SCHEID VINEYARDS INC, SB-2, 1998-04-27

SCHEID VINEYARDS INC
SB-2, 1998-04-27
AGRICULTURAL PRODUCTION-CROPS

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1998

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM SB-2

REGISTRATION STATEMENT

UNDER

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

SCHEID VINEYARDS INC.
(Name of small business issuer in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 0172 77-0461833
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) Number)
</TABLE>

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13470 WASHINGTON BLVD.
MARINA DEL REY, CALIFORNIA 90292
(310) 301-1555
(Address and telephone number of principal executive offices and principal place
of business)
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ALFRED G. SCHEID
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SCHEID VINEYARDS INC.
13470 WASHINGTON BLVD.
MARINA DEL REY, CALIFORNIA 90292
(310) 301-1555

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

COPIES TO:

GORDON R. KANOFSKY, ESQ. BRIAN W. COPPLE, ESQ.
DEBORAH L. GUNNY, ESQ. MONICA J. BURICK, ESQ.
SANDERS, BARNET, GOLDMAN, SIMONS & GIBSON, DUNN & CRUTCHER LLP
MOSK,
A PROFESSIONAL CORPORATION JAMBOREE CENTER
1901 AVENUE OF THE STARS, SUITE 850 4 PARK PLAZA
LOS ANGELES, CALIFORNIA 90067 IRVINE, CALIFORNIA 92614-8557
(310) 553-8011 (714) 451-3800

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

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

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

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

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

<TABLE>
<CAPTION>
TITLE OF EACH AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT
CLASS OF SECURITIES TO BE OFFERING AGGREGATE OF REGISTRATION
TO BE REGISTERED REGISTERED PRICE PER SHARE(1) OFFERING PRICE(1) FEE(1)
<S> <C> <C> <C> <C>
Class A Common Stock, $0.001 par value
per share........................... 1,150,000(2) $9.875 $11,365,250.00 $3,350.09
</TABLE>

(1) Determined in accordance with Rule 457(c) based on the average of the per
share high and low sale prices for the Registrant's Class A Common Stock
reported in the Nasdaq National Market System on April 21, 1998.

(2) Includes up to 150,000 shares of Class A Common Stock that may be purchased
by the Underwriters to cover overallotments, if any.
------------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SECTION 8(a) MAY
DETERMINE.

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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 27, 1998

PROSPECTUS

1,000,000 SHARES

[LOGO]
CLASS A COMMON STOCK
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All of the 1,000,000 shares (the "Shares") of Class A Common Stock (the
"Class A Common Stock") of Scheid Vineyards Inc. ("SVI" or the "Company")
offered hereby are being offered for sale by a principal stockholder of the
Company (the "Selling Stockholder"). See "Principal and Selling Stockholders."
The Company will not receive any of the proceeds from this offering.

The Company has two classes of Common Stock, Class A Common Stock 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.
The two classes generally vote together, but holders of Class A Common Stock
voting separately are entitled to elect two of the Company's five directors, and
holders of Class B Common Stock voting separately are entitled to elect the
remaining three directors. 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. The Shares offered hereby are Class B
Common Stock in the hands of the Selling Stockholder but will automatically
convert into Class A Common Stock on a share-for-share basis in connection with
their sale in this offering.

The Class A Common Stock is quoted on the Nasdaq National Market under the
symbol "SVIN". On April 24, 1998, the last reported sale price of the Class A
Common Stock as reported on the Nasdaq National Market was $10 7/16 per share.
See "Price Range of Class A Common Stock."

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SEE "RISK FACTORS" BEGINNING ON PAGE 7 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 PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS (1) STOCKHOLDER (2)
<S> <C> <C> <C>
Per Share....................................... $ $ $
Total (3)....................................... $ $ $
</TABLE>

(1) Underwriting discounts and commissions will be paid by the Selling
Stockholder. Excludes a non-accountable expense allowance payable by the
Company and the Selling Stockholder to Cruttenden Roth Incorporated (the
"Representative"). The Company and the Selling Stockholder have agreed to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."

(2) Before deducting the Selling Stockholder's share of offering expenses,
including the Representative's non-accountable expense allowance. Total
offering expenses (excluding underwriting discounts and commissions) are
estimated to be $ , and will be paid half by the Selling Stockholder
and half by the Company.

(3) Certain other stockholders of the Company have granted the Underwriters a
45-day option to purchase up to 150,000 additional shares of Class A Common
Stock on the same terms per share solely to cover overallotments, if any. If
this option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, and Proceeds to Selling Stockholder will be
$ , $ , and $ , respectively. If the overallotment
option is exercised, the stockholders selling overallotment shares will pay
the underwriting discounts and commissions on those sales and their ratable
share of offering expenses. See "Underwriting."

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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 May , 1998.

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[LOGO]

THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This Prospectus contains certain forward-looking statements, including the
plans and objectives of management for the business, operations, and economic
performance of the Company. These forward-looking statements generally can be
identified by the context of the statement or the use of words such as the
Company or its management "believes," "anticipates," "intends," "expects,"
"plans" or words of similar meaning. Similarly, statements that describe the
Company's future operating performance, financial results, plans, objectives,
strategies, or goals are forward-looking statements. Although management
believes that the assumptions underlying the forward-looking statements are
reasonable, these assumptions and the forward-looking statements are subject to
various factors, risks and uncertainties, many of which are beyond the control
of the Company, including but not limited to agricultural risks, dependence on a
small number of principal customers and uncertainties concerning growth in
revenues and profitability. Accordingly, actual results could differ materially
from those contemplated by the forward-looking statements. In addition to the
other cautionary statements relating to certain forward-looking statements
throughout this Prospectus, attention is directed to "Risk Factors" for
discussion of some of the factors, risks and uncertainties that could affect the
outcome of future results contemplated by forward-looking statements.

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."

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMPANY'S CLASS A COMMON STOCK ON THE NASDAQ
NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."

2
<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
FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS
ASSUMES (I) NO EXERCISE OF THE UNDERWRITERS' OVERALLOTMENT OPTION, (II) NO
EXERCISE OF OPTIONS GRANTED UNDER THE COMPANY'S 1997 STOCK OPTION/STOCK ISSUANCE
PLAN, (III) NO EXERCISE OF ANY OUTSTANDING WARRANTS TO PURCHASE SHARES OF
CAPITAL STOCK OF THE COMPANY, AND (IV) NO CONVERSION OF ANY OUTSTANDING SHARES
OF CLASS B COMMON STOCK TO CLASS A COMMON STOCK OTHER THAN THE SHARES OFFERED BY
THIS PROSPECTUS. 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 5,280 acres of wine grape vineyards. Of
this total, approximately 3,600 acres are operated for the Company's own account
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 1997 total California table wine sales were approximately $4.8 billion, of
which $3.8 billion, or 78%, 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 Brands, Inc.
("Canandaigua") and International Distillers and Vinters North America, a
subsidiary of Diageo plc ("IDV"), the second and seventh largest U.S. wineries
in terms of 1997 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 IDV cover 61% of the Company's acreage and accounted for
approximately 81% and 84% of the Company's 1997 and 1996 total revenues,
respectively.

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 Gundlach-Bundschu
Winery. The terms of the Company's long-term grape purchase contracts extend to
between 2001 and 2013, and have "evergreen" renewal 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.

3
<PAGE>
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. Similar productivity improvements generally are
anticipated in connection with vineyards that may be acquired in the future. 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, in 1997 the Company acquired an existing vineyard and open land that
the Company is developing as a vineyard. See "Recent Developments" below. 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
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.,
Marina del Rey, California 90292, telephone number (310) 301-1555, and its
vineyard headquarters is located at 1972 Hobson Avenue, Greenfield, California
93927.

RECENT DEVELOPMENTS

The 1997 harvest set new records for the Company for both tonnage and
revenues. The 1997 grape production from vineyards owned by the Company was
approximately 15,600 tons, generating revenues of approximately $18.6 million.
In addition, the Company realized approximately $1.2 million of revenue from its
vineyard and management services and other fees.

Based upon the pricing formulas in substantially all of the Company's grape
purchase contracts, the Company expects that the weighted average prices per ton
it will receive for the 1998 harvest for its principal grape varieties will
increase between 7% and 11% over the weighted average prices per ton it received
for the 1997 harvest.

In 1997, the Company acquired a lease option for, and began development of,
an approximately 537-acre property in Hames Valley in Monterey County. The
Company planted 207 acres of this property in 1997, and in early 1998, began
developing the remaining 330 acres. The 1997 planting is expected to begin
bearing fruit in 1999 and the 1998 planting is expected to begin bearing fruit
in 2000. In 1997, the Company also began to develop an additional 445 acres in
Hames Valley for Canandaigua under a vineyard management contract.

The Company sold grapes to ten new customers in 1997, including Beringer
Wine Estates, David Bruce Winery and Gundlach-Bundschu Winery and entered into
new long-term grape purchase contracts for 175 acres. The terms of these new
contracts extend to between 2007 and 2013 and have "evergreen" renewal
provisions requiring two years' prior written notice of termination.

During the third quarter of 1997, the Company completed its initial public
offering of 2,300,000 shares of its Class A Common Stock, from which the Company
realized approximately $20 million in net proceeds.

4
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock Offered by the
Selling Stockholder................... 1,000,000 shares

Common Stock Outstanding after the
offering (1):
Class A Common Stock................. 3,325,000 shares
Class B Common Stock................. 3,375,000 shares
Total.............................. 6,700,000 shares

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 (currently two directors).
Class B Common Stock................. Five votes per share; entitled to elect the
remainder of the authorized directors (currently
three directors).
</TABLE>

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(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 warrants issued
to the representatives of the underwriters for the Company's public offering
in July 1997, and (iii) 150,000 shares of Class A Common Stock which may be
purchased by the Underwriters from certain other stockholders of the Company
(together with the Selling Stockholder, the "Selling Stockholders") to cover
overallotments, if any. If the overallotment option is exercised in full,
the number of outstanding shares of Class A Common Stock and Class B Common
Stock will be 3,475,000 and 3,225,000, respectively.

(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."

5
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
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1996 1997
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital.......................................................................... $ 2,254 $ 15,665
Current assets........................................................................... 5,220 17,159
Total assets............................................................................. 24,069 49,869
Current liabilities...................................................................... 2,966 1,494
Long-term liabilities(2)................................................................. 12,042 19,254
Total liabilities........................................................................ 15,008 20,748
Equity................................................................................... 9,061 29,121
</TABLE>

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(1) The Exchange Transaction (as defined in "The Company") resulted in the
conversion of SVI-Cal's S Corporation status to C Corporation status in July
1997. 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 per share for 1995 and 1996 is based upon
4,400,000 shares of Class B Common Stock outstanding immediately prior to
the Company's July 1997 initial public offering. See Note 2 of "Notes to
Financial Statements."

(2) Long-term liabilities include borrowings of $4,679,000 at December 31, 1997
used for costs incurred for the development of certain vineyards owned by
IDV. IDV is obligated to advance budgeted costs to the Company on a monthly
basis, which are being funded under a line of credit obtained by the
Company. IDV has provided a letter of credit to secure repayment of these
borrowings. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations-- Liquidity and Capital Resources."

6
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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. 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 70 miles, north to south, close to Highway 101 in
Monterey County. Accordingly, adverse weather in the future could 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 in this section 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 Enzonev. 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 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 3,357 net vine acres (I.E., excluding acreage devoted to roads,
storage areas, equipment yards or uses other than vineyards) of wine grapes,
approximately 2,594 net vine acres, or 77%, are planted or interplanted with
phylloxera-resistant rootstock. The remaining approximately 763 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.

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.

7
<PAGE>
DEPENDENCE ON MAJOR CUSTOMERS; RENEWAL OF GRAPE PURCHASE AGREEMENTS

The majority of SVI's current grape production is contracted for sale to two
winery customers, IDV, which accounted for approximately 81% of the Company's
total revenues in 1997 and Canandaigua, which accounted for approximately 9% of
its total revenues in 1997. 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" renewal 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, it is possible that they
could 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 IDV 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 IDV or
Canandaigua could have a material adverse effect on the Company's business,
financial condition and results of operations.

UNCERTAINTY OF REVENUE GROWTH

Approximately 62% 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 initial development,
replanting, regrafting and various other factors. 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, develop and operate more vineyard properties. 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. See "Business--The Company's Grape
Production Operations--Maturity Levels of SVI's Net Vine Acres."

FIXED COSTS AND REVENUE FLUCTUATIONS; UNCERTAINTY OF PROFITABILITY

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

CAPITAL REQUIREMENTS

The farming of vineyards in production requires substantial amounts of
working capital. Historically, the Company has relied heavily on short-term
credit to finance its working capital requirements. Working capital requirements
are expected to increase 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 or other capital sources could impair the
Company's ability to grow and adversely affect the Company's business, financial
condition and results of operations.

8
<PAGE>
Substantial capital expenditures are required to develop and acquire new
vineyards and improve existing vineyards. 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. Over the next three years, the
Company's planned new vineyard developments are expected to require
approximately $7.3 million in capital investment and continued improvements of
existing vineyards are expected to require approximately $8 million. 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
will 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 through (i) new development of
undeveloped properties suitable for premium varietal vineyards and (ii)
acquisitions of developed vineyard properties. There can be no assurance that
the Company will be able to locate suitable properties to buy or lease at viable
prices, and any undeveloped properties acquired by the Company will require
significant capital investment and several years of development before becoming
productive. The Company does not expect to receive the full benefit from any
newly planted vineyards for at least four to five years after planting due to
the time required for the vines to mature and produce economic yields. In
addition, the Company's ability to increase profits through acquisition depends
to a significant degree upon the prices at which properties can be purchased or
leased. Furthermore, increased acreage under management will create additional
demands on Company management and may require the Company to hire and integrate
more employees. Accordingly, the Company's strategies are long-term strategies
designed to increase the Company's production capacity and expand the Company's
business. 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.

In addition, the Company initiated wine production and limited marketing
operations in 1997. The Company has not previously engaged in this business and
it competes against hundreds of larger and more experienced competitors. The
Company produced only 2,000 and 4,000 cases of wine in 1996 and 1997,
respectively, and has made no significant commercial wine sales. In the absence
of an acquisition of an established winery, 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; Stockholder 'Wine Dividend' Program."

WINE GRAPE SUPPLY AND DEMAND; PRICING

Prices for premium California wine grapes are at historically high levels
due to (i) a shortage of grapes due to a variety of factors and (ii) an increase
in demand. Recent plantings of new vineyards, yield enhancements through
technological advances, foreign competition and other factors are expected to
increase supply. Furthermore, there can be no assurance that demand 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.
Some declines in prices received by the Company should be expected, and these
declines may be significant.

9
<PAGE>
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. The holders of the Class A Common Stock, voting as a
separate class, are entitled to elect 25% of the authorized number of directors
of the Company, rounded up to the nearest whole number (currently two
directors), and the holders of the Class B Common Stock, voting as a separate
class, are entitled to elect the remaining directors of the Company (currently
three directors). 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.
Gollnick (an officer of the Company who is not related to the Scheid family),
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) 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
three of the five directors of the Company and representing approximately 84% of
the combined voting power of both classes of Common Stock, assuming no exercise
of the Underwriters' overallotment option. As a result, the holders of the Class
B Common Stock will be able for the foreseeable future to control the management
and policies of the Company. In addition, so long as the outstanding shares of
Class B Common Stock represent more than approximately 17% of the total number
of shares of Class A Common Stock and Class B Common Stock outstanding, the
holders of the Class B Common Stock will be able to 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. 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 and Selling Stockholders."

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

COMPETITION; INDUSTRY FRAGMENTATION

The wine grape industry is extremely competitive. Many of the Company's
current and prospective competitors have substantially greater financial,
production, personnel and other resources than the Company. The Company competes
with many other producers of premium wine grapes in California, including a few
thousand small independent (I.E., not winery controlled) wine grape producers
who sell their production to wineries. Many wineries also own vineyards, and
there has been a significant trend among major wineries to develop additional
acreage to produce wine grapes for their own use. To meet recent shortfalls in
supply of premium grape varieties in California, there have been significant new
plantings of vineyards which can be expected to result in increased production
of

10
<PAGE>
California wine grapes in future years. 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.
Foreign competition can be expected to continue and increase. In addition, the
Company's principal winery customers compete with each other and with other
wineries located in the United States and abroad.

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 "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

POSSIBLE TERMINATION OF VINEYARD MANAGEMENT AGREEMENTS

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

LABOR REGULATIONS AND UNION CONTRACT

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

The United Farm Workers, AFL-CIO ("UFW") is the major union representing
farm labor and has represented SVI's farm workers since 1993. The Company has
recently completed the negotiation of a new four-year contract with the UFW that
will expire at the end of 2001. Although the Company historically has had
satisfactory labor relations, it has been picketed from time to time during the
initial organization of its employees and during contract negotiations. No
assurances can be given that the Company's satisfactory labor relations will
continue or that the UFW will not engage in picketing, walk-outs, sit-downs,
slow-downs or strikes or the threat of these actions. The Company's business is
heavily dependent upon farm labor, and the failure of the Company to maintain
adequate labor relations on terms acceptable to the Company could have a
material adverse effect upon the Company's business, financial condition and
results of operations.

11
<PAGE>
DEPENDENCE ON CONSUMER DEMAND

In recent years there has been substantial publicity regarding the possible
health benefits of moderate wine consumption. Anti-alcohol groups have, in the
past, successfully advocated more stringent labeling requirements and other
regulations designed to discourage consumption of alcoholic beverages, including
wine. More restrictive regulations, negative publicity regarding alcohol
consumption, publication of studies that indicate a significant health risk from
moderate consumption of alcohol or changes in consumer perceptions of the
relative healthfulness or safety of wine generally could adversely affect the
sale and consumption of wine and the demand for wine and wine grapes and could
have a material adverse effect on the Company's business, financial condition
and results of operations.

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

GOVERNMENT REGULATION; TAXES

SVI is subject to a broad range of federal and state regulatory requirements
regarding its operations and practices. The Company's current operations and
future expansion are subject to regulations governing the storage and use of
fertilizers, fungicides, herbicides, pesticides, fuels, solvents and other
chemicals. These regulations are subject to change and conceivably could have a
significant impact on operating practices, chemical usage, and other aspects of
the Company's business.

Wine production and sales are subject to extensive regulation by the Federal
Bureau of Alcohol, Tobacco and Firearms, 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. Increases in excise
taxes on wine, if enacted, could reduce demand for wine and wine grapes, which
could materially and adversely effect 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. There can be no assurance that
the key persons will remain in their management positions with the Company, and
the loss of the services of any of the key persons could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Management."

