SCHEID VINEYARDS INC, 424B1, 1997-07-25

SCHEID VINEYARDS INC
424B1, 1997-07-25
AGRICULTURAL PRODUCTION-CROPS

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<PAGE>
2,000,000 SHARES

[LOGO]
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").

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, rounded up to the nearest whole number, and
the holders of Class B Common Stock will be entitled to elect the Company's
remaining authorized directors.

The Company conducts its business through its wholly-owned subsidiary,
Scheid Vineyards California Inc.

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. The Company's Class
A Common Stock has been approved for listing 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....................................... $10.00 $0.75 $9.25
Total (3)....................................... $20,000,000 $1,500,000 $18,500,000
</TABLE>

(1) Excludes a non-accountable expense allowance payable by the Company to
Cruttenden Roth Incorporated 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 140% 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 $1,000,000,
including the non-accountable 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 $23,000,000, $1,725,000 and $21,275,000,
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 July 30, 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 JULY 24, 1997
<PAGE>
[PROSPECTUS FRONT AND BACK COVER: COLOR PHOTOGRAPH DEPICTING ONE OF THE
COMPANY'S VINEYARDS]

[INSIDE FRONT COVER OF THE PROSPECTUS: 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 INTERIOR
OF THE COMPANY'S WINE TASTING ROOM (NO PEOPLE); 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 AND THE RELATED NOTES THERETO, APPEARING ELSEWHERE
IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS
PROSPECTUS (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION
AND (II) ASSUMES NO EXERCISE OF OPTIONS GRANTED UNDER THE COMPANY'S 1997 STOCK
OPTION/STOCK INCENTIVE PLAN. THE TERM "COMPANY" OR "SVI" WHEN USED IN THIS
PROSPECTUS INCLUDES, WHEN THE CONTEXT SO REQUIRES, SCHEID VINEYARDS INC., A
DELAWARE CORPORATION ("SVI-DEL") AND THE ISSUER OF THE CLASS A COMMON STOCK
OFFERED HEREBY, AND ITS WHOLLY-OWNED SUBSIDIARY, SCHEID VINEYARDS CALIFORNIA
INC., A CALIFORNIA CORPORATION ("SVI-CAL"), THROUGH WHICH SVI-DEL CONDUCTS ALL
OF ITS BUSINESS.

THE COMPANY

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 4,950 acres of wine grape vineyards. Of
this total, approximately 3,270 acres are operated for the Company's own
account, including the 370-acre Riverview Vineyard purchased by the Company on
June 26, 1997, and 1,680 acres are operated under management contracts for
others. 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.

Since 1980, sales revenues of premium California table wines have 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 table wine sales reached approximately $4.3
billion, of which $2.9 billion, or 67%, represented the premium table 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 14 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 68% of the Company's acreage and accounted for approximately 84%
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. See "Business--The Company's Grape Production Operations--Grape
Production."
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 begin developing 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.

RECENT DEVELOPMENTS

On June 26, 1997, the Company purchased a 370-acre vineyard known as
Riverview Vineyard. In connection with this acquisition, the Company increased
its bank borrowings by approximately $5.5 million. The vineyard is planted with
several varieties including approximately 145 acres of Chardonnay and 100 acres
of Pinot Noir. This vineyard is not subject to any long-term grape purchase
contracts.

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."
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, certain dividend features and
convertibility, the Class A Common Stock and the Class B Common Stock have
identical rights. See "Description of Capital Stock."

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<PAGE>
SUMMARY COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<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............................................................. $ 7,640 $ 11,691 $ 210 $ 347
Gross profit......................................................... 3,970 7,147 210 347
Operating income (loss).............................................. 1,387 4,543 (468) (281)
Income (loss) before income taxes.................................... 481 3,889 (562) (466)
Net income (loss).................................................... 480 3,845 (562) (466)

PRO FORMA AMOUNTS (1)(2):
Income (loss) before income taxes as reported........................ $ 481 $ 3,889 $ (562) $ (466)
Pro Forma income tax benefit (provision)............................. (192) (1,556) 225 186
Pro Forma net income (loss).......................................... 289 2,333 (337) (280)
Pro Forma net income (loss) per share................................ 0.07 0.53 (0.08) (0.06)
Shares used in computing net income (loss) per share................. 4,400 4,400 4,400 4,400
</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 (deficit)............................ $ 2,254 $ 3,113 $ (392) $ 17,108
Current assets....................................... 5,220 5,009 2,848 20,348
Total assets......................................... 24,069 25,582 23,421 40,921
Current liabilities.................................. 2,966 1,896 3,240 3,240
Long-term liabilities (4)............................ 12,042 15,091 16,391 16,391
Total liabilities.................................... 15,008 16,987 19,631 19,631
Equity............................................... 9,061 8,595 3,790 21,290
</TABLE>

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

(1) The Exchange Transaction (as defined in "The Company--Exchange Transaction")
will result in conversion of SVI-Cal's S Corporation status to C Corporation
status. The Pro Forma statement of operations data reflect provisions for
federal and state income taxes as if SVI-Cal 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 "The Company."
In addition, Pro Forma net income (loss) per share is based upon 4,400,000
shares of Class B Common Stock outstanding immediately prior to the
offering. See "Principal Stockholders."

(2) Pro Forma Balance Sheet Data reflect the assumed conversion of SVI-Cal to C
Corporation status, the establishment of $1,300,000 of related deferred
income taxes, certain distributions of approximately $3,505,000 to SVI-Cal's
sole stockholder and certain partners in Vineyard Investors 1972, a
California limited partnership, and the issuance of 4,400,000 shares of
Class B Common Stock outstanding prior to the offering resulting from the
Exchange Transaction. See "The Company--S Corporation Conversion;
Distributions" and "Certain Transactions--Exchange of Shares, 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 the initial public offering price of $10.00
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 $2,233,000 at December 31, 1996
and $2,800,000 at March 31, 1997 used for costs incurred for the development
of certain vineyards owned by Heublein. Heublein is obligated to advance
budgeted costs to the Company on a monthly basis 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." See Note 13 of "Notes to Combined Financial Statements" for
subsequent bank refinancings.

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. Furadan-TM- is currently under investigation by the Environmental
Protection Agency which may result in the prohibition of its use. There can be
no assurance that Furadan-TM- will continue to be available as a method of
controlling phylloxera for the Company and, if its use is prohibited 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 3,026 net vine acres (I.E., excluding acreage devoted to
roads, storage areas, equipment yards or uses other than vineyards) of wine
grapes, approximately 2,264 net vine acres, or 75%, are planted or interplanted
with phylloxera-resistant rootstock. The remaining approximately 762 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.

6
<PAGE>
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.

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 91% of the Company's grape sales
revenues and approximately 84% 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 67% 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.

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

7
<PAGE>
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 farming 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 $8.4 million in
capital investment and continued improvements of existing vineyards are expected
to require approximately $4.0 million. 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 also recently purchased a 370-acre vineyard known as Riverview
Vineyard located in Monterey County, with respect to which the Company has no
operating history, and no assurances regarding the ultimate production or
profitability of Riverview Vineyard can be given. 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 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

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<PAGE>
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.

Following the Exchange Transaction (as described in "Certain
Transactions--Exchange of Shares, Partnership Units and Limited Liability
Company Interests for Class B Common Stock"), the Company does not intend to
acquire, or enter into any transactions with, related parties. The Company's
acquisition strategy will focus on producing vineyard properties and land that
is suitable for development into vineyards.

