereafter owing by the Borrower to the following creditors, each such
subordination to be in form and substance satisfactory to the Bank:
Alfred G. Scheid (each a "Creditor"). Each Creditor shall also provide
evidence that the execution, delivery and performance of the
subordinations by each Creditor has been duly authorized.

D. LOAN FEES. Evidence that any required loan fees and expenses as set
forth above with respect to each credit facility have been paid or
provided for by the Borrower.

E. AUDIT. The opportunity to conduct an audit of the Borrower's books,
records and operations and the Bank shall be satisfied as to the
condition thereof.

F. MISCELLANEOUS DOCUMENTS. Such other documents, instruments,
agreements and opinions as are necessary, or as the Bank may reasonably
require, to consummate the transactions contemplated under this
Agreement, all fully executed.

4.02. CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT AND/OR ADVANCES. The
obligation of the Bank to make any extensions of credit and/or each Advance
to or on account of the Borrower (including the initial extension of credit
and/or the first Advance) shall be subject to the further conditions
precedent that, as of the date of each extension of credit or Advance and
after the making of such extension of credit or Advance:

A. REPRESENTATIONS AND WARRANTIES. The representations and warranties
set forth in the Section entitled "Representations and Warranties" herein
and in any other document, instrument, agreement or certificate delivered
to the Bank hereunder are true and correct.

C. EVENT OF DEFAULT. No event has occurred and is continuing which
constitutes, or, with the lapse of time or giving of notice or both,
would constitute an Event of Default.

D. SUBSEQUENT APPROVALS, ETC. The Bank shall have received such
supplemental approvals, opinions or documents as the Bank may reasonably
request.

4.03. REAFFIRMATION OF STATEMENTS. For the purposes hereof, the Borrower's
acceptance of the proceeds of any extension of credit and the Borrower's
execution of any document or instrument evidencing or creating any Obligation
hereunder shall each be deemed to constitute the Borrower's representation
and warranty that the statements set forth above in this Section are true
and correct.

SECTION V

REPRESENTATIONS AND WARRANTIES

The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:

5.01. STATUS. The Borrower is a corporation duly organized and validly
existing under the laws of the State of California and is properly licensed,
qualified to do business and in good standing in, and, where necessary to
maintain the Borrower's rights and privileges, has complied with the
fictitious name statute of every jurisdiction in which the Borrower is doing
business.

5.02. AUTHORITY. The execution, delivery and performance by the Borrower of
this Agreement and any instrument, document or agreement required hereunder
have been duly authorized and do not and will not: (i) violate any provision
of any law, rule, regulation, writ, judgment or injunction presently in
effect affecting the Borrower; (ii) result in a breach of or constitute a
default under any material agreement to which the Borrower is a party or by
which it or its properties may be bound or affected; or (iii) require any
consent or approval of its stockholders or violate any provision of its
articles of incorporation or by-laws.

5.03. LEGAL EFFECT. This Agreement constitutes, and any document, instrument
or agreement required hereunder when delivered will constitute, legal, valid
and binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms.

5.04. FICTITIOUS TRADE STYLES. The Borrower currently uses no fictitious
trade styles in connection with its business operations. The Borrower shall
notify the Bank within thirty (30) days of the use of any fictitious trade
style at any future date, indicating the trade style and state(s) of its use.

5.05. FINANCIAL STATEMENTS. All financial statements, information and other
data which may have been and which may hereafter be submitted by the Borrower
to the Bank are true, accurate and correct and have been and will be prepared
in accordance with generally accepted accounting principles consistently
applied and accurately represent the Borrower's financial condition and, as
applicable, the other information disclosed therein. Since the most recent
submission of any such financial statement, information or other data to the
Bank, the Borrower represents and warrants that no material adverse change in
the Borrower's financial condition or operations has occurred which has not
been fully disclosed to the Bank in writing.

5.06. LITIGATION. Except as have been disclosed to the Bank in writing,
there are no actions, suits or proceedings pending or, to the knowledge of
the Borrower, threatened against or affecting the Borrower or the Borrower's
properties before any court or administrative agency which, if determined
adversely to the Borrower, would have a material adverse effect on the
Borrower's financial condition, operations or the Collateral.

(5)

<PAGE>

5.07. TITLE TO ASSETS. The Borrower has good and marketable title to all of
its assets (including, but not limited to, the Collateral) and the same are
not subject to any security interest, encumbrance, lien or claim of any third
person except for Permitted Liens.

5.08. ERISA. If the Borrower has a pension, profit sharing or retirement
plan subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to comply
with the requirements of ERISA.

5.09. TAXES. The Borrower has filed all tax returns required to be filed and
paid all taxes shown thereon to be due, including interest and penalties,
other than taxes which are currently payable without penalty, or interest or
those which are being duly contested in good faith.

5.10. ENVIRONMENTAL COMPLIANCE. The operations of the Borrower comply, and
during the term of this Agreement will at all times comply, in all respects
with all Environmental Laws; the Borrower has obtained licenses, permits,
authorizations and registrations required under any Environmental Law
("Environmental Permits") and necessary for its ordinary operations, all such
Environmental Permits are in good standing, and the Borrower is in compliance
with all material terms and conditions of such Environmental Permits; neither
the Borrower nor any of its present properties or operations are subject to
any outstanding written order from or agreement with any governmental
authority nor subject to any judicial or docketed administrative proceeding,
respecting any Environmental Law, Environmental Claim or Hazardous Material;
there are no Hazardous Materials or other conditions or circumstances
existing, or arising from operations prior to the date of this Agreement,
with respect to any property of the Borrower that would reasonably be
expected to give rise to Environmental Claims; provided however, that with
respect to property leased from an unrelated third party, the foregoing
representation is made to the best knowledge of the Borrower. In addition,
(i) the Borrower does not have or maintain any underground storage tanks
which are not properly registered or permitted under applicable Environmental
Laws or which are leaking or disposing of Hazardous Materials off-site, and
(ii) the Borrower has notified all of its employees of the existence, if any,
of any health hazard arising from the conditions of their employment and have
met all notification requirements under Title III of CERCLA and all other
Environmental Laws.

SECTION VI

COVENANTS

The Borrower covenants and agrees that, during the term of this Agreement,
and so long thereafter as the Borrower is indebted to the Bank under this
Agreement, the Borrower shall, unless the Bank otherwise consents in writing:

6.01. PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS. Maintain
and preserve its existence and all rights and privileges now enjoyed; not
liquidate or dissolve, merge or consolidate with or into, or acquire any
other business organization; and conduct its business in accordance with all
applicable laws, rules and regulations.

6.02. MAINTENANCE OF INSURANCE. Maintain insurance in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which
the Borrower operates and maintain such other insurance and coverages as may
be required by the Bank. All such insurance shall be in form and amount and
with companies satisfactory to the Bank. With respect to insurance covering
properties in which the Bank maintains a security interest or lien, such
insurance shall be in an amount not less than the full replacement value
thereof, at the Bank's request, shall name the Bank as loss payee pursuant to
a loss payable endorsement satisfactory to the Bank and shall not be altered
or canceled except upon ten (10) days' prior written notice to the Bank. Upon
the Bank's request, the Borrower shall furnish the Bank with the original
policy or binder of all such insurance.

6.03. MAINTENANCE OF COLLATERAL AND OTHER PROPERTIES. Except for Permitted
Liens, the Borrower shall keep and maintain the Collateral free and clear of
all levies, liens, encumbrances and security interests (including but not
limited to, any lien of attachment, judgement or execution) and defend the
Collateral against any such levy, lien, encumbrance or security interest;
comply with all laws, statutes and regulations pertaining to the Collateral
and its use and operation; execute, file and record such statements, notices
and agreements, take such actions and obtain such certificates and other
documents as necessary to perfect, evidence and continue the Bank's security
interest in the Collateral and the priority thereof; maintain accurate and
complete records of the Collateral which show all sales, claims and
allowances, and properly care for, house, store and maintain the Collateral
in good condition, free of misuse, abuse and deterioration, other than normal
wear and tear. The Borrower shall also maintain and preserve all its
properties in good working order and condition in accordance with the general
practice of other businesses of similar character and size, ordinary wear and
tear excepted.

6.04. LOCATION AND MAINTENANCE OF EQUIPMENT.

A. LOCATION. The Equipment shall at all times be in the Borrower's
physical possession, shall not be held for sale or lease and shall be
kept only at the following location(s); 1632 5th Street, Suite 220, Santa
Monica, CA 90401.

The Borrower shall not secrete, abandon or remove, or permit the
removal of, the Equipment, or any part thereof, from the location(s)
shown above or remove or permit to be removed any accessories now or
hereafter placed upon the Equipment.

B. EQUIPMENT SCHEDULES. Upon the Bank's demand, the Borrower shall
immediately provide the Bank with a complete and accurate description of
the Equipment including, as applicable, the make, model, identification
number and serial number of each item of Equipment. In addition, the
Borrower shall immediately notify the Bank of the acquisition of any new
or additional Equipment or the replacement of any existing Equipment and
shall supply the Bank with a complete description of any such additional
or replacement Equipment.

C. MAINTENANCE OF EQUIPMENT. The Borrower shall, at the Borrower's
sole cost and expense, keep and maintain the Equipment in a good state of
repair and shall not destroy, misuse, abuse, illegally use or be
negligent in the care of the Equipment or any part thereof. The Borrower
shall not remove, destroy, obliterate, change, cover, paint, deface or
alter the name plates, serial numbers, labels or other distinguishing
numbers or identification marks placed upon the Equipment or any part
thereof by or on behalf of the manufacturer, any dealer or rebuilder
thereof, or the Bank. The Borrower shall allow the Bank and its
representatives free access to and the right to inspect the Equipment at
all times and shall comply with the terms and conditions of any leases
covering the real property on which the Equipment is located and any
orders, ordinances, laws, regulations or rules of any federal, state or
municipal agency or authority having jurisdiction of such real property
or the conduct of business of the persons having control or possession of
the Equipment.

D. FIXTURES. The Equipment is not now and shall not at any time
hereafter be so affixed to the real property on which it is located as to
become a fixture or a part thereof. The Equipment is now and shall at all
times hereafter be and remain personal property of the Borrower.

6.05. LOCATION OF INVENTORY. The Inventory (i) is now and shall at all times
hereafter be of good and merchantable quality and free from defects; (ii) is
not now and shall not at any time hereafter be stored with a bailee,
warehouseman or similar party without the Bank's prior written consent and,
in such event, the Borrower will concurrently therewith cause any such
bailee, warehouseman or similar party to issue and deliver to the Bank, in
form acceptable to the Bank, warehouse receipts in the Bank's name evidencing
the storage of inventory; (iii) shall at all times be in the Borrower's
physical possession; (iv) shall not be held by others on consignment, sale on
approval, or sale or return; and (v) shall be kept only at the following
location(s): 1632 5th Street, Suite 220, Santa Monica, CA 90401.

6.06. LOCATION OF HARVESTED CROPS. Any Crops now or hereafter harvested or
removed from the real property on which they are grown shall not be stored
with a bailee, warehouseman or similar party without the Bank's prior written
consent and shall be kept only at the following location(s): 1632 5th Street,
Suite 220, Santa Monica, CA 90401.

(6)

<PAGE>

6.07. CARE AND PRESERVATION OF THE CROPS.

A. Attend to and care for the Crops and do or cause to be done any and
all acts that may at any time be appropriate or necessary to grow, farm,
cultivate, irrigate, fertilize, fumigate, prune, harvest, pick, clean,
preserve and protect the Crops.

B. Not commit or suffer to be committed any waste or damage to the Crops.

C. Permit the Bank and any of its agents, employees or representatives
to enter upon any real property on which the Crops are being grown at any
reasonable time and from time to time for the purpose of examining and
inspecting the Crops and such real property.

D. Harvest and prepare the Crops for market and promptly notify the Bank
when any of the Crops are ready for market.

E. Keep the Crops separate and always capable of identification.

F. Comply with any requirements or instructions of the Bank with respect
to hauling, shipping, storing, marketing and otherwise preparing, handling
and disposing of the Crops.

6.08. PAYMENT OF OBLIGATIONS AND TAXES. Make timely payment of all
assessments and taxes and all of its liabilities and obligations including,
but not limited to, trade payables, unless the same are being contested in
good faith by appropriate proceedings with the appropriate court or
regulatory agency. For purposes hereof, the Borrower's issuance of a check,
draft or similar instrument without delivery to the intended payee shall not
constitute payment.

6.09. INSPECTION RIGHTS. At any reasonable time and from time to time permit
the Bank or any representative thereof to examine and make copies of the
records and visit the properties of the Borrower and to discuss the business
and operations of the Borrower with any employee or representative thereof.
If the Borrower now or at any time hereafter maintains any records
(including, but not limited to, computer generated records and computer
programs for the generation of such records) in the possession of a third
party, the Borrower hereby agrees to notify such third party to permit the
Bank free access to such records at all reasonable times and to provide the
Bank with copies of any records it may request, all at the Borrower's
expense, the amount of which shall be payable immediately upon demand. In
addition, the Bank may, at any reasonable time and from time to time, conduct
inspections and audits of the Collateral and the Borrower's accounts payable,
the cost and expenses of which shall be paid by the Borrower to the Bank upon
demand.

6.10. REPORTING REQUIREMENTS. Deliver or cause to be delivered to the Bank in
form and detail satisfactory to the Bank:

A. OTHER REPORTING REQUIREMENTS. 1) Borrower to provide CPA prepared
audited financial statements to include balance sheet, income statement
and cash flow on Scheid Vineyards and Management Co., Vineyard Investors
1972 and Vineyard 405 not later than 120 days after calendar year end,
2) Borrower to provide annual crop budget not later than 120 days after
calendar year end, 3) Borrower to provide monthly crop position reports
not later than 25 days after month end.

B. OTHER INFORMATION. Promptly upon the Bank's request such other
information pertaining to the Borrower, the Collateral, or any Guarantor
as the Bank may reasonably request.

6.12. REDEMPTION OR REPURCHASE OF STOCK. The Borrower shall not redeem or
repurchase any class of the corporation's stock now or hereafter outstanding.

6.13. LOANS. Not make any loans or advances or extend credit to any third
person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities or subsidiaries of the Borrower,
except for credit extended in the ordinary course of the Borrower's business
as presently conducted and except loans up to an aggregate amount not
exceeding $100,000.00 in any one fiscal year.

6.14. LIENS AND ENCUMBRANCES. Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's properties, or execute or allow to be filed
any financing statement or continuation thereof affecting any such
properties, except for Permitted Liens or as otherwise provided in this
Agreement.

6.15. TRANSFER ASSETS. Not sell, contract for sale, transfer, convey, assign,
lease or sublet any of its assets, including, but not limited to, the
Collateral, except in the ordinary course of business as presently conducted
by the Borrower, and then, only for full, fair and reasonable consideration.

6.16. CHANGE IN THE NATURE OF BUSINESS. Not make any material change in its
financial structure or in the nature of its business as existing or conducted
as of the date of this Agreement.

6.17. FINANCIAL CONDITION. Maintain at all times:

A. NET WORTH. A minimum Effective Tangible Net Worth of not less than
$5,000,000.00 (cost basis).

B. CURRENT RATIO. A ratio of current assets to current liabilities of
not less than 2.00 to 1.00.

6.18. COMPENSATION OF EMPLOYEES. Compensate its employees for services
rendered at an hourly rate at least equal to the minimum hourly rate
prescribed by any applicable federal or state law or regulation.

6.19. OTHER RESTRICTIONS. 1) The $2,000,000.00 in line availability for
purchase of the limited partnership interests will only be advanced upon
receipt of evidence of the purchase, 2) Borrower to achieve a minimum debt
coverage ratio of 1.25:1 as measured by the annual audited financial
statement. The covenant is to be calculated as follows: Net Profit After Tax
+ Depreciation + Stockholder Salary, Bonus and Dividends divided by Current
Portion Long Term Debt + Stockholder Salary, Bonus and Dividends.

6.20. ENVIRONMENTAL COMPLIANCE. The Borrower shall:

A. Conduct its operations and keep and maintain all of its properties
in compliance with all Environmental Laws.

B. Give prompt written notice to the Bank, but in no event later than
10 days after becoming aware, of the following: (i) any enforcement,
cleanup, removal or other governmental or regulatory actions instituted,
completed or threatened against the Borrower or any of its affiliates or
any of their respective properties pursuant to any applicable
Environmental Laws, (ii) all other Environmental Claims, and (iii) any
environmental or similar condition on any real property adjoining or in
the vicinity of the property of the Borrower or its affiliates that
could reasonably be anticipated to cause such property or any part
thereof to be subject to any restrictions on the ownership, occupancy,
transferability or use of such property under any Environmental Laws.

C. Upon the written request of the Bank, the Borrower shall submit to
the Bank, at the Borrower's sole cost and expense, at reasonable
intervals, a report providing an update of the status of any
environmental, health or safety compliance, hazard or liability issue
identified in any notice required pursuant to this Section.

D. At all times indemnify and hold harmless the Bank from and against
any and all liability arising out of any Environmental Claims.

(7)

<PAGE>

6.21. NOTICE. Give the Bank prompt written notice of any and all (i) Events
of Default; (ii) litigation, arbitration or administrative proceedings to
which the Borrower is a party and in which the claim or liability exceeds
$50,000.00 or which affects the Collateral; (iii) any change in its place of
business or the acquisition of more than one place of business; (iv) any
proposed or actual change in its name, identity or business nature; (v) any
change in the location of the Equipment, Inventory or Crops; (vi) any disease
to, any destruction of, any depreciation in the value of or any damage to the
Crops; and (vii) other matters which have resulted in, or might result to a
material adverse change in the Collateral or the financial condition or
business operations of the Borrower.

SECTION VII

EVENTS OF DEFAULT

Any one or more of the following described events shall constitute an event
of default under this Agreement:

7.01. NON-PAYMENT. The Borrower shall fail to pay any Obligations within 10
days of when due.

7.02. PERFORMANCE UNDER THIS AND OTHER AGREEMENTS. The Borrower shall fail in
any material respect to perform or observe any item, covenant or agreement
contained in this Agreement or in any document, instrument or agreement
evidencing or relating to any indebtedness of the Borrower (whether owed to
the Bank or third persons), and any such failure (exclusive of the payment of
money to the Bank under this Agreement or under any other document,
instrument or agreement, which failure shall constitute and be an immediate
Event of Default if not paid when due or when demanded to be due) shall
continue for more than 30 days after written notice from the Bank to the
Borrower of the existence and character of such Event of Default.

7.03. REPRESENTATIONS AND WARRANTIES; FINANCIAL STATEMENTS. Any
representation or warranty made by the Borrower under or in connection with
this Agreement or any financial statement given by the Borrower or any
Guarantor shall prove to have been incorrect in any material respect when
made or given or when deemed to have been made or given.

7.04. INSOLVENCY. The Borrower of any Guarantor shall: (i) become insolvent
or be unable to pay its debts as they mature; (ii) make an assignment for the
benefit of creditors or to an agent authorized to liquidate any substantial
amount of its properties or assets; (iii) file a voluntary petition in
bankruptcy or seeking reorganization or to effect a plan or other arrangement
with creditors; (iv) file an answer admitting the material allegations of an
involuntary petition relating to bankruptcy or reorganization or join in any
such petition; (v) become or be adjudicated a bankrupt; (vi) apply for or
consent to the appointment of, or consent that an order be made, appointing
any receiver, custodian or trustee for itself or any of its properties,
assets or businesses; or (vii) any receiver, custodian or trustee shall have
been appointed for all or a substantial part of its properties, assets or
businesses and shall not be discharged within 30 days after the date of such
appointment.

7.06. REVOCATION OF LIMITATION OF GUARANTY. Any Guaranty shall be revoked or
limited or its enforceability or validity shall be contested by any
Guarantor, by operation of law, legal proceeding or otherwise or any Guarantor
who is a natural person shall die.

7.07. SUSPENSION. The Borrower shall voluntarily suspend the transaction of
business or allow to be suspended, terminated, revoked or expired any permit,
license or approval of any governmental body necessary to conduct the
Borrower's business as now conducted.

7.08. CHANGE IN OWNERSHIP. There shall occur a sale, transfer, disposition or
encumbrance (whether voluntary or involuntary), or an agreement shall be
entered into to do so, with respect to more than 10% of the issued and
outstanding capital stock of the Borrower.

SECTION VIII

REMEDIES ON DEFAULT

Upon the occurrence of any Event of Default, the Bank may, at its sole
election, without demand and upon only such notice as may be required by law:

8.02. CEASE EXTENDING CREDIT. Cease extending credit to or for the account of
the Borrower under this Agreement or under any other agreement now existing
or hereafter entered into between the Borrower and the Bank.

8.03. TERMINATION. Terminate this Agreement as to any future obligation of the
Bank without affecting the Borrower's obligations to the Bank or the Bank's
rights and remedies under this Agreement or under any other document,
instrument or agreement.

8.04. SEGREGATE COLLECTIONS. Require the Borrower to segregate all
collections and proceeds of the Collateral so that they are capable of
identification and to deliver such collections and proceeds to the Bank, in
kind, without commingling, at such times and in such manner as required by
the Bank.

8.05. RECORDS OF COLLATERAL. Required the Borrower to periodically deliver to
the Bank records and schedules showing the status, condition and location of
the Collateral and such contracts or other matters which affect the
Collateral. In connection herewith, the Bank may conduct such audits or other
examination of such records, including, but not limited to, verification of
balances owing by any account debtor of the Borrower, as the Bank, in its
sole and absolute discretion, deems necessary.

8.06. NOTIFICATION OF ACCOUNT DEBTORS.

A. Notify any or all of the Borrower's Account Debtors, or any buyers
or transferees of the Collateral or other persons of the Bank's interest
in the Collateral and the proceeds thereof and instruct such person(s) to
thereafter make any payment due the Borrower directly to the Bank.

B. The Borrower hereby irrevocably and unconditionally appoints the
Bank as its attorney-in-fact to: (i) endorse the Borrower's name on any
notes, acceptances, checks, drafts, money orders or other evidence of
payment that may come into the Bank's possession; (ii) sign the
Borrower's name on any invoice or bill of lading relating to any of the
Collateral; (iii) notify post office authorities to change the address for
delivery of mail addressed to the Borrower to such address as the Bank
may designate and take possession of and open mail addressed to the
Borrower and remove therefrom, proceeds of and payments on the
Collateral; and (iv) demand, receive and endorse payment and give
receipts, releases and satisfactions for and sue for all money payable
to the Borrower. All of the preceding may be done either in the name of
the Bank or in the name of the Borrower with the same force and effect
as the Borrower could have done had this Agreement not been entered into.

C. Require the Borrower to indicate on the face of all invoices (or
such other documentation as may be specified by the Bank relating to the
sale, delivery or

(8)

<PAGE>

shipment of goods giving rise to the account) that the account has been
assigned to the Bank and that all payments are to be made directly to the
Bank at such address as the Bank may designate.

8.07. COMPROMISE. Grant extensions, compromise claims and settle any account
for less than the amount owing thereunder, all without notice to the Borrower
or any obligor on or guarantor of the Obligations.

8.08. CARE AND POSSESSION OF THE CROPS. Enter upon the premises where the
Crops are being grown or stored and, using any and all of the Grantor's
equipment, machinery, tools, farming implements and supplies, and improvements
located on such premises: (i) farm, cultivate, irrigate, fertilize, fumigate,
prune and perform any other act or acts appropriate or necessary to grow, care
for, maintain, preserve and protect the Crops (using any water located in, on
or adjacent to the premises); (ii) harvest, pick, clean and remove the Crops
from the premises; and (iii) appraise, store, prepare for public or private
sale, exhibit, market and sell the Crops and the products thereof. With
respect to the above, the Grantor hereby further agrees that, if the Grantor
is the owner of record of the premises upon which the Crops and the products
thereof are located, the Bank shall not be responsible or liable for
returning the premises to their condition immediately preceding the use of
the premises as provided herein or for doing such acts as may be necessary to
permit future crops to be grown on the premises.

8.09. PROTECTION OF SECURITY INTEREST. Make such payments and do such acts as
the Bank, in its sole judgment, considers necessary and reasonable to protect
its security interest or lien in the Collateral. The Borrower hereby
irrevocably authorizes the Bank to pay, purchase, contest or compromise any
encumbrance, lien or claim which the Bank, in its sole judgment, deems to be
prior or superior to its security interest. Further, the Borrower hereby
agrees to pay to the Bank, upon demand therefor, all expenses and expenditures
(including attorneys' fees) incurred in connection with the foregoing.

8.10. FORECLOSURE. Enforce any security interest or lien given or provided for
under this Agreement or under any security agreement, mortgage, deed of trust
or other document relating to the Collateral. In such manner and such order,
as to all or any part of the Collateral, as the Bank, in its sole judgment,
deems to be necessary or appropriate and the Borrower hereby waives any and
all rights, obligations or defenses now or hereafter established by law
relating to the foregoing. In the enforcement of its security interest or
lien, the Bank is authorized to enter upon the premises where any Collateral
is located and take possession of the Collateral or any part thereof,
together with the Borrower's records pertaining thereto, or the Bank may
require the Borrower to assemble the Collateral and records pertaining
thereto and make such Collateral and records available to the Bank at a place
designated by the Bank. The Bank may sell the Collateral or any portions
thereof, together with all additions, accessions and accessories thereto,
giving only such notices and following only such procedures as are required
by law, at either a public or private sale, or both, with or without having
the Collateral present at the time of sale, which sale shall be on such terms
and conditions and conducted in such manner as the Bank determines in its
sole judgment to be commercially reasonable. Any deficiency which exists
after the disposition or liquidation of the Collateral shall be a continuing
liability of any obligor on or any guarantor of the Obligations and shall be
immediately paid to the Bank.

8.11. APPLICATION OF PROCEEDS. All amounts received by the Bank as proceeds
from the disposition or liquidation of the Collateral shall be applied to the
Borrower's indebtedness to the Bank as follows: first, to the costs and
expenses of collection, enforcement, protection and preservation of the
Bank's lien in the Collateral, including court costs and reasonable
attorneys' fees, whether or not suit is commenced by the Bank; next, to those
costs and expenses incurred by the Bank in protecting, preserving, enforcing,
collecting, selling or disposing of the Collateral; next, to the payments of
accrued and unpaid interest on all of the Obligations; next, to the payment
of the outstanding principal balance of the Obligations; and last, to the
payment of any other indebtedness owed by the Borrower to the Bank. Any
excess Collateral or excess proceeds existing after the disposition or
liquidation of the Collateral will be returned or paid by the Bank to the
Borrower.

8.12. NON-EXCLUSIVITY OF REMEDIES. Exercise one or more of the Bank's rights
set forth herein or seek such other rights or pursue such other remedies as
may be provided by law, in equity or in any other agreements now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.

SECTION IX

MISCELLANEOUS PROVISIONS

9.02. ASSIGNMENT OF THE BORROWER'S RIGHTS WITH RESPECT TO CROPS.

A. If the Crops or any portion or portions thereof become infected by
disease or are destroyed by order of any local, state or federal
authority, and, by reason thereof, the Borrower is entitled to be
indemnified by such authority, the Borrower hereby assigns to the Bank any
and all such sums due from such authority, and the Bank is hereby
authorized to receive, collect and sue for the same, and the Borrower
hereby orders and directs that any such sums be paid directly to the Bank.

B. In addition, the Borrower hereby assigns and transfers to the Bank
all of the Borrower's rights and interests in and to any monies now or
hereafter placed in any funds of any marketing association, corporation,
partnership, firm or individual now, heretofore or hereafter handling or
having to do with any of the Crops or connected with the growing,
marketing, farming or other handling of such Crops and the Borrower hereby
assigns and transfers to the Bank all stock and all other interests,
benefits and rights of the Borrower in any such marketing association,
corporation, cooperative, partnership, firm or individual having anything
to do with such Crops and all monies due to the Borrower from any one or
more of them.

9.03. RELIANCE. Each warranty, representation, covenant and agreement
contained in this Agreement shall be conclusively presumed to have been
relied upon by the Bank regardless of any investigation made or information
possessed by the Bank and shall be cumulative and in addition to any other
warranties, representations, covenants or agreements which the Borrower shall
now or hereafter give, or cause to be given, to the Bank.

9.04. DISPUTE RESOLUTION

A. DISPUTES. It is understood and agreed that, upon the request of any
party to this Agreement, any dispute, claim or controversy of any kind,
whether in contract or in sort, statutory or common law, legal or
equitable, now existing or hereinafter arising between the parties in any
way arising out of, pertaining to or in connection with: (i) this Agreement
or any related agreements, documents or instruments, (ii) all past and
present loans, credits, accounts, deposits accounts (whether demand
deposits or time deposits), safe deposit boxes, safekeeping agreements,
guarantees, letters of credit, goods or services, or other transactions,
contracts or agreements of any kind, (iii) any incidents, omissions, acts,
practices, or occurrences causing injury to any party whereby another party
or its agents, employees or representatives may be liable, in whole or in
part, or (iv) any aspect of the past or present relationships of the
parties, shall be resolved through a two-step dispute resolution process
administered by the Judicial Arbitration & Mediation Services, Inc.
("JAMS") as follows:

B. STEP I - MEDIATION. At the request of any party to the dispute, claim
or controversy, the matter shall be referred to the nearest office of JAMS
for mediation, which is an informal, non-binding conference or conferences
between the parties in which a retired judge or justice from the JAMS panel
will seek to guide the parties to a resolution of the case.

(9)
<PAGE>

arbitration before a different judicial panelist, unless the parties
shall agree to have the mediator panelist act as arbitrator. The
hearing shall be conducted at a location determined by the arbitrator
in Los Angeles, California (or such other city as may be agreed upon
by the parties) and shall be administered by and in accordance with
the then existing Rules of Practice and Procedure of JAMS and
judgement upon any award rendered by the arbitrator may be entered by
any State or Federal Court having jurisdiction thereof. The arbitrator
shall determine which is the prevailing party and shall include in the
award that party's reasonable attorney's fees and costs. This
subparagraph shall apply only if, at the time of the submission of the
matter to JAMS, the dispute or issues involved do not arise out of any
transaction which is secured by real property collateral or, if so
secured, all parties consent to such submission.

As soon as practicable after selection of the arbitrator, the
arbitrator, or the arbitrator's designated representative, shall
determine a reasonable estimate of anticipated fees and costs of the
arbitrator, and render a statement to each party setting forth that
party's pro-rata share of said fees and costs. Thereafter, each party
shall, within 10 days of receipt of said statement, deposit said sum
with the arbitrator. Failure of any party to make such a deposit shall
result in a forfeiture by the non-depositing party of the right to
prosecute or defend the claim which is the subject of the arbitration,
but shall not otherwise serve to abate, stay or suspend the
arbitration proceedings.

D. STEP 11 - TRIAL BY COURT REFERENCE (CONTRACTS SECURED BY REAL
PROPERTY). If the dispute, claim or controversy is not one required or
agreed to be submitted to arbitration, as provided in the above
subparagraph, and has not been resolved by STEP I mediation, then any
remaining dispute, claim or controversy shall be submitted for
determination by a trial on Order of Reference conducted by a retired
judge or justice from the panel of JAMS appointed pursuant to the
provisions of Section 638(l) of the California Code of Civil
Procedure, or any amendments, addition or successor section thereto,
to hear the case and report a statement of decision thereon. The
parties intend this general reference agreement to be specifically
enforceable in accordance with said section. If the parties are unable
to agree upon a member of the JAMS panel to act as referee, then one
shall be appointed by the Presiding Judge of the county wherein the
hearing is to be held. The parties shall pay in advance, to the
referee, the estimated reasonable fees and costs of the reference, as
may be specified in advance by the referee. The parties shall
initially share equally, by paying their proportionate amount of the
estimated fees and costs of the reference. Failure of any party to
make such a fee deposit shall result in a forfeiture by the
non-depositing party of the right to prosecute or defend any cause of
action which is the subject of the reference, but shall not otherwise
serve to abate, stay or suspend the reference proceeding.

E. PROVISIONAL REMEDIES, SELF HELP AND FORECLOSURE. No provision of,
or the exercise of any rights under any portion of this Dispute
Resolution provision, shall limit the right of any party to exercise
self help remedies such as set off, foreclosure against any real or
personal property collateral, or the obtaining of provisional or
ancillary remedies, such as injunctive relief or the appointment of a
receiver, from any court having jurisdiction before, during or after
the pendency of any arbitration. At the Bank's option, foreclosure
under a deed of trust or mortgage may be accomplished either by
exercise of power of sale under the deed of trusts or mortgage, or by
judicial foreclosure. The institution and maintenance of an action for
provisional remedies, pursuit of provisional or ancillary remedies or
exercise of self help remedies shall not constitute a waiver of the
right of any party to submit the controversy or claim to arbitration.

9.05. WAIVER OF JURY. The Borrower and the Bank hereby expressly and
voluntarily waive any and all rights, whether arising under the California
constitution, any rules of the California Code of Civil Procedure, common law
or otherwise, to demand a trial by jury in any action, matter, claim or cause
of action whatsoever arising out of or in any way related to this Agreement
or any other agreement, document or transaction contemplated hereby.

9.06. RESTRUCTURING EXPENSES. In the event the Bank and the Borrower
negotiate for, or enter into, any restructuring, modification or
refinancing of the Indebtedness under this Agreement for the purposes of
remedying an Event of Default, The Bank, may require the Borrower to
reimburse all of the Bank's costs and expenses incurred in connection
therewith, including, but not limited to reasonable attorneys' fees and the
costs of any audit or appraisals required by the Bank to be performed in
connection with such restructuring, modification or refinancing.

9.07. ATTORNEY'S FEES. In the event of any suit, mediation, arbitration or
other action in relation to this Agreement or any document, instrument or
agreement executed with respect to, evidencing or securing the indebtedness
hereunder, the prevailing party, in addition to all other sums to which it
may be entitled, shall be entitled to reasonable attorneys' fees.

9.08. NOTICES. All notices, payments, requests, information and demands
which either party hereto may desire, or may be required to give or make to
the other party shall be given or made to such party by hand delivery or
through deposit in the United States mail, postage prepaid, or by Western
Union telegram, addressed to the address set forth below such party's
signature to this Agreement or to such other address as may be specified from
time to time in writing by either party to the other.

9.09. WAIVER. Neither the failure nor delay by the Bank in exercising any
right hereunder or under any document, instrument or agreements mentioned
herein shall operate as a waiver thereof, nor shall any single or partial
exercise of any rights hereunder or under any document, instrument or
agreement mentioned herein preclude other or further exercise thereof or the
exercise of any other right; nor shall any waiver of any right or default
hereunder or under any other document, instrument or agreement mentioned
herein constitute a waiver of any other right or default or constitute a
waiver of any other default of the same or any other term or provision.

9.10. CONFLICTING PROVISIONS. To the extent that any of the terms or
provisions contained in this Agreement are inconsistent with those contained
in any other document, instrument or agreement executed pursuant hereto, the
terms and provisions contained herein shall control. Otherwise, such
provisions shall be considered cumulative.

9.11. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the Bank's prior
written consent. The Bank may sell, assign or grant participations in all or
any portion of its rights and benefits hereunder. The Borrower agrees that,
in connection with any such sale, grant or assignment, the Bank may deliver
to the prospective buyer, participant or assignee financial statements and
other relevant information relating to the Borrower and any guarantor.

9.12. JURISDICTION. This Agreement, any notes issued hereunder, the rights
of the parties hereunder to an concerning the Collateral, and any documents,
instruments or agreements mentioned or referred to herein shall be governed by
and construed according to the laws of the State of California, to the
jurisdiction of whose courts the parties hereby submit.

9.13. HEADINGS. The headings set forth herein are solely for the purpose of
identification and have no legal significance.

9.14. ENTIRE AGREEMENT. This Agreement and all documents, instruments and
agreements mentioned herein constitute the entire and complete understanding
of the parties with respect to the transactions contemplated hereunder. All
previous conversations, memoranda and writings between the parties or
pertaining to the transactions contemplated hereunder that are not
incorporated or referenced in this Agreement or in such documents,
instruments and agreements are superseded hereby.

(10)

<PAGE>

IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first hereinabove written.

BANK: BORROWER:

SANWA BANK CALIFORNIA SCHEID VINEYARDS & MANAGEMENT CO.

By: By: /s/ Alfred G. Scheid
------------------------------- --------------------------------
Name/Title Alfred G. Scheid, President
Steven R. Edmonston, Vice President

Address: By: /s/ Ernest M. Brown
--------------------------------
Ernest M. Brown, Secretary

Fresno CBC/Agribusiness Office
2035 Fresno Street, 2nd Floor Address:
Fresno, CA 93721
1632 5th Street, Suite 220
Santa Monica, CA 90401

(11)

<PAGE>

TERM LOAN AGREEMENT

THIS TERM LOAN CREDIT AGREEMENT (the "Agreement") is made and entered into
this 30th day of September, 1991, by and between SANWA BANK CALIFORNIA (the
"Bank") and Scheid Vineyards and Management Co., formerly known as Monterey
Farming Corporation (the "Borrower").

SECTION I

AGREEMENT TO LEND

1.02 TERM LOAN. The Bank agrees to lend to the Borrower, upon the
Borrower's request made prior to October 30, 1991, up to the maximum amount of
$470,000.00 (the "Term Loan").

A. PURPOSE. Proceeds from the Term Loan shall be used to payoff term
loan with Prudential Insurance.

C. INTEREST. Interest shall accrue on the outstanding principal balance
of the Term Loan at a variable rate equivalent to an index for a variable
interest rate which is quoted, published or announced from time to time by the
Bank as its reference rate and as to which loans may be made by the Bank at,
below or above such reference rate (the "Reference Rate") plus 1.25% per annum
(the "Variable Rate"). Interest shall be adjusted concurrently with any change
in the Reference Rate. Interest shall be calculated on the basis of 360 days
per year, but charged on the actual number of days elapsed. The Borrower hereby
promises and agrees to pay interest quarterly on the last day of each quarter
commencing on December 31, 1991 and continuing on the last day of each quarter
thereafter up to and including December 31, 2000. If interest is not paid as it
becomes due, it shall be added to, become and be treated as a part of the
principal, and shall thereafter bear like interest.

D. PRINCIPAL. The Borrower hereby promises and agrees to pay principal
in 9 equal installments of $47,000.00 per installment commencing on December 31,
1991, and continuing on the last day of each December thereafter up to and
including December 31, 1999. On December 31st, 2000, the Borrower hereby
promises and agrees to pay to the Bank the entire unpaid principal balance,
together with accrued and unpaid interest.

Each payment received by the Bank shall, at the Bank's option, be applied to pay
interest then due and unpaid and the remainder thereof (if any) shall be applied
to pay principal.

SECTION II

GUARANTORS; SUBORDINATED DEBT

NAME OF CREDITOR AMOUNT OF EXISTING INDEBTEDNESS

Alfred G. Scheid $500,000.00

SECTION III

CONDITIONS PRECEDENT

3.01 DELIVERY OF EXECUTED DOCUMENTATION AND OTHER INFORMATION TO BANK.
The Borrower shall, concurrent with

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<PAGE>

its execution of this Agreement, deliver or cause to be delivered to the Bank,
in form and substance satisfactory to the Bank:

C. LOAN FEES. $7,550.00 plus any out-of-pocket expenses incurred by the
Bank including Appraisal fee in the amount of $3,500.00.

D. MISCELLANEOUS DOCUMENTS. Such other documents and opinions as the
Bank may require with respect to the transactions described in this Agreement.

SECTION IV

REPRESENTATIONS AND WARRANTIES

The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:

TRADE STYLE STATE OF USE

None at present

-2-

<PAGE>

being duly contested in good faith; (iii) liens of mechanics, materialmen,
warehousemen or other like liens arising in the ordinary course of business and
securing obligations which are not yet delinquent; (iv) liens and security
interests which, as of the date of this Agreement, have been disclosed to and
approved by the Bank in writing; (v) purchase money liens or purchase money
security interests upon or in any property acquired or held by the Borrower in
the ordinary course of business to secure indebtedness outstanding on the date
hereof or permitted to be incurred hereunder; and (vi) those liens and security
interests which in the aggregate constitute an immaterial and insignificant
monetary amount with respect to the net value of the Borrower's assets
(collectively "Permitted Lines").

SECTION V

COVENANTS

The Borrower covenants and agrees that, during the term of this Agreement,
and so long thereafter as the Borrower is indebted to the Bank under this
Agreement, the Borrower shall, unless the Bank otherwise consents in writing:

5.03 PAYMENT OF OBLIGATIONS AND TAXES. Make timely payment of all
assessments and taxes and all of its liabilities and obligations unless the same
are being contested in good faith.

5.05 REPORTING REQUIREMENTS. Deliver or cause to be delivered to the Bank
in form and detail satisfactory to the Bank:

A. ANNUAL STATEMENTS. Not later than 90 days after the end of each of the
Borrower's fiscal years, a copy of the annual financial report of the Borrower
for such year, which report shall be CPA-prepared and audited financial
statements which includes balance sheet, income statement, reconciliation of net
worth and working capital. Statements are to be provided for Scheid Vineyards
and Management Co., Vineyard Investors 1972 and Vineyard 405.

B. TAX RETURNS. Not later than N/A days after the end
of each of the Borrower's fiscal years, a copy of the Borrower's federal and
state income tax returns filed for such year.

C. INTERIM STATEMENTS. Not later than N/A days
after the end of each N/A , the Borrower's financial
statement as of the end of such N/A .

D. RECEIVABLES AND PAYABLES AGING. Not later than N/A
days after the end of each N/A , an aging of accounts receivable and an
aging of accounts payable.

E. OTHER INFORMATION. Promptly upon the Bank's request, such other
information pertaining to the Borrower or any Guarantor as the Bank may
reasonably request.

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<PAGE>

F. Borrower is to provide Bank with a copy of the crop budget annually-not
later than 90 days after calendar year end.

5.12 CHANGE IN THE NATURE OF BUSINESS. Not make any material change in its
financial structure or in the nature of its business as existing or conducted as
of the date of this Agreement.

5.13 FINANCIAL CONDITION. Maintain at all times:

A. NET WORTH. A minimum effective tangible net worth of not less than
$ N/A .

B. DEBT TO NET WORTH RATIO. A debt to effective tangible net worth ratio
of not more than N/A to 1.

C. WORKING CAPITAL. A minimum working capital of not less than
$350,000.00.

D. CURRENT RATIO. A ratio of current assets to current liabilities of not
less than 1.5 to 1.

E. None at present.

5.14 COMPENSATION OF OFFICERS, ETC./PARTNERS. Not increase total
compensation (which is defined herein to include, but not be limited to,
salaries, withdrawals, fees, bonuses and commissions) during any fiscal year to
all of the Borrower's executives, officers and directors, or, as applicable,
partners, by more than N/A % of the total compensation paid in
the prior fiscal year.

5.16 CAPITAL EXPENSES. Not make any fixed capital expenditure or any
commitment therefor, including, but not limited to, incurring liability for
leases which would be, in accordance with generally accepted accounting
principles, reported as capital leases, or purchase any real or personal
property in an aggregate amount exceeding $1,000,000.00 in any one fiscal year.
(Inclusive of the proposed capital improvements of $900,000.00 and equipment
purchases of $100,000.00.)

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<PAGE>

5.18 OTHER COVENANTS. Borrower will agree not to guaranty (with the
exception of their $3,707,000.00 and $2,079,000.00 Continuing Guaranties in
favor of Vineyard Investors 1972 and Vineyard 405), pledge, hypothecate or
dispose of assets, other than in the normal course of business, without
concurrence of the Bank.

SECTION VI

EVENTS OF DEFAULT

Any one or more of the following described events shall constitute an event of
default (an "Event of Default") under this Agreement:

6.01 NON-PAYMENT. The Borrower shall fail to pay any payment of principal
or interest or any other sum referred to in this Agreement within 10 days of
when due.

SECTION VII

REMEDIES ON DEFAULT

Upon the occurrence of any Event of Default, the Bank may, in its sole and
absolute election, without demand and upon only such notice as may be required
by law:

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<PAGE>

SECTION VIII

MISCELLANEOUS PROVISIONS

8.10 HEADINGS. The headings set forth herein are solely for the purpose of
identification and have no legal significance.

-6-

<PAGE>

IN WITNESS HEREOF, this Agreement has been executed by the parties hereto as
of the date first hereinabove written.

BANK: BORROWER:

SANWA BANK CALIFORNIA Scheid Vineyards and Management Co.
formerly known as Monterey Farming
Corporation

By: /s/ Gary R. Shaeffer By: /s/ Alfred G. Scheid
------------------------------- --------------------------------
Gary R. Shaeffer, Vice President/ Alfred G. Scheid, President
Loan Team Leader

Address: Fresno Agribusiness Office By: /s/ Ernest M. Brown
2035 Fresno St. --------------------------------
Fresno, CA 93721 Ernest M. Brown, Secretary
Address: 1632 5th St., Suite 220
Santa Monica, CA 90401

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<PAGE>

BUSINESS LOAN AGREEMENT

This Agreement dated as of March 28, 1997, is between Bank of America
National Trust and Savings Association (the "Bank") and Scheid Vineyards and
Management Co., a California corporation (the "Borrower").

1. LINE OF CREDIT AMOUNT AND TERMS

1.1. LINE OF CREDIT AMOUNT.

(a) During the availability period described below, the Bank
will provide a line of credit to the Borrower. The amount of the line of
credit (the "Development Loan Commitment") is Seven Million Five Hundred
Thousand Dollars ($7,500,000).

(b) This is a non-revolving line of credit with a term repayment
option. Any amount borrowed, even if repaid before the end of the
availability period, permanently reduces the remaining available line of
credit.

(c) Each advance must be for at least Ten Thousand Dollars
($10,000), or for the amount of the remaining available line of credit, if
less.

(d) The Borrower agrees not to permit the outstanding principal
balance of the line of credit to exceed the Development Loan Commitment.

1.2. AVAILABILITY PERIOD. The line of credit is available between the
date of this Agreement and December 31, 1999 (the "Expiration Date") unless a
default under Section 9 has occurred, whether or not such default has ripened
into an event of default giving the Bank the remedies set forth in Section 9.

1.3. INTEREST RATE.

(a) Unless an optional interest rate is elected as described
below, the interest rate is the Bank's Reference Rate minus 0.50 percentage
points.

(b) The Reference Rate is the rate of interest publicly
announced from time to time by the Bank in San Francisco, California, as
its Reference Rate. The Reference Rate is set by the Bank based on various
factors, including the Bank's costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing
some loans. The Bank may price loans to its customers at, above, or below
the Reference Rate. Any change in the Reference Rate shall take effect at
the opening of business on the day specified in the public announcement of
a change in the Bank's Reference Rate.

<PAGE>

1.4. REPAYMENT TERMS.

(a) The Borrower will pay interest on the fifth day of each
month, commencing on the fifth day of the month after the month in which
the first advance is made, until payment in full of any principal
outstanding under this line of credit.

(b) The Borrower will repay the principal amount outstanding on
the Expiration Date in annual installments starting January 5, 2000. The
first five of such annual installments shall be equal to one-tenth of the
principal amount outstanding on the Expiration Date, and the sixth and last
annual installment shall be payable on January 5, 2005 and shall pay the
remaining principal balance in full.

(c) The Borrower may prepay the loan in full or in part at any
time. The prepayment will be applied to the most remote installment(s) of
principal due under this Agreement.

1.5. OPTIONAL INTEREST RATE. Instead of the interest rate based on
the Bank's Reference Rate, Heublein, Inc.("Heublein") on behalf of the Borrower,
may elect the optional interest rates listed below during interest periods
agreed to by the Bank and the Borrower. The optional interest rates shall be
subject to the terms and conditions described later in this Agreement. Any
principal amount bearing interest at an optional rate under this Agreement is
referred to as a "Portion." The following optional interest rates are
available:

(a) LIBOR Rates.

(b) Short Term Fixed Rates.

2. OPTIONAL INTEREST RATES

2.1. OPTIONAL RATES. Each optional interest rate is a rate per year.
Interest will be paid on the last day of each interest period, and, if the
interest period is longer than one month, then on the fifth day of each month
during the interest period. No Portion will be converted to a different
interest rate during the applicable interest period. Upon the occurrence of a
default under Section 9 of this Agreement whether or not such default has
ripened into an event of default, the Bank may terminate the availability of
optional interest rates for interest periods commencing after the default
occurs.

2.2. LIBOR RATE. Heublein, on behalf of the Borrower, may elect to
have all or Portions of the principal balance bear interest at the LIBOR Rate
plus 0.50 percentage points. Designation of a LIBOR Rate Portion is subject to
the following requirements:

<PAGE>

(a) The interest period during which the LIBOR Rate will be in
effect will be one, two, three, four, five, six, seven, eight, nine, ten,
eleven, or twelve months. The first day of the interest period must be a
day other than a Saturday or a Sunday on which the Bank is open for
business in California, New York and London and dealing in offshore dollars
(a "LIBOR Banking Day"). The last day of the interest period and the
actual number of days during the interest period will be determined by the
Bank using the practices of the London inter-bank market. At the end of
any interest period, the interest rate will revert to the rate based on the
Reference Rate, unless the Borrower has designated another optional
interest rate for the Portion.

(b) Each LIBOR Rate Portion will be for an amount not less than
Five Hundred Thousand Dollars ($500,000).

(c) The "LIBOR Rate" means the interest rate determined by the
following formula, rounded upward to the nearest 1/100 of one percent.
(All amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)

LIBOR Rate = LONDON INTER-BANK OFFERED RATE
(1.00 Reserve Percentage)

Where,

(i) "London Inter-Bank Rate" means the interest rate
at which the Bank's London Branch, London, Great Britain, would offer
U.S. dollar deposits for the applicable interest period to other major
banks in the London inter-bank market at approximately 11:00 a.m.
London time two (2) London Banking Days before the commencement of the
interest period. A "London Banking Day" is a day on which the Bank's
London Branch is open for business and dealing in offshore dollars.

(ii) "Reserve Percentage" means the total of the maximum
reserve percentages for determining the reserves to be maintained by
member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in Federal Reserve Board Regulation D,
rounded upward to the nearest 1/100 of one percent. The percentage
will be expressed as a decimal, and will include, but not be limited
to, marginal, emergency, supplemental, special, and other reserve
percentages.

(d) Requests for a LIBOR Rate Portion shall be irrevocable and
shall be made no later than 12:00 noon San Francisco time on the LIBOR
Banking Day preceding the day on which the London Inter-Bank Offered Rate
will be set, as specified above.

<PAGE>

(e) A LIBOR Rate may not be elected with respect to any Portion
of the principal balance which is scheduled to be repaid before the last
day of the applicable interest period.

(f) Any Portion of the principal balance already bearing
interest at the LIBOR Rate will not be converted to a different rate during
its interest period.

(g) Each prepayment of a LIBOR Rate Portion, whether voluntary,
by reason of acceleration or otherwise, will be accompanied by the amount
of accrued interest on the amount prepaid and a prepayment fee as described
below. A "prepayment" is a payment of an amount on a date earlier than the
scheduled payment date for such amount as required by this Agreement. The
prepayment fee shall be equal to the amount (if any) by which

(i) the additional interest which would have been payable
during the interest period on the amount prepaid had it not been
prepaid until the last day of the interest period, exceeds

(ii) the interest which would have been recoverable by the
Bank by placing the amount prepaid on deposit in the domestic
certificate of deposit market, the eurodollar deposit market, or other
appropriate money market selected by the Bank, for a period starting
on the date on which it was prepaid and ending on the last day of the
interest period for such portion (or the scheduled payment date for
the amount prepaid, if earlier).

(h) The Bank will have no obligation to accept an election for a
LIBOR Rate Portion if any of the following described events has occurred
and is continuing:

(i) Dollar deposits in the principal amount, and for
periods equal to the interest period, of a LIBOR Rate portion are not
available in the London inter bank market; or

(ii) the LIBOR Rate does not accurately reflect the
cost of a LIBOR Rate portion.

2.3. SHORT TERM FIXED RATE. Heublein, on behalf of the Borrower, may
elect to have all or Portions of the principal balance bear interest at the
Short Term Fixed Rate, subject to the following requirements:

(a) The "Short Term Fixed Rate" means the Short Term Base Rate
plus 0.50 percentage points.

(b) The "Short Term Base Rate" means the fixed

<PAGE>

interest rate per annum, determined solely by the Bank on the first day of
the applicable interest period for the Short Term Fixed Rate Portion, as
the rate at which the Bank would be able to borrow funds in the Money
Market in the amount of the Short Term Fixed Rate Portion and with an
interest and principal payment schedule equal to the Short Term Fixed Rate
Portion and for a term equal to the applicable interest period. The Short
Term Base Rate shall include adjustments for reserve requirements, federal
deposit insurance, and any other similar adjustment which the Bank deems
appropriate. The Short Term Base Rate is the Bank's estimate only and the
Bank is under no obligation to actually purchase or match funds for any
transaction.

(c) "Money Market" means one or more wholesale
funding markets available to the Bank, including domestic negotiable
certificates of deposit, eurodollar deposits, bank deposit notes or other
appropriate money market instruments selected by the Bank.

(d) The interest period during which the Short
Term Fixed Rate will be in effect will be no shorter than 30 days and no
longer than one year.

(e) Each Short Term Fixed Rate Portion will be
for an amount not less than Five Hundred Thousand Dollars ($500,000).

(f) Any Portion of the principal balance already bearing
interest at the Short Term Fixed Rate will not be converted to a different rate
during its interest period.

(g) Each prepayment of a Short Term Fixed Rate portion, whether
voluntary, by reason of acceleration or otherwise, will be accompanied by the
amount of accrued interest on the amount prepaid, and a prepayment fee as
described below. A "prepayment" is a payment of an amount on a date earlier
than the scheduled payment date for such amount as required by this Agreement.
The prepayment fee shall be equal to the amount (if any) by which

(i) the additional interest which would have been payable
during the interest period on the amount prepaid had it not been
prepaid until the last day of the interest period, exceeds

(ii) the interest which would have been recoverable by the
Bank by placing the amount prepaid on deposit in the Money Market
for a period starting on the date on which it was prepaid and ending
on the last day of the interest period for such Portion (or the
scheduled payment date for the amount prepaid, if earlier).

<PAGE>

3. FEES AND EXPENSES

3.1. LOAN FEE. The Borrower agrees to pay a Thirty Seven Thousand
Five Hundred Dollar ($37,500) fee due on the date of this Agreement.

3.2. EXPENSES. The Borrower agrees to immediately repay the Bank for
expenses that include, but are not limited to, filing, recording and search
fees, appraisal fees, and documentation fees.

3.3. REIMBURSEMENT COSTS. The Borrower agrees to reimburse the Bank
for any expenses it incurs in the preparation of this Agreement and any
agreement or instrument required by this Agreement. Expenses include, but are
not limited to, reasonable attorneys' fees, including any allocated costs of the
Bank's in-house counsel.