12
<PAGE>
LIMITED TRADING MARKET; VOLATILITY OF STOCK PRICE

The Class A Common Stock is designated for trading as a National Market
Security on the Nasdaq Stock Market. The average daily trading volume of the
Class A Common Stock has fluctuated significantly since it began trading in July
1997 and trading has been generally limited. Stockholders wishing to sell shares
of the Class A Common Stock may encounter difficulties in view of the recent
level of trading volume. There can be no assurance that a more active trading
market will develop, or if one does develop, that it will be maintained. Trading
activity in the Class A Common Stock and any associated market price volatility
may be concentrated at year-end after harvest, when grape sales revenues are
known, and in early February and early March, when the Grape Crush Report is
issued by the CDFA. There can be no assurance that the market price of the Class
A Common Stock after this offering will equal or exceed the public offering
price set forth on the cover page of this Prospectus. In addition, the stock
market from time to time has experienced price and volume fluctuations that have
affected the market price for many companies and that frequently have been
unrelated to the operating performance of those companies. Such market
fluctuations may adversely affect the market price of the Class A Common Stock.
After the offering, the Company's market float will remain relatively small and
the shares of Class A Common Stock may continue to 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. A substantial
portion of the 3,375,000 shares of Class A Common Stock issuable upon conversion
of outstanding shares of Class B Common Stock following this offering will be
eligible for sale in the public market beginning July 30, 1998 (subject to the
180-day lock-up period described below), subject to certain rights of first
refusal held by the Company and certain 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 and
Selling 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 for this offering, the Class A Common Stock
issuable upon conversion of the Class B Common Stock owned by Alfred G. Scheid
may not be sold for 180 days from the date of this Prospectus, but Cruttenden
Roth Incorporated may waive this requirement. See "Shares Eligible for Future
Sale."

NO PAYMENT OF DIVIDENDS

DILUTION

Investors purchasing shares of Class A Common Stock in this offering may
incur dilution upon exercise of stock options and issuances of Class A Common
Stock in public or private offerings and in connection with future acquisitions
or issuances of Class B Common Stock in private offerings.

13
<PAGE>
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. See "Business--Environmental Issues."

WATER

The Company is dependent upon wells located on or near its vineyards for
water to irrigate the vineyards, which wells are supplied by aquifers fed by the
Salinas River and reservoirs operated by Monterey County. Although historically
the quality of water from these wells has been good and the wells have
consistently supplied a plentiful and reliable source of water, even during the
drought years of the late 1980s, and the Company believes its sources of water
will be available for the foreseeable future, it is possible that the Company's
water supplies could be impaired in the future due to drought, contamination or
other circumstances. An impairment in the Company's water supplies could
adversely affect the business, financial condition and results of operations of
the Company.

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

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

The Board of Directors of the Company has the authority to issue up to
2,000,000 shares of Preferred Stock (the "Preferred Stock") and to determine the
price, rights, preferences, privileges and restrictions, including voting
rights, of those shares without any further vote or action by the stockholders.
The rights of the holders of Class A Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any Preferred Stock that may
be issued in the future. The issuance of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue shares of Preferred Stock.
Furthermore, following this offering, the Company is permitted to issue up to
6,625,000 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."

14
<PAGE>
THE COMPANY

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 were all transferred to the Company
concurrently with the Company's July 1997 initial public 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 $11.0 million. These improvements were funded
primarily with internally generated cash, loans from Mr. Scheid, and bank
borrowings portions of which were repaid out of the net proceeds from the
initial public offering. As of the date of this Prospectus, the Company operates
for its own account approximately 3,600 acres of vineyards, at various
production levels ranging from new plantings in 1997 to fully mature.

SVI-Cal was a Subchapter S Corporation for federal and California state
income tax purposes from 1989 until July 1997. 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 Company's
initial public offering, SVI-Cal's cumulative S Corporation earnings were
determined and a distribution of $3,102,000 was made to Mr. Scheid. In addition,
a distribution of $480,000 was 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 resulted
in conversion 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."

In connection with the conversion of SVI-Cal's S Corporation status to C
Corporation status, the Company was required to record deferred tax liabilities
and deferred tax assets. Such change resulted in a net charge to earnings of
$1,390,000 in the 1997 third fiscal quarter. This one-time charge was a result
of differences in the accounting and tax treatment of certain of the Company's
assets and liabilities and was reflected through (i) an increase in deferred
income tax liabilities, partially offset by (ii) an increase in the Company's
deferred tax assets.

In connection with the Company's initial public 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,
and the limited partnership units held by all limited partners (other than
SVI-Cal) in Vineyard Investors 1972 ("VI-1972"), a California limited
partnership, were 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 issued and outstanding capital stock of the Company prior to the
initial public offering. SVI-Del was incorporated on July 15, 1997. See "Certain
Transactions-- Exchange of Shares, Partnership Units and Limited Liability
Company Interests for Class B Common Stock."

15
<PAGE>
PRICE RANGE OF CLASS A COMMON STOCK

The Company's Class A Common Stock is traded on the Nasdaq National Market
System under the symbol "SVIN". The following table sets forth, for the fiscal
quarter indicated, the high and low per share sales prices for the Class A
Common Stock, as reported by Nasdaq:

<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1997
Third Quarter (commencing July 25, 1997)............................... $ 11.88 $ 10.00
Fourth Quarter......................................................... $ 11.50 $ 8.13

1998
First Quarter.......................................................... $ 11.50 $ 6.75
</TABLE>

On April 16, 1998, there were 24 holders of record of the Company's Class A
Common Stock and 14 holders of record of the Company's Class B Common Stock. The
Company believes that on that date the number of beneficial owners of the Class
A Common Stock was in excess of 450.

DIVIDEND POLICY

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. In addition, the Company's
principal bank credit facilities prohibit the payment of dividends without the
consent of the lender. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Dividends and Distributions" for
information concerning distributions made prior to the Company's initial public
offering.

16
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company (i) at
December 31, 1997, and (ii) as adjusted at December 31, 1997 to reflect the
conversion of 1,000,000 shares of Class B Common Stock to Class A Common Stock
in connection with this offering. The Company will receive no proceeds from the
offering. This table should be read in conjunction with the "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Financial Statements, including the related notes thereto, and
other financial information included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------
HISTORICAL AS ADJUSTED(1)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
Total debt (including current portion)................................................ $ 18,511 $ 18,511
--------- --------------
Stockholders' equity:
Preferred Stock, par value $.001 per share; 2,000,000 shares authorized; no shares
issued and outstanding historical and as adjusted................................. 0 0
Class A Common Stock, par value $.001 per share; 20,000,000 shares authorized;
2,300,000 issued and outstanding historical; 3,300,000 shares issued and
outstanding as adjusted........................................................... 2 3
Class B Common Stock, par value $.001 per share; 10,000,000 shares authorized;
4,400,000 shares issued and outstanding historical; 3,400,000 shares issued and
outstanding as adjusted........................................................... 5 4
Additional paid-in capital............................................................ 21,797 21,797
Retained earnings..................................................................... 7,317 7,317
--------- --------------
Total stockholders' equity............................................................ 29,121 29,121
--------- --------------
Total capitalization.................................................................. $ 47,632 $ 47,632
--------- --------------
--------- --------------
</TABLE>

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

(1) As adjusted to give effect to the conversion of 1,000,000 shares of Class B
Common Stock to Class A Common Stock in connection with the offering. See
"Principal and Selling Stockholders" and "Underwriting." Does not give
effect to the conversion of 25,000 shares of Class B Common Stock to Class A
Common Stock that occurred since December 31, 1997.

17
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected financial data at December 31, 1996 and 1997 and for
the fiscal years ended December 31, 1995, 1996 and 1997 have been derived from
the Company's financial statements, which have been audited by Deloitte & Touche
LLP, independent auditors. The Company's Financial Statements as of and for the
years ended December 31, 1996 and 1997 are included elsewhere in this
Prospectus. The selected financial data should be read in conjunction with, and
are qualified in their entirety by, the Company's Financial Statements,
including the related notes thereto. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Sales..................................................................... $ 7,164 $ 10,769 $ 18,683
Vineyard management, service and other fees............................... 476 922 1,187
--------- --------- ---------
Total................................................................... 7,640 11,691 19,870
Cost of sales............................................................... 3,670 4,544 6,222
--------- --------- ---------
Gross profit................................................................ 3,970 7,147 13,648
General and administrative.................................................. 2,583 2,604 4,215
--------- --------- ---------
Operating income............................................................ 1,387 4,543 9,433
Interest income (expense)................................................... (906) (654) (700)
--------- --------- ---------
Income before provision for income taxes.................................... 481 3,889 8,733
Provision for income taxes.................................................. 1 44 3,887
--------- --------- ---------
Income before deferred tax adjustment....................................... 480 3,845 4,846
Deferred tax adjustment..................................................... 0 0 1,390
--------- --------- ---------
Net income.................................................................. $ 480 $ 3,845 $ 3,456
--------- --------- ---------
--------- --------- ---------
Basic and diluted net income per share...................................... $ 0.11 $ 0.87 $ 0.65
PRO FORMA AMOUNTS (1):
Income before income taxes as reported...................................... $ 481 $ 3,889 $ 8,733
Pro Forma income tax provision.............................................. 192 1,556 3,493
--------- --------- ---------
Pro Forma net income........................................................ $ 289 $ 2,333 $ 5,240
--------- --------- ---------
--------- --------- ---------
Pro Forma basic and diluted net income per share............................ $ 0.07 $ 0.53 $ 0.98
Shares used in computing net income per share............................... 4,400 4,400 5,344
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................................... $ 2,254 $ 15,665
Current assets....................................................................... 5,220 17,159
Total assets......................................................................... 24,069 49,869
Current liabilities.................................................................. 2,966 1,494
Long-term liabilities(2)............................................................. 12,042 19,254
Total liabilities.................................................................... 15,008 20,748
Equity............................................................................... 9,061 29,121
</TABLE>

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

18
<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
FINANCIAL STATEMENTS, INCLUDING THE RELATED NOTES THERETO, AND OTHER FINANCIAL
INFORMATION INCLUDED HEREIN. THE INFORMATION IN THIS PROSPECTUS INCLUDES
FORWARD-LOOKING STATEMENTS. IN ADDITION, PAST OPERATING RESULTS ARE NOT
NECESSARILY INDICATIVE OF THE RESULTS TO BE EXPECTED FOR FUTURE PERIODS. SEE
"NOTE CONCERNING FORWARD-LOOKING STATEMENTS" AND "RISK FACTORS."

OVERVIEW

SVI is a leading independent (I.E., not winery controlled) producer of
premium varietal wine grapes. The Company currently operates approximately 5,280
acres of wine grape vineyards. Of this total, approximately 3,600 acres are
operated for the Company's own account, 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.

Fiscal 1997 was an outstanding year for SVI. The Company achieved record
sales and earnings, fueled by a record harvest of over 15,600 tons from
Company-owned vineyards. In early 1997, the Company acquired an option to lease,
for a term of up to 50 years, approximately 537 acres of undeveloped land
suitable for wine grape vineyards in Hames Valley, which is located
approximately 45 miles south of the Company's vineyard headquarters. Following
exercises of the option, the Company began development on 207 acres in 1997 and
the balance of 330 acres in early 1998. These acreages are expected to begin
bearing fruit in 1999 and 2000, respectively. In June 1997, the Company acquired
a 370-acre vineyard planted primarily with Chardonnay and Pinot Noir. In
addition, during 1997, the Company signed several long-term purchase contracts
with new winery clients, including The Hess Collection Winery, Gundlach-Bundschu
Winery, Morgan Winery and The Chalone Wine Group, Ltd., covering approximately
175 acres, or 5% of the Company's net vine acreage, and entered into a new
vineyard management contract covering approximately 445 acres. 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 Company currently produces 14 varieties of premium wine grapes,
primarily Chardonnay, Merlot, Cabernet Sauvignon, Chenin Blanc, Gewurztraminer
and Sauvignon Blanc. Substantially all of the Company's current wine grape
production is contracted at least through the harvest of 2001, and the majority
is contracted at least through the harvest of 2006. The Company's two largest
winery customers are IDV, the seventh largest U.S. winery in terms of 1997 case
shipments, and Canandaigua, the second largest U.S. winery. Grape purchase
contracts with IDV covered 61% of the Company's acreage as of December 31, 1997
and accounted for approximately 81% and 84% of the Company's 1997 and 1996 total
revenues, respectively. Grape purchase contracts with Canandaigua accounted for
approximately 9% and 7% of the Company's 1997 and 1996 total revenues,
respectively. Thus, the Company is substantially dependent on IDV and
Canandaigua and termination of these contracts could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company has had grape purchase contracts with IDV and its predecessors since
1972 and with Canandaigua and its predecessors since 1979.

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.

19
<PAGE>
SEASONALITY AND QUARTERLY RESULTS

The wine grape business is extremely seasonal. Similar to most
nondiversified agricultural crop producers, the Company recognizes substantially
all of its crop sales revenues at the time of its annual harvest in September
and October. Because success of the Company's operations is dependent upon the
results of the Company's annual harvest, the first two quarters have
historically resulted in a loss and quarterly results are not considered
indicative of those to be expected for a full year. Profits, if any, are
recognized in the last two fiscal quarters of the year when revenues from grape
sales are recognized. From time to time, the Company has in the past, and may in
the future, convert grapes into bulk wine for sale in years subsequent to the
harvest year, which may impact quarterly results.

The following table sets forth certain unaudited quarterly financial data
for the four quarters in fiscal 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. The results presented below do not include
provision for income taxes for periods prior to the July 1997 Exchange
Transaction during which periods the Company was an S Corporation and
partnerships not subject to income taxes.

<TABLE>
<CAPTION>
FISCAL 1997
----------------------------------------------
QUARTER ENDED
----------------------------------------------
MAR 31 JUNE 30 SEPT 30 DEC 31
----------- ----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
Sales.................................................................. $ 0 $ 16 $ 12,410 $ 6,257
Vineyard management, services and other fees........................... 347 216 341 283
----------- ----------- --------- ---------
347 232 12,751 6,540
Cost of sales............................................................ 0 24 4,512 1,686
----------- ----------- --------- ---------
Gross profit............................................................. 347 208 8,239 4,854
General and administrative............................................... 628 830 1,260 1,497
----------- ----------- --------- ---------
Operating income (loss).................................................. (281) (622) 6,979 3,357
Interest income (expense), net........................................... (185) (137) (351) (27)
----------- ----------- --------- ---------
Income (loss) before provision for income taxes.......................... (466) (759) 6,628 3,330
Provision for income taxes............................................... 0 0 2,430 1,457
----------- ----------- --------- ---------
Net income (loss) before deferred tax adjustment......................... (466) (759) 4,198 1,873
Deferred taxes from reorganization to C Corporation...................... 0 0 1,390 0
----------- ----------- --------- ---------
Net income (loss)........................................................ $ (466) $ (759) $ 2,808 $ 1,873
----------- ----------- --------- ---------
----------- ----------- --------- ---------
</TABLE>

RESULTS OF OPERATIONS--YEARS ENDED DECEMBER 31, 1997 AND 1996

REVENUES. SVI derives its revenues from three sources: (i) sales of wine
grapes pursuant to long-term purchase contracts; (ii) vineyard management and
services revenues consisting primarily of management and harvest fees and
equipment rentals for services provided to owners of vineyards; and (iii) sales
of wine and wine-related merchandise sold primarily through the Company's
tasting room which opened in late April 1997. Sales (which include revenues from
grape sales and from the sale of wine and wine-related merchandise) increased by
73.5% to $18,683,000 for the year ended December 31, 1997 from $10,769,000 in
1996, an increase of $7,914,000.

Grape sales increased by 72.6% to $18,585,000 for the year ended December
31, 1997 from $10,769,000 in 1996, an increase of $7,816,000. The increase was
due primarily to (i) a 32% increase in the average price per ton received on
grape sales from 1996 to 1997 (contributing approximately

20
<PAGE>
$3,428,000 of the increase), (ii) a 31% increase in the yields produced by the
Company's vineyards in operation during both years on acres harvested
(contributing approximately $3,364,000 of the increase), and (iii) the
acquisition of a 370-acre vineyard in June 1997 (contributing approximately
$1,024,000 of the increase).

Revenue from the sale of wine and wine-related merchandise at the Company's
tasting room totaled $98,000 for the year ended December 31, 1997. The tasting
room was opened in April 1997.

Revenue from vineyard management, services and other fees increased by 28.7%
to $1,187,000 for the year ended December 31, 1997 from $922,000 in 1996, an
increase of $265,000. This increase was primarily due to the addition of a
445-acre long-term management contract in early 1997.

GROSS PROFIT. As a result of the factors discussed above, gross profit
increased by 91.0% to $13,648,000 for the year ended December 31, 1997 from
$7,147,000 in 1996, an increase of $6,501,000. Gross profit on grape sales as a
percentage of revenues increased to 67.0% in 1997 from 57.8% 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 relation to relatively
stable farming costs.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
by 61.9% to $4,215,000 for the year ended December 31, 1997 from $2,604,000 in
1996, an increase of $1,611,000. The increase was due primarily to costs
associated with additional compensation and related benefits and overall office
expense due to the expansion of the Company's business and its initial public
offering, as well as promotional activities surrounding the opening and initial
operations of the Company's tasting room.

INTEREST EXPENSE, NET. Net interest expense increased 7.0% to $700,000 for
the year ended December 31, 1997 from $654,000 in 1996, an increase of $46,000.
The increase in interest expense was primarily due to increased levels of
borrowing by the Company to finance crop growing costs and the completion of
certain vineyard development and improvement projects for which interest is
capitalized instead of expensed during the development or improvement period.
These increases were partially offset by an increase in interest income on cash
holdings of the Company from 1996 to 1997 as the result of funds received in the
Company's initial public offering and from the increase in revenues from 1996 to
1997.

PROVISION FOR INCOME TAXES. The provision for income taxes increased to
$3,887,000 for the year ended December 31, 1997 from $44,000 in 1996. The
Company was an S Corporation for income tax purposes prior to the initial public
offering in July 1997. The S Corporation election was terminated in connection
with the public offering, upon which the Company became taxable as a C
Corporation. As a result of the Company's prior S Corporation status, the
Company's losses for the first seven months of 1997 were allocated to the
Company's sole stockholder and were not available to offset the Company's income
for the last five months of the year. This resulted in an effective tax rate for
1997 of 44.5%. The Company anticipates a 40% effective tax rate for future
years.

NET INCOME BEFORE DEFERRED TAX ADJUSTMENT. Due to the above factors, the
Company had net income before deferred tax adjustment for the year ended
December 31, 1997 of $4,846,000 as compared to $3,845,000 in 1996, an increase
of $1,001,000 or 26.0%.