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 and early
1990s, 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
(as Trustee of the Alfred G. Scheid Revocable Trust, dated October 8, 1992),
Scott D. Scheid, Heidi M. Scheid (all of whom are officers of the Company), Kurt
J.

9
<PAGE>
Gollnick (an officer of the Company who is not related to the Scheid family),
Emanty 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 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 and their direct lineal descendants and current and former spouses
directly or indirectly hold shares of Class B Common Stock representing more
than approximately 17% of the total number of shares of Class A Common Stock and
Class B Common Stock outstanding they will be entitled to elect all of the
directors entitled to be elected by the holders of Class B Common Stock,
constituting 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, take
action by written consent without a stockholders' meeting, and cause or prevent
a change in control of the Company. Furthermore, the Company is permitted to
issue additional shares of Class B Common Stock. Except with respect to the
issuance of shares of Class B Common Stock in connection with a stock split of
such Class B Common Stock or for payment of dividends on such Class B Common
Stock in Class B Common Stock, (i) no such issuance may be made prior to July
15, 2000 without the approval, by vote or written consent, in the manner
provided by law, of a majority of the Class A Common Stock outstanding and of a
majority of the Class B Common Stock outstanding, each voting separately as a
class, and (ii) no issuance of Class B Common Stock may be made from and after
July 15, 2000 without the approval, by vote or written consent, in the manner
provided by law, of a majority of the Class A Common Stock outstanding and of a
majority of the Class B Common Stock outstanding, each voting separately as a
class, or the unanimous approval, by vote or written consent, in the manner
provided by law, of directors elected by the holders of Class A Common Stock, or
appointed to replace directors who were elected by the holders of Class A Common
Stock or their appointed successors, consisting of not less than two persons,
who are not, directly or indirectly, beneficial owners of any Class B Common
Stock and who have not been officers or employees of the Company or any of its
subsidiaries within the three-year period immediately preceding such issuance.
Any such issuance to existing holders of Class B Common Stock could extend their
control of the Company. In addition, issuance of additional shares of Class B
Common Stock could result in a change of control of the Company without approval
of the outstanding shares of Class A Common Stock. The Company has no present
plans to issue additional shares of Class B Common Stock. 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.

10
<PAGE>
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 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. From time to time the Company
has in the past, and may in the future, convert grapes into bulk wines for sales
in years subsequent to their harvest years which may impact quarterly results.
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."

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

11
<PAGE>
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.

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,

12
<PAGE>
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.

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 or issuances of Class B Common Stock in private offerings. 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 Class A Common Stock is listed 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 has been 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

13
<PAGE>
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 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 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 OF SVI-CAL AND SHAREHOLDER DISTRIBUTIONS; NO PAYMENT
OF DIVIDENDS

SVI-Cal has been a Subchapter S Corporation for federal and California state
income tax purposes since 1989. As a result, the net income of SVI-Cal for
federal and certain state income tax purposes for such periods was reported by,
and taxed directly to, SVI-Cal's sole stockholder, Alfred G. Scheid, whether or
not such earnings were distributed. Prior to the offering, SVI-Cal's cumulative
S Corporation earnings will be determined and a distribution will be made to Mr.
Scheid. This amount is estimated at $3.0 million. In addition, a distribution of
approximately $475,000 will be made to the limited partners of Vineyard
Investors 1972 (as of immediately prior to the Exchange Transaction) to pay
income taxes on income from the partnership. The Exchange Transaction will
result in conversion

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<PAGE>
of SVI-Cal's S Corporation status to C Corporation status. See "Certain
Transactions--Exchange of Shares, 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 "The Company" and
"Dividend Policy."

IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

This Prospectus contains certain forward-looking statements, including the
plans and objectives of management for the business, operations, and 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.

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,

15
<PAGE>
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.
Furthermore, the Company is permitted to issue up to 5,600,000 additional shares
of Class B Common Stock, which also 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. See "--Control by Scheid Family." The Company has no
present plans to issue additional shares of Class B Common 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.

16
<PAGE>
THE COMPANY

COMPANY HISTORY

SVI-Cal 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 concurrently with this offering. 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 $6.0 million.
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 3,270 acres of vineyards, at
various production levels ranging from new plantings in 1997 to fully mature.

S CORPORATION CONVERSION; DISTRIBUTIONS

In March 1997, SVI-Cal paid $1.0 million to Mr. Scheid as repayment of a
working capital loan made by him to SVI-Cal.

ACCOUNTING EFFECT

In connection with the conversion of SVI-Cal's 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 $1.3 million 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.

EXCHANGE TRANSACTION

In connection with this offering, the capital stock of SVI-Cal held by its
sole shareholder, the membership interests held by all members of each of Quadra
Partners LLC, a California limited liability company, and Big Vines Limited
Liability Company, a California limited liability company,

17
<PAGE>
and the limited partnership units held by all limited partners (other than
SVI-Cal) in Vineyard Investors 1972 ("VI-1972"), a California limited
partnership, are being contributed to SVI-Del in exchange for 4,400,000 shares
of Class B Common Stock of the Company (the "Exchange Transaction") representing
100% of the pre-offering issued and outstanding capital stock of the Company.
See "Certain Transactions--Exchange of Shares, Partnership Units and Limited
Liability Company Interests for Class B Common Stock."

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 $17,500,000 ($20,200,000 if the Underwriters' over-allotment
option is exercised in full) at the initial public offering price of $10.00 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 $7.0 million, continue development of approximately 374
acres in Monterey County (including 207 acres in Hames Valley), begin developing
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..................................... $ 7,000,000
Development of vineyards in Hames Valley...................................... 4,500,000
Acquisitions.................................................................. 4,000,000
Working capital for existing vineyards and general corporate purposes......... 2,000,000
--------------
Total Net Proceeds........................................................ $ 17,500,000
--------------
--------------
</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 capital indebtedness to be repaid from
proceeds of the offering accrues interest at the bank's "reference" rate per
year and matures on June 5, 1998.

DIVIDEND POLICY

18
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company (i) as of
March 31, 1997, (ii) pro forma as of March 31, 1997, after giving effect to the
Exchange Transaction 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 the
initial public offering price of $10.00 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)
--------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Total debt (including current portion) (3)............................. $ 15,549 $ 16,849 $ 16,849
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 (4).............................. 0 0 2
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 4 4
Paid-in capital........................................................ 124 2,852 $ 20,350
Retained earnings...................................................... 8,469 934 934
--------- ------------- --------------
Total stockholders' equity............................................. 8,595 3,790 $ 21,290
--------- ------------- --------------
Total capitalization................................................... $ 24,144 $ 20,639 $ 38,139
--------- ------------- --------------
--------- ------------- --------------
</TABLE>

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

(1) Gives effect to the Exchange Transaction and SVI-Cal's conversion to C
Corporation status. See "The Company-- Exchange Transaction" and "Certain
Transactions--Exchange of Shares, 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) See Note 13 of "Notes to Combined Financial Statements" for subsequent bank
refinancings.

(4) 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."