4. DISBURSEMENTS, PAYMENTS AND COSTS

4.1. REQUESTS FOR CREDIT. Each request for an extension of credit
will be made by delivering a written Request for Credit in substantially the
form attached to this Agreement as Exhibit A (a "Request for Credit"), executed
by the Borrower and approved in writing by Heublein. The Request for Credit may
be delivered to the Bank by telefax, provided that the copy of the Request for
Credit which contains an original signature of Heublein is delivered to the Bank
within 10 days of such telefax.

4.2. DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and
each payment by the Borrower will be:

(a) made at the Bank's branch (or other location) selected by
the Bank from time to time;

(b) made for the account of the Bank's branch selected by the
Bank from time to time;

(d) evidenced by records kept by the Bank. In addition, the
Bank may, at its discretion, require the Borrower to sign one or more
promissory notes.

4.3. AUTHORIZATIONS.

(a) The Bank may honor telephone or telefax instructions for
repayments given by any one of the individuals authorized to sign loan
agreements on behalf of the Borrower, or any other individual designated by
any one of such authorized signers. The Borrower will provide written
confirmation to the Bank of any telephone or telefax instructions relating
to repayment within 10 days.

<PAGE>

(b) The Borrower irrevocably authorizes the Bank to honor
telephone or telefax instructions for the designation of optional interest
rates given by any one of the individuals authorized to sign agreements
relating to this transaction on behalf of Heublein, or any other individual
designated by any one of such authorized signers. The Borrower agrees that
it shall be bound by such instructions provided by Heublein whether or not
the Borrower receives notice of such instructions or of any confirmation
provided by the Bank pursuant to Section 4.3(c).

(c) The Bank may, but shall not be required to, provide
confirmation of the telephone or telefax instructions for the designations
of optional interest rates received from the Borrower or Heublein. If
there is a discrepancy between the telephone or telefax instructions and
the written confirmation, the written confirmation will prevail.

(d) The Borrower indemnifies and excuses the Bank (including its
officers, employees, and agents) from all liability, loss, and costs in
connection with any act resulting from telephone or telefax instructions it
reasonably believes are made by any individual authorized by the Borrower
to give such instructions, or, in the case of instructions authorized to be
given by Heublein, by an individual authorized by Heublein to give such
instructions. This indemnity and excuse will survive this Agreement's
termination.

(e) Advances will be deposited in and repayments will be
withdrawn from the Borrower's account number 14989-00792.

4.4. DIRECT DEBIT (PRE-BILLING).

(a) The Borrower agrees that the Bank will debit the Borrower's
deposit account number 14989-00792 (the "Designated Account") on the date
each payment of principal and interest from the Borrower becomes due (the
"Due Date"). If the Due Date is not a banking day, the Designated Account
will be debited on the next banking day.

(b) Approximately 10 days prior to each Due Date, the Bank will
mail to the Borrower (with a copy to Heublein) a statement of the amounts
that will be due on that Due Date (the "Billed Amount"). The calculation
will be made on the assumption that no new extensions of credit or payments
will be made between the date of the billing statement and the Due Date,
and that there will be no changes in the applicable interest rate.

<PAGE>

on that date (the "Accrued Amount"). If the Billed Amount debited to such
Designated Account differs from the Accrued Amount, the discrepancy will be
treated as follows:

(i) If the Billed Amount is less than the Accrued Amount,
the Billed Amount for the following Due Date will be increased by the
amount of the discrepancy. The Borrower will not be in default by
reason of any such discrepancy.

(ii) If the Billed Amount is more than the Accrued Amount,
the Billed Amount for the following Due Date will be decreased by the
amount of the discrepancy.

Regardless of any such discrepancy, interest will continue to accrue based
on the actual amount of principal outstanding without compounding. The
Bank will not pay the Borrower interest on any overpayment.

(d) The Borrower will maintain sufficient funds in the
Designated Account to cover each debit. If there are insufficient funds in
the Designated Account on the date the Bank enters any debit authorized by
this Agreement, the debit will be reversed.

4.5. BANKING DAYS. Unless otherwise provided in this Agreement, a
banking day is a day other than a Saturday or a Sunday on which the Bank is open
for business in California. All payments and disbursements which would be due
on a day which is not a banking day will be due on the next banking day. All
payments received on a day which is not a banking day will be applied to the
credit on the next banking day.

4.6. TAXES.

(a) If any payments to the Bank under this Agreement are made
from outside the United States, the Borrower will not deduct any foreign
taxes from any payments it makes to the Bank. If any such taxes are
imposed on any payments made by the Borrower (including payments under this
paragraph), the Borrower will pay the taxes and will also pay to the Bank,
at the time interest is paid, any additional amount which the Bank
specifies as necessary to preserve the after-tax yield the Bank would have
received if such taxes had not been imposed. The Borrower will confirm
that it has paid the taxes by giving the Bank official tax receipts (or
notarized copies) within 30 days after the due date.

(b) Payments made by the Borrower to the Bank will be made
without deduction of United States withholding or similar taxes. If the
Borrower is required to pay U.S. withholding taxes, the Borrower will pay
such taxes in addition to the amounts due to the Bank under this

<PAGE>

Agreement. If the Borrower fails to make such tax payments when due, the
Borrower indemnifies the Bank against any liability for such taxes, as well
as for any related interest, expenses, additions to tax, or penalties
asserted against or suffered by the Bank with respect to such taxes.

4.7. ADDITIONAL COSTS.

(a) The Borrower will pay the Bank, on demand, for the Bank's
costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory agency which is applicable to all national
banks or a class of all national banks. The costs and losses will be
allocated to the loan in a manner determined by the Bank, using any
reasonable method. The costs include the following:

(i) any reserve or deposit requirements; and

(ii) any capital requirements relating to the Bank's assets
and commitments for credit.

(b) The Borrower's obligations under Section 4.7(a) are limited
to the Bank's costs or losses arising on or after the date which is 60 days
after the date on which the Bank sends written notice to the Borrower
confirming the Borrower's obligations under Section 4.7(a) and describing
in reasonable detail such costs or losses.

4.8. INTEREST CALCULATION. Except as otherwise stated in this
Agreement, all interest and fees, if any, will be computed on the basis of a
360-day year and the actual number of days elapsed. This results in more
interest or a higher fee than if a 365-day year is used.

4.9. DEFAULT RATE. Upon the occurrence and during the continuation of
any default under this Agreement, principal amounts outstanding under this
Agreement will at the option of the Bank bear interest at a rate which is two
percentage point(s) higher than the rate of interest otherwise provided under
this Agreement. This will not constitute a waiver of any default. Installments
of principal which are not paid when due under this Agreement shall continue to
bear interest until paid. Any interest, fees or costs which are not paid when
due will, at the option of the Bank, bear interest at the Bank's Reference Rate
plus two percentage points. This may result in compounding of interest.

5. CONDITIONS

The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit to the
Borrower under this Agreement:

<PAGE>

5.1. AUTHORIZATIONS. Evidence that the execution, delivery and
performance by the Borrower of this Agreement and any instrument or agreement
required under this Agreement have been duly authorized and evidence that the
execution, delivery and performance by Heublein of any instrument or agreement
required under this Agreement on the part of Heublein have been duly authorized.

5.2. GOVERNING DOCUMENTS. Copies of the articles of incorporation,
bylaws and any necessary authorizing resolutions of both the Borrower and
Heublein.

5.3. STANDBY LETTER OF CREDIT. A Standby Letter of Credit (together
with any substituted letter of credit delivered after the date of this
agreement, the "Letter of Credit") acceptable to the Bank issued by a financial
institution acceptable to the Bank in favor of the Bank for the account of
Heublein in a minimum amount of $7,500,000 plus interest in the amount of not
less than $112,500 with an expiration date of not earlier than July 31, 1997.

5.4. PLANS AND BUDGETS. The Borrower's written plan and budget for
the 1997 Farming Year ("Farming Year" being defined as in the Vineyard
Development and Management Agreement, effective as of December 1, 1995, between
the Borrower and Heublein, as amended by Amendment No.1 thereto (the
"Development Agreement")), delivered to Heublein pursuant to Section 4.6 of the
Development Agreement, and any plans and budgets for Farming Years following
1997 relating to the Development Agreement prepared by the Borrower, all of
which shall be acceptable to the Bank (the "Plan and Budget").

5.5. REPORT. The Borrower's written report for the 1996 Farming Year
delivered to Heublein pursuant to Section 4.10 of the Development Agreement
(each such annual report, a "Report"), which Report shall be acceptable to the
Bank.

5.6. OTHER AGREEMENTS. A copy of the Development Agreement, which
shall be satisfactory to the Bank and which shall be binding obligations of each
party thereto.

5.7. ACKNOWLEDGEMENT AGREEMENT. An Acknowledgement Agreement
acceptable to the Bank and executed by Heublein (the "Heublein Acknowledgement
Agreement").

5.8. PAYMENT OF FEES. Payment of all accrued and unpaid expenses
incurred by the Bank as required by the paragraph entitled "Reimbursement
Costs."

5.9. TERMINATION OF SANWA CREDIT AGREEMENT. Evidence satisfactory to
the Bank that, upon payment to Sanwa Bank California ("Sanwa") of a principal of
$2,800,211 and interest accrued thereon under the Credit Agreement (Crops),
dated March 26, 1996, between Sanwa and Borrower (the "Sanwa Credit Agreement"),
the Sanwa Credit Agreement shall be terminated.

<PAGE>

5.10. FINANCIAL STATEMENTS OF HEUBLEIN. Financial statements of
Heublein as of the end of the most recent fiscal year for which financial
statements are available, which financial statements shall be acceptable to the
Bank.

5.11. CONDITIONS TO EACH ADVANCE. Before each extension of credit,
including the first, the Bank shall be satisfied that each representation of
Heublein set forth in the Heublein Acknowledgement Agreement shall be true and
correct on and as of the date of such extension of credit as if made on and as
of such date and Heublein shall not be in default of any of its obligations
under the Heublein Acknowledgement Agreement.

5.12. OTHER ITEMS. Any other items that the Bank reasonably requires.

6. REPRESENTATIONS AND WARRANTIES

When the Borrower signs this Agreement, and until the Bank is repaid
in full, the Borrower makes the following representations and warranties. Each
request for an extension of credit constitutes a renewed representation:

6.1. ORGANIZATION OF BORROWER. The Borrower is a corporation duly
formed and existing under the laws of the State of California.

6.2. AUTHORIZATION. This Agreement, and any instrument or agreement
required hereunder, are within the Borrower's powers, have been duly authorized,
and do not conflict with the Borrower's articles of incorporation, bylaws, or
any other governing documents of the Borrower.

6.3. ENFORCEABLE AGREEMENT. This Agreement is a legal, valid and
binding agreement of the Borrower, enforceable against the Borrower in
accordance with its terms, and any instrument or agreement required hereunder,
when executed and delivered, will be similarly legal, valid, binding and
enforceable.

6.4. GOOD STANDING. In each state in which the Borrower does
business, it is properly licensed, in good standing, and, where required, in
compliance with fictitious name statutes.

6.5. NO CONFLICTS. This Agreement does not conflict with any law,
agreement, or obligation by which the Borrower is bound.

6.6. FINANCIAL INFORMATION. All financial statements that have been
or will be supplied to the Bank, including the Borrower's financial statement
dated as of December 31, 1996, are complete, have been prepared in accordance
with generally accepted accounting principles and fairly present the financial
condition and results of operations of the Borrower as of such

<PAGE>

date and for the period then ended. Since December 31, 1996, there has been no
material adverse change in the business, condition (financial or otherwise),
operations, properties or prospects of the Borrower.

6.7. LAWSUITS. There is no lawsuit, tax claim or other dispute
pending or threatened against the Borrower which, if lost, would impair the
Borrower's financial condition or ability to repay the loan, except as have been
disclosed in writing to the Bank.

6.8. PERMITS, FRANCHISES. The Borrower possesses all permits,
memberships, franchises, contracts and licenses required and all trademark
rights, trade name rights, patent rights and fictitious name rights necessary to
enable it to conduct the business in which it is now engaged.

6.9. OTHER OBLIGATIONS. The Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.

6.10. INCOME TAX RETURNS. The Borrower has no knowledge of any
pending assessments or adjustments of its income tax for any year.

6.11. NO EVENT OF DEFAULT. There is no event which is, or with notice
or lapse of time or both would be, a default under this Agreement.

7. COVENANTS

The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:

7.1. USE OF PROCEEDS. To use the proceeds of the Development Loan
Commitment only to pay the obligations of the Borrower under the Sanwa Credit
Agreement as specified in Section 5.9 and for the operations and activities
conducted pursuant to the Development Agreement.

7.2. FINANCIAL INFORMATION. To provide the following financial
information and statements in form and content acceptable to the Bank, and such
additional information as requested by the Bank from time to time:

(a) Within 120 days of the Borrower's fiscal year end, the
Borrower's annual financial statements. These financial statements shall
be audited by a firm of independent accountants reasonably satisfactory to
the Bank and shall be prepared consistently with the financial statements
delivered to the Bank pursuant to Section 6.6.

<PAGE>

(b) On or before March 1 of each year, a Report, satisfactory to
the Bank, for the immediately preceding Farming Year.

7.3. OTHER LIENS. Not to create, assume, or allow any security
interest or lien (including judicial liens) on all or any portion of the
Development Agreement.

7.4. NOTICES TO BANK. To promptly notify the Bank in writing of:

(a) any lawsuit over $250,000 against the Borrower.

(b) any substantial dispute between the Borrower and any
government authority or between the Borrower and Heublein.

(d) any material adverse change in the Borrower's business
condition (financial or otherwise), operations, properties or prospects, or
ability to repay the credit.

(e) any change in the Borrower's name, legal structure, place of
business, or chief executive office if the Borrower has more than one place
of business; or

(f) any material change in any Plan and Budget.

7.5. BOOKS AND RECORDS. To maintain adequate books and records.

7.6. AUDITS. To allow the Bank and its agents to inspect the
Borrower's properties and examine, audit and make copies of books and records at
any reasonable time. If any of the Borrower's properties, books or records are
in the possession of a third party, the Borrower authorizes that third party to
permit the Bank or its agents to have access to perform inspections or audits
and to respond to the Bank's requests for information concerning such
properties, books and records.

7.7. COMPLIANCE WITH LAWS. To comply with the laws (including any
fictitious name statute), regulations, and orders of any government body with
authority over the Borrower's business.

7.8. PRESERVATION OF RIGHTS. To maintain and preserve all rights,
privileges, and franchises the Borrower now has.

7.9. MAINTENANCE OF PROPERTIES. To make repairs, renewals or
replacements to the Managed Properties and the

<PAGE>

Development Properties in accordance with the Development Agreement and the
Plans and Budget.

7.10. COOPERATION. To take any action reasonably requested by the
Bank to carry out the intent of this Agreement.

7.11. INSURANCE. To maintain insurance as is usual for the business
it is in and upon the request of the Bank, to deliver to the Bank a copy of each
insurance policy, or, if permitted by the Bank, a certificate of insurance
listing all insurance in force.

7.12. ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's
written consent:

(a) liquidate or dissolve the Borrower's business.

(b) sell, assign, lease, transfer or otherwise dispose of all or
a substantial part of the Borrower's business or the Borrower's assets.

(c) sell, assign, lease, transfer or otherwise dispose of any
material asset or group of assets for less than fair market value, or enter
into any agreement to do so.

(d) sell, assign, lease, transfer or otherwise dispose of any
portion of the Borrower's interest in the Development Agreement.

(e) voluntarily suspend its business for more than ten days in
any year.

(f) change the character of the Borrower's business.

(g) convert to a limited liability company.

(h) amend, modify or waive any provision of Section 3.1, 3.2 or
3.3 of the Development Agreement.

8. HAZARDOUS WASTE INDEMNIFICATION

The Borrower will indemnify and hold harmless the Bank from any loss
or liability directly or indirectly arising out of the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply
whether the hazardous substance is on, under or about the Borrower's property or
operations or property leased to or operated by the Borrower. The indemnity
includes but is not limited to attorneys' fees (including the reasonable
estimate of the allocated cost of in-house counsel and staff). The indemnity
extends to the Bank, its parent, subsidiaries and all of their directors,
officers, employees, agents, successors, attorneys and assigns.

<PAGE>

"Hazardous substance" means any substance, material or waste that is or becomes
designated or regulated as "toxic," "hazardous," "pollutant," or "contaminant"
or a similar designation or regulation under any federal, state or local law
(whether under common law, statute, regulation or otherwise) or judicial or
administrative interpretation of such, including, without limitation, petroleum
or natural gas. This indemnity will survive repayment of the Borrower's
obligations to the Bank.

9. DEFAULT

If any of the following events occurs, the Bank may do one or more of
the following: declare the Borrower in default, stop making any additional
credit available to the Borrower, cause the entire debt of the Borrower
hereunder to become due immediately and without prior notice, or, subject to the
third sentence of this paragraph of Section 9, draw on the Letter of Credit. If
an event of default occurs under Section 9.3 with respect to the Borrower or
Heublein, then the entire debt outstanding under this Agreement will
automatically be due immediately and the Bank may draw on the Letter of Credit.
Prior to asserting any rights or remedies against the Borrower as a result of an
event of default under this Section 9, the Bank shall first draw on the Letter
of Credit by presenting to the Letter of Credit Bank the documents required to
draw on the Letter of Credit; provided however, that (i) the Bank shall not be
required to draw on the Letter of Credit prior to asserting any such rights or
remedies against the Borrower if at the time the Bank asserts any such rights or
remedies against the Borrower, the Bank is not legally permitted to draw upon
the Letter of Credit or, as the result of any applicable statutory, regulatory
or judicial restriction, the Letter of Credit is not then available for drawing
or for payment; and (ii) the Bank shall be entitled to assert any or all of its
rights and remedies under Sections 4.6, 4.7, 4.9, 8, 10.7, 10.9 and the first
two sentences of this paragraph of Section 9 (other than drawing under the
Letter of Credit) prior to any such draw under the Letter of Credit. Except
upon payment in full of the indebtedness of the Borrower owed to the Bank
hereunder, the Bank covenants and agrees that by its affirmative act it will not
release or otherwise return to Heublein, or make any changes to (other than
extensions of its expiry date), the Letter of Credit without the prior written
consent of the Borrower. Breach by the Bank of its obligations under this
paragraph of Section 9 shall not affect Borrower's obligations under this
Agreement, provided that the Bank shall be liable to the Borrower for direct
damages incurred by the Borrower as a result of such breach.

9.1. FAILURE TO PAY. The Borrower fails to make a payment under this
Agreement when due and such failure shall continue for seven days after such due
date.

9.2. FALSE INFORMATION. The Borrower (or Heublein) has given the Bank
false or misleading information or representations.

9.3. BANKRUPTCY. The Borrower, Heublein or the financial institution
issuing the Letter of Credit (the "Letter of Credit Bank")

<PAGE>

files a bankruptcy petition, a bankruptcy petition is filed against the
Borrower, Heublein or the Letter of Credit Bank or the Borrower, Heublein or the
Letter of Credit Bank makes a general assignment for the benefit of creditors.
The default will be deemed cured if any bankruptcy petition filed against the
Borrower or Heublein is dismissed within a period of 45 days after the filing;
provided, however, that the Bank will not be obligated to extend any additional
credit to the Borrower during that period.

9.4. RECEIVERS. A receiver or similar official is appointed for the
business of the Borrower, Heublein or the Letter of Credit Bank or the business
of any of them is terminated.

9.5. GOVERNMENT ACTION. Any government authority takes action that
the Bank reasonably believes, in its good faith business judgment, materially
adversely affects the Borrower's financial condition or ability to repay.

9.6. DEFAULT UNDER RELATED DOCUMENTS. Any provisions of any guaranty,
security agreement, indemnity agreement, acknowledgement or other document
required by this Agreement, including without limitation, the Heublein
Acknowledgement Agreement, is violated (and any notice or cure period provided
in such document has expired) or no longer in effect, or an event described in
Section 10.3 of the Development Agreement has occurred and is continuing and any
cure period provided therein has expired.

9.7. CHANGE OF OWNERSHIP. A direct or indirect change in the
Borrower's capital ownership in excess of 10% shall occur.

9.8. OTHER BANK AGREEMENTS. The Borrower fails to meet the conditions
of, or fails to perform any obligation under, any other agreement the Borrower
has with the Bank or any affiliate of the Bank and such failure continues for 15
days after the date on which the Bank gives written notice of the breach to the
Borrower; provided that in the event such breach is not curable during such
15-day period, such 15-day period shall be extended (but not beyond a total of
45 days) so long as the Borrower has commenced and is diligently pursuing such
cure; and provided further, however, that the Bank will not be obligated to
extend any additional credit to the Borrower during any cure period provided
hereunder.

9.9. OTHER BREACH UNDER AGREEMENT. The Borrower (i) breaches or fails
to perform any obligation under Section 7.3 or 7.12 of this Agreement or
(ii) fails to meet the conditions or breaches, or fails to perform any
obligations under, any term of this Agreement not specifically referred to in
this Article and such failure or breach continues for 15 days after the date on
which the Bank gives written notice of the breach to the Borrower; provided that
in the event such breach is not curable during such 15-day period, such 15-day
period shall be extended (but not beyond a total of 45 days) so long as the
Borrower has commenced and is diligently pursuing such cure; and provided
further, however, that the Bank will not be obligated to extend

<PAGE>

any additional credit to the Borrower during any cure period provided hereunder.

9.10. LETTER OF CREDIT. The rating of the long-term debt of the
Letter of Credit Bank is reduced below A- or A3 by Standard & Poor's Rating
Services, a division of the McGraw-Hill Companies, Inc. ("S&P") or Moody's
Investors Service, Inc. ("Moody's"), respectively, and within 30 days after the
date on which the Bank gives written notice of such reduction to the Borrower,
the Bank has not received a letter of credit (i) with an expiration date not
earlier than the expiration date set forth in the then existing Letter of
Credit, (ii) from a financial institution whose long-term debt rating is not
less than A3 by Moody's and A- by S&P, and (iii) otherwise meeting the
requirements of Section 5.3; or the Bank has received notice from the Letter of
Credit Bank with respect to the Letter of Credit then in effect that the Letter
of Credit Bank will not extend the Letter of Credit and within 60 days of the
expiration date of such Letter of Credit, the Bank has not received a letter of
credit with an expiration date not earlier than one year after the expiration
date set forth in the then existing Letter of Credit and which meets the
requirements set forth in clauses (ii) and (iii) of this Section.

10. ENFORCING THIS AGREEMENT; MISCELLANEOUS

10.1. BORROWER ACKNOWLEDGEMENTS. Borrower acknowledges and agrees as
follows:

(a) Borrower shall send copies of all notices certificates and
other documents delivered to the Bank under or pursuant to this Agreement
or any document or agreement contemplated hereby to Heublein at the same
time that Borrower delivers such notices certificates or documents to the
Bank.

(b) Borrower authorizes the Bank to release to Heublein any
financial or other information or documents provided to the Bank by or on
behalf of the Borrower and authorizes the Bank to provide to Heublein
copies of all notices and other communications delivered by the Bank to the
Borrower hereunder.

(c) Borrower has decided to enter into this Agreement and the
other agreements contemplated hereby based solely on its own evaluation of
the merits and risks of such transactions and on such information and
documents as the Borrower deems appropriate and without reliance on any
information provided by the Bank or on the Bank's decision to enter into
this Agreement. The Borrower is fully aware of the merits and risks of
such transactions, and the Bank's decision to enter into this Agreement
does not constitute any evaluation of the merits or risks of the
transactions to the Borrower.

<PAGE>

(d) The Bank has made no commitment to extend any additional
credit to the Borrower or to continue the credit provided hereunder after
this Agreement expires or is terminated as provided herein.

(e) The Bank shall have no duty to review or investigate the
purpose of any advances made hereunder or the compliance by the Borrower or
Heublein with the Development Agreement or any term thereof prior to making
any advance hereunder.

10.2. CALIFORNIA LAW. This Agreement is governed by California law.

10.3. SUCCESSORS AND ASSIGNS. This Agreement is binding on the
Borrower's and the Bank's successors and assignees. The Borrower agrees that it
may not assign this Agreement without the Bank's prior consent. The Bank may
sell participations in or assign this loan, and may exchange financial
information about the Borrower with actual or potential participants or
assignees. If a participation is sold or the loan is assigned, the purchaser
will have the right of set-off against the Borrower.

10.4. ARBITRATION.

(a) This paragraph concerns the resolution of any controversies
or claims between the Borrower and the Bank, including but not limited to
those that arise from:

(i) This Agreement (including any renewals, extensions or
modifications of this Agreement);

(ii) Any document, agreement or procedure related to or
delivered in connection with this Agreement;

(iii) Any violation of this Agreement; or

(iv) Any claims for damages resulting from any business
conducted between the Borrower and the Bank, including claims for
injury to persons, property or business interests (torts).

(b) At the request of the Borrower or the Bank, any such
controversies or claims will be settled by arbitration in accordance with
the United States Arbitration Act. The United States Arbitration Act will
apply even though this Agreement provides that it is governed by California
law.

(c) Arbitration proceedings will be administered by the American
Arbitration Association and will be subject to its commercial rules of
arbitration.

<PAGE>

(d) For purposes of the application of the statute of
limitations, the filing of an arbitration pursuant to this paragraph is the
equivalent of the filing of a lawsuit, and any claim or controversy which
may be arbitrated under this paragraph is subject to any applicable statute
of limitations. The arbitrators will have the authority to decide whether
any such claim or controversy is barred by the statute of limitations and,
if so, to dismiss the arbitration on that basis.

(e) If there is a dispute as to whether an issue is arbitrable,
the arbitrators will have the authority to resolve any such dispute.

(f) The decision that results from an arbitration proceeding may
be submitted to any authorized court of law to be confirmed and enforced.

(g) The procedure described above will not apply if the
controversy or claim, at the time of the proposed submission to
arbitration, arises from or relates to an obligation to the Bank secured by
real property located in California. In this case, both the Borrower and
the Bank must consent to submission of the claim or controversy to
arbitration. If both parties do not consent to arbitration, the
controversy or claim will be settled as follows:

(i) The Borrower and the Bank will designate a referee (or
a panel of referees) selected under the auspices of the American
Arbitration Association in the same manner as arbitrators are selected
in Association-sponsored proceedings;

(ii) The designated referee (or the panel of referees) will
be appointed by a court as provided in California Code of Civil
Procedure Section 638 and the following related sections;

(iii) The referee (or the presiding referee of the panel)
will be an active attorney or a retired judge; and

(iv) The award that results from the decision of the referee
(or the panel) will be entered as a judgment in the court that
appointed the referee, in accordance with the provisions of California
Code of Civil Procedure Sections 644 and 645.

(h) This provision does not limit the right of the Borrower or
the Bank to:

(i) exercise self-help remedies such as setoff;

<PAGE>

(ii) foreclose against or sell any real or personal property
collateral; or

(iii) act in a court of law, before, during or after the
arbitration proceeding to obtain:

(A) an interim remedy; and/or

(B) additional or supplementary remedies.

(i) The pursuit of or a successful action for interim,
additional or supplementary remedies, or the filing of a court action, does
not constitute a waiver of the right of the Borrower or the Bank, including
the suing party, to submit the controversy or claim to arbitration if the
other party contests the lawsuit. However, if the controversy or claim
arises from or relates to an obligation to the Bank which is secured by
real property located in California at the time of the proposed submission
to arbitration, this right is limited according to the provision above
requiring the consent of both the Borrower and the Bank to seek resolution
through arbitration.

(j) If the Bank forecloses against any real property securing
this Agreement, the Bank has the option to exercise the power of sale under
the deed of trust or mortgage, or to proceed by judicial foreclosure.

10.5. SEVERABILITY; WAIVERS. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Bank retains all
rights, even if it makes a loan after default. If the Bank waives a default, it
may enforce a later default. Any consent or waiver under this Agreement must be
in writing.

10.6. ADMINISTRATION COSTS. The Borrower shall pay the Bank for all
reasonable costs incurred by the Bank in connection with administering this
Agreement.

10.7. ATTORNEYS' FEES. The Borrower shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement, the
Letter of Credit and any other documents executed in connection with this
Agreement, and including any amendment, waiver, "workout" or restructuring under
this Agreement. In the event of a lawsuit or arbitration proceeding, the
prevailing party is entitled to recover costs and reasonable attorneys' fees
incurred in connection with the lawsuit or arbitration proceeding, as determined
by the court or arbitrator. In the event that any case is commenced by or
against the Borrower under the Bankruptcy Code (Title 11, United States Code) or
any similar or successor statute, the Bank is entitled to recover costs and
reasonable attorneys' fees incurred by the Bank related to the preservation,

<PAGE>

protection, or enforcement of any rights of the Bank in such a case. As used in
this paragraph, "attorneys' fees" includes the allocated costs of the Bank's
in-house counsel.

10.8. ONE AGREEMENT. This Agreement, dated the date hereof:

(a) represents the sum of the understandings and agreements
between the Bank and the Borrower concerning this credit;

(b) replaces any prior oral or written agreements between the
Bank and the Borrower concerning this credit; and

(c) is intended by the Bank and the Borrower as the final,
complete and exclusive statement of the terms agreed to by them, and shall
not be affected by any other agreement, including without limitation any
agreement between the Borrower and Heublein.

10.9. INDEMNIFICATION. The Borrower will indemnify and hold the Bank
harmless from any loss, liability, damages, judgments, and costs of any kind
relating to or arising directly or indirectly out of (a) this Agreement, any
document required hereunder or the transactions contemplated hereby or thereby,
(b) any credit extended or committed by the Bank to the Borrower hereunder, and
(c) any litigation or proceeding related to or arising out of this Agreement,
any such document, or any such credit. This indemnity includes but is not
limited to reasonable attorneys' fees (including the allocated cost of in-house
counsel). This indemnity extends to the Bank, its parent, subsidiaries and all
of their directors, officers, employees, agents, successors, attorneys, and
assigns. This indemnity will survive repayment of the Borrower's obligations to
the Bank. All sums due to the Bank hereunder shall be obligations of the
Borrower, due and payable immediately without demand.

10.10. NOTICES. All notices required under this Agreement shall be
personally delivered or sent by first class mail, postage prepaid, to the
addresses on Schedule 1 to this Agreement, or to such other addresses as the
Bank and the Borrower may specify from time to time in writing.

10.11. HEADINGS. Article and paragraph headings are for reference
only and shall not affect the interpretation or meaning of any provisions of
this Agreement.

10.12. COUNTERPARTS. This Agreement may be executed in as many
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.

<PAGE>

10.13. COMMITMENT EXPIRATION. The Bank's commitment to extend credit
under this Agreement will expire on March 31, 1997, unless this Agreement and
any documents required by this Agreement have been signed and returned to the
Bank on or before that date.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date stated at the top of the first page.

Bank of America National Scheid Vineyards and
Trust and Savings Association Management Co.

By /s/ Robert E. Anderson By /s/ Alfred G. Scheid
--------------------------- ---------------------------
Robert E. Anderson
Vice President Title Chair & CEO
------------------------

<PAGE>

Schedule 1
Addresses for Notices

If to the Bank:

Robert E. Anderson
Bank of America NT & SA
10 Santa Rosa Avenue
Santa Rosa, CA 95404
Telephone: 707-525-2477
Fax: 707-525-2287

If to the Borrower:

Scheid Vineyards and Management Co.
13470 Washington Blvd. Suite 300
Marina del Rey, CA 90292
Attn: Heidi M. Scheid
Telephone: 310-301-1555
Fax: 310-301-1569

If to Heublein:

Heublein, Inc.
1825 South Grant Street, Suite 200
San Mateo, California 94402
Attn: Robert B. Fowles
Telephone: 415-286-6308
Fax: 415-572-9599

With a copy to:

Heublein, Inc.
450 Columbus Blvd.
P.O. Box 778
Hartford, Conn. 06142-0778
Attn: General Counsel
Telephone: 860-702-4000
Fax: 860-702-4032

<PAGE>

Exhibit A

REQUEST FOR CREDIT

Date: __________, _____

Bank of America
National Trust and Savings Association
Santa Rosa Commercial Banking Office

1. Reference is made to the Business Loan Agreement, dated as of March
28, 1997 (the "Credit Agreement"), between Scheid Vineyards and Management Co.
("Borrower") and Bank of America National Trust and Savings Association (the
"Bank"). Unless otherwise indicated, all terms defined in the Credit Agreement
have the same respective meanings when used herein.

2. Pursuant to Section 4.1 of the Credit Agreement, Borrower hereby
irrevocably requests an advance in the amount of $_____________________, such
advance to be made on ________________, ____ and to be deposited into account
no. 14989-00792. The Borrower directs the Bank to transfer such amount by wire
transfer to Sanwa Bank California, Fresno Agribusiness Office No. 2480, ABA No.
122003516, for credit to the account of Scheid Vineyards and Management Co.,
account no. 080612311.

3. The Borrower hereby certifies to the Bank that, on the date of this
Request for Credit and after giving effect to the advance: (a) the
representations and warranties of the Borrower set forth in Article 6 of the
Credit Agreement are true and correct in all material respects as if made on
such date; and (b) no default or event of default has occurred and is
continuing.

IN WITNESS WHEREOF, Borrower has executed this Request for Credit on
the date set forth above.

SCHEID VINEYARDS AND MANAGEMENT CO.

By: __________________________________

HEUBLEIN ACKNOWLEDGEMENT TO REQUEST FOR CREDIT

Heublein, Inc. ("Heublein") hereby acknowledges receipt of and
approves the foregoing Request for Credit and certifies to the Bank that, on the
date of this Request for Credit and after giving effect to the advance: (a) the
representations and warranties of Heublein set forth in Article 2 of the
Acknowledgement Agreement dated as of March 28, 1997 (the "Heublein
Acknowledgement Agreement") between Heublein and the Bank are true and correct
in all material respects as if made on such date; and (b) Heublein is not in
default of any of its obligations under the Heublein Acknowledgement Agreement.

IN WITNESS WHEREOF, Heublein has executed this Heublein
Acknowledgement to Request for Credit on the date set forth above.

HEUBLEIN INC.

By: ___________________________________

<PAGE>

MEMORANDUM OF UNDERSTANDING

THIS MEMORANDUM OF UNDERSTANDING is entered into this 6th day of August, 1987,
by and between MONTEREY FARMING CORPORATION, a California corporation ("MFC" or
"Grower"), and HEUBLEIN, INC., a Corporation authorized to and doing business in
the State of California ("Heublein"), as follows:

RECITALS:

A. On February 12, 1973, MFC entered into a Long Term Grape Purchase
Contract ("Contract") with Almaden Vineyards, Inc. ("Almaden"), a true and
correct copy of which is attached hereto as Exhibit A.

B. Almaden also entered into three other substantially identical
long-term grape purchase contracts as follows:

(1) On February 12, 1973, Almaden entered into a contract with
Vineyard 405, a California Limited Partnership, by Monterey Farming Corporation
as General Partner.

(2) On November 30, 1973, Almaden entered into a contract with
Monterey Partners 1974, a California Limited Partnership, by Monterey Farming
Corporation, as General Partner.

(3) On December 31, 1972, Almaden entered into a contract with
Vineyard Investors 1972, a California limited partnership, by Monterey Farming
Corporation, as general partner.

C. In 1985, a dispute arose between Almaden and MFC on behalf of each of
the limited partnerships above-named, as well as on its

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own behalf, concerning the rights and obligations of Almaden, as a winery, on
the one hand, and the above-referenced entities on the other hand as growers.
As a result of said dispute, the growers filed an action in the Superior Court
of Monterey County, California entitled MONTEREY FARMING CORPORATION, A
CALIFORNIA CORPORATION, ET AL., V. ALMADEN VINEYARDS, INC., A DELAWARE
CORPORATION, ET AL., Action No. 83846, seeking declaratory relief as well as
payment for sums alleged to be owing for the harvest year 1985-86 to said
growers. Said action is currently pending in that Court.

D. On March 9, 1987, Heublein acquired the assets of Almaden and is the
assignee and successor in interest to the Contract as well as each of the
contracts referred to in Recital B above.

E. Heublein and MFC (and by separate agreement each of the other entities
referenced in recital B above) wish to settle and resolve the disputes
heretofore existing to assure a harmonious relationship between Heublein and
MFC.

NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

1. 1985 CROP SETTLEMENT. In settlement of the claim of MFC (together
with each other grower referred to in Recital B above), for all sums claimed to
be due as a result of the 1985 harvest season, Heublein agrees to pay MFC on
behalf of all such growers, the sum of Three Hundred Sixty-Five Thousand Five
Hundred Five and 07/100 Dollars ($365,505.07) claimed by Grower in the action
together with interest and less credits for uncashed checks previously delivered
by Almaden to MFC as set forth below:

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<PAGE>

Principal Demand
Action No. 83846 $ 337,505.07

Interest 28,000.00
------------
Gross sums due for 1986 Crop 365,505.07

Credit:
Almaden check 4870 to MFC
held uncashed (14,877.00)

Almaden Check 8076 to MFC
held uncashed (80,078.17)
------------

Net due for 1985 crop $ 270,549.90
------------
------------

Heublein warrants and represents that said Almaden check nos. 4870 and
8076 being held by MFC are drawn on an account now owned by Heublein; that said
checks are now negotiable and may be cashed by MFC; that sufficient funds exist
in said account; and that, if said checks are dishonored for any reason that
Heublein will reissue such checks.

2. 1986 CROP SETTLEMENT. In settlement of all disputes with respect to
sums payable by Heublein to MFC for the 1986 crop, the parties agree that
Heublein is entitled to a credit computed as follows:

Sums alleged by MFC to be due
for the 1986 crop $ 10,640.57

Less adjustment on Early Burgundy
to $250 per ton (20,427.50)

Add marketing order assessment at
.008 cents for Early Burgundy 163.42
-----------

Net credit to Heublein for 1986 crop $ 9,263.51
-----------
-----------

The balance of $270,549.90, as provided in paragraph 1.

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<PAGE>

above, less a credit of $9,263.51 as provided in this paragraph 2 below, or a
net sum of $261,286.39 shall be paid by Heublein to MFC concurrently with the
execution of this Memorandum of Understanding.

3. GUIDELINES FOR INTERPRETATION OF CONTRACT. Heublein, as successor in
interest to Almaden and MFC agree that they are bound by and agree that they
shall continue to perform each and every term of the Contract; provided,
however, that the following provisions shall govern the interpretation of said
Contract as set forth below:

A. The price paid by winery to grower as provided in paragraph
5(a)(ii) of the Contract shall continue, as it has in the past, to be determined
by reference to the Preliminary Grape Crush Report published by the California
Department of Food and Agriculture based upon information furnished by
processors to said Department on or before January 10 of each year. In the
event that said Preliminary Grape Crush Report is determined by the Department
of Agriculture to be erroneous on or before June 30 following publication of the
report, each party agrees that the price to be paid under paragraph 5(a)(ii) of
the Contract shall be adjusted, and sums paid and/or refunded, as the case may
be, to reflect any such inaccuracies as may be determined by said Department of
Agriculture.

B. The parties agree that a bona fide "highest price" as provided
for in paragraph 5(a)(ii) of the Contract is established by a minimum of 7-1/2
percent of the total purchased tonnage of each variety in the applicable
district as shown in the Preliminary Grape Crush Report.

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<PAGE>

C. MFC agrees that during the remaining life of the Contract the sum
of $7.50 per ton shall be deducted from the price determined in paragraph 3 B
above to establish the "FOB carrier roadside" price to be paid in accordance
with the terms of the contract.

D. Notwithstanding the provisions of paragraph 6 of the Contract,
the parties agree that grapes delivered pursuant to the Contract may be
additionally tested for sugar, MOG, and defects by independent inspectors at the
receiving winery to determine whether grapes are delivered in compliance with
the Contract and this Memorandum of Understanding. MFC shall have the right at
any time to observe such testing and, in its discretion, to also take samples
for testing. This paragraph shall not be deemed to relieve Heublein from its
obligation to specify a reasonable time for harvest of each vineyard as provided
in paragraph 3(c) and make such inspections of the grapes prior to or during
harvest as may be necessary to determine a reasonable time for harvest.
Independent weighing of all loads shall be determined in accordance with
paragraph 5(b) of the Contract.

E. Complete and full payment by Heublein of the preliminary grape
price shall be made within ten (10) days of receipt of written notice of
completion of the harvest by reference to the most current industry or
government publications containing such prices as provided in paragraph 5(c)
of the Contract. Any sums still owing as determined by the Preliminary Grape
Crush Report shall be made by Heublein on or before February 25 following the
crop year. Any portion of the preliminary price

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<PAGE>

not paid within ten (10) days after receipt of written notice of completion
of the harvest or any portion of final price payment not paid by February
25th, following the crop year shall bear interest at one percentage point
above the prime rate then being charged by Bank of America National Trust and
Savings Association. For purposes of this paragraph, "completion" shall mean
the substantial completion of the harvest of grapes to be delivered during
the harvest year, notwithstanding the existence of some grapes on which
harvest may have been deferred at the request of Heublein for later delivery.
MFC shall give written notice to Heublein of completion of the harvest.
F. It is understood and agreed by the parties that the provisions of
this Memorandum of Understanding concern a contract entered into prior to
January l, 1977; that paragraphs 3 and 4 of this Memorandum of Understanding are
intended by the parties to serve as interpretive guidelines and shall not be
deemed to modify or amend said Contract; and to the extent that the provisions
of this Memorandum of Understanding may be held to violate Food and Agriculture
Code Section 55601.5(g) or any other statute or public policy, then either party
may file an appropriate petition with a court of competent jurisdiction for the
purpose of establishing the rights and responsibilities of the parties under the
existing Contract.

4. GRAPE QUALITY STANDARDS. The parties agree that with respect to the
obligation of MFC to follow good cultural practices and to use its best efforts
to produce quality grapes for wine making, MFC agrees that the following quality
standards shall be

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<PAGE>

adopted in determining the suitability of grapes delivered under the Contract
for crushing into wine. Said grape quality standards adopted by the parties are
as follows:

A. SUGAR CONTENT. Attached as Exhibit "B" are the minimum and
optimum sugar levels set forth as standards for grapes grown pursuant to the
Contract. The optimum brix represents the sugar content which Heublein wishes
to receive for each variety set forth in Exhibit "B." MFC agrees that it will
endeavor to achieve optimum brixes as set forth in Exhibit "B." Heublein may,
during each harvest year, specify an optimum brix and MFC will make reasonable
efforts to achieve the optimum brix for that harvest year.

Minimum brix represents the minimum acceptable sugar content
based upon the Grower's delivered average sugar. If occasional loads, not more
than two (2) per variety or fifty percent (50%) of MFC committed tonnage per
variety, whichever is less, drop below the minimum brix level, such loads will
be accepted and included in the Grower average.

There shall be no maximum acceptable brix.

B. MIXED LOADS

1. BLACK AND GRENACHE GRAPES IN WHITE LOADS. Each load of
white grapes which contains any amount of black grapes shall be considered
unacceptable and may be rejected.

2. MIXED VARIETIES AND WHITE GRAPES IN BLACK OR GRENACHE LOADS.
Loads containing two or more varieties of the same color grape, or loads of
black or Grenache grapes containing some amount of white grapes, are not
desirable. If accepted by Heublein

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<PAGE>

Wines, they will be paid on the basis of the lowest price variety in the load.

C. DEFECTS.

1. "Defects" shall be defined in accordance with the custom of
the grape industry and the practice of the Grape Inspection Service of the
California Department of Food and Agriculture and shall include grapes with mold
and/or rot.

2. 1.0 PERCENT OR LESS DEFECTS. Any otherwise satisfactory
load and grapes delivered having 1.0 percent or less defects shall be considered
acceptable.

3. MORE THAN 1.0 PERCENT DEFECTS. Any load of grapes delivered
having over 1.0 percent and up to 6.0 percent is not desirable. 1.5 times the
total weight of defects in loads above 1.0 percent will be deducted from the
weight of the load. Each load of grapes delivered having over 6.0 percent
defects shall be considered unacceptable for winemaking and will be rejected.

4. In the event inclement weather causes excessive and
unavoidable deterioration of grapes throughout the industry, Heublein will
consider the advisability of accepting delivery of loads with higher percent
defects.

D. MATERIAL OTHER THAN GRAPES (MOG)

1. Material Other than Grapes (MOG) shall be defined in
accordance with the custom of the grape industry and the practice of the Grape
Inspection Service of the California Department of Food and Agriculture and
shall include leaves, leaf stems, canes and any other foreign materials.

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<PAGE>

2. 1.0 Percent or Less MOG. Any otherwise satisfactory load of
grapes delivered having 1.0 percent or less MOG will be considered acceptable.
Any otherwise satisfactory load of French Colombard or Flora grapes with 1.5
percent or less MOG will be considered acceptable.

3. Between 1.0 Percent and 2.0 Percent MOG. Each load of
grapes having over 1.0 percent or over 1.5 percent French Colombard and Flora
a,-d up to 2.0 percent MOG is not desirable; 1.5 times the weight of all MOG
will be deducted from the weight of the load.

4. MORE THAN 2.0 PERCENT MOG. Each load of grapes delivered
having more than 2.0 percent MOG will be considered unacceptable for winemaking
and will be rejected.

E. CONTAMINATION, INSECT OR WORM INFESTATION

Loads of grapes will be rejected where potential contamination of
the winery may occur, and where there is significant visible insect or worm
infestation.

F. WILD FERMENTATION

Loads which are in the process of fermentation are not desired.
Where fermentation is suspected, a load will be analyzed for volatile acid and
ethyl alcohol. If the volatile acid is greater than 0.015 gm/100 ml, or if the
ethyl alcohol is greater than 0.08 percent by volume, the load will be
considered unacceptable for winemaking and will be rejected.

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<PAGE>

G. OVER AGE LOADS

Grapes harvested prior to the day of delivery without permission
or scheduling by Winery will be rejected.

H. UNAUTHORIZED DELIVERIES

Grapes delivered in excess of Heublein Wines' daily schedule by
variety or any unscheduled grapes to any plant will be rejected.

I. MECHANICALLY HARVESTED GRAPES

MFC shall continue to have the right to determine in its
discretion whether or not to machine harvest grapes after consultation with
Heublein.

J. GENERAL REQUIREMENTS

The dosage and time of application of pesticides, herbicides, and
nematocides must have been controlled and recorded according to recommendations
of the California Department of Agriculture so that the residues are within
tolerances for grapes by law.

K. IMPLEMENTATION

1. Every load of grapes will be tested for sugar content.

2. Every load of grapes will be tested for MOG unless the test
is deemed to be unnecessary after visual inspection by Heublein's
representative.

L. GRAPE INSPECTION OPTION

If in the opinion of the Plant Manager (or Winemaker) any load of
grapes is unfit for making quality wine through contami-

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<PAGE>

nation by foreign substances, he will contact the Heublein Fieldman responsible
for MFC's load. The Plant Manager (or Winemaker) and the Heublein Fieldman will
jointly inspect the load. They will then jointly confer with MFC prior to
rejection of a load which is deemed to be unfit for making quality wine.

M. REJECTED LOADS

Any loads of grapes rejected by Heublein for crushing into wine
under the provisions of the quality standards set forth in this paragraph shall
be disposed of and paid for in accordance with paragraph 5(a)(iii) of the
Contract. All loads accepted for wine shall be paid at the price set forth in
paragraph 5(a)(ii) paid in the manner and at the times set forth in this
Agreement.

N. WAIVER

No failure or omission by either party to insist upon or enforce
any of the provisions of these quality standards shall be deemed a waiver of
such provision.

5. DISMISSAL OF ACTION. MFC agrees, on execution of this Memorandum of
Understanding to cause to be filed with the Clerk of the Superior Court of
California, County of Monterey, a dismissal of Action No. 83846 dismissing the
First Cause of Action (declaratory relief) without prejudice and the Second
Cause of Action (complaint for money) of the First Amended Complaint for
Declaratory Relief and Complaint for Money with prejudice. To the extent that
this Memorandum of Understanding addresses issues and controversies set forth in
the First Cause of Action in said Complaint in Action No. 83846, the rights and
obligations of MFC and Heublein, as successor to the

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<PAGE>

interests of Almaden, shall be determined with reference to this Memorandum of
Understanding.

6. GOOD FAITH. MFC acknowledges that Heublein, as successor to Almaden
and otherwise, has heretofore been engaged in the wine-making business and has
certain business customs and practices which may to some extent differ from
those of Almaden: Heublein acknowledges that MFC has had a contractual
relationship with Almaden which has been seasoned by years of delivering grapes
pursuant to the Contract. The parties, therefore, agree that they shall each in
good faith endeavor to resolve any differences which may arise to create a
harmonious working relationship between them for the balance of the Contract
term.

IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Understanding the day and year first above written.

MONTEREY FARMING CORPORATION, a
California Corporation, a General Partner

By /s/ Alfred G. Scheid
--------------------------------------
GROWER

HEUBLEIN, INC.,
a Corporation

By /s/ Robert D. Rossi
--------------------------------------

By
--------------------------------------

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<PAGE>

LONG TERM GRAPE PURCHASE CONTRACT

This Contract entered into the 12th day of February, 1973, is between
MONTEREY FARMING CORPORATION, a California corporation (Grower) and ALMADEN
VINEYARDS, INC., a Delaware corporation (Winery).

RECITALS:

A. Winery desires to augment its annual supply of wine grapes on a
long term basis;

B. Grower intends to develop approximately 352 acres of land by
planting this acreage to vineyards for the purpose of growing and producing
certain selected varieties of wine grapes;

C. Grower anticipates that this development program will commence
with the planting of these 352 acres in the calendar year of 1973; and

D. While Grower has leased and will develop approximately 352
acres of land and plant them in 1973, as described in Recitals B and C, supra,
and will make every reasonable effort to complete planting thereof during the
1973 planting season, the total number of acres planted by Grower may be less
than 352 acres and the planting thereof may not be completed during the 1973
planting season; Winery and Grower nonetheless desire and intend to have the
terms

<PAGE>

hereof apply to such lesser number of acres as are in fact planted by Grower,
provided at least 300 acres are planted, and to post-1973 plantings, provided
all planting is completed not later than the 1974 planting season;

IT IS THEREFORE AGREED:

1. Grower has contracted for approximately 160,000 certified virus-
free plants and to the extent the contractor is able to deliver, agrees to plant
by no later than August 31, 1973, the varieties of grapes and number of acres
set forth and described on Exhibit A attached hereto and made a part hereof.

2. Any obligation of Grower to plant the varieties of grapes in the
quantities referred to in Section 1, above, shall be conditioned upon:

(a) Grower's ability to obtain the plants described on Exhibit A
at reasonable prices;

(b) Grower's prior lease of the total vineyard acreage described
on Exhibit A sufficiently in advance of the 1973 planting season to reasonably
permit completion of the planting prior to August 31, 1973.

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<PAGE>

In the event Grower is not able to complete, prior to August 31,
1973, the planting of the vineyard acreage in fact leased by Grower, the number
of acres and number of plants to be planted by Grower shall be reduced for this
lesser acreage and the period within which planting shall be completed shall be
extended to permit completion of the planting provided Grower shall plant not
less than 300 acres and shall complete all planting on or before August 31,
1974.

3. (a) Grower shall have the exclusive right and sole discretion
to make all decisions in farming and management of the vineyards; but in making
such decisions Grower agrees to follow good cultural practices and to use its
best efforts to produce quality grapes for wine making.

(b) During each year of the term of this Contract, Grower
agrees to harvest, deliver and sell to Winery, and Winery agrees to accept
delivery of and purchase all grapes grown and produced on acreages subject to
this Contract.

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<PAGE>

carriers at Grower's vineyards to accept delivery of harvested grapes from
Grower. Title to such grapes shall pass from Grower to Winery upon delivery to
the carrier; if Grower shall suffer any net loss as the result of the
specification of the time for harvest and delivery, Winery shall compensate
Grower for such net loss.

4. This Contract shall be binding and effective for a term
ending thirty (30) years following conclusion of the first harvest but not later
than 2006.

However, if the economic life of a producing vineyard or
portion thereof designated hereunder is less than thirty (30) years, this
contract shall terminate as to such vineyard or portion thereof at the end of
its economic life. If Grower pulls out vines, such decision by Grower shall be
a determination that such vines have reached the end of their economic life.
However, prior to the pulling of such vines, Grower must notify Winery of such
intention three (3) years prior to the actual pulling of such vineyard or
portion thereof.

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<PAGE>

5. (a) The prices paid by Winery to Grower shall be determined on
the following basis:

(i) Prices for all grapes shall be f.o.b. carrier "roadside"
Grower's vineyards designated in this Contract.

(ii) In each crop year the prices paid for each variety of grape
suitable for wine shall be at the highest price paid by Winery in such
year for the same or a corparable variety or the higher of prices
paid by other wineries to growers for such variety or comparable
variety (assuming sales of such variety or comparable variety are in
quantities sufficient to establish a bona fide price) in Monterey
County. If no prices are established for Monterey County, the price
paid will be that established for the Northern Coastal growing area.

(iii) In each crop year the price paid for grapes which are not
suitable for wine, shall be the price generally established in the
industry for such lower quality grapes if the Winery retains

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<PAGE>

such grapes for processing into distilling material or for other uses,
or the best prices Winery can obtain by using its best efforts if such
grapes are resold.

(b) All grapes shall be weighed on certified scales in the vicinity
of the vineyard and payment shall be on the basis of certified weight tags
furnished by Grower to Winery.

(c) As such weight tags are received, Winery shall promptly pay
Grower at Los Angeles, California initial payments determined by use of prices
stated in the most current industry or government publication containing such
prices.

(d) As soon as the actual prices payable under this Contract can be
determined for each variety delivered, final price adjustments shall be made,
and all amounts due shall be promptly paid by Winery to Grower at Los Angeles,
California.

6. Winery shall make such inspections of the Grapes prior to and
during harvest as may be required to determine whether or not such grapes are
suitable for crushing into wine. Such determination shall be in accordance with
generally recognized industry standards, and Grower shall immediately be advised
of any negative determinations. Should Grower disagree with Winery's

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<PAGE>

determination, the matter shall be submitted to arbitration and the arbitrator
shall make a decision, based upon recognized industry standards, as to whether
or not the grapes are suitable for crushing into wine.

7. In case of dispute under the provisions of Sections 3(c), 5 and 6
of this Contract, such dispute shall be subject to arbitration if either Grower
or Winery makes written demand for arbitration on the other party. If the
parties agree on his selection, there shall be one arbitrator; but, if no such
agreement is reached within five (5) days after demand for arbitration, there
shall be three (3) arbitrators, one named in writing by Grower and a second by
Winery within ten (10) days after demand for arbitration, and a third chosen by
the two (2) who are appointed. If there is one (1) arbitrator, his decision
shall be binding; and if there are three (3) arbitrators, the decision of any
two (2) of them shall be binding. No one shall act as an arbitrator who is
employed by Grower or Winery or who is in any way financially interested in the
business affairs of either Grower or Winery. All costs of such arbitration
shall be borne equally by the parties.

While any such dispute is being resolved, neither party will be
relieved of its obligations under this Contract.

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<PAGE>

8. Grower represents that it has not sold or contracted to sell
grapes from the designated acreages to any other person, and that such grapes
will be kept free of any and all liens and encumbrances except those of which
Winery has from time to time been notified by Grower and as described in Section
9 hereof.