DEFERRED TAXES FROM REORGANIZATION TO C CORPORATION. The Company incurred a
one-time noncash charge to earnings in the amount of $1,390,000 to record the
deferred tax liability arising from the reorganization of the Company's business
from an S Corporation and partnerships to a taxable C Corporation in connection
with the Company's initial public offering in July 1997.

NET INCOME. Net income for the year ended December 31, 1997 was $3,456,000
as compared to $3,845,000 in 1996, a decrease of $389,000 or 10.1%. On a pro
forma basis, net income for the years ended December 31, 1997 and 1996 was
$5,240,000 and $2,333,000, respectively, an increase of $2,907,000 or 124.6%.
Pro forma net income is derived by providing a provision for income taxes as if
the Company had been a C Corporation for all periods presented.

21
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

SVI's primary sources of cash historically have 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 acquire and develop new acreage, and the Company 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. Primarily as a result of the application of
the net proceeds from the Company's initial public offering, working capital
increased to $15,665,000 at December 31, 1997 from $2,254,000 at December 31,
1996, an increase of $13,411,000. Such increase is expected to reduce dependence
on borrowings in the near-term to meet working capital and capital expenditure
requirements.

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
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 working capital needs.
There were no amounts outstanding under this line at December 31, 1997 as it was
repaid following the Company's initial public offering. This crop line expires
on June 5, 1998, and the Company expects to replace the line prior to maturity.
Although no assurances can be given, management believes that the Company's
existing working capital and short-term borrowing capabilities will be adequate
to meet the Company's currently anticipated liquidity needs during the fiscal
year ending December 31, 1998.

SVI also has long-term credit facilities expiring through July 2007 that
provide for maximum borrowings totaling $7,285,000, which diminish annually
through the expiration dates to a maximum allowable commitment of $3,432,000. At
December 31, 1997, the outstanding amount owed by the Company under these
facilities was $6,857,000. The annual interest rates on these lines are based on
the bank's "reference rate" and ranged from 8.59% to 8.79% at December 31, 1997.

The Company also has other long-term notes payable which, as of December 31,
1997, totaled approximately $6,975,000. 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%. At December 31, 1997, the
weighted average interest rate on these notes payable was 8.78%.

The Company also has a $7,500,000 bank line of credit, the proceeds of which
are being used to develop a vineyard owned by a major client and managed under a
long-term contract by the Company. At December 31, 1997, the outstanding balance
on this line of credit was $4,679,000. This line bears interest at the bank's
reference rate (6.31% at December 31, 1997) and is repayable in six annual
installments beginning January 2000. The note is secured by a letter of credit
provided by the client and by the Company's management contract. The management
contract provides for the Company's client to make payment of the annual
principal installments under this line as and when they become due.

The Company's principal credit facilities and notes payable bind the Company
to a number of affirmative and negative covenants, including requirements to
maintain certain financial ratios within certain parameters and to satisfy
certain other financial tests. At December 31, 1997, the Company was in
compliance with these covenants.

Management expects that capital requirements will expand significantly to
support expected future growth and that this will result in the expenditure of
the Company's available cash and additional borrowing under credit lines and/or
new arrangements for term debt. The Company's

22
<PAGE>
planned new vineyard developments are expected to require approximately $7.3
million in capital investment over the next three years, and continued
improvements of existing vineyards are expected to require approximately $8
million. 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 financings will be available on
reasonable terms.

Cash provided by operating activities was $4,685,000 for the year ended
December 31, 1997, compared to $4,461,000 in 1996, an increase of $224,000. The
increase was primarily due to non-cash deferred income taxes recorded in 1997
due to the conversion of the Company's income tax status from an S Corporation
to a C Corporation and an increase in depreciation, amortization and
abandonments from 1996 to 1997. These increases were partially offset by cash
used for increases in inventories due to an increase in deferred crop production
costs.

Cash used in investing activities was $15,400,000 for the year ended
December 31, 1997, compared to $5,962,000 in 1996, an increase of $9,438,000.
The increase principally was the result of additions to property, plant and
equipment and an increase in a long-term receivable. The additions to property
and equipment were primarily due to the Company's acquisition of the 370-acre
Riverview Vineyard in June 1997 for $5,500,000, improvements at the Company's
existing vineyards, and ongoing development of approximately 374 acres of new
vineyards. The increase in long-term receivables was for the costs incurred for
the development of certain vineyards owned by a major client of the Company and
managed by the Company pursuant to a long-term contract, as described above.

Cash provided by financing activities was $21,174,000 for the year ended
December 31, 1997, compared to $1,966,000 in 1996, an increase of $19,208,000.
The increase primarily was due to the net proceeds received in the Company's
initial public offering of $19,968,000 and net increases to long-term and other
debt of approximately $4,788,000, which were offset by distributions to partners
and shareholders of $3,582,000.

YEAR 2000 ISSUE

The Company has determined that the costs to address the Year 2000 issue
(I.E., computer applications that use only two digits to identify a year and
could produce erroneous results after 1999) are not material to the Company's
business, operations or financial condition and that the consequences of an
incomplete or untimely resolution of the Year 2000 issue for the Company's
computer systems do not represent a known material event or uncertainty that
management expects to affect future financial results. The impact of the Year
2000 on the Company's vendors and customers is not expected to be significant.

DIVIDENDS AND DISTRIBUTIONS

The Company intends to retain its future earnings, if any, to fund the
development and growth of its business and does not anticipate paying cash
dividends on either class of its Common Stock in the foreseeable future. In
addition, the Company's principal bank credit facilities prohibit the payment of
cash dividends without the consent of the lender.

In connection with the Company's initial public offering, the Company was
reorganized from an S Corporation and partnerships to a C Corporation. During
the fiscal years ended December 31, 1997 (prior to the reorganization) and
December 31, 1996, the Company and these partnerships made cash stockholder and
partner distributions totaling $3,582,000 and $468,000, respectively. The 1997
distributions were made at the time of the reorganization in respect of
cumulative S Corporation earnings and income tax liabilities on partnership
income.

23
<PAGE>
BUSINESS

OVERVIEW

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 and IDV, a
subsidiary of Diageo plc, the second and seventh largest U.S. wineries in terms
of 1997 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 IDV cover 61% of the Company's acreage and accounted for
approximately 81% and 84% of the Company's 1997 and 1996 total revenues,
respectively.

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 Gundlach-Bundschu
Winery. 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.

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. Similar productivity improvements generally are anticipated in
connection with vineyards that may be acquired in the future.

RECENT DEVELOPMENTS

24
<PAGE>
ton it received for the 1997 harvest. See "--The Company's Grape Production
Operations--Grape Sales--Pricing."

In June 1997, the Company acquired the 370-acre Riverview Vineyard in
Monterey County. This vineyard is planted with several grape varieties,
including approximately 120 acres of Chardonnay and approximately 100 acres of
Pinot Noir. The purchase price for this vineyard was approximately $5.5 million.
The Company in 1998 intends to replant approximately 54 acres and to begin an
improvement program of interplanting and trellis conversion. See "--The
Company's Grape Production Operations--New Vineyards and Redevelopment of
Existing Vineyards."

In 1997, the Company acquired a lease option for, and began development of,
an approximately 537-acre property in Hames Valley in Monterey County. The
Company planted 207 acres of this property in 1997, and exercised its option for
and began development of the remaining 330 acres in early 1998. The 1997 acreage
is expected to begin bearing fruit in 1999, and the 1998 acreage is expected to
begin bearing fruit in 2000. In 1997, the Company also began to develop an
additional 445 acres in Hames Valley for Canandaigua under a vineyard management
contract. See "--The Company's Grape Production Operations--New Vineyards and
Redevelopment of Existing Vineyards."

The Company sold grapes to 10 new customers in 1997, including Beringer Wine
Estates, David Bruce Winery and Gundlach-Bundschu Winery and entered into new
long-term grape purchase contracts for 175 acres. The terms of these new
contracts extend to between 2007 and 2013 and have "evergreen" renewal
provisions requiring two years' prior written notice of termination.

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 IDV 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.

25
<PAGE>
MAXIMIZE REVENUES AND PROFITABILITY PER ACRE. The Company 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."

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, improve 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 "--The Company's Grape Production Operations--New Vineyards and
Redevelopment of Existing Vineyards."

CALIFORNIA WINE AND GRAPE INDUSTRY

OVERVIEW

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 three or four 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 IDV, accounted for approximately 71%
of total California wine shipments in 1997. The Company historically has been,
and currently is, a supplier to IDV and Canandaigua. In 1997, IDV was the
seventh 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 1997 and its brands include DEER VALLEY, DUNNEWOOD,
TAYLOR CALIFORNIA CELLARS, INGLENOOK, PAUL MASSON and ALMADEN. The Company
believes its relationships with IDV and Canandaigua have contributed
significantly to its success.

WINE CONSUMPTION

Table wines are still wines usually containing less than 14% alcohol and are
generally consumed with food or as cocktails. Table wines that retail at less
than $3.00 per 750 ml. bottle are generally considered to be generic or "jug"
wines, while those that retail at $3.00 or more per bottle are considered
premium wines. The premium category is generally divided by the trade into three

26
<PAGE>
segments: popular premium wines that retail at $3.00 to $7.00 per bottle; super
premium wines that retail at $7.01 to $14.00 per bottle; and ultra premium wines
that retail at over $14.00 per bottle.

The market for California premium varietal table wines has grown
significantly over the last 18 years. Since 1980, unit sales of these California
wines have increased at an average 15% compound annual rate from approximately
6.6 million nine-liter cases to approximately 69.5 million nine-liter cases in
1997, according to Gomberg, Fredrikson & Associates. During the same time
period, premium wine revenues grew at an average 18% compound annual rate to
approximately $3.8 billion, or approximately 78% of total California table wine
sales of approximately $4.8 billion, in 1997. The growth in California premium
wine revenue reflects, among other things, an increase in U.S. per capita
consumption of premium California table wines from 0.2 gallons in 1986 to 0.6
gallons in 1997. The following chart shows estimated revenues for California
premium and jug wines since 1980.
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> <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 1997
Jug Wine Revenues (millions of $) $ 1,310 $ 1,046
Premium Wine Revenues (millions of $) $ 2,942 $ 3,774
</TABLE>

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 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 have indicated there may be positive health benefits associated with
moderate consumption of wine. These studies have been reported in the news,
including the 1991 and 1995 CBS television 60 Minutes broadcasts concerning the
"French Paradox," which suggested that moderate wine consumption is important in
protecting the French from coronary heart disease despite a high-fat diet and
high levels of other cardiovascular risk factors. More recently, studies have
been published that confirm a more favorable mortality profile for moderate male
wine drinkers compared to nondrinkers and that resveratrol, a compound found in
wine, inhibits processes that result in the formation and spreading of cancerous
tumors. These reports and others like them are believed to have contributed to
recent increases in the consumption of premium wines.

27
<PAGE>
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 operation, 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 1997 weighted
average prices per ton of all wine grapes purchased and crushed ranged from
$1,115 to $1,716 in the eight coastal districts, compared to a range from $236
to $890 in California's remaining nine grape producing districts.

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 1980's, 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 one to two
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.

THE COMPANY'S GRAPE PRODUCTION OPERATIONS

VINEYARD OPERATIONS

SVI currently owns or manages approximately 5,280 acres of wine grape
vineyards in Monterey and San Benito Counties. These properties consist of
approximately 3,600 acres in Monterey County operated for the Company's own
account and approximately 1,680 acres operated under management contracts for
others. Of the Company's approximately 3,357 net vine acres of wine grapes,
approximately 2,050 net vine acres, or 61%, have been contracted for sale to IDV
under long-term grape purchase contracts, approximately 400 net vine acres have
been contracted for sale to other winery clients, approximately 598 net vine
acres represent newly developed acreage planted by the Company in 1996, 1997 and
1998 which is not subject to grape purchase contracts, and approximately 309 net
vine acres represent acreage recently acquired by the Company which is not
subject to grape purchase contracts. See "--New Vineyards and Redevelopment of
Existing Vineyards."

GRAPE PRODUCTION

SVI's tons per acre and overall yields of higher value varieties (E.G.,
Chardonnay, Cabernet Sauvignon and Merlot) have increased in recent years due
to, among other factors, changes in product mix through grafting, replanting,
increased vine density and improvements in wine grape production technology and
know-how. See "--Viticultural Practices." In 1993, the Company began a major
improvement and refurbishment program and took many acres out of production
temporarily in order to graft or replant new rootstock. This planned decline in
grape production, along with poor weather, caused grape sales revenues for 1993
and 1994 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

28
<PAGE>
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. The following table shows SVI's net vine acres by variety from 1993 to 1998
and wine grape tonnage produced by SVI for 1997.

NET VINE ACRES OWNED BY SVI AND TONS PRODUCED

<TABLE>
<CAPTION>
NET VINE ACRES TONS
---------------------------------------------------------------- ---------
VARIETY 1993 1994 1995 1996 1997 1998 1997
- ----------------------------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Chardonnay............................... 552 574 656 756 901 880 5,886
Merlot................................... 66 150 307 454 506 556 3,470
Cabernet Sauvignon....................... 286 286 286 274 296 296 1,719
Sauvignon Blanc.......................... 171 133 133 133 133 121 1,190
Gewurztraminer........................... 103 103 103 103 103 82 884
Pinot Noir............................... -- -- -- -- 102 102 665
White Riesling........................... 183 124 103 83 87 87 505
Chenin Blanc............................. 350 302 228 187 84 84 487
Zinfandel................................ 138 107 107 83 83 83 257
Napa Gamay............................... 39 39 39 39 39 20 240
Grenache(1).............................. 49 49 28 28 28 28 134
Semillon................................. -- -- -- -- 26 5 135
Souzao................................... -- -- -- -- 10 10 38
Syrah.................................... -- -- -- -- -- 26 --
Early Burgundy........................... 34 13 13 -- -- -- --
French Colombard......................... 20 -- -- -- -- -- --
Replants/Grafts (2)...................... 325 436 313 164 255 327 --
New Acreage (3).......................... -- -- -- 54 374 650 --
--------- --------- --------- --------- --------- ---------
Total Net Vine Acres................... 2,316 2,316 2,316 2,358 3,027 3,357
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Total Tons Produced...................... 12,734 11,177 8,390 11,241 15,610 -- 15,610
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>

- ------------------------------
(1) Includes 28 acres leased to Joseph Phelps Vineyards and operated by the
Company for the account of Joseph Phelps Vineyards.

(2) 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.

(3) New acreage represents newly acquired bare ground which is in the
development stage. The development stage is the first three years of the
vineyard's life, when the Company expects little or no production.

GRAPE SALES

PRIMARY CUSTOMERS. The wine grape tonnage harvested from the Company's
approximately 2,374 net vine acres in production (I.E., excluding vineyards
under development or redevelopment) is largely subject to grape purchase
contracts with a small number of well-known wine producing companies. The
largest set of these contracts, representing approximately 87% of the Company's
1997 grape sales revenues and 81% of the Company's 1997 total revenues, is with
IDV. IDV is a unit of Diageo plc, one of the world's largest wine and spirits
sales companies, which is headquartered in the United Kingdom. In 1997, IDV was
California's seventh largest wine producing company with sales of approximately
6.1 million cases of wine. The Company's contractual relationship with IDV'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 IDV. 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

29
<PAGE>
operator, an aggregate of approximately 1,533 acres of wine grapes for IDV and
Canandaigua, representing 91% of the total acres managed by the Company. 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 for specified districts as reported in the Final Grape Crush Report
published by the California Department of Food and Agriculture ("CDFA"). See
"--Pricing." The contracts generally 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" renewal provisions whereby the contracts continue until
either party gives a two or three years' 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. See "Risk
Factors--Dependence on Major Customers; Renewal of Grape Purchase Agreements."

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 IDV 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 IDV and Canandaigua
contracts, the majority of which will expire in 2006, and any purchase
agreements covering new vineyards will have different terms. Among other
potential contract terms, the Company intends to consider entering into
long-term grape purchase contracts with generally fixed maximum and minimum
prices per acre instead of prices per ton that are subject to annual variation.
It is anticipated that such acreage contracts would provide for the customer to
bear more of the crop risk than is typically borne by the Company under a
tonnage contract.

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

SVI's contract grape prices are established each year by formulas which are
different for each of its customers. However, substantially all of its contracts
utilize a formula which is used to calculate a price for each wine grape variety
based on the previous year's prices in several specified CDFA reporting
districts. For example, grapes from the Company's 1998 harvest, subject to these
contracts, will be sold at prices based on the actual prices for the 1997
harvest reported in the Final Grape Crush Report published March 10, 1998. 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. Some recent
agreements

30
<PAGE>
use pricing formulas that are based more heavily on Monterey County data, which
may also be the case for the renewal or replacement of the IDV and Canandaigua
agreements and additional agreements covering new or replanted vineyards. The
chart below shows the weighted average prices SVI has received, or expects to
receive, per ton of grapes for the primary varieties it has produced since 1994
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 1998 (2)
- -------------------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Chardonnay.................................................... $ 1,092 $ 1,060 $ 1,188 $ 1,444 $ 1,572
Merlot........................................................ 1,098 1,098 1,184 1,432 1,538
Cabernet Sauvignon............................................ 1,117 1,097 1,193 1,425 1,577
Zinfandel..................................................... 582 623 790 971 1,113
Sauvignon Blanc............................................... 649 682 742 902 1,031
Gewurztraminer................................................ 590 589 663 825 913
White Riesling................................................ 512 514 624 803 828
Napa Gamay.................................................... -- -- -- 717 878
Chenin Blanc.................................................. 417 420 482 666 766
</TABLE>

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

(2) Based upon existing contracts, Company production estimates and the 1997
Final Grape Crush Report released March 10, 1998.

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 or employed by SVI over the
past ten years have included new grafting methods, interplanting, new trellis
designs and improved machine harvesting technology and practices. In addition,
the Company has experimented with increased vine densities in order to improve
productivity.

VINEYARD PRODUCTION CYCLE

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

31
<PAGE>
CAPITAL INVESTMENT REQUIREMENTS FOR ACQUISITION, DEVELOPMENT AND IMPROVEMENT
OF VINEYARDS

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's strategy is to expand its
operations and grape production through the acquisition of existing vineyards
and other properties that can be developed into new vineyards and the
redevelopment of the Company's older vineyards. As discussed below, the Company
has implemented this strategy through the 1997 acquisition of the 370-acre
Riverview Vineyard, the lease in 1997 and 1998 of approximately 537 acres of
undeveloped land in Hames Valley for vineyard development, and the redevelopment
of the Company's vineyards begun in 1993. The Company plans to expand its
operations further, subject to the availability of capital and additional
suitable properties on terms acceptable to the Company.