19
<PAGE>
DILUTION

The Pro Forma net tangible book value of the Company at March 31, 1997 was
approximately $3,790,000, or $0.86 per share based upon 4,400,000 shares
outstanding. "Pro Forma net tangible book value per share" represents the total
amount of tangible assets less total liabilities after giving effect to the
Exchange Transaction and SVI-Cal's conversion to C Corporation status, divided
by the number of shares of Common Stock outstanding immediately prior to the
offering. After giving effect to the sale of 2,000,000 shares of Class A Common
Stock offered hereby (after deducting the estimated underwriting discount and
offering expenses) at the initial public offering price of $10.00 per share, and
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 $21,290,000 or $3.33 per share of the
Company's Common Stock. This represents an immediate increase in Pro Forma net
tangible book value of $2.47 per share to the Company's stockholders and an
immediate, substantial dilution of approximately 66.7% or $6.67 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>
Initial public offering price per share of Class A Common
Stock (1)................................................. $ 10.00
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........................... 2.47
---------
Pro Forma net tangible book value per share after giving
effect to the public offering (2)......................... 3.33
---------
Dilution per share to New Investors......................... $ 6.67
---------
---------
</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 purchased from the Company, the total consideration paid to
the Company and the average price per share paid by the Company's pre-offering
stockholders, and by the New Investors, after the sale of 2,000,000 shares of
Class A Common Stock by the Company at the initial public offering price of
$10.00 per share:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- --------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Pre-offering stockholders....................... 4,400,000 68.75% $ 3,790,000 15.93% $ 0.86
New Investors................................... 2,000,000 31.25% 20,000,000 84.07% 10.00
----------- --------- -------------- ---------
Total....................................... 6,400,000 100.00% $ 23,790,000 100.00%
----------- --------- -------------- ---------
----------- --------- -------------- ---------
</TABLE>

20
<PAGE>
SELECTED COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE 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
YEAR ENDED ENDED MARCH
DECEMBER 31, 31,
--------------- --------------
1995 1996 1996 1997
------ ------- ------ ------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Sales................................. $7,164 $10,769 $ 0 $ 0
Vineyard management, service and other
fees................................ 476 922 210 347
------ ------- ------ ------
Total............................. 7,640 11,691 210 347
Cost of sales........................... 3,670 4,544 0 0
------ ------- ------ ------
Gross profit............................ 3,970 7,147 210 347
General and administrative.............. 2,583 2,604 678 628
------ ------- ------ ------
Operating income (loss)................. 1,387 4,543 (468) (281)
Other income (expense):
Interest, net......................... (906) (654) (94) (185)
------ ------- ------ ------
Income (loss) before income taxes....... 481 3,889 (562) (466)
Provision for income taxes.............. 1 44 0 0
------ ------- ------ ------
Net income (loss)....................... $ 480 $ 3,845 $ (562) $ (466)
------ ------- ------ ------
------ ------- ------ ------
PRO FORMA AMOUNTS (1)(2):
Income (loss) before income taxes as
reported.............................. $ 481 $ 3,889 $ (562) $ (466)
Pro Forma income tax benefit
(provision)........................... (192) (1,556) 225 186
------ ------- ------ ------
Pro Forma net income (loss)............. $ 289 $ 2,333 $ (337) $ (280)
------ ------- ------ ------
------ ------- ------ ------
Pro Forma net income (loss) per share... $ 0.07 $ 0.53 $(0.08) $(0.06)
Shares used in computing net income
(loss) per share...................... 4,400 4,400 4,400 4,400
</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 (deficit)............... $ 2,254 $ 3,113 $ (392) $17,108
Current assets.......................... 5,220 5,009 2,848 20,348
Total assets............................ 24,069 25,582 23,421 40,921
Current liabilities..................... 2,966 1,896 3,240 3,240
Long-term liabilities (4)............... 12,042 15,091 16,391 16,391
Total liabilities....................... 15,008 16,987 19,631 19,631
Equity.................................. 9,061 8,595 3,790 21,290
</TABLE>

- ------------------------------
(1) The Exchange Transaction will result in conversion of SVI-Cal's S
Corporation status to C Corporation status. The Pro Forma statement of
operations data reflect provisions for federal and state income taxes as if
SVI-Cal 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 "The Company." 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 of SVI-Cal to C
Corporation status, the establishment of $1,300,000 of related deferred
income taxes, certain distributions of approximately $3,505,000 to SVI-Cal's
sole stockholder and certain partners in Vineyard Investors 1972, a
California limited partnership, and the issuance of 4,400,000 shares of
Class B Common Stock to be outstanding prior to the offering resulting from
the Exchange Transaction. See "The Company--S Corporation Conversion;
Distributions" and "Certain Transactions--Exchange of Shares, 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 the offering price of $10.00 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 $2,233,000 at December 31, 1996
and $2,800,000 at March 31, 1997 used for costs incurred for the development
of certain vineyards owned by Heublein. Heublein is obligated to advance
budgeted costs to the Company on a monthly basis 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." See Note 13 of "Notes to Combined Financial Statements" for
subsequent bank refinancings.

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

SVI is a leading independent (I.E., not winery controlled) producer of
premium varietal wine grapes. The Company currently operates approximately 4,950
acres of wine grape vineyards. Of this total, approximately 3,270 acres are
operated for the Company's own account, including the 370-acre Riverview
Vineyard which was purchased by the Company on June 26, 1997, and 1,680 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 begin developing 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 91% of grape sales revenues and
approximately 84% 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., The Hess Collection Winery, Joseph Phelps Vineyards and
Independence Wine Company. 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.

The financial information presented below does not include revenues and
costs associated with operation of Riverview Vineyard, which was acquired by the
Company in June 1997 and will be reflected in the Company's operating results in
future periods. The Company's acquisition of Riverview Vineyard was based upon
analysis of a number of factors affecting the potential value of the vineyard to
the Company including, among other things, location, varietal mix and production
history as well as the Company's ability to implement its own viticultural
techniques at the vineyard and the potential to enter into long-term grape
purchase contracts for the vineyard's production. While no assurances regarding
the ultimate production or profitability of Riverview Vineyard can be given, the
acquisition was based upon the Company's expectation that Riverview Vineyard's
contribution to the

22
<PAGE>
Company's profitability will be consistent with the Company's other vineyards
with comparable varietal mixes. The Company intends to secure long-term grape
purchase contracts for the grape production from Riverview Vineyard, but there
can be no assurance that the Company will be successful in finding a winery or
wineries which will agree to such contracts. Pending entering into long-term
grape purchase contracts for the vineyard, the Company may store some or all of
the vineyard's production in the form of bulk wine for sale in later periods,
which would affect the timing of Riverview Vineyard's contribution to the
Company's revenues.

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 the information set forth therein. The operating results for any
quarter are not necessarily indicative of results for any future period, and
results presented below do not include provision for income taxes that will be
payable in future periods following the Exchange Transaction.

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------
FISCAL 1996 FISCAL 1997
---------------------------------------------- -----------
MAR 31 JUNE 30 SEPT 30 DEC 31 MAR 31
----------- ----------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Sales........................................................ $ 0 $ 0 $ 6,414 $ 4,355 $ 0
Vineyard management, services and other fees................. 210 219 155 338 347
----------- ----------- --------- --------- -----------
210 219 6,569 4,693 347
Cost of sales.................................................. 0 0 2,499 2,045 0
----------- ----------- --------- --------- -----------
Gross profit................................................... 210 219 4,070 2,648 347
General and administrative..................................... 678 423 665 838 628
----------- ----------- --------- --------- -----------
Operating income (loss)........................................ (468) (204) 3,405 1,810 (281)
Other income (expense):
Interest (net)............................................... (94) (155) (129) (276) (185)
----------- ----------- --------- --------- -----------
Income (loss) before income taxes.............................. (562) (359) 3,276 1,534 (466)
Provision for income taxes..................................... 0 0 0 44 0
----------- ----------- --------- --------- -----------
Net income (loss).............................................. $ (562) $ (359) $ 3,276 $ 1,490 $ (466)
----------- ----------- --------- --------- -----------
----------- ----------- --------- --------- -----------
</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

23
<PAGE>
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.