9. Grower agrees so long as this Agreement is in effect that it will
not create or incur any lien, charge or other encumbrance on the lands
designated pursuant to this Contract which would defeat the rights of Winery
hereunder, excepting deeds of trust securing long term indebtedness to
institutional lenders, and Grower further agrees that except for such deeds of
trust it will not transfer, assign or convey any interest in such lands in a
manner that would defeat the rights of Winery hereunder.

10. No failure or omission by either party to this Contract to
insist upon or enforce any of its terms, which may have been breached by the
other party, shall be deemed a waiver unless the same shall be in writing. No
representative or agent of either party shall have any authority to waive,
change or add to any of the terms or conditions specified herein except by a
writing duly executed by said representative or agent.

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<PAGE>

11. Time is of the essence of this Contract which embodies the
entire understanding and agreement between the parties.

12. This Contract shall be deemed modified to the extent
necessary to comply with valid State and Federal laws, rules or regulations
pursuant thereto and any valid marketing order or agreement under authority of
State or Federal law.

13. This Contract shall be binding on the heirs, assigns,
legatees, devisees, transferees, or other successors in interest, partial or
entire of each party.

IN WITNESS WHEREOF, the parties have executed this Contract as of
the date first above written.

MONTEREY FARMING CORPORATION

By /s/ William Savage
-------------------------------

ALMADEN VINEYARDS, INC.

By /s/ T.J. Grady, V.P.
-------------------------------

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<PAGE>
EXHIBIT A

MONTEREY FARMING CORPORATION

ACREAGE TO BE PLANTED IN 1973

Varieties by Acreage by Ranch

BLAND
352
-----
GRENACHE 22
GAMAY 22
MERLOT 22
CABERNET SAUVIGNON 22
ZINFANDEL 22
RUBY CABERNET 22
PETITE SIRAH 22
GAMAY BEAUJOLAIS 22
EARLY BURGUNDY 22
TINTA MADEIRA 22

GEWURZTRAMINER 22
JOHN. RIESLING 22
PINOT CHARDONNAY 22
CHENIN BLANC 22
SAUVIGNON BLANC 22
SEMILLON 22
-----
TOTAL 352
-----
-----

<PAGE>
[MFC LETTERHEAD]

May 14, 1990

Mr. Robert Rossi
Heublein Inc.
400 Montgomery Street
Suite 810
San Francisco, CA 94104

Dear Bob:

As you know, we supervise and administer four seperate grape purchase
contracts with Hueblein. We would like your agreement that we may, each
harvest, keep up to six tons of each variety covered by these contracts. By
this, we mean six tons of each variety, not six tons per variety and per
contract. This will enable us to acquaint a few wineries with our grapes and
perhaps open some doors for the future. This would be very beneficial for
Heublein and for us.

Please sign below signifying your agreement.

Many thanks for you cooperation and I'll see you Tuesday evening.

Sincerely,

/s/ Alfred G. Scheid
Alfred G. Scheid
President

Agreed and Accepted by:
Hueblein Inc.

By: /s/ Robert D. Rossi
--------------------------
Robert D. Rossi
Vice President - Wines

EXHIBIT F
<PAGE>

AMENDMENT TO
LONG TERM GRAPE PURCHASE CONTRACT

THIS AMENDMENT TO LONG TERM GRAPE PURCHASE CONTRACT (this
"AMENDMENT") is made and entered into as of this 12th day of March, 1993, by and
between SCHEID VINEYARDS AND MANAGEMENT CO. (formerly known as Monterey Farming
Corporation), a California corporation ("SCHEID VINEYARDS" or "GROWER"), and
HEUBLEIN, INC., a corporation authorized to do and doing business in the State
of California ("HEUBLEIN" or "WINERY").

RECITALS

A. On February 12, 1973, Scheid Vineyards entered into a Long Term Grape
Purchase Contract (the "ORIGINAL CONTRACT") with Almaden Vineyards, Inc.
("ALMADEN").

B. On March 9, 1987, Heublein acquired the assets of Almaden and is the
assignee and successor in interest of Almaden with respect to the Original
Contract.

C. On August 6, 1987, the parties entered into a Memorandum of
Understanding (the "MEMORANDUM") concerning disputes that had arisen under the
Original Contract and the manner in which the Original Contract was to be
understood and interpreted by the parties.

D. On May 14, 1990, the parties executed a letter agreement (the "LETTER
AGREEMENT") with respect to the Original Contract as amended.

E. The Original Contract, the Memorandum and the Letter Agreement
hereinafter collectively are referred to as the "EXISTING CONTRACT". The
Existing Contract as amended by this Amendment hereinafter is referred to as the
"CONTRACT".

F. The parties desire to amend the Existing Contract in certain
additional respects as hereinafter provided.

NOW, THEREFORE, in consideration of the premises, the parties agree as
follows:

1. VINEYARDS AND VARIETIES.

<PAGE>

convert the existing varieties to the proposed varieties as specified in EXHIBIT
A attached hereto in accordance with the methods and in the calendar years
respectively identified therein. Notwithstanding the foregoing, Scheid Vineyards
shall not be required to sell and Winery shall not be required to purchase in
excess of the following average tons per acre of the following Wine Grape
varieties in any crop year under the Contract:

VARIETY AVERAGE TONS PER ACRE
------- ---------------------

Chardonnay 8.0
Cabernet Sauvignon 7.5
Merlot 7.5

(b) RETENTION OF WINE GRAPES BY SCHEID VINEYARDS. Not-
withstanding any provision of the Contract to the contrary, each harvest
Scheid Vineyards, in its sole discretion, may retain for its own use up to 25
tons of Wine Grapes of each variety produced on the Vineyards. The provisions
of this SECTION 1(b) hereby supersede the provisions of the Letter Agreement.

2. PRICING. The price to be paid by Winery to Grower for each
variety of Wine Grapes purchased under the Contract shall be determined with
reference to the Final Grape Crush Report (the "CRUSH REPORT"), currently
published by the California Department of Food and Agriculture (the
"DEPARTMENT") on the 10th day of March of each year, for the crop year (the
"APPLICABLE CROP YEAR") preceding the harvest of such Wine Grape variety, as it
may be supplemented or corrected by the Department up through the succeeding
first day of August (the "APPLICABLE CRUSH REPORT"), in accordance with the
following:

(a) VARIETIES OTHER THAN MERLOT. The price per ton for each
variety of Wine Grapes other than Merlot under the Contract shall be
equal to [ ]* (the "PRICING DISTRICTS"), as
established by the Department, determined by:

[ ]*

______________________________
*Confidential Treatment Requested for Redacted Portion.

-2-

<PAGE>

[ ]*

Application of the provisions of this SECTION 2(a) is
illustrated by the example set forth in EXHIBIT B attached hereto.

(b) MERLOT. The price per ton for Merlot under the Contract shall be
the lower of:

[ ]*

Notwithstanding the foregoing, if the price per ton for Merlot calculated above
is the highest of the prices calculated for varieties other than Merlot under
SECTION 2(a), the price per ton for Merlot hereunder shall equal the price per
ton of the variety having the next highest price. Application of the provisions
of this SECTION 2(b) is illustrated by the example set forth in EXHIBIT C
attached hereto.

(c) UNAVAILABILITY OF CRUSH REPORT. If the Department shall cease to
publish the Crush Report or shall cease to publish the Crush Report in
substantially its present form with respect to any crop year necessary for
determining prices under this SECTION 2, the prices to be paid hereunder shall
be determined with reference to the price information for the Pricing Districts,
in form and substance as nearly identical as possible to the price information
for the Pricing Districts in the Crush Report, in an alternative government
publication.

______________________________
*Confidential Treatment Requested for Redacted Portion.

-3-

<PAGE>

The provisions of this SECTION 2 shall supersede in their entirety the
provisions of SECTION 5(a)(ii) of the Original Contract and SECTIONS 3A and 3B
of the Memorandum relating to determination of the prices to be paid by Winery
to Grower for Wine Grapes purchased under the Contract.

3. PAYMENT. Winery shall pay Grower the price (the "PRELIMINARY
PRICE") for Wine Grapes purchased under the Contract, determined in accordance
with SECTION 2 above based on all available information and subject only to
minor adjustment as hereinafter provided, within 10 days after Grower gives
Winery written notice of completion of the applicable harvest. The parties shall
have an additional 30 days after the expiration of such 10-day period to
determine the final price (the "FINAL PRICE") to be paid by Winery to Grower for
such Wine Grapes based on corrected sugar, defect or M.O.G. penalties, weight
tags or similar minor adjustments, and to make any payments or refunds necessary
to reconcile the Final Price with the Preliminary Price. For purposes of this
SECTION 3, the term "COMPLETION OF THE APPLICABLE HARVEST" shall mean the
substantial completion of the harvest of Wine Grapes to be delivered during the
applicable crop year, notwithstanding the existence of certain Wine Grapes with
respect to which harvest may have been deferred at the request of Winery for
later delivery. The provisions of this SECTION 3 shall supersede and replace, to
the extent otherwise applicable, the provisions of SECTIONS 5(c) and 5(d) of the
Original Contract and the provisions of Section 3E of the Memorandum.

4. TERM AND TERMINATION.

(a) TERM. The term of the Contract shall continue until
terminated in accordance with the provisions of this SECTION 4.

(b) TERMINATION BY EITHER PARTY. Either party may terminate the
Contract after the 2003 crop year by giving written notice (a "Termination
Notice") to the other party. Termination shall be effective upon completion of
the third crop year following the thirty-first day of December next succeeding
the Termination Notice. For example, if a party were to give a Termination
Notice on November 30, 2003, the Contract would terminate after delivery of the
2006 crop by Grower to Winery.

(c) WITHDRAWAL BY GROWER. In the event Winery properly delivers a
Termination Notice to Grower under SECTION 4(b) above, Grower at its option (i)
may withdraw up to 1/3 of any or all varieties of Wine Grapes from coverage by
the Contract by delivery to Winery of written notice (a "Withdrawal Notice") of
its intent to do so prior to the first day of April following the Withdrawal
Notice, and (ii) may withdraw up to 2/3 of any or all varieties of Wine Grapes
from such coverage by delivery of a Withdrawal Notice prior to the succeeding
first day of April.

5. FARM MANAGEMENT DECISIONS. Grower shall have the exclusive right
and sole discretion to replant any Wine Grape variety produced on the Vineyards
with the same variety at any time Grower determines that such replanting will
improve production levels with respect to such variety, and to replant and
interplant Wine Grapes to maintain contracted varieties at viable and economic
levels; PROVIDED, HOWEVER, that Grower will continue to follow

-4-

<PAGE>

"good cultural practices and use its best efforts to produce quality grapes for
winemaking" as provided in Section 3(a) or the Original Contract.

6. INCORPORATION BY REFERENCE. Exhibits attached to this Amendment
hereby are incorporated by reference herein.

7. EFFECTIVENESS OF THE EXISTING CONTRACT. Except as specifically set
forth herein, the Existing Contract shall remain unchanged and in full force and
effect. In the event of any conflict between the provisions of this Amendment
and the provisions of the Existing Contract, the provisions of this Amendment
shall govern.

8. AUTHORITY. Each corporate or partnership party executing this
Amendment and the agent executing this Amendment on such party's behalf hereby
warrants that such party is a corporation or partnership in good standing and is
fully authorized to execute this Amendment and any other documents called for
hereunder and that such agent is properly authorized to act for such party.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.

SCHEID VINEYARDS AND MANAGEMENT CO.,
a California corporation

By: /s/Alfred G. Scheid
-----------------------------
Alfred G. Scheid

Its: President

"SCHEID VINEYARDS" OR "GROWER"

HEUBLEIN, INC., a corporation

By: /s/James A. Beckman
----------------------------
James A. Beckman

Its: Vice President
-----------------------
"HEUBLEIN" OR "WINERY"

-5-

<PAGE>

LONG TERM GRAPE PURCHASE CONTRACT

This Contract entered into the 21st day of December, 1972, is between
VINEYARD INVESTORS-1972, a California Limited Partnership (Grower) and ALMADEN
VINEYARDS, INC., a Delaware corporation (Winery).

RECITALS:

A. Winery desires to augment its annual supply of wine grapes on a
long term basis;

B. Grower intends to develop approximately 1,345 acres of land by
planting this acreage to vineyards for the purpose of growing and producing
certain selected varieties of wine grapes;

C. Grower anticipates that this development program will commence
with the planting of these 1,345 acres in the calendar year of 1973; and

D. While Grower intends to acquire and develop approximately 1,345
acres of land and plant them in 1973, as described in Recitals B and C, supra,
and will make every reasonable effort to successfully consummate pending
negotiations for the acquisition of this acreage and to complete planting
thereof during the 1973 planting season, the total number of acres

<PAGE>

acquired by Grower may be less than 1,345 acres and the planting thereof may not
be completed during the 1973 planting season; Winery and Grower nonetheless
desire and intend to have the terms hereof apply to such lesser number of acres
as are in fact acquired by Grower, provided at least 865 acres are acquired, and
to post-1973 plantings, provided all planting is completed not later than the
1974 planting season;

IT IS THEREFORE AGREED:

1. Grower has contracted for approximately 600,000 certified
virus-free plants and to the extent the contractor is able to deliver, agrees
to plant by no later than August 31, 1973 the varieties of grapes and number
of acres set forth and described on Exhibit A attached hereto and made a part
hereof.

2. Any obligation of Grower to plant the varieties of grapes in the
quantities referred to Section 1, above, shall be conditioned upon:

(a) Grower's ability to obtain the plants described on Exhibit A
at reasonable prices;

(b) Grower's prior acquisition of the total vineyard acreage
described on Exhibit A sufficiently in advance of the 1973 planting season to
reasonably permit completion of the planting prior to August 31, 1973.

-2-

<PAGE>

In the event Grower is not able to consummate the acquisition of the
total vineyard acreage described on Exhibit A and to complete, prior to August
31, 1973, the planting of the vineyard acreage in fact acquired by Grower, or in
either of these events, the number of acres and number of plants to be planted
by Grower shall be reduced to the number of acres in fact acquired and plants
required for this lesser acreage and the period within which planting shall be
completed shall be extended to permit completion of the planting provided Grower
shall plant not less than 865 acres and shall complete all planting on or before
August 31, 1974.

3. (a) Grower shall have the exclusive right and sole discretion to
make all decisions in farming and management of the vineyards; but in making
such decisions, Grower agrees to follow good cultural practices and to use its
best efforts to produce quality grapes for wine making.

(b) During each year of the term of this Contract, Grower agrees
to harvest, deliver and sell to Winery, and Winery agrees to accept delivery of
and purchase all grapes grown and produced on acreages subject to this Contract.

-3-

<PAGE>

4. This Contract shall be binding and effective for a term ending
thirty (30) years following conclusion of the first harvest but not later than
2006.

However, if the economic life of a producing vineyard or portion
thereof designated hereunder is less than thirty (30) years, this contract shall
terminate as to such vineyard or portion thereof at the end of its economic
life. If Grower pulls out vines, such decision by Grower shall be a
determination that such vines have reached the end of their economic life.
However, prior to the pulling of such vines, Grower must notify Winery of such
intention three (3) years prior to the actual pulling of such vineyard or
portion thereof.

-4-
<PAGE>

5. (a) The prices paid by Winery to Grower shall be determined on
the following basis:

(i) Prices for all grapes shall be f.o.b. carrier "roadside"
Grower's vineyards designated in this Contract.

(ii) In each crop year the prices paid for each variety of grape
suitable for wine shall be at the highest price paid by Winery in such
year for the same or a comparable variety or the higher of prices paid
by other wineries to growers for such variety or comparable variety
(assuming sales of such variety or comparable variety are in quantities
sufficient to establish a bona fide price) in Monterey County. If no
prices are established for Monterey County, the price paid will be that
established for the Northern Coastal growing area.

(iii) In each crop year the price paid for grapes which are not
suitable for wine, shall be the price generally established in the
industry for such lower quality grapes if the Winery retains

-5-

<PAGE>

such grapes for processing into distilling material or for other uses,
or the best prices Winery can obtain by using its best efforts if such
grapes are resold.

(b) All grapes shall be weighed on certified scales in the vicinity
of the vineyard and payment shall be on the basis of certified weight tags
furnished by Grower to Winery.

-6-

<PAGE>

While any such dispute is being resolved, neither party will be
relieved of its obligations under this Contract.

-7-

<PAGE>

10. No failure or omission by either party to this Contract to insist
upon or enforce any of its terms, which may have been breached by the other
party, shall be deemed a waiver unless the same shall be in writing. No
representative or agent of either party shall have any authority to waive,
change or add to any of the terms or conditions specified herein except by a
writing duly executed by said representative or agent.

-8-

<PAGE>

11. Time is of the essence of this Contract which embodies the entire
understanding and agreement between the parties.

12. This Contract shall be deemed modified to the extent, necessary
to comply with valid State and Federal laws, rules or regulations pursuant
thereto and any valid marketing order or agreement under authority of State or
Federal law.

13. This Contract shall be binding on the heirs, assigns, legatees,
devisees, transferees, or other successors in interest, partial or entire of
each party.

IN WITNESS WHEREOF, the parties have executed this Contract as of the
date first above written.

VINEYARD INVESTORS-1972

By \s\ Alfred G. Schied
--------------------

ALMADEN VINEYARDS, INC.

By /s/ T.J. Grady
--------------------

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<PAGE>

VINEYARD INVESTORS 1972

ALMADEN VINEYARDS, INC.
GRAPE PURCHASE CONTRACT

EXHIBIT "A"

Wine Grape Varieties, by Acreage, by Ranch

<TABLE>
<CAPTION>
OLIVEIRA COWLES BLAND ANTHONY ZANETTA ZANETTA MARTELLA TOGNETTI TOTAL
150 255 40 50 197 196 232 225
----- ------ ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GRENACHE 1 1 42 20 64
GAMAY 20 2.5 2.5 38 42 20 125
MERLOT 27 2.5 2.5 26 42 21 121
CABERNET SAUVIGNON 27 2.5 2.5 26 42 41 141
ZINFANDEL 13.5 2.5 2.5 41 21 41 121.5
RUBY CABERNET 2.5 2.5 21 41 67
PETITE SIRAH 2.5 2.5 24 32 61
GAMEY BEAUIOLAIS 2.5 2.5 5
EARLY BURGUNDY 13.5 2.5 2.5 15 28 61.5
TINTA MADEIRA 22 41 63
NEBBIOLO 23 10 33

FLORA 23 23
GEWURZTRAMINER 13.5 23 2.5 2.5 22 63
J0HN. RIESLING 69 2.5 2.5 40 114
PINOT CHARDONNAY 13.5 23 1.6 24 62.1
CHENIN BLANC 46 1.6 24 71.6
SAUVIGNON BLANC 13.5 23 2.3 5 24 67.8
SEMILLON 23 2.3 5 24 54.3
------ ------- ------ ------ ------ ------ ------ ------------
TOTAL 141.5 253 33.8 46.0 197.0 191 232 225 1318.8
-------
-------

December 21, 1972

<PAGE>

VINEYARD INVESTORS 1972

ALMADEN VINEYARDS, INC.
GRAPE PURCHASE CONTRACT

EXHIBIT "A"

Wine Grape Varieties, by Acreage, by Ranch

OLIVEIRA COWLES BLAND ANTHONY ZANETTA ZANETTA MARTELLA TOGNETTI TOTAL
150 255 40 50 197 196 232 225
-------- ------- ------- -------- ------- ------- -------- -------- -------
GRENACHE 1 1 42 20 64
GAMAY 20 2.5 2.5 38 42 20 125
MERLOT 27 2.5 2.5 26 42 21 121
CABERNET SAUVIGNON 27 2.5 2.5 26 42 41 141
ZINFANDEL 13.5 2.5 2.5 41 21 41 121.5
RUBY CABERNET 2.5 2.5 21 41 67
PETITE SIRAH 2.5 2.5 24 32 61
GAMEY BEAUIOLAIS 2.5 2.5 5
EARLY BURGUNDY 13.5 2.5 2.5 15 28 61.5
TINTA MADEIRA 22 41 63
NEBBIOLO 23 10 33

FLORA 23 23
GEWURZTRAMINER 13.5 23 2.5 2.5 22 63
JOHN. RIESLING 69 2.5 2.5 40 114
PINOT CHARDONNAY 13.5 23 1.6 24 62.1
CHENIN BLANC 46 1.6 24 71.6
SAUVIGNON BLANC 13.5 23 2.3 5 24 67.8
SEMILLON 23 2.3 5 24 54.3
-------- ------- ------- -------- ------- ------- -------- -------- -------
TOTAL 141.5 253 33.8 46.0 197.0 191 232 225 1318.8
-------
-------

December 21, 1972
</TABLE>

<PAGE>

MEMORANDUM OF UNDERSTANDING

THIS MEMORANDUM OF UNDERSTANDING is entered into this 6th day of August,
1987, by and between VINEYARD INVESTORS 1972, a California Limited Partnership
("VI-72" or "Grower"), and HEUBLEIN, INC., a Corporation authorized to and doing
business in the State of California ("Heublein"), as follows:

RECITALS:

A. On December 31, 1972, VI-72 entered into a Long Term Grape Purchase
Contract ("Contract") with Almaden Vineyards, Inc. ("Almaden"), a true and
correct copy of which is attached hereto as Exhibit A. Monterey Farming
Corporation, a California Corporation ("MFC"), is the general partner of VI-72.

B. Almaden also entered into three other substantially identical
long-term grape purchase contracts as follows:

(1) On February 12, 1973, Almaden entered into a contract with
Vineyard 405, a California Limited Partnership, by Monterey Farming Corporation
as General Partner.

(2) On November 30, 1973, Almaden entered into a contract with
Monterey Partners 1974, a California Limited Partnership, by Monterey Farming
Corporation, as General Partner.

(3) On February 12, 1973, Almaden entered into a contract with
Monterey Farming Corporation on its own account.

C. In 1985, a dispute arose between Almaden and MFC on behalf of each of
the limited partnerships above-named, as well as on its

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<PAGE>

D. On March 9, 1987, Heublein acquired the assets of Almaden and is the
assignee and successor in interest to the Contract as well as each of the
contracts referred to in Recital B above.

E. Heublein and VI-72 (and by separate agreement each of the other
entities referenced in recital B above) wish to settle and resolve the disputes
heretofore existing to assure a harmonious relationship between Heublein and
VI-72.

NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

1. 1985 CROP SETTLEMENT. In settlement of the claim of VI-72 (together
with each other grower referred to in Recital B above), for all sums claimed to
be due as a result of the 1985 harvest season, Heublein agrees to pay MFC on
behalf of all such growers, the sum of Three Hundred Sixty-Five Thousand Five
Hundred Five and 07/100 Dollars ($365,505.07) claimed by Grower in the action
together with interest and less credits for uncashed checks previously delivered
by Almaden to MFC as set forth below:

-2-

<PAGE>

Principal Demand
Action No. 83846 $ 337,505.07

Interest 28,000.00
-------------

Gross sums due for 1986 Crop 365,505.07

Credit:
Almaden check 4870 to MFC
held uncashed (14,877.00)

Almaden Check 8076 to MFC
held uncashed (80,078.17)
--------------

Net due for 1985 crop $ 270,549.90
--------------
--------------

Heublein warrants and represents that said Almaden check nos. 4870 and 8076
being held by MFC are drawn on an account now owned by Heublein; that said
checks are now negotiable and may be cashed by MFC; that sufficient funds exist
in said account; and that, if said checks are dishonored for any reason that
Heublein will reissue such checks.

2. 1986 CROP SETTLEMENT. In settlement of all disputes with respect to
sums payable by Heublein to MFC for the 1986 crop, the parties agree that
Heublein is entitled to a credit computed as follows:

Sums alleged by MFC to be due
for the 1986 crop $ 10,640.57

Less adjustment on Early Burgundy
to $250 per ton (20,427.50)

Add marketing order assessment at
.008 cents for Early Burgundy 163.42
-------------

Net credit to Heublein for 1986 crop $ 9,263.51
-------------
-------------

The balance of $270,549.90, as provided in paragraph 1

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<PAGE>

above, less a credit of $9,263.51 as provided in this paragraph 2 below, or a
net sum of $261,286.39 shall be paid by Heublein to MFC concurrently with the
execution of this memorandum of Understanding.

3. GUIDELINES FOR INTERPRETATION OF CONTRACT. Heublein, as successor in
interest to Almaden and VI-72 agree that they are bound by and agree that they
shall continue to perform each and every term of the Contract; provided,
however, that the following provisions shall govern the interpretation of said
Contract as set forth below:

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<PAGE>

C. VI-72 agrees that during the remaining life of the Contract the
sum of $7.50 per ton shall be deducted from the price determined in paragraph 3B
above to establish the "FOB carrier roadside" price to be paid in accordance
with the terms of the Contract.

D. Notwithstanding the provisions of paragraph 6 of the Contract,
the parties agree that grapes delivered pursuant to the Contract may be
additionally tested for sugar, MOG, and defects by independent inspectors at the
receiving winery to determine whether grapes are delivered in compliance with
the Contract and this Memorandum of Understanding. VI-72 shall have the right
at any time to observe such testing and, in its discretion, to also take samples
for testing. This paragraph shall not be deemed to relieve Heublein from its
obligation to specify a reasonable time for harvest of each vineyard as provided
in paragraph 3(c) and make such inspections of the grapes prior to or during
harvest as may be necessary to determine a reasonable time for harvest.
Independent weighing of all loads shall be determined in accordance with
paragraph 5(b) of the Contract.

E. Complete and full payment by Heublein of the preliminary grape
price shall be made within ten (10) days of receipt of written notice of
completion of the harvest by reference to the most current industry or
government publications containing such prices as provided in paragraph 5(c) of
the Contract. Any sums still owing as determined by the Preliminary Grape Crush
Report shall be made by Heublein on or before February 25 following the crop
year. Any portion of the preliminary price not paid within ten (10) days after
receipt of written notice of completion of the harvest

-5-

<PAGE>

or any portion of final price payment not paid by February 25th, following the
crop year shall bear interest at one percentage point above the prime rate then
being charged by Bank of America National Trust and Savings Association. For
purposes of this paragraph, "completion" shall mean the substantial completion
of the harvest of grapes to be delivered during the harvest year;
notwithstanding the existence of some grapes on which harvest may have been
deferred at the request of Heublein for later delivery. MFC may give notice to
Heublein of completion of the harvest.

F. It is understood and agreed by the parties that the provisions of
this Memorandum of Understanding concern a contract entered into prior to
January 1, 1977; that paragraphs 3 and 4 of this Memorandum of Understanding are
intended by the parties to serve as interpretive guidelines and shall not be
deemed to modify or amend said Contract; and to the extent that the provisions
of this Memorandum of Understanding may be held to violate Food and Agriculture
Code Section 55601.5(g) or any other statute or public policy, then either party
may file an appropriate petition with a court of competent jurisdiction for the
purpose of establishing the rights and responsibilities of the parties under the
existing Contract.

4. GRAPE QUALITY STANDARDS. The parties agree that with respect to the
obligation of VI-72 to follow good cultural practices and to use its best
efforts to produce quality grapes for wine making, VI-72 agrees that the
following quality standards shall be adopted in determining the suitability of
grapes delivered under the

-6-

<PAGE>

Contract for crushing into wine. Said grape quality standards adopted by the
parties are as follows:

A. SUGAR CONTENT. Attached as Exhibit "B" are the minimum and
optimum sugar levels set forth as standards for grapes grown pursuant to the
Contract. The optimum brix represents the sugar content which Heublein wishes
to receive for each variety set forth in Exhibit "B." MP-74 agrees that it will
endeavor to achieve optimum brixes as set forth in Exhibit "B." Heublein may,
during each harvest year, specify an optimum brix and MP-74 will make reasonable
efforts to achieve the optimum brix for that harvest year.

Minimum brix represents the minimum acceptable sugar content
based upon the Grower's delivered average sugar. If occasional loads, not more
than two (2) per variety or fifty percent (50%) of MP-74 committed tonnage per
variety, whichever is less, drop below the minimum brix level, such loads will
be accepted and included in the Grower average.

There shall be no maximum acceptable brix.

B. MIXED LOADS

1. BLACK AND GRENACHE GRAPES IN WHITE LOADS. Each load of
white grapes which contains any amount of black grapes shall be considered
unacceptable and may be rejected.

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<PAGE>

Wines, they will be paid on the basis of the lowest price variety in the load.

C. DEFECTS.

2. 1.0 PERCENT OR LESS DEFECTS. Any otherwise satisfactory
load and grapes delivered having 1.0 percent or less defects shall be considered
acceptable.

D. MATERIAL OTHER THAN GRAPES (MOG)

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<PAGE>

2. 1.0 PERCENT OR LESS MOG. Any otherwise satisfactory load of
grapes delivered having 1.0 percent or less MOG will be considered acceptable.
Any otherwise satisfactory load of French Colombard or Flora grapes with 1.5
percent or less MOG will be considered acceptable.

3. BETWEEN 1.0 PERCENT AND 2.0 PERCENT MOG. Each load of
grapes having over 1.0 percent or over 1.5 percent French Colombard and Flora
and up to 2.0 percent MOG is not desirable; 1.5 times the weight of all MOG will
be deducted from the weight of the load.

4. MORE THAN 2.0 PERCENT MOG. Each load of grapes delivered
having more than 2.0 percent MOG will be considered unacceptable for winemaking
and will be rejected.

E. CONTAMINATION, INSECT OR WORM INFESTATION

Loads of grapes will be rejected where potential contamination of
the winery may occur, and where there is significant visible insect or worm
infestation.

F. WILD FERMENTATION

Loads which are in the process of fermentation are not desired.
Where fermentation is suspected, a load will be analyzed for volatile acid and
ethyl alcohol. If the volatile acid is greater than 0.015 gm/l00 ml, or if the
ethyl alcohol is greater than 0.08 percent by volume, the load will be
considered unacceptable for winemaking and will be rejected.

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<PAGE>

G. OVER AGE LOADS

Grapes harvested prior to the day of delivery without permission
or scheduling by Winery will be rejected.

H. UNAUTHORIZED DELIVERIES

Grapes delivered in excess of Heublein Wines' daily schedule by
variety or any unscheduled grapes to any plant will be rejected.

I. MECHANICALLY HARVESTED GRAPES

VI-72 shall continue to have the right to determine in its
discretion whether or not to machine harvest grapes after consultation with
Heublein.

J. GENERAL REQUIREMENTS

K. IMPLEMENTATION

1. Every load of grapes will be tested for sugar content.

2. Every load of grapes will be tested for MOG unless the test
is deemed to be unnecessary after visual inspection by Heublein's
representative.

L. GRAPE INSPECTION OPTION

If in the opinion of the Plant Manager (or Winemaker) any load of
grapes is unfit for making quality wine through contami-

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<PAGE>

nation by foreign substances, he will contact the Heublein Fieldman responsible
for VI-72's load. The Plant Manager (or Winemaker) and the Heublein Fieldman
will jointly inspect the load. They will then jointly confer with VI-72 through
a representative of MFC prior to rejection of a load which is deemed to be unfit
for making quality wine.

M. REJECTED LOADS

N. WAIVER

No failure or omission by either party to insist upon or enforce
any of the provisions of these quality standards shall be deemed a waiver of
such provision.

5. DISMISSAL OF ACTION. VI-72 agrees, on execution of this Memorandum of
Understanding to cause to be filed with the Clerk of the Superior Court of
California, County of Monterey, a dismissal of Action No. 83846 dismissing the
First Cause of Action (declaratory relief) without prejudice and the Second
Cause of Action (complaint for money) of the First Amended Complaint for
Declaratory Relief and Complaint for Money with prejudice. To the extent that
this Memorandum of Understanding addresses issues and controversies set forth in
the First Cause of Action in said Complaint in Action No. 83846,

-11-

<PAGE>

the rights and obligations of VI-72 and Heublein, as successor to the interests
of Almaden, shall be determined with reference to this Memorandum of
Understanding.

6. GOOD FAITH. VI-72 acknowledges that Heublein, as successor to Almaden
and otherwise, has heretofore been engaged in the winemaking business and has
certain business customs and practices which may to some extent differ from
those of Almaden. Heublein acknowledges that VI-72 has had a contractual
relationship with Almaden which has been seasoned by years of delivering grapes
pursuant to the Contract. The parties, therefore, agree that they shall each in
good faith endeavor to resolve any differences which may arise to create a
harmonious working relationship between them for the balance of the Contract
term.

7. RELEASE OF PARCELS FROM CONTRACT. The parties agree that certain
parcels of real property, improved with vineyards, which are subject to the
Contract shall, notwithstanding the provisions of paragraph 4 of the Contract,
be released therefrom without the necessity of giving notice as otherwise
provided in said paragraph. Said acreage is set forth as Parcel I, Parcel II,
Parcel III, and Parcel IV on that certain map attached hereto as Exhibit "C" and
by this reference made a part hereof. Each parcel shall be released from the
provisions of said Contract and VI-72 will not be obligated to supply nor will
Heublein be obligated to accept delivery of grapes from said acreages as set
forth below:

A. PARCEL I- 18.8 ACRES. Of said acreage, 5 acres, the location of
which shall be determinedby VI-72 shall be released

-12-

<PAGE>

immediately with the balance of approximately 13.8 acres released after delivery
of the 1987 crop. Thereafter said property shall not be in any manner subject
to Said Contract.

B. PARCEL II- 105 ACRES. Of said 105 acres, approximately 20 acres
of Petite Sarah shall be released now at no cost to Heublein with the balance of
approximately 85 acres to be released after delivery of the 1987 crop.
Thereafter said property shall not be in any manner subject to said Contract.

C. PARCEL III-44 ACRES. All 44 acres shall be immediately released
from the agreement with no grapes to be delivered in the 1987 crop year.
Thereafter said property shall not be in any manner subject to said Contract.

D. PARCEL IV-98.8 ACRES. Of said 98.8 acres, approximately 38.76
acres of Petite Sarah shall be released immediately with the balance of
approximately 59.32 acres to be released after delivery of the 1987 crop.
Thereafter said property shall not be in any manner subject to said Contract.

VI-72 shall have the right to sell, lease, or otherwise dispose of the
above-referenced parcels, subject to, however, the terms of this paragraph.

-13-

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Understanding the day and year first above written.

VINEYARD INVESTORS 1972,
a California Limited Partnership

By MONTEREY FARMING CORPORATION,
a California Corporation, a
General Partner

/s/ Alfred G Scheid
----------------------------------
GROWER

HEUBLEIN, INC.,
a Corporation

By /s/ Robert D. Rossi
-------------------------------
By
-------------------------------

<PAGE>

EXHIBIT A

LONG TERM GRAPE PURCHASE CONTRACT

This Contract entered into the 21st day of DECEMBER, 1972, is between
VINEYARD INVESTORS-1972, a California Limited Partnership (Grower) and ALMADEN
VINEYARDS, INC., a Delaware corporation (Winery).

RECITALS:

A. Winery desires to augment its annual supply of wine grapes on a
long term basis;

B. Grower intends to develop approximately 1,345 acres of land by
planting this acreage to vineyards for the purpose of growing and producing
certain selected varieties of wine grapes;

C. Grower anticipates that this development program will commence
with the planting of these 1,345 acres in the calendar year of 1973; and

<PAGE>

acquired by Grower may be less than 1,345 acres and the planting thereof may
not be completed during the 1973 planting season; Winery and Grower
nonetheless desire and intend to have the terms hereof apply to such lesser
number of acres as are in fact acquired by Grower, provided at least 865
acres are acquired, and to post-1973 plantings, provided all plantingis
completed not later than the 1974 planting season;

IT IS THEREFORE AGREED:

2. Any obligation of Grower to plant the varieties of grapes in the
quantities referred to Section 1, above, shall be conditioned upon:

(a) Grower's ability to obtain the plants described on Exhibit A
at reasonable prices;

-2-

<PAGE>

(b) During each year of the term of this Contract, Grower agrees
to harvest, deliver and sell to Winery, and Winery agrees to accept delivery of
and purchase all grapes grown and produced on acreages subject to this Contract.

-3-

<PAGE>

4. This Contract shall be binding and effective for a term ending
thirty (30) years following conclusion of the first harvest but not later than
2006.

However, if the economic life of a producing vineyard or portion
thereof designated hereunder is less than thirty (30) years, this contract shall
terminate as to such vineyard or portion thereof at the end of its economic
life. If Grower pulls out vines, such decision by Grower shall be a
determination that such vines have reached the end of their economic life.
However, prior to the pulling of such vines, Grower must notify Winery of such
intention three (3) years prior to the actual pulling of such vineyard or
portion thereof.

-4-

<PAGE>

5. (a) The prices paid by Winery to Grower shall be determined on
the following basis:

(i) Prices for all grapes shall be f.o.b. carrier
"roadside" Grower's vineyards designated in this Contract.

(ii) In each crop year the prices paid for each variety of
grape suitable for wine shall be at the highest price paid by Winery
in such year for the same or a comparable variety or the higher of
prices paid by other wineries to growers for such variety or
comparable variety (assuming sales of such variety or comparable
variety are in quantities sufficient to establish a bona fide price)
in Monterey County. If no prices are established for Monterey County,
the price paid will be that established for the Northern Coastal
growing area.

(iii) In each crop year the price paid for grapes which are
not suitable for wine, shall be the price generally established in the
industry for such lower quality grapes if the Winery retains

-5-

<PAGE>

such grapes for processing into distilling material or for other uses,
or the best prices Winery can obtain by using its best efforts if such
grapes are resold.

(b) All grapes shall be weighed on certified scales in the
vicinity of the vineyard and payment shall be on the basis of certified weight
tags furnished by Grower to Winery.

(d) As soon as the actual prices payable under this Contract can
be determined for each variety delivered, final price adjustments shall be made,
and all amounts due shall be promptly paid by Winery to Grower at Los Angeles,
California.

-6-

<PAGE>

While any such dispute is being resolved, neither party will be
relieved of its obligations under this Contract.

-7-

<PAGE>

10. No failure or omission by either party to this Contract to insist
upon or enforce any of its terms, which may have been breached by the other
party, shall be deemed a waiver unless the same shall be in writing. No
representative or agent of either party shall have any authority to waive,
change or add to any of the terms or conditions specified herein except by a
writing duly executed by said representative or agent.

-8-

<PAGE>

11. Time is of the essence of this Contract which embodies the entire
understanding and agreement between the parties.

12. This Contract shall be deemed modified to the extent necessary to
comply with valid State and Federal laws, rules or regulations pursuant thereto
and any valid marketing order or agreement under authority of State or Federal
law.

13. This Contract shall be binding on the heirs, assigns, legatees,
devisees, transferees, or other successors in interest, partial or entire of
each party.

IN WITNESS WHEREOF, the parties have executed this Contract as of the
date first above written.

VINEYARD INVESTORS-1972

By /s/ Alfred G. Scheid
---------------------

ALMADEN VINEYARDS, INC.

By /s/ T.J. Grady V.P.
---------------------

-9-

<PAGE>

EXHIBIT B
HEUBLEIN WINES SUGAR STANDARDS
FOR
MONTEREY FARMING CORPORATION
(Central Coast Grapes)

B R I X
- --------------------------------------------------------------------------------
VARIETY MINIMUM OPTIUM

WHITE GROUP

1 Chardonnay 20.0 23.5

2 Sauvignon Blanc 20.0 22.5

3 Johannisberg
Riesling, Semillon,
Gewurztraminer 19.0 22.0

4 Chenin Blanc 19.0 21.5

5 Colombard 18.0 22.0

BLACK GROUP

6 Grenache 20.0 22.0

7 Cabernet Sauvignon,
Zinfandel 20.0 23.5

8 Petite Sirah,
Merlot,
Early Burgundy 20.0 23.0

9 Napa Gamay 20.0 22.0

<PAGE>

EXHIBIT C
GREENFIELD

[MAP]

<PAGE>

AMENDMENT TO LONG TERM GRAPE PURCHASE CONTRACT

THIS AMENDMENT to Long Term Grape Purchase Contract is entered into this
19th day of April, 1988, by and between VINEYARD INVESTORS 1972, a California
Limited Partnership ("VI-72" or "Grower") and HEUBLEIN, INC., a Corporation
authorized to and doing business in the State of California ("Heublein") as
follows:

RECITALS

A. On December 21, 1972, VI-72 entered into a Long Term Grape Purchase
Contract with Almaden Vineyards, Inc. ("Almaden"), a true and correct copy of
which is attached hereto. Monterey Farming Corporation, a California
corporation ("MFC"), is a general partner of VI-72.

B. On March 9, 1987, Heublein acquired the assets of Almaden and is the
assignee and successor in interest of Almaden to the Contract attached as
Exhibit "A".

C. On August 6, 1987, VI-72 and Heublein entered into a Memorandum of
Understanding concerning disputes that had

<PAGE>

arisen under the Long Term Grape Purchase Contract and the manner in which
said Contract was to be understood and interpreted by the parties.

D. The parties desire to amend the Long Term Grape Purchase
Contract to permit the grafting of certain vines from one variety to another
variety of grapes.

NOW THEREFORE THE PARTIES AGREE AS FOLLOWS:

1. VI-72 agrees to graft 11.92 acres of Napa Gamay vines to Cabernet
Sauvignon vines on that certain vineyard known as the Martella Ranch.

2. VI-72 agrees that such grafting shall be completed during the
1988 crop year.

3. The parties agree that all production of grapes from said
vineyard shall be subject to that certain Long Term Grape Purchase Contract
as understood and interpreted by that Memorandum of Understanding between
the parties hereto.

4. In all other respects the parties confirm their Long Term Grape
Purchase Contract and said Memorandum of Understanding.

<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Long
Term Grape Purchase Contract the day and year first above written.

VINEYARD INVESTORS 1972,
a California Limited Partnership,

By MONTEREY FARMING CORPORATION
a California Corporation, a
General Partner

By /s/ Alfred G. Scheid
-------------------------------
Vineyard Investors 1972

HEUBLEIN, INC.,
a Corporation,

By /s/ Robert D. Rossi
-------------------------------
Heublein, Inc.

Copy of contract dated December 21, 1972 attached.

<PAGE>

SECOND AMENDMENT TO
LONG TERM GRAPE PURCHASE CONTRACT

This Second Amendment to Long Term Grape Purchase Contract is entered into
this 2nd day of June, 1988, by and between VINEYARD INVESTORS-1972, a
California Limited Partnership ("VI-72" or "Grower") and HEUBLEIN, INC., a
Corporation authorized to and doing business in the State of California
("Heublein") as follows:

RECITALS

A. On December 31, 1972, VI-72 entered into a Long Term Grape Purchase
Contract with Almaden Vineyards, Inc. ("Almaden"), a true and correct copy of
which is attached hereto as Exhibit "A". Monterey Farming Corporation, a
California corporation ("MFC"), is a general partner of VI-72.

B. On March 9, 1987, Heublein acquired the assets of Almaden and is the
assignee and successor in interest of Almaden to the Contract attached as
Exhibit "A".

C. On August 6, 1987, VI-72 and Heublein entered into a Memorandum of
Understanding concerning disputes that had arisen under the Long Term Grape
Purchase Contract and the manner in which said Contract was to be understood and
interpreted by the parties.

D. On April 19, 1988, the parties executed an Amendment to Long Term
Grape Purchase Contract, a true and correct copy of which is attached hereto as
Exhibit "B".

E. The parties desire to further amend the Long Term Grape Purchase
Contract to release from the effects thereof certain real

-1-

<PAGE>

property and to permit the grafting of certain vines from one variety to another
variety of grapes.

NOW THEREFORE THE PARTIES AGREE AS FOLLOWS:

1. Heublein agrees to release approximately 121.2 acres of real property
from Exhibit "A", said real property being generally described as Assessor's
Parcel No. 221-011-13, generally known as the Reed Ranch; the parcel to be
released is shown as Parcel A on that certain Preliminary Sketch of Survey, a
true and correct copy of which is attached hereto as Exhibit "C". Said release
shall be effective immediately after completion of the 1988 crop year. VI-72
shall bear all costs of subdividing Parcel A as shown on Exhibit "C."

2. With respect to all existing vines now existing in Parcel B as shown
on Exhibit "C", VI-72 agrees to graft all existing vines located on Parcel B in
the Gewurztraminer, Chenin Blanc, Sauvignon Blanc, and Semillon varieties, over
to the Pinot Chardonnay variety. VI-72 may also replant existing Pinot
Chardonnay vines in the Pinot Chardonnay variety.

3. VI-72 agrees that the grafting contemplated by this Agreement shall be
completed by it, at its own expense, upon conclusion of the 1988 harvest and
during the 1989 crop year.

4. Notwithstanding any earlier agreements of the parties concerning the
release of certain varieties of grapes from the effect of Exhibit "A" on the
Reed Ranch, all production of grapes from the remaining portion of the vineyard
shown as Parcel B in Exhibit "C" shall be subject to that certain Long Term
Grape Purchase Contract as understood and interpreted by that Memorandum of
Understanding

-2-

<PAGE>

of the parties referred to above.

5. In all other respects the parties confirm their Long Term Grape
Purchase Contract as amended by Exhibit "B", as well as said Memorandum of
Understanding.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Long
Term Grape Purchase Contract the day and year first above written.

VINEYARD INVESTORS 1972,
a California Limited Partnership,

By MONTEREY FARMING CORPORATION
a California Corporation, a
General Partner

By /s/ Alfred G. Scheid
---------------------------
VI-72 or Grower

HEUBLEIN, INC.
a Corporation

By /s/ Robert D. Rossi
---------------------------
Vice Pres HEUBLEIN

-3-

<PAGE>

EXHIBIT A

LONG TERM GRAPE PURCHASE CONTRACT

This Contract entered into the 21st day of December, 1972, is between VINEYARD
INVESTORS-1972, a California Limited Partnership (Grower) and ALMADEN VINEYARDS,
INC., a Delaware corporation (Winery).

RECITALS:

A. Winery desires to augment its annual supply of wine grapes on
long term basis;

B. Grower intends to develop approximately 1,345 acres of land by
planting this acreage to vineyards for the purpose of growing and producing
certain selected varieties of wine grapes;

C. Grower anticipates that this development program will commence
with the planting of these 1,345 acres in the calendar year of 1973; and

<PAGE>

acquired by Grower may be less than 1,345 acres and the planting thereof may
not be completed during the 1973 planting season; Winery and Grower
nonetheless desire and intend to have the terms hereof apply to such lesser
number of acres as are in fact acquired by Grower, provided at least 865
acres are acquired, and to post-1973 plantings, provided all planting is
completed not later than the 1974 planting season;

IT IS THEREFORE AGREED:

1. Grower has contracted for approximately 600,000 certified
virus-free plants and to the extent the contractor is able to deliver, agrees to
plant by no later than August 31, 1973 the varieties of grapes and number of
acres set forth and described on Exhibit A attached hereto and made a part
hereof.

2. Any obligation of Grower to plant the varieties of grapes in the
quantities referred to Section 1, above, shall be conditioned upon:

(a) Grower's ability to obtain the plants described on Exhibit A
at reasonable prices;

-2-

<PAGE>

(b) During each year of the term of this Contract, Grower agrees
to harvest, deliver and sell to Winery, and Winery agrees to accept delivery of
and purchase all grapes grown and produced on acreages subject to this Contract.

-3-

<PAGE>

4. This Contract shall be binding and effective for a term ending
thirty (30) years following conclusion of the first harvest but not later than
2006.

However, if the economic life of a producing vineyard or portion
thereof designated hereunder is less than thirty (30) years, this contract shall
terminate as to such vineyard or portion thereof at the end of its economic
life. If Grower pulls out vines, such decision by Grower shall be a
determination that such vines have reached the end of their economic life.
However, prior to the pulling of such vines, Grower must notify Winery of such
intention three (3) years prior to the actual pulling of such vineyard or
portion thereof.

-4-

<PAGE>

5. (a) The prices paid by Winery to Grower shall be determined on
the following basis:

(i) Prices for all grapes shall be f.o.b. carrier
"roadside" Grower's vineyards designated in this Contract.

(ii) In each crop year the prices paid for each variety of
grape suitable for wine shall be at the highest price paid by Winery
in such year for the same or a comparable variety or the higher of
prices paid by other wineries to growers for such variety or
comparable variety (assuming sales of such variety or comparable
variety are in quantities sufficient to establish a bona fide price)
in Monterey County. If no prices are established for Monterey County,
the price paid will be that established for the Northern Coastal
growing area.

(iii) In each crop year the price paid for grapes which are
not suitable for wine, shall be the price generally established in the
industry for such lower quality grapes if the Winery retains

-5-

<PAGE>

such grapes for processing into distilling material or for other uses,
or the best prices Winery can obtain by using its best efforts if such
grapes are resold.

(b) All grapes shall be weighed on certified scales in the
vicinity of the vineyard and payment shall be on the basis of certified weight
tags furnished by Grower to Winery.

(d) As soon as the actual prices payable under this Contract can
be determined for each variety delivered, final price adjustments shall be made,
and all amounts due shall be promptly paid by Winery to Grower at Los Angeles,
California.

-6-

<PAGE>

While any such dispute is being resolved, neither party will be
relieved of its obligations under this Contract.

-7-

<PAGE>

10. No failure or omission by either party to this Contract to insist
upon or enforce any of its terms, which may have been breached by the other
party, shall be deemed a waiver unless the same shall be in writing. No
representative or agent of either party shall have any authority to waive,
change or add to any of the terms or conditions specified herein except by a
writing duly executed by said representative or agent.

-8-

<PAGE>

11. Time is of the essence of this Contract which embodies the entire
understanding and agreement between the parties.

12. This Contract shall be deemed modified to the extent necessary to
comply with valid State and Federal laws, rules or regulations pursuant thereto
and any valid marketing order or agreement under authority of State or Federal
law.

13. This Contract shall be binding on the heirs, assigns, legatees,
devisees, transferees, or other successors in interest, partial or entire of
each party.

IN WITNESS WHEREOF, the parties have executed this Contract as of the
date first above written.

VINEYARD INVESTORS-1972

By /s/ Alfred G. Scheid
------------------------

ALMADEN VINEYARDS, INC.

By /s/ T.J. Grady V.P.
------------------------

-9-

<PAGE>

EXHIBIT B

AMENDMENT TO LONG TERM GRAPE PURCHASE CONTRACT

THIS AMENDMENT to Long Term Grape Purchase Contract is entered into
this 19th day of April, 1988, by and between VINEYARD INVESTORS 1972, a
California Limited Partnership ("VI-72" or "Grower") and HEUBLEIN, INC., a
Corporation authorized to and doing business in the State of California
("Heublein") as follows:

RECITALS

B. On March 9, 1987, Heublein acquired the assets of Almaden and is
the assignee and successor in interest of Almaden to the Contract attached as
Exhibit "A".

C. On August 6, 1987, VI-72 and Heublein entered into a Memorandum
of Understanding concerning disputes that had

<PAGE>

arisen under the Long Term Grape Purchase Contract and the manner in which
said Contract was to be understood and interpreted by the parties.

D. The parties desire to amend the Long Term Grape Purchase
Contract to permit the grafting of certain vines from one variety to another
variety of grapes.

NOW THEREFORE THE PARTIES AGREE AS FOLLOWS:

1. VI-72 agrees to graft 11.92 acres of Napa Gamay vines to Cabernet
Sauvignon vines on that certain vineyard known as the Martella Ranch.

2. VI-72 agrees that such grafting shall be completed during the
1988 crop year.

3. The parties agree that all production of grapes from said vineyard
shall be subject to that certain Long Term Grape Purchase Contract as
understood and interpreted by that Memorandum of Understanding between the
parties hereto.

4. In all other respects the parties confirm their Long Term Grape
Purchase Contract and said Memorandum of Understanding.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Long Term Grape Purchase Contract the day and year first above written.

VINEYARD INVESTORS 1972,
a California Limited Partnership,

By MONTEREY FARMING CORPORATION
a California Corporation, a
General Partner

By /s/ Alfred G. Scheid
-------------------------------
Vineyard Investors 1972

HEUBLEIN, INC.,
a Corporation,

By /s/ Robert D. Rossi
-------------------------------
Heublein, Inc.

Copy of contract dated

December 21, 1972 attached.

<PAGE>

Exhibit "C"
Rancho Arroyo Seco
CITY OF GREENFIELD

[MAP]
PRELIMINARY
SKETCH OF SURVEY
IN "LOT 4" ACCORDING TO THE MAP
OF THE PARTITION OF THE ESPINOS
PORTION OF THE RANCHO POSO DE
LOS OSITOS, MONTEREY COUNTY,
CALIFORNIA
- MADE FOR -
MONTEREY FARMING CORP.
-BY-
AG SURVEYS, INC.
66 SALINAS-MONTEREY HWY.
SALINAS, CALIFORINA 93908
PH. 408-757-2075

JOB NO. M 8072 MAY, 1988

NOTE:
PARCEL "A" AREA IS ACCORDING
TO A FIELD SURVEY

PARCEL "B" AREA WAS DETERMINE
BY SUBTRACTING PARCEL "A"
FROM ASSESSOR'S ACREAGE.

<PAGE>

[Logo]

April 6, 1990

Robert D. Rossi
Vice President - Wines
Heublein Inc.
400 Montgomery Street, Suite 810
San Francisco, California 94104

Dear Bob,

Today we agreed to the following with respect to our current grape
purchase agreement:

1. We will graft approximately fourteen acres of Flora to Chardonnay on
the Central Vineyard (formerly Cowles). When the Chardonnay starts
bearing, we will deliver the grapes to Heublein under our
present grape purchase contract.

2. We will plant approximately eight acres, now fallow, with Chardonnay.
This acreage is a slope on the Pueblo Vineyard (formerly Reed).

When these new vines start bearing, we will deliver the grapes to
Heublein under our present grape purchase agreement.

3. Heublein will pay to Monterey Farming Corporation $28,672 due from
last year's crop settlement. This will be paid within ten days and
will constitute complete and final payment for the 1989 crop.

If this reflects your understanding of our agreement, please sign two of
the enclosed copies of this letter and return to me.

Bob, I really appreciate Heublein's willingness to negotiate in good faith
to resolve our differences. We did it again!

Sincerely,
/s/ Alfred G. Scheid
Alfred G. Scheid
President

Agreed to and Accepted by:
Heublein Inc.

By: /s/ Robert D. Rossi April 10, 1990
---------------------------- ----------------------------
Robert D. Rossi Date
Vice President - Wine

EXECUTIVE OFFICE: 1632 5th Street, Suite 220 - Santa Monica, California 90401-
Tel. (213) 394-5511 - Fax (213) 394-8511 VINEYARD OFFICE: P.O. Box 627 - King
City, California 93930 - Tel. (408) 385-4801 - Fax (408) 385-0136

<PAGE>

THIRD AMENDMENT TO
LONG TERM GRAPE PURCHASE CONTRACT

THIS THIRD AMENDMENT TO LONG TERM GRAPE PURCHASE CONTRACT (this
"Amendment") is made and entered into as of this 12th day of March, 1993, by and
between VINEYARD INVESTORS - 1972, a California limited partnership ("VI-72" or
"GROWER"), and HEUBLEIN, INC., a corporation authorized to do and doing business
in the State of California ("HEUBLEIN" or "WINERY").