Generally, significant amounts of fruit are not produced for three years
from newly planted vines and for two years from vines which are grafted to a new
variety. 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 begin to
produce grapes in sufficient quantities to cover production costs and contribute
to gross profit, subject to some variation due to the effects of factors such as
geographic location, variety of grape grown, vine density, quality and type of
soil, water quality and weather conditions.

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 3,600 acres is approximately $49 to $59 million, before cost of
land and ignoring the amount of time necessary to produce grapes economically.
The costs of redeveloping existing vineyards vary depending upon the condition
of the vineyard and the scope of the redevelopment plan.

Due to the acquisition and development of new vineyards and the
redevelopment of existing vineyards, 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 under
development or redevelopment represents significant potential for revenue
growth. The following table shows recent and anticipated maturity of the
Company's vineyards.

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

<TABLE>
<CAPTION>
CROP YEAR
----------------------------------------------------------------
1997 1998 1999 2000 2001 2002
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Acres five or more years old (at or near full production)... 1,999 2,093 2,210 2,374 2,875 3,357
Acres three and four years old (partial production)......... 363 281 665 983 482 --
Acres one and two years old (not in production)............. 665 983 482 -- -- --
--------- --------- --------- --------- --------- ---------
Total Acres............................................. 3,027 3,357 3,357 3,357 3,357 3,357
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</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.

If the Company's vineyards under development 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 those anticipated from the Company's existing
vineyards. In

32
<PAGE>
addition, acquisitions of producing vineyards or open land suitable for vineyard
development 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.
See "--Uncertainty of Revenue Growth," "--Capital Requirements," and "--Risks
Associated with Business Expansion and Acquisition Strategy; Long-Term
Strategies" under "Risk Factors."

NEW VINEYARDS AND REDEVELOPMENT OF EXISTING VINEYARDS

HAMES VALLEY. In 1997, the Company acquired an option to lease, for a term
of up to 50 years, approximately 537 acres of undeveloped land suitable for wine
grape vineyards in Hames Valley, which is located approximately 45 miles south
of the Company's vineyard headquarters. Following exercises of the option, the
Company began development on 207 acres in 1997 and on the remaining 330 acres 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.

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 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 are provided by Canandaigua.

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.
The vineyard is planted with several varieties, including approximately 120
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.

REDEVELOPMENT OF EXISTING VINEYARDS. In 1993, SVI began a major improvement
and refurbishment program at its vineyards in order to increase production and
to upgrade its variety mix to those grapes that were expected to be in greater
demand and sell at higher prices. From 1993 through 1997, the Company made
capital expenditures at its vineyards of over $11.0 million, and the improvement
and refurbishment program is continuing. From 1993 through 1997, the Company
replanted or regrafted approximately 995 acres to higher value varieties and
interplanted an additional 870 acres. In 1998, the Company is replanting
approximately 152 acres and is interplanting approximately 322 acres. See "--Net
Vine Acres Owned by SVI and Tons Produced."

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 all of 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

33
<PAGE>
and reliable source of water for the Company's operations, even during the
drought years of the late 1980s. See "Risk Factors--Water."

VINEYARD MANAGEMENT CONTRACTS

The Company manages, as a contract vineyard operator, approximately 1,680
acres in Monterey and San Benito Counties for four vineyard owners, including
approximately 1,533 acres managed for IDV 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; STOCKHOLDER "WINE DIVIDEND" PROGRAM

SVI began limited production of its own ultra premium varietal wines under
the SCHEID VINEYARDS and SAN LUCAS VINEYARD labels in 1991. The Company has
contracted for its wine production with Storrs Winery, a small producer of award
winning wines located in Santa Cruz, California, approximately 50 miles from the
Company's vineyard headquarters. 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 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 and 1997, SVI
produced approximately 2,000 and 4,000 cases, respectively, of ultra premium
varietal wines, including Chardonnay, Cabernet Sauvignon, Merlot and White
Riesling, using Company-grown 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. In 1997, the Company also
offered a "wine dividend" to holders of at least 100 shares of its Class A
Common Stock, whereby such shareholders were entitled to a $0.50 per share
credit for use in making limited purchases of the Company's wine at up to a 50%
discount from the retail price. The Company intends to offer another "wine
dividend" in 1998. 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 71% of sales based on total California wine
shipments in 1997. In addition, there are many sources of supply of wine grapes
in California and in countries outside the United States. At the end of 1996,
approximately 380,000 acres were planted to wine grapes in California according
to the California Agricultural Statistics Service, 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

34
<PAGE>
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.

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. 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.

TRADEMARKS AND LABELS

The Company is seeking to register a trademark relating to a specific slogan
which the Company uses on souvenirs and paraphernalia sold at the Company's
wine-tasting room. The Company also has wine labels approved by the Bureau of
Alcohol, Tobacco and Firearms, including the SCHEID VINEYARDS and SAN LUCAS
VINEYARD brand names.

EMPLOYEES AND LABOR RELATIONS

The Company has approximately 63 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 400 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.

The UFW has represented the Company's farm workers since 1993. The Company
has recently completed the negotiation of a new four-year contract with the UFW
that will expire at the end of 2001. The terms of the new contract are not
expected to have a material economic impact on the Company. 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

35
<PAGE>
Company has, however, been picketed, particularly during the organizing effort
by the UFW and during negotiation of the first contract in 1995. See "Risk
Factors--Labor Regulations and Union Contract."

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. Each
of these members of the Scheid family is a principal stockholder of the Company.
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 1,763 acres of land underlying its vineyards, all of which
are located in Monterey County, California. 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 up to 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. Substantially all of the Company's property, plant and equipment
serves as collateral for long-term debt.

36
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following sets forth certain information with regard to each of the
directors and executive officers of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ----------------------------------------------------------------------
<S> <C> <C>
Alfred G. Scheid(1)................. 66 Chairman of the Board of Directors and Chief Executive Officer

Scott D. Scheid..................... 37 Vice President, Chief Operating Officer and Director

Heidi M. Scheid(2).................. 34 Vice President Finance, Chief Financial Officer, Treasurer and
Director

Kurt J. Gollnick.................... 39 Vice President Vineyard Operations

Ernest M. Brown..................... 70 Vice President and Secretary

John L. Crary (1)(2)................ 44 Director

Robert P. Hartzell (1)(2)........... 64 Director
</TABLE>

- ------------------------
(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

ALFRED G. SCHEID, the Company's Chairman of the Board and Chief Executive
Officer, was one of the founders of the Company 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
County Vintners and Growers Association, 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 more than 25 years. Mr.
Scheid is a graduate of the Harvard Graduate School of Business, and is the
father of Scott D. Scheid 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 was recently elected as a director of the California Association
of Winegrape Growers, and he previously has served as a director of Monterey
County Vintners and Growers Association. Mr. Scheid holds a B.A. degree in
economics from Claremont Men's College.

HEIDI M. SCHEID became the Company's Vice President Finance, Chief Financial
Officer, Treasurer 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 from 1989 through 1997. Mr. Gollnick has also
served as president of the Central Coast Grape Growers and Monterey Grape
Growers Associations. Mr. Gollnick holds a

37
<PAGE>
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 the positions of Vice President and Secretary. 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 at 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
at Davis.

Officers serve at the discretion of the Board of Directors.

BOARD OF DIRECTORS, COMMITTEES AND COMPENSATION

Directors are elected to serve a one-year term and until their successors
are duly elected and qualified. The number of authorized directors is currently
set at five. See "Description of Capital Stock--Class A Common Stock and Class B
Common Stock--Voting Rights" for information concerning the election of
directors by the holders each class of the Company's Common Stock.

The Board of Directors has appointed an Audit Committee and a Compensation
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. Crary, Hartzell and Alfred G.
Scheid. The Company's Compensation Committee establishes and reviews salary,
bonus and other forms of compensation for officers of the Company, provides
recommendations to the Board of Directors 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 Company has no nominating committee or committee
performing similar functions.

The Company pays each non-employee director an annual fee of $5,000 and
meeting fees at the rate of $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. No fees are paid for participation in telephonic
meetings of the Board of directors or its committees or actions taken in
writing. Under the Company's 1997 Stock Option/Stock Issuance Plan, non-employee
directors of the Company periodically receive automatic grants of stock options
exercisable for shares of the Company's Class A Common Stock as described below
under "--1997 Stock Option/Stock Issuance Plan."

38
<PAGE>
EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION OF NAMED EXECUTIVE OFFICERS

The following table sets forth information concerning the annual and
long-term compensation earned by the Named Executive Officers for services
rendered in all capacities to the Company for the fiscal years ended December
31, 1997 and 1996. The "Named Executive Officers" include (i) each person who
served as Chief Executive Officer during 1997 (one person), (ii) each person who
(a) served as an executive officer at December 31, 1997, (b) was among the four
most highly paid executive officers of the Company, not including the Chief
Executive Officer, during 1997 and (c) earned total annual salary and bonus
compensation in 1997 in excess of $100,000 (four persons), and (iii) up to two
persons who would be included under clause (ii) above had they served as an
executive officer at December 31, 1997 (no persons).

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION (4)
-------------------------------------------------- -----------------
OTHER SHARES
ANNUAL UNDERLYING ALL OTHER
NAME AND CAPACITY FISCAL SALARY COMPENSATION OPTIONS/SARS COMPENSATION
IN WHICH SERVED YEAR ($)(2) BONUS ($) ($)(3) (#) ($)(5)(6)
- ---------------------------------- --------- ----------- ----------- ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>

Alfred G. Scheid, 1997 $ 400,000 $ 140,000 -- 0 $ 168,183
CHAIRMAN OF THE BOARD 1996 $ 400,000 $ 0 -- 0 $ 97,095
AND CHIEF EXECUTIVE
OFFICER

Scott D. Scheid, 1997 $ 118,300 $ 105,000 -- 20,000 $ 3,550
VICE PRESIDENT AND CHIEF 1996 $ 90,000 $ 75,000 -- 0 $ 2,700
OPERATING OFFICER

Heidi M. Scheid, 1997 $ 106,700 $ 90,000 -- 20,000 $ 3,200
VICE PRESIDENT FINANCE, CHIEF 1996 $ 75,000 $ 30,000 -- 0 $ 2,250
FINANCIAL OFFICER AND TREASURER

Kurt J. Gollnick, 1997 $ 111,700 $ 105,000 -- 20,000 $ 3,350
VICE PRESIDENT VINEYARD OPERATIONS 1996 $ 92,700 $ 85,000 -- 0 $ 2,781

Ernest M. Brown, 1997 $ 120,000 $ 72,000 -- 20,000 $ 3,600
VICE PRESIDENT AND SECRETARY 1996 $ 118,000 $ 72,000 -- 0 $ 2,070
</TABLE>

- ------------------------
(1) Amounts shown include cash compensation earned for the periods reported
whether paid or accrued in such periods.

(2) As of the date of this Prospectus, the annual salary levels for the Named
Executive Officers were: Alfred G. Scheid ($400,000); Scott D. Scheid
($130,000); Heidi M. Scheid ($120,000); Kurt J. Gollnick ($120,000); and
Ernest M. Brown ($120,000).

(3) During 1997 and 1996, the Named Executive Officers received personal
benefits, the aggregate amounts of which for each Named Executive Officer
did not exceed the lesser of $50,000 or 10% of the total of the annual
salary and bonus reported for such Named Executive Officer in such years.

(4) The Named Executive Officers did not receive any restricted stock awards or
long-term incentive plan payouts in 1997 or 1996.

(5) Except as described in note 6, all amounts in this column represent matching
contributions under the Company's 401(k) plan. In the case of Alfred G.
Scheid, matching contributions in 1997 and 1996 were $4,750 and $4,620,
respectively.

(6) In the case of Alfred G. Scheid, includes $163,433 and $92,475 in 1997 and
1996, respectively, representing benefits received under a split dollar life
insurance trust arrangement pursuant to which Alfred G. Scheid is entitled
to designate the

39
<PAGE>
beneficiary of a $2,000,000 life insurance policy and the Company is
obligated to advance a portion of the premiums. The owner of the insurance
policy is a trust, the trustees of which include Scott D. Scheid and Heidi
M. Scheid, each of whom is an executive officer and director of the Company
and a child of Alfred G. Scheid. Advances by the Company are required to be
repaid out of the surrender proceeds or death benefits payable under the
policy. The amount of the benefits received in each year represents (i) the
premiums payable by the Company during the year ($163,433 in 1997 and
$92,475 in 1996) plus (ii) the proportionate amount, if any, of the excess
of the actuarially projected cash surrender value of the policy at the end
of such year over the aggregate amount of premiums advanced by the Company
through such year ($0 at each of December 31, 1997 and 1996). Such
proportionate amount is measured by the time-weighted compounded returns on
the premiums advanced by each of the Company and the policy owner, and
assuming a constant rate of return from inception of the policy.

OPTION GRANTS

The following table sets forth information with respect to grants of stock
options to the Named Executive Officers during fiscal 1997, which stock options
are exercisable for shares of Class A Common Stock of the Company. No stock
appreciation rights were granted by the Company in fiscal 1997.

OPTIONS/SAR GRANTS IN FISCAL 1997

<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARS EMPLOYEES IN PRICE
NAME GRANTED (#) (1) FISCAL YEAR ($/SHARE) EXPIRATION DATE
- ------------------------------------------------ --------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C>
Scott D. Scheid................................. 20,000 14.2% $ 10.00 July 23, 2007
Heidi M. Scheid................................. 20,000 14.2% $ 10.00 July 23, 2007
Kurt J. Gollnick................................ 20,000 14.2% $ 10.00 July 23, 2007
Ernest M. Brown................................. 20,000 14.2% $ 10.00 July 23, 2007
</TABLE>

- ------------------------
(1) These options were granted on July 24, 1997. The exercise price is equal to
the fair market value of the Class A Common Stock on the date of grant. The
options vest 25% on the first anniversary of the grant date with the
remaining 75% vesting ratably in 36 monthly installments following the first
anniversary of the grant date; provided, however, that the vesting of
options will be accelerated immediately prior to certain corporate
transactions involving certain changes in control of the Company unless the
options are assumed, or replaced with comparable options or a cash incentive
program, by the successor corporation. The stock options are subject to
termination prior to the expiration date following the termination of the
optionee's employment with the Company. The terms of the stock options
granted to the Named Executive Officers are the same as those granted on the
same date to other employees of the Company, except that none of the stock
options granted to the Named Executive Officers are "incentive stock
options," and the stock options granted to the Named Executive Officers
provide for the acceleration of vesting and extension of the option
termination dates upon the termination of the optionee's employment with the
Company under certain circumstances following certain changes in control of
the Company. See "--1997 Stock Option/Stock Issuance Plan" and "--Employment
Agreements, Termination of Employment and Change-in-Control Arrangements"
below.

40
<PAGE>
OPTION EXERCISES AND HOLDINGS

The following table sets forth with respect to the Named Executive Officers
information concerning the exercise of stock options during 1997 and unexercised
options held as of the end of the year. The Company has never granted stock
appreciation rights.

AGGREGATED OPTION/SAR EXERCISES
AND 1997 YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS/SARS AT OPTIONS/SARS
AT FISCAL YEAR
FISCAL YEAR END(#) END($)(1)
SHARES ACQUIRED ON VALUE -------------------------------- -----------------
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- --------------------- --------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Alfred G. Scheid............. 0 $ 0 0 0
Scott D. Scheid.............. 0 $ 0 20,000 0 $ 0
Heidi M. Scheid.............. 0 $ 0 20,000 0 $ 0
Kurt J. Gollnick............. 0 $ 0 20,000 0 $ 0
Ernest M. Brown.............. 0 $ 0 20,000 0 $ 0

NAME EXERCISABLE
- ----------------------------- ---------------
<S> <C>
Alfred G. Scheid.............
Scott D. Scheid.............. $ 0
Heidi M. Scheid.............. $ 0
Kurt J. Gollnick............. $ 0
Ernest M. Brown.............. $ 0
</TABLE>

- ------------------------
(1) The values of unexercised in-the-money options have been determined based on
the per share closing price of the Company's Common Stock as reported in the
Nasdaq National Market System on December 31, 1997 ($9.125).

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, as amended (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 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 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 are
administered by the Board of Directors with recommendations by the Compensation
Committee. The Board of Directors has 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

41
<PAGE>
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 Board of Directors 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 Board of Directors 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 was serving as
a non-employee director on the date the underwriting agreement for the Company's
initial public offering was executed (July 24, 1997) received an option grant on
such date for 10,000 shares of Class A Common Stock. Such option grants were
made to each of Messrs. Crary and Hartzell. 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 and has not
previously received an option grant from the Company in his or her capacity as a
non-employee director. In addition, at each Annual Stockholders Meeting,
beginning with the 1998 Annual Meeting, each individual with at least six months
of Board service who is to continue to serve as a non-employee director after
the meeting will receive an additional option grant to purchase 2,500 shares of
Class A Common Stock, whether or not such individual has been in the prior
employ of the Company.

Each automatic grant has or 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.

As of the date of this Prospectus, options exercisable for 162,000 shares
had been granted under the Plan at an average exercise price of $10.00 per
share.

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

42
<PAGE>
damages for breach of their fiduciary duties as directors, except for liability
(i) for any breach of the director's 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. Under
certain circumstances, the scope of liability of directors and the
indemnification of directors and officers may be subject to the requirements of
California corporate laws. See "Description of Capital Stock--Potential
Applicability of Certain Provisions of the California General Corporation Law"

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
persons arising out of or in connection with such persons' service as directors
or officers of the Company or an affiliate of the Company. These agreements
provide for the advancement of expenses incurred in defending a claim prior to
resolution of the merits of the claim. These agreements also require the Company
to maintain directors and officers liability insurance. The Employment
Agreements described below impose similar indemnification obligations on 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.

The Company has an individual retirement agreement with Ernest M. Brown,
Vice President and Secretary of the Company, age 70. This agreement provides for
the Company to pay to Mr. Brown $100,000 per annum at the time of his retirement
or disability for the rest of his life. Mr. Brown has not set a date for his
retirement and this retirement agreement is unfunded; therefore, it is not
possible to determine the absolute dollar amount for which the Company is liable
in the future. The Company has, however, reserved $662,000 for this contingency
as of December 31, 1997.