<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. Grape sales increased by 50.3% to $10,769,000 for the year ended
December 31, 1996 from $7,164,000 in 1995, an increase of $3,605,000.
Approximately $2,436,000 of this increase was due to 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. The remaining $1,169,000 of the grape
sales increase was due to an approximately 12% increase in the average price
received as well as the combined effect of higher prices on an increase in tons.
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 $922,000
for the year ended December 31, 1996 from $476,000 in 1995, an increase of
$446,000. 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 $7,147,000 for the year ended December 31, 1996 from
$3,970,000 in 1995, an increase of $3,177,000. 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 $2,604,000 for the year ended December 31, 1996 from
$2,583,000 in 1995, an increase of $21,000. 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 27.8% to $654,000
for the year ended December 31, 1996 from $906,000 in 1995, a decrease of
$252,000. 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 $291,000 and $430,000 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 $3,845,000 for the year ended
December 31, 1996 from $480,000 in 1995, an increase of $3,365,000. 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 65.2% to $347,000 for the quarter ended March 31,
1997 from $210,000 for the same period in 1996, an increase of $137,000. 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 $628,000 for the quarter ended March 31, 1997 from $678,000 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 $185,000 for the
quarter ended March 31, 1997 from $94,000 for the same period in 1996, an
increase of $91,000. 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 $466,000, compared to a net loss of
$562,000 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 $3,505,000; (iv) capital equipment
expenditures of approximately $500,000; and (v) anticipated expenditures of
approximately $500,000 due to expansion of the Company's wine inventory. See
"The Company--S Corporation Conversion."

25
<PAGE>
SVI also has a long-term credit line which expires on July 5, 2005 and provides
for a maximum borrowing of $2,786,000 diminishing annually through the
expiration date to a maximum allowable commitment of $1,071,000. 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.

On June 25, 1997, the Company replaced notes payable totaling $1,722,000
with two long-term credit lines which provide for maximum aggregate borrowings
of $4,285,000, diminishing annually to a maximum aggregate allowable commitment
of $2,361,000 which is due on June 4, 2007. In addition, on June 23, 1997, the
Company borrowed on a short-term note payable of $3,000,000 with an expiration
date of September 5, 1997. The net proceeds from the credit lines and the
short-term note payable were used to acquire a 370-acre vineyard known as
Riverview Vineyard on June 26, 1997 for a total purchase price of approximately
$5,500,000. Based on current discussions with its bank, the Company expects to
be able to refinance the short-term note prior to its due date with a long-term
note secured by Riverview Vineyard.

The Company also has other long-term notes payable which, as of March 31,
1997, totaled approximately $9,359,000. 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 1/4% to 1 1/4%.

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 $4,000,000. 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 $4,461,000 and $2,287,000, 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 $4,863,000 and $1,194,000,
respectively. The increase in cash used was primarily a result of a $2,161,000
receivable from the Company's principal stockholder resulting from advances
related to SVI-Cal'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 $5,962,000 from $2,454,000 in 1995. The increase was principally the
result of a long-term receivable of $2,233,000 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
advance budgeted costs to the Company on a monthly basis 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 $1,987,000 from
$824,000 for the same period in 1996. The increase was principally the result of
a further increase of $566,000 in the long-term receivable due from Heublein
described above and additions to property, plant and equipment.

Cash provided by financing activities was $1,966,000 for the year ended
December 31, 1996. This was an increase from 1995 of $3,178,000. The increase
reflects $7,267,000 of proceeds from long-term debt (which includes borrowings
of $2,233,000 under the Heublein arrangement), reduced by $4,832,000 of
repayments on long-term debt in 1996. In the prior year, the Company borrowed
$5,040,000 in long-term debt and repaid $5,867,000. Cash provided by financing
activities was $3,029,000 for the quarter ended March 31, 1997. This was an
increase from the same period in 1995 of $3,390,000. The increase reflects
$3,029,000 of proceeds from long-term debt, which includes additional borrowings
of $567,000 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.

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 begin developing 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.

27
<PAGE>
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" or "jug" 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, Merlot and Zinfandel 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. Approximately 90% of all wines made in the
United States and 76% of all table wine consumed in the United States are made
in California. The following chart shows estimated revenues for California
premium and jug wines since 1980.

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

<TABLE>
<CAPTION>
1980 1981 1982 1983 1984 1985 1986 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jug Wine Revenues (millions of $) $ 930 $ 1,022 $ 1,053 $ 1,031 $ 984 $ 905 $ 876 $ 848
Premium Wine Revenues (millions of $) $ 211 $ 269 $ 318 $ 337 $ 478 $ 572 $ 750 $ 891

<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995
<S> <C>
Jug Wine Revenues (millions of $) $ 841 $ 858 $ 922 $ 1,076 $ 1,154 $ 1,150 $ 1,209 $ 1,242
Premium Wine Revenues (millions of $) $ 1,094 $ 1,204 $ 1,392 $ 1,616 $ 1,883 $ 2,002 $ 2,224 $ 2,518

<CAPTION>
1996
Jug Wine Revenues (millions of $) $ 1,310
Premium Wine Revenues (millions of $) $ 2,942
</TABLE>

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

Source: Estimated by 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 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

29
<PAGE>
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 500 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 wine grapes purchased and crushed 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 4.8 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 4.1 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 67,008 762 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. See "Risk Factors--Agricultural Risks." 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 3,026 net
vine acres of wine grapes, approximately 2,264 net vine acres, or 75%, are
planted or interplanted with phylloxera-resistant rootstock.

PRODUCTION AND MARKETING OF CALIFORNIA PREMIUM WINE AND GRAPES

The most popular California premium wine varieties include 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 4,950 acres of wine grape
vineyards in Monterey and San Benito Counties. These properties consist of
approximately 3,270 acres in Monterey County operated for the Company's own
account (including the 370-acre Riverview Vineyard purchased by the Company on
June 26, 1997 and approximately 207 new acres currently under development in
Hames Valley) and approximately 1,680 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 3,026 net vine acres of wine
grapes, approximately 2,050 net vine acres, or 68%, 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.,
approximately 320 net vine acres represent newly developed acreage which was
planted by the Company in 1996 and 1997, and approximately 357 net vine acres
represent the Company's recent Riverview Vineyard acquisition. In addition, the
Company has acquired an option to lease an additional 450 acres in Hames Valley,
which it intends to begin developing with premium varietal wine grapes in 1998.
See "Location Map," "--New Vineyards--The Hames Valley Properties," and "--New
Vineyards--Riverview Vineyard." 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

Riverview Vineyard.......... 370 Owned(4) Chardonnay, Pinot Noir, White Riesling, Semillon,
Souzao

San Lucas Vineyard.......... 874 Land Lease(5) Chardonnay, Cabernet Sauvignon, Merlot, Sauvignon
Blanc, Syrah

Hames Valley................ 207(6) Land Lease(7) Rootstock planted in 1997 and varieties to be
determined in 1998
-----

Total................... 3,270
-----
-----
</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) Acquired by the Company on June 26, 1997.

(5) 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.

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

(7) 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

35
<PAGE>
rootstock. This planned decline in grape production, along with poor weather,
caused grape sales revenues for 1993 and 1994 ($10.9 million and $9.4 million,
respectively) to be lower than they otherwise would have been and resulted in a
significant decline in tonnage produced through 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 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 28 184

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(1)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
---------

Total Tons Produced............................... 12,734 11,177 8,390 11,241 -- 11,241
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

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

(1) Does not include the 370-acre Riverview Vineyard acquired by the Company on
June 26, 1997. 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 began
developing in the year shown.