RECITALS

A. On December 21, 1972, VI-72 entered into a Long Term Grape Purchase
Contract (the "ORIGINAL CONTRACT") with Almaden Vineyards, Inc. ("ALMADEN") with
respect to the purchase and sale of wine grapes produced on approximately 1,345
vineyard acres owned by VI-72. Scheid Vineyards and Management Co., a California
corporation, formerly known as Monterey Farming Corporation, a California
corporation, is a general partner in VI-72.

B. On March 9, 1987, Heublein acquired the assets of Almaden and is the
assignee and successor in interest of Almaden with respect to the Original
Contract.

D. On April 19, 1988, the parties entered into an Amendment to Long Term
Grape Purchase Contract (the "FIRST AMENDMENT") with respect to the Original
Contract.

E. On June 2, 1988, the parties entered into a Second Amendment to Long
Term Grape Purchase Contract (the "SECOND AMENDMENT") with respect to the
Original Contract.

F. On April 6, 1990, and on May 14, 1990, the parties respectively
executed letter agreements (collectively, the "LETTER AGREEMENTS") with respect
to the Original Contract, as amended.

G. The Original Contract, the Memorandum, the First Amendment, the Second
Amendment and the Letter Agreements hereinafter collectively are referred to as
the "EXISTING CONTRACT". The Existing Contract as amended by this Amendment
hereinafter is referred to as the "CONTRACT".

H. The parties desire to amend the Existing Contract in certain
additional respects as hereinafter provided.

JAB AGS

<PAGE>

NOW, THEREFORE, in consideration of the premises, the parties agree as
follows:

1. VINEYARDS AND VARIETIES.

(a) VINEYARDS AND VARIETIES COVERED. The vineyards (the "VINEYARDS")
and wine grapes (the "WINE GRAPES") currently subject to the provisions of
the Existing Contract shall continue to be subject to the provisions of the
Existing Contract following execution of this Amendment. Similarly, VI-72
shall continue to produce existing Wine Grape varieties in existing
locations on the Vineyards following execution of this Amendment; PROVIDED,
HOWEVER, that VI-72 shall convert the existing varieties to the proposed
varieties as specified in EXHIBIT A attached hereto in accordance with the
methods and in the calendar years respectively identified therein.
Notwithstanding the foregoing, VI-72 shall not be required to sell and
Winery shall not be required to purchase in excess of the following average
tons per acre of the following Wine Grape varieties produced on acreage
converted as provided above in any crop year under the Contract:

VARIETY AVERAGE TONS PER ACRE
------- ---------------------

Chardonnay 8.0
Cabernet Sauvignon 7.5
Merlot 7.5

(b) RETENTION OF WINE GRAPES BY VI-72. Notwithstanding any provision
of the Contract to the contrary, each harvest VI-72, in its sole
discretion, may retain for its own use up to 25 tons of Wine Grapes of each
variety produced on the Vineyards.

2. PRICING. The price to be paid by Winery to Grower for each variety of
Wine Grapes purchased under the Contract shall be determined with reference to
the Final Grape Crush Report (the "CRUSH REPORT"), currently published by the
California Department of Food and Agriculture (the "DEPARTMENT") on the 10th day
of March of each year, for the crop year (the "APPLICABLE CROP YEAR") preceding
the harvest of such Wine Grape variety, as it may be supplemented or corrected
by the Department up through the succeeding first day of August (the "APPLICABLE
CRUSH REPORT"), in accordance with the following:

(a) VARIETIES OTHER THAN MERLOT. The price per ton for each
variety of Wine Grapes other than Merlot under the Contract shall be equal
to [ ]* (the "PRICING DISTRICTS"), as established by the
Department, determined by:

[ ]*

JAB AGS

_____________________
*Confidential Treatment Requested for Redacted Portion.

-2-

<PAGE>

[ ]*

Application of the provisions of this SECTION 2(a) is illustrated by the example
set forth in EXHIBIT B attached hereto.

(b) MERLOT. The price per ton for Merlot under the Contract shall be
the lower of:

[ ]*

JAB AGS

_____________________
*Confidential Treatment Requested for Redacted Portion.

-3-

<PAGE>

(c) UNAVAILABILITY OF CRUSH REPORT. If the Department shall cease to
publish the Crush Report or shall cease to publish the Crush Report in
substantially its present form with respect to any crop year necessary for
determining prices under this SECTION 2, the prices to be paid hereunder
shall be determined with reference to the price information for the Pricing
Districts, in form and substance as nearly identical as possible to the
price information for the Pricing Districts in the Crush Report, in an
alternative government publication.

4. TERM AND TERMINATION.

(a) TERM. The term of the Contract shall continue until
terminated in accordance with the provisions of this SECTION 4.

(b) TERMINATION BY EITHER PARTY. Either party may terminate the
Contract after the 2003 crop year by giving written notice (a "TERMINATION
NOTICE") to the other party. Termination shall be effective upon completion
of the third crop year following the thirty-first day of December next
succeeding the Termination Notice. For example, if a party were to give a
Termination Notice on November 30, 2003, the Contract would terminate after
delivery of the 2006 crop by Grower to Winery.

(c) WITHDRAWAL BY GROWER. In the event Winery properly delivers
a Termination Notice to Grower under SECTION 4(b) above, Grower at its
option (i) may withdraw up to 1/3 of any or all varieties of Wine Grapes
from coverage by the Contract by delivery to Winery of written notice (a
"WITHDRAWAL NOTICE") of its intent to do so prior to the first day of April
following the Withdrawal Notice, and (ii) may

JAB AGS

-4-

<PAGE>

withdraw up to 2/3 of any or all varieties of Wine Grapes from such
coverage by delivery of a Withdrawal Notice prior to the succeeding first
day of April.

6. INCORPORATION BY REFERENCE. Exhibits attached to this Amendment
hereby are incorporated by reference herein.

7. EFFECTIVENESS OF THE EXISTING CONTRACT. Except as specifically
set forth herein, the Existing Contract shall remain unchanged and in full force
and effect. In the event of any conflict between the provisions of this
Amendment and the provisions of the Existing Contract, the provisions of this
Amendment shall govern.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.

VINEYARD INVESTORS - 1972,
a California limited partnership

By: Scheid Vineyards and Management Co.,
a California corporation

By: /s/ Alfred G. Scheid
-----------------------------------
Alfred G. Scheid
Its: President

"VI-72" or "GROWER"

HEUBLEIN, INC., a corporation

By: /s/ James A. Beckman
-----------------------------------

Its: Vice President
-----------------------
"HEUBLEIN" or "WINERY"

-5-

<PAGE>

LONG TERM GRAPE PURCHASE CONTRACT.

This Contract entered into the 12th day of February, 1973, is between
MONTEREY FARMING CORPORATION, as General Partner on behalf of VINEYARD 405, a
California Limited Partnership to be formed (Grower) and ALMADEN VINEYARDS,
INC., a Delaware corporation (Winery).

RECITALS:

A. Winery desires to augment its annual supply of wine grapes on a
long term basis;

B. Grower intends to develop approximately 405 acres of land by
planting this acreage to vineyards for the purpose of growing and producing
certain selected varieties of wine grapes;

C. Grower anticipates that this development program will commence
with the planting of these 405 acres in the calendar year of 1973; and

D. While Grower intends to acquire and develop approximately 405
acres of land and plant them in 1973, as described in Recitals B and C, supra,
and will make every reasonable effort to successfully consummate pending
negotiations for the acquisition of this acreage and to complete planting
thereof during the 1973 planting season, the total number of acres acquired by
Grower may

<PAGE>

be less than 405 acres and the planting thereof may not be completed during the
1973 planting season; Winery and Grower nonetheless desire and intend to have
the terms hereof apply to such lesser number of acres as are in fact acquired
by Grower, provided at least 230 acres are acquired, and to post-1973 plantings,
provided all planting is completed not later than the 1974 planting season;

IT IS THEREFORE AGREED:

1. Grower has contracted for approximately 185,000 certified virus-
free plants and to the extent the contractor is able to deliver, agrees to plant
by no later than August 31, 1973, the varieties of grapes and number of acres
set forth and described on Exhibit A attached hereto and made a part hereof.

2. Any obligation of Grower to plant the varieties of grapes in the
quantities referred to in Section 1 above, shall be conditioned upon:

(a) Grower's ability to obtain the plants described on Exhibit A
at reasonable prices;

-2-

<PAGE>

In the event Grower is not able to consummate the acquisition of the
total vineyard acreage described on Exhibit A and to complete, prior to August
31, 1973, the planting of the vineyard acreage in fact acquired by Grower, or in
either of these events, the number of acres and number of plants to be planted
by Grower shall be reduced to the number of acres in fact acquired and plants
required for this lesser acreage and the period within which planting shall be
completed shall be extended to permit completion of the planting provided Grower
shall plant not less than 230 acres and shall complete all planting on or
before August 31, 1974.

(b) During each year of the term of this Contract, Grower agrees
to harvest, deliver and sell to Winery, and Winery agrees to accept delivery of
and purchase all grapes grown and produced on acreages subject to this Contract.

-3-

<PAGE>

4. This Contract shall be binding and effective for a term ending
thirty (30) years following conclusion of the first harvest but not later than
2006.

However, if the economic life of a producing vineyard or portion
thereof designated hereunder is less than thirty (30) years, this contract shall
terminate as to such vineyard or portion thereof at the end of its economic
life. If Grower pulls out vines, such decision by Grower shall be a
determination that such vines have reached the end of their economic life.
However, prior to the pulling of such vines, Grower must notify Winery of such
intention three (3) years prior to the actual pulling of such vineyard or
portion thereof.

-4-

<PAGE>

5. (a) The prices paid by Winery to Grower shall be determined on
the following basis:

(i) Prices for all grapes shall be f.o.b. carrier
"roadside" Grower's vineyards designated in this Contract.

(ii) In each crop year the prices paid for each
variety of grape suitable for wine shall be at the highest
price paid by Winery in such year for the same or a
comparable variety or the higher of prices paid by other
wineries to growers for such variety or comparable variety
(assuming sales of such variety or comparable variety are in
quantities sufficient to establish a bona fide price) in
Monterey County. If no prices are established for Monterey
County, the price paid will be that established for the
Northern Coastal growing area.

(iii) In each crop year the price paid for grapes which
are not suitable for wine, shall be the price generally
established in the industry for such lower quality grapes if the
Winery retains

-5-

<PAGE>

such grapes for processing into distilling material or for other
uses, or the best prices Winery can obtain by using its best
efforts if such grapes are resold.

(b) All grapes shall be weighed on certified scales in the
vicinity of the vineyard and payment shall be on the basis of certified weight
tags furnished by Grower to Winery.

(d) As soon as the actual prices payable under this Contract can
be determined for each variety delivered, final price adjustments shall be
made, and all amounts due shall be promptly paid by Winery to Grower at Los
Angeles, California.

-6-

<PAGE>

While any such dispute is being resolved, neither party will be
relieved of its obligations under this Contract.

-7-

<PAGE>

10. No failure or omission by either party to this Contract to insist
upon or enforce any of its terms, which may have been breached by the other
party, shall be deemed a waiver unless the same shall be in writing. No
representative or agent of either party shall have any authority to waive,
change or add to any of the terms or conditions specified herein except by a
writing duly executed by said representative of agent.

-8-

<PAGE>

11. Time is of the essence of this Contract which embodies the entire
understanding and agreement between the parties.

12. This Contract shall be deemed modified to the extent necessary to
comply with valid State and Federal laws, rules or regulations pursuant thereto
and any valid marketing order or agreement under authority of State or Federal
law.

13. This Contract shall be binding on the heirs, assigns, legatees,
devisees, transferees, or other successors in interest, partial or entire of
each party.

IN WITNESS WHEREOF, the parties have executed this Contract as of
the date first above written.

MONTEREY FARMING CORPORATION
on behalf of

VINEYARD 405

By /s/ illegible
-----------------------------------------

ALMADEN VINEYARDS, INC.

BY /s/ illegible
-----------------------------------------

-9-

<PAGE>

EXHIBIT A

VINEYARD 405

ACREAGE TO BE PLANTED IN 1973
-----------------------------

Varieties by Acreage by Ranch

(Upper)
KAISER KAISER
230 175 TOTAL
------- ------ -----

GEWURZTRAMINER 28 28

JOHN. RIESLING 76 21 97

PINOT CHARDONNAY 76 20 96

CHENIN BLANC 78 78

SAUVIGNON BLANC 28 28

SEMILLON 28 28

FRENCH COLOMBARD 50 50
------- ------ -----

TOTAL 230 175 405
------- ------ -----
------- ------ -----

<PAGE>

MEMORANDUM OF UNDERSTANDING

THIS MEMORANDUM OF UNDERSTANDING is entered into this 6th day of August
1987, by and between VINEYARD 405, a California Limited Partnership ("Vineyard
405" or "Grower"), and HEUBLEIN, INC., a Corporation authorized to and doing
business in the State of California ("Heublein"), as follows:

RECITALS:

A. On February 12, 1983, Vineyard 405 entered into a Long Term Grape
Purchase Contract ("Contract") with Almaden Vineyards, Inc. ("Almaden"), a true
and correct copy of which is attached hereto as Exhibit A. Monterey Farming
Corporation, a California Corporation ("MFC"), is the general partner of
Vineyard 405.

B. Almaden also entered into three other substantially identical long-
term grape purchase contracts as follows:

(1) On December 31, 1972, Almaden entered into a contract with
Vineyard Investors 1972, a California Limited Partnership, by Monterey Farming
Corporation as General Partner.

(2) On November 30, 1973, Almaden entered into a contract with
Monterey Partners 1974, a California Limited Partnership, by Monterey Farming
Corporation, as General Partner.

(3) On February 12, 1973, Almaden entered into a contract with
Monterey Farming Corporation on its own account.

C. In 1985, a dispute arose between Almaden and MFC on behalf of each of
the limited partnerships above-named, as well as on its

-1-

<PAGE>

own behalf, concerning the rights and obligations of Almaden, as a winery, on
the one hand, and the above-referenced entities on the other hand as growers.
As a result of said dispute, the growers filed an action in the Superior Court
of Monterey County, California entitled MONTERY FARMING CORPORATION, A
CALIFORNIA CORPORATION, ET AL., V. ALMADEN VINEYARDS, INC., A DELAWARE
CORPORATION, ET AL., Action No. 83846, seeking declaratory relief as well as
payment for sums alleged to be owing for the harvest year 1985-86 to said
growers. Said action is currently pending in that Court.

D. On March 9, 1987, Heublein acquired the assets of Almaden and is the
assignee and successor in interest to the Contract as well as each of the
contracts referred to in Recital B above.

E. Heublein and Vineyard 405 (and by separate agreement each of the other
entities referenced in recital B above) wish to settle and resolve the disputes
heretofore existing to assure a harmonious relationship between Heublein and
Vineyard 405.

NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

1. l985 CROP SETTLEMENT. In settlement of the claim of Vineyard 405
(together with each other grower referred to in Recital B above), for all sums
claimed to be due as a result of the 1985 harvest season, Heublein agrees to pay
MFC on behalf of all such growers, the sum of Three Hundred Sixty-Five Thousand
Five Hundred Five and 07/100 Dollars ($365,505.07) claimed by Grower in the
action together with interest and less credits for uncashed checks previously
delivered by Almaden to MFC as set forth below:

-2-

<PAGE>

Principal Demand
Action No. 83846 $ 337,505.07

Interest 28,000.00
------------

Gross sums due for 1986 Crop 365,505.07

Credit:
Almaden check 4870 to MFC
held uncashed (14,877.00)

Almaden Check 8076 to MFC
held uncashed (80,078.17)
------------

Net due for 1985 crop $ 270,549.90
------------
------------

Heublein warrants and represents that said Almaden check nos. 4870 and 8076
being held by MFC are drawn on an account now owned by Heublein; that said
checks are now negotiable and may be cashed by MFC; that sufficient funds exist
in said account; and that, if said checks are dishonored for any reason that
Heublein will reissue such checks.

2. 1986 CROP SETTLEMENT. In settlement of all disputes with respect to
sums payable by Heublein to MFC for the 1986 crop, the parties agree that
Heublein is entitled to a credit computed as follows:

Sums alleged by MFC to be due
for the 1986 crop $ 10,640.57

Less adjustment on Early Burgundy
to $250 per ton (20,427.50)

Add marketing order assessment at
.008 cents for Early Burgundy 163.42
-----------

Net credit to Heublein for 1986 crop $ 9,263.51
-----------
-----------

The balance of $270,549.90, as provided in paragraph 1

-3-

<PAGE>

3. GUIDELINES FOR INTERPRETATION OF CONTRACT. Heublein, as successor in
interest to Almaden and Vineyard 405 agree that they are bound by and agree that
they shall continue to perform each and every term of the Contract; provided,
however, that the following provisions shall govern the interpretation of said
Contract as set forth below:

-4-

<PAGE>

C. Vineyard 405 agrees that during the remaining life of the
Contract the sum of $7.50 per ton shall be deducted from the price determined in
paragraph 3 B above to establish the "FOB carrier roadside" price to be paid in
accordance with the terms of the contract.

D. Notwithstanding the provisions of paragraph 6 of the Contract,
the parties agree that grapes delivered pursuant to the Contract may be
additionally tested for sugar, MOG, and defects by independent inspectors at the
receiving winery to determine whether grapes are delivered in compliance with
the Contract and this Memorandum of Understanding. Vineyard 405 shall have the
right at any time to observe such testing and, in its discretion, to also take
samples for testing. This paragraph shall not be deemed to relieve Heublein
from its obligation to specify a reasonable time for harvest of each vineyard as
provided in paragraph 3(c) and make such inspections of the grapes prior to or
during harvest as may be necessary to determine a reasonable time for harvest.
Independent weighing of all loads shall be determined in accordance with
paragraph 5(b) of the Contract.

E. Complete and full payment by Heublein of the preliminary grape
price shall be made within ten (10) days of receipt of written notice of
completion of the harvest by reference to the most current industry or
government publications containing such prices as provided in paragraph 5(c) of
the Contract. Any sums still owing as determined by the Preliminary Grape Crush
Report shall be made by Heublein on or before February 25 following the crop
year. Any portion of the preliminary price

-5-

<PAGE>

4. GRAPE QUALITY STANDARDS. The parties agree that with respect to the
obligation of Vineyard 405 to follow good cultural practices and to use its best
efforts to produce quality grapes for wine making, Vineyard 405 agrees that the
following quality stan-

-6-

<PAGE>

dards shall be adopted in determining the suitability of grapes delivered under
the Contract for crushing into wine. Said grape quality standards adopted by
the parties are as follows:

A. SUGAR CONTENT. Attached as Exhibit "B" are the minimum and
optimum sugar levels set forth as standards for grapes grown pursuant to the
Contract. The optimum brix represents the sugar content which Heublein wishes
to receive for each variety set forth in Exhibit "B." Vineyard 405 agrees that
it will endeavor to achieve optimum brixes as set forth in Exhibit "B."
Heublein may, during each harvest year, specify an optimum brix and Vineyard 405
will make reasonable efforts to achieve the optimum brix for that harvest year.

Minimum brix represents the minimum acceptable sugar content
based upon the Grower's delivered average sugar. If occasional loads, not more
than two (2) per variety or fifty percent (50%) of Vineyard 405 committed
tonnage per variety, whichever is less, drop below the minimum brix level, such
loads will be accepted and included in the Grower average.

There shall be no maximum acceptable brix.

B. MIXED LOADS

1. BLACK AND GRENACHE GRAPES IN WHITE LOADS. Each load of
white grapes which contains any amount of black grapes shall be considered
unacceptable and may be rejected.

2. MIXED VARIETIES AND WHITE GRAPES IN BLACK OR GRENACHE LOADS.
Loads containing two or more varieties of the same color grape, or loads of
black or Grenache grapes containing some

-7-

<PAGE>

amount of white grapes, are not desirable. If accepted by Heublein Wines, they
will be paid on the basis of the lowest price variety in the load.

C. DEFECTS.

2. 1.0 PERCENT OR LESS DEFECTS. Any otherwise satisfactory
load and grapes delivered having 1.0 percent or less defects shall be considered
acceptable.

D. MATERIAL OTHER THAN GRAPES (MOG)

1. Material Other than Grapes (MOG) shall be defined in accordance
with the custom of the grape industry and the practice of the Grape Inspection
Service of the California Depart-

-8-

<PAGE>

ment of Food and Agriculture and shall include leaves, leaf stems, canes and any
other foreign materials.

4. MORE THAN 2.0 PERCENT MOG. Each load of grapes delivered
having more than 2.0 percent MOG will be considered unacceptable for winemaking
and will be rejected.

E. CONTAMINATION, INSECT OR WORM INFESTATION

Loads of grapes will be rejected where potential contamination of
the winery may occur, and where there is significant visible insect or worm
infestation.

F. WILD FERMENTATION

-9-

<PAGE>

G. OVER AGE LOADS

Grapes harvested prior to the day of delivery without permission
or scheduling by Winery will be rejected.

H. UNAUTHORIZED DELIVERIES

Grapes delivered in excess of Heublein Wines' daily schedule by
variety or any unscheduled grapes to any plant will be rejected.

I. MECHANICALLY HARVESTED GRAPES

Vineyard 405 shall continue to have the right to determine in its
discretion whether or not to machine harvest grapes after consultation with
Heublein.

J. GENERAL REQUIREMENTS

K. IMPLEMENTATION

1. Every load of grapes will be tested for sugar content.

2. Every load of grapes will be tested for MOG unless the test
is deemed to be unnecessary after visual inspection by Heublein's
representative.

L. GRAPE INSPECTION OPTION

If in the opinion of the Plant Manager (or Winemaker) any load of
grapes is unfit for making quality wine through contami-

-10-

<PAGE>

nation by foreign substances, he will contact the Heublein Fieldman responsible
for Vineyard 405's load. The Plant Manager (or Winemaker) and the Heublein
Fieldman will jointly inspect the load. They will then jointly confer with
Vineyard 405 through a representative of MFC prior to rejection of a load which
is deemed to be unfit for making quality wine.

M. REJECTED LOADS

N. WAIVER

No failure or omission by either party to insist upon or enforce
any of the provisions of these quality standards shall be deemed a waiver of
such provision.

5. DISMISSAL OF ACTION. Vineyard 405 agrees, on execution of this
Memorandum of Understanding to cause to be filed with the Clerk of the Superior
Court of California, County of Monterey, a dismissal of Action No. 83846
dismissing the First Cause of Action (declaratory relief) without prejudice and
the Second Cause of Action (complaint for money) of the First Amended Complaint
for Declaratory Relief and Complaint for Money with prejudice. To the extent
that this Memorandum of Understanding addresses issues and controversies set
forth in the First Cause of Action in said Complaint in Action

-11-

<PAGE>

No. 83846, the rights and obligations of Vineyard 405 and Heublein, as successor
to the interests of Almaden, shall be determined with reference to this
Memorandum of Understanding.

6. GOOD FAITH. Vineyard 405 acknowledges that Heublein, as successor to
Almaden and otherwise, has heretofore been engaged in the winemaking business
and has certain business customs and practices which may to some extent differ
from those of Almaden. Heublein acknowledges that Vineyard 405 has had a
contractual relationship with Almaden which has been seasoned by years of
delivering grapes pursuant to the Contract. The parties, therefore, agree that
they shall each in good faith endeavor to resolve any differences which may
arise to create a harmonious working relationship between them for the balance
of the Contract term.

IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Understanding the day and year first above written.

VINEYARD 405,
a California Limited Partnership

By MONTEREY FARMING CORPORATION,
a California Corporation, a
General Partner

/s/ Alfred G. Scheid
-------------------------------------------------
GROWER

HEUBLEIN, INC.,
a Corporporation

By /s/ Robert D. Rossi
----------------------------------------------

By
----------------------------------------------

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<PAGE>

EXHIBIT A

LONG TERM GRAPE PURCHASE CONTRACT

RECITALS:

A. Winery desires to augment its annual supply of wine grapes on a
long term basis;

B. Grower intends to develop approximately 405 acres of land by
planting this acreage to vineyards for the purpose of growing and producing
certain selected varieties of wine grapes;

C. Grower anticpates that this development program will commence
with the planting of these 405 acres in the calendar year of 1973; and

<PAGE>

IT IS THEREFORE AGREED:

1. Grower has contracted for approximately 185,000 certified
virus-free plants and to the extent the contractor is able to deliver, agrees to
plant by no later than August 31, 1973, the varieties of grapes and number of
acres set forth and described on Exhibit A attached hereto and made a part
hereof.

2. Any obligation of Grower to plant the varieties of grapes in
the quantities referred to in Section 1 above, shall be conditioned upon:

(a) Grower's ability to obtain the plants described on Exhibit A
at reasonable prices;

-2-

<PAGE>

In the event Grower is not able to consummate the acquisition of the
total vineyard acreage described on Exhibit A and to complete, prior to August
31, 1973, the planting of the vineyard acreage in fact acquired by Grower, or in
either of these events, the number of acres and number of plants to be planted
by Grower shall be reduced to the number of acres in fact acquired and plants
required for this lesser acreage and the period within which planting shall be
completed shall be extended to permit completion of the planting provided Grower
shall plant not less than 230 acres and shall complete all planting on or before
August 31, 1974.

3. (a) Grower shall have the exclusive right and sole discretion to make
all decisions in farming and management of the vineyards; but in making such
decisions, Grower agrees to follow good cultural practices and to use its best
efforts to produce quality grapes for wine making.

(b) During each year of the term of this Contract, Grower agrees to
harvest, deliver and sell to Winery, and Winery agrees to accept delivery of and
purchase all grapes grown and produced on acreages subject to this Contract.

-3-

<PAGE>

carriers at Grower's vineyards to accept delivery of harvested grapes from
Grower. Title to such grapes shall pass from Grower to Winery upon delivery to
the carrier; if Grower shall suffer any net lass as the result of the
specification of the time for harvest and delivery, Winery shall compensate
Grower for such net loss.

4. This Contract shall be binding and effective for a term ending
thirty (30) years following conclusion of the first harvest but not later than
2006.

However, if the economic life of a producing vineyard or portion
thereof designated hereunder is less than thirty (30) years, this contract shall
terminate as to such vineyard or portion thereof at the end of its economic
life. If Grower pulls out vines, such decision by Grower shall be a
determination that such vines have reached the end of their economic life.
However, prior to the pulling of such vines, Grower must notify Winery of such
intention three (3) years prior to the actual pulling of such vineyard or
portion thereof.

-4-

<PAGE>

5. (a) The prices paid by Winery to Grower shall be determined on
the following basis:

(i) Prices for all grapes shall be f.o.b. carrier
"roadside" Grower's vineyards designated in this Contract.

(ii) In each crop year the prices paid for each
variety of grape suitable for wine shall be at the highest price
paid by Winery in such year for the same or a comparable variety
or the higher of prices paid by other wineries to growers for
such variety or comparable variety (assuming sales of such
variety or comparable variety are in quantities sufficient to
establish a bona fide price) in Monterey County. If no prices are
established for Monterey County, the price paid will be that
established for the Northern Coastal growing area.

(iii) In each crop year the price paid for grapes
which are not suitable for wine, shall be the price generally
established in the industry for such lower quality grapes if the
Winery retains

-5-

<PAGE>

such grapes for processing into distilling material or for other
uses, or the best prices Winery can obtain by using its best
efforts if such grapes are resold.

(b) All grapes shall be weighed on certified scales in the
vicinity of the vineyard and payment shall be on the basis of certified weight
tags furnished by Grower to Winery.

(d) As soon as the actual prices payable under this Contract can
be determined for each variety delivered, final price adjustments shall be made,
and all amounts due shall be promptly paid by Winery to Grower at Los Angeles,
California.

-6-

<PAGE>

While any such dispute is being resolved, neither party will be
relieved of its obligations under this Contract.

-7-

<PAGE>

10. No failure or omission by either party to this Contract to
insist upon or enforce any of its terms, which may have been breached by the
other party, shall be Deemed a waiver unless the same shall be in writing. No
representative or agent of either party shall have any authority to waive,
change or add to any of the terms or conditions specified herein except by a
writing duly executed by said representative or agent.

-8-

<PAGE>

11. Time is of the essence of this Contract which embodies the
entire understanding and agreement between the parties.

13. This Contract shall be binding on the heirs, assigns,
legatees, devisees, transferees, or other successors in interest, partial or
entire of each party.

IN WITNESS WHEREOF, the parties have executed this Contract as of
the date first above written.

MONTEREY FARMING CORPORATION
on behalf of

VINEYARD 405

By /s/ William Savage
------------------------------------

ALMADEN VINEYARDS, INC.

By /s/ T.J. Grady, V.P.
------------------------------------

<PAGE>

EXHIBIT A

VINEYARD 405

ACREAGE TO BE PLANTED IN 1973
-----------------------------

Varieties by Acreage by Ranch

(Upper)
KAISER KAISER
230 175 TOTAL
------- ------ -----

GEWURZTRAMINER 28 28
JOHN. RIESLING 76 21 97
PINOT CHARDONNAY 76 20 96
CHENIN BLANC 78 78
SAUVIGNON BLANC 28 28
SEMILLON 28 28
FRENCH COLOMBARD 50 50
------- ------ -----

TOTAL 230 175 405
------- ------ -----
------- ------ -----

<PAGE>

EXHIBIT B
HEUBLEIN WINES SUGAR STANDARDS
FOR
MONTEREY FARMING CORPORATION
(Central Coast Grapes)

B R I X

- -------------------------------------------------------------------------------
VARIETY MINIMUM OPTIUM

WHITE GROUP
- -----------

1 Chardonnay 20.0 23.5

2 Sauvignon Blanc 20.0 22.5

3 Johannisberg
Riesling, Semillon,
Gewurztraminer 19.0 22.0

4 Chenin Blanc 19.0 21.5

5 Colombard 18.0 22.0

BLACK GROUP
- -----------

6 Grenache 20.0 22.0

7 Cabernet Sauignon,
Zinfandel 20.0 23.5

8 Petite Sirah,
Merlot,
Early Burgundy 20.0 23.0

9 Napa Gamay 20.0 22.0

<PAGE>

AMENDMENT TO
LONG TERM GRAPE PURCHASE CONTRACT

THIS AMENDMENT TO LONG TERM GRAPE PURCHASE CONTRACT (this
"AMENDMENT") is made and entered into as of this 12th day of March, 1993, by
and between VINEYARD 405, a California limited partnership ("VINEYARD 405" or
"GROWER"), and HEUBLEIN, INC., a corporation authorized to do and doing
business in the State of California ("HEUBLEIN" or "WINERY").

RECITALS

A. On February 12, 1973, Vineyard 405 entered into a Long Term Grape
Purchase Contract (the "ORIGINAL CONTRACT") with Almaden Vineyards, Inc.
("ALMADEN") with respect to the purchase and sale of wine grapes produced on
approximately 405 vineyard acres owned by Vineyard 405. Scheid Vineyards and
Management Co., a California corporation, formerly known as Monterey Farming
Corporation, a California corporation, is a general partner in Vineyard 405.

B. On March 9, 1987, Heublein acquired the assets of Almaden and is the
assignee and successor in interest of Almaden with respect to the Original
Contract.

D. On May 14, 1990, the parties executed a letter agreement (the "Letter
AGREEMENT") with respect to the Original Contract, as amended.

E. The Original Contract, the Memorandum and the Letter Agreement
hereinafter collectively are referred to as the "Existing Contract". The
Existing Contract as amended by this Amendment hereinafter is referred to as the
"CONTRACT".

F. The parties desire to amend the Existing Contract in certain additional
respects as hereinafter provided.

NOW, THEREFORE, in consideration of the premises, the parties agree
as follows:

<PAGE>

1. VINEYARDS AND VARIETIES.

(a) VINEYARDS AND VARIETIES COVERED. The vineyards (the
"VINEYARDS") and wine grapes (the "WINE GRAPES") currently subject to the
provisions of the Existing Contract shall continue to be subject to the
provisions of the Existing Contract following execution of this Amendment.
Similarly, Vineyard 405 shall continue to produce existing Wine Grape
varieties in existing locations on the Vineyards following execution of
this Amendment; PROVIDED, HOWEVER, that Vineyard 405 shall convert the
existing varieties to the proposed varieties as specified in EXHIBIT A
attached hereto in accordance with the methods and in the calendar years
respectively identified therein. Notwithstanding the foregoing, Vineyard
405 shall not be required to sell and Winery shall not be required to
purchase in excess of the following average tons per acre of the following
Wine Grape varieties produced on acreage converted as provided above in any
crop year under the Contract:

VARIETY AVERAGE TONS PER ACRE
------- ---------------------

Chardonnay 8.0
Cabernet Sauvignon 7.5
Merlot 7.5

(b) RETENTION OF WINE GRAPES BY VINEYARD 405. Notwithstanding any
provision of the Contract to the contrary, each harvest Vineyard 405, in
its sole discretion, may retain for its own use up to 25 tons of Wine
Grapes of each variety produced on the Vineyards.

(a) VARIETIES OTHER THAN MERLOT. The price per ton for each
variety of Wine Grapes other than Merlot under the Contract shall be equal
to [ ]* (the "PRICING DISTRICTS"), as established by the
Department, determined by:

[ ]*

_______________________
*Confidential Treatment Requested for Redacted Portion.

-2-

<PAGE>

[ ]*

Application of the provisions of this SECTION 2(a) is illustrated by the
example set forth in EXHIBIT B attached hereto.

(b) MERLOT. The price per ton for Merlot under the Contract shall
be the lower of:

[ ]*

Notwithstanding the foregoing, if the price per ton for Merlot calculated
above is the highest of the prices calculated for varieties other than
Merlot under SECTION 2(a), the price per ton for Merlot hereunder shall
equal the price per ton of the variety having the next highest price.
Application of the provisions of this SECTION 2(b) is illustrated by the
example set forth in EXHIBIT C attached hereto.

_______________________
*Confidential Treatment Requested for Redacted Portion.

-3-

<PAGE>

(c) UNAVAILABILITY OF CRUSH REPORT. If the Department shall cease
to publish the Crush Report or shall cease to publish the Crush Report in
substantially its present form with respect to any crop year necessary for
determining prices under this SECTION 2, the prices to be paid hereunder
shall be determined with reference to the price information for the Pricing
Districts, in form and substance as nearly identical as possible to the
price information for the Pricing Districts in the Crush Report, in an
alternative government publication.

4. TERM AND TERMINATION.

(a) TERM. The term of the Contract shall continue until
terminated in accordance with the provisions of this SECTION 4.

(c) WITHDRAWAL BY GROWER. In the event Winery properly delivers
a Termination Notice to Grower under SECTION 4(b) above, Grower at its
option (i) may withdraw up to 1/3 of any or all varieties of Wine Grapes
from coverage by the Contract by delivery to Winery of written notice (a
"WITHDRAWAL NOTICE") of its intent to do so prior to the first day of April
following the Withdrawal Notice, and (ii) may

-4-

<PAGE>

withdraw up to 2/3 of any or all varieties of Wine Grapes from such
coverage by delivery of a Withdrawal Notice prior to the succeeding first
day of April.

6. INCORPORATION BY REFERENCE. Exhibits attached to this Amendment
hereby are incorporated by reference herein.

7. EFFECTIVENESS OF THE EXISTING CONTRACT. Except as specifically
set forth herein, the Existing Contract shall remain unchanged and in full force
and effect. In the event of any conflict between the provisions of this
Amendment and the provisions of the Existing Contract, the provisions of this
Amendment shall govern.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.

VINEYARD 405, a California limited
partnership

By: Scheid Vineyards and Management
Co., a California corporation

By: /s/ Alfred G. Scheid
-----------------------------------
Alfred G. Scheid

Its: President

"VINEYARD 405" or "GROWER"

-5-

<PAGE>

HEUBLEIN, INC., a corporation

By: /s/ James A. Beckman
---------------------------------------------

Its: Vice President
---------------------------------------

"HEUBLEIN" OR "WINERY"

-6-

<PAGE>

LONG TERM WINE GRAPE PURCHASE AGREEMENT

THIS LONG TERM WINE GRAPE PURCHASE AGREEMENT (this "AGREEMENT") is
made and entered into as of this 12th day of March, 1993, by and between SCHEID
VINEYARDS AND MANAGEMENT CO., a California corporation ("GROWER"), and HEUBLEIN,
INC., a corporation authorized to do and doing business in the State of
California ("WINERY").

RECITALS

A. Winery desires to purchase from Grower, and Grower desires to sell to
Winery, certain wine grapes (the "Wine Grapes") grown and to be grown on
Grower's land commonly referred to as the San Lucas Ranch (the "Vineyard").

B. Winery desires for Grower to convert certain Wine Grape varieties
currently grown on the Vineyard over to certain other varieties and thereafter
to purchase such converted varieties, and Grower is willing to convert to and
sell such other varieties to Winery hereunder.

NOW, THEREFORE, in consideration of the premises, the parties agree as
follows:

1. PURCHASE AND SALE OF WINE GRAPES. During the term of this
Agreement, Grower shall sell to Winery, and Winery shall purchase from Grower,
(i) the Wine Grape varieties currently produced on the Vineyard in accordance
with SECTION 2 below, and (ii) the Wine Grape varieties into which varieties
currently produced on the Vineyard are converted in accordance with SECTION 3
below.

2. CURRENTLY PRODUCED VARIETIES. The Wine Grape varieties currently
produced and subject to this Agreement are as follows:

(a) CHARDONNAY AND CABERNET SAUVIGNON. The Chardonnay and
Cabernet Sauvignon produced on the two portions of the Vineyard currently
planted with such varieties, consisting of approximately 174 acres each, in
accordance with the following Tonnage Schedule:

<PAGE>

TONNAGE SCHEDULE

Approximate Minimum Approximately Minimum Tons
Crop Year Tons of Chardonnay of Cabernet Sauvignon
--------- ------------------ ---------------------

1993 400 0
1994 800 225
1995 All 475
1996 " 775
1997 " 1000
1998-2002 " All
and Until
Termination

Notwithstanding the foregoing, Winery may elect to purchase Chardonnay and
Cabernet Sauvignon produced on the Vineyard in excess of the tonnage
specified above by giving Grower written notice of such election on or
before the first day of April of the crop year to which such election is to
apply; PROVIDED, HOWEVER, that the tonnage of each such variety required to
be purchased in each crop year succeeding any such election shall be the
greater of the total tonnage purchased pursuant to such election and the
tonnage specified in the Tonnage Schedule above. The parties acknowledge
that the tonnage amounts specified above are approximations only, and that
the delivery of Wine Grapes by Grower to Winery hereunder may be up to 15
tons above or below the amounts specified in the Tonnage Schedule above.

(b) ZINFANDEL. All Zinfandel produced on the 24 acres of the
Vineyard currently planted with such variety, commencing with the 1993 crop
year, all of which shall be harvested as White Zinfandel hereunder.

3. CONVERSIONS.

(a) CHENIN BLANC AND SAUVIGNON BLANC. Grower shall convert
approximately 200 acres of the Vineyard currently planted with Chenin Blanc
and/or Sauvignon Blanc to acres planted with Merlot in accordance with the
following schedule:

Approximate
Crop Year Number of Acres
--------- ---------------

1993 70
1994 30
1995 50
1996 50

PROVIDED, HOWEVER, that Winery may elect:

(i) to cause Grower to convert the acres specified above
for any crop year to Chardonnay or Cabernet Sauvignon in lieu of
Merlot; or

<PAGE>

(ii) to enter into good faith negotiations with Grower to
convert such acres to a variety other than Merlot, Chardonnay or
Cabernet Sauvignon,

by giving Grower written notice of such election prior to the first day of
November preceding the crop year to which such conversion is to apply. If
Winery fails to elect a conversion variety by such first day of November or
elects to enter into negotiations with Grower in accordance with the
foregoing and agreement is not reached on an alternative variety by the
succeeding 15th day of December, Grower shall convert the acres specified
for such crop year to Merlot as provided above.

(b) ZINFANDEL. Grower may elect to convert the 24 acres of the
Vineyard currently planted with Zinfandel to acres planted with Merlot,
Chardonnay or Cabernet Sauvignon:

(i) if gross revenues received by Grower for Zinfandel
hereunder are less than $72,000 ($3,000 per acre) in any crop year; or

(ii) after completion of the harvest for the 1995 crop
year,

by giving Winery written notice (the "GROWER ELECTION NOTICE") prior to the
first day of December preceding the crop year to which the election is to
apply. If Grower gives a Grower Election Notice, Winery shall have the
right to elect (x) which of the varieties such acres will be converted
into, or (y) to enter into good faith negotiations with Grower to convert
to a variety other than Merlot, Chardonnay or Cabernet Sauvignon, by giving
Grower written notice within 15 days following the Grower Election Notice.
If Winery fails to make such election within the 15-day period, or elects
to negotiate and agreement is not reached within 20 days thereafter, Grower
may convert such acres to Merlot, Chardonnay or Cabernet Sauvignon or
withdraw the acres from coverage by this Agreement by giving written notice
to Winery not more than 60 days after the date Grower gives the Grower
Election Notice.

(c) LIMITATIONS. Notwithstanding any provision of SECTIONS 3(a)
and 3(b) above to the contrary, Grower shall not be required:

(i) to convert acres of the Vineyard currently planted with
Chef Blanc, Sauvignon Blanc or Zinfandel to acres planted with any
other variety unless such other variety (x) was purchased under this
Agreement at a price in excess of $500 per ton in the crop year
preceding the crop year to which such conversion is to apply, or (y)
would have generated a price in excess of $500 per ton for such
preceding crop year using the method for determining price specified
in SECTION 6 below if such variety was not so purchased; or

(ii) to sell to Winery, and Winery shall not be required to
purchase, in excess of the following average tons per acre of the
following Wine Grape varieties in any crop year hereunder:

<PAGE>

Variety Average Tons Per Acre
------- ---------------------

Chardonnay 8.0
Cabernet Sauvignon 7.5
Merlot 7.5

(d) CONVERSION METHOD. Any conversion in accordance with
SECTIONS 3(a) and 3(b) above shall be effected by interplanting, replanting
or grafting in the sole discretion of Grower.

4. DELIVERY. Deliveries of Wine Grapes hereunder shall be FOB
Heublein in Paicines, California. In the event Winery desires Grower to deliver
Wine Grapes to another location, delivery shall be FOB such other location, and
Winery shall reimburse Grower for all carrier costs in excess of the carrier
costs that would have been required to be paid to deliver such Wine Grapes to
Paicines. All risk of loss and risk of damage and depreciation with respect to
The Wine Grapes to be sold and delivered to Winery hereunder shall be borne by
Grower until actually delivered to and accepted without unreasonable delay by
Winery hereunder.

5. RETENTION OF WINE GRAPES BY GROWER. Notwithstanding the
provisions of SECTIONS 2 and 3 above to the contrary, each harvest Grower, in
its sole discretion, may retain for its own use up to 25 tons of Wine Grapes of
each variety produced on the Vineyard.

6. TERM AND TERMINATION.

(a) TERM. The term of this Agreement shall extend from the date
hereof until terminated in accordance with the provisions of this SECTION
6.

(b) TERMINATION BY EITHER PARTY. Either party may terminate
this Agreement after the 1999 crop year by giving written notice (a
"TERMINATION NOTICE") to the other party. Termination shall be effective
upon completion of the third crop year following the thirty-first day of
December next succeeding the Termination Notice. For example, if a party
were to give a Termination Notice on November 30, 1999, this Agreement
would terminate after delivery of the 2002 crop by Grower to Winery.

(c) WITHDRAWAL BY GROWER. In the event Winery properly delivers
a Termination Notice to Grower under SECTION 6(b) above, Grower at its
option (i) may withdraw up to 1/3 of any or all varieties of Wine Grapes
from coverage by this Agreement by delivery to Winery of written notice (a
"WITHDRAWAL NOTICE") of its intent to do so prior to the first day of April
following the Withdrawal Notice, and (ii) may withdraw up to 2/3 of any or
all varieties of Wine Grapes from such coverage by delivery of a Withdrawal
Notice prior to the succeeding first day of April.

7. PRICING. The price to be paid by Winery to Grower for each
variety of Wine Grapes purchased under this Agreement shall be determined with
reference to the Final Grape Crush Report (the "CRUSH REPORT"), currently
published by the California Department of Food and Agriculture (the
"DEPARTMENT") on the 10th day of March of each year, for the crop year (the
"APPLICABLE CROP YEAR") preceding the harvest of such Wine Grape variety, as

<PAGE>

it may be supplemented or corrected by the Department up through the succeeding
first day of August (the "APPLICABLE CRUSH REPORT"), in accordance with the
following:

(a) VARIETIES OTHER THAN MERLOT. The price per ton for each
variety of Wine Grapes other than Merlot under this Agreement shall be
equal to [ ]* (the
"PRICING DISTRICTS"), as established by the Department, determined by:

[ ]*

Application of the provisions of this SECTION 7(a) is illustrated by the
example set forth in EXHIBIT A attached hereto and by this reference
incorporated herein.

(b) MERLOT. The price per ton for Merlot under this Agreement
shall be the lower of:

- ---------------------------------
* Confidential Treatment Requested for Redacted Portion.

<PAGE>

[ ]*

Notwithstanding the foregoing, if the price per ton for Merlot calculated
above is the highest of the prices calculated for varieties other than
Merlot under SECTION 7(a), the price per ton for Merlot hereunder shall
equal the price per ton of the variety having the next highest price.
Application of the provisions of this SECTION 7(b) is illustrated by the
example set forth in EXHIBIT B.

(c) UNAVAILABILITY OF CRUSH REPORT. If the Department shall
cease to publish the Crush Report or shall cease to publish the Crush
Report in substantially its present form with respect to any crop year
necessary for determining prices under this SECTION 7, the prices to be
paid hereunder shall be determined with reference to the price information
for the Pricing Districts, in form and substance as nearly identical as
possible to the price information for the Pricing Districts in the Crush
Report, in an alternative government publication.

8. PAYMENT. Winery shall pay Grower the price (the "PRELIMINARY
PRICE") for Wine Grapes purchased under this Agreement, determined in accordance
with SECTION 7 above and subject only to minor adjustment as hereinafter
provided, within 10 days after Grower gives Winery written notice of completion
of the applicable harvest. The parties shall have an additional 30 days after
the expiration of such 10-day period to determine the final price (the "FINAL
PRICE") to be paid by Winery to Grower for such Wine Grapes based on corrected
sugar, defect or M.O.G. penalties, weight tags or similar minor adjustments, and
to make any Winery payments and/or Grower refunds necessary to reconcile the
Final Price with the Preliminary Price. For purposes of this SECTION 8, the
term "COMPLETION OF THE APPLICABLE HARVEST" shall mean the substantial
completion of the harvest of all varieties of Wine Grapes to be delivered under
this Agreement during the applicable crop year, notwithstanding the existence of
certain Wine Grapes with respect to which harvest may have been deferred at the
request of Winery for later delivery.

9. GRACE QUALITY STANDARDS. Wine Grapes purchased by Winery
hereunder shall be required to meet the quality standards set forth in EXHIBIT C
attached hereto and by this reference incorporated herein. Grower represents
and warrants that the Wine Grapes delivered hereunder to Winery will not be
adulterated or misbranded within the meaning of the Federal Food, Drug and
Cosmetic Act, as amended, and will not be an article that may not under the
provisions of Section 301(d), 404 or 405 of that Act, be introduced into
interstate commerce. Grower further represents and warrants that all such Wine
Grapes will in all respects conform to all requirements of the Sherman Food,
Drug and Cosmetic law of California, and the regulations of the California State
Department of Public Health, and that it will comply in all

- ---------------------------------
* Confidential Treatment Requested for Redacted Portion.

<PAGE>

material respects with all other state and federal laws pertaining to Wine
Grapes sold under this Agreement. If Grower breaches its obligations under the
preceding two sentences, Grower shall indemnify and hold harmless Winery from
any costs, expenses, damages or claim arising out of such breach. In the event
any litter or foreign material is present in the Wine Grapes, it shall be
presumed that such litter or foreign material originated with Grower, and Grower
shall be responsible for all damages caused by such litter and foreign material.

10. FARM MANAGEMENT DECISIONS. Grower shall have the exclusive right
and sole discretion to make all decisions with respect to the farming and
management of the Vineyard and the Wine Grapes subject to this Agreement,
including but not limited to the right and discretion to replant and interplant
Wine Grapes to maintain contracted varieties at viable and economic levels;
PROVIDED, HOWEVER, that Grower will follow good farming and viticultural
practices in growing Wine Grapes sold to Winery hereunder.

11. MATTERS BEYOND PARTIES' CONTROL.

(a) INTERRUPTION OF OR INTERFERENCE WITH BUSINESS. If the
business of either party is interrupted or interfered with due to a
condition beyond its reasonable control, including without limitation fire,
flood, storm, earthquake, explosion, war, rebellion, insurrection,
quarantine, act of God, boycott, embargo, strike or other labor
disturbance, riot, any governmental law, directive or regulation or a
shortage of fuel or natural gas, materially and adversely affecting such
parties' business, such party shall, at its option, be excused for the
duration of the intervention or interference from its performance under
this Agreement with respect to the Wine Grapes thereby affected. A party
wishing to have its performance excused under this SECTION 11(a) shall
first give written notice to the other party as soon as such party
determines a sufficient condition of intervention or interference may
exist.

(b) RELEASE OF LIABILITY DURING INTERRUPTION OR INTERFERENCE.
If performance under this Agreement by either party is excused under
SECTION 11(a) above, each party shall be released from any and all
liability for its failure to purchase or sell the Wine Grapes, as
applicable, during the duration of the condition which resulted in the
excuse of performance, including without limitation all liability for loss
of market, loss of price and any other claim whatsoever which a party might
have against the other party as a result of such condition, except only the
obligation of Winery to pay for Wine Grapes already delivered by Grower and
accepted by Winery hereunder.

(c) WINERY'S UNDERTAKING IN THE EVENT OF INTERRUPTION OR
INTERFERENCE. If Winery is the party whose performance is excused under
SECTION 11(a) above, Winery shall use its reasonable best efforts to accept
and process the Wine Grapes affected thereby at a facility other than
Winery's facility in Paicines, California. If Winery designates another
point of delivery, the provisions of SECTION 4 above with respect to the
allocation of carrier costs shall apply. If Winery does not designate
another delivery point, it shall use its reasonable best efforts to find an
alternative purchaser for the affected Wine Grapes.

<PAGE>

12. ARBITRATION. In the event of any dispute under the provisions of
this Agreement, such dispute shall be subject to arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association if
either party makes written demand for arbitration on the other party; PROVIDED,
HOWEVER, that each party shall be limited to a period of 5 days for presentation
of its case in arbitration, and any briefs submitted by the parties in support
of their respective positions shall be limited to 20 pages each. If the parties
agree on his or her selection, there shall be one arbitrator; but, if no such
agreement is reached within 5 days after demand for arbitration, there shall be
three arbitrators, one appointed by Grower and a second appointed by Winery
within 10 days after demand for arbitration, and a third chosen by the two who
are so appointed within 10 days after expiration of the foregoing 10-day period.
If there is one arbitrator, his or her decision shall be binding; and if there
are three arbitrators, the decision of any two of them shall be binding. No one
shall act as an arbitrator who is employed by Grower or by Winery or who in any
way is financially interested in the business affairs of either Grower or
Winery. All costs of such arbitration shall be borne equally by the parties.
While any such dispute is being resolved, neither party shall be relieved of its
obligations under this Agreement.

13. LIENS AND ENCUMBRANCES. During the term of this Agreement,
Grower will not create or incur any lien, charge or other encumbrance on the
Vineyard which would defeat the rights of Winery hereunder, except deeds of
trust securing indebtedness (including but not limited to crop loans) to
institutional lenders, and except for such deeds of trust Grower will not
transfer, assign or convey any interest in the Vineyard that would defeat the
rights of Winery hereunder.

14. MISCELLANEOUS.

(a) NOTICES. All notices under this Agreement shall be in
writing and shall be deemed to be given when personally delivered or when
sent by United States Registered or Certified Mail, postage prepaid, or
when sent by facsimile or telegraph, addressed to the party for whom
intended at the following addresses:

IF TO GROWER:

Scheid Vineyards and Management Co.
1632 5th Street, Suite 220
Santa Monica, CA 90401
Attention: President

IF TO WINERY:

Heublein, Inc.
16 Munson Road
Farmington, CT 06034
Attention: Mr. David Scott

AND:

<PAGE>

Heublein, Inc.
12667 Road #24
Madera, CA 93637
Attention: Mr. James A. Beckman

Either party may change the address to which notices shall be sent by
giving written notice to such effect in accordance with the terms of this
SECTION 14(a) provided that notice of change of address shall not be deemed
given until received.

(b) AMENDMENTS AND MODIFICATIONS. This Agreement may not be
supplemented, altered, modified, amended or otherwise changed except by an
instrument in writing signed by the parties.

(c) HEADINGS. The headings of the various Sections of this
Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.

(d) ENTIRE AGREEMENT; WAIVERS. This Agreement constitutes the
entire agreement between the parties and supersedes all prior and
contemporaneous agreements, representations and understandings of the
parties pertaining to the subject matter hereof. No waiver of any
provision of this Agreement shall be deemed or shall constitute a waiver of
any other provision, nor shall any waiver constitute a continuing waiver.
No waiver shall be binding unless executed in writing by the party making
the waiver.

(e) ATTORNEYS' FEES AND COSTS. If any action or other
proceeding, including arbitration, is brought by either party against the
other to enforce this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with this Agreement, the
prevailing party shall be entitled to recover its reasonable attorneys'
fees and other costs incurred in such action or proceeding, in addition to
any other relief to which such party may be entitled.

(f) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with and by the laws of the State of California.

(g) TIME OF THE ESSENCE. Time is of the essence of this
Agreement, and the time for performance of any act provided in this
Agreement shall be strictly construed.

(h) ASSIGNMENT. This Agreement may not be assigned by either
party without the prior written consent of the other party, which consent
shall not be unreasonably withheld. Notwithstanding the foregoing, either
party may assign this Agreement to one or more of such party's affiliates,
a partnership in which such party is a general partner or a joint venture
in which such party is a joint venturer, without the prior written consent
of the other party.

<PAGE>

(i) BINDING EFFECT. This Agreement and the covenants herein
contained shall run with and bind the land covered by this Agreement and
shall bind the parties hereto, their heirs, executors, administrators,
grantees, vendees, transferees, assignees, legatees, devisees and other
successors in interest, whether partial or entire. Grower shall cause any
of its successors in interest to sign an agreement with Winery to assume
and be bound by this Agreement in form suitable for recording, and Winery
agrees that on execution of such an assumption agreement Grower will be
relieved from this Agreement.

(j) SEVERABILITY. If any provision or any application of any
provision of this Agreement shall be invalid or unenforceable, the
remainder of this Agreement and all other applications of such provision
shall be unaffected by such invalidity or unenforceability.