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 July 19, 1997, except for Alfred
G. Scheid, whose Employment Agreement has a one-year term. Under

43
<PAGE>
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 Board of Directors upon the recommendation of 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 among the Company and the holders of Class B Common
Stock provides, among other things, that the shares of Class B Common Stock held
by Mr. Gollnick (currently 300,093) 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 and Selling
Stockholders--Agreement Among Class B Stockholders." If such termination is a
voluntary termination by Mr. Gollnick that occurs prior to July 29, 2004, or is
for "cause" (as defined) 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 outstanding stock options exercisable for shares of Class A Common Stock
of the Company that have been granted under the Plan, including those granted to
the directors and Named Executive Officers, provide for accelerated vesting in
connection with certain corporate transactions involving certain changes in
control of the Company unless the options are assumed, or replaced with
comparable options or a cash incentive program, by the successor corporation. In
addition, the stock options that have been granted to the Named Executive
Officers provide for immediate acceleration of these options upon an
"involuntary termination" of employment occurring within 18 months of a "change
in control." In the event of such an acceleration, the options will remain
exercisable until the earlier of the expiration date specified in the option
grant and one year after the date of involuntary termination. For purposes of
these provisions: an "involuntary termination" means, generally, termination by
the Company other than for "misconduct" (as defined) or termination by the
employee following an involuntary material change in position and
responsibility, an involuntary reduction in compensation by more than 15% or an
involuntary relocation by more than 50 miles; and a "change in control" means,
generally, the acquisition of securities representing a majority of the voting
power of the Company other than by the Company and its affiliates, a change in a
majority of the Board of Directors over a period of 36 months or less involving
new directors that have not been elected or nominated by the other directors or
a change in ownership of securities representing more than a majority of the
voting power of certain subsidiaries of the Company.

44
<PAGE>
CERTAIN TRANSACTIONS

FORMATION OF SVI

SVI was incorporated in Delaware in July 1997 to act as a holding company
for Scheid Vineyards California Inc., a California corporation ("SVI-Cal"), the
Company's operating subsidiary, 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."

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

Prior to the Company's initial public 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 and an executive officer and a director of
the Company) and Heidi M. Scheid (the daughter of Alfred G. Scheid and an
executive officer and a director of the Company) as its members, Emanty Limited
Liability Company, a California limited liability company having Alfred G.
Scheid (an executive officer and a director 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 (an executive officer 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 the initial public
offering, 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, V-405 and Quadra Partners were the owners or
ground lessees of various vineyard properties currently owned or leased by the
Company.

In connection with the initial public 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 were contributed to the
Company in exchange for (i) 4,400,000 shares of Class B Common Stock of the
Company (the "Exchange Transaction"), representing 100% of the issued and
outstanding common stock of the Company prior to the initial public offering,
and (ii) a commitment by SVI-Cal to make the distributions described below. See
"--Termination of SVI-Cal's S Corporation Status." The Company, as part of the
Exchange Transaction, simultaneously contributed 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 was terminated and dissolved and the assets and liabilities of each
became 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 were issued
to 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>
PERCENTAGE OF CLASS B
NUMBER OF SHARES COMMON STOCK
OF CLASS B COMMON OUTSTANDING FOLLOWING
NAME OF MEMBER OR PARTNER STOCK RECEIVED EXCHANGE TRANSACTION
- ----------------------------------------------------------------- ----------------- -----------------------
<S> <C> <C>
Emanty Limited Liability Company (1)............................. 573,870 13.0%
Alfred G. Scheid (2)............................................. 2,955,851 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) Emanty Limited Liability Company has been dissolved by agreement of its
members, and its shares of Class B Common Stock have been distributed to its
members (Alfred G. Scheid and two of his children not employed by the
Company) pro rata in accordance with their respective membership interests.
(2) All of these shares were issued to Mr. Scheid as Trustee of the Alfred G.
Scheid Revocable Trust dated October 8, 1992.

45
<PAGE>
TERMINATION OF SVI-CAL'S S CORPORATION STATUS

SVI-Cal was a Subchapter S Corporation for federal and California state
income tax purposes from 1989 until July 1997. 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 Company's
initial public offering, SVI-Cal's cumulative S Corporation earnings were
determined and a distribution of $3,102,000 was made to Mr. Scheid. In addition,
a distribution of $480,000 was 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 resulted
in the termination of SVI-Cal's S Corporation status. See "--Exchange of Shares,
Partnership Units and Limited Liability Company Interests for Class B Common
Stock."

CORPORATE HEADQUARTERS LEASE

Pursuant to a five-year lease (the "Lease"), the Company leases the third
floor of a 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. The
general partner of Tesh Partners, L.P. is SVI-Cal and the limited partners are
Alfred G. Scheid's four children, two of whom are Scott D. Scheid and Heidi M.
Scheid, each an executive officer and a director of the Company. The Lease runs
until 1999 and the rent is $98,616 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.

WORKING CAPITAL LOAN

In March 1997, SVI-Cal paid $1.0 million to Alfred G. Scheid, then its sole
stockholder, as repayment of a working capital loan made by him to SVI-Cal. This
loan bore interest at one-quarter percentage point above the reference rate of a
commercial bank.

GOLLNICK NOTE

On December 30, 1994, Kurt J. Gollnick, an executive officer 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 bore
interest at the rate of 8.23% per annum, and was 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 was payable in full.
The Gollnick Note was repaid in full in December 1997.

CONSULTING AGREEMENTS

The Company 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. Consulting fees
and reimbursable consulting-related expenses paid to Mr. Crary by the Company
during 1997 aggregated $124,864.

FUTURE TRANSACTIONS

The Company does not have any current intentions to enter into any future
transactions with related parties with respect to the acquisition or development
of additional vineyard or other properties. The Company has adopted a policy
requiring future transactions with affiliates to be on terms no less favorable
to the Company than could be obtained from unaffiliated parties.

46
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following tables set forth certain information as of the date of this
Prospectus with respect to persons known by the Company to be beneficial owners
of more than five percent of the Company's Class A Common Stock and Class B
Common Stock, respectively, as well as beneficial ownership of such classes of
Common Stock by the executive officers and directors of the Company, and all
executive officers and directors as a group. These tables also set forth the
number of shares of Class A Common Stock to be sold by Alfred G. Scheid in this
offering and the beneficial ownership of the Class A Common Stock and Class B
Common Stock after giving effect to this offering and the resulting conversion
of the shares sold in the offering from Class B Common Stock to Class A Common
Stock. The persons named in the table have sole voting and investment power with
respect to all shares beneficially owned, unless otherwise indicated.

CLASS A COMMON STOCK

<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS A COMMON STOCK
BENEFICIALLY OWNED TO BE BENEFICIALLY OWNED
PRIOR TO OFFERING (1) AFTER OFFERING (1)
-------------------------- --------------------------
NUMBER OF SHARES TO NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER (2) SHARES PERCENTAGE BE SOLD SHARES PERCENTAGE
- ------------------------------------------------ ----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Alfred G. Scheid (3)(4)(5)...................... 2,709,589 53.8 1,000,000 1,709,589 34.0
Scott D. Scheid (3)(5)(6)....................... 327,093 12.3 327,093 9.0
Heidi M. Scheid (3)(5)(7)....................... 337,093 12.7 337,093 9.2
Kurt J. Gollnick (3)(5)(8)...................... 300,093 11.4 300,093 8.3
Ernest M. Brown (5)............................. 5,000 * 5,000 *
John L. Crary................................... 0 0.0 0 0.0
Robert P. Hartzell.............................. 0 0.0 0 0.0
Emily K. Liberty (3)(5)(9)...................... 299,066 11.4 299,066 8.3
Tyler P. Scheid (3)(5).......................... 299,066 11.4 299,066 8.3
John Hancock Advisors, Inc. (10)................ 388,600 16.9 388,600 11.7
Wellington Management Company, LLP (11)......... 290,000 12.6 290,000 8.7
Delaware Management Company, Inc. (12).......... 169,900 7.4 169,900 5.1
Putnam Investment Management, Inc. (13)......... 141,500 6.2 141,500 4.3
Fidelity Management & Research Company (14)..... 125,000 5.4 125,000 3.8
All executive officers and directors as a group
(7 PERSONS)................................... 3,666,868 61.2 2,666,868 44.5
</TABLE>

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

* Less than one percent.
Footnotes appear after the following table.

47
<PAGE>
CLASS B COMMON STOCK

<TABLE>
<CAPTION>
CLASS B COMMON STOCK CLASS B COMMON STOCK
BENEFICIALLY OWNED TO BE BENEFICIALLY OWNED
PRIOR TO OFFERING (1) AFTER OFFERING (1)
-------------------------- --------------------------
NUMBER OF NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER (2) SHARES PERCENTAGE SHARES PERCENTAGE
- -------------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Alfred G. Scheid (3)(4)(5).................................... 2,709,589 61.9 1,709,589 50.7
Scott D. Scheid (3)(5)(6)..................................... 327,093 7.5 327,093 9.7
Heidi M. Scheid (3)(5)(7)..................................... 337,093 7.7 337,093 10.0
Kurt J. Gollnick (3)(5)(8).................................... 300,093 6.9 300,093 8.9
Ernest M. Brown............................................... 0 0.0 0 0.0
John L. Crary................................................. 0 0.0 0 0.0
Robert P. Hartzell............................................ 0 0.0 0 0.0
Emily K. Liberty (3)(5)(9).................................... 299,066 6.8 299,066 8.9
Tyler P. Scheid (3)(5)........................................ 299,066 6.8 299,066 8.9
All executive officers and directors as a group (7 PERSONS)... 3,661,868 83.7 2,661,868 78.9
</TABLE>

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

(1) Except in the cases of Mr. Brown and John Hancock Advisors, Inc.,
Wellington Management Company, LLP, Delaware Management Company, Inc.,
Putnam Investment Management, Inc. and Fidelity Management & Research
Company (the "Institutional Holders"), all shares of Class A Common Stock
reflected as beneficially owned by each person named in the first table
above represent shares issuable upon conversion of the beneficial holder's
shares of Class B Common Stock. Beneficial ownership and the percentages of
the Class A Common Stock and Class B Common Stock outstanding have been
determined in accordance with Section 13(d) of the Securities Exchange Act
of 1934, as amended, and the rules promulgated thereunder.

(2) The address of each of the persons named in this table, other than the
Institutional Holders, is c/o Scheid Vineyards Inc., 13470 Washington
Boulevard, Marina del Rey, California 90292. The addresses of the
Institutional Holders are set forth in notes 10 through 14 below. Scott D.
Scheid, Heidi M. Scheid, Emily K. Liberty and Tyler P. Scheid are children
of Alfred G. Scheid.

(3) The shares sold will be converted from Class B Common Stock to Class A
Common Stock at the time of sale on the basis of a one-to-one conversion
ratio. The information in this table assumes that the Underwriters'
overallotment option is not exercised. If the overallotment option is
exercised in full, the following Selling Stockholders will sell the
specified number of shares of Class A Common Stock: Scott D. Scheid (30,000
shares); Heidi M. Scheid (30,000 shares); Kurt J. Gollnick (30,000 shares);
Emily K. Liberty (25,000 shares); Tyler P. Scheid (25,000 shares); and
Shirley Gladden Scheid (the wife of Alfred G. Scheid), as sole trustee of a
revocable trust (10,000 shares). All of the overallotment shares also will
be converted from Class B Common Stock at the time of sale on the basis of
a one-to-one conversion ratio. If the overallotment option is exercised in
part, each of the Selling Stockholders (other than Alfred G. Scheid) will
sell a pro rata portion of the aggregate number of shares for which the
option is exercised.

(4) Owned by Alfred G. Scheid as Trustee of the Alfred G. Scheid Revocable
Trust dated October 8, 1992. Does not include 100,000 shares of Class B
Common Stock owned by a revocable trust of which Mr. Scheid's wife is the
sole trustee and over which Mr. Scheid does not have any voting power or
investment power. Mr. Scheid disclaims beneficial ownership of the shares
beneficially owned by his wife's trust.

(5) Pursuant to agreements provided to the representatives of the underwriters
for the Company's initial public offering in July 1997, each of these
stockholders has agreed, subject to certain exceptions, not to sell or
dispose of any shares of capital stock of the Company, either publicly or
privately, without the prior written consent of Cruttenden Roth
Incorporated until July 24, 1998, which consent has been obtained for this
offering. In addition, pursuant to the underwriting agreement for this
offering, Alfred G. Scheid has agreed, subject to certain exceptions, not
to sell or dispose of any shares of capital stock of the Company, either
publicly or privately, without the prior written consent of Cruttenden Roth
Incorporated until 180 days after the date of this Prospectus.

(6) Includes 315,093 shares of Class B Common Stock owned by Scott D. Scheid
and 12,000 shares of Class B Common Stock owned by trusts for the benefit
of the children of Heidi M. Scheid, of which Mr. Scheid is a co-trustee
together with Heidi M. Scheid. Does not include 11,000 shares of Class B
Common Stock owned by Mr. Scheid's wife and over which Mr. Scheid does not
have any voting power or investment power. Mr. Scheid disclaims beneficial
ownership of the shares beneficially owned by his wife.

48
<PAGE>
(7) Includes 325,093 shares of Class B Common Stock owned by Heidi M. Scheid
and 12,000 shares of Class B Common Stock owned by trusts for the benefit
of the children of Ms. Scheid, of which Ms. Scheid is a co-trustee together
with Scott D. Scheid. Does not include 1,000 shares of Class B Common Stock
owned by Ms. Scheid's husband and over which Ms. Scheid does not have any
voting power or investment power. Ms. Scheid disclaims beneficial ownership
of the shares beneficially owned by her husband.

(8) Does not include 1,000 shares of Class B Common Stock owned by Mr.
Gollnick's wife and over which Mr. Gollnick does not have any voting power
or investment power. Mr. Gollnick disclaims beneficial ownership of the
shares beneficially owned by his wife.

(9) Does not include 1,000 shares of Class B Common Stock owned by Ms.
Liberty's husband and over which Ms. Liberty does not have any voting power
or investment power. Ms. Liberty disclaims beneficial ownership of the
shares beneficially owned by her husband.

(10) John Hancock Advisors, Inc. ("JHA") is an indirect wholly owned subsidiary
of John Hancock Mutual Life Insurance Company. JHA is the investment
adviser to various clients that beneficially own these 388,600 shares of
Class A Common Stock, including John Hancock Emerging Growth Fund, which
beneficially owns 316,200 of these shares. The address of JHA is 101
Huntington Avenue, Boston, Massachusetts 02199.

(11) The address of Wellington Management Company, LLP is 75 State Street,
Boston, Massachusetts 02109.

(12) Lincoln National Corp. is the ultimate parent of Delaware Management
Company, Inc. ("DMC"). The address of DMC is 2005 Market Street,
Philadelphia, Pennsylvania 19103.

(13) Putnam Investment Management, Inc. ("PIM") is an indirect wholly owned
subsidiary of Marsh & McLennan Companies, Inc. PIM is the investment
adviser to the Putnam Capital Appreciation Fund, which beneficially owns
these 141,500 shares of Class A Common Stock. The address of PIM is One
Post Office Square, Boston, Massachusetts 02109.

(14) Fidelity Capital Research & Management Company ("FCR&MC") is a wholly
owned subsidiary of FMR Corp. FCR&MC is the investment adviser to the
Fidelity Capital Appreciation Fund, which beneficially owns these 125,000
shares of Class A Common Stock. The address of FCR&MC is 82 Devonshire
Street, Boston, Massachusetts 02109.

AGREEMENT AMONG CLASS B STOCKHOLDERS

The holders of the outstanding shares of Class B Common Stock and the
Company are parties to an Amended and Restated Buy-Sell Agreement (the "Buy-Sell
Agreement"). Pursuant to the Buy-Sell Agreement, no holder of shares of Class B
Common Stock other than Alfred G. Scheid 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, in a specified order, to the Company, Alfred
G. Scheid, Scott D. Scheid and Heidi M. Scheid. The Buy-Sell Agreement applies
to a broad range of transfers and dispositions other than transfers to (i) the
Company, (ii) certain other Class B stockholders, (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
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). The Buy-Sell Agreement
also grants an option, exercisable in a specified order, to the Company, Alfred
G. Scheid, Scott D. Scheid and Heidi M. Scheid, to purchase the shares of Class
B Common Stock held by certain Class B stockholders at specified prices upon (A)
the death of such Class B Stockholder, (B) the entry or imposition of certain
judgments, levies or attachments affecting the shares of Class B Common Stock
held by such stockholder, (C) certain bankruptcy or insolvency events affecting
such stockholder or (D) in the case of Kurt J. Gollnick, the termination of his
employment with the Company.

49
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 20,000,000 shares of
Class A Common Stock, par value $0.001 per share, 10,000,000 shares of Class B
Common Stock, par value $0.001 per share, and 2,000,000 shares of Preferred
Stock, par value $0.001 per share. Immediately prior to this offering, there
were 2,325,000 shares of Class A Common Stock outstanding, 4,375,000 shares of
Class B Common Stock outstanding 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, are entitled to elect 25% of the authorized number of directors
rounded up to the nearest whole number (currently two), and the holders of the
Class B Common Stock, voting as a separate class, are entitled to elect the
remaining directors (currently three). Immediately following this 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 84% 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. The Certificate of Incorporation provides that
the election of directors by the respective classes of Common Stock shall be
from separate slates of nominees.

For matters requiring a separate class vote of the Class A or the Class B
Common Stock, the holders of a majority of the shares of that class entitled to
vote on such matter will constitute a quorum. For all other matters, holders of
a majority of the total votes entitled to be voted on such matter will
constitute a quorum.

The record date for the Company's May 28, 1998 Annual Meeting of
Stockholders was April 16, 1998. As a result, purchasers in this offering will
not be permitted to vote their shares at this meeting.

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 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 proposals 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

50
<PAGE>
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 the
holders 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 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
simultaneously 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
4,375,000 shares of its Class A Common Stock for issuance upon the exercise of a
conversion right or automatic conversion, and all shares sold in this offering
will be converted at the time of sale from shares of Class B Common Stock to
shares of Class A Common Stock. See "Principal and Selling 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 is 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 or
Kurt J. Gollnick (the "Permitted

51
<PAGE>
Transferees"), (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 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 legally issued, fully paid and nonassessable.

PREFERRED STOCK

The Board of Directors has the authority, subject to any limitations
prescribed by law, without further action by the stockholders, to issue up to an
aggregate of 2,000,000 shares of Preferred Stock in one or more series and to
fix the rights, preferences, privileges and restrictions granted to or imposed
upon any unissued shares of Preferred Stock and to fix the number of shares
constituting any series and the designations of such series. The shares noted
above constitute "blank check" Preferred Stock, and, as of the date of this
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.

OUTSTANDING WARRANTS; REGISTRATION RIGHTS

The Company issued to the representatives of the underwriters for the
Company's initial public offering warrants to purchase up to 200,000 shares of
Class A Common Stock at an exercise price per share of $14.00. These warrants
are exercisable for a period of four years commencing July 24, 1998. The holders
of these 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 these 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.