GRAPE SALES

PRIMARY CUSTOMERS. The wine grape tonnage harvested from the Company's
approximately 3,270 acres is largely subject to grape purchase contracts with a
small number of well-known wine

36
<PAGE>
producing companies. The largest of these contracts, representing approximately
91% of the Company's 1996 grape sales revenues and 84% 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
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, the majority of 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

37
<PAGE>
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 published
March 10, 1997. 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 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.................................................................. 1,098 1,098 1,184 1,436

Cabernet Sauvignon...................................................... 1,117 1,097 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) Does not include the 370-acre Riverview Vineyard acquired by the Company on
June 26, 1997. 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.

38
<PAGE>
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 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,

39
<PAGE>
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 farming 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.

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 $6.0 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 3,270 acres is approximately $49.1 to $58.9 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. The table includes the recently
purchased Riverview Vineyard (357 net vine acres) but does not include the 450
acres of undeveloped land located in Hames Valley which the Company has an
option to lease and intends to begin developing in 1998.

40
<PAGE>
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 2,019 2,144 2,261 2,425 2,926
Acres three and four years old (partial
production)........................................ 615 343 281 665 602 101
Acres one and two years old (not in production)..... 281 665 602 101 -- --
--------- --------- --------- --------- --------- ---------
Total Acres..................................... 2,350 3,027(2) 3,027 3,027 3,027 3,027
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</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 purchased a 357 net vine acre vineyard and began development on
approximately 320 additional acres.

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 begin developing 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 it 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.

41
<PAGE>
RIVERVIEW VINEYARD

On June 26, 1997, the Company acquired a 370-acre vineyard known as
Riverview Vineyard located approximately 12 miles north of SVI's vineyard
headquarters. The purchase price was approximately $5.5 million and was financed
through bank borrowings. The vineyard is planted with several varieties
including approximately 145 acres of Chardonnay and 100 acres of Pinot Noir. The
Company intends to secure long-term grape purchase contracts for the grape
production from this new vineyard. 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.

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 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.

42
<PAGE>
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

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.

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 3,026 net vine acres of wine grapes, approximately 2,264
net vine acres, or 75%, are planted or interplanted with phylloxera-resistant
rootstock. The remaining approximately 762 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

43
<PAGE>
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 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 1,684
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, budgeted costs of labor and equipment are
advanced to the Company on a monthly basis and the Company 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

44
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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 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
279,000 gallons in 1995 to approximately 6 million 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-

45
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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 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 1,837 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 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
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

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<PAGE>
whose total compensation for the 1996 fiscal year exceeded $100,000 (the "Named
Executive 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. The Company may grant options exercisable
for shares of Class A Common Stock to certain employees, including officers of
the Company, on or shortly after the effective date of the offering. Any such
option grants will be made by the Stock Plan Administrative Committee. If
granted, the options will 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, through the purchase of such shares at a price
not less than 100% of their fair market value at the time

49
<PAGE>
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 while
SVI-Del continues to own at least 50% of the outstanding voting securities of
SVI-Cal, or in the event SVI-Cal 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
(unless such acceleration is precluded by the terms of the grant), 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 or such acceleration is precluded by
the terms of the grant. 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 whether or not 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. In addition, one or more options or repurchase rights may be
structured so that the shares subject to those options or repurchase rights will
vest immediately upon the termination of the individual's service within a
designated period following a change in ownership of more than 50% of the
outstanding voting securities of SVI-Cal.

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.

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<PAGE>
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 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

51
<PAGE>
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 $584,000 for this contingency as of December 31, 1996.

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 three years beginning on June 1, 1997 except for Alfred G.
Scheid, whose Employment Agreement has a one-year term. 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, 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. See "Principal Stockholders--Agreement Among
Class B Stockholders". If such termination is a voluntary termination by Mr.
Gollnick which occurs prior to July 29, 2004, or is for defined cause regardless
of when such termination for cause occurs, 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 for any other reason or
under any other circumstances, or upon the death of Mr. Gollnick, the per share
purchase price will be the weighted average trading price of the Class A Common
Stock for the immediately preceding 20 trading days on which such Class A Common
Stock actually was traded.

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 periodically consults with John L. Crary and Robert P. Hartzell, both
directors of the Company, on various matters relating to its business
activities. The Company pays Messrs. Crary and 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, two of whom are Scott D. Scheid, Vice
President, Chief Operating Officer and a director of the

52
<PAGE>
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.

FORMATION OF SVI-DEL

SVI-Del was incorporated in Delaware in July 1997 to act as a holding
company for SVI-Cal and to participate in the Exchange Transaction described
below. See "--Exchange of Shares, Partnership Units and Limited Liability
Company Interests for Class B Common Stock."

TERMINATION OF SVI-CAL'S S CORPORATION STATUS

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

Prior to the date of this offering, SVI-Cal was the general partner of (i)
Vineyard Investors 1972 ("VI-1972"), a California limited partnership having as
its limited partners SVI-Cal, 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-Cal and VI-1972. Prior to such date, SVI-Cal 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 capital stock of SVI-Cal held by its
sole stockholder, the membership interests held by all members of each of Quadra
Partners and Big Vines and the limited partnership units held by all limited
partners (other than SVI-Cal) in VI-1972 are being contributed to SVI-Del in
exchange for (i) 4,400,000 shares of Class B Common Stock of the Company (the
"Exchange Transaction"), representing 100% of the pre-offering issued and
outstanding common stock of the Company and (ii) a commitment by SVI-Cal to make
the distributions described above.

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<PAGE>
See "--Termination of SVI-Cal's S Corporation Status." SVI-Del, as part of the
Exchange Transaction, is simultaneously contributing such limited partnership
units in VI-1972 and such membership interests in each of Quadra Partners and
Big Vines to SVI-Cal and, as a result, each of Quadra Partners, Big Vines,
VI-1972 and V-405 is being terminated and dissolved and the assets and
liabilities of each are becoming assets and liabilities of SVI-Cal. The
following table sets forth the number and percentage of shares of Class B Common
Stock of SVI that are being received by the sole stockholder of SVI-Cal and the
members of and limited partners in Quadra Partners, Big Vines and VI-1972 as 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).......................................... 2,955,851(1) 67.2%
Scott D. Scheid.............................................. 290,093 6.6%
Heidi M. Scheid.............................................. 290,093 6.6%
Kurt J. Gollnick............................................. 290,093 6.6%
---------- ---
Total...................................................... 4,400,000 100%
---------- ---
---------- ---
</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, after the Exchange
Transaction and 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)............................................. 3,523,721 80.1% 73.4%
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 Limited Liability Company (7)............................. 573,870 13.0 12.0

All directors and officers as a group (7 persons)................ 4,398,000 85.8 78.6
</TABLE>

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

(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) Consists of (i) 2,899,851 shares of Class B Common Stock owned by Alfred G.
Scheid as Trustee of the Alfred G. Scheid Revocable Trust, dated October
8,1992, (ii) 573,870 shares of Class B Common Stock owned by Emanty Limited
Liability Company, of which Mr. Scheid is the managing member and (iii)
50,000 shares of Class B Common Stock owned by Mr. Scheid's wife.

(5) Also includes 11,000 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.

(7) The members of Emanty Limited Liability Company are Tyler P. Scheid (49.5%
interest), the son of Alfred G. Scheid, and Emily K. Liberty (49.5%
interest), the daughter of Alfred G. Scheid, neither of whom is involved in
the Company's business, and the managing member is Alfred G. Scheid (1%
interest).