(k) ENTRY TO THE VINEYARD. Throughout the term hereof, Winery's
representatives may enter upon the Vineyard at reasonable times and in a
reasonable manner following reasonable notice for the purpose of inspecting
the Vineyard and the Winegrapes and observing the viticultural practices
being followed. Such inspections may include, without limitation, taking
samples of Wine Grapes in reasonable quantities and taking pictures of and
otherwise recording data with respect to the Vineyard and the Wine Grapes.
No such sampling shall be deemed to be acceptance by Winery of such
WineGrapes.

(l) AUTHORITY. Each corporate party executing this Agreement
and the agent executing this Agreement on such party's behalf hereby
warrants that such party is a corporation in good standing and is fully
authorized to execute this Agreement and any other documents called for
here under and that such agent is properly authorized to act for such
party.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.

SCHEID VINEYARDS AND MANAGEMENT
CO., a California corporation

By: /s/ Alfred G. Scheid
----------------------------------
Alfred G. Scheid

Its: President

"GROWER"

<PAGE>

HEUBLEIN, INC., a corporation

By: /s/ James A. Beckman
-----------------------------------

Its: Vice President
-----------------------------

"WINERY"

<PAGE>

GRAPE PURCHASE AGREEMENT

This Grape Purchase Agreement (the "Agreement") is entered into as of April 1,
1996 between THE HESS COLLECTION WINERY, a California corporation ("Winery"),
and SCHEID VINEYARDS AND MANAGEMENT CO., a California corporation ("Grower").

RECITALS

A. Grower is the lessee of the San Lucas Vineyard in San Lucas, California on
which Grower grows approximately 25 acres of Syrah grapes (the
"Vineyards"). The Vineyards are more particularly described in Exhibit "A"
to this Agreement.

B. Winery wishes to purchase the wine grapes grown on the Vineyards from
Grower under the terms of this Agreement.

AGREEMENT

For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

1. PURCHASE. Grower agrees to sell, and Winery agrees to purchase, all the
production of Syrah grapes ("Grapes") grown on the Vineyard each year that
this Agreement is in effect.

2. TERM AND TERMINATION. The initial term of this Agreement ("Term") is for
the crop years 1997 through 2011; provided, however, that unless written
notice of termination has been given by either party prior to May 31, 2010,
the Term will automatically convert to a two-year evergreen contract
beginning June 1, 2010. Thereafter, written notice of termination may be
given before May 31st of any year and shall be effective at the completion
of the second harvest following such written notice.

3. PRICE.

(a) Except as provided in Paragraphs 3(b) and 3(c) below, the price
per ton (the "Price") for the Grapes delivered to The Hess Collection
Winery, Napa, California, will be $[ ]* for 1997. For the years 1998 and
beyond, the Price for the Grapes will be the previous year's per ton price,
increased or decreased by the percentage change in [ ]*.

- -------------------
* Confidential Treatment Requested for Redacted Portion.

<PAGE>

[ ]* See Exhibit "B" attached hereto for an example of a
calculation of future price adjustments.

(b) If the Grape Report shall no longer be published, then any
appropriate substitute for the Grape Report mutually agreed upon by the
Winery and the Grower shall be used. In the event that no substitute for a
discontinued Grape Report can be agreed upon, then the substitution shall
be determined in accordance with Paragraph 11.

(c) In the event that the California State Department of Food and
Agriculture changes the format of the Grape Report from the format of the
Grape Report dated March 8, 1996, the source of data, from within the
applicable Grape Report, for determining the Price, shall be [ ]*.

4. PAYMENT. For the purchase of the Grapes for each crop year, Winery will
pay one-half the amount due to Grower within thirty (30) days after the
final harvest of Grapes, with the remaining balance due sixty (60) days
after such harvest.

5. STANDARDS. Grower agrees to deliver whole, sound, mature Grapes, free from
commercial defects, in good and merchantable condition suitable for use in
the production of premium wine produced on a bonded winery premise
("Acceptable Grapes"). Grapes will not be Acceptable Grapes
("Non-Acceptable Grapes") if:

(a) They are infected, adulterated (including with pesticide or other
residues) or misbranded under any federal or state law or regulation, or
may not be introduced into interstate commerce pursuant to any federal or
state law or regulation; or

(b) any truckload ("Load") of such Grapes which has two percent (2%)
or more by weight of material other than grapes ("MOG"), such as leaves,
canes or other material foreign to grapes, or two percent (2%) or more by
weight of rot or mold, or one percent (1%) or more by weight of mildew; or

(c) the Load of such Grapes is delivered to The Hess Collection
Winery more than eight (8) hours after the completion of the harvesting of
such Grapes; or

(d) Brix of such Load of Grapes is below 21.3 DEG. Brix.

- ---------------------
* Confidential Treatment Requested for Redacted Portion.

<PAGE>

obligations under this Agreement for delivering the remaining Grapes to
Winery. Inspection by Winery in the field prior to hauling of Grapes to the
Winery shall not be deemed an acceptance of the Grapes.

6. GRAPE MATURITY. The desired target Brix at harvest is 23.3 DEG. Brix, with
a target Brix window of 22.8 DEG. to 23.8 DEG., as measured by a properly
calibrated refractometer. If any Load of Grapes is delivered to the
processing facility below 22.3 DEG. Brix, the Price for such Load will be
adjusted downwards by one percent (1%) for each 0.1 below 22.3 DEG. Brix,
with a maximum adjustment of ten percent (10%) downwards at 21.3 DEG. Brix.

When Grapes are tested pursuant to Paragraph 6 of this Agreement, Winery
shall provide Grower with the results. Winery shall immediately notify
Grower of any Load of Grapes which is determined to be subject to
adjustment in purchase price.

All inspections to determine acceptability of the Grapes pursuant to
Paragraphs 5 and 6 must be made by the Bureau of Food and Vegetable
Standardization of the Department of Food and Agriculture of the State of
California, another comparable official agency, or by a certified,
independent testing laboratory. Winery and Grower agree to be bound by
such inspections as to whether the Grapes are Acceptable Grapes or
Non-Acceptable Grapes. In the event of such inspections, Grower will pay
for all additional costs if the Grapes are deemed Non-Acceptable Grapes,
and Winery will pay for all additional costs if the Grapes are deemed
Acceptable Grapes.

7. VITICULTURAL CONTROL. Grower and Winery will maintain open communication
regarding viticultural practices of the Vineyards. Upon request, Winery
personnel will be permitted to enter the Vineyards to inspect farming
practices and harvesting operations. Grower will follow the Viticultural
Plan developed by Winery as set forth in Exhibit "C" to this Agreement and,
furthermore, Grower will listen to and give reasonable consideration to
other suggestions made by Winery concerning viticultural practices.

8. HARVESTING, WEIGHING AND DELIVERY. Grower and Winery will cooperate in
establishing a delivery schedule during each harvest. Grower will notify
Winery by telephone or facsimile transmission when Grower wishes to deliver
the Grapes to Winery in order to satisfy the foregoing standards. If
Winery is unable to comply with Grower's requirements within 24 hours
following such notice, Grower shall be relieved of the obligation to
satisfy the foregoing standards, except those for MOG. Grapes shall be
delivered in clean gondolas of no more than six (6) tons each.

<PAGE>

such location, provided that Grower will be reimbursed for any costs of
delivery in excess of the cost that would have been incurred if such Loads
were delivered to The Hess Collection Winery. Title and risk of loss shall
pass to the Winery upon delivery to the Winery premises or such other
designated delivery location.

Grower represents that Winery will have good title to all grapes sold, free
of all security interests and other encumbrances.

9. REDWOOD ROAD SAFETY. Grower shall, and shall cause any agent whom Grower
appoints to deliver grapes to, drive carefully and alertly along Redwood
Road using a safe driving speed appropriate for the prevailing road
conditions and load weight of the truck.

10. ASSIGNMENT AND BINDING EFFECT. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, grantees, vendees, transferees, assignees, legatees,
devisees and other successors in interest whether partial or entire.

11. ARBITRATION. The parties will attempt to settle any dispute in a mutually
agreeable manner. Any controversy or claim arising out of or relating to
this Agreement or any breach thereof that is not settled by the parties,
shall be determined by arbitration in San Jose, California (or such other
location in California as the parties may agree upon) before a panel of
arbitrators in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Either party's request for arbitration
shall be given in writing by first-class mail, postage prepaid, addressed
to the party at the address set forth in paragraph 13. The arbitration
hearing shall be held within thirty (30) days after arbitration is
requested. The panel of arbitrators shall consist of three people, who
shall be independent of either party's business. Winery and Grower shall
each select an arbitrator and these two arbitrators will select a third
arbitrator.

12. ATTORNEYS FEES. If any arbitration, action or other proceeding is brought
for the enforcement of this Agreement or because of an alleged dispute in
connection with this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in such
arbitration, action or proceeding, in addition to any other relief to which
such party is entitled.

13. NOTICE. Whenever the term "notice" is used in this Agreement, it means a
written notice or facsimile transmission delivered or sent to that party's
address or facsimile shown below or at such other address or facsimile
number as the party specifies by notice. All facsimile transmissions will
be followed by a "hard copy" letter sent via regular mail.

<PAGE>

GROWER: WINERY:
NAME: Scheid Vineyards and Management Co. The Hess Collection
ADDRESS: 13470 Washington Blvd. 4411 Redwood Road
Suite 300 P.O. Box 4140
Marina del Rey, CA 90292 Napa, CA 94558
CONTACT: Alfred Scheid or Heidi Scheid Paul Hoffman or Randle Johnson
PHONE: 310/301-1555 707/255-1144
FAX: 310/301-1569 707/253-1682

WITH A COPY TO:
NAME: Scheid Vineyards and Management Co.
ADDRESS: 1972 Hobson Avenue
Greenfield, CA 93927
CONTACT: Kurt Gollnick
PHONE: 408/385-4801
FAX: 408/385-0136

14. CONFIDENTIALITY. Grower and Winery both warrant that the other party's
name will not be used in any fashion or context with respect to any
representation, sales, or marketing of grapes, bulk wine, vineyards, or
bottled products without the other party's prior written consent.

15. SEVERABILITY. If any part or parts of this Agreement are found to be
illegal or unenforceable, the remainder shall be considered severable,
shall remain in full force and effect, and shall be enforceable.

16. GENERAL PROVISIONS. This Agreement, along with Exhibits "A", "B" and "C"
attached hereto are the entire agreement between the parties, and
supersedes all other written or oral agreements. This Agreement may only
be amended or modified by a written document signed by the party against
whom the modification is to be enforced. Each party will perform such
other acts as are reasonably necessary or desirable to carry out the
purposes of this Agreement.

17. FORCE MAJEURE. Grower shall not be liable to Winery for any failure to
perform any of its duties or obligations hereunder or for any loss or
damage of any kind, nor shall any such failure give Winery the right to
reject any Grapes pursuant to Paragraph 5(c), so long as such failure to
perform or loss or damage is the the result of any act of God or any normal
hazard of farming, including, without limitation, rain, hail, heat, frost,
drought, flooding, windstorm or other action of the elements, strike, work
slow-down, worker unavailability, fire, truck, car, rail, labor, equipment
or material shortage or unavailability, freight embargo, transportation
delays or difficulties, governmental action or any other cause beyond
Grower's reasonable control. If Grower is prevented from performing its
obligations hereunder in part or in full as a result of an occurrence set
forth

<PAGE>

in this Paragraph 17, it shall give prompt notice thereof in writing to
Winery, which notice shall specify the nature of such occurrence and an
estimate of the date when full performance will be resumed hereunder.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first indicated above.

Grower: SCHEID VINEYARDS AND Winery: THE HESS COLLECTION WINERY
MANAGEMENT CO.

By: /s/ Heidi M. Scheid By: /s/ Paul Hoffman
------------------------------- --------------------------

Its: Vice President of Planning Its: CFO
-------------------------- ---------------------

By: /s/ Randle Johnson
--------------------------

Its: Winemaker
---------------------

<PAGE>

GRAPE PURCHASE AGREEMENT

This Grape Purchase Agreement (the "Agreement") is entered into as of July 1,
1996 between STEPHEN DOOLEY WINE CO., INC, a California corporation, and THE
CHALONE WINE GROUP, LTD., a California corporation (collectively, the "Winery"),
and SCHEID VINEYARDS AND MANAGEMENT CO., a California corporation ("Grower").

RECITALS

A. Grower is the lessee of the San Lucas Vineyard in San Lucas, California on
which Grower grows approximately 25 acres of Chardonnay grapes (the
"Vineyards"). The Vineyards are more particularly described in Exhibit "A"
to this Agreement.

B. Winery wishes to purchase the wine grapes grown on the Vineyards from
Grower under the terms of this Agreement

AGREEMENT

For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

1. PURCHASE. Grower agrees to sell, and Winery agrees to purchase, all the
production of Chardonnay grapes ("Grapes") grown on the Vineyard each year
that this Agreement is in effect.

2. TERM AND TERMINATION.

(A) The initial term of this Agreement ("Term") is for the crop years
1997 through 2011; provided, however, that unless written notice of
termination has been given by either party prior to May 31, 2010, the Term
will automatically convert to a two-year evergreen contract beginning June
1, 2010. Thereafter, written notice of termination may be given before May
31st of any year and shall be effective at the completion of the second
harvest following such written notice.

(B) Either party (the "Nonbreaching Party") shall have the right to
terminate this Agreement for cause in the event the other party (the
"Breaching Party") breaches any material provision or condition of this
Agreement; and

A. such breach remains uncured for a period of thirty (30) days
following the Nonbreaching Party giving written notice of
such breach to the Breaching Party, or if any such breach
shall not reasonably be susceptible of cure within such
thirty (30) day

<PAGE>

period; then

B. the Breaching Party shall fail to take steps reasonably
designed to cure such breach and such breach is not cured as
expeditiously as reasonably possible thereafter.

3. PRICE.

(a) Except as provided in Paragraphs 3(b) and 3(c) below, the price
per ton (the "Price") to be paid with respect to each crop year by Winery
to Grower for Grapes shall be determined with reference to the Final Grape
Crush Report (the "Crush Report"), published by the California Department
of Food and Agriculture (the "Department") on or about March 10 of each
year, for the crop year (the "Applicable Crop Year") preceding the harvest
of such Grapes, as it may be supplemented or corrected by the Department up
through the succeeding first day of August (the "Applicable Crush Report").
The price per ton for Grapes shall be equal to

[ ]*

See Exhibit "B" attached hereto for an example of this price calculation.

(b) If the Crush Report shall no longer be published, then any
appropriate substitute for the Crush Report mutually agreed upon by Winery
and Grower shall be used and the computations set forth in Paragraph 3(a)
shall be appropriately adjusted. In
-------------------------------
* Confidential Treatment Requested for Redacted Portion.

<PAGE>

the event that no substitute for a discontinued Crush Report can be agreed
upon, then the substitution shall be determined in accordance with
Paragraph 10.

(c) In the event that the Department changes the format of the Crush
Report from the format of the Crush Report dated March 8, 1996, the source
of data (from within the applicable Crush Report) for determining the Price
shall be [ ]*

(d) In the event that the reporting rules of the Department are
changed to include related party transactions in the Crush Report, then
Winery and Grower shall negotiate in good faith an alternative pricing
method. A related party transaction is a transaction where there is a
relationship between the buyer and seller other than arms-length.

(a) They are infected, adulterated (including with pesticide or other
residues) or misbranded under any federal or state law regulation, or may
not be introduced into interstate commerce pursuant to any federal or state
law or regulation; or

(b) any truckload ("Load") of such Grapes which has two percent (2%)
or more by weight of material other than grapes ("MOG"), such as leaves,
canes or other material foreign to grapes, or three percent (3%) or more by
weight of rot or mold; or

(c) the Load of such Grapes is delivered to Winery more than twelve
(12) hours after the completion of the harvesting of such Grapes; or

(d) Brix of such Load of Grapes is below 21.0 DEG. Brix.

Winery will have the right to reject any Non-Acceptable Grapes. In the
event Winery elects to reject any load of Grapes, Winery shall immediately
notify Grower of such election. If such election is made due to MOG in
excess of two percent (2%), Grower will be given the opportunity to remove
such MOG and the Load shall be re-tested. Rejection or acceptance of any
Non-Acceptable Grapes by Winery does not relieve Grower from obligations
under this Agreement for delivering the remaining Grapes to Winery.
Inspection by Winery in the field prior to hauling of Grapes to the Winery
shall not be deemed an acceptance of Grapes.

- ----------------------
* Confidential Treatment Requested for Redacted Portion.

<PAGE>

6. GRAPE MATURITY. The desired target Brix at harvest is 23.0 DEG. Brix, with
a target Brix window of 22.0 DEG. to 24.5 DEG., as measured by a properly
calibrated refractometer. If any Load of Grapes is delivered to the
processing facility below 22.0 DEG. Brix, the Price for such Load will be
adjusted downwards by one percent (1%) for each 0.1 below 22.0 DEG. Brix,
with a maximum adjustment of ten percent (10%) downwards at 21.0 DEG. Brix.

All inspections to determine acceptability of the Grapes pursuant to
paragraphs 5 and 6 must be made by the Bureau of Food and Vegetable
Standardization of the Department of Food and Agriculture of the State of
California, another comparable official agency, or by a certified,
independent testing laboratory. Winery and Grower agree to be bound by
such inspections as to whether the Grapes are Acceptable Grapes or
Non-Acceptable Grapes. In the event of such inspections, Grower will pay
for all additional costs if the Grapes are deemed Non-Acceptable Grapes,
and Winery will pay for all additional costs if the Grapes are deemed
Acceptable Grapes.

7. VITICULTURAL PRACTICES. Grower and Winery will maintain open communication
regarding viticultural practices of the Vineyards. Upon request, Winery
personnel will be permitted to enter the Vineyards to inspect farming
practices and harvesting operations. Grower will follow the Viticultural
Plan as set forth in Exhibit "C" to this Agreement.

All Loads of Grapes will be weighed on a certified scale at the processing
facility. Grower will bear the cost of delivery of the Grapes to Winery's
facility in Soledad or to a delivery location specified by Winery in Paso
Robles, including costs of harvesting, delivery, and of the gondolas in
which the Grapes are delivered. If Winery designates a delivery location
outside of Soledad or Paso Robles, Grower shall deliver Grapes to such
location, provided that Grower will be reimbursed by Winery for any costs
of delivery in excess of the cost that would have been incurred if such
Loads were delivered to Winery's facility in Soledad. Title and risk of
loss shall pass to Winery upon delivery to Winery premises or such other
designated delivery location.

Grower represents that Winery will have good title to all Grapes sold, free
of all security interests and other encumbrances.

<PAGE>

9. ASSIGNMENT AND BINDING EFFECT. This Agreement shall bind and inure to the
benefit of the parties hereto, their respective heirs, executors,
administrators, grantees, vendees, transferees, assignees, legatees,
devisees and other successors in interest whether partial or entire.

10. ARBITRATION. The parties will attempt to settle any dispute in a mutually
agreeable manner. Any controversy or claim arising out of or relating to
this Agreement or any breach thereof that is not settled by the parties,
shall be determined by arbitration in San Jose, California (or such other
location in California as the parties may agree upon) before a panel of
arbitrators in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Either party's request for arbitration
shall be given in writing by first-class mail, postage prepaid, addressed
to the party at the address set forth in paragraph 12. The arbitration
hearing shall be held within thirty (30) days after arbitration is
requested. The panel of arbitrators shall consist of three people, who
shall be independent of either party's business. Winery and Grower shall
each select an arbitrator and these two arbitrators will select a third
arbitrator.

11. ATTORNEYS' FEES. If any arbitration, action or other proceeding is brought
for the enforcement of this Agreement or because of an alleged dispute in
connection with this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in such
arbitration, action or proceeding, in addition to any other relief to which
such party is entitled.

12. NOTICE. Whenever the term "notice" is used in this Agreement, it means a
written notice or facsimile transmission delivered or sent to that party's
address or facsimile shown below or to such other address or facsimile
number as the party specifies by notice. All facsimile transmissions will
be followed by a "hard copy" letter sent via regular mail.

GROWER: WINERY:
NAME: Scheid Vineyards and Management Co. Stephen Dooley Wine Co., Inc
ADDRESS: 13470 Washington Blvd. 1234 Ella Street
Suite 300 San Luis Obispo, CA 93401
Marina del Rey, CA 90292
CONTACT: Alfred Scheid or Heidi Scheid Stephen Dooley
PHONE: 310/301-1555 805/594-1318
FAX: 310/301-1569 805/594-1318

WITH A COPY TO:
NAME: Scheid Vineyards and Management Co.
ADDRESS: 1972 Hobson Avenue
Greenfield, CA 93927
CONTACT: Kurt Gollnick
PHONE: 408/385-4801
FAX: 408/385-0136

<PAGE>

13. CONFIDENTIALITY. Grower and Winery both warrant that the other party's
name will not be used in any fashion or context with respect to the
representation, sales, or marketing of grapes, bulk wine, vineyards, or
bottled products without the other party's prior written consent.

14. SEVERABILITY. If any part or parts of this Agreement are found to be
illegal or unenforceable, the remainder shall be considered severable,
shall remain in full force and effect, and shall be enforceable.

15. GENERAL PROVISIONS. This Agreement, along with Exhibits "A", "B" and "C"
attached hereto are the entire agreement between the parties, and
supersedes all other written or oral agreements. This Agreement may only
be amended or modified by a written document signed by the party against
whom the modification is to be enforced. Each party will perform such
other acts as are reasonably necessary or desirable to carry out the
purposes of this Agreement.

16. FORCE MAJEURE. Grower shall not be liable to Winery for any failure to
perform any of its duties or obligations hereunder or for any loss or
damage of any kind, nor shall any such failure give Winery the right to
reject any Grapes pursuant to Paragraph 5(c), so long as such failure to
perform or loss or damage is the result of any act of God or any normal
hazard of farming, including, without limitation, rain, hail, frost,
drought, flooding, windstorm or other action of the elements, strike, work
slow-down, worker unavailability, fire, truck, car, rail, labor, equipment
or material shortage or unavailability, freight embargo, transportation
delays or difficulties, governmental action or any other cause beyond
Grower's reasonable control. If Grower is prevented from performing its
obligations hereunder in part or in full as a result of an occurrence set
forth in this Paragraph 16, it shall give prompt notice thereof in writing
to Winery, which notice shall specify the nature of such occurrence and an
estimate of the date when full performance will be resumed hereunder.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first indicated above.

Grower: SCHEID VINEYARDS AND Winery: STEPHEN DOOLEY WINE CO., INC.
MANAGEMENT CO.
By: /s/ Heidi M. Scheid By: /s/ S.R. Dooley
--------------------------- ---------------------------
Its: Vice President of Planning Its: President
-------------------------- ----------------------

Winery: THE CHALONE WINE GROUP, LTD.

By: /s/ L.M. Brooks
---------------------------
Its: V.P. Production
----------------------

<PAGE>

ALTERNATING WINERY AGREEMENT

The following agreement is executed between Storrs Winery ("Winery") and Scheid
Vineyards and Management Company ("Customer") dated November 30, 1995,
hereinafter, the "Agreement".

RECITALS

WHEREAS, Customer wishes to establish its own bonded winery, hereinafter
"Customer's Bonded Winery", but wishes to reduce both its start-up expenses and
risk by (1) subleasing space within Winery's premise, (2) sharing Winery's
equipment and facilities, (3) making use of Winery's administrative, compliance
and record keeping systems and personnel and incidental equipment; and, (4)
making use of Winery's winemaking expertise through it's winemaker(s) and/or
cellar personnel; and

WHEREAS, Winery wishes to accommodate Customer while maintaining the orderly
operation of its own winemaking activities and its ability to offer winemaking
and recordkeeping services to Customer at a reasonable price; and

WHEREAS, the parties acknowledge these goals can be best achieved by defining
and structuring their relationship and the services provided by Winery to
Customer;

NOW THEREFORE, the parties agree as follows:

AGREEMENT

I. DEFINITIONS:

1. "THE BUILDING": An approximately 1600 sq. ft. building leased by Winery
from Lemar Co., used by Winery in its winemaking/warehousing business, located
at 303 Potraro Street, No. 35, Santa Cruz, California, and as shown in
Attachment A.

2. "DEDICATED PREMISE": Established in the "Sublease" section of this
agreement, a specified area reaching from floor to ceiling in the Building, as
identified in Attachment A, in which Customer's Bonded Winery is located.

<PAGE>

3. "WINERY PREMISE": The entire remaining area of the Building.

4. "ALTERNATING PREMISE": A space in the Winery Premise which is operated
alternately by Winery and Customer to conduct their respective winemaking
activities.

5. "THE REGULATION": Section 24.136, "Procedure for Alternating Proprietors",
in Vol. 55, No. 118 of the Federal Register published June 19, 1990, (27 CFR
Part et al, "Revision and Recodification of Winery Regulations: Final Rule",
Bureau of Alcohol, Tobacco and Firearms, U.S. Department of the Treasury). This
section is attached hereto as Attachment B.

6. "THE PROCEDURE": A written procedure which shall be prepared by Winery and
which shall conform to the Regulation, which shall govern the operations of the
Alternating Premise.

7. "ATF": The Bureau of Alcohol, Tobacco and Firearms, U.S. Department of the
Treasury.

8. "ABC": The Department of Alcoholic Beverage Control, State of California.

II. SUBLEASE

The Winery will segregate a Dedicated Premise within the Building for the
Customer's Bonded Winery. The size of the Dedicated Premise will be
approximately 128 sq ft. and rent of $500.00 per month will be due and payable
by Customer to Winery on the first day of each month. The Dedicated Premise
will be for the exclusive use of Customer.

USE: Customer will use the Dedicated Premise for normal winemaking activities
and will not use any other space in the Building except the Alternating Premise.

FIRE INSURANCE: Winery shall be responsible to pay for fire insurance for the
Building itself. Customer shall be responsible to pay insurance related to its
personal and business property in the Building.

UTILITIES: Winery shall pay for all water, gas, light and power, and all other
services provided to the Dedicated Premise.

<PAGE>

ENTRY BY WINERY: Customer shall permit Winery and/or Landlord to enter into and
upon the Dedicated or Alternating Premises at all reasonable times for the
purpose of inspecting or repairing or to make alterations or additions to any
portion of said Premises.

ENTRY BY REGULATORY OFFICIALS: Winery shall permit regulatory officials to cross
the Winery Premise in order to inspect the Dedicated Premise.

III. ALTERNATING PREMISE

Winery will make available to Customer, equipment and facilities including tanks
at mutually convenient times during the term of this Agreement. Such equipment
and facilities and the area in which they are located will constitute the
Alternating Premise. Tanks may be operated individually as an Alternating
Premise for normal winery operations. When the Alternating Premise is used for
Customer's winemaking activities, it will be under the control of the Customer.

REGULATION AND PROCEDURE: The Alternating Premise shall be governed by the
Regulation and Procedure as defined above. Winery and Customer hereby commit
themselves to operate in accordance with the Regulation and each party agrees to
follow ATF and ABC regulations, as well as any specific conditions or guidelines
established by the regulatory agencies regarding the alternation of proprietors
in a winery.

RECORD KEEPING: A log will be maintained by Winery to document the time and date
each of the parties uses any portion of the Alternating Premise.

SCHEDULING OF ALTERNATING PREMISE: The Winery shall schedule use of the
Alternating Premise.

IV. CRUSH SERVICES

Since Customer does not have its own crush facility, Winery agrees to crush
grapes and deliver grape must or juice to the Dedicated Premise or the
Alternating Premise for fermentation. Customer agrees to pay Winery for Crush
Services according to Winery's current fee schedule in effect at the time
services are provided.

<PAGE>

V. WINERY SERVICES

WINEMAKING ACTIVITIES: Customer hereby contracts with Winery to perform
winemaking activities on Customer's grapes and wine in the Dedicated and
Alternating Premises. When Winery is providing such services, Winery is acting
as Customer's independent contractor. The scope and fees of such services will
be established by a separate agreement between Winery and Customer.

RECORDKEEPING: Customer hereby contracts with Winery to perform all
recordkeeping required in connection with Customer's Dedicated and Alternating
Premises, including but not limited to, records and reports regarding wine
production, storage, bottling, shipping and tax determination. Customer will
use the tax information to report and pay its wine excise taxes. Customer
agrees to execute documents sufficient to grant Winery employees the necessary
authority to execute the aforementioned recordkeeping on Customer's behalf.

Winery is acting as Customer's independent contractor when Winery is performing
recordkeeping services for Customer. Customer's records will be maintained by
Winery as independent files in its computer and/or manual records at its
premise. Customer hereby authorizes Winery to make copies of Customer's records
available for inspection by regulatory agencies, and Winery agrees to do so upon
request.

VI. CUSTOMER COMPLIANCE AND LIABILITY

Customer will be responsible for the initial compliance setup of the Dedicated
Premise including the premiums necessary to establish the surety bond for
Customer's Dedicated Premise and all other licenses or permits required by state
and federal agencies. Customer acknowledges that it is ultimately responsible
for its own winemaking activities, winery recordkeeping and reporting,
occupational and exise taxes, and for any violations on its premises or any
portion of the Alternating Premises during its period of control.

VII. TERM

This agreement shall be in effect for an initial term of three years, commencing
January 1, 1996. The Agreement shall be extended

<PAGE>

for a one year term unless written notice of its intention to terminate this
Agreement is given by either party to the other on or before June 30, 1998.

Each one year term the Agreement is extended, either party may notify the other
as specified above by June 30 of that year and this Agreement shall terminate at
the end of such one year term. Otherwise, the Agreement will be extended for an
additional one year term.

VIII. GENERAL PROVISIONS

Nothing in this Agreement establishes or shall be construed to establish a
Partnership or Joint Venture between Winery and Customer. Any services rendered
by Winery to Customer are as an Independent Contractor, not as an employee,
agent, partner, or joint venturer.

TITLE TO WINE: Title to Customer's wine will remain with Customer at all times.
It shall be the responsibility of Customer to pay all federal, state and local
taxes when due.

LICENSING: Customer warrants that it has, or will obtain all necessary licenses
and permits to comply with federal and state regulations. Copies of these
documents will be given to Winery.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
written above.

Storrs Winery ("Winery")

By: /s/ Steven J. Storrs
-----------------------
Steven J. Storrs - Owner/Winemaker

Scheid Vineyards and Management Co. ("Customer")

By: /s/ Scott D. Scheid
------------------------
Scott D. Scheid - Vice President

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WINERY SERVICES AGREEMENT

The following agreement is executed between Storrs Winery ("Winery") and Scheid
Vineyards and Management Company ("Customer") on January 1, 1996, hereinafter,
the "Agreement".

RECITALS

WHEREAS, Winery and Customer have executed and entered into an "Alternating
Winery Agreement" dated November 30, 1995; and

WHEREAS, the parties wish to define in greater detail the provisions and fee
structure in Section V. "WINERY SERVICES" of the Alternating Winery Agreement;

NOW THEREFORE, the parties agree as follows:

AGREEMENT

I. WINEMAKING ACTIVITIES:

The following is a list of winemaking activities Winery has agreed to perform
for Customer:

1. Pre-harvest chemistry on grapes
2. Crushing and pressing
3. Red wine: punch down
4. White wine: settling, racking, barrel fermentation
5. Racking of wines as needed
6. Lab work
7. Bottling preparations: racking, blending, filtering, etc.
8. Bottling
9. Other necessary services

Customer agrees to pay Winery a monthly baseline fee of $500.00 for the above
services. In addition, Customer will pay, upon submission of an invoice by
Winery, for specific services above according to Winery's current fee schedule
in effect at the time services are provided.

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II. RECORDKEEPING

Winery has agreed to perform the following recordkeeping and compliance
functions and to make all such records and reports available to Customer upon
request.

1. ATF Reports as required
2. ABC Reports as required
3. Excise Tax reporting: state and federal
4. Bottling records
5. Wine Production records
6. Storage records
7. Alternating Premise Log
8. Shipping records
9. Schedule of equipment owned by Customer
10. Other necessary recordkeeping

Customer agrees to pay Winery a monthly fee of $500.00 to compensate Winery for
providing recordkeeping and compliance services to Customer.

III. CONSULTING SERVICES

Winery agrees to perform certain consulting and planning services, as requested
by Customer from time-to-time, including, but not limited to the following:

1. Discussions and planning regarding which wines to produce
2. Discussions and planning regarding quantity to produce
3. Pre-harvest check of vineyards
4. Block selection in vineyards
5. Discussions of tasting room issues
6. Discussions of future winery issues

Customer agrees to pay Winery, upon submission of an invoice for consulting
services provided by Steve Storrs, winemaker, at the rate of $120.00 per hour.
In the event that other Winery personnel provide consulting services, such
services will be invoiced at the appropriate agreed upon rate.

IV. TERM

This Agreement shall be in effect for an initial term of three years, commencing
January 1, 1996, and shall run concurrently, including all extensions, with the
term of the Alternating Winery Agreement executed by Winery and Customer on
November 30,

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1995, as provided in Section VII. "TERM" of that agreement.

V. GENERAL PROVISIONS

Nothing in this Agreement establishes or shall be construed to establish a
partnership or joint venture between Winery and Customer. Any services rendered
by Winery to Customer are as an Independent Contractor, not as an employee,
agent, partner or joint venturer.

IN WITNNESS WHEREOF, the parties have executed this Agreement on the date
first written above.

Storrs Winery ("Winery")

/s/ Stephen J. Storrs
--------------------------------
Stephen J. Storrs - Owner/Winemaker

Scheid Vineyards and Management Co. ("Customer")

/s/ Scott D. Scheid
--------------------------------
Scott D. Scheid - Vice President

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STANDARD OFFICE LEASE - GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

[LOGO]

1. BASIC LEASE PROVISIONS ("Basic Lease Provisions")

1.1 PARTIES: This Lease, dated, for reference purposes only, July 1,
1994, is made by and between TESH PARTNERS, L.P., (herein called "Lessor") and
SCHEID VINEYARDS AND MANAGEMENT COMPANY, doing business under the name of SAME,
(herein called "Lessee").

1.2 PREMISES: Suite Number(s) 300 floors, consisting of approximately
5,685 feet, more or less, as defined in paragraph 2 and as shown on Exhibit "A"
hereto (the "Premises").

1.3 BUILDING: Commonly described as being located at 13470 Washington
Boulevard in the City of Marina del Rey, County of Los Angeles, State of
California, as more particularly described in Exhibit A hereto, and as defined
in paragraph 2.

1.4: USE: General Office, subject to paragraph 6.

1.5 TERM: Five (5) Years commencing July 1, 1994 ("Commencement Date")
and ending June 30, 1999, as defined in paragraph 3.

1.6 BASE RENT: Seven Thousand Six Hundred Eighteen Dollars per month,
payable on the 1st day of each month, per paragraph 4.1.

1.8 RENT PAID UPON EXECUTION: Fifteen Thousand Two Hundred Thirty-Six
($15,236) Dollars. for $7,618 - First month's rent $7,618 - Security Deposit

1.9 SECURITY DEPOSIT: Seven Thousand Six Hundred Eighteen ($7,618)
Dollars

1.10 LESSEE'S SHARE OF OPERATING EXPENSE INCREASE: 46.2% as defined in
paragraph 4.2.

2. PREMISES, PARKING AND COMMON AREAS.

2.1 PREMISES: The Premises are a portion of a building, herein sometimes
referred to as the "Building" identified in paragraph 1.3 of the Basic Lease
Provisions. "Building" shall include adjacent parking structures used in
connection therewith. The Premises, the Building, the Common Areas, the land
upon which the same are located, along with all other buildings and improvements
thereon or thereunder, are herein collectively referred to as the "Office
Building Project." Lessor hereby leases to Lessee and Lessee leases from Lessor
for the term, at the rental, and upon all of the conditions set forth herein,
the real property referred to in the Basic Lease Provisions, paragraph 1.2, as
the "Premises," including rights to the Common Areas as hereinafter specified.

2.2 VEHICLE PARKING: So long as Lessee is not in default, and subject to
the rules and regulations attached hereto, and as established by Lessor from
time to time, Lessee shall be entitled to rent and use 8* parking spaces in the
Office Building Project at the monthly rate applicable from time to time for
monthly parking as set by Lessor and/or its licensee. *7 - covered, 1 -
uncovered

2.2.1 If Lessee commits, permits or allows any of the prohibited
activities described in the Lease or the rules then in effect, then Lessor shall
have the right, without notice, in addition to such other rights and remedies
that it may have, to remove or tow away the vehicle involved and charge the cost
to Lessee, which cost shall be immediately payable upon demand by Lessor.

2.2.2 The monthly parking rate will be $305.00 per month at the
commencement of the term of this Lease, and is subject to change upon five (5)
days prior written notice to Lessee. Monthly parking fees shall be payable one
month in advance prior to the first day of each calendar month.

2.3 COMMON AREAS - DEFINITION. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Office Building Project that are provided and designated by the Lessor
from time to time for the general non-exclusive use of Lessor, Lessee and of
other lessees of the Office Building Project and their respective employees,
suppliers, shippers, customers and invitees, including but not limited to common
entrances, lobbies, corridors, stairways and stairwells, public restrooms,
elevators, escalators, parking areas to the extent not otherwise prohibited by
this Lease, loading and unloading areas, trash areas roadways, sidewalks,
walkways, parkways, ramps, driveways, landscaped areas and decorative walls.

2.4 COMMON AREAS - RULES AND REGULATIONS. Lessee agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit B with respect
to the Office Building Project and Common Areas, and to cause its employees,
suppliers, shippers, customers and invitees to so abide and conform. Lessor or
such other person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
modify, amend and enforce said rules and regulations. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees, their agents, employees and invitees of the Office Building
Project.

2.5 COMMON AREAS - CHANGES. Lessor shall have the right, in Lessor's sole
discretion, from time to time:

(a) To make changes to the Building interior and exterior and Common
Areas, including, without limitation, changes in the location, size, shape,
number, and appearance thereof, including but not limited to the lobbies,
windows, stairways, air shafts, elevators, escalators, restrooms, driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, decorative walls, landscaped areas and walkways;
provided, however, Lessor shall at all times provide the parking facilities
required by applicable law;

(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;

(c) To designate other land and improvements outside the boundaries
of the Office Building Project to be a part of the Common Areas, provided that
such other land and improvements have a reasonable and functional relationship
to the Office Building Project;

(d) To add additional buildings and improvements to the Common Areas;

(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Office Building Project, or any
portion thereof;

(f) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Office Building Project as Lessor
may, in the exercise of sound business judgment deem to be appropriate.

3. TERM.

3.1 TERM. The term and Commencement Date of this Lease shall be as
specified in paragraph 1.5 of the Basic Lease Provisions.

3.2 DELAY IN POSSESSION. Notwithstanding said Commencement Date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date and subject to paragraph 3.2.2, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease or
the obligations of Lessee hereunder or extend the term hereof; but, in such
case, Lessee shall not be obligated to pay rent or perform any other obligation
of Lessee under the terms of this Lease, except as may be otherwise provided in
this Lease, until possession of the Premises is tendered to Lessee, as
hereinafter defined; provided, however, that if Lessor shall not have delivered
possession other Premises within sixty (60) days following said Commencement
Date, as the same may be extended under the terms of a Work Letter executed by
Lessor and Lessee, Lessee may, at Lessee's

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option, by notice in writing to Lessor within ten (10) days thereafter, cancel
this Lease, in which event the parties shall be discharged from all obligations
hereunder, provided, however, that, as to Lessee's obligations, Lessee first
reimburses Lessor for all costs incurred for Non-Standard Improvements and, as
to Lessor's obligations, Lessor shall return any money previously deposited by
Lessee (less any offsets due Lessor for Non-Standard Improvements) and provided
further that if such written notice by Lessee is not received by Lessor within
said ten (10) day period. Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect.

3.2.1 POSSESSION TENDERED - DEFINED. Possession of the Premises shall
be deemed tendered to Lessee ("Tender of Possession") when (1) the Improvements
to be provided by Lessor under this Lease are substantially completed, (2) the
Building utilities are ready for use in the Premises, (3) Lessee has reasonable
access to the Premises, and (4) ten (10) days shall have expired following
advance written notice to Lessee of the occurrence of the matters described in
(1), (2) and (3), above of this paragraph 3.2.1.

3.2.2 DELAYS CAUSED BY LESSEE. There shall be no abatement of rent,
and the sixty (60) day period following the Commencement Date before which
Lessee's right to cancel this Lease accrues under paragraph 3.2. shall be deemed
extended to the extent of any delays caused by acts or omissions of Lessee,
Lessee's agents, employees and contractors.

3.3 EARLY POSSESSION. If Lessee occupies the Premises prior to said
Commencement Date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not change the termination date, and Lessee shall
pay rent for such occupancy.

3.4 UNCERTAIN COMMENCEMENT. In the event commencement of the Lease term
is defined as the completion of the improvements, Lessee and Lessor shall
execute an amendment to this Lease establishing the date of Tender of
Possession (as defined in paragraph 3.2.1) or the actual taking of possession
by Lessee, whichever first occurs, as the Commencement Date.

4. RENT.

4.1 BASE RENT. Subject to adjustment as hereinafter provided in paragraph
4.3, and except as may be otherwise expressly provided in this Lease, Lessee
shall pay to Lessor the Base Rent for the Premises set forth in paragraph 1.6 of
the Basic Lease Provisions, without offset or deduction. Lessee shall pay Lessor
upon execution hereof the advance Base Rent described in paragraph 1.8 of the
Basic Lease Provisions. Rent for any period during the term hereof which is for
less than one month shall be prorated based upon the actual number of days of
the calendar month involved. Rent shall be payable in lawful money of the United
States to Lessor at the address stated herein or to such other persons or at
such other places as Lessor may designate in writing.

4.2 OPERATING EXPENSE INCREASE. Lessee shall pay to Lessor during the term
hereof, in addition to the Base Rent, Lessee's Share, as hereinafter defined, of
the amount by which all Operating Expenses, as hereinafter defined, for each
Comparison Year exceeds the amount of all Operating Expenses for the Base Year,
such excess being hereinafter referred to as the "Operating Expense Increase,"
in accordance with the following provisions:

(a) "Lessee's Share" is defined, for purposes of this Lease, as the
percentage set forth in paragraph 1.10 of the Basic Lease Provisions, which
percentage has been determined by dividing the approximate square footage of the
Premises by the total approximate square footage of the rentable space contained
in the Office Building Project. It is understood and agreed that the square
footage figures set forth in the Basic Lease Provisions are approximations which
Lessor and Lessee agree are reasonable and shall not be subject to revision
except in connection with an actual change in the size of the Premises or a
change in the space available for lease in the Office Building Project.

(b) "Base Year" is defined as the calendar year in which the Lease
term commences.

(c) "Comparison Year" is defined as each calendar year during the
term of this Lease subsequent to the Base Year; provided, however, Lessee shall
have no obligation to pay a share of the Operating Expense Increase applicable
to the first twelve (12) months of the Lease Term (other than such as are
mandated by a governmental authority, as to which government mandated expenses
Lessee shall pay Lessee's Share, notwithstanding they occur during the first
twelve (12) months). Lessee's Share of the Operating Expense Increase for the
first and last Comparison Years of the Lease Term shall be prorated according to
that portion of such Comparison Year as to which Lessee is responsible for a
share of such increase.

(d) "Operating Expenses" is defined, for purposes of this Lease, to
include all costs, if any, incurred by Lessor in the exercise of its reasonable
discretion, for:

(i) The operation, repair, maintenance, and replacement, in
neat, clean, safe, good order and condition, of the Office Building Project,
including but not limited to, the following:

(aa) The Common Areas, including their surfaces,
coverings, decorative items, carpets, drapes and window coverings, and including
parking areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, stairways, parkways, driveways, landscaped areas, striping, bumpers,
irrigation systems, Common Area lighting facilities, building exteriors and
roofs, fences and gates;

(bb) All heating, air conditioning, plumbing, electrical
systems, life safety equipment, telecommunication and other equipment used in
common by, or for the benefit of, lessees or occupants of the Office Building
Project, including elevators and escalators, tenant directories, fire detection
systems including sprinkler system maintenance and repair.

(ii) Trash disposal, janitorial and security services;

(iii) Any other service to be provided by Lessor that is
elsewhere in this Lease stated to be an "Operating Expense";

(iv) The cost of the premiums for the liability and property
insurance policies to be maintained by Lessor under paragraph 8 hereof;

(v) The amount of the real property taxes to be paid by Lessor
under paragraph 10.1 hereof;

(vi) The cost of water, sewer, gas, electricity, and other
publicly mandated services to the Office Building Project;

(vii) Labor, salaries and applicable fringe benefits and costs,
materials, supplies and tools, used in maintaining and/or cleaning the Office
Building Project and accounting and a management fee attributable to the
operation of the Office Building Project;

(viii) Replacing and/or adding improvements mandated by any
governmental agency and any repairs or removals necessitated thereby amortized
over its useful life according to Federal income tax regulations or guidelines
for depreciation thereof (including interest on the unamortized balance as is
then reasonable in the judgment of Lessor's accountants);

(ix) Replacements of equipment or improvements that have a
useful life for depreciation purposes according to Federal income tax guidelines
of five (5) years or less, as amortized over such life.

(e) Operating Expenses shall not include the costs of replacments
of equipment or improvements that have a useful life for Federal income tax
purposes in excess of five (5) years unless it is of the type described in
paragraph 4.2(d)(viii), in which case their cost shall be included as above
provided.

(f) Operating Expenses shall not include any expenses paid by any
lessee directly to third parties, or as to which Lessor is otherwise reimbursed
by any third party, other tenant, or by insurance proceeds.

(g) Lessee's Share of Operating Expense Increase shall be payable
by Lessee within ten (10) days after a reasonably detailed statement of
actual expenses is presented to Lessee by Lessor. At Lessor's option,
however, an amount may be estimated by Lessor from time to time in advance of
Lessee's Share of the Operating Expense Increase for any Comparison Year,
and the same shall be payable monthly or quarterly, as Lessor shall
designate, during each Comparison Year of the Lease term, on the same day as
the Base Rent is due hereunder. In the event that Lessee pays Lessor's
estimate of Lessee's Shares of Operating Expense Increase as aforesaid,
Lessor shall deliver to Lessee within sixty (60) days after the expiration of
each Comparison Year a reasonably detailed statement showing Lessee's Share
of the actual Operating Expense increase incurred during such year. If
Lessee's payments under this paragraph 4.2(g) during said Comparison Year
exceed Lessee's Share as indicated on said statement, Lessee shall be
entitled to credit the amount of such overpayment against Lessee's Share of
Operating Expense Increase next falling due. If Lessee's payments under this
paragraph during said Comparison Year were less than Lessee's Share as
indicated on said statement, Lessee shall pay to Lessor the amount of the
deficiency within ten (10) days after delivery by Lessor to Lessee of said
statement. Lessor and Lessee shall forthwith adjust between them by cash
payment any balance determined to exist with respect to that portion of the
last Comparison Year for which Lessee is responsible as to Operating Expense
Increases, notwithstanding that the Lease term may have terminated before the
end of such Comparison Year.

4.3 RENT INCREASE.

4.3.1 At the times set forth in paragraph 1.7 of the Basic Lease
Provisions, the monthly Base Rent payable under paragraph 4.1 of this Lease
shall be adjusted by the increase, if any, in the Consumer Price Index of the
Bureau of Labor Statistics of the Department of Labor for All Urban Consumers,
(1967 = 100), "All Items," for the city nearest the location of the Building,
herein referred to as "C.P.I.," since the date of this Lease.

4.3.2 The monthly Base Rent payable pursuant to paragraph 4.3.1
shall be calculated as follows: the Base Rent payable for the first month of
the term of this Lease, as set forth in paragraph 4.1 of this Lease, shall be
multiplied by a fraction the numerator of which shall be the C.P.I. of the
calendar month during which the adjustment is to take effect, and the
denominator of which shall be the C.P.I. for the calendar month in which the
original Lease term commences. The sum so calculated shall constitute the new
monthly Base Rent hereunder, but, in no event, shall such new monthly Base
Rent be less than the Base Rent payable for the month immediately preceding
the date for the rent adjustment.

4.3.3 In the event the compilation and/or publication of the C.P.I.
shall be transferred to any other governmental department or bureau or

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agency or shall be discontinued, then the index most nearly the same as the
C.P.I. shall be used to make such calculations in the event that Lessor and
Lessee cannot agree on such alternative index, then the matter shall be
submitted for decision to the American Arbitration Association in the County in
which the Premises are located, in accordance with the then rules of said
association and the decision of the arbitrators shall be binding upon the
parties, notwithstanding one party failing to appear after due notice of the
proceeding. The cost of said Arbitrators shall be paid equally by Lessor and
Lessee.

4.3.4 Lessee shall continue to pay the rent at the rate previously in
effect until the increase, if any, is determined. Within five (5) days following
the date on which the increase is determined, Lessee shall make such payment to
Lessor as will bring the increased rental current, commencing with the effective
date of such increase through the date of any rental instalments then due.
Thereafter the rental shall be paid at the increased rate.

4.3.5 At such time as the amount of any change in rental required by
this Lease is known or determined, Lessor and Lessee shall execute an amendment
to this Lease setting forth such change.

5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the security deposit set forth in paragraph 1.9 of the Basic Lease Provisions as
security for Lessee's faithful performance of Lessee's obligations hereunder. If
Lessee fails to pay rent or other charges due hereunder, or otherwise defaults
with respect to any provision of this Lease, Lessor may use, apply or retain all
or any portion of said deposit for the payment of any rent or other charge in
default for the payment of any other sum to which Lessor may become obligated by
reason of Lessee's default, or to compensate Lessor for any loss or damage which
Lessor may suffer thereby. If Lessor so uses or applies all or any portion of
said deposit, Lessee shall within ten (10) days after written demand therefor
deposit cash with Lessor in an amount sufficient to restore said deposit to the
full amount then required of Lessee. If the monthly Base Rent shall, from time
to time, increase during the term of this Lease, Lessee shall, at the time of
such increase, deposit with Lessor additional money as a security deposit so
that the total amount of the security deposit held by Lessor shall at all times
bear the same proportion to the then current Base Rent as the initial security
deposit bears to the initial Base Rent set forth in paragraph 1.6 of the Basic
Lease Provisions. Lessor shall not be required to keep said security deposit
separate from its general accounts. If Lessee performs all of Lessee's
obligations hereunder, said deposit, or so much thereof as has not heretofore
been applied by Lessor, shall be returned, without payment of interest or other
increment for its use, to Lessee (or, at Lessor's option, to the last assignee,
if any, of Lessee's interests hereunder) at the expiration of the term hereof,
and after Lessee has vacated the Premises. No trust relationship is created
herein between Lessor and Lessee with respect to said Security Deposit.

6. USE.

6.1 USE. The Premises shall be used and occupied only for the purpose set
forth in paragraph 1.4 of the Basic Lease Provisions or any other use which is
reasonably comparable to that use and for no other purpose.

6.2 COMPLIANCE WITH LAW.

(a) Lessee shall, at Lessee's expense, promptly comply with all
applicable statutes, ordinances, rules, regulations, orders, covenants and
restrictions of record, and requirements of any fire insurance underwriters or
rating bureaus, now in effect or which may hereafter come into effect, whether
or not they reflect a change in policy from that now existing, during the term
or any part of the term hereof, relating in any manner to the Premises and the
occupation and use by Lessee of the Premises. Lessee shall conduct its business
in a lawful manner and shall not use or permit the use of the Premises or the
Common Areas in any manner that will tend to create waste or a nuisance or shall
tend to disturb other occupants of the Office Building Project.

6.3 CONDITION OF PREMISES.

(a) Lessor shall deliver the Premises to Lessee in a clean condition
on the Lease Commencement Date (unless Lessee is already in possession) and that
the plumbing, lighting, air conditioning, and heating system in the Premises
shall be in good operating condition. In the event that this provision has been
violated, then it shall be the obligation of Lessor, after receipt of written
notice from Lessee setting forth with specificity the nature of the violation,
to promptly, at Lessor's sole cost, rectify such violation.

(b) Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises and the Office Building Project in their condition
existing as of the Lease Commencement Date or the date that Lessee takes
possession of the Premises, whichever is earlier, subject to all applicable
zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and any easements,
covenants or restrictions of record, and accepts this Lease subject thereto
and to all matters disclosed thereby and by any exhibits attached hereto.
Lessee acknowledges that it has satisfied itself by its own independent
investigation that the Premises are suitable for its intended use, and that
neither Lessor nor Lessor's agent or agents has made any representation or
warranty as to the present or future suitability of the Premises, Common
Areas, or Office Building Project for the conduct of Lessee business.

7. MAINTENANCE, REPAIRS, ALTERATIONS AND COMMON AREA SERVICES.

7.1 LESSOR'S OBLIGATIONS. Lessor shall keep the Office Building
Project, including the Premises, interior and exterior walls, roof, and
common areas, and the equipment whether used exclusively for the Premises or
in common with other premises, in good condition and repair, provided,
however, Lessor shall not be obligated to paint, repair or replace wall
coverings, or to repair or replace any improvements that are not ordinarily a
part of the Building or are above then Building standards. Except as provided
in paragraph 9.5, there shall be no abatement of rent or liability of Lessee
on account of any injury or interference with Lessee's business with respect
to any improvements, alterations or repairs made by Lessor to the Office
Building Project or any part thereof. Lessee expressly waives the benefits of
any statute now or hereafter in effect which would otherwise afford Lessee
the right to make repairs at Lessor's expense or to terminate this Lease
because of Lessor's failure to keep the Premises in good order, condition and
repair.

7.2 LESSEE'S OBLIGATIONS.

(a) Notwithstanding Lessor's obligation to keep the Premises in good
condition and repair. Lessee shall be responsible for payment of the cost
thereof to Lessor as additional rent for that portion of the cost of any
maintenance and repair of the Premises, or any equipment (wherever located) that
serves only Lessee or the Premises, to the extent such cost is attributable to
causes beyond normal wear and tear. Lessee shall be responsible for the cost of
painting, repairing or replacing wall coverings, and to repair or replace any
Premises improvements that are not ordinarily a part of the Building or that are
above then Building standards. Lessor may, at its option, upon reasonable
notice, elect to have Lessee perform any particular such maintenance or repairs
the cost of which is otherwise Lessee's responsibility hereunder.

(b) On the last day of the term hereof, or on any sooner termination,
Lessee shall surrender the Premises to Lessor in the same condition as received,
ordinary wear and tear excepted, clean and free of debris. Any damage or
deterioration of the Premises shall not be deemed ordinary wear and tear if the
same could have been prevented by good maintenance practices by Lessee. Lessee
shall repair any damage to the Premises occasioned by the installation or
removal of Lessee's trade fixtures, alterations, furnishings and equipment.
Except as otherwise stated in this Lease, Lessee shall leave the air lines,
power panels, electrical distribution systems, lighting fixtures, air
conditioning, window coverings, wall coverings, carpets, wall paneling, ceilings
and plumbing on the Premises and in good operating condition.