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 of stock entitled to vote at

52
<PAGE>
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 B Common
Stock may take certain actions by written consent without formally convening a
meeting of stockholders. `

CERTAIN PROVISIONS OF THE DELAWARE GENERAL CORPORATION LAW

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

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

53
<PAGE>
POTENTIAL APPLICABILITY OF CERTAIN PROVISIONS OF THE CALIFORNIA GENERAL
CORPORATION LAW

Under Section 2115 of the California General Corporation Law ("Section
2115"), certain foreign corporations having specified minimum contacts with
California are made subject to certain provisions of the California General
Corporation Law with respect to the internal governance of their affairs.
Section 2115 provides that in such instances California law is to apply to the
exclusion of the laws of the state in which such a corporation is incorporated.
Among other provisions, Section 2115 applies to a subject corporation the
provisions of the California General Corporation law relating to: (i) annual
election of directors; (ii) removal of directors and the filling of director
vacancies in certain circumstances; (iii) directors' standard of care; (iv)
indemnification of directors, officers and other agents; (v) cumulative voting
rights; (vi) certain supermajority voting requirements; (vii) certain rights in
connection with sales of assets, mergers and other reorganizations; and (viii)
stockholder inspection rights. Many of the substantive requirements of Section
2115 are not subject to variation by the charter or bylaws of a subject
corporation. Although the constitutionality of Section 2115 has been upheld by
the California courts, the Board of Directors of the Company believes that
significant legal issues regarding the constitutionality and enforceability of
Section 2115 remain.

Section 2115 does not apply to a foreign corporation (i) with securities
that are listed on the New York or American Stock Exchanges or (ii) with
securities that are designated as qualified for trading as a national market
security on the National Association of Securities Dealers, Inc. Automated
Quotation System and with at least 800 record holders of its equity securities
as of the record date of its most recent annual meeting. For this purpose, the
beneficial owners of certain shares held by nominees may be counted as the
record holders. A corporation not exempt under Section 2115 is subject to the
requirements of Section 2115 if the average of its statutory property factor,
statutory payroll factor and statutory sales factor is greater than 50% in
respect of its latest full income year and if more than one-half of its
outstanding voting securities are held of record by persons having addresses in
California.

Although the Company currently is not subject to the requirements of Section
2115, the Company will become subject to Section 2115 effective as of January 1,
1999. If the number of record holders of the Company's Common Stock increases to
at least 800 as of the record date of any annual meeting of stockholders,
Section 2115 will not apply to the Company commencing on the first day of the
following fiscal year.

At the Company's Annual Meeting of Stockholders scheduled to be held on May
28, 1998, the Board of Directors is proposing to put to a vote of the
stockholders certain amendments to the Company's Certificate of Incorporation
and Bylaws so that the internal affairs of the Company, if governed by
California law at any time, will be subject to legal requirements as comparable
as possible to those of Delaware law with respect to the exculpation of
directors from liability and the indemnification of directors, officers and
other agents.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar of the Class A Common Stock is American
Stock Transfer & Trust Company.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have outstanding
3,325,000 shares of Class A Common Stock and 3,375,000 shares of Class B Common
Stock. 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, 3,300,000 shares of Class A Common Stock
will be freely tradeable without restriction under the Securities Act, except
for any shares held by an

54
<PAGE>
"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 3,375,000 shares of Class B Common Stock owned by members of the Scheid
family and Kurt J. Gollnick following this offering and the other 25,000
outstanding shares of Class A Common Stock are "restricted" securities within
the meaning of Rule 144 and may not be resold in a public distribution (before
or upon conversion into Class A Common Stock) except in compliance with the
registration requirements of the Securities Act or pursuant to Rule 144.

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

Alfred G. Scheid has agreed not to sell any shares of capital stock of the
Company, either publicly or privately, without the prior consent of Cruttenden
Roth Incorporated for a period ending 180 days after the date of this
Prospectus. In addition, the other members of the Scheid family and the
Company's other officers and their families who, together with Alfred G. Scheid,
hold beneficially all of the outstanding 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 until July 24, 1998.

The Company has reserved an aggregate of 200,000 shares of Class A Common
Stock for issuance pursuant to the Plan. The Company has filed a registration
statement on Form S-8 under the Securities Act to register the shares to be
issued pursuant to the Plan. As a result, shares of Class A Common Stock issued
under the Plan 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.

55
<PAGE>
UNDERWRITING

The underwriters named below, for whom Cruttenden Roth Incorporated is
acting as representative (the "Representative"), have severally agreed, subject
to the terms and conditions of the Underwriting Agreement, to purchase from
Alfred G. Scheid 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....................................................

------------
Total........................................................................... 1,000,000
------------
------------
</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
that are located outside the U.S., 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 $ per
share. The Underwriters may allow, and such dealers may reallow, a concession
not exceeding $ per share. After the shares of Class A Common Stock are
released for sale to the public, the Representative may change the initial price
to public and other selling terms. No change in such terms will change the
amount of proceeds to be received by the Selling Stockholders as set forth on
the cover page of this Prospectus.

Certain stockholders (other than Alfred G. Scheid) have granted the
Underwriters an option, exercisable for 45 days after the date of this
Prospectus, to purchase up to 150,000 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 overallotments, if any. To the extent that the Underwriters exercise the
overallotment 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 stockholders who have granted the
overallotment option and the number of shares of Class A Common Stock owned by
each that are subject to the overallotment option are as follows: Heidi M.
Scheid, 30,000 shares; Scott D. Scheid, 30,000 shares; Kurt J. Gollnick, 30,000
shares; Emily K. Liberty, 25,000 shares; Tyler P. Scheid, 25,000 shares; and
Shirley Gladden Scheid, 10,000 shares. Each of these six stockholders will share
ratably in any partial exercise of the overallotment option.

All of the shares to be sold in this offering are Class B Common Stock in
the hands of the Selling Stockholders, but will automatically convert into Class
A Common Stock on a share-for-share basis in connection with their sale in this
offering.

56
<PAGE>
Each of the Selling Stockholders has also agreed to pay the Representative a
non-accountable expense allowance equal to 1.0% of the gross proceeds of the
shares sold by such person (including any overallotment shares). The Company
will pay or reimburse to the Selling Stockholders half of the non-accountable
expense allowance and other offering expenses (excluding underwriting discounts
and commissions).

Alfred G. Scheid has agreed, subject to certain limited exceptions, not to
sell or offer to sell, contract to sell, transfer the economic risk of ownership
in, make any short sale, pledge, or otherwise dispose of any equity securities
of the Company for a period ending 180 days after the date of this Prospectus,
without the prior written consent of the Representative, other than shares sold
in this offering. The Representative may, in its sole discretion at any time and
from time to time without notice, release all or any portion of the securities
subject to this lock-up agreement.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriter 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 this offering, certain Underwriters 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 Selling Stockholders, 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 short position. The
Underwriters may also cover all or a portion of such short position, up to
150,000 shares, by exercising the Underwriters' overallotment option referred to
above. In addition, the Representative, on behalf of the Underwriters, may
impose "penalty bids" whereby it 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.

In connection with this offering, certain Underwriters may engage in passive
market making transactions in the Class A Common Stock on the Nasdaq National
Market in accordance with Rule 103 of Regulation M under the Securities Exchange
Act of 1934. Passive market making consists of displaying bids on the Nasdaq
National Market limited by the bid prices of independent market makers and
making purchases limited by such prices. Net purchases by a passive market maker
are limited to a specific percentage of the average daily trading volume in the
Class A Common Stock during a specified period and must be discontinued when
such limit is reached.

Any of the stabilization or passive market making activities described above
may result in the maintenance of the price of the Class A Common stock at a
level above that which might otherwise prevail in the open market, although no
representation is made regarding the direction or magnitude of any effect that
these transactions may have on the market price of the Class A Common Stock.
None of the stabilization or passive market making activities described above is
required, and if they are undertaken they may be discontinued at any time.

The Representative was the managing underwriter of the Company's initial
public offering in July 1997 and received customary compensation in connection
with that transaction. The Representative may be engaged from time to time in
the future to provide investment banking and other advisory services to the
Company and its affiliates, including the Selling Stockholders.

57
<PAGE>
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 Sanders,
Barnet, Goldman, Simons & Mosk, A Professional Corporation, Los Angeles,
California. Certain legal matters are being passed upon for the Underwriters by
Gibson, Dunn & Crutcher LLP, Orange County, California.

EXPERTS

The Financial Statements as of and for the years ended December 31, 1996 and
1997 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
Financial Statements, including the related notes thereto, schedules and
exhibits filed as a part thereof.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Agreement") and, in accordance
therewith, files reports, proxy and information statements and other information
with the Commission. The Registration Statement, including all schedules and
exhibits thereto, and the reports, proxy and information statements and other
information filed by the Company under the Exchange Act 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. The Company's Class
A Common Stock is designated for trading as a National Market Security in the
Nasdaq system. Material filed by the Company with the Commission may also be
inspected at the offices of The Nasdaq Stock Market, 1735 K Street, N.W.,
Washington, D.C.

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.

58
<PAGE>
INDEX TO FINANCIAL STATEMENTS

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

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

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

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

Statements of Equity....................................................................................... F-6

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

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of

Scheid Vineyards Inc.:

We have audited the accompanying balance sheets of Scheid Vineyards Inc. and
subsidiary (the "Company") as of December 31, 1997 and 1996, and the related
statements of operations, cash flows and equity for the years then ended. 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 audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly in all material
respects, the financial position of Scheid Vineyards Inc. and subsidiary as of
December 31, 1997 and 1996, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.

Deloitte & Touche LLP
Los Angeles, California
February 13, 1998

F-2
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY

BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
NOTES 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................................... 2 $ 14,483 $ 4,024
Accounts receivable, trade...................................................... 349 274
Accounts receivable, other...................................................... 412 3
Inventories..................................................................... 3 1,102 100
Supplies, prepaid expenses and other current assets............................. 813 819
--------- ---------
Total current assets........................................................ 17,159 5,220
PROPERTY, PLANT AND EQUIPMENT, NET................................................ 4,7 27,795 16,342
LONG-TERM RECEIVABLE.............................................................. 5 4,679 2,233
OTHER ASSETS, NET................................................................. 236 274
--------- ---------
$ 49,869 $ 24,069
--------- ---------
--------- ---------
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt............................................... 7 $ 660 $ 458
Notes payable to affiliates..................................................... 8 -- 807
Note payable to stockholder..................................................... 9 -- 1,000
Accounts payable and accrued liabilities........................................ 519 497
Accrued interest payable........................................................ 315 204
--------- ---------
Total current liabilities................................................... 1,494 2,966
LONG-TERM DEBT, NET OF CURRENT PORTION............................................ 7 17,851 11,458
DEFERRED COMPENSATION............................................................. 11 662 584
DEFERRED INCOME TAXES............................................................. 10 741 --
--------- ---------
Total liabilities........................................................... 20,748 15,008
--------- ---------
COMMITMENTS AND CONTINGENCIES..................................................... 12
EQUITY:........................................................................... 13,14
Preferred stock, $.001 par value; 2,000,000 shares authorized; no shares issued
and outstanding............................................................... -- --
Common stock,
Class A, $.001 par value; 20,000,000 shares authorized; 2,300,000 and no
shares issued and outstanding in 1997 and 1996, respectively
Class B, $.001 par value; 10,000,000 shares authorized; 4,400,000 and 97,413
shares issued and outstanding in 1997 and 1996, respectively................ 7 2
Additional paid-in capital...................................................... 21,797 124
Retained earnings............................................................... 7,317 5,621
Partners' capital............................................................... -- 3,314
--------- ---------
29,121 9,061
--------- ---------
$ 49,869 $ 24,069
--------- ---------
--------- ---------
</TABLE>

See accompanying Notes to Financial Statements.

F-3
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
NOTES 1997 1996
--------- ------------- -------------
<S> <C> <C> <C>
REVENUES:
Sales..................................................................... $ 18,683 $ 10,769
Vineyard management, services and other fees.............................. 1,187 922
------------- -------------
Total revenues.......................................................... 19,870 11,691
COST OF SALES............................................................... 6,222 4,544
------------- -------------
GROSS PROFIT................................................................ 13,648 7,147
General and administrative expenses....................................... 4,215 2,604
Interest expense (net of interest income of $283,000 in 1997 and $86,000
in 1996)................................................................ 700 654
------------- -------------
INCOME BEFORE PROVISION FOR INCOME TAXES.................................... 8,733 3,889
PROVISION FOR INCOME TAXES.................................................. 10 3,887 44
------------- -------------
INCOME BEFORE DEFERRED TAX ADJUSTMENT....................................... 4,846 3,845
DEFERRED INCOME TAXES FROM REORGANIZATION TO C CORPORATION.................. 2 1,390 --
------------- -------------
NET INCOME.................................................................. $ 3,456 $ 3,845
------------- -------------
------------- -------------
BASIC AND DILUTED EARNINGS PER SHARE........................................ 2 $ 0.65 $ 0.87
------------- -------------
------------- -------------
PRO FORMA AMOUNTS: 2
INCOME BEFORE INCOME TAXES AS REPORTED...................................... $ 8,733 $ 3,889
PRO FORMA INCOME TAX PROVISION.............................................. 3,493 1,556
------------- -------------
PRO FORMA NET INCOME........................................................ $ 5,240 $ 2,333
------------- -------------
------------- -------------
PRO FORMA BASIC AND DILUTED NET INCOME PER SHARE............................ $ 0.98 $ 0.53
------------- -------------
------------- -------------
WEIGHTED AVERAGE SHARES OUTSTANDING......................................... 2 5,344,000 4,400,000
------------- -------------
------------- -------------
</TABLE>

See accompanying Notes to Financial Statements.

F-4
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY

STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................... $ 3,456 $ 3,845
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and abandonments........................................ 1,711 909
Deferred compensation.............................................................. 78 71
Deferred income taxes.............................................................. (649) --
Deferred taxes arising from reorganization......................................... 1,390 --
Changes in operating assets and liabilities:
Accounts receivable, trade......................................................... (75) (111)
Accounts receivable, other......................................................... (409) 62
Inventories........................................................................ (956) (46)
Supplies, prepaid expenses and other current assets................................ 6 (249)
Accounts payable and accrued liabilities........................................... 133 (20)
----------- -----------
Net cash provided by operating activities........................................ 4,685 4,461
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Long-term receivable................................................................. (2,446) (2,233)
Additions to property, plant and equipment........................................... (12,994) (3,742)
Other assets......................................................................... 40 13
----------- -----------
Net cash used in investing activities............................................ (15,400) (5,962)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt........................................................... 22,589 7,267
Repayment of long-term debt.......................................................... (15,994) (4,833)
Repayment of notes payable, affiliates............................................... (807) --
Repayment of note payable, stockholder............................................... (1,000) --
Proceeds from issuance of common stock............................................... 20,700 --
Stock offering costs................................................................. (732) --
Subchapter S distributions........................................................... (3,102) (125)
Partnership distributions............................................................ (480) (343)
----------- -----------
Net cash provided by financing activities........................................ 21,174 1,966
----------- -----------
Increase in cash and cash equivalents.............................................. 10,459 465
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR........................................... 4,024 3,559
----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR................................................. $ 14,483 $ 4,024
----------- -----------
----------- -----------
</TABLE>

See accompanying Notes to Financial Statements.

F-5
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY

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

<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------- RETAINED
NUMBER OF NUMBER OF ADDITIONAL EARNINGS AND
CLASS A CLASS B PAID-IN PARTNERS'
SHARES SHARES AMOUNT CAPITAL CAPITAL
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996.......................... -- 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
Recapitalization as Delaware corporation and
contribution of partnership interests......... -- 4,302,587 3 1,707 (1,492)
Subchapter S distribution....................... -- -- -- -- (3,102)
Partnership distributions....................... -- -- -- -- (480)
Issuance of common stock, net of costs.......... 2,300,000 -- 2 19,966 --
Net income...................................... -- -- -- -- 3,456
----------- ----------- --- ----------- ------------
BALANCE, DECEMBER 31, 1997........................ 2,300,000 4,400,000 $ 7 $ 21,797 $ 7,317
----------- ----------- --- ----------- ------------
----------- ----------- --- ----------- ------------
</TABLE>

See accompanying Notes to Financial Statements.

F-6
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1997 AND 1996

1. ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION--The principal business of the Company is the management and
farming of approximately 5,280 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
current 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
set of these winery contracts with a single customer covers approximately 61% of
the Company's acreage and accounted for approximately 81% and 84% of the
Company's total revenues in 1997 and 1996, respectively.

BASIS OF PRESENTATION--In connection with the Company's initial public stock
offering as described below, the Company formed Scheid Vineyards Inc., a
Delaware corporation ("SVI-Del"). SVI-Del conducts all of its business through
its wholly-owned subsidiary, Scheid Vineyards California Inc., a California
corporation ("SVI-Cal").

On July 30, 1997, SVI-Del completed its initial public offering of 2,000,000
shares of Class A Common Stock, par value $.001 per share. On September 3, 1997,
the underwriters of the Company's public offering exercised their over-allotment
option to purchase 300,000 additional shares of Class A Common Stock. The
increase in net worth due to the public offering totaled approximately
$19,968,000, after deduction of offering-related expenses.

The Company reported its operations through the date of the Exchange
Transaction described below on a combined basis. Since the date of the Exchange
Transaction, the Company reports its operations on a consolidated basis. All
significant intercompany balances have been eliminated in the combination and
consolidation.

EXCHANGE OF PARTNERSHIP UNITS AND LIMITED LIABILITY COMPANY INTERESTS FOR
CLASS B COMMON STOCK--Immediately prior to the date of the Company's initial
public stock offering, SVI-Cal was the general partner of two California limited
partnerships, Vineyard Investors 1972 ("VI-1972") and Vineyard 405 ("V-405") and
a member of a California limited liability company, Quadra Partners LLC ("Quadra
Partners"). SVI-Cal and VI-1972 were the only limited partners of V-405. In
connection with the Company's public offering, SVI-Del was formed to act as a
holding company for SVI-Cal. The capital stock of SVI-Cal held by its sole
stockholder, the membership interests held by all members (other than SVI-Cal)
of Quadra Partners, and the limited partnership units held by all limited
partners (other than SVI-Cal) in VI-1972 were contributed to SVI-Del in exchange
for (i) 4,400,000 shares of Class B Common Stock of SVI-Del (the "Exchange
Transaction") and (ii) a commitment by SVI-Cal to make the distributions
described below. SVI-Del, as part of the Exchange Transaction, simultaneously
contributed such limited partnership units in VI-1972 and such membership
interests in Quadra Partners to SVI-Cal. As a result, each of VI-1972, V-405 and
Quadra Partners was terminated and dissolved, and SVI-Cal succeeded to their
respective assets and liabilities.