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 or former 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,
(iv) a trust under

55
<PAGE>
which all of the beneficiaries are persons described in clauses (ii) or (iii)
above, and (v) a corporation, partnership or limited liability company, all of
the equity interests of which are owned by persons or entities described in
clauses (i), (ii), (iii) and (iv) above or corporations, partnerships and
limited liability companies described in this clause (v).

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 12 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. Stockholders do not have cumulative
voting rights with respect to election 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. Any director so appointed also may be removed with or
without cause by the holders of the class of stock entitled to elect such
director.

Because the Company's shareholders are permitted to act by written consent
in lieu of a meeting, the holders of the Class B Common Stock may take actions
required to be voted upon by stockholders without providing the holders of the
Class A Common Stock with an opportunity to make nominations or raise other
matters at a meeting.

The Company may not alter the rights, preferences, privileges or
restrictions of either the Class A Common Stock or the Class B Common Stock (i)
without the approval by vote or written consent, in the manner provided by law,
of holders of a majority of the total number of outstanding shares of such
changed class, or (ii) in any way that would adversely affect such class or that
would adversely affect the relative rights, preferences, privileges or
restrictions of the other class in comparison with the altered class without the
approval by vote or written consent, in the manner provided by law, of holders
of a majority of the total number of shares of the adversely affected class
outstanding, voting as a separate class. No increase in the authorized number of
shares of either the Class A Common Stock or the Class B Common Stock may be
effected without the approval, by vote or written consent, in the manner
provided by law, of a majority of the total number of shares of each such class
outstanding, voting as a separate class. In addition, except with respect to the
issuance of shares of

56
<PAGE>
Class B Common Stock in connection with a stock split of such Class B Common
Stock or for payment of dividends on such Class B Common Stock in Class B Common
Stock, (i) no issuance of Class B Common Stock may be made prior to July 15,
2000 without the approval, by vote or written consent, in the manner provided by
law, of a majority of the Class A Common Stock outstanding and of a majority of
the Class B Common Stock outstanding, each voting separately as a class, and
(ii) no issuance of Class B Common Stock may be made from and after July 15,
2000 without the approval, by vote or written consent, in the manner provided by
law, of a majority of the Class A Common Stock outstanding and of the Class B
Common Stock outstanding, each voting separately as a class, or the unanimous
approval, by vote or written consent, in the manner provided by law, of all
directors elected by the holders of Class A Common Stock, or appointed to
replace directors who were elected by the holders of Class A Common Stock or
their appointed successors, consisting of not less than two persons, who are
not, directly or indirectly, beneficial owners of any Class B Common Stock and
who have not been officers or employees of the Company or any of its
subsidiaries within the three-year period immediately preceding such issuance.

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 or made on
the Class A Common Stock at any time that dividends are paid or made on the
Class B Common Stock, except that dividends payable in shares of Class B Common
Stock may be paid only on shares of Class B Common Stock and dividends payable
in shares of Class A Common Stock may be paid only on shares of Class A Common
Stock. Dividends other than dividends payable in Class A Common Stock may be
declared and paid or made on the Class A Common Stock without an identical or
equivalent dividend being declared and paid or made on the Class B Common Stock.
If a dividend 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 of Class
B Common Stock on the Class B Common Stock. If a dividend 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 of Class A Common Stock on the Class A Common
Stock.

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 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 other than (i) the Company, (ii) any of Alfred G.
Scheid, Scott D. Scheid, Heidi M. Scheid, Tyler P. Scheid, Emily K. Liberty,
Kurt J. Gollnick (the "Permitted Transferees") or Emanty Limited Liability
Company, (iii) a current or former spouse or direct lineal descendant of any of
the Permitted Transferees including, without limitation, adopted persons (if
adopted during minority) and persons born out of wedlock, and excluding foster
children and stepchildren, (iv) a trust under which all of the beneficiaries are
persons described in clauses (ii) or (iii) above, or (v) a corporation,
partnership or limited liability company, all of the equity interests of which
are owned

57
<PAGE>
by persons or entities described in clauses (i), (ii), (iii) and (iv) above or
corporations, partnerships and limited liability companies described in this
clause (v).

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, on a per share basis, 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.

CAPITAL STOCK

Except with respect to the issuance of shares of Class B Common Stock in
connection with a stock split of such Class B Common Stock or for payment of
dividends on such Class B Common Stock in Class B Common Stock, (i) no issuance
of Class B Common Stock may be made prior to July 15, 2000 without the approval,
by vote or written consent, in the manner provided by law, of a majority of the
Class A Common Stock outstanding and of a majority of the Class B Common Stock
outstanding, each voting separately as a class, and (ii) no issuance of Class B
Common Stock may be made from and after July 15, 2000 without the approval, by
vote or written consent, in the manner provided by law, of a majority of the
Class A Common Stock outstanding and a majority of the Class B Common Stock
outstanding, each voting separately as a class, or the unanimous approval, by
vote or written consent, in the manner provided by law, of all directors elected
by the holders of Class A Common Stock, or appointed to replace directors who
were elected by the holders of Class A Common Stock or their appointed
successors, consisting of not less than two persons, who are not, directly or
indirectly, beneficial owners of any Class B Common Stock and who have not been
officers or employees of the Company or any of its subsidiaries within the
three-year period immediately preceding such issuance.

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.

58
<PAGE>
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 share equal to 140% 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-4 or 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 25% of the voting power of any class entitled to vote 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

59
<PAGE>
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 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 (I.E.,
the Scheid family and its descendants and Kurt J. Gollnick) 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
American Stock Transfer & Trust Company.

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 and Kurt J. Gollnick 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

60
<PAGE>
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.

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.

61
<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.................................................... 480,000
Laidlaw Equities, Inc........................................................... 480,000
Rodman & Renshaw, Inc........................................................... 480,000
Dain Bosworth Incorporated...................................................... 55,000
J.J.B. Hilliard, W.L. Lyons, Inc................................................ 55,000
Josephthal Lyon & Ross Incorporated............................................. 55,000
Piper Jaffray Inc............................................................... 55,000
Principal Financial Securities, Inc............................................. 55,000
The Robinson-Humphrey Company, Inc.............................................. 55,000
Sutro & Co. Incorporated........................................................ 55,000
Brean Murray & Co., Inc......................................................... 35,000
Hanifen, Imhoff Inc............................................................. 35,000
Orrues Capital Markets, Inc..................................................... 35,000
RAF Financial Corporation....................................................... 35,000
Van Kasper & Company............................................................ 35,000
------------
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"), or institutions
located outside the U.S. that are not registered under the Securities Exchange
Act of 1934 and agree to make no sales within the U.S. or its territories and
possessions or to persons who are nationals thereof or residents therein, at the
price to public less a concession not exceeding $0.42 per share. The
Underwriters may allow, and such dealers may reallow, a concession not exceeding
$0.10 per share. After the shares of Class A 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 Cruttenden Roth Incorporated a
non-accountable expense allowance equal to 2.5% of the gross proceeds of the
offering (including any over-allotment shares), 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

62
<PAGE>
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 140% 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.

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, transfers to family trusts, and certain other non-public
transfers 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.

63
<PAGE>
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.

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.

64
<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 Equity.............................................................................. F-6

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

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

Scheid Vineyards Inc.

We have audited the accompanying 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 audits.