7.3 ALTERATIONS AND ADDITIONS.

(a) Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions, Utility Installations or repairs in, on or
about the Premises, or the Office Building Project. As used in this paragraph
7.3 the term "Utility Installation" shall mean carpeting, window and wall
coverings, power panels, electrical distribution systems, lighting fixtures, air
conditioning, plumbing, and telephone and telecommunication wiring and
equipment. At the expiration of the term, Lessor may require the removal of any
or all of said alterations, improvements, additions or Utility Installations,
and the restoration of the Premises and the Office Building Project to their
prior condition, at Lessee's expense. Should Lessor permit Lessee to make its
own alterations, improvements, additions or Utility Installations, Lessee shall
use only such contractor as has been expressly approved by Lessor, and Lessor
may require Lessee to provide Lessor, at Lessee's sole cost and expense, a lien
and completion bond in an amount equal to one and one-half times the estimated
cost of such improvements, to insure Lessor against any liability for mechanic's
and materialmen's liens and to insure completion of the work. Should Lessee make
any alterations, improvements, additions or Utility Installations without the
prior approval of Lessor, or use a contractor not expressly approved by Lessor,
Lessor may, at any time during the term of this Lease, require that Lessee
remove any part or all of the same.

(b) Any alterations, improvements, additions or Utility Installations
in or about the Premises or the Office Building Project that Lessee shall desire
to make shall be presented to Lessor in written form, with proposed detailed
plans. If Lessor shall give its consent to Lessee's making such alteration,
improvement, addition or Utility Installation, the consent shall be deemed
conditioned upon Lessee acquiring a permit to do so from the applicable
governmental agencies, furnishing a copy thereof to Lessor prior to the
commencement of the work, and compliance by Lessee with all conditions of said
permit in a prompt and expeditious manner.

(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building or the Office Building
Project, or any interest therein.

(d) Lessee shall give Lessor not less than ten (10) days' notice
prior to the commencement of any work in the Premises by Lessee, and Lessor
shall have the right to post notices of non-responsibility in or on the Premises
or the Building as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend itself and Lessor against the same and shall pay and satisfy

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any such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises, the Building or the Office
Building Project, upon the condition that if Lessor shall require, Lessee
shall furnish to Lessor a surety bond satisfactory to Lessor in an amount
equal to such contested lien claim or demand indemnifying Lessor against
liability for the same and holding the Premises, the Building and the Office
Building Project free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's reasonable attorneys fees and costs
in participating in such action if Lessor shall decide it is to Lessor's best
interest so to do.

(e) All alterations, improvements, additions and Utility
Installations (whether or not such Utility Installations constitute trade
fixtures of Lessee), which may be made to the Premises by Lessee, including
but not limited to, floor coverings, panelings, doors, drapes, built-ins,
moldings, sound attenuation, and lighting and telephone or communication
systems, conduit, wiring and outlets, shall be made and done in a good and
workmanlike manner and of good and sufficient quality and materials and shall
be the property of Lessor and remain upon and be surrendered with the
Premises at the expirations of the Lease term, unless Lessor requires their
removal pursuant to paragraph 7.3(a). Provided Lessee is not in default,
notwithstanding the provisions of this paragraph 7.3(e). Lessee's personal
property and equipment, other than that which is affixed to the Premises so
that it cannot be removed without material damage to the Premises or the
Building, and other than Utility installations, shall remain the property of
Lessee and may be removed by Lessee subject to the provisions of paragraph
7.2.

(f) Lessee shall provide Lessor with as-built plans and
specifications for any alterations, improvements, additions or Utility
Installations.

7.4 UTILITY ADDITIONS. Lessor reserves the right to install new or
additional utility facilities throughout the Office Building Project for the
benefit of Lessor or Lessee, or any other lessee of the Office Building
Project, including, but not by way of limitation, such utilities as plumbing,
electrical systems, communication systems, and fire protection and
detection systems, so long as such installations do not unreasonably
interfere with Lessee's use of the Premises.

8. INSURANCE: INDEMNITY.

8.1 LIABILITY INSURANCE-LESSEE. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease a policy of
Comprehensive General Liability insurance utilizing an Insurance Services
Office standard form with Broad Form General Liability Endorsement (GL0404),
or equivalent, in an amount of not less than $1,000,000 per occurrence of
bodily injury and property damage combined or in a greater amount as
reasonably determined by Lessor and shall insure Lessee with Lessor as an
additional insured against liability arising out of the use, occupancy or
maintenance of the Premises. Compliance with the above requirement shall not,
however, limit the liability of Lessee hereunder.

8.2 LIABILITY INSURANCE-LESSOR. Lessor shall obtain and keep in force
during the term of this Lease a policy of Combined Single Limit Bodily Injury
and Broad Form Property Damage Insurance, plus coverage against such other
risks Lessor deems advisable from time to time, insuring Lessor, but not
Lessee, against liability arising out of the ownership, use, occupancy or
maintenance of the Office Building Project in an amount not less than
$5,000,000.00 per occurrence.

8.3 PROPERTY INSURANCE-LESSEE. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease for the benefit of
Lessee, replacement cost fire and extended coverage insurance, with vandalism
and malicious mischief, sprinkler leakage and earthquake sprinkler leakage
endorsements, in an amount sufficient to cover not less than 100% of the full
replacement cost, as the same may exist from time to time, of all of Lessee's
personal property, fixtures, equipment and tenant improvements.

8.4 PROPERTY INSURANCE-LESSOR. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss
or damage to the Office Building Project improvements, but not Lessee's
personal property, fixtures, equipment or tenant improvements, in the amount
of the full replacement cost thereof, as the same may exist from time to
time, utilizing Insurance Services Office standard form, or equivalent,
providing protection against all perils included within the classification of
fire, extended coverage, vandalism, malicious mischief, plate glass, and such
other perils as Lessor deems advisable or may be required by a lender having
a lien on the Office Building Project. In addition, Lessor shall obtain and
keep in force, during the term of this Lease, a policy of rental value
insurance covering a period of one year, with loss payable to Lessor, which
insurance shall also cover all Operating Expenses for said period. Lessee
will not be named in any such policies carried by Lessor and shall have no
right to any proceeds therefrom. The policies required by these paragraphs
8.2 and 8.4 shall contain such deductibles as Lessor or the aforesaid lender
may determine. In the event that the Premises shall suffer an insured loss
as defined in paragraph 9.1(f) hereof, the deductible amounts under the
applicable insurance policies shall be deemed an Operating Expense. Lessee
shall not do or permit to be done anything which shall invalidate the
insurance policies carried by Lessor. Lessee shall pay the entirety of any
increase in the property insurance premium for the Office Building Project
over what it was immediately prior to the commencement of the term of this
Lease if the increase is specified by Lessor's insurance carrier as being
caused by the nature of Lessee's occupancy or any act or omission of Lessee.

8.5 INSURANCE POLICIES. Lessee shall deliver to Lessor copies of
liability insurance policies required under paragraph 8.1 or certificates
evidencing the existence and amounts of such insurance within seven (7) days
after the Commencement Date of this Lease. No such policy shall be
cancellable or subject to reduction of coverage or other modification except
after thirty (30) days prior written notice to Lessor. Lessee shall, at
least thirty (30) days prior to the expiration of such policies, furnish
Lessor with renewals thereof.

8.6 WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the
other, for direct or consequential loss or damage arising out of or incident
to the perils covered by property insurance carried by such party, whether
due to the negligence of Lessor of Lessee or their agents, employees,
contractors and/or invitees. If necessary all property insurance policies
required under this Lease shall be endorsed to so provide.

8.7 INDEMNITY. Lessee shall indemnify and hold harmless Lessor and its
agents. Lessor's master or ground lessor, partners and lenders, from and
against any and all claims for damage to the person or property of anyone or
any entity arising from Lessee's use of the Office Building Project, or from
the conduct of Lessee's business or from any activity, work or things done,
permitted of suffered by Lessee in or about the Premises or elsewhere and
shall further indemnify and hold harmless Lessor from and against any and all
claims, costs and expenses arising from any breach or default in the
performance of any obligation on Lessee's part to be performed under the
terms of this Lease, or arising from any act or omission of Lessee, or any of
Lessee's agents, contractors, employees, or invitees, and from and against
all costs, attorney's fees, expenses and liabilities incurred by Lessor as
the result of any such use, conduct, activity, work, things done, permitted
or suffered, breach, default or negligence, and in dealing reasonably
therewith, including but not limited to the defense or pursuit of any claim
or any action or proceeding involved therein; and in case any action or
proceeding be brought against Lessor by reason of any such matter, Lessee
upon notice from Lessor shall defend the same at Lessee's expense by counsel
reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in
such defense. Lessor need not have first paid any such claim in order to be
so indemnified. Lessee, as a material part of the consideration to Lessor,
hereby assumes all risk of damage to property of Lessee or injury to persons,
in, upon or about the Office Building Project arising from any cause and
Lessee hereby waives all claims in respect thereof against Lessor.

8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of
income therefrom or for loss of or damage to the goods, wares, merchandise or
other property of Lessee, Lessee's employees, invitees, customers, or any
other person in or about the Premises or the Office Building Project, nor
shall Lessor be liable for injury to the person of Lessee. Lessee's
employees, agents or contractors, whether such damage or injury is caused by
or results from theft, fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, obstruction or other defects of pipes, sprinklers,
wires, appliances, plumbing, air conditioning or lighting fixtures, or from
any other cause, whether said damage or injury results from conditions
arising upon the Premises or upon other portions of the Office Building
Project, or from other sources or places, of from new construction or the
repair, alteration or improvement of any part of the Office Building Project,
or of the equipment, fixtures or appurtenances applicable thereto, and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible. Lessor shall not be liable for any
damages arising from any act or neglect of any other lessee, occupant or user
of the Office Building Project, nor from the failure of Lessor to enforce the
provisions of any other lease of any other lessee of the Office Building
Project.

8.9 NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified in
this paragraph 8 are adequate to cover Lessee's property or obligations under
this Lease. Lessor's obligation to insure under this paragraph 8 may be
satisfied by blanket coverage of self-insurance.

9. DAMAGE OR DESTRUCTION.

9.1 DEFINITIONS.

(a) "Premises Damage" shall mean if the Premises are damaged or
destroyed to any extent.

(b) "Premises Building Partial Damage" shall mean if the Building
of which the Premises are a part is damaged or destroyed to the extent that
the cost to repair is less than fifty percent (50%) of the then Replacement
Cost of the building.

(c) "Premises Building Total Destruction" shall mean if the Building
of which the Premises are a part is damaged or destroyed to the extent that
the cost of repair is fifty percent (50%) or more of the then Replacement
Cost of the Building.

(d) "Office Building Project Buildings" shall mean all of the
buildings on the Office Building Project site.

(e) "Office Building Project Buildings Total Destruction" shall mean
if the Office Building Project Buildings are damaged or destroyed to the
extent that the cost of repair is fifty percent (50%) or more of the then
Replacement Cost of the Office Building Project Buildings.

(f) "Insured Loss" shall mean damage or destruction which was caused
by an event required to be covered by the insurance described in paragraph 8.
The fact that an Insured Loss has a deductible amount shall not make the
loss an uninsured loss.

(g) "Replacement Cost" shall mean the amount of money necessary to
be spent in order to repair or rebuild the damaged area to the condition that
existed immediately prior to the damage occurring, excluding all improvements
made by lessees, other than those installed by Lessor at Lessee's expense.

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9.2 PREMISES DAMAGE; PREMISES BUILDING PARTIAL DAMAGE.

(a) Insured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage which is an
insured Loss and which falls into the classification of either Premises
Damage or Premises Building Partial Damage, then Lessor shall, as soon as
reasonably possible and to the extent the required materials and labor are
readily available through usual commercial channels, at Lessor's expense,
repair such damage (but not Lessee's fixtures, equipment or tenant
improvements originally paid for by Lessee) to its condition existing at the
time of the damage, and this Lease shall continue in full force and effect.

(b) Uninsured Loss: Subject to the provisions of paragraphs 9.4
and 9.5, if at any time during the term of this Lease there is damage which
is not an Insured Loss and which falls within the classification of Premises
Damage or Premises Building Partial Damage, unless caused by a negligent or
willful act of Lessee (in which event Lessee shall make the repairs at
Lessee's expense), which damage prevents Lessee from making any substantial
use of the Premises, Lessor may at Lessor's option either (i) repair such
damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written
notice to Lessee within thirty (30) days after the date of the occurrence of
such damage of Lessor's intention to cancel and terminate this Lease as of
the date of the occurrence of such damage, in which event this Lease shall
terminate as of the date of the occurrence of such damage.

9.3 PREMISES BUILDING TOTAL DESTRUCTION: OFFICE BUILDING PROJECT TOTAL
DESTRUCTION. Subject to the provisions of paragraphs 9.4 and 9.5, if at any
time during the term of this Lease there is damage, whether or not it is an
Insured Loss, which falls into the classifications of either (i) Premises
Building Total Destruction, or (ii) Office Building Project Total
Destruction, then Lessor may at Lessor's option either (i) repair such damage
or destruction as soon as reasonably possible at Lessor's expense (to the
extent the required materials are readily available through usual commercial
channels) to its condition existing at the time of the damage, but not
Lessee's fixtures, equipment or tenant improvements, and this Lease shall
continue in full force and effect, or (ii) give written notice to Lessee
within thirty (30) days after the date of occurrence of such damage of
Lessor's intentions to cancel and terminate this Lease, in which case this
Lease shall terminate as of the date of the occurrence of such damage.

9.4 DAMAGE NEAR END OF TERM.

(a) Subject to paragraph 9.4(b), if at any time
during the last twelve (12) months of the term of this Lease
there is substantial damage to the Premises, Lessor may at
Lessor's option cancel and terminate this Lease as of the date of
occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within 30 days after the date of
occurrence of such damage.

(b) Notwithstanding paragraph 9.4(a), in the event that Lessee
has an option to extend or renew this Lease, and the time within which said
option may be exercised has not yet expired, Lessee shall exercise such
option, if it is to be exercised at all, no later than twenty (20) days after
the occurrence of an Insured Loss falling within the classification of
Premises Damage during the last twelve (12) months of the term of this Lease.
If Lessee duly exercises such option during said twenty (20) day period,
Lessor shall, at Lessor's expense, repair such damage, but not Lessee's
fixtures, equipment or tenant improvements, as soon as reasonably possible
and this Lease shall continue in full force and effect. If Lessee fails to
exercise such option during said twenty (20) day period, then Lessor may at
Lessor's option terminate and cancel this Lease as of the expiration of said
twenty (20) day period by giving written notice to Lessee of Lessor's
election to do so within ten (10) days after the expiration of said twenty
(20) day period, notwithstanding any term or provision in the grant of option
to the contrary.

9.5 ABATEMENT OF RENT; LESSEE'S REMEDIES.

(a) In the event Lessor repairs or restores the Building or
Premises pursuant to the provisions of this paragraph 9, and any part of the
Premises are not usable (including loss of use due to loss of access or
essential services), the rent payable hereunder (including Lessee's Share of
Operating Expense Increase) for the period during which such damage, repair
or restoration continues shall be abated, provided (1) the damage was not the
result of the negligence of Lessee, and (2) such abatement shall only be to
the extent the operation and profitability of Lessee's business as operated
from the Premises is adversely affected. Except for said abatement of rent,
if any, Lessee shall have no claim against Lessor for any damage suffered by
reason of any such damage, destruction, repair or restoration.

(b) If Lessor shall be obligated to repair or restore the
Premises or the Building under the provisions of this Paragraph 9 and shall
not commence such repair or restoration within ninety (90) days after such
occurrence, or if Lessor shall not complete the restoration and repair within
six (6) months after such occurrence, Lessee may at Lessee's option cancel
and terminate this Lease by giving Lessor written notice of Lessee's election
to do so at any time prior to the commencement or completion, respectively,
of such repair or restoration. In such event this Lease shall terminate as
of the date of such notice.

(c) Lessee agrees to cooperate with Lessor in connection with any
such restoration and repair, including but not limited to the approval and/or
execution of plans and specifications required.

9.6 TERMINATION--ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this paragraph 9, an equitable adjustment shall be made
concerning advance rent and any advance payments made by Lessee to Lessor,
Lessor shall, in addition return to Lessee so much of Lessee's security
deposit as has not theretofore been applied by Lessor.

9.7 WAIVER. Lessor and Lessee waive the provisions of any statute
which relate to termination of leases when leased property is destroyed and
agree that such event shall be governed by the terms of this Lease.

10. REAL PROPERTY TAXES.

10.1 PAYMENT OF TAXES. Lessor shall pay the real property tax, as
defined in paragraph 10.3, applicable to the Office Building Project subject
to reimbursement by Lessee of Lessee's Share of such taxes in accordance with
the provisions of paragraph 4.2, except as otherwise provided in paragraph
10.2.

10.2 ADDITIONAL IMPROVEMENTS. Lessee shall not be responsible for paying
any increase in real property tax specified in the tax assessor's records and
work sheets as being caused by additional improvements placed upon the Office
Building Project by other lessees or by Lessor for the exclusive enjoyment of
any other lessee. Lessee shall, however, pay to Lessor at the time that
Operating Expenses are payable under paragraph 4.2(c) the entirety of any
increase in real property tax if assessed solely by reason of additional
improvements placed upon the Premises by Lessee or at Lessee's request.

10.3 DEFINITION OF "REAL PROPERTY TAX." As used herein, the term "real
property tax" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed on the Office Building Project or
any portion thereof by any authority having the direct or indirect power to
tax, including any city, county, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage or other improvement district
thereof, as against any legal or equitable interest of Lessor in the Office
Building Project or in any portion thereof, as against Lessor's right to rent
or other income therefrom, and as against Lessor's business of leasing the
Office Building Project. The term "real property tax" shall also include any
tax, fee, levy, assessment or charge (i) in substitution of, partially or
totally, any tax, fee, levy, assessment or charge hereinabove included within
the definition of "real property tax," or (ii) the nature of which was
hereinbefore included within the definition of "real property tax," or (iii)
which is imposed for a service or right not charged prior to June 1, 1978,
or, if previously charged, has been increased since June 1, 1978, or (iv)
which is imposed as a result of a change in ownership, as defined by
applicable local statutes for property tax purposes, of the Office Building
Project or which is added to a tax or charge hereinbefore included within the
definition of real property tax by reason of such change of ownership, of (v)
which is imposed by reason of this transaction, any modifications of changes
hereto, or any transfers hereof.

10.4 JOINT ASSESSMENT. If the improvements or property, the taxes for
which are to be paid separately by Lessee under paragraph 10.2 or 10.5 are
not separately assessed, Lessee's portion of that tax shall be equitably
determined by Lessor from the respective valuations assigned in the
assessor's work sheets or such other information (which may include the cost
of construction) as may be reasonably available. Lessor's reasonable
determination thereof, in good faith, shall be conclusive.

10.5 PERSONAL PROPERTY TAXES.

(a) Lessee shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere.

(b) If any of Lessee's said personal property shall be assessed
with Lessor's real property, Lessee shall pay to Lessor the taxes
attributable to Lessee within ten (10) days after receipt of a written
statement setting forth the taxes applicable to Lessee's property.

11. UTILITIES.

11.1 SERVICES PROVIDED BY LESSOR. Lessor shall provide heating,
ventilation, air conditioning, and janitorial service as reasonably required,
reasonable amounts of electricity for normal lighting and office machines,
water for reasonable and normal drinking and lavatory use, and replacement
light bulbs and/or fluorescent tubes and ballasts for standard overheard
fixtures.

11.2 SERVICES EXCLUSIVE TO LESSEE. Lessee shall pay for all water, gas,
heat, light, power, telephone and other utilities and services specially or
exclusively supplied and/or metered exclusively to the Premises or to Lessee,
together with any taxes thereon, if any such services are not separately
metered to the Premises. Lessee shall pay at Lessor's option, either
Lessee's Share or a reasonable proportion to be determined by Lessor of all
charges jointly metered with other premises in the Building.

11.3 HOURS OF SERVICE. Said services and utilities shall be provided
during generally accepted business days and hours or such other days or hours
as may hereafter be set forth. Utilities and services required at other times
shall be subject to advance request and reimbursement by Lessee to Lessor of
the cost thereof.

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11.4 EXCESS USAGE BY LESSEE. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water,
lighting or power, or suffer or permit any act that causes extra burden upon
the utilities or services, including but not limited to security services,
over standard office usage for the Office Building Project. Lessor shall
require Lessee to reimburse Lessor for any excess expenses or costs that may
arise out of a breach of this subparagraph by Lessee. Lessor may, in its
sole discretion, install at Lessee's expense supplemental equipment and/or
separate metering applicable to Lessee's excess usage or loading.

11.5 INTERRUPTIONS. There shall be no abatement of rent and Lessor shall
not be liable in any respect whatsoever for the inadequacy, stoppage,
interruption or discontinuance of any utility or service due to riot, strike,
labor dispute, breakdown, accident, repair or other cause beyond Lessor's
reasonable control or in cooperation with governmental request or directions.

12. ASSIGNMENT AND SUBLETTING.

12.1 LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a material
default and breach of this Lease without the need for notice to Lessee under
paragraph 13.1. "Transfer" within the meaning of this paragraph 12 shall
include the transfer or transfers aggregating: (a) if Lessee is a corporation,
more than twenty-five percent (25%) of the voting stock of such corporation, or
(b) if Lessee is a partnership, more than twenty-five percent (25%) of the
profit and loss participation in such partnership.

12.2 LESSEE AFFILIATE. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by
or is under common control with Lessee, or to any corporation resulting from
the merger or consolidation with Lessee, or to any person or entity which
acquires all the assets of Lessee as a going concern of the business that is
being conducted on the Premises, all of which are referred to as "Lessee
Affiliate"; provided that before such assignment shall be effective, (a) said
assignee shall assume, in full, the obligations of Lessee under this Lease
and (b) Lessor shall be given written notice of such assignment and
assumption. Any such assignment shall not, in any way, affect or limit the
liability of Lessee under the terms of this Lease even if after such
assignment or subletting the terms of this Lease are materially changed or
altered without the consent of Lessee, the consent of whom shall not be
necessary.

12.3 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.

(a) Regardless of Lessor's consent, no assignment or subletting shall
release Lessee of Lessee's obligations hereunder or alter the primary liability
of Lessee to pay the rent and other sums due Lessor hereunder including Lessee's
Share of Operating Expense Increase, and to perform all other obligations to be
performed by Lessee hereunder.

(b) Lessor may accept rent from any person other than Lessee pending
approval or disapproval of such assignment.

(c) Neither a delay in the approval or disapproval of such assignment
or subletting, nor the acceptance of rent, shall constitute a waiver or estoppel
of Lessor's right to exercise its remedies for the breach of any of the terms or
conditions of this paragraph 12 or this Lease.

(d) If Lessee's obligations under this Lease have been guaranteed by
third parties, then an assignment or sublease, and Lessor's consent thereto,
shall not be effective unless said guarantors give their written consent to such
sublease and the terms thereof.

(e) The consent by Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the Sublessee.
However, Lessor may consent to subsequent sublettings and assignments of the
sublease or any amendments or modifications thereto without notifying Lessee or
anyone else liable on the Lease or sublease and without obtaining their consent
and such action shall not relieve such persons from liability under this Lease
or said sublease; however, such persons shall not be responsible to the extent
any such amendment or modification enlarges or increases the obligations of the
Lessee or sublessee under this Lease or such sublease.

(f) In the event of any default under this Lease, Lessor may proceed
directly against Lessee, any guarantors or any one else responsible for the
performance of this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.

(g) Lessor's written consent to any assignment or subletting of the
Premises by Lessee shall not constitute an acknowledgment that no default then
exists under this Lease of the obligations to be performed by Lessee nor shall
such consent be deemed a waiver of any then existing default, except as may be
otherwise stated by Lessor at the time.

(h) The discovery of the fact that any financial statement relied upon
by Lessor in giving its consent to an assignment or subletting was materially
false shall, at Lessor's election, render Lessor's said consent null and void.

12.4 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. Regardless
of Lessor's consent, the following terms and conditions shall apply to any
subletting by Lessee of all or any part of the Premises and shall be deemed
included in all subleases under this Lease whether or not expressly incorporated
therein:

(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease heretofore or
hereafter made by Lessee, and Lessor may collect such rent and income and
apply same toward Lessee's obligations under this Lease; provided, however,
that until a default shall occur in the performance of Lessee's obligations
under this Lease, Lessee may receive, collect and enjoy the rents accruing
under such sublease. Lessor shall not, by reason of this or any other
assignment of such sublease to Lessor nor by reason of the collection of the
rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such
sublessee under such sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor
stating that a default exists in the performance of Lessee's obligations
under this Lease, to pay to Lessor the rents due and to become due under the
sublease. Lessee agrees that such sublessee shall have the right to rely
upon any such statement and request from Lessor, and that such sublessee
shall pay such rents to Lessor without any obligation or right to inquire as
to whether such default exists and notwithstanding any notice from or claim
from Lessee to the contrary. Lessee shall have no right or claim against
said sublessee or Lessor for any such rents so paid by said sublessee to
Lessor.

(b) No sublease entered into by Lessee shall be effective unless and
until it has been approved in writing by Lessor. In entering into any
sublease, Lessee shall use only such form of sublessee as is satisfactory to
Lessor, and once approved by Lessor, such sublease shall not be changed or
modified without Lessor's prior written consent. Any sublease shall, by
reason of entering into a sublease under this Lease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every obligation herein to be performed by Lessee other than such
obligations as are contrary to or inconsistent with provisions contained in a
sublease to which Lessor has expressly consented in writing.

(c) In the event Lessee shall default in the performance of its
obligations under this Lease, Lessor at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event
Lessor shall undertake the obligations of Lessee under such sublease from the
time of the exercise of said option to the termination of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or
security deposit paid by such sublessee to Lessee or for any other prior
defaults of Lessee under such sublease.

(d) No sublessee shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.

(e) With respect to any subletting to which Lessor has consented,
Lessor agrees to deliver a copy of any notice of default by Lessee to the
sublessee. Such sublessee shall have the right to cure a default of Lessee
within three (3) days after service of said notice of default upon such
sublessee, and the sublessee shall have a right of reimbursement and offset
from and against Lessee for any such defaults cured by the sublessee.

12.5 LESSOR'S EXPENSES. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or
if Lessee shall request the consent of Lessor for any act Lessee proposes to
do then Lessee shall pay Lessor's reasonable costs and expenses incurred in
connection therewith, including attorneys', architects', engineers' or other
consultants' fees.

12.6 CONDITIONS TO CONSENT. Lessor reserves the right to condition any
approval to assign or sublet upon Lessor's determination that (a) the
proposed assignee or sublessee shall conduct a business on the Premises of a
quality substantially equal to that of Lessee and consistent with the general
character of the other occupants of the Office Building Project and not in
violation of any exclusives or rights then held by other tenants, and (b) the
proposed assignee or sublessee be at least as financially responsible as
Lessee was expected to be at the time of the execution of this Lease or of
such assignment or subletting, whichever is greater.

13. DEFAULT; REMEDIES.

13.1 DEFAULT. The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Lessee:

(a) The vacation or abandonment of the Premises by Lessee. Vacation
of the Premises shall include the failure to occupy the Premises for a
continuous period of thirty (30) days or more, whether or not the rent is
paid.

(b) The breach by Lessee of any of the covenants, conditions or
provisions of paragraphs 7.3(a), (b) or (d) (alterations), 12.1 (assignment or
subletting), 13.1(a) (vacation or abandonment), 13.1(e) (insolvency), 13.1(f)
(false statement), 16(a) (estoppel certificate), 30(b) (subordination), 33
(auctions), or 41.1 (easements), all of which are hereby deemed to be material,
non-curable defaults without the necessity of any notice by Lessor to Lessee
thereof.

(c) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of three (3) days thereof from Lessor to
Lessee. In the event that Lessor serves Lessee with a Notice to Pay Rent or
Quit pursuant to applicable Unlawful Detainer statutes such Notice to Pay
Rent or Quit shall also constitute the notice required by this subparagraph.

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(d) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Lessee
other than those referenced in subparagraphs (b) and (c), above, where such
failure shall continue for a period of thirty (30) days after written notice
thereof from Lessor to Lessee; provided, however, that if the nature of Lessee's
noncompliance is such that more than thirty (30) days are reasonably required
for its cure, then Lessee shall not be deemed to be in default if Lessee
commenced such cure within said thirty (30) day period and thereafter diligently
pursues such cure to completion. To the extent permitted by law, such thirty
(30) day notice shall constitute the sole and exclusive notice required to be
given to Lessee under applicable Unlawful Detainer statutes.

(e) (i) The making by Lessee of any general arrangement or general
assignment for the benefit of creditors; (ii) Lessee becoming a "debtor" as
defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in
the case of a petition filed against Lessee, the same is dismissed within
sixty (60) days; (iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at the Premises or
of Lessee's interest in this Lease, where possession is not restored to
Lessee within thirty (30) days; or (iv) the attachment, execution or other
judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not
discharged within thirty (30) days. In the event that any provision of this
paragraph 13.1(e) is contrary to any applicable law, such provision shall be
of no force or effect.

(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee, or its successor in interest or by any guarantor of Lessee's
obligation hereunder, was materially false.

13.2 REMEDIES. In the event of any material default or breach of this
Lease by Lessee, Lessor may at any time thereafter, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such default:

(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate
and Lessee shall immediately surrender possession of the Premises to Lessor.
In such event Lessor shall be entitled to recover from Lessee all damages
incurred by Lessor by reason of Lessee's default including, but not limited
to, the cost of recovering possession of the Premises; expenses of reletting,
including necessary renovation and alteration of the Premises, reasonable
attorneys' fees, and any real estate commission actually paid; the worth at
the time of award by the court having jurisdiction thereof of the amount by
which the unpaid rent for the balance of the term after the time of such
award exceeds the amount of such rental loss for the same period that Lessee
proves could be reasonably avoided; that portion of the leasing commission
paid by Lessor pursuant to paragraph 15 applicable to the unexpired term of
this Lease.

(b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have vacated or
abandoned the Premises. In such event Lessor shall be entitled to enforce
all of Lessor's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder.

(c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the state wherein the Premises are located.
Unpaid installments of rent and other unpaid monetary obligations of Lessee
under the terms of this Lease shall bear interest from the date due at the
maximum rate then allowable by law.

13.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but in
no event later than thirty (30) days after written notice by Lessee to Lessor
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Lessee in
writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such 30-day period and thereafter
diligently pursues the same to completion.

13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee
to Lessor of Base Rent, Lessee's Share of Operating Expense Increase or other
sums due hereunder will cause Lessor to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain. Such
costs include, but are not limited to, processing and accounting charges, and
late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the Office Building Project. Accordingly, if any
installment of Base Rent, Operating Expense Increase, or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten (10) days
after such amount shall be due, then, without any requirement for notice to
Lessee, Lessee shall pay to Lessor a late charge equal to 6% of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's default with respect to such overdue amount, nor prevent
Lessor from exercising any of the other rights and remedies granted hereunder.

14. CONDEMNATION. If the Premises or any portion thereof or the Office
Building Project are taken under the power of eminent domain, or sold under
the threat of the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes title or possession, whichever first
occurs; provided that if so much of the Premises or the Office Building
Project are taken by such condemnation as would substantially and adversely
affect the operation and profitability of Lessee's business conducted from
the Premises. Lessee shall have the option, to be exercised only in writing
within thirty (30) days after Lessor shall have given Lessee written notice
of such taking (or in the absence of such notice, within thirty (30) days
after the condemning authority shall have taken possession), to terminate
this Lease as of the date the condemning authority takes such possession. If
Lessee does not terminate this Lease in accordance with the foregoing, this
Lease shall remain in full force and effect as to the portion of the Premises
remaining, except that the rent and Lessee's Share of Operating Expense
Increase shall be reduced in the proportion that the floor area of the
Premises taken bears to the total floor area of the Premises. Common Areas
taken shall be excluded from the Common Areas usable by Lessee and no
reduction of rent shall occur with respect thereto or by reason thereof.
Lessor shall have the option in its sole discretion to terminate this Lease
as of the taking of possession by the condemning authority, by giving written
notice to Lessee of such election within thirty (30) days after receipt of
notice of a taking by condemnation of any part of the Premises or the Office
Building Project. Any award for the taking of all or any part of the
Premises or the Office Building Project under the power of eminent domain or
any payment made under threat of the exercise of such power shall be the
property of Lessor, whether such award shall be made as compensation for
diminution in value of the leasehold or for the taking of the fee, or as
severance damages; provided, however, that Lessee shall be entitled to any
separate award for loss of or damage to Lessee's trade fixtures, removable
personal property and unamortized tenant improvements that have been paid for
by Lessee. For that purpose the cost of such improvements shall be amortized
over the original term of this Lease excluding any options. In the event
that this Lease is not terminated by reason of such condemnation, Lessor
shall to the extent of severance damages received by Lessor in connection
with such condemnation, repair any damage to the Premises caused by such
condemnation except to the extent that Lessee has been reimbursed therefor by
the condemning authority. Lessee shall pay any amount in excess of such
severance damages required to complete such repair.

15. BROKER'S FEE

(a) The brokers involved in this transaction are RING BROTHERS MANAGEMENT
DBA: SOVEREIGN/RING as "listing broker" and SAME as "cooperating broker,"
licensed real estate broker(s). A "cooperating broker" is defined as any broker
other than the listing broker entitled to a share of any commission arising
under this Lease. Upon execution of this Lease by both parties, Lessor shall
pay to said brokers jointly, or in such separate shares as they may mutually
designate in writing, a fee as set forth in a separate agreement between Lessor
and said broker(s), or in the event there is no separate agreement between
Lessor and said broker(s), the sum of $500.00 for brokerage services rendered by
said broker(s) to Lessor in this transaction.

(c) Lessor agrees to pay said fee not only on behalf of Lessor but also on
behalf of any person, corporation, association, or other entity having an
ownership interest in said real property or any part thereof, when such fee is
due hereunder. Any transferee of Lessor's interest in this Lease, whether such
transfer is by agreement or by operation of law, shall be deemed to have assumed
Lessor's obligation under this paragraph 15. Each listing and cooperating
broker shall be a third party beneficiary of the provisions of this paragraph 15
to the extent of their interest in any commission arising under this Lease and
may enforce that right directly against Lessor; provided, however, that all
brokers having a right to any part of such total commission shall be a necessary
party to any suit with respect thereto.

(d) Lessee and Lessor each represent and warrant to the other that neither
has had any dealings with any person, firm, broker or finder (other than the
person(s), if any, whose names are set forth in paragraph 15(a), above) in
connection with the negotiation of this Lease and/or the consummation of the
transaction contemplated hereby, and no other broker or other person, firm or
entity is entitled to any commission or finder's fee in connection with said
transaction and Lessee and Lessor do each hereby indemnify and hold the other
harmless from and against any costs, expenses, attorneys' fees or liability for
compensation or charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of the indemnifying
party.

16. ESTOPPEL CERTIFICATE.

(a) Each party (as "responding party") shall at any time upon not less than
ten (10) days' prior written notice from the other party ("requesting party")
execute, acknowledge and deliver to the requesting party a statement in writing
(i) certifying that this Lease is unmodified and in full force and effect (or,
if modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date

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to which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party or specifying such defaults
if any are claimed. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Office Building Project or of the
business of Lessee.

(b) At the requesting party's option, the failure to deliver such statement
within such time shall be a material default of this Lease by the party who is
to respond, without any further notice to such party, or it shall be conclusive
upon such party that (i) this Lease is in full force and effect, without
modification except as may be represented by the requesting party, (ii) there
are no uncured defaults in the requesting party's performance, and (iii) if
Lessor is the requesting party, not more than one month's rent has been paid in
advance.

(c) If Lessor desires to finance, refinance, or sell the Office Building
Project, or any part thereof, Lessee hereby agrees to deliver to any lender
or purchaser designated by Lessor such financial statements of Lessee as may
be reasonably required by such lender or purchaser. Such statements shall
include the past three (3) years financial statements of Lessee. All such
financial statements shall be received by Lessor and such lender or purchaser
in confidence and shall be used only for the purposes herein set forth.

17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only
the owner or owners, at the time in question, of the fee title or a lessee's
interest in a ground lease of the Office Building Project, and except as
expressly provided in paragraph 15, in the event of any transfer of such
title or interest. Lessor herein named (and in case of any subsequent
transfers then the grantor) shall be relieved from and after the date of such
transfer of all liability as respects Lessor's obligations thereafter to be
performed, provided that any funds in the hands of Lessor or the then grantor
at the time of such transfer, in which Lessee has an interest, shall be
delivered to the grantee. The obligations contained in this Lease to be
performed by Lessor shall, subject as aforesaid, be binding on Lessor's
successors and assigns, only during their respective periods of ownership.

18. SEVERABILITY. The invalidity of any provision of this Lease as determined
by a court of competent jurisdiction shall in no way affect the validity of any
other provision hereof.

19. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law or judgments from the date due. Payment of such interest
shall not excuse or cure any default by Lessee under this Lease; provided,
however, that interest shall not be payable on late charges incurred by Lessee
nor on any amounts upon which late charges are paid by Lessee.

20. TIME OF ESSENCE. Time is of the essence with respect to the obligations to
be performed under this Lease.

21. ADDITIONAL RENT. All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited to Lessee's Share of Operating
Expense increase and any other expenses payable by Lessee hereunder shall be
deemed to be rent.

22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
or contemporaneous agreement or understanding pertaining to any such matter
shall be effective. This Lease may be modified in writing only, signed by the
parties in interest at the time of the modification. Except as otherwise stated
in this Lease, Lessee hereby acknowledges that neither the real estate broker
listed in paragraph 15 hereof nor any cooperating broker on this transaction nor
the Lessor or any employee or agents of any of said persons has made any oral or
written warranties or representations to Lessee relative to the condition or use
by Lessee of the Premises or the Office Building Project and Lessee acknowledges
that Lessee assumes all responsibility regarding the Occupational Safety Health
Act, the legal use and adaptability of the Premises and the compliance thereof
with all applicable laws and regulations in effect during the term of this
Lease.

23. NOTICES. Any notice required or permitted to be given hereunder shall be
in writing and may be given by personal delivery or by certified or registered
mail, and shall be deemed sufficiently given if delivered or addressed to Lessee
or to Lessor at the address noted below or adjacent to the signature of the
respective parties, as the case may be. Mailed notices shall be deemed given
upon actual receipt at the address required, or forty-eight hours following
deposit in the mail, postage prepaid, whichever first occurs. Either party may
by notice to the other specify a different address for notice purposes except
that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time to time
hereafter designate by notice to Lessee.

24. WAIVERS. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder
by Lessor shall not be a waiver of any preceding breach by Lessee of any
provision hereof, other than the failure of Lessee to pay the particular rent so
accepted, regardless of Lessor's knowledge of such preceding breach at the time
of acceptance of such rent.

25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.

26. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, except that the rent payable
shall be two hundred percent (200%) of the rent payable immediately preceding
the termination date of this Lease, and all Options, if any, granted under the
terms of this Lease shall be deemed terminated and be of no further effect
during said month to month tenancy.

27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.

28. COVENANTS AND CONDITIONS. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.

29. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions of
paragraph 17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
where the Office Building Project is located and any litigation concerning this
Lease between the parties hereto shall be initiated in the county in which the
Office Building Project is located.

30. SUBORDINATION.

(a) This Lease, and any Option or right of first refusal granted hereby, at
Lessor's option, shall be subordinate to any ground lease, mortgage, deed of
trust, or any other hypothecation or security now or hereafter placed upon the
Office Building Project and to any and all advances made on the security thereof
and to all renewals, modifications, consolidations, replacements and extensions
thereof. Notwithstanding such subordination, Lessee's right to quiet
possession of the Premises shall not be disturbed if Lessee is not in default
and so long as Lessee shall pay the rent and observe and perform all of the
provisions of this Lease, unless this Lease is otherwise terminated pursuant to
its terms. If any mortgagee, trustee or ground lessor shall elect to have this
Lease and any Options granted hereby prior to the lien of its mortgage, deed of
trust or ground lease, and shall give written notice thereof to Lessee, this
Lease and such Options shall be deemed prior to such mortgage, deed of trust or
ground lease, whether this Lease or such Options are dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.

(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination, or to make this Lease or any Option granted herein
prior to the lien of any mortgage, deed of trust or ground lease, as the case
may be. Lessee's failure to execute such documents within ten (10) days after
written demand shall constitute a material default by Lessee hereunder without
further notice to Lessee or, at Lessor's option, Lessor shall execute such
documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee does hereby
make, constitute and irrevocably appoint Lessor as Lessee's attorney-in-fact and
in Lessee's name, place and stead, to execute such documents in accordance with
this paragraph 30(b).

31. ATTORNEYS' FEES.

31.1 If either party or the broker(s) named herein bring an action to
enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, trial or appeal thereon, shall be entitled to his reasonable
attorneys' fees to be paid by the losing party as fixed by the court in the same
or a separate suit, and whether or not such action is pursued to decision or
judgment. The provisions of this paragraph shall inure to the benefit of the
broker named herein who seeks to enforce a right hereunder.

31.2 The attorneys' fee award shall not be computed in accordance with
any court fee schedule, but shall be such as to fully reimburse all attorneys'
fees reasonably incurred in good faith.

31.3 Lessor shall be entitled to reasonable attorneys' fees and all other
costs and expenses incurred in the preparation and service of notice of default
and consultations in connection therewith, whether or not a legal transaction is
subsequently commenced in connection with such default.

32. LESSOR'S ACCESS.

32.1 Lessor and Lessor's agents shall have the right to enter the Premises
at reasonable times for the purpose of inspecting the same, performing any
services required of Lessor, showing the same to prospective purchasers,
lenders, or lessees, taking such safety measures, erecting such scaffolding or
other necessary structures, making such alterations, repairs, improvements or
additions to the Premises or to the Office Building Project as Lessor may
reasonably deem necessary or desirable and the erecting, using and maintaining
of utilities, services, pipes and conduits through the Premises and/or other
premises as long as there is no material adverse effect to Lessee's use of the
Premises. Lessor may at any time place on or about the Premises or the Building
any ordinary "For Sale" signs and Lessor may at any time during the last 120
days of the term hereof place on or about the Premises any ordinary "For Lease"
signs.

32.2 All activities of Lessor pursuant to this paragraph shall be without
abatement of rent, nor shall Lessor have any liability to Lessee for the same.

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32.3 Lessor shall have the right to retain keys to the Premises and to
unlock all doors in or upon the Premises other than to files, vaults and safes,
and in the case of emergency to enter the Premises by any reasonably appropriate
means, and any such entry shall not be deemed a forceable or unlawful entry or
detainer of the Premises or an eviction. Lessee waives any charges for damages
or injuries or interference with Lessee's property or business in connection
therewith.

33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common
Areas without first having obtained Lessor's prior written consent.
Notwithstanding anything to the contrary in this Lease, Lessor shall not be
obligated to exercise any standard of reasonableness in determining whether
to grant such consent. The holding of any auction on the Premises or Common
Areas in violation of this paragraph shall constitute a material default of
this Lease.

34. SIGNS. Lessee shall not place any sign upon the Premises or the Office
Building Project without Lessor's prior written consent. Under no circumstances
shall Lessee place a sign on any roof of the Office Building Project.

35. MERGER. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to
Lessor of any or all of such subtenancies.

36. CONSENTS. Except for paragraphs 33 (auctions) and 34 (signs) hereof,
wherever in this Lease the consent of one party is required to an act of the
other party such consent shall not be unreasonably withheld or delayed.

37. GUARANTOR. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.

38. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and observing
and performing all of the covenants, conditions and provisions on Lessee's part
to be observed and performed hereunder, Lessee shall have quiet possession of
the Premises for the entire term hereof subject to all of the provisions of this
Lease. The individuals executing this Lease on behalf of Lessor represent and
warrant to Lessee that they are fully authorized and legally capable of
executing this Lease on behalf of Lessor and that such execution is binding upon
all parties holding an ownership interest in the Office Building Project.

39. OPTIONS.

39.1 DEFINITION. As used in this paragraph the word "Option" has the
following meaning: (1) the right or option to extend the term of this Lease
or to renew this Lease or to extend or renew any lease that Lessee has on
other property of Lessor; (2) the option of right of first refusal to lease
the Premises or the right of first offer to lease the Premises or the right
of first refusal to lease other space within the Office Building Project or
other property of Lessor or the right of first offer to lease other space
within the Office Building Project or other property of Lessor; (3)the right
or option to purchase the Premises or the Office Building Project, or the
right of first refusal to purchase the Premises or the Office Building
Project or the right of first offer to purchase the Premises or the Office
Building Project, or the right or option to purchase other property of
Lessor, or the right of first refusal to purchase other property of Lessor or
the right of first offer to purchase other property of Lessor.

39.2 OPTIONS PERSONAL. Each Option granted to Lessee in this Lease is
personal to the original Lessee and may be exercised only by the original
Lessee while occupying the Premises who does so without the intent of
thereafter assigning this Lease or subletting the Premises or any portion
thereof, and may not be exercised or be assigned, voluntarily or
involuntarily, by or to any person or entity other than Lessee; provided,
however, that an Option may be exercised by or assigned to any Lessee
Affiliate as defined in paragraph 12.2 of this Lease. The Options, if any,
herein granted to Lessee are not assignable separate and apart from this
Lease, nor may any Option be separated from this Lease in any manner, either
by reservation or otherwise.

39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple options to
extend or renew this Lease a later option cannot be exercised unless the prior
option to extend or renew this Lease has been so exercised.

39.4 EFFECT OF DEFAULT ON OPTIONS.

(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i)
during the time commencing from the date Lessor gives to Lessee a notice of
default pursuant to paragraph 13.1(c) or 13.1(d) and continuing until the
noncompliance alleged in said notice of default is cured, or (ii) during the
period of time commencing on the day after a monetary obligation to Lessor is
due from Lessee and unpaid (without any necessity for notice thereof to
Lessee) and continuing until the obligation is paid, or (iii) in the event
that Lessor has given to Lessee three or more notices of default under
paragraph 13.1(c), or paragraph 13.1(d), whether or not the defaults are
cured, during the 12 month period of time immediately prior to the time that
Lessee attempts to exercise the subject Option, (iv) if Lessee has committed
any non-curable breach, including without limitation those described in
paragraph 13.1(b), or is otherwise in default of any of the terms, covenants
or conditions of this Lease.

(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of paragraph 39.4(a).

(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due
and timely exercise of the Option, if, after such exercise and during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation
of Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessee fails to commence to cure a default specified in paragraph 13.1(d)
within (30) days after the date that Lessor gives notice to Lessee of such
default and/or Lessee fails thereafter to diligently prosecute said cure to
completion, or (iii) Lessor gives to Lessee three or more notices of default
under paragraph 13.1(c), or paragraph 13.1(d), whether or not the defaults
are cured, or (iv) if Lessee has committed any non-curable breach, including
without limitation those described in paragraph 13.1(b), or is otherwise in
default of any of the terms, covenants and conditions of this Lease.

40. SECURITY MEASURES--LESSOR'S RESERVATIONS.

40.1 Lessee hereby acknowledges that Lessor shall have no obligation
whatsoever to provide guard service or other security measures for the benefit
of the Premises or the Office Building Project. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and the
property of Lessee and of Lessee's agents and invitees from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole option,
from providing security protection for the Office Building Project or any part
thereof, in which event the cost thereof shall be included within the definition
of Operating Expenses, as set forth in paragraph 4.2(b).

40.2 Lessor shall have the following rights:

(a) To change the name, address or title of the Office Building
Project or building in which the Premises are located upon not less than 90 days
prior written notice;

(b) To, at Lessee's expense, provide and install Building standard
graphics on the door of the Premises and such portions of the Common Areas as
Lessor shall reasonably deem appropriate;

(c) To permit any lessee the exclusive right to conduct any business
as long as such exclusive does not conflict with any rights expressly given
herein;

(d) To place such signs, notices or displays as Lessor reasonably
deems necessary or advisable upon the roof, exterior of the buildings or the
Office Building Project or on pole signs in the Common Areas;

40.3 Lessee shall not:

(a) Use a representation (photographic or otherwise) of the Building
or the Office Building Project or their name(s) in connection with Lessee's
business;

(b) Suffer or permit anyone, except in emergency, to go upon the roof
of the Building.

41. EASEMENTS.

41.1 Lessor reserves to itself the right, from time to time, to grant such
easements, rights and dedications that Lessor deems necessary or desirable, and
to cause the recordation of Parcel Maps and restrictions, so long as such
easements, rights, dedications, Maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material default of this Lease by Lessee without the need for
further notice to Lessee.

41.2 The obstruction of Lessee's view, air, or light by any structure
erected in the vicinity of the Building, whether by Lessor or third parties,
shall in no way affect this Lease or impose any liability upon Lessor.

42.2 PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the provisions
hereof, the party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment, and there shall survive the right on the part
of said party to institute suit for recovery of such sum. If it shall be
adjudged that there was no legal obligation on the part of said party to pay
such sum or any part thereof, said party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay under the provisions of
this Lease.

Initials: AGS
---
SS
---
FULL SERVICE-GROSS

PAGE 9 OF 10 PAGES

<PAGE>

43. AUTHORITY. If Lessee is a corporation, trust or general or limited
partnership, Lessee and each individual executing this Lease on behalf of such
entity represent and warrant that such individual is duly authorized to execute
and deliver this Lease on behalf of said entity if Lessee is a corporation,
trust or partnership. Lessee shall, within thirty (30) days after execution of
this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.

44. CONFLICT. Any conflict between the printed provisions, Exhibits or Addenda
of this Lease and the typewritten or handwritten provisions, if any, shall be
controlled by the typewritten or handwritten provisions.

45. NO OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to lease.
This Lease shall become binding upon Lessor and Lessee only when fully executed
by both parties.

46. LENDER MODIFICATION. Lessee agrees to make such reasonable modifications to
this Lease as may be reasonably required by an institutional lender in
connection with the obtaining of normal financing or refinancing of the Office
Building Project.

47. MULTIPLE PARTIES. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee,
respectively.

48. WORK LETTER. This Lease is supplemented by that certain Work Letter of even
date executed by Lessor and Lessee, attached hereto as Exhibit C and
incorporated herein by this reference.

49. ATTACHMENTS. Attached hereto are the following documents which constitute a
part of this Lease.

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION
RELATING THERETO; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF
THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE.

LESSOR TESH PARTNERS, L.P. LESSEE SCHEID VINEYARDS &
MANAGEMENT COMPANY

/s/ Scott D. Scheid /s/ Alfred G. Scheid
- -------------------------------------- -----------------------------------

By Scott Scheid By Alfred G. Scheid
------------------------------------ --------------------------------
Its PARTNER Its Pres.
------------------------ ---------------------

By By
------------------------------------ ---------------------------------
Its Its
------------------------- ----------------------

Executed at Executed at
---------------------------- ------------------------

on on
------------------------------------ ---------------------------------

Address Address
------------------------------- ---------------------------

FULL SERVICE-GROSS

PAGE 10 OF 10 PAGES

<PAGE>

COLLECTIVE BARGAINING AGREEMENT

BETWEEN

SCHEID VINEYARDS AND MANAGEMENT CO.

AND

UNITED FARM WORKERS OF AMERICA, AFL-CIO

January 1, 1996 - December 31, 1997

<PAGE>

PREAMBLE

This Collective Bargaining Agreement (hereinafter called the "Agreement")
is between SCHEID VINEYARDS AND MANAGEMENT CO. (hereinafter called the
"Company"), and THE UNITED FARM WORKERS OF AMERICA, AFL-CIO (hereinafter called
the "Union"), and said Collective Bargaining Agreement shall operate for the
purpose of establishing uniform wages, hours, and working conditions as
hereinafter defined.
The parties agree as follows:

ARTICLE 1

RECOGNITION
A. The Company recognizes the rights and obligations of the Union as the
sole and exclusive bargaining agent to negotiate wages, hours and conditions of
employment, and to administer this Agreement on behalf of covered workers. The
term "worker" shall mean persons performing agricultural labor in the vineyards
or in support of such labor, but not include family members of management,
interns, security guards, management trainees, clerical, sales or supervisory
workers who have the authority to hire, transfer, suspend, layoff, recall,
promote, discharge, assign, reward or discipline other workers or the
responsibility to independently direct them without discretion or adjust their
grievances or effectively recommend such action, if, in connection with the
foregoing, the exercise of such authority is not of a merely routine manner or
clerical in nature, but requires the use of independent

<PAGE>

judgment.

B. Both the Company and the Union will make known to the workers the
obligations of the parties set forth in this Agreement, and in addition, the
Company shall so inform its supervisors.

C. Neither the Company nor any of its representatives will take any
action to disparage, denigrate or subvert the Union. Neither the Union nor any
of its representatives will take any action to disparage, denigrate or subvert
the Company.

D. The Union and the Company agree with the objective of a fair day's
work for a fair day's pay. The Union and the Company further agree with the
objective of a safe, productive and incentive based work environment. In
accordance with these objectives, the workers recognize their obligations in
carrying out their job responsibilities and assignments.

E. The United Farm Workers Union was certified to represent all
agricultural workers of the Company in the State of California by the
Agricultural Labor Relations Board on April 30, 1992 in Case Number 92-RC-1-SAL.

<PAGE>

ARTICLE 2

UNION SECURITY

A. Union membership shall be a condition of employment. Each worker
shall be required to become a member of the Union immediately following ten (10)
continual days of work after the beginning of employment or ten (10) days from
the effective date of this Agreement, whichever is later and to remain a member
of the Union. The Company will advise new workers that it is a condition of
their employment that they must become a member of the Union immediately
following ten (10) continual days of work after the beginning of their
employment. The Union agrees to admit new workers into the Union.

B. Any worker who fails to become a Union member within the time limit
set forth herein or who fails to pay the required initiation fee and periodic
dues shall be immediately discharged or suspended within five (5) work days
after written notice from the Union to the Company.

C. The Union will be responsible for obtaining the membership
applications and dues check-off authorization forms not later than thirty (30)
continual days of work following the beginning of a new worker's employment.

<PAGE>

D. The Union will notify the Company in writing of the amounts of
deduction within thirty (30) days of the execution of this Agreement and thirty
(30) days before the effective date of any changes.

E. The Company agrees to deduct from each worker's pay, the Union's
normal initiation fee and all periodic dues as required by the Union. The
Company shall make such deductions upon presentation by the Union of individual
authorizations, signed by the worker, directing the Company to make such
deductions. The Company shall make such deductions from the worker's pay for
that payroll period in which it is submitted, provided that it is submitted
seven (7) days in advance of the close of the pay period and periodically
thereafter, as specified on the authorization so long as such authorization is
in effect. The Union shall provide the forms for all dues and initiation fees.

F. Withheld deductions are to be sent to the Union within three (3) days
after the payroll checks are distributed to the workers. Dues reports shall be
provided by the Company to the Union in accordance with procedures to be agreed
upon by the parties.

G. The Union shall indemnify and hold the Company harmless from and
against any and all claims, demands, suits or other forms of liability that may
arise out of or by reason of action taken by the Company for the purpose of
compliance with any of the provisions of this Article.

<PAGE>

H. In the event that the Company files in bankruptcy proceedings it shall
promptly notify the Union. If such proceedings occur, any Union dues withheld
from employees' pay checks shall be forwarded to the Union as provided in
Paragraph F.