For periods prior to the Exchange Transaction, the term "Company" refers
collectively to SVI-Cal, VI-1972, V-405 and Quadra Partners on a combined basis,
and for periods following the Exchange Transaction, the term "Company" refers
collectively to SVI-Del and SVI-Cal on a consolidated basis.

F-7
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997 AND 1996

1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
Prior to the Exchange Transaction, the financial statements were based upon
the historical cost of assets and liabilities except that assets related to
limited partnership interests purchased from unrelated partners were recorded at
the cost of acquisition.

DISTRIBUTIONS--Immediately prior to the offering, SVI-Cal's cumulative S
Corporation earnings in the amount of $3,102,000 were distributed to its
stockholder. In addition, a distribution of approximately $480,000 was made to
the limited partners of VI-1972 (immediately prior to the Exchange Transaction)
to pay income taxes on income from the partnership.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, 1997 and 1996, substantially all cash balances were
on deposit with the Company's major bank. Cash invested in short-term commercial
paper with one large corporation totaled $12,000,000 at December 31, 1997.

INVENTORIES--Inventories are stated at the lower of FIFO (first-in,
first-out) cost or market. Cost includes the cost of grown grapes, harvesting,
production, aging and bottling, and tasting room merchandise. 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 and reduces such inventories to
market if required.

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 25 to 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. Vineyard
management and other services are recognized as provided.

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, market driven, interest rates.

IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF--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" 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

F-8
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997 AND 1996

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
disposed of be reported at the lower of carrying amount or fair value, less cost
to sell. There have been no such impairments or write-downs to date.

INCOME TAXES--Prior to the date of the Exchange Transaction, SVI-Cal 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-Cal
was included in the income tax returns of the stockholder. Consequently, no
federal income tax provision has been recorded in the accompanying financial
statements through the date of the Exchange Transaction. 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 through the date of the Exchange Transaction. VI-1972, V-405 and
Quadra Partners were treated as partnerships for federal and state income tax
purposes such that their income or loss was included in the taxable income of
the partners.

The Exchange Transaction resulted in the termination of SVI-Cal's S
Corporation status. As a result, the Company currently pays income taxes at the
corporate level. The pro forma income tax provision in the statements of
operations is based upon an assumed 40% federal and state income tax rate.

In connection with the conversion of SVI-Cal's S Corporation status to C
Corporation status, the Company was required by SFAS No. 109, "Accounting for
Income Taxes" to record deferred tax liabilities and deferred tax assets. Such
change resulted in a net charge to earnings of $1,390,000 upon the conversion to
C Corporation status. 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.

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.

EARNINGS PER SHARE AND CLASSES OF COMMON STOCK--The weighted average shares
outstanding in the statements of operations for the year ended December 31, 1996
and through the effective date of the Exchange Transaction are based upon the
4,400,000 shares of Class B Common Stock outstanding after giving pro forma
effect to the Exchange Transaction. The weighted average shares outstanding
since the date of the Exchange Transaction are based on the actual weighted
average shares of Class A and Class B Common Stock outstanding since the date of
the Exchange Transaction. The Company adopted the provisions of SFAS No. 128,
"Earnings per Share" in 1997. The adoption had no effect on the presentation of
prior period disclosures. The effect of outstanding stock options and warrants
on the weighted average shares was immaterial for the periods presented.

F-9
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997 AND 1996

3. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
1997 1996
------------- -----------
<S> <C> <C>
Bulk and bottled wine............................................. $ 612,000 $ 56,000
Deferred crop costs............................................... 458,000 44,000
Tasting room merchandise.......................................... 32,000 --
------------- -----------
Total......................................................... $ 1,102,000 $ 100,000
------------- -----------
------------- -----------
</TABLE>

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Land and buildings........................................... $ 6,515,000 $ 3,616,000
Vineyard improvements........................................ 16,972,000 10,274,000
Vineyard improvements under development...................... 8,396,000 6,111,000
Machinery and equipment...................................... 3,598,000 2,696,000
-------------- --------------
Total.................................................... 35,481,000 22,697,000
Less accumulated depreciation and amortization............... 7,686,000 6,355,000
-------------- --------------
Property, plant and equipment--net........................... $ 27,795,000 $ 16,342,000
-------------- --------------
-------------- --------------
</TABLE>

5. LONG-TERM RECEIVABLE

The Company has a contract to redevelop certain vineyards owned or
controlled by a major client. The current contract calls for the expenditure of
approximately $7,500,000 over a three-year period. The funds for this project
are being borrowed, as an accommodation to the client, by the Company under a
line of credit (see Note 7). The interest rate and payment terms of this
receivable are the same as the related note payable. The note payable to the
bank is secured by a letter of credit provided by the client and by the
management contract. The contract calls for the payment of this receivable by
the client's payment of the six annual principal installments under the line,
beginning January 5, 2000. Under the contract, the client is responsible on an
annual basis for determining the nature and amount of budgeted expenditures for
the year. The client is obligated to advance the budgeted costs to the Company
on a monthly basis, which are funded out of draws under the line of credit.

6. LINES OF CREDIT

The Company had two Agricultural Credit Agreements with a bank which
provided for maximum aggregate borrowings of $3,900,000 through July 5, 1997. No
amounts were outstanding under these agreements at December 31, 1996.

On June 4, 1997, the Company replaced the two crop line of credit agreements
with a crop line of credit which provides for maximum borrowings of $10,500,000
through June 5, 1998. Borrowings are

F-10
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997 AND 1996

6. LINES OF CREDIT (CONTINUED)
secured by crops and other assets with interest due quarterly at the bank's
reference rate. No amounts were outstanding under this agreement at December 31,
1997.

The crop line prohibits the payment of dividends without the consent of the
lender and contains various financial covenants, including minimum tangible net
worth amounts, and current and debt to net worth ratios. The Company was in
compliance with all financial provisions of the agreement.

7. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
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 the lower of a bank-quoted fixed rate or 3/4% over the bank's
reference rate (8.79% at December 31, 1997).................................... $ 2,572,000 $ 327,000

Revolving/Declining Line of Credit Agreement with a bank which provides for a
maximum borrowing of $2,835,000 diminishing annually to a maximum allowable
commitment of $1,775,000, which is due on July 5, 2007. The line of credit is
secured by a leasehold interest in 405 vineyard acres. Interest is payable
quarterly at the lower of a bank-quoted fixed rate or 1/4% over the bank's
reference rate (8.59% at December 31, 1997).................................... 2,835,000 --

Revolving/Declining Line of Credit Agreement with a bank which provides for a
maximum borrowing of $1,450,000 diminishing annually to a maximum allowable
commitment of $586,000, which is due on July 5, 2007. The line of credit is
secured by a leasehold interest in 352 vineyard acres. Interest is payable
quarterly at the lower of a bank-quoted fixed rate or 1/4% over the bank's
reference rate (8.59% at December 31, 1997).................................... 1,450,000 --

Note payable to bank, with interest at the lower of a bank-quoted fixed rate or
the bank's reference rate plus 3/4% (8.79% at December 31, 1997), principal due
in annual installments through July 5, 2005, secured by trust deed on 707
vineyard acres................................................................. 1,350,000 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, refinanced in
June 1997...................................................................... -- 1,434,000
</TABLE>

F-11
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997 AND 1996

7. LONG-TERM DEBT (CONTINUED)

<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Note payable to bank, with interest at the lower of a bank-quoted fixed rate or
the bank's reference rate plus 3/4% (8.79% at December 31, 1997), principal due
in annual installments through October 5, 2004, secured by first deed of trust
on 1,063 acres of real property................................................ $ 5,050,000 $ 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% (8.5% at December 31, 1997)............................. 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..... 140,000 862,000

Note payable to bank represents borrowings on a $7,500,000 line of credit, which
bears interest at the bank's reference rate (6.31% at December 31, 1997). The
note is secured by a letter of credit provided by a major client, and is used
for costs incurred for the development of certain vineyards owned by the client
(see Note 5). Principal due in six annual installments beginning January 5,
2000........................................................................... 4,679,000 2,233,000
-------------- --------------

Total........................................................................ 18,511,000 11,916,000

Less current maturities.......................................................... 660,000 458,000
-------------- --------------

Long-term portion................................................................ $ 17,851,000 $ 11,458,000
-------------- --------------
-------------- --------------
</TABLE>

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

<TABLE>
<S> <C>
1998.......................................................... $ 660,000
1999.......................................................... 660,000
2000.......................................................... 1,182,000
2001.......................................................... 1,270,000
2002.......................................................... 1,410,000
Thereafter.................................................... 13,329,000
-----------
Total......................................................... $18,511,000
-----------
-----------
</TABLE>

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

F-12
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997 AND 1996

8. NOTES PAYABLE TO AFFILIATES

The Company had notes payable to various affiliates in the amount of
$807,000 at December 31, 1996, with interest at the rate of 5.75%. These notes
were repaid in March 1997.

9. NOTE PAYABLE TO STOCKHOLDER

The Company had a note payable at December 31, 1996 to its stockholder of
$1,000,000 which bore interest at the bank's reference rate plus 1/4%. The note
was repaid in April 1997.

10. INCOME TAXES

Significant components of the Company's net deferred tax liability at
December 31, 1997 are as follows.

<TABLE>
<S> <C>
Deferred income tax assets:
Deferred compensation........................................ $ 284,000
State income taxes........................................... 403,000
Miscellaneous reserves....................................... 86,000
-----------
773,000
Deferred income tax liabilities:
Depreciation................................................. (1,514,000)
-----------
Net deferred income tax liability.............................. $ (741,000)
-----------
-----------
</TABLE>

The provision for income taxes is as follows:

<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Current:
Federal....................................................... $ 3,600,000 $ --
State......................................................... 936,000 44,000
------------- -------------
Total........................................................... 4,536,000 44,000
------------- -------------
Deferred:
Federal....................................................... (576,000) --
State......................................................... (73,000) --
------------- -------------
Total........................................................... (649,000) --
------------- -------------
Total provision for income taxes................................ $ 3,887,000 $ 44,000
------------- -------------
------------- -------------
</TABLE>

F-13
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997 AND 1996

10. INCOME TAXES (CONTINUED)
The Company's effective income tax rate differs from the federal statutory
income tax rate due to the following:

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Federal statutory rate........................................................ 34.0% 34.0%
Losses (income) allocated to Subchapter S Corporation shareholder............. 4.0 (34.0)
State taxes, net of federal benefit........................................... 6.5 1.1
--- ---------
Total..................................................................... 44.5% 1.1%
--- ---------
--- ---------
</TABLE>

11. DEFERRED COMPENSATION

The Company 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 balance sheets represents the net present value at 7% of the
expected future payments. Compensation expense related to the arrangement was
$78,000 and $71,000 for the years ended December 31, 1997 and 1996,
respectively.

12. 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 currently $102,000 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. Aggregate minimum rental
expense for each of the next five years ending December 31 is as follows:

<TABLE>
<S> <C>
1998.......................................................... $ 517,000
1999.......................................................... 517,000
2000.......................................................... 414,000
2001.......................................................... 414,000
2002.......................................................... 414,000
Thereafter.................................................... 3,896,000
</TABLE>

Rent charged to operations was $485,000 and $388,000 for the years ended
December 31, 1997 and 1996, respectively.

PENSION 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, subject to the limitations imposed by the Internal Revenue
Code. The

F-14
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997 AND 1996

12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Company's contribution to the union employees' plan amounted to $35,000 for each
of the years ended December 31, 1997 and 1996.

The second plan covers the Company'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 employee
contributions up to 6% of their annual salaries, subject to the limitations
imposed by the Internal Revenue Code. The Company's contribution to this plan
amounted to $22,000 and $27,000 for the years ended December 31, 1997 and 1996,
respectively.

13. COMMON STOCK

In connection with the stock offering (see Note 1), the Company sold
2,300,000 shares of Class A Common Stock. 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. 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. Except for the
differing voting rights, the shares of Class A and Class B common stock have
substantially identical rights, preferences and privileges.

In addition, the Company granted warrants to purchase 200,000 shares of
common stock to the representative of the underwriters of the offering. The
warrants are exercisable at $14.00 per share any time between July 24, 1998 and
July 24, 2002.

14. STOCK OPTION PLAN

In 1997, the Board of Directors of the Company adopted the 1997 Stock
Option/Stock Issuance Plan authorizing the issuance of qualified or
non-qualified stock options to directors, officers, employees, consultants and
others to purchase up to 200,000 shares of the Company's Class A Common Stock at
prices equal to the fair value of the Company's stock at the date of grant. In
July and November 1997, options to purchase a total of 162,000 shares were
granted at an exercise price of $10.00 per share. Such options vest one-quarter
each year, beginning one year after the grant date or a specified vesting
commencement date and expire ten years after the earlier of the grant date and
the vesting

F-15
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997 AND 1996

14. STOCK OPTION PLAN (CONTINUED)
commencement date. No options have vested at December 31, 1997. The following
summarizes stock option activity for the periods presented:

<TABLE>
<CAPTION>
WEIGHTED- AVERAGE
SHARES EXERCISE PRICE
----------- ----------------
<S> <C> <C>
Outstanding, January 1, 1997....................................................... -- --
Granted............................................................................ 162,000 $ 10.00
----------- --------
Outstanding, December 31, 1997..................................................... 162,000 $ 10.00
----------- --------
----------- --------
Options exercisable at December 31, 1997........................................... None
Weighted average fair value of options granted..................................... $ 3.69
Weighted average remaining contractual life........................................ 9.6 years
</TABLE>

The Company accounts for its stock-based awards using the intrinsic value
method in accordance with Accounting Principals Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and its related interpretations.
Accordingly, no compensation expense has been recognized in the financial
statements for employee stock arrangements.

SFAS No. 123, "Accounting for Stock-Based Compensation," requires the
disclosure of pro forma net income and net income per share. Under SFAS No. 123,
the fair value of stock-based awards to employees is calculated through the use
of options pricing models, even though such models were developed to estimate
the fair value of freely-tradable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock option awards.
These models also require subjective assumptions, including future stock price
volatility and expected time to exercise, which greatly affect the calculated
values. The Company's calculations were made using the Black-Scholes option
pricing model with the following weighted average assumptions: expected life, 5
years following vesting; 29% stock price volatility; risk free rate of return of
between 6.0% and 6.2%; and no dividends during the expected term. Forfeitures
are recognized as they occur. If the computed fair values of the Company's stock
option awards had been amortized to expense over the vesting period of the
awards, pro forma net income for the year ended December 31, 1997 would have
been reduced to the pro forma amounts indicated below. There were no grants
prior to 1997.

<TABLE>
<S> <C>
Net income:
As reported.................................................. $3,456,000
Pro forma.................................................... $3,394,000
Net income per share:
As reported.................................................. $ 0.65
Pro forma.................................................... $ 0.64
</TABLE>

F-16
<PAGE>
SCHEID VINEYARDS INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1997 AND 1996

15. SUPPLEMENTAL CASH FLOW INFORMATION

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

<TABLE>
<CAPTION>
1997 1996
------------- -----------
<S> <C> <C>
Interest paid (net amount capitalized)............................ $ 872,000 $ 654,000
Interest capitalized.............................................. $ 294,000 $ 430,000
Income taxes paid................................................. $ 4,550,000 $ 0
</TABLE>

F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Note Concerning Forward-Looking Statements................................ 2
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
The Company............................................................... 15
Price Range of Class A Common Stock....................................... 16
Dividend Policy........................................................... 16
Capitalization............................................................ 17
Selected Financial Data................................................... 18
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 19
Business.................................................................. 24
Management................................................................ 37
Certain Transactions...................................................... 45
Principal and Selling Stockholders........................................ 47
Description of Capital Stock.............................................. 50
Shares Eligible for Future Sale........................................... 54
Underwriting.............................................................. 56
Legal Matters............................................................. 58
Experts................................................................... 58
Available Information..................................................... 58
Index to Financial Statements............................................. F-1
</TABLE>

1,000,000 SHARES

[LOGO]

CLASS A COMMON STOCK

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

PROSPECTUS

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

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

, 1998

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

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

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

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

Reference is made to Sections 317 and 2115 of the California General
Corporation Law (the "CGCL"). Under Section 2115 of the CGCL, the Registrant
from time to time may be subject to the requirements of Section 317 of the CGCL,
instead of Sections 102(b)(7) and 145 of the DGCL with respect to exculpation
from liability and indemnification of directors and officers of the Registrant.
Section 317 of the CGCL provides that a subject corporation shall have the power
to indemnify any agent of the corporation (including its directors and officers)
who was or is a party to any proceeding or threatened proceeding (other than an
action by or in the right of the corporation) against expenses, judgments,
fines, settlements and other amounts incurred if that person acted in good faith
and in a manner reasonably believed to be in the best interests of the
corporation, and in the case of a criminal proceeding, had no reasonable cause
to believe the conduct of such person was unlawful. Section 317 of the CGCL
further provides that a subject corporation shall have the power to indemnify
any agent of the corporation who was or is a party to any proceeding or
threatened proceeding by or in the right of the corporation against expenses
incurred in connection with the defense or settlement of the proceeding if the
person acted in good faith and in a manner the person believed to be in the best
interests of the corporation and its shareholders. Under Section 317 of the
CGCL, to the extent that an agent of a subject corporation is successful on the
merits in the defense of an action, the corporation must indemnify such person
for his or her actual and reasonable expenses incurred in connection with

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<PAGE>
such defense. Under Section 317 of the CGCL, a subject corporation may advance
expenses of an indemnifiable person in defending an action; provided that such
advancement of expenses may be made only if the person provides an undertaking
to reimburse the corporation if it is ultimately determined that the person is
not entitled to be indemnified against such expenses.

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

The Registrant has entered into agreements to provide indemnification for
its directors and certain officers in addition to the indemnification provided
for in the Bylaws. These agreements, among other things, indemnify such parties
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 persons arising out of or in connection with
such persons' service as directors or officers of the Registrant or an affiliate
of the Registrant.

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

The above-described provisions relating to the indemnification of directors
and officers are sufficiently broad to permit the indemnification of such
persons in certain circumstances against liabilities (including reimbursement of
expenses incurred) arising under the Securities Act of 1993, as amended (the
"Securities Act").