We conducted our audits 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 combined results of its 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
(AMOUNTS IN THOUSANDS)

<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 $ 203 $ 203
Accounts receivable, trade............................................... 274 534 534
Accounts receivable, stockholder......................................... -- 2,161 --
Accounts receivable, other............................................... 3 5 5
Inventories.............................................................. 100 1,392 1,392
Supplies and prepaid expenses............................................ 819 714 714
------------ --------- -----------
Total current assets................................................. 5,220 5,009 2,848

PROPERTY, PLANT AND EQUIPMENT, NET......................................... 16,342 17,517 17,517

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

OTHER ASSETS, NET.......................................................... 274 256 256
------------ --------- -----------
$ 24,069 $ 25,582 $ 23,421
------------ --------- -----------
------------ --------- -----------

LIABILITIES AND EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt........................................ $ 458 $ 458 $ 458
Notes payable to affiliates.............................................. 807 -- --
Notes payable, crop loan................................................. -- 203 203
Note due stockholder..................................................... 1,000 -- --
Distributions payable to stockholder/partners............................ -- -- 1,344
Accounts payable and accrued liabilities................................. 497 974 974
Accrued interest payable................................................. 204 261 261
------------ --------- -----------
Total current liabilities............................................ 2,966 1,896 3,240

LONG TERM DEBT............................................................. 11,458 14,487 14,487
DEFERRED COMPENSATION...................................................... 584 604 604
DEFERRED INCOME TAXES...................................................... -- -- 1,300
COMMITMENTS AND CONTINGENCIES (NOTE 9).....................................

EQUITY:....................................................................
Common stock............................................................. 2 2 4
Additional paid-in capital............................................... 124 124 2,852
Retained earnings........................................................ 5,621 5,264 934
Partners' capital........................................................ 3,314 3,205 --
------------ --------- -----------
9,061 8,595 3,790
------------ --------- -----------
$ 24,069 $ 25,582 $ 23,421
------------ --------- -----------
------------ --------- -----------
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-3
<PAGE>
SCHEID VINEYARDS INC.

COMBINED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER THREE MONTHS ENDED
31, MARCH 31,
-------------------- --------------------
1995 1996 1996 1997
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Sales................................................................. $ 7,164 $ 10,769 $ -- $ --
Vineyard management, services and other fees.......................... 476 922 210 347
--------- --------- --------- ---------
7,640 11,691 210 347
Cost of sales......................................................... 3,670 4,544 -- --
--------- --------- --------- ---------
GROSS PROFIT............................................................ 3,970 7,147 210 347
General and administrative............................................ 2,583 2,604 678 628
Interest expense (net of interest income of $86,452 in 1996 and
$118,968 in 1995)................................................... 906 654 94 185
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES....................................... 481 3,889 (562) (466)
PROVISION FOR INCOME TAXES.............................................. 1 44 -- --
--------- --------- --------- ---------
NET INCOME (LOSS)....................................................... $ 480 $ 3,845 $ (562) $ (466)
--------- --------- --------- ---------
--------- --------- --------- ---------

PRO FORMA AMOUNTS (NOTE 14):
INCOME BEFORE INCOME TAXES AS REPORTED.................................. 481 3,889 (562) (466)
PRO FORMA INCOME TAX BENEFIT (PROVISION)................................ (192) (1,556) 225 186
--------- --------- --------- ---------
PRO FORMA NET INCOME (LOSS)............................................. $ 289 $ 2,333 $ (337) $ (280)
--------- --------- --------- ---------
--------- --------- --------- ---------
PRO FORMA NET INCOME (LOSS) PER SHARE................................... $ 0.07 $ 0.53 $ (0.08) $ (0.06)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-4
<PAGE>
SCHEID VINEYARDS INC.

COMBINED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER THREE MONTHS ENDED
31, MARCH 31,
-------------------- --------------------
1995 1996 1996 1997
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................................ $ 480 $ 3,845 $ (562) $ (466)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities-
Depreciation, amortization and abandonments............................ 914 909 213 263
Deferred compensation.................................................. 64 71 18 20
Changes in operating assets and liabilities-
Accounts receivable, trade............................................. 105 (111) (782) (260)
Accounts receivable, stockholder....................................... -- -- -- (2,161)
Accounts receivable, other............................................. 739 62 57 (2)
Inventories............................................................ (53) (46) (1,471) (1,292)
Supplies and prepaid expenses.......................................... (315) (249) 176 105
Accounts payable and accrued liabilities............................... 368 (20) 622 534
Borrowings on notes payable, short term................................ -- -- 537 203
Repayments on notes payable, short term................................ -- -- -- (1,807)
Income taxes payable................................................... (15) -- (2) --
--------- --------- --------- ---------
Net cash provided by (used in) operations............................ 2,287 4,461 (1,194) (4,863)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Long-term receivable..................................................... -- (2,233) -- (567)
Additions to property, plant and equipment............................... (2,383) (3,742) (821) (1,438)
Other assets............................................................. (71) 13 (3) 18
--------- --------- --------- ---------
Net cash used in investing activities................................ (2,454) (5,962) (824) (1,987)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt............................................... 5,040 7,267 (15) 3,029
Repayment of long-term debt.............................................. (5,867) (4,832) (300) --
Subchapter S distributions............................................... (336) (125) -- --
Partnership distributions................................................ (49) (344) (46) --
--------- --------- --------- ---------
Net cash provided by (used in) financing activities.................. (1,212) 1,966 (361) 3,029
--------- --------- --------- ---------
Increase (decrease) in cash and cash equivalents..................... (1,379) 465 (2,379) (3,821)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............................. 4,938 3,559 3,559 4,024
--------- --------- --------- ---------
Cash and cash equivalents, end of period................................. $ 3,559 $ 4,024 $ 1,180 $ 203
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-5
<PAGE>
SCHEID VINEYARDS INC.

COMBINED STATEMENTS OF EQUITY
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
RETAINED
COMMON STOCK EARNINGS
-------------------------- ADDITIONAL AND
NUMBER OF PAID-IN PARTNERS
SHARES AMOUNT CAPITAL CAPITAL
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994............................................ 97,413 $ 2 $ 124 $ 5,464
Subchapter "S" distribution......................................... -- -- -- (336)
Partnership distributions........................................... -- -- -- (50)
Net Income.......................................................... -- -- -- 480
--
----------- ----- -----------
BALANCE, December 31, 1995............................................ 97,413 $ 2 $ 124 $ 5,558
Subchapter "S" distribution......................................... -- -- -- (125)
Partnership distributions........................................... -- -- -- (343)
Net Income.......................................................... -- -- -- 3,845
--
----------- ----- -----------
BALANCE, December 31, 1996............................................ 97,413 $ 2 $ 124 $ 8,935
Net loss (unaudited)................................................ -- -- -- (466)
--
----------- ----- -----------
BALANCE, March 31, 1997 (unaudited)................................... 97,413 $ 2 $ 124 $ 8,469
--
--
----------- ----- -----------
----------- ----- -----------

RETAINED EARNINGS........................................................................................ $ 5,264
PARTNERS' CAPITAL........................................................................................ 3,205
-----------
$ 8,469
-----------
-----------
</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).

Prior to December 31, 1996 the interests of all unrelated limited partners
were purchased by the Company. The accompanying combined financial statements
are based upon the historical cost of assets and liabilities except that assets
related to limited partnership interests purchased from unrelated partners are
recorded at the cost of acquisition.

ORGANIZATION--The principal business of the Company is the management and
farming of approximately 4,950 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 68% of the Company's acreage and accounted for
approximately 91% 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.

ACCOUNTS RECEIVABLE, STOCKHOLDER--The $2,161,000 "accounts receivable,
stockholder" represents advances made for working capital purposes. Such
advances are charged against retained earnings in the March 31, 1997 pro forma
balance sheet because they represent partial distribution of accumulated
earnings related to the prior S Corporation status. The estimated remaining
accumulated earnings of $869,000 are included in the pro forma balance sheet
caption "distributions payable to stockholder/partners" (see Note 14).