<PAGE>

ARTICLE 3

HIRING

A. The Company shall operate, maintain and staff two or more facilities
for the purpose of hiring new or additional workers. The Company will inform
the Union of any change in the locations of the hiring facilities. Company
headquarters at Hobson Avenue and Highway 101 will be a facility and the Sage
Ranch headquarters on Airline Highway in Paicines will be a facility.

B. Whenever, at the beginning of any operating season, in any area of
operation of the Company, the Company anticipates the need for new or additional
workers to perform any work covered by this Agreement, the Company may, at least
seventy-two (72) hours prior to the date of anticipated need for such workers,
notify the Union, in writing, stating the number of workers needed, the type of
work to be performed, the date the workers are needed, and estimated duration
thereof. The Company shall notify the Union promptly of any changes in
estimated starting date.

C. Hiring shall not be done in an unlawfully discriminatory manner, but
the Company may hire on the basis of past experience, competence, productivity,
positive verification of previous employment and other legitimate factors. The
Company will determine job qualifications.

<PAGE>

D. When the Company hires workers, it will make available to the Union in
writing within fourteen (14) days thereafter, the names, social security
numbers, hire dates, job classifications, and addresses of all workers hired.

E. The parties understand and accept that the Company has two separate
geographical areas of operations, one based in South Monterey County ("the South
Monterey County Operation") and the other based in the Paicines area of San
Benito County ("the Paicines Operation"). Workers hired for employment in
either of these two areas of operations shall work solely in that respective
area, rather than be transferred back and forth between the two areas, except in
emergencies as determined by the Company and during the early stages of the
harvest when the Company may assign equipment operators to work in both areas in
order to prepare for operations.

<PAGE>

ARTICLE 4

SENIORITY

A. Seniority is defined as total length of service with the Company from
date of hire in the geographical area of operation where the worker is hired
(either the South Monterey County Operation or the Paicines Operation), unless
there is a break in service. Classification seniority is defined as a worker's
total length of service within a job classification, which has been designated
as a separate classification for purposes of acquiring and losing seniority
beginning with his/her date of entry or reentry into the classification. The
foregoing is subject to the geographical area of operation where the worker is
hired. More specifically, classification seniority is defined as a worker's
total length of service within a job classification in either the South Monterey
County Operation or the Paicines Operation. A break in service terminates
seniority. Layoffs are not considered a break in service. All workers on the
payroll on the effective date of this Agreement shall have seniority dates based
on their original dates of hire unless seniority has been broken in accordance
with Article 4, Paragraph B of this Agreement. If seniority is or has been
broken, then the worker's new seniority shall be based on the worker's most
recent date of hire. After a worker has worked for the Company at least
twenty-five (25) work days within the preceding 120 days, he/she shall acquire
seniority. The days prior to acquiring seniority shall constitute a
probationary period, during which period a worker may be terminated; such
termination will not be subject to the grievance and arbitration provision. The
worker shall be entitled to all benefits of the Agreement during the
probationary period, except as modified in this Agreement.

<PAGE>

B. Seniority shall be lost for the following reasons:
1. Voluntary quitting;
2. Discharge for just cause;
3. When recalled following a layoff, failure to report back to work
within four (4) calendar days after telephone notice to the worker or, if
telephone contact is not made within five (5) calendar days from the mailing of
a notice to the worker, unless reasons satisfactory to the Company are given.
Employment elsewhere is not a satisfactory reason.
4. Failure to report to work at the termination of a leave of
absence or vacation without an approved extension or other reasons satisfactory
to the Company. Securing other employment during a leave of absence is not a
satisfactory reason.
5. When a worker leaves the bargaining unit to accept a permanent
supervisory position or other nonbargaining unit position with the Company.

The Company will provide to the Union and the Workers Board on a quarterly
basis, a list of workers by name, social security, seniority date, and job
classification, whose seniority was broken during the prior quarter, pursuant to
this Article.

C. Within ten (10) days of the signing of this Agreement, and thereafter
on April 15, August 15 and November 15, the Company shall provide the Union with
up-to-date seniority lists, one for the South Monterey County Operation and the
other for the Paicines Operation, showing the name of each worker, his/her
seniority date, social security number, and job classification. Where more than
one worker has the same original date of hire, the

<PAGE>

worker with the highest last four digits in his/her social security number shall
have the higher seniority. The Company shall also post the same seniority lists
in a conspicuous place for examination by the workers and the Union. The Union
may review the accuracy of the seniority lists and present to the Company any
error it may find on such lists.

D. If a question arises concerning the accuracy of the seniority lists,
the Union and the Company have up to two (2) weeks after the posting is complete
to resolve the dispute, provided, however, that a worker not on the Company's
payroll during such two (2) week period shall have up to five (5) work days
within which to file a written grievance on the accuracy of the seniority lists
after he/she returns to the Company's payroll, or if a worker is not recalled,
such worker shall have the right to file a grievance on the accuracy of the
lists within three (3) days of the discovery thereof.

E. It is understood that the Company and the Union may agree, in writing,
to make deviations from these seniority provisions regarding the application of
seniority.

F. There shall be two separate seniority lists, one maintained for the
South Monterey County Operation and the other maintained for the Paicines
Operation. Each seniority list shall be organized by classification.

ARTICLE 5

LAYOFF AND RECALL

<PAGE>

A. Whenever there is a layoff in any job classification, the Company
shall retain the most effective workers based on their qualifications which
include skills, efforts, productivity, experience, work history and seniority.
Company approved leaves and excused absences will not adversely affect a
worker's work history. The Company shall layoff first those workers who are
least effective in accordance with the above qualifications. In case of a
dispute, the Company has the burden of proving that the workers retained are
more able to do an effective job. If workers are equal in this respect, the
layoff shall be by seniority order within the classification in the geographical
area of operation where the worker is working, with the worker with the lowest
seniority laid off first. More specifically, classification seniority shall be
followed on a geographical basis, with no bumping of workers between the South
Monterey County Operation and the Paicines Operation. In making determinations
for the purposes of this Article, there shall be no favoritism or unlawful
discrimination by the Company.

B. The Company will notify the Union twenty-four (24) hours in advance of
any layoff, or as soon as possible prior to any layoff.

C. The Company, when anticipating the recall of seniority workers, shall
telephone the workers not less than seventy-two (72) hours prior to the
estimated starting day of work. If contact with the worker is not made by
telephone, a written notice shall be mailed by First Class mail to the worker at
his/her last known address. The names and addresses of those

<PAGE>

workers who are not contacted by telephone will be provided to the Union, upon
the Union's written request. The most effective workers according to the
qualifications listed in Paragraph A shall be recalled first. Only those
workers who have acquired classification seniority in a particular seasonal
operation (i.e., pruning/tying season; suckering/training season; and harvest
season) are entitled to be recalled for the same seasonal operation. If a
worker does not work during the same seasonal operation in the following year
after being recalled, he/she shall lose his/her seniority except where a Company
approved leave of absence has been in effect. The Company shall request and the
worker shall supply at the time of layoff, if a change of address has occurred,
the exact address where he/she wishes to receive a written notice of recall,
and, thereafter, the worker shall be responsible for notifying the Company in
writing of any such change of address.

1. The Company shall send a postcard or letter to the address
supplied by each worker on layoff within the classification, advising him/her of
the estimated date on which his/her classification will begin work. The
postcard or letter shall advise the worker that the exact date on which work
will begin can be obtained by phoning the Company office at (408) 385-4801. The
postcard or letter shall further advise the worker that if he/she is unable to
report to work on the date specified, he/she shall inform the Company at 1972
Hobson, Greenfield, California 93927, in writing and that his/her failure to
report may result in his/her loss of seniority and termination.

2. Upon the Union's written request, the Company shall make
available to

<PAGE>

the Union the names of all workers to whom recall notices were sent.

3. The Company shall notify the Union of the exact starting date
forty-eight (48) hours in advance, or in the case of the harvest, as soon as
possible, but no less than twenty-four (24) hours, of the exact date on which
work is scheduled to begin.

4. The Company shall make available to the Union, at the Union's
request, any notices of recall that have been returned with Post Office notice
of nondelivery.

5. During the operating season, when a layoff occurs within a
classification of work that is fifteen (15) days or less, and the worker has
been given a specific report-back date, no written notice of recall shall be
required.

D. Whenever there is a recall and fewer than the expected number of
employees return to work, the Company may call additional workers twenty-four
(24) hours prior to the estimated starting day of work.

E. In cases of crews performing general labor, layoffs may be by entire
crew without regard to individual seniority. Such provision will not be used
for more than four (4) work days.

F. In cases where general labor crews will be transferred from one job to
another,

<PAGE>

such transfers may be made by entire crew without regard to individual
seniority. Such provision will not be used for more than five (5) work days.

<PAGE>

ARTICLE 6

PROMOTION, DEMOTION AND TRANSFER

A. When the Company decides to permanently fill a job vacancy, or when it
creates a new job, the job will be posted. Each unit job opening description
posted shall include the job classification title, pay range, working title,
and, if available, a brief job description, anticipated shifts, required
licenses and other pertinent data.

B. Such posting shall remain on the bulletin board for three (3)
consecutive work days. All applications must be received within the posting
period in order to be eligible. The posting period shall be extended for
another three (3) consecutive workdays if the Company receives no qualified
applications during the initial posting.

C. Workers shall not be limited on their rights to bid for posted job
vacancies in a job class higher than their own. A worker who will be absent
during the bidding period may submit a bid in writing prior to departing.

D. The filling of vacancies, new jobs, and promotions within the
bargaining unit and transfer to lower paying jobs shall be on the basis of the
worker's qualifications as listed in Paragraph A of Article 5. In making
determinations for the purposes of this article, there will be no favoritism or
unlawful discrimination by the Company.

<PAGE>

E. A bargaining unit worker has the right to refuse a promotion to a
supervisor or management position.

F. The Company shall have the right to fill temporary vacancies, such as
during the posting period or those created by a worker's short-term illness,
injury or other temporary absence not exceeding ten (10) days, without regard to
the posting procedures.

<PAGE>

ARTICLE 7

TRAINING AND APPRENTICESHIP

A. The Company and the Union will negotiate an apprentice program if they
mutually decide to do so.

B. The Company agrees to provide on-the-job training for workers in the
bargaining unit to fill expected vacancies to the extent that the Company
decides necessary.

<PAGE>

ARTICLE 8

GRIEVANCE AND ARBITRATION

A. The parties agree that all disputes which arise during the duration of
this contract concerning the application and interpretation of any specific and
express provision of this Agreement shall be subject to the grievance and
arbitration procedure. The parties further agree that the grievance and
arbitration procedure of this Agreement shall be the exclusive remedy with
respect to any disputes arising under this Agreement and no other remedies shall
be utilized by any person with respect to any dispute involving this Agreement.

B. Grievances shall be resolved in the following manner:

STEP ONE: Any grievance arising under this Agreement shall be immediately
taken up between the Company supervisor involved and the Union steward. They
shall use their best efforts to resolve the grievance. In the event the
grievance is not immediately satisfactorily resolved the grieving party shall
reduce the grievance to writing and set forth the nature of the grievance. A
grievance regarding discharge must be in writing and sent to the Company by
certified mail, fax (followed by certified mail hard copy sent same day), or
hand delivery within five (5) days (excluding Sundays and holidays) of the
occurrence of the grievance. All other grievances must be in writing and sent
to the Company by certified mail within ten (10) calendar days of the occurrence
of the grievances or within ten (10) days of discovery thereof by the aggrieved
party.

<PAGE>

The failure of the grieving party to file a grievance within the time
limits specified in this paragraph shall waive the grievance.

All written grievances shall include the following information:

1. Section or sections of contract alleged to have been violated.
2. Action or actions claimed to have violated contract.
3. Remedies sought.
4. Persons in the grievance.

STEP TWO: Any grievance not resolved in the First Step shall be discussed
in a meeting between the Union Representative and the Company representative
delegated to resolve such matters not later than ten (10) calendar days of the
filing of the grievance. If the grievance is not satisfactorily resolved in
such meeting, the party receiving the grievance shall give a written response to
the other regarding its position including reasons for denial within seven (7)
work days from the close of the Step Two meeting. If the party receiving the
grievance fails to respond within said seven (7) work days such party shall be
considered to have withdrawn its objection to the grievance and the grievance
shall be granted in the grieving party's favor. A Union representative may
fully participate in the grievance meeting.

STEP 3: If the grieving party is not satisfied with the written response,
it may request in writing that the matter be referred to arbitration. This
request shall be made not more than

<PAGE>

thirty (30) calendar days from the receipt of such written response. The
request for arbitration must be sent to the Company by certified mail, fax
(followed by certified mail hard copy sent same day), or hand delivery. If the
parties are unable to agree upon an arbitrator within fifteen (15) days of the
request for arbitration, they shall select an arbitrator for each case from a
list of nine (9) persons submitted to the parties by the California State
Mediation and Conciliation Service (CSMCS). Each party shall alternatively
strike one (1) name from said list (the first strike being determined by a coin
toss) and the last name remaining shall be the arbitrator. If said individual
is unable or unwilling to serve, the parties shall request a new list of nine
(9) names from the CSMCS and the process shall be repeated. Either party has
the right to reject the first list sent by the CSMCS.

C. The arbitrator shall consider and decide the grievance referred to
him/her, and his/her decision shall be final and binding on the Company, the
Union, and the workers. The arbitrator's decision shall be in writing, signed
and delivered to the respective parties. The arbitrator shall have no authority
to modify, amend, change, alter, or waive any provision of the Agreement.
Within this limitation, he/she shall have the authority in a discipline case to
award back pay for any loss of earnings from the Company and the right to revoke
the discipline, if it is found that the discipline was
rendered without just cause. The arbitrator shall have no authority to impose
compensatory damages, punitive damages, or attorney's fees.

D. Unless otherwise mutually agreed to, all testimony taken at
arbitration hearings

<PAGE>

shall be under oath, reported and transcribed. The arbitrator's fee and
expenses shall be paid by the losing party. The expense and fees of the
reporter and the cost, if any, of a hearing room shall be borne equally by the
Company and the Union. All other expenses incident to the arbitration shall be
borne by the party incurring them. The arbitrator shall allow briefs if either
party so requests.

<PAGE>

ARTICLE 9

STRIKES AND LOCKOUTS

A. There shall be no strikes, slowdowns or interruptions of work by any
of the workers or the Union during the term of the Agreement. There shall be no
picketing, boycotts, or other adverse economic action of any kind against the
Company or its products, and there shall be no lockout against the workers
during the term of this Agreement.

B. If any said events occur, the officers and representatives of the
Union and/or Company, as the case may be, shall do everything within their power
to end or avert such activity.

C. Workers engaging in any strikes, slowdowns, boycotts or other
curtailment of production in violation of this Agreement may be subject to
discipline, including discharge. In the event of an arbitration over
disciplinary action taken by the Company against a worker for violation of this
Article, the arbitrator's authority shall be limited to determining whether the
worker in fact violated any provision of the Article. If it is found that
he/she did, the discipline shall stand.

<PAGE>

ARTICLE 10

DISCIPLINE AND DISCHARGE

A. The Company shall have the right to discipline and discharge workers
for just cause. The parties agree that working under the influence of alcohol
or illegal drugs, having the same in their possession on Company time or
property, negotiating a transaction pertaining to illegal drugs constitute just
cause and if any of the foregoing is established, the Company has the right to
terminate. Additional basis for termination may be reviewed in individual
discipline cases which proceed to arbitration.
The Company shall have the right to require a worker to submit to a drug
and/or alcohol test if reasonable suspicion exists that the worker has consumed
or has in his/her possession alcohol or drugs or is under the influence of
either. If the worker refuses to submit to the test, such refusal shall
constitute insubordination and be grounds for termination. If the worker admits
to the consumption or the possession of drugs or alcohol or being under the
influence of either, or the Company believes it has sufficient evidence of the
foregoing, the Company shall not be required to have the worker tested. The
first twenty-five (25) work days of employment (within a 120 day period) for a
new non-seniority employee shall be considered as a probationary period. The
Company may discharge such new employee during this twenty-five (25) work day
period without being subject to the grievance procedures or Union intervention.
Unless immediate action is necessary, the Company shall, upon the worker's
request, notify the Union prior to any investigatory interview of a worker which
might reasonably result in disciplinary action, and upon request of the worker,
the Union shall

<PAGE>

have the right to be present during these interviews. Provided, however, if a
situation occurs in a remote area, wherein the Company deems it necessary to
take action and no steward or Union representative is available, the Company may
take action.

B. No worker shall be summarily discharged. In all cases in which the
Company concludes that a worker's conduct may justify discharge, he/she shall be
suspended initially for not more than five (5) working days. Upon the worker's
request, during this suspension, the Company will meet with the worker.
Furthermore, if the worker requests the presence of a Union representative
during the review of the facts of the case, such shall be permissible. This
suspension period may be extended for three (3) days at the request of either
party to assure a complete investigation of the facts which initiated the
suspension. At the end of the suspension period, the Company shall notify the
worker and the Union of its final action.

C. The Union and the worker(s) involved shall be furnished with any
discharge or suspension notices within forty-eight (48) hours, exclusive of
Saturday, Sunday, or holidays, after the suspension or discharge occurs.

D. The worker may acknowledge, by signature, if he so desires, in
receiving a written warning, and such acknowledgement is in no way an admission
of guilt.

E. Within three (3) days of signing the Agreement, the Union will initial
a set of the Company's Rules of Conduct, indicating on its own behalf and on
behalf of its members

<PAGE>

who are employed by the Company the receipt and knowledge of the Rules, and it
further acknowledges and accepts that the Company takes the position that
violation of any of the Rules of Conduct constitutes just cause for the
discipline imposed for the violation. The Company acknowledges and accepts that
the Union may take the position during a grievance proceeding or in arbitration
that the discipline imposed for violation of the Rules of Conduct does not
constitute just cause for the discipline imposed. It shall then be for the
arbitrator to decide whether just cause has been established, subject to the
limitation set forth in Paragraph A of this Article.

<PAGE>

ARTICLE 11

LEAVES OF ABSENCE

A. A worker shall be granted a leave of absence without pay upon request
for valid personal reasons, as determined by the Company. Applications for
leaves of absence without pay and any extension thereof, shall be made to the
Company at least two (2) days, excluding weekends and holidays, in advance of
the effective date of the leave of absence, except for emergency requests.
Applications for leaves of absence which will be longer than two (2) continual
days shall be submitted to the Company at least two (2) weeks in advance of the
effective date of the leave of absence, except for emergency requests. Such
leaves shall not constitute a breach of the worker's seniority. Leaves of
absence are not valid unless they are approved by the Company in writing before
the effective date of the leave of absence.

B. A copy of each approved leave of absence request will be submitted to
the Secretary of the Worker's Board.

C. Unless excused, a worker who does not return to work on the day
following the expiration of his/her leave of absence will be considered as
having resigned voluntarily and will forfeit all his/her seniority rights.

D. Workers on leaves of absence who desire to return to work before their
leave expires, shall notify the Company three (3) days prior to their intended
date of return to work.
27

<PAGE>

The Company is not required to return the worker to his/her job prior to the
expiration of the earlier agreed upon expiration date.

E. (1) At the written request of the Union, a leave of absence shall be
granted to no more than two (2) workers selected by the Union who are required
to perform functions on behalf of the Union, necessitating a leave of absence.
The leave of absence may be granted for a period of one (1) month, renewable for
one additional month upon proper application.

(2) A leave of absence without pay shall be granted for temporary
leave not to exceed three (3) consecutive work days at one time, to conduct
Union business, provided that notice is given by the Union to the Company at
least two (2) days prior to the day on which such leave commences.

F. A disability leave shall be for the purpose of recuperating from an
illness, injury, disability or pregnancy leave. The following shall apply to
disability leaves of absence:

1. The worker must provide written verification from a medical
doctor that he/she cannot work due to the disability. The Company may waive
this requirement if the disability does not exceed three (3) days.

<PAGE>

2. A worker shall be granted a leave of absence for a period of up
to 4 months while disabled due to non job-related illness. This provision shall
also apply to female employees who are disabled due to pregnancy including
prenatal and postnatal disability.

3. A leave of absence for a job-related disability will be
authorized for the duration of the disability or until the worker indicates a
desire to be terminated, accepts employment with another company or refuses to
return to work after having been released for full or partial work.

4. Workers on an approved disability leave of absence or work
related injury in excess of ten (10) days must update the Company at the end of
the first calendar month and each month thereafter concerning their health
status, anticipated date of return to work and continued intent to return to
work. If a worker does not comply with this reporting requirement, the Company
may terminate the worker.

5. All jobs in the Company require varying amounts of physical
labor. The Company will attempt to adjust a disabled worker's work assignment
to accommodate the disability. New assignments will depend on the availability
of vacancies in suitable positions and upon the approval of the worker's medical
doctor. If a suitable position is not available, the worker may not return to
work until a written release is approved by the worker's medical doctor.

<PAGE>

6. The Company requires all workers who plan to take a leave on account
of disability (e.g., due to corrective surgery or pregnancy) to give the Company
at least two (2) months notice of the approximate date the leave will commence
and the estimated duration of the leave.

7. A leave of absence without pay shall be granted to workers by the
Company upon workers applying to and being confirmed by the Company for jury
duty or witness duty when subpoenaed.

8. The Company agrees to be bound contractually to any applicable Family
and Medical Leave Act (FMLA) laws. If the same are not applicable as a matter
of law, this paragraph is of no effect. Nothing in this Agreement is intended
to abrogate rights under the FMLA laws.

<PAGE>

ARTICLE 12

WORKING CONDITIONS AND SAFETY

A. The Company will comply with all applicable laws relating to the
health and safety of farm workers.

B. In the interest of each workers personal safety, the Company will
publish safety rules covering the overall operations.
The use of such chemicals injurious to farm workers must be such so as not
to cause injury to workers. Therefore, the Company shall maintain in its area
office(s) and shall make available to its workers, the following information, in
English and Spanish and shall make such information available to the Union. The
Company shall have seventy- two (72) hours to make such information available to
the requesting party following written request.
1. Location of fields treated with an agricultural chemical.
2. Name of material used by brand name, formulation, chemical name,
and registration number.
3. Date and time material was applied.
4. Amount of material applied.
5. Method of application.
6. Applicator's name and address, if any.
7. Re-entry date in accordance with the chemical label requirements.

<PAGE>

When an agricultural chemical is to be applied, the Company shall advise
all workers in the immediate area prior to the application. Re-entry into
treated fields shall be in accordance with label requirements. Workers shall
not re-enter a field during the prohibited period, nor shall the worker refuse
to re-enter thereafter. Nothing in this paragraph shall infringe upon the right
of a worker under the paragraph below.
Equipment and chemicals for fumigation and spraying shall be stopped
outside the area where employees are working, or where workers take rests or
lunch. Fumigation and spraying shall not be performed in close proximity to the
area in which workers are present.

C. Protective equipment and other devices necessary to properly protect
workers from injury and sickness shall be provided by the Company according to
state and federal laws. Such protective equipment shall be provided by the
Company without cost, except that the Company may assess a reasonable charge to
cover loss or willful destruction thereof by the worker. When the Company
introduces new personal protective apparel or extends the use of protective
apparel to new areas or issues, or new rules relating to the use of protective
apparel, the Union will be advised of such changes, in advance.
Workers shall be responsible for returning all equipment that was
checked out to them, but shall not be responsible for normal wear and tear.
Workers shall be charged actual cost for excessive breakage beyond normal wear
and tear and for equipment that is not returned. Receipts for returned
equipment shall be given to the worker by the Company. The Company and the
Union have agreed that the following tools, equipment and protective garments
are to be provided: irrigation boots for irrigators and those temporarily
assigned to

<PAGE>

irrigation work; pruning shears; budding knives; coveralls for tractor drivers;
breathing and protective eye wear for tractor drivers when spraying or dusting;
protective rubberized coveralls, gloves, masks and goggles for employees engaged
in hand spraying; hard hats for driving stakes hydraulically; gloves for
handling stakes and wires in the installation and repair and maintenance of
trellises, stakes, wire and posts. Supervisors will have mill bastard files
available for use by the crew leader or the worker as appropriate for sharpening
shears when needed; no Company shears will be sharpened except with Company
files.

D. All Company vehicles and equipment used by and around workers shall be
maintained and operated in safe conditions at all times.

E. A worker may refuse to perform work the worker legitimately believes
to be unsafe or hazardous to his/her health.

F. In cases involving occupation injuries, illnesses, or disease, the
Company will provide to the Union, upon receipt of a written request, a copy of
Occupational Safety and Health Administration form OSHA no. 101 entitled
"Supplementary Record of Occupational Injuries and Illnesses," provided the ill
or injured worker involved approves in writing the release of such information.
In the event a worker dies, written approval from the worker's legal heirs is
acceptable.

G. The Company shall make the necessary provisions for the safety and
health of

<PAGE>

its workers and will maintain adequate medical and first aid services to care
for accidents and minor illnesses occurring while at work.

H. Any worker who becomes sick or injured during working hours will be
provided with transportation to the nearest Company approved doctor provided
that if an injury is of a minor nature and does not impair an employees ability
to transport himself/herself, such shall be permissible.

I. In accordance with law, there shall be adequate toilet facilities,
separate for men and women in the field readily accessible to workers, that will
be maintained in a clean and sanitary manner. Doors on portable toilets shall
have latches. Hand washing facilities, soap and paper towels shall be provided.

J. Each place where there is work being performed shall be provided with
suitable, cool, potable drinking water convenient to workers. Water shall be
provided in cool cans or equivalent containers. Individual paper drinking cups
shall be provided.

K. Workers will comply with all safety procedures prescribed by the
Company. Failure to adhere strictly to these safety procedures will subject a
worker to disciplinary actions which may include termination.

ARTICLE 13

MANAGEMENT AND UNION RIGHTS

<PAGE>

A. The Company retains any and all rights and prerogatives of management
it had prior to the execution of this contract except as specifically and
expressly limited or modified by the provisions of this contract.

B. The Company may adopt or alter any rules which are not in direct
conflict with the provisions of this Agreement. The Company will provide to the
nearest Union field office a copy of any new or revised Company rules and the
Union will acknowledge receipt of the same, thereby indicating its knowledge of
the rules.

C. Supervisors, interns and other workers not included in the bargaining
unit shall not perform any work covered by this Agreement except for
instruction, training, emergencies, temporary work and/or work they have
performed in the past. There shall be no more than three (3) interns working
at any one time in each geographical area of operation as defined in Paragraph A
of Article 4. This paragraph shall not be used for the purpose of avoiding the
recall of laid off workers.

D. Crew Leaders are "workers" as defined in Paragraph A of Article 1 and
are members of the bargaining unit. Crew Leaders are responsible for carrying
out the instructions of Vineyard Supervisors and management and relaying such
instructions to their crews. As defined in Paragraph A of Article 1, Crew
Leaders do not discipline or recommend discipline for other workers; however,
they are responsible for observing, reporting and quality control. The parties
understand and accept that workers on occasion may serve as

<PAGE>

Crew Leaders for a period of time and thereafter not serve as Crew Leaders.
In accordance with past practice, such is permissible.

E. In the event the Company decides to increase its mechanization in any
way that will result in the permanent displacement of bargaining unit workers,
the Company shall notify the Union in writing one (1) month before commencing
such mechanical operations and shall meet with the Union to discuss the training
of displaced workers to operate and maintain the new mechanical equipment, the
placing of displaced workers in other jobs with the Company, the training of
workers for other jobs with the Company, or the placing of such workers on a
preferential rehire list. Experimentation with new equipment is not subject to
the next paragraph. The Company may experiment with new equipment applications
without following the procedure in paragraph E.

F. New job classifications or material changes in the operation of
existing job classifications shall be established and made effective by the
Company in accordance with the following procedure.

1. The Company shall notify the Union in writing of new job
classifications or of material changes in existing job classifications. Such
notices shall be given at least ten (10) days in advance of the date on which
the new classification or the change in an existing job classification is to
become effective.

2. The Company and the Union shall meet within five (5) days after
notice is received to negotiate the wage rate.

<PAGE>

3. If the Union and the Company cannot reach an agreement on the job
classification and wage rates, the matter may be submitted to arbitration as
provided for in Article 8 of this Agreement, which shall decide the dispute.
The scope of such arbitration shall be the job wage rate.

4. Any wage rate increase shall be retroactive to the effective date
of the new classification or of the change in the existing job classification.

G. The parties understand and agree that the hazards of agriculture are
such that subcontracting may be necessary and proper. Subcontracting may be
necessary in areas such as land leveling, custom land work, agricultural
chemicals, irrigation system installation, grafting and any emergency situation
and/or where specialized equipment is required.

HARVEST: The Company has historically used contract labor during
harvest under certain conditions. The Company may continue with this past
practice limited, however, to ten (10) workdays in each geographical area if any
of the following conditions exist:
1. Weather conditions that cause grapes to rot or overripen.
2. Labor, transportation or equipment shortages.
3. Customer demands for grape deliveries which exceed tonnages that
can be harvested by the current labor force.
4. Other unforeseen acts of God.

<PAGE>

Notwithstanding the above, if there exists adverse weather conditions
or some other act of God for a sustained period, lasting more than ten (10)
workdays, the Company may utilize a labor contractor for such longer period only
so long as the adverse condition exists.

The parties agree that in the application of this article the
following guidelines may be used:

1. Subcontracting is permissible under this Agreement where workers
in the bargaining unit covered by this Agreement do not have the skills to
operate and maintain the equipment or perform the work of a specialized nature.

2. Subcontracting is permissible under this Agreement where the
Company does not have the equipment to do the work being subcontracted. When
the Company does subcontract pursuant to the terms of this provision, any
workers of the subcontractor who actually operate or maintain the equipment
shall not be covered by terms of this Agreement.

H. Time off during regular working hours without pay will be provided to
no more than five (5) members of the Worker's Board to attend collective
bargaining sessions scheduled by the Company during working hours. The Union
may post notices on the Company's bulletin board provided these notices do not
exceed an area of 12" x 12" and do not remain in place longer than ten (10)
days.

<PAGE>
ARTICLE 14

HOURS AND OVERTIME

A. Nine (9) hours per day and fifty-four (54) hours a week shall be the
usual number of hours of work for piece work and general labor, except during
harvest.

B. Each worker shall be entitled to one full day, twenty-four (24) hours
off work, without pay during each payroll week. Insofar as possible, work shall
be arranged so that each worker will have Sunday off.

C. Time and one-half (1 1/2) shall be paid for all work in excess of ten
(10) hours in any one work day, for all work in excess of sixty (60) hours in
any regularly scheduled work week and time and one-half (1 1/2) for work
performed on Sunday, hereafter defined as "overtime work." Overtime earnings
while working by piece rate shall equal at least 1.5 times the piece rate
minimum base wage.

D. A worker shall receive the rate of his/her classification for all time
worked, including time, if any, worked in a classification with a lesser rate of
pay. When a worker performs work in a higher rated job, he/she shall be paid at
the highest rate for all time worked on the highest rated job.

E. If more than five (5) consecutive days of overtime work are
anticipated, the work shall be offered initially on the basis of highest
seniority within the classification

<PAGE>

required to work the overtime. If there are no volunteers for the overtime
work, the Company has the right to assign the work to anyone. The Company has
the right to finish fields or the harvest orders without searching for seniority
workers.

F. Meal time breaks shall be one-half (1/2) hour and not compensated for
nor counted as hours worked under the provisions of this Agreement. The Company
shall not use the meal time breaks for the purpose of moving the workers to
another job-site, or any other related work activity.

G. Workers shall have paid rest periods of fifteen (15) minutes each,
which insofar as practical, shall be in the middle of each continuous four (4)
hour work period or major fraction thereof.

H. A worker paid on a hourly basis who is required to report for work and
does report and is furnished no work or less than four (4) hours of work for
reasons other than an Act of God or other cause beyond the control of the
Company, shall be paid at least four (4) hours for that day at the worker's
hourly rate of pay.

<PAGE>

ARTICLE 15

WAGES

A. The Company shall pay the wage rates (hourly and piece rates) in
accordance with Appendices A, B and C attached hereto. However, when the
Company determines that particular piece rates are inappropriate, it may pay on
an hourly basis.

<PAGE>

ARTICLE 16

INCOME MAINTENANCE

[LEFT BLANK INTENTIONALLY]

<PAGE>

ARTICLE 17

VACATIONS AND BONUS

A. Vacation pay for the completed calendar year will be paid to workers
in January of the following year. In order to qualify for the first January
vacation check, the worker must have earned gross wages of at least $6,500 in
each of the immediate past two calendar years. Workers must continue to earn
$6,500 in gross wages each calendar year in order to maintain their
qualifications for vacation pay. If the worker falls below the $6,500 minimum
in any one calendar year, he/she then must requalify as if it were his/her first
year of employment. The vacation pay amounts are calculated as a percentage of
gross wages. The percentage is based on the number of consecutive calendar
years the worker has met the minimum qualifications, as follows:

Calendar Minimum % Vacation
Year Gross Pay
------- -------- ---------

1 $6,500 0
2 $6,500 2
3 - 4 $6,500 4
5 or more $6,500 6

B. A bonus is paid to any worker who works 600 hours or more during the
farming year from December 1st to November 30th. Workers will be paid a bonus
of ten ($.10) cents for each hour worked. Bonuses will paid to those who
qualify with the first check

<PAGE>

in December or with the final check at lay-off.

<PAGE>

ARTICLE 18

HOLIDAYS

A. Commencing on the effective date of this Agreement, the following
holidays shall be paid holidays for workers who qualify under the provisions of
this Article:

NEW YEARS DAY
GOOD FRIDAY
MEMORIAL DAY
JULY 4TH
LABOR DAY
THANKSGIVING
CHRISTMAS

Workers shall be paid eight (8) hours at their usual hourly rate for
each of these holidays. To qualify a worker must work the scheduled work day
both immediately before and after each holiday. In addition, the worker must
have already worked four hundred (400) hours during the current calendar year;
however, for New Year's Day the qualifying period shall be the prior calendar
year.
A worker who reports for work on such workdays immediately before and
after the holiday but who works less than the full number of scheduled hours on
the day before and the day after the holiday must provide valid written
documentation to the Company in support of his reasons why he only worked a
partial day in order to be eligible to receive holiday pay. The Company shall
apply reasonable standards in determining what to accept as valid written
documentation.

ARTICLE 19

<PAGE>

ROBERT F. KENNEDY FARM WORKERS MEDICAL PLAN

The Company will, starting in the first pay period after execution of
the Agreement, contribute to the RFK Farm Workers Medical Plan one dollar and
three and one quarter cents ($1.0325) per hour for each hour worked by each
worker who completed the 1995 harvest season and who also completed either the
1995 suckering season or the 1996 pruning/tying season.

Starting with the first pay period of 1997, the Company will contribute to
the RFK Farm Workers Medical Plan one dollar and seven and one half cents
($1.075) per hour for each hour worked by each worker who completed the 1996
harvest season and who also completed either the 1996 suckering season or the
1997 pruning/tying season.

<PAGE>

ARTICLE 20

SCHEID VINEYARDS AND MANAGEMENT CO.

401(K) DEFINED CONTRIBUTION PLAN

The Company will, after execution of this Agreement, contribute
fifteen cents ($.15) per hour worked into a 401(k) Defined Contribution Plan for
each worker who has qualified.

<PAGE>
ARTICLE 21

DURATION

This Agreement shall be in full force and effect until December 31,
1997.

SCHEID VINEYARDS AND UNITED FARM WORKERS OF
MANAGEMENT CO. AMERICA, AFL-CIO

By: /s/ Scott D. Scheid By: /s/ Arturo Rodriguez
---------------------- -------------------------
Scott D. Scheid Arturo Rodriguez
Vice President President

By: /s/ Kurt J. Gollnick By: /s/ Efren Barajas
---------------------- -------------------------
Kurt J. Gollnick Efren Barajas
General Manager, Vineyard Operations National Vice President

By: /s/ Jorge Rivera
-------------------------
Jorge Rivera
Negotiator

Bargaining Committee:

/s/ Miguel Angel Perez
--------------------------

/s/ Raul Arregnin
--------------------------

/s/ Juan M. Ruiz
--------------------------

/s/ Antonio Pantoya
--------------------------

/s/ Rufina Recendiz
--------------------------

/s/ Simon T. Bassiatos
--------------------------

--------------------------

<PAGE>

APPENDIX "A"

SCHEDULE OF 1996 HOURLY WAGE RATES

MECHANIC $ 10.80

MECHANIC TRAINEE $ 9.85

ADVANCED TRACTOR DRIVER $ 9.85

INTERMEDIATE TRACTOR DRIVER $ 9.35

TRACTOR DRIVER TRAINING (TRIAL PERIOD) $ 8.50

IRRIGATOR LEVEL 1 $ 9.85

IRRIGATOR LEVEL 2 $ 9.35

IRRIGATOR TRAINEE (TRIAL PERIOD) $ 8.25

CREW LEADER $ 9.50

CREW LEADER TRAINEE (TRIAL PERIOD) $ 8.25

GENERAL LABOR $ 8.10

An employee in the "Trainee" classification will be promoted to the appropriate
regular classification when, in the Company's sole discretion, he/she has
exhibited the necessary qualifications in accordance with Article 6, Paragraph
D.

"A" 1

<PAGE>

APPENDIX "B"

SCHEDULE OF 1997 HOURLY WAGE RATES

MECHANIC $ 10.85

MECHANIC TRAINEE $ 9.95

ADVANCED TRACTOR DRIVER $ 9.92

INTERMEDIATE TRACTOR DRIVER $ 9.40

TRACTOR DRIVER TRAINING (TRIAL PERIOD) $ 8.55

IRRIGATOR LEVEL 1 $ 9.92

IRRIGATOR LEVEL 2 $ 9.40

IRRIGATOR TRAINEE (TRIAL PERIOD) $ 8.30

CREW LEADER $ 9.57

CREW LEADER TRAINEE (TRIAL PERIOD) $ 8.30

GENERAL LABOR $ 8.15

"B" 1
<PAGE>

APPENDIX "C"

SCHEDULE OF PIECE RATES

Piece rates will be determined by the Company and announced to the employees
prior to the time they enter the field and begin working. The Company shall
closely evaluate the field conditions and will consider vine vigor, spacing,
training practices and timing when determining rates. There shall be a piece
rate minimum wage of $6.50 per hour.

"C" 1

<PAGE>

PROMISSORY NOTE

$98,790.00 Los Angeles, California December 30, 1994

FOR VALUE RECEIVED, the undersigned (the "Obligor") promises to pay to
SCHEID VINEYARDS AND MANAGEMENT CO., a California corporation ("SVMC"), or any
subsequent holder, at 13740 Washington Boulevard, Suite 300, Marina del Rey,
California 90292, the principal sum of Ninety-Eight Thousand Seven Hundred
Ninety Dollars ($98,790.00), with interest thereon commencing on the date hereof
at the rate of eight and twenty-three one-hundredths percent (8.23%) per annum.

Payments of interest accrued hereon shall be made on the 30th day of
December of each year commencing on December 30, 1995 and continuing thereafter
until this Promissory Note shall have been paid in full. On the tenth
anniversary date of this Promissory Note, the principal balance hereof and
accrued and unpaid interest hereon shall be due and payable in full. Payments
shall be made in lawful money of the United States at the address set forth
above or at such other place as the holder shall from time to time designate to
Obligor in writing, and shall be applied first to interest then accrued and
unpaid and then to principal.

Obligor agrees to pay all actual expenditures incurred in any attempt
to collect the amount due under this Promissory Note including, without
limitation, reasonable attorneys' fees, whether or not legal proceedings are
commenced.

This Promissory Note shall be governed by and construed under the laws
of the State of California.

/s/ Kurt Gollnick
------------------------------
KURT GOLLNICK

<PAGE>

JOINT AGREEMENT

THIS JOINT AGREEMENT (this "Agreement") is made as of March 27, 1997,
by and among SAMUEL R. AVILA (also known as SAM AVILA) and MARGARET J. AVILA,
individually and as trustees under declaration of trust dated August 16, 1989,
and MARGARET J. AVILA and VALARIE BASSETTI (also known as VALERIE BASSETTI), as
successor co-trustees of the testamentary trust of Joseph Labarere, deceased
(collectively, "Owners"), METROPOLITAN LIFE INSURANCE COMPANY, a New York
corporation ("Lender"), SCHEID VINEYARDS AND MANAGEMENT CO., a California
corporation ("Scheid"), CANANDAIGUA WEST, INC., a New York corporation ("CWI"),
CANANDAIGUA WINE COMPANY, INC., a Delaware corporation ("CWC" and, together with
CWI, "Canandaigua") (Canandaigua and Scheid are together referred to herein as
"Lessees").

RECITALS

A. Owners and Lender have entered into that certain Loan Agreement
dated February 1, 1991 (the "Loan Agreement"), that certain Security Agreement
dated February 1, 1991 (the "Security Agreement"), that certain Assignment of
Bonuses, Rentals and Royalties dated February 1, 1991, recorded in the Official
Records of Monterey County, California on March 5, 1991, as Document No. 12551,
at Reel 2614, Page 240 (the "Assignment"), that certain Deed of Trust dated
February 1, 1991 by Owners, as trustor, Daniel A. O'Neill, as trustee, and
Lender, as beneficiary, recorded in the Official Records of Monterey County,
California on March 5, 1991, as Document No. 12550, at Reel 2614, Page 224 (the
"Deed of Trust"), that certain Note in the original principal amount of $908,000
dated February 1, 1991 executed by Owners in favor of Lender (the "Note"), and
those certain financing statement executed by Owners, as debtor, in favor of
Lender, as secured party, recorded in the Official Records of Monterey County,
California on March 5, 1991, as Document No. 12552, at Reel 2614, Page 251 and
filed in the Office of the Secretary of State of the State of California on
March 11, 1991, as Document No. 91052015 (as amended and continued, the
"Financing Statements" and, together with the Loan Agreement, Security
Agreement, Assignment, Deed of Trust, and Note, are hereinafter referred to as
the "Loan Documents"), with respect to the financing (the "Loan") of that
certain real property, improvements and other property (the "Property")
described in the Loan Documents.

B. Owners and Scheid have entered into that certain Lease dated as
of January 1, 1997 (the "Scheid Lease"), with respect to a portion of the
Property.

C. Owners and Canandaigua have entered into that certain Lease dated
as of January 1, 1997 ("Canandaigua Lease" and, together with the Scheid Lease,
the "Leases"), with respect to a portion of the Property.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency

<PAGE>

of which are hereby acknowledged, the parties hereto agree as follows:

1. CONSENT TO LEASES. Lender hereby acknowledges the entry by
Owners into the Leases and agrees that such entry by Owners into the Leases
shall not, by itself, constitute a default or event of default by Owners under
the Loan Documents; provided, however, that Lender, by such acknowledgement and
agreement, shall not be construed as having subordinated or otherwise impaired
in any manner whatsoever its liens and interests pursuant to the Loan Documents
to any liens or interests evidenced by or related to the Leases, except as
otherwise specifically set forth in this Agreement. Except as otherwise
specifically set forth in this Agreement, it is understood and agreed that the
Leases are and shall remain fully junior and subordinate to the liens and
interests of Lender pursuant to the Loan Documents.

2. APPLICATION OF RENTALS. Upon payment of any rentals under the
Leases, Owners shall apply all or part of such payments (together with funds of
Owners, if necessary) to amounts due under the Loan such that all obligations
under or in connection with the Loan shall be kept current. Each Lessee shall
have the option of paying directly to Lender an appropriate amount of rentals
under its Lease for this purpose (with copies to Owners of checks or other
evidences of such payments). Upon the written request of any Lessee, Lender
shall supply such Lessee with appropriate statements showing the status of the
Loan, the amounts due thereunder and the outstanding balance thereof.

3. NOTICE OF DEFAULT AND OPPORTUNITY TO CURE. Upon the occurrence
of any default or event of default under the Loan documents (each, a "Loan
Event"), Lender shall (a) simultaneously provide Lessees with any written notice
provided to Owners with respect thereto or, in the event no notice to Owners is
required by the Loan Documents with respect thereto, provide Lessees with prompt
written notice thereof and (b) provide Lessees with the opportunity to cure such
Loan Event within a period of forty-five (45) days after the date of such notice
(the "Cure Period"). Notwithstanding any terms of the Loan Documents to the
contrary, during any such Cure Period, Lender agrees not to accelerate the
maturity of the Loan nor to assert any other rights or remedies available to it
under the Loan Documents, at law or in equity, other than as may be necessary or
desirable in the reasonable business judgment of Lender to preserve and protect
(but not enforce) its liens and interest pursuant to the Loan Documents or any
other collateral serving as security for the Loan.

4. CURE BY LESSEES. Owners and Lessees hereby agree that, in the
event that either or both Lessees elect to cure any Loan Event, such Lessee
shall be entitled to a credit against the next succeeding installment(s) of
rentals due under its Lease with Owners in an amount equal to (a) the payment
made by such Lessee to cure such Loan Event, plus (b) interest thereon, from the
date of such cure payment to the date(s) of the rental installment(s) against
which such cure payment is credited, at a rate of ten percent (10%) per annum.
Solely as an agreement between Lessees, in the event either Lessee elects to
cure any Loan Event, Lessees shall jointly make such cure payment and agree that
the amount of the cure payment shall be prorated between them as follows: 60%
to Scheid and 40% to Canandaigua.

5. DISCLAIMERS OF CROP LIENS OR INTERESTS. Each of Lender and
Owners hereby disclaim any lien or interest in the crops growing or to be grown
and owned by the Lessees on the Property in accordance with the Leases; Lender
specifically retains its liens and

-2-

<PAGE>

interests upon crops owned by Owners. Lender agrees to execute, deliver, record
and file such further documents and instruments (including, without limitation,
amendments to the Financing Statements) as may be reasonably requested from time
to time by Lessees to evidence the foregoing disclaimer. Lender represents and
warrants that Lender is the sole holder of the security interests evidenced by
the Financing Statements and has the power and authority to agree to the
foregoing disclaimer.

6. NOTICES. Any notices to be given hereunder will be deemed to
have been given if (a) personally served upon the party to whom it is directed
or (b) deposited in the United States mail, registered or certified, addressed
to the party to whom it is directed at the address shown below its signature
hereto, or at such other address as such party hereafter may designate for
notices hereunder.

7. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.

8. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
California without application of the conflicts of laws provisions thereof.

9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon,
and inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and assigns.

10. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement by and among the parties hereto with respect to the subject matter
hereof, and may not be amended, modified, or terminated, in whole or in part,
except by an instrument in writing signed by the parties hereto or their
respective successors or assigns. It is understood and agreed that nothing
contained in this Agreement shall be construed in any manner whatsoever as
limiting or otherwise impairing Lender from modifying or amending the Loan
Documents or otherwise servicing the Loan, including, without limitation,
releasing or otherwise modifying any collateral therefor, nor shall any notice
to or consent of Lessees be required with respect thereto except as otherwise
specifically set forth herein.

-3-

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

/s/ Samuel R. Avila
--------------------------------------------
SAMUEL R. AVILA, individually and as trustee
under declaration of trust dated August 16,
1989

Address: P. O. Box 419
San Ardo, California 93450

/s/ Margaret J. Avila
--------------------------------------------
MARGARET J. AVILA, individually, and as
trustee under declaration of trust dated
August 16, 1989, and as successor co-trustee
of the testamentary trust of Joseph Labarere,
deceased

Address: P. O. Box 419
San Ardo, California 93450

/s/ Valerie Bassetti
--------------------------------------------
VALERIE BASSETTI as successor co-trustee of
the testamentary trust of Joseph Labarere,
deceased

Address: c/o Valerie Bassetti
402 Bassett Street
King City, California 93930

METROPOLITAN LIFE INSURANCE COMPANY

By /s/
-----------------------------------------
Name:
Title:

Address: 7100 N. Financial Drive, Suite 105
Fresno, California 93710
Attention: Manager

With a copy to:
8717 W. 110th Street, Suite 700
Overland Park, Kansas 66210
Attention: Vice President

[SIGNATURES CONTINUED ON NEXT PAGE]

-4-

<PAGE>

SCHEID VINEYARDS AND MANAGEMENT CO.

By /s/
----------------------------------------
Name:
Title:

Address: 13470 Washington Boulevard
Marina del Rey, California

CANANDAIGUA WEST, INC.

By /s/
----------------------------------------
Name:
Title:

Address: 116 Buffalo Street
Canandaigua, New York 14424
Attn: President

CANANDAIGUA WINE COMPANY, INC.

By /s/
----------------------------------------
Name:
Title:

Address: 116 Buffalo Street
Canandaigua, New York 14424
Attn: President

-5-

<PAGE>

WATER SUPPLY AGREEMENT

THIS WATER SUPPLY AGREEMENT ("Agreement") is made as of January 1,
1997, by SCHEID VINEYARDS AND MANAGEMENT CO., a California corporation
("Scheid"), and CANANDAIGUA WEST, INC., a New York corporation ("Canandaigua").

RECITALS

A. Canandaigua, as lessee, proposes to enter into a Lease dated as of
January 1, 1997 (as amended from time to time, the "Canandaigua Lease"), with
Sam Avila and Margaret J. Avila, as trustees under declaration of trust dated
August 16, 1989, and Margaret J. Avila and Valarie Bassetti (also known as
Valerie Bassetti), successor co-trustees of the testamentary trust of Joseph
Labarere, deceased, and Sam Avila, also known as Samuel R. Avila, Jr., and
Margaret J. Avila, husband and wife, as lessors (collectively, the "Owners"),
with regard to that certain real property situated in the County of Monterey,
State of California, and more particularly described on Exhibit A attached
hereto and made a part hereof (the "Canandaigua Property"). A condition to
Canandaigua entering into the Canandaigua Lease is the execution and delivery of
this Agreement by Scheid.

B. The Owners, as lessors, and Scheid, as lessee, have entered into a
Lease dated as of January 1, 1997 (as amended from time to time, the "Scheid
Lease"), with regard to that certain real property situated in the County of
Monterey, State of California, and more particularly described on Exhibit B
attached hereto and made a part hereof (the "Scheid Property").

C. Scheid and Canandaigua propose to enter into a Vineyard Management
Agreement dated as of January 1, 1997 (as amended from time to time, the
"Vineyard Management Agreement"), with regard to the Canandaigua Property.

D. Concurrently herewith, the Owners and Scheid are entering into an
Agreement Regarding Water (the "Agreement Regarding Water"), in favor of
Canandaigua, regarding a source of water for the development, maintenance and
operation of the Canandaigua Property.

E. Canandaigua and Scheid desire to enter into an agreement regarding the
development of a water system on the Scheid Property and the supply of water to
the Canandaigua Property from such water system.

AGREEMENT

1. The parties acknowledge and agree that the water system currently in
place on the Scheid Property (the "Water System") requires maintenance and
improvement to provide water for the development of the Scheid Property and the
Canandaigua Property as wine grape vineyards. Scheid hereby agrees to take the
following actions with regard to the Water System to enable the Water System to
produce, store and deliver water to the Canandaigua Property:
a. Clean and repair well #1 and well #2

<PAGE>

b. Install valves, meters, pumps and diesel motors for well #1 and
well #2;

c. Install of 18" high pressure mainline from well #1 to reservoir;

d. Install of 15" high pressure mainline from well #2 to well #1;

e. Develop a reservoir with approximately 60 acre feet of water
storage capacity; and

f. Perform miscellaneous grading and slab work.

2. Scheid agrees to provide ongoing repairs and maintenance to the Water
System as necessary for water production, storage and delivery for the
Canandaigua Property pursuant to the terms of this Agreement.

3. Subject to the provisions of Section 6, below, Scheid agrees to
deliver to Canandaigua water sufficient for the development, maintenance and
operation of a wine grape vineyard on the Canandaigua Property.

4. In consideration of the covenants of Scheid hereunder and the delivery
from time to time of water through the Water System to the Canandaigua Property,
Canandaigua agrees to pay Scheid Thirty-Five Dollars ($35.00) per acre foot of
water. Commencing on June 1, 1997 and continuing on each June 1 and December 1
thereafter, Scheid shall submit an invoice to Canandaigua for water delivered
prior to the date of such invoice. Canandaigua shall remit amounts due with
respect to each such invoice within fifteen (15) days after receipt thereof.

5. Notwithstanding the foregoing, if Scheid determines, in its reasonable
business judgment, that the development of a second reservoir, additional wells,
or other improvements to the Water System are necessary or appropriate for the
Water System to service the Canandaigua Property and the Scheid Property,
Canandaigua and Scheid shall negotiate, in good faith, an adjustment to the
payment rate set forth in Section 4, above, based on the reasonable cost of
carrying out the development of such second reservoir, additional well or other
improvement; provided, however, that, for purposes of such adjustment,
development costs shall exclude any amounts for which Scheid is entitled to a
credit against rental payments under the Scheid Lease.

6. Notwithstanding any other terms of this Agreement, Scheid makes no
representation, warranty or covenant to Canandaigua concerning the availability
of water or water quality. Scheid's obligations hereunder are limited solely to
the performance of Section 1 and 2 above, and to the delivery to Canandaigua
pursuant to Section 3, above, of such water as is produced by the Water System,
as may be allocated in accordance with the Vineyard Management Agreement.

7. This Agreement shall be binding upon, and shall inure to the benefit
of Canandaigua and Scheid, and their respective successors and assigns.

-2-

<PAGE>

8. This Agreement, together with the Vineyard Management Agreement and
the Agreement Regarding Water, constitutes the entire agreement of the parties
with regard to the subject matter hereof and may be amended or modified except
by an instrument in writing signed by the parties hereto or their respective
successors or assigns.

9. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same agreement.

IN WITNESS WHEREOF, Scheid and Canandaigua have entered into this Agreement
as of the date first above set forth.

SCHEID VINEYARDS AND MANAGEMENT CO.

By /s/ Scott D. Scheid
------------------------------------
Name: Scott D. Scheid
Title: Vice President

CANANDAIGUA WEST, INC.

By /s/
------------------------------------
Name:
Title:

-3-

<PAGE>

RECORDING REQUESTED BY

AND WHEN RECORDED MAIL TO

- --------------------------------------
SPACE ABOVE THIS LINE FOR RECORDER'S USE

AGREEMENT REGARDING WATER
- --------------------------------------------------------------------------------

This Agreement Regarding Water (this "Agreement") is made as of January 1,
1996, by LUIS ECHENIQUE, a married man dealing with his separate property,
RICARDO ECHENIQUE, a single man, and MARGARET ECHENIQUE, Executrix of the Estate
of Francis D. Echenique, deceased (collectively, the "Owners"), in favor of each
of SCHEID VINEYARDS AND MANAGEMENT CO., a California corporation and formerly
known as Monterey Farming Corporation ("Scheid"), and CANANDAIGUA WEST, INC., a
New York corporation ("Canandaigua").

RECITALS

A. The Owners, as lessors, and Scheid, as lessee, have entered into that
certain Lease dated September 27, 1979, as amended from time to time (as so
amended, the "1979 Lease"), with regard to that certain real property situated
in the County of MONTEREY, State of California, and more particularly described
on Exhibit A attached hereto and made a part hereof (the "First Property").
Paragraph 11 of the 1979 Lease prohibits water produced on the First Property
from being transported for use off of the First Property.