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

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

<TABLE>
<S> <C>
SEC registration fee............................................. $ 3,350
NASD filing fee.................................................. 1,637
Nasdaq National Market listing fee............................... *
Blue sky fees and expenses....................................... *
Accounting fees and expenses..................................... *
Legal fees and expenses of the Company........................... *
Printing and engraving........................................... *
Transfer agent and registrar fees and expenses................... *
Miscellaneous.................................................... *
---------
Total........................................................ $ *
---------
---------
</TABLE>

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

* To be filed by amendment.

The Registrant maintains director and officer liability insurance insuring
the Registrant's directors and executive officers against certain liabilities,
including without limitation liabilities they may incur in the registration,
offering or sale of the securities being registered hereby, the annual premium
for which is approximately $53,000.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

(a) There have been no sales of unregistered securities by the Registrant
during the past three years, except that simultaneously with the Registrant's
initial public offering, the Registrant issued an aggregate of 4,400,000 shares
of Class B Common Stock to the sole stockholder of Scheid Vinyards California
Inc., a California company and wholly-owned subsidiary of the Registrant, the
limited

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<PAGE>
partners of Vineyards Investors 1972, a California limited partnership, and the
members of each of Quadra Partners LLC, a California limited liability company,
other than the Registrant or Scheid Vineyards California Inc., and Big Vines
Limited Liability Company, as applicable, in exchange for all of their
partnership and membership interests, respectively. These shares were issued in
reliance on Section 4(2) of the Securities Act.

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

(c) The issuances of the securities set forth in this Item 26 were deemed to
have been exempt from registration under the Securities Act in reliance on
Section 4(2) of the Act as transactions by an issuer not involving any public
offering. It was a condition in all such transactions that the recipients of
securities represent their intentions to acquire the securities for investment
only and not with a view to or for sale in connection with any distribution
thereof and appropriate legends were affixed to the share certificates issued in
such transactions. All recipients had adequate access, through their
relationships with the Registrant, to information about the Registrant.

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<PAGE>
ITEM 27. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------
<S> <C>
1.1* Form of Underwriting Agreement.
2.1 Exchange and Contribution Agreement, dated as of July 29, 1997, among Registrant and certain affiliated
entities and stockholders of Registrant (incorporated by reference to Exhibit number 2.1 to
Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997).

3.1 Certificate of Incorporation (incorporated by reference to Exhibit number 3.1 to Amendment No. 2 to
Registrant's Registration Statement on Form SB-2 filed July 21, 1997).

3.2 Bylaws (incorporated by reference to Exhibit number 3.2 to Amendment No. 2 to Registrant's Registration
Statement on Form SB-2 filed July 21, 1997).

4.1 Warrant Agreement, dated as of July 30, 1997, by and among the Company, Cruttenden Roth Incorporated,
Laidlaw Equities, Inc. and Rodman & Renshaw, Inc. (incorporated by reference to Exhibit number 4.1 to
Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997).

4.2 Form of Certificate Evidencing Ownership of Class A Common Stock of Scheid Vineyards Inc. (incorporated
by reference to Exhibit number 4.2 to Registrant's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1998).

4.3 Form of Certificate Evidencing Ownership of Class B Common Stock of Scheid Vineyards Inc. (incorporated
by reference to Exhibit number 4.3 to Amendment No. 1 to Registrant's Registration Statement on Form
SB-2 filed July 3, 1997).

4.4 Form of Lock-Up Agreement between Cruttenden Roth Incorporated and the Scheid Vineyards Inc. Class B
Common Stockholders (incorporated by reference to Exhibit number 10.2 to Amendment No. 2 to
Registrant's Registration Statement on Form SB-2 filed July 21, 1997).

5.1* Opinion of Sanders, Barnet, Goldman, Simons & Mosk, A Professional Corporation as to the legality of
the securities being registered.

10.1 Form of 1997 Stock Option/Stock Issuance Plan, as amended and restated through March 10, 1998
(incorporated by reference to Exhibit number 10.1 to Registrant's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1997).

10.2 Lease, dated as of January 1, 1997, by and among Sam Avila and Margaret J. Avila, as trustees under
declaration of trust dated August 16, 1989, and Margaret J. Avila and Valarie Bassetti successor
co-trustees of the testamentary trust of Joseph Laberere, and Sam Avila, and Margaret J. Avila, and
Scheid Vineyards and Management Co. (incorporated by reference to Exhibit number 10.3 to Registrant's
Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.3 Lease, dated as of January 1, 1996, by and between Echenique Ranch and Scheid Vineyards and Management
Co., as amended by a Letter Agreement dated March 27, 1996 (incorporated by reference to Exhibit
number 10.4 to Registrant's Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.4 Land Lease by and between William McHenry Bland and Monterey Farming Corporation and Addendum to Land
Lease, dated September 26, 1973, by and between William McHenry Bland and Monterey Farming
Corporation (incorporated by reference to Exhibit number 10.5 to Registrant's Registration Statement
on Form SB-2 filed May 28, 1997).(1)
</TABLE>

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<PAGE>
<TABLE>
<S> <C>
10.5 Lease, dated September 27, 1979, by and among Luis Echenique, Francis D. Echenique, Ricardo Echenique
and Monterey Farming Corporation, as amended by (i) a Memorandum of Lease, dated September 27, 1979,
(ii) an Amendment to Memorandum of Lease, dated September 4, 1987, (iii) a First Amendment to Lease,
dated September 4, 1987, and (iv) a Second Amendment of Lease, dated September 4, 1987 (incorporated
by reference to Exhibit number 10.6 to Registrant's Registration Statement on Form SB-2 filed May 28,
1997).(1)

10.6+ Vineyard Management Agreement, dated as of January 1, 1997, by and among Scheid Vineyards and
Management Co., Canandaigua West, Inc. and Canandaigua Wine Company, Inc. (incorporated by reference
to Exhibit number 10.7 to Registrant's Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.7+ Vineyard Management Agreement, dated as of January 1, 1996, by and among Scheid Vineyards and
Management Co., Canandaigua West, Inc. and Canandaigua Wine Company, Inc. (incorporated by reference
to Exhibit number 10.8 to Registrant's Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.8+ Grenache Vineyard Management Agreement, dated as of April 1, 1995, by and between Scheid Vineyards and
Management Co. and Joseph Phelps Vineyards (incorporated by reference to Exhibit number 10.9 to
Registrant's Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.9+ Vineyard Management Agreement, dated as of April 1, 1995, by and between Scheid Vineyards and
Management Co. and Joseph Phelps Vineyards (incorporated by reference to Exhibit number 10.10 to
Registrant's Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.10+ Vineyard Management Agreement, dated as of February 1, 1992, by and between Scheid Vineyards and
Management Co. and John Hill and Richard Hill as co-trustees of the Hill Living Trust (incorporated
by reference to Exhibit number 10.11 to Registrant's Registration Statement on Form SB-2 filed May
28, 1997).(1)

10.11a+ Vineyard Development and Management Agreement, dated as of December 1, 1995, by and between Heublein,
Inc. and Scheid Vineyards and Management Co. (incorporated by reference to Exhibit number 10.12 to
Registrant's Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.11b Amendment No. 1 to Vineyard Development and Management Agreement, dated as of March 28, 1997, by and
between Heublein, Inc. and Scheid Vineyards and Management Co. (incorporated by reference to Exhibit
number 10.11b to Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1997).(1)

10.12 Agricultural Credit Agreement (General Term Loan), dated October 6, 1994, between Vineyard Investors
1972 and Sanwa Bank California (incorporated by reference to Exhibit number 10.15 to Registrant's
Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.13 Business Loan Agreement, dated as of March 28, 1997, between Scheid Vineyards and Management Co. and
Bank of America National Trust and Savings Association (incorporated by reference to Exhibit number
10.20 to Registrant's Registration Statement on Form SB-2 filed May 28, 1997).(1)
</TABLE>

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<PAGE>
<TABLE>
<S> <C>
10.14+ Long Term Grape Purchase Contract, dated February 12, 1973, between Monterey Farming Corporation and
Almaden Vineyards, Inc., as amended by (i) a Memorandum of Understanding, dated August 6, 1987, (ii)
a Letter Agreement, dated May 14, 1990, and (iii) an Amendment to Long Term Grape Purchase Contract,
dated as of March 12, 1993, between Scheid Vineyards and Management Co. and Heublein, Inc.
(incorporated by reference to Exhibit number 10.21 to Registrant's Registration Statement on Form
SB-2 filed May 28, 1997).(1)

10.15+ Long Term Grape Purchase Contract, dated December 21, 1972, between Vineyard Investors 1972 and Almaden
Vineyards, Inc., as amended by (i) a Memorandum of Understanding, dated August 6, 1987, (ii) an
Amendment to Long Term Grape Purchase Contract, dated April 19, 1988, between Vineyard Investors 1972
and Heublein, Inc., (iii) a Second Amendment to Long Term Grape Purchase Contract, dated June 2,
1988, (iv) a Third Amendment to Long Term Grape Purchase Contract, dated as of March 12, 1993 and (v)
a letter agreement, dated April 6, 1990 (incorporated by reference to Exhibit number 10.22 to
Registrant's Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.16+ Long Term Grape Purchase Contract, dated February 12, 1973, between Monterey Farming Corporation, as
General Partner on behalf of Vineyard 405, and Almaden Vineyards, Inc., as amended by (i) a certain
Memorandum of Understanding, dated August 6, 1987, and (ii) an Amendment to Long Term Grape Purchase
Contract, dated as of March 12, 1993, between Vineyard 405 and Heublein, Inc. (incorporated by
reference to Exhibit number 10.23 to Registrant's Registration Statement on Form SB-2 filed May 28,
1997).(1)

10.17+ Long Term Wine Grape Purchase Agreement, dated as of March 12, 1993, by and between Scheid Vineyards
and Management Co. and Heublein, Inc. (incorporated by reference to Exhibit number 10.24 to
Registrant's Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.18+ Grape Purchase Agreement, dated as of April 1, 1996, by and between Scheid Vineyards and Management Co.
and The Hess Collection Winery (incorporated by reference to Exhibit number 10.25 to Registrant's
Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.19+ Grape Purchase Agreement, dated July 1, 1996, by and among Scheid Vineyards and Management Co., Stephen
Dooley Wine Co., Inc. and The Chalone Wine Group, Ltd. (incorporated by reference to Exhibit number
10.26 to Registrant's Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.20 Alternating Winery Agreement, dated November 30, 1995, by and between Scheid Vineyards and Management
Co. and Storrs Winery (incorporated by reference to Exhibit number 10.27 to Registrant's Registration
Statement on Form SB-2 filed May 28, 1997).(1)

10.21 Winery Services Agreement, dated January 1, 1996, by and between Scheid Vineyards and Management Co.
and Storrs Winery (incorporated by reference to Exhibit number 10.28 to Registrant's Registration
Statement on Form SB-2 filed May 28, 1997).(1)

10.22 Standard Office Lease, dated July 1, 1994, by and between Scheid Vineyards and Management Co. and Tesh
Partners, L.P. (incorporated by reference to Exhibit number 10.29 to Registrant's Registration
Statement on Form SB-2 filed May 28, 1997).(1)

10.23 Collective Bargaining Agreement, dated January 1, 1996, by and between Scheid Vineyards and Management
Co. and United Farm Workers of America, AFL-CIO (incorporated by reference to Exhibit number 10.30 to
Registrant's Registration Statement on Form SB-2 filed May 28, 1997).(1)
</TABLE>

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<PAGE>
<TABLE>
<S> <C>
10.24 Amended and Restated Buy-Sell Agreement, dated as of December 31, 1997, by and among Scheid Vineyards
Inc. and holders of Class B Common Stock (incorporated by reference to Exhibit number 10.24 to
Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997).

10.25 Promissory Note, dated December 30, 1994, by Kurt Gollnick for the benefit of Scheid Vineyards and
Management Co. (incorporated by reference to Exhibit number 10.32 to Registrant's Registration
Statement on Form SB-2 filed May 28, 1997).(1)

10.26 Individual Retirement Agreement, dated as of May 1, 1997, by and between Scheid Vineyards and
Management Co. and Ernest M. Brown (incorporated by reference to Exhibit number 10.34 to Amendment
No. 2 to Registrant's Registration Statement on Form SB-2 filed July 21, 1997).(1)

10.27 Joint Agreement, dated as of March 27, 1997, by and among Samuel R. Avila and Margaret J. Avila,
individually and as trustees under declaration of trust dated August 16, 1989, and Margaret J. Avila
and Valarie Bassetti, as successor co-trustees of the testamentary trust of Joseph Labarere,
Metropolitan Life Insurance Company, Scheid Vineyards and Management Co., Canandaigua West, Inc. and
Canandaigua Wine Company, Inc. (incorporated by reference to Exhibit number 10.35 to Registrant's
Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.28 Water Supply Agreement, dated as of January 1, 1997, by Scheid Vineyards and Management Co. and
Canandaigua West, Inc. (incorporated by reference to Exhibit number 10.36 to Registrant's
Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.29 Agreement Regarding Water, dated as of January 1, 1996, by Luis Echenique, Ricardo Echenique and
Margaret Echenique, Executrix of the Estate of Francis D. Echenique, in favor of each of Scheid
Vineyards and Management Co. and Canandaigua West, Inc. (incorporated by reference to Exhibit number
10.37 to Registrant's Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.30 Easement Agreement, dated January 1, 1997, by Sam Avila and Margaret J. Avila, as trustees under
declaration of trust dated August 16, 1989, and Margaret J. Avila and Valarie Bassetti successor
co-trustees of the testamentary trust of Joseph Labarere and Sam Avila and Margaret J. Avila and
Scheid Vineyards and Management Co., in favor of Canandaigua West, Inc. (incorporated by reference to
Exhibit number 10.38 to Registrant's Registration Statement on Form SB-2 filed May 28, 1997).(1)

10.31 Agricultural Credit Agreement, dated June 4, 1997, between Scheid Vineyards Inc. and Sanwa Bank
(incorporated by reference to Exhibit number 10.31 to Registrant's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1997).(1)

10.32 Vineyard Lease Agreement, dated as of April 1, 1995, by and between Vineyard Investors 1972 and Joseph
Phelps Vineyards (incorporated by reference to Exhibit number 10.41 to Registrant's Registration
Statement on Form SB-2 filed May 28, 1997).(1)

10.33+ Grape Purchase Agreement, dated as of May 9, 1997, by and between Scheid Vineyards Inc. and The Hess
Collection Winery (incorporated by reference to Exhibit number 10.42 to Registrant's Registration
Statement on Form SB-2 filed May 28, 1997).(1)

10.34+ Grape Purchase Agreement, dated as of April 1, 1997, by and between Vineyard Investors 1972 and Stephen
Dooley Wine Co., Inc. (incorporated by reference to Exhibit number 10.43 to Registrant's Registration
Statement on Form SB-2 filed May 28, 1997).(1)
</TABLE>

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<PAGE>
<TABLE>
<S> <C>
10.35 Employment Agreement, dated as of July 19, 1997, by and between Scheid Vineyards Inc. and Alfred G.
Scheid (incorporated by reference to Exhibit number 10.44 to Amendment No. 2 to Registrant's
Registration Statement on Form SB-2 filed July 21, 1997).

10.36 Employment Agreement, dated as of July 19, 1997, by and between Scheid Vineyards Inc. and Scott D.
Scheid (incorporated by reference to Exhibit number 10.45 to Amendment No. 2 to Registrant's
Registration Statement on Form SB-2 filed July 21, 1997).

10.37 Employment Agreement, dated as of July 19, 1997, by and between Scheid Vineyards Inc. and Heidi M.
Scheid (incorporated by reference to Exhibit number 10.46 to Amendment No. 2 to Registrant's
Registration Statement on Form SB-2 filed July 21, 1997).

10.38 Employment Agreement, dated as of July 19, 1997, by and between Scheid Vineyards Inc. and Kurt J.
Gollnick (incorporated by reference to Exhibit number 10.47 to Amendment No. 2 to Registrant's
Registration Statement on Form SB-2 filed July 21, 1997).

10.39 Form of Indemnification Agreement (incorporated by reference to Exhibit number 10.48 to Amendment No. 1
to Registrant's Registration Statement on Form SB-2 filed July 3, 1997).

21.1 List of Subsidiaries (incorporated by reference to Exhibit number 21.1 to Amendment No. 1 to
Registrant's Registration Statement on Form SB-2 filed July 3, 1997).

23.1 Independent Auditors' Consent (filed electronically herewith).

23.2* Consent of Sanders, Barnet, Goldman, Simons & Mosk, A Professional Corporation (included in Exhibit 5.1
hereto).

24.1 Power of Attorney (see signature page of this Registration Statement).
</TABLE>

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

* To be filed by amendment.

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

(1) The contracting party is a predecessor in interest to Scheid Vineyards
California Inc., the Registrant's wholly owned subsidiary.

All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted because
they are not required, are inapplicable or the required information has already
been provided elsewhere in this Registration Statement.

ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes:

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

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

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

II-8
<PAGE>
(4) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

II-9
<PAGE>
SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Los
Angeles, State of California, on April 27, 1998.

<TABLE>
<S> <C> <C>
SCHEID VINEYARDS INC.

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

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Alfred G.
Scheid, Scott D. Scheid and Heidi M. Scheid, or any of them, jointly and
severally, his/her true and lawful attorneys-in-fact and agents, with full
powers of substitution and resubstitution, for him/her and in his/her name,
place and stead, in any and all capacities, to do any and all things and to
execute any and all instruments which said attorneys-in-fact and agents deem
necessary or advisable to enable Scheid Vineyards Inc. to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission in respect thereof in connection with
this Registration Statement to the same extent that he/she could do in person,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign his/her name on any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same with all exhibits to, and other documents in connection with, this
Registration Statement with the Securities and Exchange Commission.

In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.

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

Chairman of the Board and
/s/ ALFRED G. SCHEID Chief Executive Officer
- ------------------------------ (Principal Executive April 27, 1998
Alfred G. Scheid Officer)

Vice President Finance,
/s/ HEIDI M. SCHEID Chief Financial Officer,
- ------------------------------ Treasurer and Director April 27, 1998
Heidi M. Scheid (Principal Financial and
Accounting Officer)

/s/ SCOTT D. SCHEID Vice President, Chief
- ------------------------------ Operating Officer and April 27, 1998
Scott D. Scheid Director

S-1
<PAGE>

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

/s/ JOHN L. CRARY
- ------------------------------ Director April 27, 1998
John L. Crary

/s/ ROBERT P. HARTZELL
- ------------------------------ Director April 27, 1998
Robert P. Hartzell

S-2

<PAGE>
EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Scheid Vineyards
Inc. on Form SB-2 of our report dated February 13, 1998 appearing in the
Prospectus which is part of this Registration Statement and to the references to
us under the headings "Selected Financial Data" and "Experts" in such
Prospectus.

/s/ Deloitte & Touche LLP

Los Angeles, California
April 24, 1998