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. On a quarterly basis, the
Company evaluates the cost of its inventories (both crop costs and bottled wine)
and reduces such inventories to market if required.

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)
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.

REVENUE RECOGNITION--The Company recognizes revenue from grape sales when
the grapes are delivered to the winery. The Company does not have any allowance
for returns because grapes are tested and accepted upon delivery.

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 the Impairment of Long-Lived Assets and for 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.

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)

2. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -------------
<S> <C> <C>
Bulk and Bottled Wine........................................... $ 56,000 $ 58,000
Deferred Crop Costs............................................. 44,000 1,334,000
------------ -------------
Total....................................................... $ 100,000 $ 1,392,000
------------ -------------
------------ -------------
</TABLE>

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........................................... $ 3,616,000 $ 3,679,000
Vineyard improvements........................................ 10,332,000 12,255,000
Vineyard improvements under development...................... 6,111,000 5,245,000
Machinery and equipment...................................... 2,696,000 3,014,000
-------------- --------------
Total.................................................... 22,755,000 24,193,000
Less accumulated depreciation and amortization............... 6,413,000 6,676,000
-------------- --------------
Property, plant and equipment--net........................... $ 16,342,000 $ 17,517,000
-------------- --------------
-------------- --------------
</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). Under the
contract, the client is responsible on an annual basis for determining the
nature and amount of budgeted expenditures for the year. On a monthly basis, the
client is obligated to advance the budgeted costs to the Company.

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 (see Note 13).

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 to a maximum
allowable commitment of $1,071,000, which is due on July 5, 2005. The line of
credit is secured by a leasehold interest in 707 vineyard acres. Interest is
payable quarterly at 3/4% over the bank's reference rate (8 1/4% at December 31,
1996)........................................................................... $ 327,000 $ 2,786,000

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 (see Note 13).............................. 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 (see
Note 13)........................................................................ 862,000 865,000

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)..................... 2,233,000 2,800,000
-------------- --------------

Total......................................................................... 11,916,000 14,945,000

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

Long-term portion................................................................. $ 11,458,000 $ 14,487,000
-------------- --------------
-------------- --------------
</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......................................................... 1,895,000 2,109,000
1999......................................................... 342,000 556,000
2000......................................................... 342,000 556,000
2001......................................................... 634,000 852,000
Thereafter................................................... 8,245,000 10,414,000
-------------- --------------
Total........................................................ $ 11,916,000 $ 14,945,000
-------------- --------------
-------------- --------------
</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....................................... $ 807,000
</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 $91,000 annually. Farm land leases
cover approximately 1,433 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........................................................... $ 455,000
1998........................................................... 455,000
1999........................................................... 402,000
2000........................................................... 384,000
2001........................................................... 384,000
Thereafter..................................................... 3,909,000
</TABLE>

Rent charged to operations in 1995 and 1996 was $388,000 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 $29,000 and $35,000 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 $12,000 and $27,000 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 $64,000 and $71,000 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).... $ 654,000 $ 906,000 $ 185,000 $ 94,000
Interest capitalized...................... 430,000 291,000 35,000 108,000
Income taxes paid......................... 0 16,000 42,000 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. The Company has not determined the terms of such options or
the vesting period. It is anticipated that all stock option grants will be at
fair market value at the date of the grant. Options can be either qualified or
non-qualified and no stock options have been granted to date (see Note 14).

13. SUBSEQUENT EVENTS (UNAUDITED)

NOTES 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.

On June 4, 1997, the Company replaced its two crop line of credit agreements
which provided for maximum aggregate borrowings of $3,900,000 with a crop line
of credit which provides for maximum borrowings of $10,500,000 through June 5,
1998. Borrowings are secured by crops and other assets with interest due
quarterly at the bank's reference rate.

On June 23, 1997, SVI borrowed on a short-term note payable to bank of
$3,000,000, due in full on September 5, 1997, with interest at the bank's
reference rate, to partially finance its acquisition of a 370-acre vineyard
property. The Company intends to refinance the note to a long-term note payable
prior to its due date.

On June 25, 1997, the Company replaced its note payable to bank of
$1,434,000 with a line of credit which provides for maximum borrowings of
$2,835,000 diminishing annually to a maximum allowable commitment of $1,775,000
which is due on June 4, 2007. The line of credit is secured by a deed of trust
on real property. Interest is payable quarterly at 1/4% over the bank's
reference rate.

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)

13. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
On June 25, 1997, the Company replaced notes payable to bank of $288,000
with a line of credit which provides for maximum borrowings of $1,450,000
diminishing to a maximum allowable commitment of $586,000 which is due on June
4, 2007. The line of credit is secured by a leasehold interest. Interest is
payable quarterly at 1/4% over the bank's reference rate.

On June 26, 1997, the Company purchased a 370-acre vineyard known as
Riverview Vineyard for a purchase price of approximately $5.5 million. The
purchase price was financed by the notes payable established on June 23rd and
June 25th as referred to above.

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 each of Quadra Partners, other
than those held by SVI in each case, and Big Vines will be exchanged for Class B
Common Stock of SVI (the "Exchange Transaction"). As a result, each of VI-1972,
V-405, Big Vines 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.

S CORPORATION CONVERSION--In connection with the Company's contemplated
initial public stock offering, the Company has formed Scheid Vineyards Inc., a
Delaware corporation ("SVI-Del"), which will be the issuer of the Class A Common
Stock. SVI-Del conducts all of its business through its wholly-owned subsidiary,
Scheid Vineyards California Inc., a California corporation ("SVI-Cal"). The
Exchange Transaction will result in termination of SVI-Cal's 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.

DISTRIBUTIONS--Prior to the offering, SVI-Cal's cumulative S Corporation
earnings will be determined and a distribution will be made to its stockholder.
This amount is estimated at $3,030,000. In addition, a distribution of
approximately $475,000 will be made to the limited partners of VI-1972 (as of
immediately prior to the Exchange Transaction) to pay income taxes on income
from the partnership.

F-14
<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 SVI-Cal's 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 status 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.

ADJUSTMENTS TO EQUITY--The pro forma adjustments to equity are as follows:

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED PARTNERS'
STOCK CAPITAL EARNINGS CAPITAL
----------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
March 31, 1997--Actual................................. $ 2,000 $ 124,000 $ 5,264,000 $ 3,205,000

Accounts receivable, stockholder....................... -- -- (2,161,000) --

Distribution payable to stockholder/partners........... -- -- (869,000) (475,000)

Deferred income taxes.................................. -- -- (1,300,000) --

Exchange of partnership interests for common stock..... 2,000 2,728,000 -- (2,730,000)
----------- -------------- -------------- --------------

March 31, 1997--Pro Forma.............................. $ 4,000 $ 2,852,000 $ 934,000 $ 0
----------- -------------- -------------- --------------
----------- -------------- -------------- --------------
</TABLE>

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.

F-15
<PAGE>
[PHOTO #1 OF WINE GRAPES AND LEAVES ON ONE OF THE COMPANY'S VINEYARDS]
<PAGE>
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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
The Company............................................................... 17
Use of Proceeds........................................................... 18
Dividend Policy........................................................... 18
Capitalization............................................................ 19
Dilution.................................................................. 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........................................... 60
Underwriting.............................................................. 62
Legal Matters............................................................. 64
Experts................................................................... 64
Available Information..................................................... 64
Index to Combined Financial Statements.................................... F-1
</TABLE>

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

UNTIL AUGUST 19, 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

[LOGO]

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.

JULY 24, 1997

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