B. Scheid, as lessee, proposes to enter into a Lease dated as of
January 1, 1996 (as amended from time to time, the "Scheid Lease"), with
Jerry D. Echenique, James J. Echenique, Julie Trescony and Jane Johnson, as
lessors (collectively, the "Lessors"), with regard to that certain real property
situated in the County of MONTEREY, State of California, and more particularly
described on Exhibit B attached hereto and made a part hereof (the "Second
Property"). A condition to Scheid entering into the Scheid Lease is the
execution and delivery of this Agreement by the Owners.

C. Canandaigua, as lessee, proposes to enter into a Lease dated as of
January 1, 1996 (as amended from time to time, the "Canandaigua Lease"), with
the Lessors, as lessors, with regard to that certain real property situated in
the County of MONTEREY, State of California, and more particularly described on
Exhibit C attached hereto and made a part hereof (the "Third Property"). A
condition to Canandaigua entering into the Canandaigua Lease is the execution
and delivery of this Agreement by the Owners.

AGREEMENT

1. In consideration of Scheid entering into the Scheid Lease and
notwithstanding Paragraph 11 of the 1979 Lease, any other terms of the 1979
Lease or the terms of any future lease that the Owners may enter into with
respect to the First Property, the Owners hereby agree that, for so long as the
Scheid Lease shall be in effect (or until, if earlier, the delivery or recording
of a written notice of termination hereof by Scheid), Scheid shall have the
right, at no fee or cost to Scheid, to take, transport and use such amount of
water from the First Property as shall be reasonably necessary for the
development, maintenance and operation of a wine grape vineyard on the Second
Property. In connection therewith, Scheid shall have the right of access to the
First Property, at all reasonable times, to construct, maintain and repair
wells, pipelines and all other fixtures and improvements as may be reasonably
necessary to take and transport such water from the First Property to the Second
Property.

2. In consideration of Canandaigua entering into the Canandaigua Lease
and notwithstanding Paragraph 11 of the 1979 Lease, any other terms of the 1979
Lease or the terms of any future lease that the Owners may enter into with

<PAGE>

respect to the First Property, the Owners hereby agree that, for so long as the
Canandaigua Lease shall be in effect (or until, if earlier, the delivery or
recording of a written notice of termination hereof by Canandaigua), Canandaigua
shall have the right, at no fee or cost to Canandaigua, to take, transport and
use such amount of water from the First Property as shall be reasonably
necessary for the development, maintenance and operation of a wine grape
vineyard on the Third Property. In connection therewith, Canandaigua shall have
the right of access to the First Property, at all reasonable times, to
construct, maintain and repair wells, pipelines and all other fixtures and
improvements as may be reasonably necessary to take and transport such water
from the First Property to the Third Property.

3. This Agreement shall continue in effect without regard to whether the
1979 Lease shall then be in effect.

4. This Agreement shall be binding upon the Owners and their respective
heirs, legal representatives, successors and assigns and shall inure to the
benefit of Scheid and its successors and assigns and Canandaigua and its
successors and assigns.

5. Any notice to be provided to the Owners hereunder shall be deemed
properly given if sent by registered, certified or express mail addressed to any
one of the Owners at P.O. Box 108, San Lucas, California 93954.

IN WITNESS WHEREOF, the Owners have entered into this Agreement as of the
date first above set forth.

/s/ Luis Echenique
----------------------------------
LUIS ECHENIQUE
STATE OF CALIFORNIA )
COUNTY OF MONTEREY ) SS. /s/ Ricardo Echenique
----------------------------------
On , before me, RICARDO ECHENIQUE
the undersigned, a Notary Public,
personally appeared LUIS ECHENIQUE, /s/ Margaret Echenique
RICARDO ECHENIQUE AND MARGARET ECHENIQUE, ----------------------------------
personally known to me (or proved to me MARGARET ECHENIQUE, as Executrix
on the basis of the satisfactory evidence) of Estate of Francis D.
to be the persons whose names are Echenique, deceased
subscribed the within instrument and
acknowledged tome that they executed the
same in their authorized capacities, and
that by their signatures on the instrument
the persons, or the entity upon behalf of
which the persons acted,executed the
instrument.

WITNESS my hand and official seal.

Signature /s/
------------------------------

(This area for official notarial seal)

<PAGE>

RECORDING REQUESTED BY

AND WHEN RECORDED MAIL TO

- -------------------------------------
SPACE ABOVE THIS LINE FOR RECORDER'S USE

EASEMENT AGREEMENT (RIGHT TO TAKE WATER)
- --------------------------------------------------------------------------------

This Easement Agreement (Right to Take Water) (this "Agreement") is made as
of January 1, 1997, by SAM AVILA and MARGARET J. AVILA, as trustees under
declaration of trust dated August 16, 1989, and MARGARET J. AVILA and VALARIE
BASSETTI (also known as Valerie Bassetti) successor co-trustees of the
testamentary trust of Joseph Labarere, deceased, and SAM AVILA, also known as
Samuel R. Avila, Jr., and MARGARET J. AVILA, husband and wife (collectively, the
"Owners"), and SCHEID VINEYARDS AND MANAGEMENT CO., a California corporation
("Scheid"), in favor of CANANDAIGUA WEST, INC., a New York corporation
("Canandaigua").

RECITALS

A. The Owners, as lessors, and Scheid, as lessee, have entered into that
certain Lease dated as of January 1, 1997 (as amended from time to time, the
"Scheid Lease"), with regard to that certain real property situated in the
County of MONTEREY, State of California, and more particularly described on
Exhibit A attached hereto and made a part hereof (the "First Property").
Paragraph 11 of the Scheid Lease prohibits water produced on the First Property
from being transported for use off of the First Property.

B. Canandaigua, as lessee, proposes to enter into a Lease dated as of
January 1, 1997 (as amended from time to time, the "Canandaigua Lease"), with
the Owners, as lessors, with regard to that certain real property situated in
the County of MONTEREY, State of California, and more particularly described on
Exhibit B attached hereto and made a part hereof (the "Second Property"). A
condition to Canandaigua entering into the Canandaigua Lease is the execution
and delivery of this Agreement by the Owners and Scheid.

AGREEMENT

1. In consideration of Canandaigua entering into the Canandaigua Lease
and notwithstanding Paragraph 11 of the Scheid Lease, any other terms of the
Scheid Lease or the terms of any future lease that the Owners may enter into
with respect to the First Property, the Owners and Scheid hereby agree that, for
so long as the Canandaigua Lease shall be in effect (or until, if earlier, the
delivery or recording of a written notice of termination hereof by Canandaigua),
Canandaigua shall have the right, at no fee or cost to Canandaigua, and Owners
and Scheid hereby grant an easement to Canandaigua, to take, transport and use
such amount of water from the First Property as shall be reasonably necessary
for the development, maintenance and operation of a wine grape vineyard on the
Second Property. In connection therewith, Canandaigua shall have the right of
pedestrian and vehicular access to the First Property, at all reasonable times,
to construct, maintain and repair wells, pipelines, pumps and all other fixtures
and improvements as may be reasonably necessary to take and transport such water
from the First Property to the Second Property.

2. This Agreement shall continue in effect without regard to whether the
Scheid Lease shall then be in effect.

3. This Agreement shall be binding upon the Owners and Scheid, and their
respective heirs, legal representatives, successors and assigns, and shall inure
to the benefit of Canandaigua and its successors, subtenants and assigns.

<PAGE>

4. This Agreement is an easement which shall be, constitute and remain a
covenant running with the land and a burden which binds all current and
subsequent owner(s) of the First Property and/or improvements from time to time
located thereon and each of their heirs, executors, administrators, personal and
legal representatives, grantees, successors and assigns.

5. Any notice to be provided to the Owners hereunder shall be deemed
properly given if sent by registered, certified or express mail addressed to Sam
Avila or Margaret J. Avila at P.O. Box 419, San Ardo, California 93450. Any
notice to be provided to Scheid hereunder shall be deemed properly given if sent
by registered, certified or express mail to 13470 Washington Boulevard, Marina
del Rey, California 90292.

IN WITNESS WHEREOF, the Owners and Scheid have entered into this Agreement
as of the date first above set forth.

/s/ Sam Avila
----------------------------------
SAM AVILA, individually and
STATE OF CALIFORNIA ) as trustee under declaration
COUNTY OF MONTEREY ) SS. of trust dated August 16,
1989
/s/ Margaret J. Avila
On_______________, before me, the ----------------------------------
undersigned, a Notary Public, MARGARET J. AVILA,
personally appeared SAM AVILA, individually, as trustee
MARGARET J. AVILA, AND VALERIE under declaration of trust
BASSETTI, personally known to me (or dated August 16, 1989, and
proved to me on the basis of as successor co-trustee of
satisfactory evidence) to be the the testamentary trust of
persons whose names are subscribed Joseph Labarere, deceased
to the within instrument and
acknowledged to me that they
executed the same in their
authorized capacities, and that by
their signatures on the instrument
the persons, or the entity upon
behalf of which the persons acted,
executed the instrument.
/s/ Valerie Bassetti
----------------------------------
WITNESS my hand and official seal. VALERIE BASSETTI, as
successor co-trustee of the
Signature /s/ testamentary trust of Joseph
------------------------------ Labarere, deceased

(This area for official notarial seal)

STATE OF CALIFORNIA ) SCHEID VINEYARDS AND MANAGEMENT
COUNTY OF MONTEREY ) SS. CO.

On____________, before me, the By /s/ Scott D. Scheid
undersigned, a Notary Public, ------------------------------------
personally appeared SCOTT D. SCHEID, Name: Scott D. Scheid
personally known to me (or proved to Title: Vice President
me on the basis of satisfactory
evidence) to be the person whose
name is subscribed to the within
instrument and acknowledged to me
that he/she executed the same in
his/her authorized capacity, and
that by his/her signature on the
instrument the person, or the entity
upon behalf of which the person
acted, executed the instrument.

WITNESS my hand and official seal.

Signature /s/
---------------------------

(This area for official notarial seal)

-2-

<PAGE>

ADJUSTABLE RATE NOTE

THIS NOTE CONTAINS PROVISIONS ALLOWING FOR CHANGES IN MY INTEREST RATE AND MY
MONTHLY PAYMENT. THIS NOTE LIMITS THE MAXIMUM RATE I MUST PAY.

OCTOBER 6, 1989 Newport Beach California
- -----------------------

31 MENTONE DRIVE, CARMEL HIGHLANDS, CA. 93923

(Property Address)

1. BORROWER'S PROMISE TO PAY

In return for a loan that I have received, I promise to pay U.S.
$ 435,000.00 (this amount is called "principal"), plus interest, to the order
of the Lender. The Lender is Boston Safe Deposit and Trust Company. I
understand that the Lender may transfer this Note. The Lender or anyone who
takes this Note by transfer and who is entitled to receive payments under this
Note is called the "Note Holder".

2. INTEREST

Interest will be charged on unpaid principal until the full amount of
principal has been paid. I will pay interest for the first six (6) months of
this loan at a yearly rate of 10.00%. The interest rate I will pay will change
in accordance with Section 4 of this Note.
The interest rate required by this Section 2 and Section 4 of this Note is
the rate I will pay both before and after any default described in Section 7(B)
of this Note.

3. PAYMENTS

(A) Time and Place of Payments
For the first 120 months of my loan I will pay all interest due monthly in
arrears. My first monthly interest payment will be due on December 1, 1989.

Beginning with my payment due on December 1, 1999, I will pay principal and
interest by making payments every month. My monthly payments will be applied to
interest before principal. If on November 1, 2014. I still owe amounts under
this Note, I will pay those amounts in full. This date is called the "Maturity
Date".

I will make my monthly payments at One Boston Place, Boston, MA 02108, or
at a different place if required by the Note Holder.

(B) Amount of My Initial Monthly Payments.
Each of my initial monthly interest payments will be in the amount of U.S.
$ 3625.00. This amount may change.

(C) Monthly Payment Changes
Changes in my monthly payment will reflect changes in the unpaid principal
of my loan and in the interest rate that I must pay. The Note Holder will
determine my new interest rate and the changed amount of my monthly payment in
accordance with Section 4 of this Note.

4. INTEREST RATE AND MONTHLY PAYMENT CHANGES

(A) Change Dates
The interest rate I will pay may change on the first day of May, 1990 and
on the first day of every 6th month thereafter. Each date on which my interest
rate could change is called a "Change Date."

(B) The Index
Beginning with the first Change Date, my interest rate will be based on an
Index. The "Index" is the Prime Rate reported in THE WALL STREET JOURNAL
(Eastern Edition) in its general guide to money rates as the base rate on
corporate loans at large U.S. money center commercial banks. If this rate is
reported as a range of

52 Note -1-

<PAGE>

rates, the rate used will be the highest rate reported. The most recent Index
figure available as of the date 45 days before each Change Date is called the
"Current Index."

If the Index is no longer available, the Note Holder will choose a new
index which is based upon comparable information. The Index may not be reported
in THE WALL STREET JOURNAL or any other newspaper, but will be an Index about
which public information is readily available. The Note Holder will give me
notice of this choice.

(C) Calculations of Changes
Before each Change Date, the Note Holder will calculate my new interest
rate by adding 0.00 percentage points ( 0.00 %) to the Current Index. The Note
Holder will then round the result of this addition to the nearest one-eight of
one percentage point (0.125%). Subject to the limits stated in Section 4(D)
below, this rounded amount will be my new interest rate until the next Change
Date.

During the first 120 months of this loan, the Note Holder will determine
the amount of my new monthly payment that will be sufficient to pay the
monthly interest charges on my loan at my new interest rate. Beginning with
the Change Date on November 1, 1999, the Note Holder will determine the
amount of the monthly payment that would be sufficient to repay the unpaid
principal in full on the Maturity Date at my new interest rate in
substantially equal payments.

(D) Limits on Interest Rate Changes
During the first 300 months of this loan, the interest rate I am
required to pay at any Change Date will not be greater than 18.00%. Thereafter,
my interest rate will never be greater than 18.00%.

(E) Effective Dates of Changes
My new interest rate will become effective on each Change Date. I will pay
the amount of my new monthly payment beginning on the first monthly payment date
after the Change Date until the amount of my monthly payment changes again.

(F) Notice of Changes
The Note Holder will deliver or mail to me a notice of any changes in my
interest rate and the amount of my monthly payment before the effective date of
any change. The notice will include information required by law to be given me
and also the title and telephone number of a person who will answer any question
I may have regarding this notice.

5. BORROWERS RIGHT TO PREPAY

I have the right to make payments of principal at any time before they are
due. A payment of principal only is known as a "prepayment". When I make a
prepayment, I will tell the Note Holder in writing that I am doing so.

I may make a full prepayment or partial prepayments without paying any
prepayment charge. The Note Holder will use all of my prepayments to reduce the
amount of principal that I owe under this Note. If I make a partial prepayment,
there will be no changes in the due dates of my monthly payments unless the Note
Holder agrees in writing to those changes. My partial prepayment may reduce the
amount of my monthly payments after the first Change Date following my partial
prepayment. However, any reduction due to my partial prepayment may be offset
by an interest rate increase.

6. LOAN CHARGES

If a law, which applies to this loan and which sets maximum loan charges,
is finally interpreted so that the interest or other loan charges collected or
to be collected in connection with this loan exceed the permitted limits, then:
(i) any such loan charge shall be reduced by the amount necessary to reduce the
charge to the permitted limit; and (ii) any sums already collected from me which
exceeded permitted limits will be refunded to me. The Note Holder may choose to
make this refund by reducing the principal I owe under this Note or by making a
direct payment to me. If a refund reduces principal, the reduction will be
treated as a partial prepayment.

52 Note -2-

<PAGE>

7. BORROWER'S FAILURE TO PAY AS REQUIRED

(A) Late Charges for Overdue Payments
If the Note Holder has not received the full amount of any monthly payment
by the end of 15 calendar days after the date it is due, I will pay a late
charge to the Note Holder. The amount of the charge will be 5.00% of my overdue
payment of principal and interest. I will pay this late charge promptly but
only once on each late payment.

(B) Default
If I do not pay the full amount of each monthly payment on the date it is
due, I will be in default.

(C) Notice of Default
If I am in default, the Note Holder may send me a written notice telling me
that if I do not pay the overdue amount by a certain date, the Note Holder may
require me to pay immediately the full amount of principal which has not been
paid and all the interest that I owe on that amount. That date must be at least
30 days after the date on which the notice is delivered or mailed to me.

(D) No Waiver By Note Holder
Even if, at a time when I am in default, the Note Holder does not require
me to pay immediately in full as described above, the Note Holder will still
have the right to do so if I am in default at a later time.

(E) Payment of Note Holder's Costs and Expenses
If the Note Holder has required me to pay immediately in full as described
above, the Note Holder will have the right to be paid back by me for all of its
costs and expenses in enforcing this Note to the extent not prohibited by
applicable law. Those expenses include, for example, reasonable attorneys'
fees.

8. GIVING OF NOTICES

Unless applicable law requires a different method, any notice that must be
given to me under this Note will be given by delivering it or by mailing it by
first class mail to me at the Property Address above or at a different address
if I give the Note Holder a notice of my different address.
Any notice that must be given to the Note Holder under this Note will be
given by mailing it by first class mail to the Note Holder at the address stated
in Section 3(A) above or at a different address if I am given a notice of that
different address.

9. OBLIGATIONS OF PERSONS UNDER THIS NOTE

If more than one person signs this Note, each person is fully and
personally obligated to keep all of the promises made in this Note, including
the promise to pay the full amount owed. Any person who is a guarantor,
surety or endorser of this Note is also obligated to do these things. Any
person who takes over these obligations, including the obligations of a
guarantor, surety or endorser of this Note, is also obligated to keep all of
the promises made in this Note. The Note Holder may enforce its rights under
this Note against each person individually or against all of us together.
This means that any one of us may be required to pay all of the amounts owed
under this Note.

10. WAIVERS

I and any other person who has obligations under this Note waive the rights
of presentment and notice of dishonor. "Presentment" means the right to require
the Note Holder to demand payment of amounts due. "Notice of dishonor" means
the right to require the Note Holder to give notice to other persons that
amounts due have not been paid.

11. UNIFORM SECURED NOTE

This Note is a uniform instrument with limited variations in some
jurisdictions. In addition to the protections given to the Note Holder under
this Note, a Mortgage, Deed of Trust or Security Deed (the "Security
Instrument"), dated the same date as this Note, protects the Note Holder from
possible losses which might result if I do not keep the promises which I make in
this Note. That Security

52 Note -3-

<PAGE>

Instrument describes how and under what conditions I may be required to make
immediate payment in full of all amounts I owe under this Note. Some of those
conditions are described as follows:

Transfer of the Property or a Beneficial Interest in Borrower. If all or
any part of the Property or any interest in it is sold or transferred (or if
a beneficial interest in Borrower is sold or transferred and Borrower is not
a natural person) without Lender's prior written consent, Lender may, at its
option, require immediate payment in full of all sums secured by this
Security Instrument. However, this option shall not be exercised by Lender
if exercise is prohibited by federal law as of the date of this Security
Instrument. Lender also shall not exercise this option if: (a) Borrower
causes to be submitted to Lender information required by Lender to evaluate
the intended transferee as if a new loan were being made to the transferee;
and (b) Lender reasonably determines that Lender's security will not be
impaired by the loan assumption and that the risk of a breach of any covenant
or agreement in this Security Instrument is acceptable to Lender.

To the extent permitted by applicable law, Lender may charge a reasonable
fee as a condition to Lender's consent to the loan assumption. Lender may also
require the transferee to sign an assumption agreement that is acceptable to
Lender and that obligates the transferee to keep all the promises and agreements
made in the Note and in this Security Instrument. Borrower will continue to be
obligated under the Note and this Security Instrument unless Lender releases
Borrower in writing.

If Lender exercises the option to require immediate payment in full, Lender
shall give Borrower notice of acceleration. The notice shall provide a period
of not less than 30 days from the date the notice is delivered or mailed within
which Borrower must pay all sums secured by this Security Instrument. If
Borrower fails to pay these sums prior to the expiration of this period, Lender
may invoke any remedies permitted by this Security Instrument without further
notice or demand on Borrower.

WITNESS THE HAND(S) AND SEAL(S) OF THE UNDERSIGNED.

WITNESS:

/s/ Alfred G. Scheid
- ----------------------------------- -----------------------------------
Borrower ALFRED G. SCHEID

-----------------------------------
Borrower

[Sign Original Only]

52 Note -4-

<PAGE>

ADJUSTABLE RATE RIDER

THIS ADJUSTABLE RATE RIDER is made this 6th day of October, 1989, and is
incorporated into and shall be deemed to amend and supplement the Mortgage, Deed
of Trust or Security Deed (the "Security Instrument") of the same date given by
the undersigned (the "Borrower") to secure Borrower's Adjustable Rate Note (the
"Note") to Boston Safe Deposit and Trust Company (the "Lender") of the same date
and covering the property described in the Security Instrument and located at:

31 MENTONE DRIVE, CARMEL HIGHLAND, CA. 93923

[Property Address]

THE NOTE CONTAINS PROVISIONS ALLOWING FOR CHANGES IN THE INTEREST RATE AND
THE MONTHLY PAYMENT THE NOTE LIMITS THE MAXIMUM RATE THE BORROWER MUST PAY.

ADDITIONAL COVENANTS. In addition to the covenants and agreements made in
the Security Instrument, Borrower and Lender further covenant and agree as
follows:

A. INTEREST RATE AND MONTHLY PAYMENT CHANGES

The Note provides for an initial interest rate of 10.000%. The Note provides
for changes in the interest rate and the monthly payments, as follows:

4. INTEREST RATE AND MONTHLY PAYMENT CHANGES

(A) Change Dates

The interest rate I will pay may change on the first day of May __, 1990,
and on the first day of every 6th month thereafter. Each date on which my
interest rate could is called a "Change Date."

(B) The Index

Beginning with the first Change Date, my interest rate will be based on an
Index. The "Index" is the Prime Rate reported in THE WALL STREET JOURNAL
(Eastern Edition) in its general guide to money rates as the base rate on
corporate loans at large U.S. money center commercial banks. If this rate is
reported as a range of rates, the rate used will be the highest rate reported.
The most recent Index figure available as of the date 45 days before each Change
Date is called the "Current Index".

Before each Change Date, the Note Holder will calculate my new interest
rate by adding 0.00 percentage points (0.00%) to the Current Index. The Note
Holder will then round the result of this addition to the nearest one-eight of
one percentage point (0.125%). Subject to the limits stated in Section 4(D)
below, this rounded amount will be my new interest rate until the next Change
Date.

During the first 120 months of this loan, the Note Holder will determine
the amount of my new monthly payment that will be sufficient to pay the monthly
interest charges on my loan at my new interest rate. Beginning with the Change
Date on December 1, 1999, the Note Holder will determine the amount of the
monthly payment that would be sufficient to repay the unpaid principal in full
on the Maturity Date at my new interest rate in substantially equal payments.

(D) Limits on Interest Rate Changes

During the first 300 months of the loan, the interest rate I am required to
pay at any Change Date will not be greater than 18.00%. Thereafter, my interest
rate will never be greater than 18.00%.

-1-

<PAGE>

(E) Effective Date of Changes

My new interest rate will become effective on each Change Date. I will pay
the amount of my new monthly payment beginning on the first monthly payment date
after the Change Date until the amount of my monthly payment changes again.

(F) Notice of Changes

The Note Holder will deliver or mail to me a notice of any changes in my
interest rate and the amount of my monthly payment before the effective date of
any change. The notice will include information required by law to be given me
and also the title and telephone number of a person who will answer any question
I may have regarding the notice.

B. TRANSFER OF THE PROPERTY OR A BENEFICIAL INTEREST IN BORROWER.

Uniform Covenant 17 of the Security Instrument is amended to read as follows:

Transfer of the Property or a Beneficial Interest in Borrower. If all or
any part of the Property or any interest in it is sold or transferred (or if a
beneficial interest in Borrower is sold or transferred and Borrower is not a
natural person) without Lender's prior written consent, Lender may, at its
option, require immediate payment in full of all sums secured by this Security
Instrument. However, this option shall not be exercised by Lender is exercise
is prohibited by federal law as of the date of this Security Instrument. Lender
also shall not exercise this option if: (a) Borrower causes to be submitted to
Lender information required by Lender to evaluate the intended transferee as if
a new loan were being made to the transferee; and (b) Lender reasonably
determines that Lender's security will not be impaired by the loan assumption
and that the risk of a breach of any covenant or agreement in this Security
Instrument is acceptable to Lender.

To the extent permitted by applicable law, Lender may charge a reasonable
fee as a condition to lender's consent to the loan assumption. Lender may also
require the transferee to sign an assumption agreement that is acceptable to
lender and that obligates the transferee to keep all the promises and agreements
made in the Note and in this Security Instrument. Borrower will continue to be
obligated under the Note and this Security Instrument unless Lender releases
Borrower in writing.

BY SIGNING BELOW, Borrower accepts and agrees to the terms and covenants
contained in this Adjustable Rate Rider.

/s/ Alfred G. Scheid (Seal) (Seal)
- ----------------------------------- -------------------------------
Borrower ALFRED G. SCHEID Borrower

(Seal) (Seal)
- ----------------------------------- -------------------------------
Borrower Borrower

-2-

<PAGE>

VINEYARD LEASE AGREEMENT

THIS VINEYARD LEASE AGREEMENT (this "Lease") is made and entered into as of
April 1, 1995, by and between VINEYARD INVESTORS 1972, a California limited
partnership ("Landlord"), and JOSEPH PHELPS VINEYARDS, a California corporation
("Tenant").

RECITALS

A. Landlord is the owner of an approximate 407 acre parcel of real
property located in the County of Monterey, State of California, as more
particularly described on EXHIBIT A attached hereto and made a part hereof (the
"Wild Horse Vineyard").

B. Tenant desires to lease from Landlord an approximate 28-acre portion
of the Wild Horse Vineyard currently planted to the Grenache winegrape variety,
and more particularly described on EXHIBIT B attached hereto and made a part
hereof.

C. Simultaneously with the execution of this Lease, Tenant is entering
into a Grenache Vineyard Management Agreement (the "Grenache Management
Agreement") with Scheid Vineyards and Management Co., a California corporation
("SCHEID"). SCHEID is the general partner of Landlord.

NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
as follows:

AGREEMENT

1. LEASE. Landlord, in consideration of the rents, terms, covenants and
agreements hereinafter set forth on the part of Tenant to be paid, kept and
performed, grants, demises and lets to Tenant, and Tenant hereby takes and hires
from Landlord on the terms, covenants, provisions and agreements hereinafter
provided, all that certain tract or parcel of land containing approximately
twenty-eight (28) acres, located in the County of Monterey, State of California,
and more particularly described on EXHIBIT B attached hereto and made a part
hereof, together with any and all improvements (including vines) presently on
that land and all appurtenances, rights, interests, easements and privileges
belonging or in any way appertaining to the same (collectively, the "Premises").

<PAGE>

2. TERM AND DURATION.

2.1 INITIAL TERM. The initial term (the "Initial Term") of this
Lease shall be thirty-six (36) months commencing as of January 1, 1995 (the
"Commencement Date"), and, unless extended pursuant to Section 2.2 below, ending
at midnight on December 31, 1997. The Initial Term and any Extended Term (as
defined below) are hereinafter sometimes collectively referred to as the "Lease
Term."

2.2 EXTENDED TERM. Provided no Event of Default (as defined in
Section 12.1 hereof) exists on the exercise date of the option granted in this
Section 2.2 or on the commencement date of the Extended Term, Landlord hereby
grants to Tenant one option to extend the term of this Lease for an option
period of one (1) year ending on December 31, 1998 (the "Extended Term"). If
Tenant exercises the foregoing option, the Extended Term shall be on and subject
to all of the terms, covenants, conditions, provisions and agreements of this
Lease, except as otherwise specified herein. If Tenant elects to exercise its
option to extend, Tenant shall give Landlord written notice of its election in
accordance with the provisions of Section 14 hereof on or before July 1, 1997.

3. RENT.

3.1 BASIC RENT. Tenant covenants and agrees to pay Landlord at the
address provided in Section 14 hereof for notices to Landlord, or at such other
place or places as Landlord shall from time to time designate in writing,
without demand, offset or deduction of any nature whatsoever, except as
otherwise specifically provided in this Lease, net annual basic rental (the
"Basic Rent"). The Basic Rent shall be Twenty-Eight Thousand Dollars ($28,000)
per annum, prorated for any partial year. Basic Rent payable with respect to
each Lease Year (as defined below) shall be payable in equal monthly
installments of $2,333.33, and shall be due on the first day of each month
commencing on May 1, 1995; provided, however, that, upon execution of this
Agreement by Tenant, Tenant shall pay to Landlord $9,333.32 as the Basic Rent
for the months of January, February, March and April, 1995. Basic Rent payable
with respect to any partial month shall be the amount of Basic Rent otherwise
payable during that month multiplied by a fraction, the numerator of which shall
be the number of days the Premises were leased by Tenant during such month and
the denominator of which shall be the total number of days in such month.

3.2 LEASE YEAR. "Lease Year" means that period of twelve (12) or
fewer consecutive months which ends on December 31 of each whole or partial
calendar year during the term of this Lease.

4. USE AND OCCUPANCY.

4.1 PERMITTED USE. Subject to the provisions of Section 4.2 below,
Tenant may use the Premises for viticulture and for other purposes accessory to
the viticultural use of the Premises.

<PAGE>

4.2 GRENACHE MANAGEMENT AGREEMENT. Tenant and Landlord acknowledge
that, during the Lease Term, the Premises shall be managed pursuant to the
Grenache Management Agreement.

5. UTILITIES. Tenant shall pay all costs in connection with Tenant's
operations upon the Premises, including but not limited to costs of preparing
the Premises for planting of crops, production costs, costs of tools and labor,
electricity and other utilities, and costs of irrigation.

6. TAXES AND IMPOSITIONS. Landlord covenants and agrees to pay, prior to
delinquency, all real estate taxes, governmental impositions, special
assessments and general assessments which are levied or assessed against the
Premises and which become payable during the term of this Lease.

7. INSURANCE. Insurance in connection with the Premises and Tenant's
operations thereon shall be maintained as provided in the Grenache Management
Agreement.

8. LIMITATION ON LANDLORD LIABILITY. Subject to the provisions of this
Lease, Tenant covenants and agrees that during the term of this lease, Landlord
shall not be liable or responsible for damages for any personal injury or
injuries, death, damage or loss to any persons or property that may be suffered
or sustained on or about the Premises or any part thereof and which arise from
Tenant's failure to keep the Premises in good condition and repair or from the
use or occupancy of the Premises by Tenant or its agents, contractors,
employees, or invitees.

9. IMPROVEMENTS. Without the prior written consent of Landlord in its
sole discretion, Tenant shall not make or erect on the Premises or on any
portions thereof, any building, improvement, structure or appurtenances thereto.

10. COMPLIANCE WITH LAWS. During the Lease Term, Tenant shall comply with
all applicable laws, ordinances, orders, rules, regulations and requirements of
Federal, State, County, City and Municipal Governments, departments, bureaus,
boards, commissions and officials with respect to the Premises, the improvements
thereon or the use or occupancy thereof. Tenant shall have the right, after
prior written notice to Landlord, to contest by appropriate legal proceedings
(which shall be conducted diligently and in good faith in the name of Landlord
or Tenant or both), and without cost or expenses to Landlord, the validity or
applicability of any law, ordinance, order, rule, regulation or requirement
referred to in this Section 10, and Tenant shall have the right to delay
observance thereof and compliance therewith until such contest is finally
determined and is no longer subject to appeal, provided that observance and
compliance therewith pending the prosecution of such proceeding may be legally
delayed without subjecting Landlord to any criminal liability or fine.

<PAGE>

11. MAINTENANCE, REPAIRS AND ALTERATIONS.

11.1 TENANT'S OBLIGATIONS. Tenant shall keep the Premises in good
order, condition and repair throughout the Lease Term. On the last day of the
Lease Term, or on sooner termination of this Lease, Tenant shall surrender the
Premises to Landlord in good and sound condition, ordinary wear and tear
excepted, clean and free of debris.

11.2 REPAIR AND RESTORATION. Repairs, restorations and replacements
to the Premises, as may be required to maintain the Premises in good and safe
condition, shall be made in accordance with the terms of the Grenache Management
Agreement.

12. DEFAULTS; REMEDIES.

12.1 EVENTS OF TENANT DEFAULT. The following shall constitute events
of default ("Events of Default") under this Lease:

(1) Tenant shall fail to make any payment of Basic Rent or any other
sum payable by Tenant under the terms of this Lease within ten (10) days
after receipt of written notice from Landlord that the same is due and
payable;

(2) Tenant shall fail to perform any other agreement or covenant of
Tenant under this Lease and Tenant shall fail to cure such default within
thirty (30) days after written notice thereof from Landlord; provided,
however, if such default may not be reasonably cured by Tenant within such
thirty (30) day period, then no Event of Default shall occur hereunder
provided Tenant commences cure within such thirty (30) day period and
thereafter diligently pursues cure to completion;

(3) Tenant shall make any general arrangement or assignment for the
benefit of creditors, any petition shall be filed by or against Tenant
under any chapter of the Federal Bankruptcy Code, or any successor statute
thereto, or Tenant shall be adjudicated as a bankrupt or insolvent, or a
receiver or trustee shall be appointed to take possession of all or
substantially all of the assets of Tenant, or any other action shall be
taken or suffered by Tenant under any State or Federal insolvency or
bankruptcy law; or

(4) The Management Agreement shall be terminated for any reason.

12.2 LANDLORD REMEDIES. Upon the occurrence of any Event of Default,
Landlord, with or without further notice or demand, may at its option terminate
Tenant's right to possession of the Premises on account of such breach and
recover from Tenant all damages allowed under Section 1951.2 of the California
Civil Code, including, without limitation, (i) the worth at the time of the
award of the unpaid Rent which had been earned at the time of termination, (ii)
the worth at the time of the award of the amount by which the unpaid Rent which
would have been earned after termination until the time of award exceeds the
amount of

<PAGE>

such rental loss that Tenant proves could have been reasonably avoided, and
(iii) the worth at the time of the award of the amount by which the unpaid Rent
for the balance of the Lease Term after the time of award exceeds the amount of
such rental loss for the same period that Tenant proves could be reasonably
avoided, or not terminate Tenant's right to possession because of such breach,
but continue this Lease in full force and effect; and in that event (A) Landlord
may enforce all rights and remedies under this Lease and under the provisions of
Section 1951.4 of the California Civil Code, including, without limitation, the
right to recover the Rent and all other charges due hereunder as such Rent and
other charges become due hereunder, and (B) Tenant may assign its interest in
this Lease with Landlord's prior written consent, which consent shall not be
unreasonably withheld; provided, however, no such assignment shall release
Tenant from liability hereunder.

12.3 NOTICE OF TERMINATION. No reentry or reletting of the Premises
by Landlord following a default by Tenant shall be construed as an election by
Landlord to terminate this Lease or Tenant's right to possession under this
Lease unless a written notice of such intention is given by Landlord to Tenant.
Notwithstanding any such reletting, Landlord may at any time thereafter elect,
so long as Tenant remains in default, to terminate this Lease and Tenant's right
to possession hereunder.

12.4 INTEREST. Any sum accruing to Landlord under the terms and
provisions of this Lease which shall not be paid when due shall bear interest at
the interest rate provided below from the date the same becomes due and payable
by the terms and provisions of this Lease until paid, unless otherwise
specifically provided in this Lease. The interest rate which shall apply shall
be the lesser of (i) the discount rate charged by the San Francisco Reserve Bank
plus five (5) percentage points, or (ii) the highest rate allowed by applicable
law.

12.5 OTHER LANDLORD REMEDIES. Nothing contained in this Lease shall
limit Landlord to the remedies set forth in this Section 12; upon Tenant's
default, Landlord shall be entitled to exercise any right or remedy then
provided by law, including, without limitation, the right to obtain injunctive
relief and the right to recover all damages caused by Tenant's default in the
performance of any of its obligations under this Lease. The various rights,
elections, and remedies of Landlord and Tenant contained in this Lease shall be
cumulative, and no one of them shall be construed as exclusive of any of the
others or of any right, priority or remedy allowed or provided for by law.

12.6 LANDLORD DEFAULTS. In the event Landlord shall neglect or fail
to perform or observe any of the covenants, provisions or conditions contained
in this Lease within thirty (30) days after receipt by Landlord of Tenant's
written notice specifying the nature of Landlord's default, then Landlord shall
be responsible to Tenant for any and all damages sustained by Tenant as a result
of Landlord's breach. In addition to damages, Tenant may seek injunctive relief
at any time upon showing that Landlord's continued non-performance or breach
would cause immediate or irrevocable harm to Tenant. Notwithstanding anything
to the contrary herein contained, should the nature of Landlord's obligation
reasonably require more than thirty (30) days to perform, Landlord shall not be
deemed in default if Landlord commences performance within said thirty (30) day
period and thereafter diligently pursues cure to completion. If Landlord shall
fail to cure any default under this Lease within the above provided period,
Tenant shall have the

<PAGE>

right to cure any such default at Landlord's expense, and Landlord shall
immediately reimburse Tenant the sum so paid (including reasonable attorneys'
fees).

13. SEVERABILITY. If any term, covenant, condition or provision of this
Lease or the application thereof to any person or circumstances shall, at any
time or to any extent, be invalid or unenforceable, the remainder of this Lease,
or the application of such term or provision to persons or circumstances other
than those as to which such term or provision is held invalid or unenforceable,
shall not be affected thereby, and shall continue to be valid and to be enforced
to the fullest extent permitted by law.

14. NOTICES. Whenever it shall be required or permitted that notice or
demand be given or served by either party to this Lease to or on the other, such
notice or demand shall be in writing, and shall be deemed to have been duly
given or served (a) if personally served, when received or (b) 72-hours after
the same is deposited in the United States mail as certified or registered mail,
return receipt requested, postage prepaid, and addressed as follows:

To Landlord:

Vineyard Investors 1972
Scheid Vineyards and Management Co.
13470 Washington Blvd, Suite 300
Marina del Rey, CA 90292

To Tenant:

Joseph Phelps Vineyards
200 Taplin Road
P.O. Box 1031
St. Helena, CA 94574
Attn: Joseph Phelps

15. ASSIGNMENT AND SUBLETTING. Tenant shall have no right to assign its
interest in this Lease or to sublet the whole or any portion or portions of the
Premises.

16. SUCCESSORS AND ASSIGNS. Except as otherwise provided in this Lease,
all covenants, agreements, provisions, and conditions of this Lease shall be
binding on and inure to the benefit of the parties hereto and their respective
successors and assigns.

17. SUBORDINATION. This Lease and all of Tenant's right, title and
interest in the Premises demised hereunder shall be subject and subordinate to
any mortgages or deeds of trust that now exist or that may subsequently be
placed upon the Premises, to all advances made under them, and to all
amendments, modifications, extensions or replacements of them.

18. NO WAIVER. No waiver by either party of any covenant or condition
contained in this Lease or of any breach of any such covenant or condition shall

<PAGE>

constitute a waiver by such party of any subsequent breach of such covenant or
condition, or justify or authorize the nonobservance by the other party on any
other occasion of the same or any other covenant or condition hereof.

19. INTERPRETATION. This Lease shall be construed in accordance with the
internal laws of the State of California without application of the conflicts of
laws provisions thereof. Whenever the contents of any provision shall require,
the singular number shall be deemed to include the plural number, and vice
versa, and the reference to any gender shall be deemed to include reference to
all other genders. This Lease has been drafted by both parties and shall not be
construed either for or against Landlord or Tenant. The captions and headings
of the Sections of this Lease are solely for convenience and shall not be deemed
to be a part of this Lease for the purpose of construing the meaning hereof or
for any other purpose.

20. ENTIRE AGREEMENT. This Lease, together with the Grenache Management
Agreement, contains the entire agreement of the parties hereto with respect to
the letting and hiring of the Premises described above and this Lease may not be
amended, modified, released or discharged, in whole or in part, except by an
instrument in writing signed by the parties hereto or their respective
successors or assigns.

21. ATTORNEYS' FEES. If either party brings an action to enforce the
terms hereof or to declare rights hereunder, the prevailing party in any such
action shall be entitled to recover from the other party its reasonable
attorneys' fees and costs as determined by the court, in addition to any other
relief to which it may be entitled.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
day and year first above written.

VINEYARD INVESTORS 1972,
a California limited partnership

By: Scheid Vineyards and Management Co.,
a California corporation, its General Partner

By: /s/ Scott D. Scheid
-----------------------------------------

Its: Vice President
----------------------------------------

JOSEPH PHELPS VINEYARDS,
a California corporation

By: /s/ Craig Williams
-----------------------------------------

Its: V.P. Production
----------------------------------------

<PAGE>

GRAPE PURCHASE AGREEMENT

This Grape Purchase Agreement (the "Agreement") is entered into as of May 9,
1997 between THE HESS COLLECTION WINERY, a California corporation ("Winery"),
and SCHEID VINEYARDS INC., a California corporation ("Grower").

RECITALS

A. Grower is the owner of the Baja Viento Vineyard in Greenfield, California
on which Grower grows approximately 30 acres of Chardonnay grapes (the
"Vineyards"). The Vineyards are more particularly described in Exhibit "A"
to this Agreement.

B. Winery wishes to purchase the wine grapes grown on the Vineyards from
Grower under the terms of this Agreement.

AGREEMENT

For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

1. PURCHASE. Grower agrees to sell, and Winery agrees to purchase, all the
production of Chardonnay grapes ("Grapes") grown on the Vineyard each year
that this Agreement is in effect.

2. TERM AND TERMINATION. The initial term of this Agreement ("Term") is for
the crop years 1998 through 2013; provided, however, that unless written
notice of termination has been given by either party prior to May 31, 2012,
the Term will automatically convert to a two-year evergreen contract
beginning June 1, 2012. Thereafter, written notice of termination may be
given before May 31st of any year and shall be effective at the completion
of the second harvest following such written notice.

3. PRICE.

<PAGE>

through the succeeding first day of August (the "Applicable Crush Report").
The price per ton for Grapes shall be equal to [ ]* (the "Pricing
Districts"), as determined by:

[ ]*

See Exhibit "B" attached hereto for an example of this price calculation.

(b) If the Crush Report shall no longer be published, then any
appropriate substitute for the Crush Report mutually agreed upon by Winery
and Grower shall be used and the computations set forth in Paragraph 3(a)
shall be appropriately adjusted. In the event that no substitute for a
discontinued Crush Report can be agreed upon, then the substitution shall
be determined in accordance with Paragraph 11.

(c) In the event that the Department changes the format of the Crush
Report from the format of the Crush Report dated March 10, 1997, the source
of data (from within the applicable Crush Report) for determining the Price
shall be [ ]*

(d) In the event that the reporting rules of the Department are
changed to include related party transactions in the Crush Report, then
Winery and Grower shall negotiate in

____________________
* Confidential Treatment Requested for Redacted Portion.

<PAGE>

good faith an alternative pricing method. A related party transaction is a
transaction where there is a relationship between the buyer and seller
other than arms-length.

(b) any truckload ("Load") of such Grapes which has two percent (2%)
or more by weight of material other than grapes ("MOG"), such as leaves,
canes or other material foreign to grapes, or three percent (3%) or more by
weight of rot or mold, or one percent (1%) or more by weight of mildew; or

(c) the Load of such Grapes is delivered to The Hess Collection Winery
more than eight (8) hours after the completion of the harvesting of such
Grapes; or

(d) Brix of such Load of Grapes is below 21.0DEG. Brix.

6. GRAPE MATURITY. The desired target Brix at harvest is 23.0DEG. Brix, with
a target Brix window of 22.0DEG. to 24.5DEG. , as measured by a properly
calibrated refractometer. If any Load of Grapes is delivered to the
processing facility below 22.0DEG. Brix, the Price for such Load will be
adjusted downwards by one percent (1%) for each 0.1 below 22.0DEG. Brix,
with a maximum adjustment of ten percent (10%) downwards at 21.0DEG. Brix.

<PAGE>

All Loads of Grapes will be weighed on a certified scale at the processing
facility. Grower will bear the cost of delivery of the Grapes to The Hess
Collection Winery or wherever Winery directs Grapes to be delivered within
the Napa Valley, including costs of harvesting, delivery, and of the
gondolas in which the Grapes are delivered. If Winery designates a
delivery location outside of the Napa Valley, Grower shall deliver Grapes
to such location, provided that Grower will be reimbursed for any costs of
delivery in excess of the cost that would have been incurred if such Loads
were delivered to The Hess Collection Winery. Title and risk of loss shall
pass to the Winery upon delivery to the Winery premises or such other
designated delivery location.

Grower represents that Winery will have good title to all grapes sold, free
of all security interests and other encumbrances.

10. ASSIGNMENT AND BINDING EFFECT. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, grantees, vendees,

<PAGE>

transferees, assignees, legatees, devisees and other successors in interest
whether partial or entire.

12. ATTORNEYS' FEES. If any arbitration, action or other proceeding is brought
for the enforcement of this Agreement or because of an alleged dispute in
connection with this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in such
arbitration, action or proceeding, in addition to any other relief to which
such party is entitled.

GROWER: WINERY:
NAME: Scheid Vineyards Inc. The Hess Collection Winery
ADDRESS: 13470 Washington Blvd. 4411 Redwood Road
Suite 300 P.O. Box 4140
Marina del Rey, CA 90292 Napa, CA 94558
CONTACT: Alfred Scheid or Heidi Scheid Bruce Wise or Randle Johnson
PHONE: 310/301-1555 707/255-1144
FAX: 310/301-1569 707/253-1682

WITH A COPY TO:
NAME: Scheid Vineyards Inc.
ADDRESS: 1972 Hobson Avenue
Greenfield, CA 93927
CONTACT: Kurt Gollnick
PHONE: 408/385-4801
FAX: 408/385-0136

<PAGE>

17. FORCE MAJEURE. Grower shall not be liable to Winery for any failure to
perform any of its duties or obligations hereunder or for any loss or
damage of any kind, nor shall any such failure give Winery the right to
reject any Grapes pursuant to Paragraph 5(c), so long as such failure to
perform or loss or damage is the result of any act of God or any normal
hazard of farming, including, without limitation, rain, hail, heat, frost,
drought, flooding, windstorm or other action of the elements, strike, work
slow-down, worker unavailability, fire, truck, car, rail, labor, equipment
or material shortage or unavailability, freight embargo, transportation
delays or difficulties, governmental action or any other cause beyond
Grower's reasonable control. If Grower is prevented from performing its
obligations hereunder in part or in full as a result of an occurrence set
forth in this Paragraph 17, it shall give prompt notice thereof in writing
to Winery, which notice shall specify the nature of such occurrence and an
estimate of the date when full performance will be resumed hereunder.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first indicated above.

Grower: SCHEID VINEYARDS INC. Winery: THE HESS COLLECTION WINERY

By: /s/ Alfred G. Scheid By: /s/ Randall Johnson
-------------------------------- --------------------------------

Print Name: Alfred G. Scheid Print Name: Randall Johnson
------------------------ ------------------------

Its: Chief Executive Its: Winemaker
------------------------------- --------------------------------

By:
--------------------------------

Print Name:
------------------------

Its:
--------------------------------

<PAGE>

GRAPE PURCHASE AGREEMENT

This Grape Purchase Agreement (the "Agreement") is entered into as of April 1,
1997 between STEPHEN DOOLEY WINE CO., INC, a California corporation ("Winery"),
and VINEYARDS INVESTORS 1972, a California limited partnership ("Grower").

RECITALS

A. Scheid Vineyards and Management Co., a California corporation, is the
general partner of Grower.

B. Grower is the owner of the Central Avenue Vineyard in Greenfield,
California on which Grower grows approximately 23 acres of Chardonnay
grapes (the "Vineyards"). The Vineyards are more particularly described in
Exhibit "A" to this Agreement.

C. Winery wishes to purchase the wine grapes grown on the Vineyards from
Grower under the terms of this Agreement

AGREEMENT

For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

1. PURCHASE. Grower agrees to sell, and Winery agrees to purchase, all the
production of Chardonnay grapes ("Grapes") grown on the Vineyard each year
that this Agreement is in effect.

2. TERM AND TERMINATION.

(a) The initial term of this Agreement ("Term") is for the crop years
1998 through 2012; provided, however, that unless written notice of
termination has been given by either party prior to May 31, 2011, the Term
will automatically convert to a two-year evergreen contract beginning June
1, 2011. Thereafter, written notice of termination may be given before May
31st of any year and shall be effective at the completion of the second
harvest following such written notice.

(b) Either party (the "Nonbreaching Party") shall have the right to
terminate this Agreement for cause in the event the other party (the
"Breaching Party") breaches any material provision or condition of this
Agreement; and

A. such breach remains uncured for a period of thirty (30) days
following the Nonbreaching Party giving written notice of
such breach to the Breaching Party, or if any such breach
shall not

<PAGE>

reasonably be susceptible of cure within such thirty (30)
day period; then

B. the Breaching Party shall fail to take steps reasonably
designed to cure such breach and such breach is not cured as
expeditiously as reasonably possible thereafter.

3. PRICE.

[ ]*

See Exhibit "B" attached hereto for an example of this price calculation.

_______________________
*Confidential Treatment Requested for Redacted Portion.

<PAGE>

(b) If the Crush Report shall no longer be published, then any
appropriate substitute for the Crush Report mutually agreed upon by Winery
and Grower shall be used and the computations set forth in Paragraph 3(a)
shall be appropriately adjusted. In the event that no substitute for a
discontinued Crush Report can be agreed upon, then the substitution shall
be determined in accordance with Paragraph 10.

(b) any truckload ("Load") of such Grapes which has two percent (2%)
or more by weight of material other than grapes ("MOG"), such as leaves,
canes or other material foreign to grapes, or three percent (3%) or more by
weight of rot or mold; or

(c) the Load of such Grapes is delivered to Winery more than twelve
(12) hours after the completion of the harvesting of such Grapes; or

(d) Brix of such Load of Grapes is below 21.0DEG. Brix.

________________________
* Confidential Treatment Requested for Redacted Portion.

<PAGE>

be given the opportunity to remove such MOG and the Load shall be
re-tested. Rejection or acceptance of any Non-Acceptable Grapes by Winery
does not relieve Grower from obligations under this Agreement for
delivering the remaining Grapes to Winery. Inspection by Winery in the
field prior to hauling of Grapes to the Winery shall not be deemed an
acceptance of Grapes.

6. GRAPE MATURITY. The desired target Brix at harvest is 23.0DEG. Brix, with
a target Brix window of 22.0DEG. to 24.5DEG. , as measured by a properly
calibrated refractometer. If any Load of Grapes is delivered to the
processing facility below 22.0DEG. Brix, the Price for such Load will be
adjusted downwards by one percent (1%) for each 0.1 below 22.0DEG. Brix,
with a maximum adjustment of ten percent (10%) downwards at 21.0DEG. Brix.

<PAGE>

location, provided that Grower will be reimbursed by Winery for any costs
of delivery in excess of the cost that would have been incurred if such
Loads were delivered to Winery's facility in Soledad. Title and risk of
loss shall pass to Winery upon delivery to Winery premises or such other
designated delivery location.

Grower represents that Winery will have good title to all Grapes sold, free
of all security interests and other encumbrances.

12. NOTICE. Whenever the term "notice" is used in this Agreement, it means a
written notice or facsimile transmission delivered or sent to that party's
address or facsimile number shown below or to such other address or
facsimile number as the party specifies by notice. All facsimile
transmissions will be followed by a "hard copy" letter sent via regular
mail.

GROWER: WINERY:
NAME: Scheid Vineyards and Management Co. Stephen Dooley Wine Co., Inc
ADDRESS: 13470 Washington Blvd., Suite 300 1234 Ella Street
Marina del Rey, CA 90292 San Luis Obispo, CA 93401
CONTACT: Alfred Scheid or Heidi Scheid Stephen Dooley

<PAGE>

PHONE: 310/301-1555 805/594-1318
FAX: 310/301-1569 805/594-1318

WITH A COPY TO:
NAME: Scheid Vineyards and Management Co.
ADDRESS: 1972 Hobson Avenue
Greenfield, CA 93927
CONTACT: Kurt Gollnick
PHONE: 408/385-4801
FAX: 408/385-0136

15. GENERAL PROVISIONS. This Agreement, along with Exhibits "A", "B" and "C"
attached hereto are the entire agreement between the parties with respect
to the subject matter hereof, and supersedes all other written or oral
agreements. This Agreement may only be amended or modified by a written
document signed by the party against whom the modification is to be
enforced. Each party will perform such other acts as are reasonably
necessary or desirable to carry out the purposes of this Agreement.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first indicated above.

Grower: VINEYARD INVESTORS 1972 Winery: STEPHEN DOOLEY WINE CO., INC.

By Scheid Vineyards and Management Co., By: /s/ Stephen R. Dooley
---------------------------------
its general partner

Its:
--------------------------
By: /s/ Heidi M. Scheid
-----------------------------

Its: Chief Financial Officer
-----------------------

<PAGE>

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Scheid Vineyards Inc. on
Form SB-2 of our report dated April 18, 1997 appearing in the prospectus and to
the reference to us under the headings "Selected Financial Data" and "Experts"
in such prospectus.

/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Los Angeles, CA

May 27, 1997

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMBINED
FINANCIAL STATEMENTS OF SCHEID VINEYARDS INC. AS OF MARCH 31, 1997 AND DECEMBER
31, 1996 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND THE YEAR ENDED
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
COMBINED FIN STMTS INCLUDED IN THE REG STMT ON FORM SB-2 OF SCHEID VINEYARDS INC
</LEGEND>

<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> MAR-31-1997 DEC-31-1996
<CASH> 202,700 4,024,146
<SECURITIES> 0 0
<RECEIVABLES> 2,700,105 276,887
<ALLOWANCES> 0 0
<INVENTORY> 57,988 99,905
<CURRENT-ASSETS> 5,008,683 5,220,262
<PP&E> 24,192,796 22,755,230
<DEPRECIATION> 6,676,073 6,413,073
<TOTAL-ASSETS> 25,582,547 24,069,009
<CURRENT-LIABILITIES> 1,896,249 2,965,637
<BONDS> 0 0
0 0
0 0
<COMMON> 2,215 2,215
<OTHER-SE> 8,592,881 9,058,959
<TOTAL-LIABILITY-AND-EQUITY> 25,582,547 24,069,009
<SALES> 0 10,768,611
<TOTAL-REVENUES> 347,273 11,691,163
<CGS> 0 4,543,647
<TOTAL-COSTS> 628,588 7,148,185
<OTHER-EXPENSES> 184,763 653,745
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 184,763 653,745
<INCOME-PRETAX> (466,078) 3,889,233
<INCOME-TAX> 0 44,001
<INCOME-CONTINUING> 0 3,845,232
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (466,078) 3,845,232
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>